e10vk
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended October 30,
2010
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
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For the transition period
from
to
Commission File
No. 1-7819
Analog Devices, Inc.
(Exact name of registrant as
specified in its charter)
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Massachusetts
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04-2348234
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(State or other jurisdiction
of
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(I.R.S. Employer
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incorporation or
organization)
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Identification No.)
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One Technology Way, Norwood, MA
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02062-9106
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(Address of principal executive
offices)
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(Zip Code)
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(781) 329-4700
(Registrants telephone
number, including area code)
Securities registered pursuant to Section 12(b) of the
Act:
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Common Stock
$0.162/3
Par Value
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New York Stock
Exchange
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Title of Each Class
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Name of Each Exchange on Which
Registered
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Securities registered pursuant to Section 12(g) of the
Act:
None
Title
of Class
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. YES þ NO o
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. YES o NO þ
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. YES þ NO o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such
files.) YES þ NO o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. þ
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
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Large accelerated
filer þ
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Accelerated
filer o
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Non-accelerated
filer o
(Do not check if a smaller reporting company)
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Smaller reporting
company o
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the
Act). YES o NO þ
The aggregate market value of the voting and non-voting common
equity held by nonaffiliates of the registrant was approximately
$7,314,000,000 based on the last reported sale of the Common
Stock on the New York Stock Exchange Composite Tape reporting
system on May 1, 2010. 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.
As of October 30, 2010 there were 298,652,994 shares
of Common Stock,
$0.162/3
par value per share, outstanding.
Documents
Incorporated by Reference
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Document Description
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Form 10-K Part
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Portions of the Registrants Proxy Statement for the Annual
Meeting of Shareholders to be held March 8, 2011
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III
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TABLE OF CONTENTS
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PART I |
| ITEM 1. BUSINESS |
| ITEM 1A. RISK FACTORS |
| ITEM 1B. UNRESOLVED STAFF COMMENTS |
| ITEM 2. PROPERTIES |
| ITEM 3. LEGAL PROCEEDINGS |
EXECUTIVE OFFICERS OF THE COMPANY |
PART II |
| ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
| ITEM 6. SELECTED FINANCIAL DATA |
| ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (all tabular amounts in thousands except per share amounts) |
| ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
| ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
CONSOLIDATED STATEMENTS OF INCOME |
CONSOLIDATED BALANCE SHEETS October 30, 2010 and October 31, 2009 |
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY Years ended October 30, 2010, October 31, 2009 and November 1, 2008 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Years ended October 30, 2010, October 31, 2009 and November 1, 2008 |
CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended October 30, 2010 October 31, 2009 and November 1, 2008 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
| ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
| ITEM 9A. CONTROLS AND PROCEDURES |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
| ITEM 9B. OTHER INFORMATION |
PART III |
| ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
| ITEM 11. EXECUTIVE COMPENSATION |
| ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
| ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
| ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES |
PART IV |
| ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
EX-10.33 |
EX-12.1 |
EX-21 |
EX-23 |
EX-31.1 |
EX-31.2 |
EX-32.1 |
EX-32.2 |
EX-101 INSTANCE DOCUMENT |
EX-101 SCHEMA DOCUMENT |
EX-101 CALCULATION LINKBASE DOCUMENT |
EX-101 LABELS LINKBASE DOCUMENT |
EX-101 PRESENTATION LINKBASE DOCUMENT |
EX-101 DEFINITION LINKBASE DOCUMENT |
PART I
Company
Overview
We are a world leader in the design, manufacture and marketing
of high-performance analog, mixed-signal and digital signal
processing integrated circuits, or ICs, used in virtually all
types of electronic equipment. Since our inception in 1965, we
have focused on solving the engineering challenges associated
with signal processing in electronic equipment. Our signal
processing products translate real-world phenomena such as
temperature, pressure, sound, light, speed and motion into
electrical signals to be used in a wide array of electronic
devices. Signal processing technology is a critical element of
industrial, automotive, consumer, and communications
applications. As new generations of digital applications evolve,
they generate new needs for high-performance analog signal
processing and digital signal processing technology. We produce
a wide range of products that are designed to meet the signal
processing technology needs of a broad base of customers.
Used by over 60,000 customers worldwide, our products are
embedded inside many types of electronic equipment including:
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Industrial process controls
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Medical imaging equipment
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Factory automation systems
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Portable electronic devices
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Instrumentation
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Cellular basestations
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Energy management systems
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Wireless communications equipment
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Defense electronics
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Digital cameras
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Automobiles
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Digital televisions
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The breakdown of our fiscal 2010 revenue by end market is set
out in the table below.
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Percent of
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Total FY2010 ADI
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End Market
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Revenue*
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Industrial
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46
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%
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Automotive
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12
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%
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Consumer
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19
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%
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Communications
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22
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%
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Computer
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2
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%
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* |
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The sum of the individual percentages do not equal 100% due to
rounding. |
We sell our products worldwide through a direct sales force,
third-party distributors and independent sales representatives
and through our website. We have direct sales offices in 17
countries, including the United States.
We were founded in 1965 and are incorporated in Massachusetts.
Our headquarters are near Boston, in Norwood, Massachusetts, and
we have manufacturing facilities in Massachusetts, Ireland, and
the Philippines. Our common stock is listed on the New York
Stock Exchange, or NYSE, under the symbol ADI and is included in
the Standard & Poors 500 Index.
We maintain a website with the address www.analog.com. 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.
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, or SEC. We also make available on our
website our corporate governance guidelines, the charters for
our audit committee, compensation committee, and nominating and
corporate governance committee, our equity award granting
policies, our code of business conduct and ethics which applies
to our directors, officers and employees, and our related person
transaction policy, and 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
1
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 the NYSE.
Industry
Background
Electronic signals fall into one of two categories: analog or
digital. Analog signals, also known as linear signals, represent
real-world phenomena, such as temperature, pressure, sound,
light, speed and motion. This information can be detected and
measured using analog sensors, which generate an electronic
signal of continuously-varying voltages and currents. The
signals from these sensors are initially processed using analog
methods, such as amplification, filtering and shaping. They are
then usually converted to digital form for storage or further
manipulation. Digital signals represent the ones and
zeros of binary arithmetic; the further manipulation
of the signals after conversion to digital form is called
digital signal processing, or DSP. Digital signals
are often converted back to analog form for functions such as
video display, audio output or control. We refer to these
manipulations and transformations as real-world signal
processing. Providing real-world signal processing
solutions that achieve the customers desired performance
generally involves working in multiple technology domains:
analog and digital processing, sensors and transducers and power
management.
New
Organizational Structure in 2009: Product and Market
Organizations
We implemented a new organizational structure at the end of 2009
with the intention of optimizing our focus on the technologies
we create and the markets we serve. We continue to operate with
one reporting segment, but under the new organizational
structure we have two separate groups, one focused on products
and one focused on end markets. The product group is focused on
core technology development and leadership in converters,
amplifiers and radio frequency, or RF, micro-electromechanical
sensors, or MEMS, power management, and DSP. The end
market-focused organization is dedicated to understanding,
selecting, and resourcing initiatives that are more customized
to a particular market or application. The focus of this team is
to apply the full expanse of our broad technology portfolio to
more integrated and targeted product strategies for the
industrial, healthcare, automotive, consumer, and communications
infrastructure markets. The end market group includes our sales
organization.
These two new groups collaborate at all levels. On the one hand,
our product group develops key technology for use by the end
market groups, which apply these technologies to specific
applications. Equally important, the applications expertise
within each end market group is used to enhance core technology
development by our product group.
Principal
Products
We design, manufacture and market a broad line of
high-performance ICs that incorporate analog, mixed-signal and
digital signal processing technologies. Our ICs are designed to
address a wide range of real-world signal processing
applications. Our 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 clusters of customers in key 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. However, for some industrial, medical, automotive,
consumer, and communications products, we focus on working with
leading customers to design application-specific solutions. We
begin with our existing core technologies in data conversion,
amplification, RF, MEMS, power management and DSP, and devise a
solution to more closely meet the needs of a specific customer
or group of customers. Because we have already developed the
core technology for our general-purpose products, we can create
application-specific solutions quickly.
2
We produce and market several thousand products and operate in
one reporting segment. Our ten highest revenue products, in the
aggregate, accounted for approximately 9% of our revenue for
fiscal 2010. A breakdown of our fiscal 2010 revenue by product
category follows.
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Percent of
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Total FY2010 ADI
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Product Category
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Revenue
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Converters
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47
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Amplifiers/ Radio frequency
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25
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Other analog
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12
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Power management & reference
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7
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Digital signal processing
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9
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Analog
Products
Our analog IC technology has been the foundation of our business
for over four decades, and we are one of the worlds
largest suppliers of high-performance analog ICs. Our analog
signal processing ICs are primarily high-performance devices,
generally defined today as devices that support a minimum of
12-bits of accuracy and a minimum of 50 megahertz of speed. The
principal advantages these products have versus
competitors products include higher accuracy, lower cost
per function, smaller size, lower power consumption and fewer
components, resulting in improved reliability. Our product
portfolio includes several thousand analog ICs, any one of which
can have as many as several hundred customers. Our analog ICs
typically have long product life cycles. Our analog
IC customers include both original equipment manufacturers,
or OEMs, and customers who build electronic subsystems for
integration into larger systems.
We derive the majority of our analog signal processing IC
product revenue from sales of data converters and amplifiers. We
are the industrys 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. With the industrys leading portfolio of ADCs
(analog-to-digital
converters) and DACs
(digital-to-analog
converters), our converter products combine sampling rates and
accuracy with the low noise, power, price and small package size
required by industrial, medical, automotive, consumer, and
communications electronics. We are also a leading supplier of
high-performance amplifiers. Amplifiers are used to condition
analog signals and minimize noise. We provide high speed,
precision, RF, broadband, instrumentation and other amplifiers.
We also offer an extensive portfolio of comparators that are
used in a wide variety of applications.
Our analog product line also includes a broad portfolio of RF
ICs covering the entire RF signal chain from industry-leading
high performance RF function blocks to highly integrated
broadband and short-range single chip transceiver solutions. To
date, we have sold our RF ICs principally for cellular
infrastructure and
point-to-point
applications and have been focused on the high performance end
of the market.
Also within our analog technology portfolio are products that
use an advanced IC technology known in the industry as surface
micromachining, which is used to produce semiconductor products
known as micro-electromechanical systems, or MEMS. This
technology enables us to build extremely small mechanical
sensing elements on the surface of a chip along with supporting
circuitry. In addition to incorporating an electromechanical
structure, these devices also have analog circuitry for
conditioning signals obtained from the sensing element. The
integration of signal conditioning and MEMS is a unique feature
of our products which we call
iMEMS®.
Our iMEMS product portfolio includes accelerometers used to
sense acceleration, gyroscopes used to sense rotation, and MEMS
microphones used to capture audio sounds. The majority of our
current revenue from MEMS products is derived from automotive
manufacturers, industrial customers, and consumer customers.
Power management and reference products make up the balance of
our analog sales. Whether the product is plugged into the wall
or runs on batteries, every electronic device requires some form
of power management, which can include converters, battery
chargers, charge pumps, and regulators. We leverage our leading
analog signal
3
technology to devise innovative high-performance power
management ICs, high-reliability infrastructure equipment and
battery-operated portable medical, communications and consumer
devices.
Digital
Signal Processing Products
Digital Signal Processors (DSPs) complete our product portfolio.
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 DSP products 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 provide the
flexibility to modify the devices function quickly and
inexpensively using software. Our general-purpose DSP IC
customers typically write their own algorithms using software
development tools that we provide and software development tools
they obtain from third-party suppliers. Our DSPs are designed in
families of products that share a common architecture and
therefore can execute the same software. We support these
products with easy-to-use development tools, which are designed
to reduce our customers product development costs and
time-to-market.
Markets
and Applications
The following describes some of the characteristics of, and
customer products within, our major end markets:
Industrial Our industrial market
includes the following sectors:
Industrial and Instrumentation Our industrial
automation applications generally require ICs that offer
performance greater than that available from
commodity-level ICs but generally do not have production
volumes that warrant custom or application-specific ICs.
Combinations of analog, mixed-signal, and DSP ICs are usually
employed to achieve the necessary functionality. Our
instrumentation applications are usually designed using the
highest performance analog and mixed-signal ICs available. Our
industrial and instrumentation market includes applications such
as:
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Process control systems
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Oscilloscopes
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Robotics
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Lab, chemical, and environmental analyzers
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Environmental control systems
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Weigh scales
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Defense/Aerospace The defense, commercial
avionics and space markets all require high-performance ICs that
meet rigorous environmental and reliability specifications. Many
of our analog 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 specifically tested versions of products derived from
our standard product offering. Customer products include:
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Navigation systems
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Radar systems
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Space and satellite communications
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Security devices
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Energy Management The desire to improve
energy efficiency, conservation, reliability, and cleanliness is
driving investments in 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:
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Utility meters
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Wind turbines
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Meter communication modules
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Solar inverters
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Substation relays and automation equipment
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Building energy automation/control
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Healthcare Two significant trends in the
healthcare market today are the increasing need for higher
channel counts in medical systems to improve resolution and
throughput while achieving a lower cost per channel, and the
movement of highly accurate patient monitoring devices to the
home, improving patient care and reducing overall healthcare
costs. Our innovative technologies are designed into a variety
of high performance imaging, patient
4
monitoring, medical instrumentation, and home health devices.
Our offerings include both standard and application-specific
products and are used in applications such as:
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Ultrasound
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Infusion pumps
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CT scanners
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Clinical lab instrumentation
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Digital x-ray
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Surgical instrumentation
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Multi-parameter patient monitors
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Blood analyzers
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Pulse oximeters
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Activity monitors
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Automotive The automotive industry
relies on electronics to bring differentiated features to market
quickly. As a result, electronic equipment content is continuing
to increase as a percentage of total vehicle cost. In the
automotive market, we have achieved significant market
penetration through collaboration with manufacturers worldwide
to drive innovation in three key areas: safety systems, power
train electronics, and infotainment (which includes
entertainment, communications and navigation systems). We offer
a wide portfolio of analog ICs used in powertrain and body
electronics applications designed to help improve fuel
efficiency and lower emissions. We have developed products
specifically for the automotive market which are used in such
applications as:
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Crash sensors in airbag systems
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Smart suspension systems
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Roll-over sensing
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Engine control
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Global positioning satellite (GPS)
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In-cabin electronics
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Automotive navigation systems
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Audio
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Anti-lock brakes
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Collision avoidance systems
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Consumer Market demand for digital
entertainment systems and the consumer demand for high quality
voice transmissions, music, movies and photographs have allowed
us to combine analog and digital design capability to provide
solutions that meet the rigorous cost 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. These products include:
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Digital camcorders and cameras
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High-performance audio/video equipment
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Home theater systems
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Portable media devices
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High-definition televisions
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High-definition DVD recorders/players
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Communications The development of
broadband, wireless and Internet infrastructures around the
world has created an important market for our communications
products. Communications technology involves the acquisition of
analog 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, has been creating demand for our products. Our
products are used in the full spectrum of signal processing for
audio, data, image and video communication. In wireless and
broadband communication applications, our products are
incorporated into:
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Cellular basestation equipment
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Cellular handsets
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Wired networking equipment
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Computer Revenues from computer
customers now comprise only a small percentage of our total
revenue given the limited opportunity for high performance
signal processing technology in this market.
See Note 4 in the Notes to our Consolidated Financial
Statements contained in Item 8 of this Annual Report on
Form 10-K
for further information about our products by category and end
market.
Research
and Development
Our markets are characterized by rapid technological changes and
advances. Accordingly, we make substantial investments in the
design and development of new products and manufacturing
processes, and the improvement of existing products and
manufacturing processes. We spent approximately
$492 million during fiscal 2010 on the design, development
and improvement of new and existing products and manufacturing
processes, compared to approximately $447 million during
fiscal 2009 and approximately $533 million during fiscal
2008.
5
Our research and development strategy focuses on building
technical leadership in core technologies of converters,
amplifiers and RF, MEMS, power management, and DSP. In support
of our research and development activities, we employ thousands
of engineers involved in product and manufacturing process
development at 33 design centers and manufacturing sites located
throughout the world.
Patents
and Other Intellectual Property Rights
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 October 30,
2010, we held approximately 1,600 U.S. patents and
approximately 560 non-provisional 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. It is
generally our policy to seek patent protection for significant
inventions that may be patented, though 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.
Sales
Channels
We sell our products globally through a direct sales force,
third-party distributors, independent sales representatives and
via our website.
We derived approximately 56% of our fiscal 2010 revenue from
sales made through distributors. These distributors typically
maintain an inventory of our products. Some of them also sell
products which compete with our products, including those for
which we are an alternate source. In all regions of the world,
we defer revenue and the related cost of sales on shipments to
distributors until the distributors resell the products to their
customers. We make sales to distributors under agreements that
allow distributors to receive price adjustment credits and to
return qualifying products for credit, 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, distributors
are allowed to return unsold products if we terminate the
relationship with the distributor. Additional information
relating to our sales to distributors is set forth in
Note 2n. in the Notes to Consolidated Financial Statements
contained in Item 8 of this Annual Report on
Form 10-K.
The categorization of sales into geographic regions set forth
below is based upon the location of the customer.
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Geographic Area
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% of 2010 Revenue
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Direct Sales Offices
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United States
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19
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%
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12
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Rest of North/South America
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6
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%
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Europe
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25
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%
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11
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Japan
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16
|
%
|
|
|
2
|
|
China
|
|
|
18
|
%
|
|
|
3
|
|
Rest of Asia
|
|
|
16
|
%
|
|
|
4
|
|
We also have sales representatives
and/or
distributors in over 40 countries outside North America,
including countries where we also have direct sales offices. For
further detail regarding revenue and financial information
6
about our industry, segment and geographic areas, see our
Consolidated Financial Statements and Note 4 in the related
Notes contained in Item 8 of this Annual Report on
Form 10-K.
We support our worldwide technical direct field sales efforts by
an extensive promotional program that includes editorial
coverage and paid advertising in trade publications, direct mail
programs, promotional brochures, technical seminars and
participation in trade shows. We publish and distribute product
catalogs, applications guides, technical handbooks and detailed
data sheets for individual products. We also provide this
information and sell products via our website. We maintain a
staff of field application engineers who aid customers in
incorporating our products into their products.
We have tens of thousands of customers worldwide. Our largest
single customer, excluding distributors, represented
approximately 4% of our fiscal 2010 revenue. Our 20 largest
customers, excluding distributors, accounted for approximately
32% of our fiscal 2010 revenue. These customers used hundreds of
different types of our products in a wide range of applications
spanning the industrial, automotive, communication, consumer and
computer markets.
Seasonality
Sales to customers during our first fiscal quarter may be lower
than other quarters due to plant shutdowns at some of our
customers during the holiday season. 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 included elsewhere in this report, our revenue is more
likely to be influenced on a quarter to quarter basis by
cyclicality in the semiconductor industry.
Foreign
Operations
Through subsidiaries and affiliates, we conduct business in
numerous countries outside the United States. During fiscal
2010, we derived approximately 81% of our revenue from customers
in international markets. Our international business is subject
to risks customarily encountered in foreign operations,
including fluctuations in foreign currency exchange rates and
controls, import and export controls, and other laws, policies
and regulations of foreign governments. Although we engage in
hedging transactions to reduce our exposure to currency exchange
rate fluctuations, our competitive position may be adversely
affected by changes in the exchange rate of the
United States dollar against other currencies.
Production
and Raw Materials
Monolithic integrated circuit components are manufactured in a
sequence of semiconductor production steps that include wafer
fabrication, wafer testing, cutting 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 and ceramic and plastic used for
packaging.
We develop and employ a wide variety of proprietary
manufacturing processes that are specifically tailored for use
in fabricating high-performance analog, DSP, mixed-signal and
MEMS ICs. We also use bipolar and complementary metal-oxide
semiconductor, or CMOS, wafer fabrication processes.
Our IC products are fabricated both at our production facilities
and by third-party wafer fabricators. Our products are
manufactured in our own wafer fabrication facilities using
proprietary processes and at third-party wafer-fabrication
foundries using
sub-micron
digital CMOS processes. A significant portion of our revenue in
fiscal 2010, 2009 and 2008 was from products fabricated at
third-party wafer-fabrication facilities, primarily Taiwan
Semiconductor Manufacturing Company, or TSMC. We operate wafer
fabrication facilities in Wilmington, Massachusetts and
Limerick, Ireland. We closed our wafer fabrication facility in
Cambridge, Massachusetts at the end of fiscal 2009. We also
operate test facilities located in the Philippines and use
third-party subcontractors for the assembly and testing of our
products.
Capital spending was $111.6 million in fiscal 2010,
compared with $56.1 million in fiscal 2009. We currently
plan to make capital expenditures in the range of approximately
$120 million to $130 million in fiscal 2011.
7
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. However, a large portion of our external wafer
purchases and foundry services are from a limited number of
suppliers, primarily TSMC. If TSMC or any of our other 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, these items have generally been available to us as needed.
Backlog
Backlog at the end of fiscal 2010 was approximately
$563 million, up from approximately $411 million at
the end of fiscal 2009. We define backlog as of a particular
date to mean firm orders from a customer or distributor with a
requested delivery date within thirteen weeks. Backlog is
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 cancelled or deliveries to be delayed by customers without
significant penalty. Accordingly, we believe that our backlog at
any time should not be used as an indication of our future
revenue.
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
customers unique requirements so that those cancelled
orders would, in addition, result in an inventory of unsaleable
products, resulting in potential inventory write-offs. As a
result of lengthy manufacturing cycles for some of our products
that are subject to these uncertainties, the amount of
unsaleable product could be substantial.
Government
Contracts
We estimate that approximately 4% of our fiscal 2010 revenue was
attributable to sales to the U.S. government and
U.S. government contractors and subcontractors. Our
government contract business is predominantly in the form of
negotiated, firm fixed-price subcontracts. All such contracts
and subcontracts contain standard provisions relating to
termination at the election of the U.S. government.
Acquisitions,
Divestitures and Investments
An element of our business strategy involves expansion through
the acquisition of businesses, assets, products or technologies
that allow us to complement our existing product offerings,
expand our market coverage, increase our engineering workforce
or enhance our technological capabilities. From time to time, we
consider acquisitions and divestitures that may strengthen our
business.
Additional information relating to our acquisition and
divestiture activities during fiscal 2010, fiscal 2009 and
fiscal 2008 is set forth in Note 2u. and Note 6 of the
Notes to Consolidated Financial Statements included in
Item 8 of this Annual Report on
Form 10-K.
8
Competition
We compete with a number of semiconductor companies in markets
that are highly competitive. Our competitors include:
|
|
|
Broadcom Corporation
|
|
Microchip Technology, Inc.
|
Cirrus Logic, Inc.
|
|
National Semiconductor Corporation
|
Freescale Semiconductor, Inc.
|
|
NXP Semiconductors
|
Infineon Technologies
|
|
ST Microelectronics
|
Intersil Corporation
|
|
Silicon Laboratories, Inc.
|
Linear Technology Corporation
|
|
Texas Instruments, Inc.
|
Maxim Integrated Products, Inc.
|
|
|
We believe that competitive performance in the marketplace for
real-world signal processing components depends upon several
factors, including design and quality of products, product
performance, features and functionality, and product pricing,
availability and capacity, with the relative importance of these
factors varying among products, markets and customers. We
believe our technical innovation emphasizing product performance
and reliability, supported by our commitment to strong customer
service and technical support, enables us to compete in our
chosen markets against both foreign and domestic semiconductor
manufacturers.
Many other companies offer products that compete with our
products, and some have greater financial, manufacturing,
technical and marketing resources than we have. Some of our
competitors may have better established supply or development
relationships with our current and potential customers.
Additionally, some formerly independent competitors have been
purchased by larger companies. Our competitors also include
emerging companies selling specialized products into markets we
serve. 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 price competition.
Environment,
Health and Safety
We are committed to protecting the environment and the health
and safety of our employees, customers and the public. We
endeavor to adhere to applicable environmental, health and
safety (EHS) regulatory and industry standards across all of our
facilities, and to encourage pollution prevention, reduce our
water and energy consumption, reduce waste generation, 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 management systems are certified to ISO 14001, OHSAS 18001,
ISO 9001 and TS16949. We are an applicant member of the
Electronic Industry Citizenship Coalition, or EICC. In fiscal
2009, we published our first Sustainability Report, which stated
our commitment to consuming less energy and applying fair labor
standards, among other things. We are not including the
information contained in our Sustainability Report in, or
incorporating it by reference into this Annual Report on
Form 10-K.
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 chemical content in
jurisdictions where we sell products, including the Restriction
of Hazardous Substances (RoHS) and Registration, Evaluation,
Authorization and Restriction of Chemicals (REACH) directives in
the European Union. Contracts with many of our customers reflect
these and additional EHS compliance standards. 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
9
requirements upon us. Any failure by us to comply with
applicable environmental laws, regulations and contractual
obligations could result in fines, suspension of production, the
need to alter fabrication processes and legal liability.
Employees
As of October 30, 2010, we employed approximately 8,500
individuals worldwide. 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 those
highly-skilled design, process, test and applications engineers
involved in the design, support and manufacture of new and
existing products and processes. We believe that relations with
our employees are good; however, the competition for such
personnel is intense, and the loss of key personnel could have a
material adverse impact on our results of operations and
financial condition.
10
Set forth below and elsewhere in this report and in other
documents we file with the SEC are descriptions of the risks and
uncertainties that could cause our actual results to differ
materially from the results contemplated by the forward-looking
statements contained in this report.
Disruptions
in global credit and financial markets could materially and
adversely affect our business and results of
operations.
Global credit and financial markets appear to be recovering from
extreme disruptions experienced over the past two years.
However, uncertainty about continuing economic stability
remains. Our business was significantly affected by the global
economic crisis. These economic uncertainties affect businesses
such as ours in a number of ways, making it difficult to
accurately forecast and plan our future business activities.
High unemployment rates, continued weakness in commercial and
residential real estate markets and the tightening of credit by
financial institutions may lead consumers and businesses to
continue to postpone spending, which may cause our customers to
cancel, decrease or delay their existing and future orders with
us. In addition, the inability of customers to obtain credit
could impair their ability to make timely payments to us.
Customer insolvencies could also negatively impact our revenues
and our ability to collect receivables. In addition, financial
difficulties experienced by our suppliers or distributors could
result in product delays, increased accounts receivable defaults
and inventory challenges. Financial turmoil may cause financial
institutions to consolidate or go out of business, which
increases the risk that the actual amounts realized in the
future on our financial instruments could differ significantly
from the fair value assigned to them. During the global
financial crisis, many governments adopted stimulus or spending
programs designed to ease the economic impact of the crisis.
Some of our businesses benefited from these stimulus programs
and as these programs conclude, those businesses could be
negatively impacted. The recent debt crisis in certain European
countries could cause the value of the Euro to deteriorate, thus
reducing the purchasing power of our European customers. In
addition, the recent European debt crisis and related financial
restructuring efforts has contributed to the instability in
global credit markets. We are unable to predict the impact of
these events on the apparent economic recovery, and if economic
conditions deteriorate again, we may record additional charges
relating to restructuring costs or the impairment of assets and
our business and results of operations could be materially and
adversely affected.
Our
future revenue, gross margins, operating results and net income
are difficult to predict and may materially fluctuate.
Our future revenue, gross margins, operating results and net
income are difficult to predict and may be materially affected
by a number of factors, including:
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|
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|
|
the effects of adverse economic conditions in the United States
and international markets;
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|
|
changes in customer demand for our products and for end products
that incorporate our products;
|
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|
|
the effectiveness of our efforts to refocus our operations,
including our ability to reduce our cost structure in both the
short term and over a longer duration;
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|
the timing of new product announcements or introductions by us,
our customers or our competitors;
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|
competitive pricing pressures;
|
|
|
|
fluctuations in manufacturing yields, adequate availability of
wafers and other raw materials, and manufacturing, assembly and
test capacity;
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|
|
the ability of our third party suppliers, subcontractors and
manufactures to supply us with sufficient quantities of products
or components;
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|
|
any significant decline in our backlog;
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|
|
the timing, delay or cancellation of significant customer orders
and our ability to manage inventory;
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11
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|
|
|
|
our ability to hire, retain and motivate adequate numbers of
engineers and other qualified employees to meet the demands of
our customers;
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|
|
|
changes in geographic, product or customer mix;
|
|
|
|
our ability to utilize our manufacturing facilities at efficient
levels;
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|
|
potential significant litigation-related costs;
|
|
|
|
the difficulties inherent in forecasting future operating
expense levels, including with respect to costs associated with
labor, utilities, transportation and raw materials;
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|
|
|
the costs related to compliance with increasing worldwide
environmental regulations;
|
|
|
|
changes in our effective tax rates in the United States, Ireland
or worldwide; and
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|
the effects of public health emergencies, natural disasters,
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 is subject to rapid technological
changes and there can be no assurance, depending on the mix of
future business, that products stocked in our inventory will not
be rendered obsolete before we ship them. As a result of these
and other factors, there can be no assurance that we will not
experience material fluctuations in future revenue, gross
margins, operating results and net income on a quarterly or
annual basis. In addition, if our revenue, gross margins,
operating results and net income do not meet the expectations of
securities analysts or investors, the market price of our common
stock may decline.
Changes
in our effective tax rate may impact our results of
operations.
A number of factors may increase our future effective tax rate,
including: increases in tax rates in various jurisdictions; the
jurisdictions in which profits are earned and taxed; the
resolution of issues arising from tax audits with various tax
authorities; 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 write-offs of acquired in-process
research and development and impairments of goodwill in
connection with acquisitions; changes in available tax credits;
and changes in tax laws or the interpretation of such tax laws.
Any significant increase in our future effective tax rates could
adversely impact our net income for future periods.
Long-term
contracts are not typical for us and reductions, cancellations
or delays in orders for our products could adversely affect our
operating results.
We typically do not have long-term sales contracts with our
customers. 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
forecasts of customer demands. As a result, we may incur
inventory and manufacturing costs in advance of anticipated
sales and are subject to the risk of cancellations of orders,
leading to a sharp reduction of sales and backlog. Further,
orders or forecasts may be for products that meet the
customers unique requirements so that those cancelled or
unrealized orders would, in addition, result in an inventory of
unsaleable products, causing potential inventory write-offs. As
a result of lengthy manufacturing cycles for certain of the
products that are subject to these uncertainties, the amount of
unsaleable product could be substantial. Incorrect forecasts, or
reductions, cancellations or delays in orders for our products
could adversely affect our operating results.
Our
future success depends upon our ability to continue to innovate,
improve our products, develop and market new products, and
identify and enter new markets.
Our success significantly depends on our continued ability to
improve our products and develop and market innovative new
products. Product 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
12
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 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 standards or comply
with industry standards and technical requirements may adversely
affect demand for our products and our results of operations. In
addition, our growth is dependent on our continued ability to
identify and penetrate new markets where we have limited
experience and competition is intense. Also, some of our
customers in these markets are less established, which could
subject us to increased credit risk. There can be no assurance
that the markets we serve will grow in the future, that our
existing and new products will meet the requirements of these
markets, that our products 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. Furthermore,
a decline in demand in one or several of our end-user markets
could have a material adverse effect on the demand for our
products and our results of operations.
We may
not be able to compete successfully in markets within the
semiconductor industry in the future.
We face intense technological and pricing competition in the
semiconductor industry, and we expect this competition to
increase in the future, including from companies located outside
the United States. Many other companies offer products that
compete with our products. Some have greater financial,
manufacturing, technical, sales and marketing resources than we
have. Some of our competitors may have more advantageous supply
or development relationships with our current and potential
customers or suppliers. Our competitors also include emerging
companies selling specialized products in markets we serve.
Competition is generally based on design and quality of
products, product performance, features and functionality, and
product pricing, availability and capacity, with the relative
importance of these factors varying among products, markets and
customers. 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. 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.
We rely
on third-party suppliers, subcontractors and manufacturers for
some industry-standard wafers, manufacturing processes and
assembly and test services, and generally cannot control their
availability or conditions of supply.
We rely, and plan to continue to rely, on suppliers, assembly
and test subcontractors, and third-party wafer fabricators to
supply most of our wafers that can be manufactured using
industry-standard submicron processes. This reliance involves
several risks, including reduced control over availability,
capacity utilization, delivery schedules, manufacturing yields,
and costs. Additionally, we utilize a limited number of
third-party wafer fabricators, primarily Taiwan Semiconductor
Manufacturing Company, or TSMC. In addition, these suppliers
often provide manufacturing services to our competitors and
therefore periods of increased industry demand may result in
capacity constraints. In certain instances, the third party
supplier is the sole source of highly specialized processing
services. If our suppliers are unable or unwilling to
manufacture and deliver components to us on the time schedule
and of the quality or quantity that we require or provide us
with required manufacturing processes, we may be forced to seek
to engage additional or replacement suppliers, which could
result in additional expenses and delays in product development
or shipment of product to our customers. If replacement
suppliers or manufacturing processes are not available, we may
also experience delays in product development or shipment which
could, in turn, result in the temporary or permanent loss of
customers. A significant portion of our fiscal 2010 revenue was
from products fabricated at third-party wafer-fabrication
facilities, primarily TSMC.
13
The
markets for semiconductor products are cyclical, and increased
production may lead to overcapacity and lower prices, and
conversely, we may not be able to satisfy unexpected demand for
our products.
The cyclical nature of the semiconductor industry has resulted
in periods when demand for our products has increased or
decreased rapidly. If 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, or if we
overbuild inventory in a period of decreased demand, our
operating results may be adversely affected as a result of
increased operating expenses, reduced margins, underutilization
of capacity or asset impairment charges. These capacity
expansions by us and other semiconductor manufacturers could
also lead to overcapacity in our target markets which could lead
to price erosion that would 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, or locate suitable third-party
suppliers, to respond effectively to changes in demand for our
existing products or to the demand for new products requested by
our customers, and our current or future business could be
materially and adversely affected.
Our
semiconductor products are complex and we may be subject to
product warranty and indemnity claims, which could result in
significant costs and damage to our reputation and adversely
affect the market acceptance of our products.
Semiconductor products are highly complex and may contain
defects when they are first introduced or as new versions are
developed. We generally warrant our products to our customers
for one year from the date title passes from us. We invest
significant resources in the testing of our products; however,
if any of our products contain defects, 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 associated with product
recalls, which may adversely impact our operating results. We
may also be subject to customer indemnity claims. Our customers
have on occasion been sued, and may in the future be sued, by
third parties with respect to infringement or other product
matters, and 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. If any of our products contains defects, or has
reliability, quality or compatibility problems, our reputation
may be damaged, which could make it more difficult for us to
sell our products to existing and prospective customers and
could adversely affect our operating results.
We have manufacturing processes that utilize a substantial
amount of technology as the fabrication of integrated circuits
is a highly complex and precise process. 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.
We are
involved in frequent litigation, including regarding
intellectual property rights, which could be costly to bring or
defend and could require us to redesign products or pay
significant royalties.
The semiconductor industry is characterized by frequent claims
and litigation involving patent and other intellectual property
rights, including claims arising under our contractual
obligations to indemnify our customers. 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. From time to time, we receive claims from
third parties asserting that our products or processes infringe
their patents or other intellectual property rights. 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
14
necessary to enforce our patents or other of our intellectual
property rights or to defend us against claims of infringement,
and this litigation could be costly and divert the attention of
our key personnel. We could be subject to warranty or product
liability claims that could lead to significant costs and
expenses as we defend those claims or pay damage awards. There
can be no assurance that we are adequately insured to protect
against all claims and potential liabilities. We may incur costs
and expenses relating to a recall of our customers
products due to an alleged failure of components we supply. An
adverse outcome in litigation could have a material adverse
effect on our financial position or on our operating results or
cash flows in the period in which the litigation is resolved.
We may be
unable to adequately protect our proprietary rights, which may
limit our ability to compete effectively.
Our 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 and other methods, to protect our
proprietary technologies and processes. Despite our efforts to
protect our proprietary technologies and processes, it is
possible that competitors or other unauthorized third parties
may obtain, copy, use or disclose our technologies, products and
processes. 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 proprietary technology.
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 provide us with meaningful
protection. We may not have foreign patents or pending
applications corresponding to our U.S. patents and
applications. Even if foreign patents are granted, effective
enforcement in foreign countries may not be available. If our
patents and mask works do not adequately protect our technology,
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 there can
be no assurance that the confidential nature of our proprietary
information will be maintained in the course of such future
employment.
If we do
not retain our key personnel, our ability to execute our
business strategy will be adversely affected.
Our continued success depends to a significant extent upon the
recruitment, retention and effective succession of our executive
officers and key management and technical personnel,
particularly our experienced engineers. The competition for
these employees is intense. The loss of the services of one or
more of our key personnel could have a material adverse effect
on our operating results. In addition, there could be a material
adverse effect on our business should the turnover rates for
engineers and other key personnel increase significantly or if
we are unable to continue to attract qualified personnel. We do
not maintain any key person life insurance policy on any of our
officers or employees.
To remain
competitive, we may need to 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,
expand our market coverage, increase our engineering workforce
or enhance our technological capabilities. We may not be able to
find businesses that have the technology or resources we need
and, if we find such businesses, we may not be able to purchase
or license the technology or resources on commercially favorable
terms or at all. Acquisitions and technology licenses are
difficult to identify and complete for a number of reasons,
including the cost of potential transactions, competition among
prospective buyers and licensees, the need for regulatory
approvals, and difficulties related to integration efforts. Both
in the U.S. and abroad, governmental regulation of
acquisitions has become more complex, increasing the costs and
risks of undertaking significant acquisitions. In order to
finance a potential transaction, we may need to
15
raise additional funds by issuing securities or borrowing money.
We may not be able to find 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.
Acquisitions also involve a number of risks, including:
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|
|
|
|
difficulty integrating acquired technologies, operations and
personnel with our existing businesses;
|
|
|
|
diversion of management attention in connection with both
negotiating the acquisitions and integrating the assets;
|
|
|
|
strain on managerial and operational resources as management
tries to oversee larger operations;
|
|
|
|
the future funding requirements for acquired companies, which
may be significant;
|
|
|
|
potential loss of key employees;
|
|
|
|
exposure to unforeseen liabilities of acquired
companies; and
|
|
|
|
increased risk of costly and time-consuming litigation.
|
If we are unable to successfully address these risks, we may not
realize some or all of the expected benefits of the acquisition,
which may have an adverse effect on our business plans and
operating results.
We rely
on manufacturing capacity located in geologically unstable
areas, which could affect the availability of supplies and
services.
We, like many companies in the semiconductor industry, rely on
internal manufacturing capacity, wafer fabrication foundries and
other
sub-contractors
in geologically unstable locations around the world. This
reliance involves risks associated with the impact of
earthquakes on us and the semiconductor industry, including
temporary loss of capacity, availability and cost of key raw
materials, utilities and equipment and availability of key
services, including transport of our products worldwide. Any
prolonged inability to utilize one of our manufacturing
facilities, or those of our subcontractors or third-party wafer
fabrication foundries, as a result of fire, 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.
We are
exposed to business, economic, political, legal and other risks
through our significant worldwide operations.
We have significant operations and manufacturing facilities
outside the United States, including in Ireland and the
Philippines. During fiscal 2010, we derived approximately 81% of
our revenue from customers in international markets. Although we
engage in hedging transactions to reduce our exposure to
currency exchange rate fluctuations, there can be no assurance
that our competitive position will not be adversely affected by
changes in the exchange rate of the United States dollar against
other currencies. Potential interest rate increases, as well as
high energy costs, could have an adverse impact on industrial
and consumer spending patterns and could adversely impact demand
for our products. While a majority of our cash is generated
outside the United States, we require a substantial amount of
cash in the United States for operating requirements, stock
repurchases, cash dividends and acquisitions. If we are unable
to address our U.S. cash requirements through operations,
through borrowings under our current credit facility or from
other sources of cash obtained at an acceptable cost, our
business strategies and operating results could be adversely
affected.
In addition to being exposed to the ongoing economic cycles in
the semiconductor industry, we are also subject to the economic,
political and legal risks inherent in international operations,
including the risks associated with the recent crisis in global
credit and financial markets, ongoing uncertainties and
political and economic instability in many countries around the
world, as well as economic disruption from acts of terrorism and
the response to them by the United States and its allies. Other
business risks associated with global operations include
increased managerial complexities, air transportation
disruptions, expropriation, currency controls, currency exchange
rate movement, additional costs related to foreign taxes,
tariffs and freight rate increases, exposure to different
business practices and legal standards, particularly with
respect to price protection, competition practices, intellectual
property, anti-
16
corruption and environmental compliance, trade and travel
restrictions, pandemics, import and export license requirements
and restrictions, difficulties in staffing and managing
worldwide operations, and accounts receivable collections.
We expect to continue to expand our business and operations in
China. Our success in the Chinese markets may be adversely
affected by Chinas continuously evolving laws and
regulations, including those relating to taxation, import and
export tariffs, currency controls, environmental regulations,
anti-corruption, and intellectual property rights and
enforcement of those rights. Enforcement of existing laws or
agreements may be inconsistent. In addition, changes in the
political environment, governmental policies or
U.S.-China
relations could result in revisions to laws or regulations or
their interpretation and enforcement, increased taxation,
restrictions on imports, import duties or currency revaluations,
which could have an adverse effect on our business plans and
operating results.
Our
operating results are dependent on the performance of
independent distributors.
A significant portion of our sales are through independent
distributors that are not under our control. These independent
distributors generally represent product lines offered by
several companies and thus could reduce their sales efforts
applied to our products or they could terminate their
representation of us. We generally do not require letters of
credit from our distributors and are not protected against
accounts receivable default or bankruptcy by these distributors.
Our inability to collect open accounts receivable could
adversely affect our operating results. Termination of a
significant distributor, whether at our initiative or the
distributors initiative, could disrupt our current
business, and if we are unable to find suitable replacements,
our operating results could be adversely affected.
We are
subject to increasingly strict environmental health and safety
(EHS) regulations, which could increase our expenses and affect
our operating results.
Our industry is subject to increasingly strict EHS requirements,
particularly those environmental requirements that control and
restrict the use, transportation, emission, discharge, storage
and disposal of certain chemicals used or produced in the
semiconductor manufacturing process. Public attention to
environmental concerns continues to increase, and our customers
routinely include stringent environmental standards in their
contracts with us. Changes in environmental regulations may
require us to invest in potentially costly pollution control
equipment or alter the way our products are made. In addition,
we use hazardous and other regulated materials that subject us
to risks of strict liability for damages caused by releases of
such materials. Any failure to control such materials adequately
or to comply with regulatory restrictions or contractual
obligations could result in penalties, civil and criminal fines,
and damage our reputation, and might increase our expenses and
adversely affect our operating results.
New climate change regulations could require us to change our
manufacturing processes or obtain substitute materials that may
cost more or be less available for our manufacturing operations.
In addition, new restrictions on carbon dioxide or other
greenhouse gas emissions could result in significant costs for
us. The Commonwealth of Massachusetts has adopted greenhouse gas
requirements, and the U.S. Congress may pass federal
greenhouse gas legislation in the future. The
U.S. Environmental Protection Agency (EPA) is preparing
greenhouse gas reporting regulations that are likely to apply to
us. EPA may propose other climate change-based regulations that
also may increase our expenses and adversely affect our
operating results. We expect increased worldwide regulatory
activity relating to climate change in the future. Compliance
with these laws and regulations has not had a material impact on
our capital expenditures, earnings, financial condition or
competitive position. There is no assurance that the cost to
comply with current or future EHS laws and regulations will not
exceed our estimates or adversely affect our financial condition
or results of operations. Additionally, any failure by us to
comply with applicable EHS requirements or contractual
obligations could result in penalties, civil and criminal fines,
suspension of or changes to production, legal liability and
damage to our reputation.
If we are
unable to generate sufficient cash flow, we may not be able to
service our debt obligations, including making payments on our
$375 million senior unsecured notes.
In fiscal 2009, we issued in a public offering $375 million
aggregate principal amount of 5.0% senior unsecured notes
due July 1, 2014. Our ability to make payments of principal
and interest on our indebtedness when
17
due depends upon our future performance, which will be subject
to general economic conditions, industry cycles and financial,
business and other factors affecting our consolidated
operations, many of which are beyond our control. If we are
unable to generate sufficient cash flow from operations in the
future to service our debt, we may be required to, among other
things:
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|
|
seek additional financing in the debt or equity markets;
|
|
|
|
refinance or restructure all or a portion of our indebtedness,
including the notes;
|
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|
|
sell selected assets;
|
|
|
|
reduce or delay planned capital expenditures; or
|
|
|
|
reduce or delay planned operating expenditures.
|
Such measures might not be sufficient to enable us to service
our debt, including the notes, which could negatively impact our
financial results. In addition, any such financing, refinancing
or sale of assets might not be possible on economically
favorable terms.
Restrictions
in our credit facility and outstanding debt instruments may
limit our activities.
Our current credit facility and our 5.0% senior unsecured
notes 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 our company,
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 foreign exchange rates, interest rates, changes in
technology and changes in the level of competition. In addition,
our credit facility requires us to maintain compliance with
specified financial ratios. If we breach any of the covenants
under our credit facility or the indenture governing our
outstanding notes and do not obtain appropriate waivers, then,
subject to applicable cure periods, our outstanding indebtedness
thereunder could be declared immediately due and payable.
Our stock
price may be volatile.
The market price of our common stock has been volatile in the
past and may be volatile in the future, as it may be
significantly affected by the following factors:
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|
|
crises in global credit, debt and financial markets;
|
|
|
|
actual or anticipated fluctuations in our revenue and operating
results;
|
|
|
|
changes in financial estimates by securities analysts or our
failure to perform in line with those estimates or our published
guidance;
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|
|
changes in market valuations of other semiconductor companies;
|
|
|
|
announcements by us or our competitors of significant new
products, technical innovations, acquisitions or dispositions,
litigation or capital commitments;
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|
|
departures of key personnel;
|
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|
|
actual or perceived noncompliance with corporate responsibility
or ethics standards by us or any of our employees, officers or
directors; and
|
|
|
|
negative media publicity targeting us or our competitors.
|
The stock market has historically experienced volatility,
especially within the semiconductor industry, that often has
been unrelated to the performance of particular companies. These
market fluctuations may cause our stock price to fall regardless
of our operating results.
18
|
|
ITEM 1B.
|
UNRESOLVED
STAFF COMMENTS
|
Not applicable.
Our corporate headquarters is located in Norwood, Massachusetts.
Manufacturing and other operations are conducted in several
locations worldwide. The following tables provide certain
information about our principal general offices and
manufacturing facilities:
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Principal Properties
|
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|
|
Owned:
|
|
Use
|
|
Floor Space
|
|
Wilmington, MA
|
|
Wafer fabrication, testing, engineering, marketing and
administrative offices
|
|
|
586,200 sq. ft.
|
|
Cavite, Philippines
|
|
Wafer probe and testing, warehouse, engineering and
administrative offices
|
|
|
545,300 sq. ft.
|
|
Limerick, Ireland
|
|
Wafer fabrication, wafer probe and testing, engineering and
administrative offices
|
|
|
446,500 sq. ft.
|
|
Greensboro, NC
|
|
Product testing, engineering and administrative offices
|
|
|
98,700 sq. ft.
|
|
San Jose, CA
|
|
Engineering, administrative offices
|
|
|
76,700 sq. ft.
|
|
Manila, Philippines
|
|
Components assembly and testing, engineering and administrative
offices
|
|
|
74,000 sq. ft.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal
|
|
|
|
|
|
|
|
|
Properties
|
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|
|
|
|
Lease
|
|
|
Leased:
|
|
Use
|
|
Floor Space
|
|
Expiration
|
|
Renewals
|
|
|
|
|
|
|
(fiscal year)
|
|
|
|
Norwood, MA
|
|
Corporate headquarters, engineering, components testing, sales
and marketing offices
|
|
|
130,000 sq. ft.
|
|
|
|
2022
|
|
|
2, five-yr.
periods
|
Greensboro, NC
|
|
Engineering and administrative offices
|
|
|
47,600 sq. ft.
|
|
|
|
2011
|
|
|
1, two-yr.
period
|
In addition to the principal leased properties listed in the
above table, we also lease sales offices and other premises at
20 locations in the United States and 36 locations
internationally under operating lease agreements. These leases
expire at various dates through the year 2022. We do not
anticipate experiencing significant difficulty in retaining
occupancy of any of our manufacturing, office or sales
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 11 in the Notes to Consolidated Financial
Statements contained in Item 8 of this Annual Report on
Form 10-K.
19
|
|
ITEM 3.
|
LEGAL
PROCEEDINGS
|
From time to time in the ordinary course of our business,
various claims, charges and litigation are asserted or commenced
against us arising from, or related to, contractual matters,
patents, trademarks, personal injury, environmental matters,
product liability, insurance coverage and personnel and
employment disputes. 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.
|
|
ITEM 4.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
|
No matters were submitted to a vote of our security holders
during the last quarter of the fiscal year ended
October 30, 2010.
20
EXECUTIVE
OFFICERS OF THE COMPANY
The following table sets forth (i) the name, age and
position of each of our executive officers and (ii) the
business experience of each person named in the table during at
least the past five years. There is no family relationship among
any of our executive officers.
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|
Executive Officer
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Age
|
|
Position(s)
|
|
Business Experience
|
|
Ray Stata
|
|
|
76
|
|
|
Chairman of the Board
|
|
Chairman of the Board since 1973; Chief Executive Officer from
1973 to November 1996; President from 1971 to November 1991.
|
Jerald G. Fishman
|
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|
64
|
|
|
President, Chief Executive Officer and Director
|
|
Chief Executive Officer since November 1996; President and
Director since November 1991; Executive Vice President from 1988
to November 1991; Group Vice President Components
from 1982 to 1988.
|
David A. Zinsner
|
|
|
41
|
|
|
Vice President, Finance and Chief Financial Officer
|
|
Vice President, Finance and Chief Financial Officer since
January 2009; Senior Vice President and Chief Financial Officer
Intersil Corporation from 2005 to December 2008; Corporate
Controller and Treasurer Intersil Corporation from 2000 to
2005. Corporate Treasurer Intersil Corporation from 1999 to
2000.
|
Seamus Brennan
|
|
|
59
|
|
|
Vice President, Corporate Controller and Chief Accounting Officer
|
|
Vice President, Corporate Controller and Chief Accounting
Officer since December 2008; Corporate Controller from 2002 to
December 2008; Assistant Corporate Controller from 1997 to 2002;
Manager Enterprise System Implementation from 1994 to 1997;
Plant Controller, Analog Devices, B.V. Limerick,
Ireland from 1989 to 1994.
|
Samuel H. Fuller
|
|
|
64
|
|
|
Vice President, Research and Development and Chief Technology
Officer
|
|
Vice President, Research and Development since March 1998; Chief
Technology Officer since March 2006; Vice President of Research
and Chief Scientist of Digital Equipment Corp. from 1983 to 1998.
|
Robert R. Marshall
|
|
|
56
|
|
|
Vice President, Worldwide Manufacturing
|
|
Vice President, Worldwide Manufacturing since February 1994;
Vice President, Manufacturing, Limerick Site, Analog Devices,
B.V. Limerick, Ireland from November 1991 to
February 1994; Plant Manager, Analog Devices, B.V.
Limerick, Ireland from January 1991 to November 1991.
|
21
|
|
|
|
|
|
|
|
|
Executive Officer
|
|
Age
|
|
Position(s)
|
|
Business Experience
|
|
William Matson
|
|
|
51
|
|
|
Vice President, Human Resources
|
|
Vice President, Human Resources since November 2006; Chief Human
Resource Officer of Lenovo, an international computer
manufacturer, from January 2005 to June 2006; General Manager of
IBM Business Transformation Outsourcing from September 2003 to
April 2005; Vice President, Human Resources of IBM Asia Pacific
Region from December 1999 to September 2003.
|
Robert McAdam
|
|
|
59
|
|
|
Vice President, Core Products and Technologies Group
|
|
Vice President, Core Products and Technologies Group since
October 2009; Vice President and General Manager, Analog
Semiconductor Components from February 1994 to September 2009;
Vice President and General Manager, Analog Devices,
B.V. Limerick, Ireland from January 1991 to February
1994; Product Line Manager, Analog Devices, B.V.
Limerick, Ireland from October 1988 to January 1991.
|
Vincent Roche
|
|
|
50
|
|
|
Vice President, Strategic Market Segments Group
|
|
Vice President, Strategic Market Segments Group since October
2009; Vice President, Worldwide Sales from March 2001 to October
2009; Vice President and General Manager, Silicon Valley
Business Units and Computer & Networking from 1999 to March
2001; Product Line Director from 1995 to 1999; Product Marketing
Manager from 1988 to 1995.
|
Margaret K. Seif
|
|
|
49
|
|
|
Vice President, General Counsel and Secretary
|
|
Vice President, General Counsel and Secretary since January
2006; Senior Vice President, General Counsel and Secretary of
RSA Security Inc. from January 2000 to November 2005; Vice
President, General Counsel and Secretary of RSA Security Inc.
from June 1998 to January 2000.
|
22
PART II
|
|
ITEM 5.
|
MARKET
FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
|
Our common stock is listed on the New York Stock Exchange under
the symbol ADI. The tables below set forth the high and low
sales prices per share of our common stock on the New York Stock
Exchange and the dividends declared for each quarterly period
within our two most recent fiscal years.
High and
Low Sales Prices of Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2010
|
|
|
Fiscal 2009
|
|
Period
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
First Quarter
|
|
$
|
32.19
|
|
|
$
|
25.26
|
|
|
$
|
22.40
|
|
|
$
|
15.29
|
|
Second Quarter
|
|
$
|
31.50
|
|
|
$
|
26.38
|
|
|
$
|
22.53
|
|
|
$
|
17.82
|
|
Third Quarter
|
|
$
|
31.37
|
|
|
$
|
26.28
|
|
|
$
|
28.21
|
|
|
$
|
19.14
|
|
Fourth Quarter
|
|
$
|
34.09
|
|
|
$
|
27.45
|
|
|
$
|
29.71
|
|
|
$
|
25.54
|
|
Dividends
Declared Per Outstanding Share of Common Stock
In fiscal 2010 and fiscal 2009, we paid a cash dividend in each
quarter as follows:
|
|
|
|
|
|
|
|
|
Period
|
|
Fiscal 2010
|
|
|
Fiscal 2009
|
|
|
First Quarter
|
|
$
|
0.20
|
|
|
$
|
0.20
|
|
Second Quarter
|
|
$
|
0.20
|
|
|
$
|
0.20
|
|
Third Quarter
|
|
$
|
0.22
|
|
|
$
|
0.20
|
|
Fourth Quarter
|
|
$
|
0.22
|
|
|
$
|
0.20
|
|
During the first quarter of fiscal 2011, on November 19,
2010, our Board of Directors declared a cash dividend of $0.22
per outstanding share of common stock. The dividend will be paid
on December 22, 2010 to all shareholders of record at the
close of business on December 3, 2010. The payment of
future dividends, if any, will be based on several factors
including our financial performance, outlook and liquidity.
Information regarding our equity compensation plans and the
securities authorized for issuance thereunder is set forth in
Item 12 below.
Issuer
Purchases of Equity Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approximate Dollar
|
|
|
|
|
|
|
|
|
|
Total Number of Shares
|
|
|
Value of Shares that
|
|
|
|
Total Number of
|
|
|
|
|
|
Purchased as Part of
|
|
|
May Yet Be Purchased
|
|
|
|
Shares
|
|
|
Average Price Paid
|
|
|
Publicly Announced
|
|
|
Under the Plans or
|
|
Period
|
|
Purchased(a)
|
|
|
Per Share(b)
|
|
|
Plans or Programs(c)
|
|
|
Programs
|
|
|
August 1, 2010 through August 28, 2010
|
|
|
74,879
|
|
|
$
|
29.70
|
|
|
|
74,879
|
|
|
$
|
85,343,471
|
|
August 29, 2010 through September 25, 2010
|
|
|
50,584
|
|
|
$
|
28.88
|
|
|
|
49,565
|
|
|
$
|
83,912,272
|
|
September 26, 2010 through October 30, 2010
|
|
|
1,014,390
|
|
|
$
|
31.71
|
|
|
|
1,013,801
|
|
|
$
|
51,767,122
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,139,853
|
|
|
$
|
31.45
|
|
|
|
1,138,245
|
|
|
$
|
51,767,122
|
|
|
|
|
(a) |
|
Includes 1,608 shares paid to us by employees to satisfy
employee tax obligations upon vesting of restricted stock
granted to our employees under our equity compensation plans. |
|
(b) |
|
The average price paid per share of stock repurchased under the
stock repurchase program includes the commissions paid to the
brokers. |
23
|
|
|
(c) |
|
We publicly announced a stock repurchase program on
August 12, 2004. On June 6, 2007, our Board of
Directors authorized the repurchase by us of an additional
$1 billion of our common stock, increasing the total amount
of our common stock we are authorized to repurchase under the
program to $4 billion. On November 19, 2010, our Board
of Directors authorized the repurchase by us of an additional
$1 billion of our common stock under our existing share
repurchase program. Under the repurchase program, we may
repurchase outstanding shares of our common stock from time to
time in the open market and through privately negotiated
transactions. Unless terminated earlier by resolution of our
Board of Directors, the repurchase program will expire when we
have repurchased all shares authorized for repurchase under the
repurchase program. |
The number of holders of record of our common stock at
November 18, 2010 was 2,936. This number does not include
shareholders for whom shares are held in a nominee
or street name. On October 29, 2010, the last
reported sales price of our common stock on the New York Stock
Exchange was $33.67 per share.
Comparative
Stock Performance Graph
The following graph compares cumulative total shareholder return
on our common stock since October 29, 2005 with the
cumulative total return of the Standard & Poors
500 Index and the Standard & Poors
Semiconductors Index. This graph assumes the investment of $100
on October 29, 2005 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.
24
|
|
ITEM 6.
|
SELECTED
FINANCIAL DATA
|
The following table includes selected financial data for each of
our last five fiscal years and includes adjustments to reflect
the classification of our Baseband Chipset Business and our CPU
voltage regulation and PC thermal monitoring business as
discontinued operations. See Note 2u. in the Notes to
Consolidated Financial Statements contained in Item 8 of
this Annual Report on
Form 10-K
for information on discontinued operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(thousands, except per share amounts)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Statement of Operations data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue from continuing operations
|
|
$
|
2,761,503
|
|
|
$
|
2,014,908
|
|
|
$
|
2,582,931
|
|
|
$
|
2,464,721
|
|
|
$
|
2,250,100
|
|
Income from continuing operations, net of tax
|
|
|
711,225
|
|
|
|
247,408
|
|
|
|
525,177
|
|
|
|
502,123
|
|
|
|
519,175
|
|
Total income (loss) from discontinued operations, net of tax
|
|
|
859
|
|
|
|
364
|
|
|
|
261,107
|
|
|
|
(5,216
|
)
|
|
|
30,307
|
|
Net income
|
|
|
712,084
|
|
|
|
247,772
|
|
|
|
786,284
|
|
|
|
496,907
|
|
|
|
549,482
|
|
Income per share from continuing operations, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
2.39
|
|
|
|
0.85
|
|
|
|
1.79
|
|
|
|
1.55
|
|
|
|
1.45
|
|
Diluted
|
|
|
2.33
|
|
|
|
0.85
|
|
|
|
1.77
|
|
|
|
1.51
|
|
|
|
1.40
|
|
Net income per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
2.39
|
|
|
|
0.85
|
|
|
|
2.69
|
|
|
|
1.54
|
|
|
|
1.53
|
|
Diluted
|
|
|
2.33
|
|
|
|
0.85
|
|
|
|
2.65
|
|
|
|
1.50
|
|
|
|
1.48
|
|
Cash dividends declared per common share
|
|
|
0.84
|
|
|
|
0.80
|
|
|
|
0.76
|
|
|
|
0.70
|
|
|
|
0.56
|
|
Balance Sheet data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
4,328,831
|
|
|
$
|
3,369,407
|
|
|
$
|
3,081,132
|
|
|
$
|
2,967,276
|
|
|
$
|
3,992,476
|
|
Long term debt
|
|
$
|
400,635
|
|
|
$
|
379,626
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
|
|
ITEM 7.
|
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (all tabular amounts in thousands except per share
amounts)
|
This Managements Discussion and Analysis of Financial
Condition and Results of Operations, including in particular the
section entitled Outlook, contains forward-looking
statements regarding future events and our future results that
are subject to the safe harbors created under the Securities Act
of 1933 (the Securities Act) and the Securities
Exchange Act of 1934 (the Exchange Act). These
statements are based on current expectations, estimates,
forecasts, and projections about the industries in which we
operate and the beliefs and assumptions of our management. Words
such as expects, anticipates,
targets, goals, projects,
intends, plans, believes,
seeks, estimates, continues,
may, 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,
particularly in light of the uncertainty remaining after the
global credit and financial market crisis over the past two
years; our anticipated growth and trends in our businesses, our
future capital needs and capital expenditures; our future market
position and competitive changes in the marketplace for our
products; our ability to innovate new products and technologies;
the timing or the effectiveness of our continuing efforts to
refocus our operations and reduce our cost structure and the
expected amounts of any cost savings related to those efforts;
our ability to access credit or capital markets; our ability to
pay dividends or repurchase stock; our ability to service our
outstanding debt; our expected tax rate; the future actions of
our third-party suppliers; our reliance on assembly and test
subcontractors, third party wafer fabricators and independent
distributors; the expected outcomes of intellectual property and
litigation matters; the ability to safeguard our patents and
intellectual property; potential acquisitions or divestitures;
the continued availability of key personnel; the global nature
of our operations; the effect of new accounting pronouncements;
and other characterizations of future events or circumstances
are forward-looking statements. Readers are cautioned that these
forward-looking statements are only predictions and are subject
to risks, uncertainties, and assumptions that are difficult to
predict, including those identified in Part I,
Item 1A. Risk Factors and elsewhere in our 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 except to the extent required by law.
During the first quarter of fiscal 2008, we sold our baseband
chipset business and related support operations, or Baseband
Chipset Business, to MediaTek Inc. and sold our CPU voltage
regulation and PC thermal monitoring business to certain
subsidiaries of ON Semiconductor Corporation. The financial
results of these businesses are presented as discontinued
operations in the consolidated statements of income for all
periods presented. The assets related to these businesses are
reflected as non-current assets of discontinued operations in
the consolidated balance sheet as of October 31, 2009.
Unless otherwise noted, this Managements Discussion and
Analysis relates only to financial results from continuing
operations.
Results
of Operations
Overview
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
2010
|
|
2009
|
|
2008
|
|
Revenue
|
|
$
|
2,761,503
|
|
|
$
|
2,014,908
|
|
|
$
|
2,582,931
|
|
Gross Margin %
|
|
|
65.2
|
%
|
|
|
55.5
|
%
|
|
|
61.1
|
%
|
Net income from Continuing Operations
|
|
$
|
711,225
|
|
|
$
|
247,408
|
|
|
$
|
525,177
|
|
Net income from Continuing Operations as a % of Revenue
|
|
|
25.8
|
%
|
|
|
12.3
|
%
|
|
|
20.3
|
%
|
Diluted EPS from Continuing Operations
|
|
$
|
2.33
|
|
|
$
|
0.85
|
|
|
$
|
1.77
|
|
Diluted EPS
|
|
$
|
2.33
|
|
|
$
|
0.85
|
|
|
$
|
2.65
|
|
The
year-to-year
revenue changes by end market and product category are more
fully outlined below under Revenue Trends by End Market
and Revenue Trends by Product.
In fiscal 2010, our revenue increased 37% from fiscal 2009 and
our diluted earnings per share from continuing operations
increased from $0.85 to $2.33. Cash flow from operations in
fiscal 2010 was $991.2 million, or 36% of revenue. In
addition, we received $216.1 million in net proceeds
related to employee stock option exercises,
26
distributed $250 million to our shareholders in dividend
payments and paid $111.6 million for capital expenditures.
These factors contributed to the net increase in cash, cash
equivalents and short-term investments of $871.8 million in
fiscal 2010.
The
year-to-year
increase in revenue from fiscal 2009 to fiscal 2010 was the
result of a resurgence in economic activity from the low levels
achieved during 2009 as a result of the general economic
downturn following the global credit and financial crisis. The
strategy we employed during the start of the economic downturn
to be more focused on products and markets that value innovation
and to make fundamental improvements to our cost structure aided
in our growth. Improving macro trends in the industrial,
communications, automotive and healthcare markets helped, and we
believe will continue to help, to generate strong growth
opportunities for us in the future. However, these trends remain
uncertain and we cannot predict the sustainability of the
current economic conditions. Consequently, our reported results
for fiscal 2010 may not be indicative of our future results.
Revenue
Trends by End Market
The following table summarizes revenue by end market. The
categorization of revenue by end market is determined using a
variety of data points including the technical characteristics
of the product, the sold to customer information,
the ship to customer information and the end
customer product or application into which our product will be
incorporated. As data systems for capturing and tracking this
data evolve and improve, 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
Product
|
|
|
|
|
|
|
|
|
Product
|
|
|
|
|
|
Product
|
|
|
|
Revenue
|
|
|
Revenue*
|
|
|
Y/Y%
|
|
|
Revenue
|
|
|
Revenue
|
|
|
Revenue
|
|
|
Revenue
|
|
|
Industrial
|
|
$
|
1,266,423
|
|
|
|
46
|
%
|
|
|
48
|
%
|
|
$
|
857,950
|
|
|
|
43
|
%
|
|
$
|
1,143,333
|
|
|
|
44
|
%
|
Automotive
|
|
|
333,045
|
|
|
|
12
|
%
|
|
|
66
|
%
|
|
|
200,989
|
|
|
|
10
|
%
|
|
|
255,172
|
|
|
|
10
|
%
|
Consumer
|
|
|
513,348
|
|
|
|
19
|
%
|
|
|
23
|
%
|
|
|
417,652
|
|
|
|
21
|
%
|
|
|
538,202
|
|
|
|
21
|
%
|
Communications
|
|
|
595,709
|
|
|
|
22
|
%
|
|
|
21
|
%
|
|
|
493,409
|
|
|
|
24
|
%
|
|
|
559,006
|
|
|
|
22
|
%
|
Computer
|
|
|
52,978
|
|
|
|
2
|
%
|
|
|
18
|
%
|
|
|
44,908
|
|
|
|
2
|
%
|
|
|
87,218
|
|
|
|
3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue
|
|
$
|
2,761,503
|
|
|
|
100
|
%
|
|
|
37
|
%
|
|
$
|
2,014,908
|
|
|
|
100
|
%
|
|
$
|
2,582,931
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
The sum of the individual percentages do not equal the total due
to rounding. |
Industrial The
year-to-year
increase in revenue from fiscal 2009 to fiscal 2010 in
industrial end market revenue was primarily the result of a
broad-based increase in demand in this end market, which was
most significant for products sold into the instrumentation and
automation sectors. The
year-to-year
decrease in revenue from fiscal 2008 to fiscal 2009 in
industrial end market revenue was primarily the result of a
broad-based decline in demand in this end market, which was most
significant for products sold into the instrumentation and
process controls sectors.
Automotive The
year-to-year
increase in revenue from fiscal 2009 to fiscal 2010 in
automotive end market revenue was primarily the result of
increased demand due to various government-initiated incentive
programs, inventory replenishment and a general increase in the
electronic content found in vehicles. The
year-to-year
decrease in revenue from fiscal 2008 to fiscal 2009 in
automotive end market revenue was primarily due to economic
conditions relating to the global credit crisis resulting in
cautious customer spending behavior.
Consumer The
year-to-year
increase in revenue from fiscal 2009 to fiscal 2010 in consumer
end market revenue was primarily the result of a broad-based
increase in demand for products used in digital cameras and
other consumer applications. The
year-to-year
decrease in revenue from fiscal 2008 to fiscal 2009 in consumer
end market revenue was primarily the result of a decrease in
demand for products used in home entertainment, digital cameras
and video game applications, consistent with the global slowdown
in consumer spending.
27
Communications The
year-to-year
increase in revenue from fiscal 2009 to fiscal 2010 in
communications end market revenue was primarily the result of a
broad-based increase in demand in this end market, which was
most significant for the infrastructure sector. The
year-to-year
decrease from fiscal 2008 to fiscal 2009 in communications end
market revenue was primarily the result of a decrease in sales
of analog products used in basestations, wireless handsets and
networking applications.
Revenue
Trends by Product
The following table summarizes revenue by product categories.
The categorization of our products into broad categories is
based on the characteristics of the individual products, the
specification of the products and in some cases the specific
uses that certain products have within applications. The
categorization of products into categories is therefore subject
to judgment in some cases and can vary over time. In instances
where products move between product categories we reclassify the
amounts in the product categories for all prior periods. Such
reclassifications typically do not materially change the sizing
of, or the underlying trends of results within, each product
category.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
Product
|
|
|
|
|
|
|
|
|
Product
|
|
|
|
|
|
Product
|
|
|
|
Revenue
|
|
|
Revenue
|
|
|
Y/Y%
|
|
|
Revenue
|
|
|
Revenue*
|
|
|
Revenue
|
|
|
Revenue*
|
|
|
Converters
|
|
$
|
1,286,344
|
|
|
|
47
|
%
|
|
|
29
|
%
|
|
$
|
999,227
|
|
|
|
50
|
%
|
|
$
|
1,235,378
|
|
|
|
48
|
%
|
Amplifiers/Radio frequency
|
|
|
703,082
|
|
|
|
25
|
%
|
|
|
40
|
%
|
|
|
502,972
|
|
|
|
25
|
%
|
|
|
666,893
|
|
|
|
26
|
%
|
Other analog
|
|
|
342,473
|
|
|
|
12
|
%
|
|
|
55
|
%
|
|
|
221,110
|
|
|
|
11
|
%
|
|
|
272,950
|
|
|
|
11
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal analog signal processing
|
|
|
2,331,899
|
|
|
|
84
|
%
|
|
|
35
|
%
|
|
|
1,723,309
|
|
|
|
86
|
%
|
|
|
2,175,221
|
|
|
|
84
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Power management & reference
|
|
|
194,761
|
|
|
|
7
|
%
|
|
|
65
|
%
|
|
|
118,258
|
|
|
|
6
|
%
|
|
|
143,572
|
|
|
|
6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total analog products
|
|
$
|
2,526,660
|
|
|
|
91
|
%
|
|
|
37
|
%
|
|
$
|
1,841,567
|
|
|
|
91
|
%
|
|
$
|
2,318,793
|
|
|
|
90
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Digital signal processing
|
|
|
234,843
|
|
|
|
9
|
%
|
|
|
35
|
%
|
|
|
173,341
|
|
|
|
9
|
%
|
|
|
264,138
|
|
|
|
10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue
|
|
$
|
2,761,503
|
|
|
|
100
|
%
|
|
|
37
|
%
|
|
$
|
2,014,908
|
|
|
|
100
|
%
|
|
$
|
2,582,931
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
The sum of the individual percentages do not equal the total due
to rounding. |
The increase in total revenue from fiscal 2009 to fiscal 2010
was the result of a broad-based increase in sales across all of
our product categories. The decrease in revenue from fiscal 2008
to fiscal 2009 was due to declining demand across our product
categories in every market that we serve, particularly the
industrial and consumer end markets, as a result of an overall
decline in the worldwide economy.
Revenue
Trends by Geographic Region
The percentage of product sales from continuing operations by
geographic region, based upon point of sale, for the last three
fiscal years is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
Region
|
|
2010
|
|
2009
|
|
2008
|
|
United States
|
|
|
19
|
%
|
|
|
20
|
%
|
|
|
20
|
%
|
Rest of North and South America
|
|
|
6
|
%
|
|
|
5
|
%
|
|
|
4
|
%
|
Europe
|
|
|
25
|
%
|
|
|
25
|
%
|
|
|
26
|
%
|
Japan
|
|
|
16
|
%
|
|
|
17
|
%
|
|
|
19
|
%
|
China
|
|
|
18
|
%
|
|
|
19
|
%
|
|
|
16
|
%
|
Rest of Asia
|
|
|
16
|
%
|
|
|
14
|
%
|
|
|
15
|
%
|
28
In fiscal year 2010 and 2009, the predominant countries
comprising Rest of North and South America are
Canada and Mexico; the predominant countries comprising
Europe are Germany, Sweden, France and the
United Kingdom; and the predominant countries comprising
Rest of Asia are Taiwan, South Korea and Singapore.
In fiscal year 2008, the predominant countries comprising
Rest of North and South America are Canada and
Mexico; the predominant countries comprising Europe
are Germany, France and the United Kingdom; and the
predominant countries comprising Rest of Asia are
Taiwan and South Korea.
Sales increased in all geographic regions in fiscal 2010 as
compared to fiscal 2009, with sales in Europe and the Rest of
Asia experiencing the largest increases. The increase in sales
was the result of an increase in demand for our products
primarily as a result of improving economic conditions worldwide.
Sales declined in all geographic regions in fiscal 2009, as
compared to fiscal 2008, with sales in Europe and Japan
experiencing the largest decline. This decline in sales in
Europe was partially attributable to a decline in the automotive
end market. The decline in sales in Japan was principally
attributable to the general decline in consumer spending as a
result of the global economic crisis. The decline in China was
smaller than the decline in the other regions primarily due to
the strong demand for our products used in Chinas recent
infrastructure build-out of the countrys next generation
of communication technology.
Gross
Margin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
2010
|
|
2009
|
|
2008
|
|
Gross Margin
|
|
$
|
1,799,422
|
|
|
$
|
1,118,637
|
|
|
$
|
1,577,275
|
|
Gross Margin %
|
|
|
65.2
|
%
|
|
|
55.5
|
%
|
|
|
61.1
|
%
|
Gross margin percentage was higher in fiscal 2010 by
970 basis points as compared to fiscal 2009 primarily as a
result of an increase in sales of $746.6 million, increased
operating levels in our manufacturing facilities and the impact
of ongoing efforts to reduce overall manufacturing costs,
including the savings realized as a result of wafer fabrication
facility consolidations. Additionally, a higher proportion of
our revenues was from products sold into the instrumentation and
automation sectors of the industrial end market, which earn
higher margins as compared to products sold into our other end
markets.
Gross margin percentage was lower in fiscal 2009 by
560 basis points as compared to fiscal 2008, primarily as a
result of a decrease in sales of $568.0 million and reduced
operating levels in our manufacturing facilities that created
adverse utilization variances.
Research
and Development (R&D)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
2010
|
|
2009
|
|
2008
|
|
R&D Expenses
|
|
$
|
492,305
|
|
|
$
|
446,980
|
|
|
$
|
533,480
|
|
R&D Expenses as a % of Revenue
|
|
|
17.8
|
%
|
|
|
22.2
|
%
|
|
|
20.7
|
%
|
Research and development, or R&D, expenses in fiscal 2010
increased $45.3 million, or 10%, from fiscal 2009. The
increase was primarily the result of an increase in variable
compensation expense, which is a variable expense linked to our
overall profitability, partially offset by the impact of actions
we took over the past two years to control discretionary
spending and permanently reduce operating expenses.
R&D expenses in fiscal 2009 decreased $86.5 million,
or 16%, from fiscal 2008. This decrease was primarily the result
of the actions we took to constrain or permanently reduce
operating expenses as well as a decrease in variable
compensation expenses.
R&D expenses as a percentage of revenue will fluctuate from
year-to-year
depending on the amount of revenue and the success of new
product development efforts, which we view as critical to our
future growth. At any point in time we have hundreds of R&D
projects underway, and we believe that none of these projects is
material on an individual basis. We expect to continue the
development of innovative technologies and processes for new
products, and we believe that a continued commitment to R&D
is essential in order to maintain product leadership with our
29
existing products and to provide innovative new product
offerings, and therefore we expect to continue to make
significant R&D investments in the future.
Selling,
Marketing, General and Administrative (SMG&A)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
2010
|
|
2009
|
|
2008
|
|
SMG&A Expenses
|
|
$
|
390,560
|
|
|
$
|
333,184
|
|
|
$
|
415,682
|
|
SMG&A Expenses as a % of Revenue
|
|
|
14.1
|
%
|
|
|
16.5
|
%
|
|
|
16.1
|
%
|
Selling, marketing, general and administrative, or SMG&A,
expenses in fiscal 2010 increased $57.4 million, or 17%,
from fiscal 2009. The increase was primarily the result of an
increase in variable compensation expense, which is a variable
expense linked to our overall profitability, and higher sales
commission expenses, which are variable expenses linked to our
sales. These increases were offset by the impact of actions we
took over the past two years to control discretionary spending
and permanently reduce operating expenses.
SMG&A expenses in fiscal 2009 decreased $82.5 million,
or 20%, from fiscal 2008. This decrease was primarily the result
of our actions taken to constrain or permanently reduce
operating expenses as well as a decrease in variable
compensation expenses.
Stock-based
Compensation Expense
As of October 30, 2010, the total compensation cost related
to unvested equity awards not yet recognized in our statement of
income was approximately $95 million (before tax
consideration), which we will recognize over a weighted average
period of 1.4 years.
During fiscal 2009, our shareholders approved and we completed
an employee stock option exchange program (Option Exchange). The
Option Exchange provided our eligible employees, excluding our
named executive officers and directors, the opportunity to
exchange eligible stock option grants for a smaller number of
new stock options with a lower exercise price, or in some
instances cash, that had approximately the same fair value as
the options surrendered.
See Note 3 in the Notes to our Consolidated Financial
Statements contained in Item 8 of this Annual Report on
Form 10-K
for further information on our stock based compensation.
Special
Charges
The following is a summary of ongoing restructuring actions we
have taken over the last several years.
Closure
of Wafer Fabrication Facility in Sunnyvale
We ceased production at our California wafer fabrication
facility in November 2006. We paid the related lease obligation
costs on a monthly basis over the remaining lease term, which
expired in March 2010. We recorded a one-time settlement charge
of $0.4 million in the first quarter of fiscal 2010 related
to the termination of the lease. This action was completed in
fiscal 2010.
Consolidation
of a Wafer Fabrication Facility in Limerick
In fiscal 2007, we recorded a special charge of
$13.7 million as a result of our decision to only use
eight-inch technology at our wafer fabrication facility in
Limerick. Certain manufacturing processes and products produced
on the Limerick facilitys six-inch production line have
transitioned to our existing eight-inch production line in
Limerick while others have transitioned to external foundries.
The charge was for severance and fringe benefit costs recorded
in accordance with our ongoing benefit plan for 150
manufacturing employees associated with this action. We
terminated the employment of all employees associated with these
programs and have paid out all amounts owed to employees as
severance. During fiscal 2008, we recorded an additional charge
of $1.5 million related to this action, of which
$1.2 million was an adjustment to the original estimate of
the severance costs and $0.3 million was for
clean-up and
closure costs that we expensed as incurred. During fiscal 2009,
we recorded additional charges of
30
$1.2 million for
clean-up and
closure costs that we expensed as incurred. The production in
the six-inch wafer fabrication facility ceased during the fourth
quarter of fiscal 2009. This action was completed in fiscal
2010. The closure of this facility resulted in annual cost
savings of approximately $25 million per year, which we
began realizing in the first quarter of fiscal 2010. These
savings are recorded in cost of sales, of which approximately
$1 million relates to non-cash depreciation savings.
Reduction
of Operating Costs
During the fourth quarter of fiscal 2008, in order to further
reduce our operating cost structure, we recorded a special
charge of $1.6 million for severance and fringe benefit
costs recorded in accordance with our ongoing benefit plan or
the statutory requirements at foreign locations for 19
engineering, selling, marketing, general and administrative
employees.
During fiscal 2009, we recorded an additional charge of
$30.3 million related to this cost reduction action.
Approximately $2.1 million of this charge was for lease
obligation costs for facilities that we ceased using during the
first quarter of fiscal 2009; approximately $0.8 million
was for the write-off of property, plant and equipment no longer
used as a result of this action; and approximately
$0.5 million was for contract termination costs and
approximately $0.3 million was for
clean-up and
closure costs that we expensed as incurred. The remaining
$26.6 million related to the severance and fringe benefit
costs recorded in accordance with our ongoing benefit plan or
statutory requirements at foreign locations for 245
manufacturing employees and 302 engineering and SMG&A
employees. This cost reduction action, which was substantially
completed during the second quarter of fiscal 2009, resulted in
annual savings of approximately $36.4 million. These annual
savings are being realized as follows: approximately
$31.6 million in SMG&A expenses and approximately
$4.8 million in cost of sales.
During the first quarter of fiscal 2010, we recorded an
additional charge of $11.4 million related to the further
reduction of our operating cost structure. Approximately
$10.9 million of this charge was for severance and fringe
benefit costs recorded in accordance with our ongoing benefit
plan or statutory requirements at foreign locations for 149
engineering and SMG&A employees. Approximately
$0.5 million of the charge relates to our decision to
abandon efforts to develop a particular expertise in power
management, resulting in the impairment of related intellectual
property. When fully implemented in the first quarter of fiscal
2011, we estimate that these cost reduction actions will result
in annual savings of approximately $16 million.
We terminated the employment of all employees associated with
this action and are paying amounts owed to employees for
severance as income continuance.
Closure
of a Wafer Fabrication Facility in Cambridge
During the first quarter of fiscal 2009, we recorded a special
charge of $22.1 million as a result of our decision to
consolidate our Cambridge, Massachusetts wafer fabrication
facility into our existing Wilmington, Massachusetts facility.
In connection with the anticipated closure of this facility, we
evaluated the recoverability of the facilitys
manufacturing assets and concluded that there was an impairment
of approximately $12.9 million based on the revised period
of intended use. The remaining $9.2 million was for
severance and fringe benefit costs recorded in accordance with
our ongoing benefit plan for 175 manufacturing employees and 9
SMG&A employees associated with this action.
We finished production in the Cambridge wafer fabrication
facility and began
clean-up
activities during the fourth quarter of fiscal 2009. During the
fourth quarter of fiscal 2009 we reversed approximately
$1.8 million of our severance accrual. The accrual reversal
was required because 51 employees either voluntarily left
the Company or found alternative employment within the Company.
In addition, we recorded a special charge of approximately
$1.7 million for the impairment of manufacturing assets
that were originally going to be moved to our other wafer
fabrication facilities but are no longer needed at those
facilities and therefore have no future use. We also recorded a
special charge of $0.1 million for
clean-up
costs as we began our
clean-up of
the Cambridge wafer fabrication facility at the end of the
fourth quarter of fiscal 2009. We terminated the employment of
all employees associated with this charge and are paying amounts
owed to employees for severance as income continuance. We
estimate that this action will result in annual cost savings of
approximately $41 million per year, which we began
realizing in the third quarter of fiscal 2010. We expect these
annual savings to be realized as follows: approximately
$40.2 million
31
in cost of sales, of which approximately $4.0 million
relates to non-cash depreciation savings, and approximately
$0.8 million relates to SMG&A expenses.
During the first quarter of fiscal 2010, we recorded an
additional charge of $4.7 million related to this cost
reduction action. Approximately $3.4 million of the charge
related to lease obligation costs for the Cambridge wafer
fabrication facility, which we ceased using in the first quarter
of fiscal 2010, and the remaining $1.3 million of the
charge related to
clean-up and
closure costs. These cost reductions resulted in annual savings
of approximately $2.4 million, which we began realizing in
the first quarter of fiscal 2010.
Operating
Income from Continuing Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
2010
|
|
2009
|
|
2008
|
|
Operating income from Continuing Operations
|
|
$
|
900,074
|
|
|
$
|
284,817
|
|
|
$
|
625,025
|
|
Operating income from Continuing Operations as a % of Revenue
|
|
|
32.6
|
%
|
|
|
14.1
|
%
|
|
|
24.2
|
%
|
The $615.3 million, or 216%, increase in operating income
from continuing operations in fiscal 2010 as compared to fiscal
2009 was primarily the result of an increase in revenue of
$746.6 million, a 970 basis point increase in gross
margin percentage, and lower special charges recorded in fiscal
2010 as compared to fiscal 2009.
The $340.2 million, or 54%, decrease in operating income
from continuing operations in fiscal 2009 as compared to fiscal
2008 was primarily the result of a decrease in revenue of
$568.0 million, a 560 basis point decrease in gross
margin percentage and an increase of $50.6 million in
special charges. This decrease in operating income from
continuing operations was partially offset by a decrease in
R&D and SMG&A expenses as more fully described above
under the headings Research and Development and
Selling, Marketing, General and Administrative.
Nonoperating
(Income) Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Interest expense
|
|
$
|
10,429
|
|
|
$
|
4,094
|
|
|
$
|
|
|
Interest income
|
|
|
(9,837
|
)
|
|
|
(15,621
|
)
|
|
|
(41,041
|
)
|
Other, net
|
|
|
(2,183
|
)
|
|
|
(1,100
|
)
|
|
|
(36
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonoperating income
|
|
$
|
(1,591
|
)
|
|
$
|
(12,627
|
)
|
|
$
|
(41,077
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonoperating income was lower by $11 million in fiscal 2010
as compared to fiscal 2009 primarily due to higher interest
expense incurred during fiscal 2010 as a result of the issuance
of $375 million aggregate principal 5.0% senior
unsecured notes on June 30, 2009 resulting in a partial
year of interest expense in 2009 compared to a full year in
2010. In addition, we earned lower interest income on
investments as a result of lower interest rates in fiscal 2010
as compared to fiscal 2009.
Nonoperating income was lower by $28.5 million in fiscal
2009 as compared to fiscal 2008 primarily due to lower interest
income earned on investments as a result of lower interest rates
in fiscal 2009 as compared to fiscal 2008. In addition, we
incurred interest expense during fiscal 2009 as a result of the
issuance of $375 million aggregate principal
5.0% senior unsecured notes on June 30, 2009. We
entered into an interest rate swap in June 2009 that swaps the
fixed rate of the notes to a variable rate based on the
three-month LIBOR plus 2.05%.
Provision
for Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
2010
|
|
2009
|
|
2008
|
|
Provision for Income Taxes
|
|
$
|
190,440
|
|
|
$
|
50,036
|
|
|
$
|
140,925
|
|
Effective Income Tax Rate
|
|
|
21.1
|
%
|
|
|
16.8
|
%
|
|
|
21.2
|
%
|
32
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 fiscal 2010 was higher compared to
our effective tax rate for fiscal 2009 primarily as a result of
a change in the mix of our income to jurisdictions where income
is taxed at a higher rate. In addition, higher special charges
recorded in fiscal 2009, a majority of which provided a tax
benefit at the higher U.S. tax rate contributed to a higher
effective tax rate for fiscal 2010 as compared to fiscal 2009.
Our effective tax rate for fiscal 2009 was lower compared to our
effective tax rate for fiscal 2008 primarily as a result of our
recording special charges of $53.7 million in fiscal 2009,
a majority of which provided a tax benefit at the higher
U.S. tax rate, and as a result of a change in the mix of
our income to jurisdictions where income is taxed at a lower
rate.
Income
from Continuing Operations, Net of Tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
2010
|
|
2009
|
|
2008
|
|
Income from Continuing Operations, net of tax
|
|
$
|
711,225
|
|
|
$
|
247,408
|
|
|
$
|
525,177
|
|
Income from Continuing Operations, net of tax as a % of Revenue
|
|
|
25.8
|
%
|
|
|
12.3
|
%
|
|
|
20.3
|
%
|
Diluted EPS from Continuing Operations
|
|
$
|
2.33
|
|
|
$
|
0.85
|
|
|
$
|
1.77
|
|
Income from continuing operations, net of tax, in fiscal 2010
was higher than in fiscal 2009 by approximately
$463.8 million primarily as a result of the
$615.3 million increase in operating income that was
partially offset by a higher provision for income taxes in
fiscal 2010.
Income from continuing operations, net of tax, in fiscal 2009
was lower than in fiscal 2008 by approximately
$277.8 million primarily as a result of the
$340.2 million decrease in operating income that was
partially offset by a lower provision for income taxes in fiscal
2009.
The impact of inflation and foreign currency exchange rate
movement on our results of operations during the past three
fiscal years has not been significant.
Discontinued
Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Income from Discontinued Operations, net of tax
|
|
$
|
|
|
|
$
|
364
|
|
|
$
|
12,779
|
|
Gain on sale of Discontinued Operations, net of tax
|
|
|
859
|
|
|
|
|
|
|
|
248,328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income from Discontinued Operations, net of tax
|
|
$
|
859
|
|
|
$
|
364
|
|
|
$
|
261,107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share from Discontinued Operations
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
$
|
0.88
|
|
We sold our Baseband Chipset Business to MediaTek Inc. and our
CPU voltage regulation and PC thermal monitoring business to
certain subsidiaries of ON Semiconductor Corporation during the
first quarter of fiscal 2008. Accordingly, the results of the
operations of these businesses have been presented as
discontinued operations within the consolidated financial
statements.
Acquisitions
In fiscal 2006, we acquired substantially all the outstanding
stock of privately-held Integrant Technologies, Inc. (Integrant)
of Seoul, Korea. The acquisition enabled us to enter the mobile
TV market and strengthened our presence in the Asia region. We
paid $8.4 million related to the purchase of shares from
the founder of Integrant during the period from July 2007
through July 2009. We recorded these payments as additional
goodwill.
In fiscal 2006, we acquired all the outstanding stock of
privately-held AudioAsics A/S (AudioAsics) of Roskilde, Denmark.
The acquisition of AudioAsics allows us to continue developing
low-power audio solutions, while expanding our presence in the
Nordic and Eastern European regions. We paid additional cash
payments of
33
$3.1 million during fiscal 2009 for the achievement of
revenue-based milestones during the period from October 2006
through January 2009, which we recorded as additional goodwill.
In addition, in accordance with the terms of the acquisition
documents, we paid $3.2 million during fiscal 2009 based on
the achievement of technological milestones during the period
from October 2006 through January 2009, which we recorded as
compensation expense in fiscal 2008. All revenue and
technological milestones related to this acquisition have been
met and no additional payments will be made.
We have not provided pro forma results of operations for
Integrant and AudioAsics in this report as they were not
material to us on either an individual or an aggregate basis. We
included the results of operations of each acquisition in our
consolidated statement of income from the date of such
acquisition.
Liquidity
and Capital Resources
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
2010
|
|
2009
|
|
2008
|
|
Net Cash Provided by Operations
|
|
$
|
991,175
|
|
|
$
|
432,148
|
|
|
$
|
669,368
|
|
Net Cash Provided by Operations as a % of Revenue
|
|
|
35.9
|
%
|
|
|
21.4
|
%
|
|
|
25.9
|
%
|
At October 30, 2010, cash, cash equivalents and short-term
investments totaled $2,687.8 million, an increase of
$871.8 million from the fourth quarter of fiscal 2009. The
primary sources of funds for fiscal 2010 were net cash generated
from operating activities of $991.2 million and
$216.1 million in net proceeds from employee stock option
exercises. The principal uses of funds for fiscal 2010 were
dividend payments of $250.0 million and capital
expenditures of $111.6 million.
We sold our Baseband Chipset Business to MediaTek Inc. and our
CPU voltage regulation and PC thermal monitoring business to
certain subsidiaries of ON Semiconductor Corporation during the
first quarter of fiscal 2008. The cash flows from these
discontinued operations have been combined with the operating,
investing and financing cash flows from continuing operations
(i.e. no separate classification of cash flows from discontinued
operations) for all periods presented. We believe the absence of
the cash flows from these discontinued operations has not and
will not have a material impact on our future liquidity and
financial position. Additionally, as a result of these
dispositions, we reclassified certain assets and liabilities
related to these businesses to assets or liabilities of
discontinued operations. See Note 2u. in the Notes to our
Consolidated Financial Statements contained in Item 8 of
this Annual Report on
Form 10-K
for further information regarding these discontinued operations.
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
2010
|
|
2009
|
|
Accounts Receivable
|
|
$
|
387,169
|
|
|
$
|
301,036
|
|
Days Sales Outstanding*
|
|
|
46
|
|
|
|
48
|
|
Inventory
|
|
$
|
277,478
|
|
|
$
|
253,161
|
|
Days Cost of Sales in Inventory*
|
|
|
100
|
|
|
|
92
|
|
|
|
|
* |
|
We use the annualized fourth quarter revenue in our calculation
of days sales outstanding and we use the annualized fourth
quarter cost of sales in our calculation of days cost of sales
in inventory. |
Accounts receivable at October 30, 2010 increased
$86.1 million, or 29%, from the end of the fourth quarter
of fiscal 2009. The increase in receivables was the result of
higher revenue in the fourth quarter of fiscal 2010 as compared
to the fourth quarter of fiscal 2009.
Inventory at October 30, 2010 increased by
$24.3 million, or 10%, from the end of the fourth quarter
of fiscal 2009. The increase in inventory relates primarily to
an increase in manufacturing production to support higher sales
demand.
Current liabilities increased to $643.5 million at
October 30, 2010, an increase of $256.9 million, or
66%, from $386.6 million at the end of fiscal 2009. This
increase was primarily due to higher deferred income on
shipments to distributors in fiscal 2010 as compared to fiscal
2009, and an increase in accrued liabilities relating to
variable
34
compensation expense. In addition, income taxes payable
increased in fiscal 2010 as compared to fiscal 2009 as a result
of higher profits and a change in the mix of our income to
jurisdictions where income is taxed at a higher rate.
Net additions to property, plant and equipment including
discontinued operations were $111.6 million in fiscal 2010,
$56.1 million in fiscal 2009 and $157.4 million in
fiscal 2008. We expect fiscal 2011 capital expenditures to be in
the range of $120 million to $130 million.
During fiscal 2010, our Board of Directors declared cash
dividends totaling $0.84 per outstanding share of common stock
resulting in aggregate dividend payments of $250.0 million.
After the end of fiscal 2010, on November 19, 2010, our
Board of Directors declared a cash dividend of $0.22 per
outstanding share of our common stock. The dividend is payable
on December 22, 2010 to shareholders of record on
December 3, 2010 and is expected to total approximately
$66 million. We currently expect quarterly dividends to
continue at $0.22 per share, although they remain subject to
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.
Our common stock repurchase program has been in place since
August 2004. In the aggregate, the Board of Directors has
authorized us to repurchase $4 billion of our common stock
under the program. 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 we have
repurchased all shares authorized under the program. As of
October 30, 2010, we had repurchased a total of
approximately 116.0 million shares of our common stock for
approximately $3,948.2 million under this program. As of
October 30, 2010, an additional $51.8 million remained
available for repurchase of shares under the current authorized
program. On November 19, 2010, our Board of Directors
authorized the repurchase by us of an additional $1 billion
of our common stock under our existing share repurchase program.
The repurchased shares are held as authorized but unissued
shares of common stock. We also from time to time repurchase
shares in settlement of employee tax withholding obligations due
upon the vesting of restricted stock or restricted stock units
or the exercise of stock options, or in certain limited
circumstances to satisfy the exercise price of options granted
to our employees under our equity compensation plans. Any future
common stock repurchases will be based on several factors
including our financial performance, outlook, liquidity and the
amount of cash we have available in the United States.
On June 30, 2009, we issued $375 million aggregate
principal amount of 5.0% senior unsecured notes due
July 1, 2014 (the Notes) with annual interest payments of
5.0% paid in two installments on January 1 and July 1 of each
year, commencing January 1, 2010. The net proceeds of the
offering were $370.4 million, after issuing at a discount
and deducting expenses, underwriting discounts and commissions,
which will be amortized over the term of the Notes. We swapped
the fixed interest portion of these Notes for a variable
interest rate based on the three-month LIBOR plus 2.05% (2.34%
as of October 30, 2010). The variable interest payments
based on the variable annual rate are payable quarterly. The
LIBOR based rate is set quarterly three months prior to the date
of the interest payment. The indenture governing the Notes
contains covenants that may limit our ability to: incur, create,
assume or guarantee any debt for borrowed money secured by a
lien upon a principal property; enter into sale and lease-back
transactions with respect to a principal property; and
consolidate with or merge into, or transfer or lease all or
substantially all of our assets to any other party. In addition,
we have a five-year $165 million unsecured revolving credit
facility that expires in May 2013. To date, we have not borrowed
under this credit facility but we may borrow in the future and
use the proceeds for support of commercial paper issuance, stock
repurchases, dividend payments, acquisitions, capital
expenditures, working capital and other lawful corporate
purposes.
At October 30, 2010, our principal source of liquidity was
$2,687.8 million of cash and cash equivalents and
short-term investments. As of October 30, 2010,
approximately $725.4 million of our cash and cash
equivalents and short-term investments was held in the United
States. The balance of our cash and cash equivalents and
short-term investments was held outside the United States in
various foreign subsidiaries. As we intend to reinvest certain
of our foreign earnings indefinitely, this cash held outside the
United States is not available to meet certain of our cash
requirements in the United States, including for cash dividends
and common stock repurchases.
The volatility in the credit markets has generally diminished
liquidity and capital availability in worldwide markets. While
there are signs that conditions may be improving, there is no
certainty that the current tentative recovery in credit and
financial markets will continue. We are unable to predict the
likely duration of the tentative
35
recovery in the credit and financial markets. However, we
believe that our existing sources of liquidity and cash expected
to be generated from future operations, together with existing
and anticipated available long-term financing, will be
sufficient to fund operations, capital expenditures, research
and development efforts, dividend payments (if any) and
purchases of stock (if any) under our stock repurchase program
in the immediate future and for at least the next twelve months.
The table below summarizes our contractual obligations and the
amounts we owe under these contracts in specified periods as of
October 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment due by period
|
|
|
|
|
|
|
|
|
|
Less than
|
|
|
|
|
|
|
|
|
More than
|
|
(thousands)
|
|
Total
|
|
|
1 Year
|
|
|
1-3 Years
|
|
|
4-5 Years
|
|
|
5 Years
|
|
|
Contractual obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
leasesa
|
|
$
|
85,729
|
|
|
$
|
21,871
|
|
|
$
|
21,400
|
|
|
$
|
11,803
|
|
|
$
|
30,655
|
|
Long-term debt obligations
|
|
|
375,000
|
|
|
|
|
|
|
|
|
|
|
|
375,000
|
|
|
|
|
|
Interest payments associated with long-term debt
obligationsb
|
|
|
75,000
|
|
|
|
18,750
|
|
|
|
37,500
|
|
|
|
18,750
|
|
|
|
|
|
Payments due under interest rate swap
agreementsc
|
|
|
33,369
|
|
|
|
8,897
|
|
|
|
17,818
|
|
|
|
6,654
|
|
|
|
|
|
Deferred compensation
pland
|
|
|
8,690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,690
|
|
Pension
fundinge
|
|
|
8,965
|
|
|
|
8,965
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
586,753
|
|
|
$
|
58,483
|
|
|
$
|
76,718
|
|
|
$
|
412,207
|
|
|
$
|
39,345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Certain of our operating lease obligations include escalation
clauses. These escalating payment requirements are reflected in
the table. |
|
(b) |
|
These interest payments are expected to be offset by the
proceeds from our interest rate swap agreements. |
|
(c) |
|
These interest payments are based on a variable interest rate
based on the three month LIBOR plus 2.05%. The actual payments
will be based on the LIBOR based rate which is set quarterly
three months prior to the date of the interest payments plus
2.05%. |
|
(d) |
|
These payments relate to obligations under our Deferred
Compensation Plan. The deferred compensation plan 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 amount in the More than
5 Years column of the table represents the remaining
total balance under the deferred compensation plan to be paid to
participants who have not terminated employment. Since we cannot
reasonably estimate the timing of withdrawals for participants
who have not yet terminated employment we have included the
future obligation to these participants in the More than
5 Years column of the table. |
|
(e) |
|
Our funding policy for our foreign defined benefit plans is
consistent with the local requirements of each country. The
payment obligations in the table are estimates of our expected
contributions to these plans for fiscal year 2010. The actual
future payments may differ from the amounts presented in the
table and reasonable estimates of payments beyond one year are
not practical because of potential future changes in variables
such as plan asset performance, interest rates and the rate of
increase in compensation levels. |
Purchase orders for the purchase of raw materials and other
goods and services are not included in the table above. We are
not able to determine the total amount of these purchase orders
that represent contractual obligations, as purchase orders may
represent authorizations to purchase rather than binding
agreements. In addition, our purchase orders generally allow for
cancellation without significant penalties. We do not have
significant agreements for the purchase of raw materials or
other goods specifying minimum quantities or set prices that
exceed our expected short-term requirements.
As of October 30, 2010, our total liabilities associated
with uncertain tax positions was $28.3 million, which are
included in Other non-current liabilities in our
Consolidated Balance Sheet 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
36
tax positions. Therefore, we have not included these uncertain
tax positions in the above contractual obligations table.
The expected timing of payments and the amounts of the
obligations discussed above are estimated based on current
information available as of October 30, 2010.
Off-balance
Sheet Financing
As of October 30, 2010, we had no off-balance sheet
financing arrangements.
Outlook
The following statements are based on current expectations.
These statements are forward-looking, and actual results may
differ materially. Unless specifically mentioned, these
statements do not give effect to the potential impact of any
mergers, acquisitions, divestitures, or business combinations
that may be announced or closed after the date of filing this
report. These statements supersede all prior statements
regarding our business outlook made by us.
We are planning for revenue in the first quarter of fiscal 2011
to be in the range of $715 million to $740 million.
Our plan is for gross margin for the first quarter of fiscal
2011 to be approximately 66%. We are planning for operating
margins in the first quarter of fiscal 2011 to be in the range
of 34.5% to 35.5%. As a result, our plan is for diluted EPS from
continuing operations to be approximately $0.63 to $0.67 in the
first quarter of fiscal 2011.
New
Accounting Pronouncements
Revenue
Arrangements That Include Software Elements
In October 2009, the Financial Accounting Standards Board (FASB)
issued Accounting Standards Update (ASU)
No. 2009-14
Software (Topic 985): Certain Revenue Arrangements That
Include Software Elements (formerly EITF Issue
No. 09-3).
This standard removes tangible products from the scope of
software revenue recognition guidance and also provides guidance
on determining whether software deliverables in an arrangement
that includes a tangible product are within the scope of the
software revenue guidance. More specifically, if the software
sold with or embedded within the tangible product is essential
to the functionality of the tangible product, then this
software, as well as undelivered software elements that relate
to this software, are excluded from the scope of existing
software revenue guidance. ASU
No. 2009-14
is effective for fiscal years that begin on or after
June 15, 2010, which is our fiscal year 2011. We are
currently evaluating the impact, if any, that ASU
No. 2009-14
may have on our financial condition and results of operations.
Multiple-Deliverable
Revenue Arrangements
In October 2009, the FASB issued ASU
No. 2009-13
Revenue Recognition (Topic 605): Multiple-Deliverable Revenue
Arrangements (formerly EITF Issue
No. 08-1).
This standard modifies the revenue recognition guidance for
arrangements that involve the delivery of multiple elements,
such as product, software, services or support, to a customer at
different times as part of a single revenue generating
transaction. This standard provides principles and application
guidance to determine whether multiple deliverables exist, how
the individual deliverables should be separated and how to
allocate the revenue in the arrangement among those separate
deliverables. The standard also expands the disclosure
requirements for multiple deliverable revenue arrangements. ASU
No. 2009-13
is effective for fiscal years that begin on or after
June 15, 2010, which is our fiscal year 2011. We are
currently evaluating the impact, if any, that ASU
No. 2009-13
may have on our financial condition and results of operations.
Variable
Interest Entities
In December 2009, the FASB issued ASU
No. 2009-17
Consolidations (Topic 810): Improvements to Financial
Reporting by Enterprises Involved with Variable Interest
Entities, which amends ASC 810, Consolidation.
This standard requires an enterprise to perform an analysis to
determine whether the enterprises variable
37
interest or interests give it a controlling financial interest
in a variable interest entity. Additionally, an enterprise is
required to assess whether it has an implicit financial
responsibility to ensure that a variable interest entity
operates as designed when determining whether it has the power
to direct the activities of the variable interest entity that
most significantly impact the entitys economic
performance. ASU
No. 2009-17
is effective for fiscal years that begin after November 15,
2009, which is our fiscal year 2011. We are currently evaluating
the impact, if any, that ASU
No. 2009-17
may have on our financial condition and results of operations.
Transfers
of Financial Assets
In June 2009, the FASB issued ASU
No. 2009-16,
Accounting for Transfers of Financial Assets, (Topic
820). This standard changes the way entities account for
securitizations and other transfers of financial instruments.
ASU
No. 2009-16
is effective for fiscal years that begin after November 15,
2009, which is our fiscal year 2011. We are currently evaluating
the impact, if any, that ASU
No. 2009-16
may have on our financial condition and results of operations.
Critical
Accounting Policies and Estimates
Managements 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. generally accepted accounting
principles. 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 managements estimates and projections,
there could be a material effect on our financial statements. We
also have other policies that we consider key accounting
policies, such as our policy for revenue recognition, including
the deferral of revenue on sales to distributors until the
products are sold to the end user; however, the application of
these policies does not require us to make significant estimates
or judgments that are difficult or subjective.
Inventory
Valuation
We value inventories at the lower of cost
(first-in,
first-out method) or market. 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 market
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,
and we do not expect them to be materially different in the
future.
Allowance
for Doubtful Accounts
We maintain allowances for doubtful accounts, when appropriate,
for estimated losses resulting from the inability of our
customers to make required payments. If the financial condition
of our customers were to deteriorate, our actual losses may
exceed our estimates, and additional allowances would be
required. To date, our actual results have not been materially
different than our estimates, and we do not expect them to be
materially different in the future.
Long-Lived
Assets
We review property, plant, and equipment and intangible assets
for impairment whenever events or changes in circumstances
indicate that the carrying value of assets may not be
recoverable. Recoverability of these assets is measured by
comparison of their carrying value to future undiscounted cash
flows that the assets are expected to generate over their
remaining economic lives. If such assets are considered to be
impaired, the impairment to be
38
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. Although we have
recognized no material impairment adjustments related to our
property, plant, and equipment and identified intangible assets
during the past three fiscal years, except those made in
conjunction with restructuring actions, deterioration in our
business in the future could lead to such impairment adjustments
in future periods. Evaluation of impairment of long-lived assets
requires estimates of future operating results that are used in
the preparation of the expected future undiscounted cash flows.
Actual future operating results and the remaining economic lives
of our long-lived assets could differ from the estimates used in
assessing the recoverability of these assets. These differences
could result in impairment charges, which could have a material
adverse impact on our results of operations. In addition, in
certain instances, assets may not be impaired but their
estimated useful lives may have decreased. In these situations,
we amortize the remaining net book values over the revised
useful lives.
Goodwill
Goodwill is subject to annual impairment tests or more
frequently if indicators of potential impairment exist and
suggest that the carrying value of goodwill may not be
recoverable from estimated discounted future cash flows. We test
goodwill for impairment at the reporting unit level (operating
segment or one level below an operating segment) on an annual
basis in the fourth quarter or more frequently if we believe
indicators of impairment exist. The performance of the test
involves a two-step process. The first step of the impairment
test involves comparing the fair values of the applicable
reporting units with their aggregate carrying values, including
goodwill. We generally determine the fair value of our reporting
units using the income approach methodology of valuation that
includes the discounted cash flow method as well as other
generally accepted valuation methodologies, which requires
significant judgment by management. If the carrying amount of a
reporting unit exceeds the reporting units fair value, we
perform the second step of the goodwill impairment test to
determine the amount of impairment loss. The second step of the
goodwill impairment test involves comparing the implied fair
value of the affected reporting units goodwill with the
carrying value of that goodwill. These impairment tests may
result in impairment losses that could have a material adverse
impact on our results of operations.
Accounting
for Income Taxes
We must make certain estimates and judgments in determining
income tax expense for financial statement purposes. These
estimates and judgments occur in the calculation of 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 revenue and expense for tax and
financial statement purposes, as well as the interest and
penalties relating to these uncertain tax positions. We assessed
the likelihood of the realization of deferred tax assets and
concluded that a valuation allowance is needed to reserve the
amount of the deferred tax assets that may not be realized due
to the uncertainty of the timing and amount of the realization
of certain state credit carryovers. In reaching our conclusion,
we evaluated certain relevant criteria including the existence
of deferred tax liabilities that can be used to absorb deferred
tax assets, the taxable income in prior carryback years in the
impacted state 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, resulting in
a reduction in net income or an increase in net loss in the
period when such determinations are made, which in turn, may
result in an increase or decrease to our tax provision in a
subsequent period.
On November 4, 2007 (the first day of our 2008 fiscal
year), we adopted new accounting principles on accounting for
uncertain tax positions. These principles requires companies to
determine that it is more likely than not that a tax
position will be sustained by the appropriate taxing authorities
before any benefit can be recorded 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 benefit
will be sustained, we have recorded the largest amount of tax
benefit with a greater than 50 percent 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 reevaluate these uncertain tax
positions on a quarterly basis. This evaluation is based on
39
factors including, but not limited to, changes in known facts or
circumstances, changes in tax law, effectively settled issues
under audit, and new audit activity. A change in these factors
would result in the recognition of a tax benefit or an
additional charge to the tax provision.
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 accruals. 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.
Stock-Based
Compensation
Stock-based compensation expense associated with stock options
and related awards is recognized in the statement of income.
Determining the amount of stock-based compensation to be
recorded requires us to develop estimates to be used in
calculating the grant-date fair value of stock options. We
calculate the grant-date fair values using the Black-Scholes
valuation model. The use of valuation models requires us to make
estimates of the following assumptions:
Expected volatility We are responsible for
estimating volatility and have considered a number of factors,
including third-party estimates, when estimating volatility. We
currently believe that the exclusive use of implied volatility
results in the best estimate of the grant-date fair value of
employee stock options because it reflects the markets
current expectations of future volatility. In evaluating the
appropriateness of exclusively relying on implied volatility, we
concluded that: (1) options in our common stock are
actively traded with sufficient volume on several exchanges;
(2) the market prices of both the traded options and the
underlying shares are measured at a similar point in time to
each other and on a date close to the grant date of the employee
share options; (3) the traded options have exercise prices
that are both
near-the-money
and close to the exercise price of the employee share options;
and (4) the maturities of the traded options used to
estimate volatility are at least one year.
Expected term We use historical employee
exercise and option expiration data to estimate the expected
term assumption for the Black-Scholes grant-date valuation. We
believe that this historical data is currently the best estimate
of the expected term of a new option, and that generally, all of
our employees exhibit similar exercise behavior. In general, the
longer the expected term used in the Black-Scholes valuation
model, the higher the grant-date fair value of the option.
Risk-free interest rate The yield on
zero-coupon U.S. Treasury securities for a period that is
commensurate with the expected term assumption is used as the
risk-free interest rate.
Expected dividend yield Expected dividend
yield is calculated by annualizing the cash dividend declared by
our Board of Directors for the current quarter and dividing that
result by the closing stock price on the date of grant of the
option. Until such time as our Board of Directors declares a
cash dividend for an amount that is different from the current
quarters cash dividend, the current dividend will be used
in deriving this assumption. Cash dividends are not paid on
options, restricted stock or restricted stock units.
The amount of stock-based compensation expense recognized during
a period is based on the value of the portion 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 option.
Based on an analysis of our historical forfeitures, we have
applied an annual forfeiture rate of 4.3% to all unvested
stock-based awards as of October 30, 2010. The rate of 4.3%
represents the portion that is expected to be forfeited each
year over the vesting period. This analysis is re-evaluated
quarterly and the forfeiture rate is adjusted as necessary.
Ultimately, the actual expense recognized over the vesting
period will only be for those awards that vest.
40
Contingencies
From time to time, we receive demands from third parties
alleging that our products or manufacturing processes infringe
the patent or intellectual property rights of these parties. We
periodically assess each matter to determine if a contingent
liability should be recorded. In making this determination, we
may, depending on the nature of the matter, consult with
internal and external legal counsel and technical experts. Based
on the information we obtain, combined with our judgment
regarding all the facts and circumstances of each matter, we
determine whether it is probable that a contingent loss may be
incurred and whether the amount of such loss can be reasonably
estimated. If a loss is probable and reasonably estimable, we
record a contingent loss. In determining the amount of a
contingent loss, we consider advice received from experts in the
specific matter, current status of legal proceedings, settlement
negotiations that may be ongoing, prior case history and other
factors. If the judgments and estimates made by us are
incorrect, we may need to record additional contingent losses
that could materially adversely impact our results of operations.
|
|
ITEM 7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
Interest
Rate Exposure
Based on our marketable securities and short term investments
outstanding as of October 30, 2010 and October 31,
2009, our annual interest income would change by approximately
$27 million and $18 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 a 100 basis point parallel shift in the
yield curve. Based on investment positions as of
October 30, 2010, a hypothetical 100 basis point
increase in interest rates across all maturities would result in
a $4 million incremental decline in the fair market value
of the portfolio. As of October 31, 2009, a similar
100 basis point shift in the yield curve would have
resulted in approximately $3 million of incremental decline
in the fair market value of the portfolio. Such losses would
only be realized if we sold the investments prior to maturity.
In June 2009, we entered into an interest rate swap agreement to
hedge the benchmark interest rate of our $375 million
5.0% senior unsecured notes due July 1, 2014. The
effect of the swap was to convert our 5.0% fixed interest rate
to a variable interest rate based on the three-month LIBOR plus
2.05% (2.34% as of October 30, 2010). If LIBOR changes by
100 basis points, our annual interest expense would change
by approximately $4 million.
Foreign
Currency Exposure
As more fully described in Note 2i. in 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 month 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 foreign currency exposures
existing at October 30, 2010 and October 31, 2009, a
10% unfavorable movement in foreign currency exchange rates over
the course of the year would expose us to approximately
$6 million in losses in earnings or cash flows.
The market risk associated with our 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 our foreign
exchange instruments consist of a number of major international
financial institutions with high credit ratings. We do not
believe that there is significant risk of nonperformance by
these counterparties because we continually monitor the credit
ratings of such counterparties. 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.
41
The following table illustrates the effect that a 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 October 30,
2010 and October 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
October 30, 2010
|
|
|
October 31, 2009
|
|
|
Fair value of forward exchange contracts asset
|
|
$
|
7,256
|
|
|
$
|
8,367
|
|
Fair value of forward exchange contracts after a 10% unfavorable
movement in foreign currency exchange rates asset
|
|
$
|
22,062
|
|
|
$
|
20,132
|
|
Fair value of forward exchange contracts after a 10% favorable
movement in foreign currency exchange rates liability
|
|
$
|
(7,396
|
)
|
|
$
|
(6,781
|
)
|
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.
42
|
|
ITEM 8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
ANALOG
DEVICES, INC.
CONSOLIDATED
STATEMENTS OF INCOME
Years ended October 30, 2010, October 31, 2009 and
November 1, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
(thousands, except per share amounts)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
2,761,503
|
|
|
$
|
2,014,908
|
|
|
$
|
2,582,931
|
|
Costs and Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales(1)
|
|
|
962,081
|
|
|
|
896,271
|
|
|
|
1,005,656
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
|
1,799,422
|
|
|
|
1,118,637
|
|
|
|
1,577,275
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development(1)
|
|
|
492,305
|
|
|
|
446,980
|
|
|
|
533,480
|
|
Selling, marketing, general and administrative(1)
|
|
|
390,560
|
|
|
|
333,184
|
|
|
|
415,682
|
|
Special charges
|
|
|
16,483
|
|
|
|
53,656
|
|
|
|
3,088
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
899,348
|
|
|
|
833,820
|
|
|
|
952,250
|
|
Operating income from continuing operations
|
|
|
900,074
|
|
|
|
284,817
|
|
|
|
625,025
|
|
Nonoperating (income) expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
10,429
|
|
|
|
4,094
|
|
|
|
|
|
Interest income
|
|
|
(9,837
|
)
|
|
|
(15,621
|
)
|
|
|
(41,041
|
)
|
Other, net
|
|
|
(2,183
|
)
|
|
|
(1,100
|
)
|
|
|
(36
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,591
|
)
|
|
|
(12,627
|
)
|
|
|
(41,077
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes
|
|
|
901,665
|
|
|
|
297,444
|
|
|
|
666,102
|
|
Provision for income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
Payable currently
|
|
|
200,306
|
|
|
|
38,441
|
|
|
|
152,294
|
|
Deferred
|
|
|
(9,866
|
)
|
|
|
11,595
|
|
|
|
(11,369
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
190,440
|
|
|
|
50,036
|
|
|
|
140,925
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, net of tax
|
|
|
711,225
|
|
|
|
247,408
|
|
|
|
525,177
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations
|
|
|
|
|
|
|
364
|
|
|
|
12,779
|
|
Gain on sale of discontinued operations
|
|
|
859
|
|
|
|
|
|
|
|
248,328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income from discontinued operations, net of tax
|
|
|
859
|
|
|
|
364
|
|
|
|
261,107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
712,084
|
|
|
$
|
247,772
|
|
|
$
|
786,284
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used to compute earnings per share Basic
|
|
|
297,387
|
|
|
|
291,385
|
|
|
|
292,688
|
|
Shares used to compute earnings per share Diluted
|
|
|
305,861
|
|
|
|
292,698
|
|
|
|
297,110
|
|
Earnings per share Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, net of tax
|
|
$
|
2.39
|
|
|
$
|
0.85
|
|
|
$
|
1.79
|
|
Net income
|
|
$
|
2.39
|
|
|
$
|
0.85
|
|
|
$
|
2.69
|
|
Earnings per share Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, net of tax
|
|
$
|
2.33
|
|
|
$
|
0.85
|
|
|
$
|
1.77
|
|
Net income
|
|
$
|
2.33
|
|
|
$
|
0.85
|
|
|
$
|
2.65
|
|
Dividends declared and paid per share
|
|
$
|
0.84
|
|
|
$
|
0.80
|
|
|
$
|
0.76
|
|
(1) Includes stock-based compensation expense as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
$
|
7,333
|
|
|
$
|
7,469
|
|
|
$
|
7,806
|
|
Research and development
|
|
$
|
23,342
|
|
|
$
|
22,666
|
|
|
$
|
23,768
|
|
Selling, marketing, general and administrative
|
|
$
|
21,077
|
|
|
$
|
18,478
|
|
|
$
|
20,970
|
|
See accompanying Notes.
43
ANALOG
DEVICES, INC.
CONSOLIDATED BALANCE SHEETS
October 30,
2010 and October 31, 2009
|
|
|
|
|
|
|
|
|
(thousands, except per share amounts)
|
|
2010
|
|
|
2009
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,070,000
|
|
|
$
|
639,729
|
|
Short-term investments
|
|
|
1,617,768
|
|
|
|
1,176,244
|
|
Accounts receivable less allowances of $1,581 ($1,681 in 2009)
|
|
|
387,169
|
|
|
|
301,036
|
|
Inventories(1)
|
|
|
277,478
|
|
|
|
253,161
|
|
Deferred tax assets
|
|
|
74,710
|
|
|
|
78,740
|
|
Deferred compensation plan investments
|
|
|
|
|
|
|
1,363
|
|
Prepaid expenses and other current assets
|
|
|
51,874
|
|
|
|
40,363
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
3,478,999
|
|
|
|
2,490,636
|
|
|
|
|
|
|
|
|
|
|
Property, Plant and Equipment, at Cost
|
|
|
|
|
|
|
|
|
Land and buildings
|
|
|
401,277
|
|
|
|
395,151
|
|
Machinery and equipment
|
|
|
1,578,493
|
|
|
|
1,511,822
|
|
Office equipment
|
|
|
56,449
|
|
|
|
56,294
|
|
Leasehold improvements
|
|
|
65,326
|
|
|
|
66,847
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,101,545
|
|
|
|
2,030,114
|
|
Less accumulated depreciation and amortization
|
|
|
1,628,880
|
|
|
|
1,553,598
|
|
|
|
|
|
|
|
|
|
|
Net property, plant and equipment
|
|
|
472,665
|
|
|
|
476,516
|
|
|
|
|
|
|
|
|
|
|
Other Assets
|
|
|
|
|
|
|
|
|
Deferred compensation plan investments
|
|
|
8,690
|
|
|
|
6,580
|
|
Other investments
|
|
|
1,317
|
|
|
|
1,485
|
|
Goodwill
|
|
|
255,580
|
|
|
|
250,881
|
|
Intangible assets, net
|
|
|
1,343
|
|
|
|
6,855
|
|
Deferred tax assets
|
|
|
52,765
|
|
|
|
38,759
|
|
Other assets
|
|
|
57,472
|
|
|
|
35,658
|
|
Non-current assets of discontinued operations
|
|
|
|
|
|
|
62,037
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
|
377,167
|
|
|
|
402,255
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,328,831
|
|
|
|
3,369,407
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
133,111
|
|
|
$
|
107,334
|
|
Deferred income on shipments to distributors, net
|
|
|
242,848
|
|
|
|
149,278
|
|
Income taxes payable
|
|
|
60,421
|
|
|
|
6,445
|
|
Deferred compensation plan liability
|
|
|
|
|
|
|
1,363
|
|
Accrued liabilities
|
|
|
207,087
|
|
|
|
122,193
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
643,467
|
|
|
|
386,613
|
|
|
|
|
|
|
|
|
|
|
Non-current Liabilities
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
400,635
|
|
|
|
379,626
|
|
Deferred income taxes
|
|
|
1,800
|
|
|
|
1,345
|
|
Deferred compensation plan liability
|
|
|
8,690
|
|
|
|
6,577
|
|
Other non-current liabilities
|
|
|
74,522
|
|
|
|
66,097
|
|
|
|
|
|
|
|
|
|
|
Total non-current liabilities
|
|
|
485,647
|
|
|
|
453,645
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 12)
|
|
|
|
|
|
|
|
|
Shareholders Equity
|
|
|
|
|
|
|
|
|
Preferred stock, $1.00 par value, 471,934 shares
authorized, none outstanding
|
|
|
|
|
|
|
|
|
Common stock,
$0.162/3
par value, 1,200,000,000 shares authorized,
298,652,994 shares issued and outstanding (291,861,767 on
October 31, 2009)
|
|
|
49,777
|
|
|
|
48,645
|
|
Capital in excess of par value
|
|
|
286,969
|
|
|
|
56,306
|
|
Retained earnings
|
|
|
2,896,566
|
|
|
|
2,434,446
|
|
Accumulated other comprehensive loss
|
|
|
(33,595
|
)
|
|
|
(10,248
|
)
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
3,199,717
|
|
|
|
2,529,149
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,328,831
|
|
|
$
|
3,369,407
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes $2,534 and $2,718 related to stock-based compensation
at October 30, 2010 and October 31, 2009, respectively. |
See accompanying Notes.
44
ANALOG
DEVICES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
Years
ended October 30, 2010, October 31, 2009 and
November 1, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Capital in
|
|
|
|
|
|
Other
|
|
|
|
Common Stock
|
|
|
Excess of
|
|
|
Retained
|
|
|
Comprehensive
|
|
(thousands)
|
|
Shares
|
|
|
Amount
|
|
|
Par Value
|
|
|
Earnings
|
|
|
(Loss) Income
|
|
|
BALANCE, NOVEMBER 3, 2007
|
|
|
303,354
|
|
|
$
|
50,560
|
|
|
$
|
|
|
|
$
|
2,253,483
|
|
|
$
|
33,091
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Activity in Fiscal 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
786,284
|
|
|
|
|
|
Dividends declared and paid
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(222,530
|
)
|
|
|
|
|
Issuance of stock under stock plans and other, net of repurchases
|
|
|
7,256
|
|
|
|
1,209
|
|
|
|
|
|
|
|
92,946
|
|
|
|
|
|
Tax benefit stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,095
|
|
|
|
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,247
|
|
|
|
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(81,269
|
)
|
Common stock repurchased
|
|
|
(19,417
|
)
|
|
|
(3,236
|
)
|
|
|
|
|
|
|
(566,617
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, NOVEMBER 1, 2008
|
|
|
291,193
|
|
|
|
48,533
|
|
|
|
|
|
|
|
2,419,908
|
|
|
|
(48,178
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Activity in Fiscal 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in defined benefit plan measurement date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(246
|
)
|
|
|
|
|
Net Income 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
247,772
|
|
|
|
|
|
Dividends declared and paid
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(232,988
|
)
|
|
|
|
|
Issuance of stock under stock plans and other, net of repurchases
|
|
|
851
|
|
|
|
142
|
|
|
|
12,235
|
|
|
|
|
|
|
|
|
|
Tax deficit stock options
|
|
|
|
|
|
|
|
|
|
|
(810
|
)
|
|
|
|
|
|
|
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
48,613
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,930
|
|
Common stock repurchased
|
|
|
(182
|
)
|
|
|
(30
|
)
|
|
|
(3,732
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, OCTOBER 31, 2009
|
|
|
291,862
|
|
|
|
48,645
|
|
|
|
56,306
|
|
|
|
2,434,446
|
|
|
|
(10,248
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Activity in Fiscal 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
712,084
|
|
|
|
|
|
Dividends declared and paid
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(249,964
|
)
|
|
|
|
|
Issuance of stock under stock plans and other, net of repurchases
|
|
|
8,066
|
|
|
|
1,344
|
|
|
|
214,803
|
|
|
|
|
|
|
|
|
|
Tax benefit stock options
|
|
|
|
|
|
|
|
|
|
|
3,744
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
51,752
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(23,347
|
)
|
Common stock repurchased
|
|
|
(1,275
|
)
|
|
|
(212
|
)
|
|
|
(39,636
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, OCTOBER 30, 2010
|
|
|
298,653
|
|
|
$
|
49,777
|
|
|
$
|
286,969
|
|
|
$
|
2,896,566
|
|
|
$
|
(33,595
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes.
45
ANALOG
DEVICES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME
Years
ended October 30, 2010, October 31, 2009 and
November 1, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
(thousands)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Income from continuing operations, net of tax
|
|
$
|
711,225
|
|
|
$
|
247,408
|
|
|
$
|
525,177
|
|
Foreign currency translation adjustment
|
|
|
6,085
|
|
|
|
14,840
|
|
|
|
(42,370
|
)
|
Net unrealized (losses) gains on securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized holding (losses) gains (net of taxes of $6 in
2010, $347 in 2009 and $372 in 2008) on securities
classified as short-term investments
|
|
|
(50
|
)
|
|
|
(2,456
|
)
|
|
|
2,508
|
|
Net unrealized holding gains (losses) (net of taxes of $175 in
2010, $197 in 2009 and $217 in 2008) on securities
classified as other investments
|
|
|
325
|
|
|
|
366
|
|
|
|
400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized (losses) gains on securities
|
|
|
275
|
|
|
|
(2,090
|
)
|
|
|
2,908
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative instruments designated as cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in fair value of derivatives (net of taxes of $449 in
2010, $2,278 in 2009 and $3,001 in 2008)
|
|
|
(1,339
|
)
|
|
|
16,215
|
|
|
|
(19,727
|
)
|
Realized loss (gain) reclassification (net of taxes of $458 in
2010, $1,609 in 2009 and $1,042 in 2008)
|
|
|
1,863
|
|
|
|
9,657
|
|
|
|
(6,848
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in derivative instruments designated as cash flow
hedges
|
|
|
524
|
|
|
|
25,872
|
|
|
|
(26,575
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive (loss) income
pension plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
Transition obligation (net of taxes of $34 in 2010, $1 in 2009
and $4 in 2008)
|
|
|
(80
|
)
|
|
|
(34
|
)
|
|
|
(43
|
)
|
Net actuarial loss (net of taxes of $4,594 in 2010, $287 in 2009
and $1,971 in 2008)
|
|
|
(30,151
|
)
|
|
|
(663
|
)
|
|
|
(15,197
|
)
|
Net prior service income (net of taxes of $0 in 2010, $1 in 2009
and $4 in 2008)
|
|
|
|
|
|
|
5
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in accumulated other comprehensive loss
pension plans (net of taxes of $4,560 in 2010, $286 in 2009 and
$1,963 in 2008)
|
|
|
(30,231
|
)
|
|
|
(692
|
)
|
|
|
(15,232
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive (loss) income
|
|
|
(23,347
|
)
|
|
|
37,930
|
|
|
|
(81,269
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income from continuing operations
|
|
|
687,878
|
|
|
|
285,338
|
|
|
|
443,908
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations, net of tax
|
|
|
859
|
|
|
|
364
|
|
|
|
261,107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
688,737
|
|
|
$
|
285,702
|
|
|
$
|
705,015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes.
46
ANALOG
DEVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years
ended October 30, 2010 October 31, 2009 and
November 1, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
(thousands)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
712,084
|
|
|
$
|
247,772
|
|
|
$
|
786,284
|
|
Adjustments to reconcile net income to net cash provided by
operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
116,083
|
|
|
|
132,493
|
|
|
|
144,222
|
|
Amortization of intangibles
|
|
|
4,828
|
|
|
|
7,377
|
|
|
|
9,250
|
|
Stock-based compensation expense
|
|
|
51,752
|
|
|
|
48,613
|
|
|
|
50,247
|
|
Gain on sale of business
|
|
|
(859
|
)
|
|
|
|
|
|
|
(248,328
|
)
|
Non-cash portion of special charges
|
|
|
487
|
|
|
|
15,468
|
|
|
|
|
|
Other non-cash activity
|
|
|
1,662
|
|
|
|
1,663
|
|
|
|
310
|
|
Excess tax benefit stock options
|
|
|
(317
|
)
|
|
|
(20
|
)
|
|
|
(18,586
|
)
|
Deferred income taxes
|
|
|
(9,866
|
)
|
|
|
11,595
|
|
|
|
(11,369
|
)
|
Change in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase) decrease in accounts receivable
|
|
|
(82,380
|
)
|
|
|
16,561
|
|
|
|
48,903
|
|
(Increase) decrease in inventories
|
|
|
(24,274
|
)
|
|
|
67,347
|
|
|
|
16,784
|
|
(Increase) decrease in prepaid expenses and other current assets
|
|
|
(4,002
|
)
|
|
|
731
|
|
|
|
6,557
|
|
(Increase) decrease in deferred compensation plan investments
|
|
|
(747
|
)
|
|
|
24,097
|
|
|
|
4,401
|
|
Increase (decrease) in accounts payable, deferred income and
accrued liabilities
|
|
|
190,043
|
|
|
|
(100,064
|
)
|
|
|
(60,736
|
)
|
Increase (decrease) in deferred compensation plan liability
|
|
|
750
|
|
|
|
(24,801
|
)
|
|
|
(3,811
|
)
|
Income tax payments related to gain on sale of businesses
|
|
|
|
|
|
|
(4,105
|
)
|
|
|
(110,401
|
)
|
Increase (decrease) in income taxes payable
|
|
|
61,984
|
|
|
|
(24,909
|
)
|
|
|
41,443
|
|
(Decrease) increase in other liabilities
|
|
|
(26,053
|
)
|
|
|
12,330
|
|
|
|
14,198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total adjustments
|
|
|
279,091
|
|
|
|
184,376
|
|
|
|
(116,916
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
991,175
|
|
|
|
432,148
|
|
|
|
669,368
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of short-term
available-for-sale
investments
|
|
|
(3,478,025
|
)
|
|
|
(2,812,094
|
)
|
|
|
(1,925,654
|
)
|
Maturities of short-term
available-for-sale
investments
|
|
|
2,801,727
|
|
|
|
2,274,254
|
|
|
|
1,768,948
|
|
Sales of short-term available-for-sale investments
|
|
|
234,718
|
|
|
|
74,880
|
|
|
|
99,734
|
|
Additions to property, plant and equipment, net
|
|
|
(111,557
|
)
|
|
|
(56,095
|
)
|
|
|
(157,408
|
)
|
Net proceeds (expenditures) related to sale of businesses
|
|
|
63,036
|
|
|
|
(1,653
|
)
|
|
|
403,181
|
|
Payments for acquisitions
|
|
|
|
|
|
|
(8,360
|
)
|
|
|
(3,146
|
)
|
Decrease (increase) in other assets
|
|
|
4,276
|
|
|
|
(5,661
|
)
|
|
|
2,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used for) provided by investing activities
|
|
|
(485,825
|
)
|
|
|
(534,729
|
)
|
|
|
188,363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of long-term debt
|
|
|
|
|
|
|
370,350
|
|
|
|
|
|
Dividend payments to shareholders
|
|
|
(249,964
|
)
|
|
|
(232,988
|
)
|
|
|
(222,530
|
)
|
Repurchase of common stock
|
|
|
(39,848
|
)
|
|
|
(3,762
|
)
|
|
|
(569,853
|
)
|
Net proceeds from employee stock plans
|
|
|
216,147
|
|
|
|
12,377
|
|
|
|
94,155
|
|
Other financing activities
|
|
|
710
|
|
|
|
|
|
|
|
(366
|
)
|
Excess tax benefit stock options
|
|
|
317
|
|
|
|
20
|
|
|
|
18,586
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used for) provided by financing activities
|
|
|
(72,638
|
)
|
|
|
145,997
|
|
|
|
(680,008
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
(2,441
|
)
|
|
|
2,714
|
|
|
|
(9,096
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
430,271
|
|
|
|
46,130
|
|
|
|
168,627
|
|
Cash and cash equivalents at beginning of year
|
|
|
639,729
|
|
|
|
593,599
|
|
|
|
424,972
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
$
|
1,070,000
|
|
|
$
|
639,729
|
|
|
$
|
593,599
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes.
47
ANALOG
DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended October 30, 2010, October 31, 2009 and
November 1, 2008
(all tabular amounts in thousands except per share
amounts)
|
|
1.
|
Description
of Business
|
Analog Devices, Inc. (Analog Devices or the
Company) is a world leader in the design,
manufacture and technical support of high-performance analog,
mixed-signal and digital signal processing integrated circuits
used in industrial, automotive, consumer, communication and
computer applications. Since the Companys inception in
1965, it has focused on solving the engineering challenges
associated with signal processing in electronic equipment. The
Companys signal processing products convert real-world
phenomena such as temperature, pressure, sound, light, speed and
motion into electrical signals to be used in a wide array of
electronic equipment. Signal processing technology is a critical
element of industrial, automotive, consumer, and communications
applications. As new generations of digital applications evolve,
they generate new needs for high-performance analog signal
processing and digital signal processing technology. The Company
produces a wide range of products that are designed to meet the
signal processing technology needs of a broad base of customers.
The Companys products are embedded inside many types of
electronic equipment including:
|
|
|
Industrial process controls
|
|
Medical imaging equipment
|
Factory automation systems
|
|
Portable electronic devices
|
Instrumentation
|
|
Cellular basestations
|
Energy management systems
|
|
Wireless communications equipment
|
Defense electronics
|
|
Digital cameras
|
Automobiles
|
|
Digital televisions
|
|
|
2.
|
Summary
of Significant Accounting Policies
|
|
|
a.
|
Principles
of Consolidation
|
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 fiscal 2010 presentation. Such reclassified
amounts were immaterial. The Companys fiscal year is the
52-week or 53-week period ending on the Saturday closest to the
last day in October. Fiscal years 2010, 2009 and 2008 were
52-week periods.
The Company sold its baseband chipset business and related
support operations (Baseband Chipset Business) to MediaTek Inc.
and its CPU voltage regulation and PC thermal monitoring
business to certain subsidiaries of ON Semiconductor Corporation
during the first quarter of fiscal 2008. The Company has
reflected the financial results of these businesses as
discontinued operations in the consolidated statements of income
for all periods presented. The assets of these businesses are
reflected as non-current assets of discontinued operations in
the consolidated balance sheet as of October 31, 2009. The
historical results of operations of these businesses have been
segregated from the Companys consolidated financial
statements and are included in income from discontinued
operations, net of tax, in the consolidated statements of income.
|
|
b.
|
Cash,
Cash Equivalents and Short-term Investments
|
Cash and cash equivalents are highly liquid investments with
insignificant interest rate risk and maturities of three months
or less at the time of acquisition. Cash, cash equivalents and
short-term investments consist primarily of corporate
obligations such as commercial paper and corporate bonds and
institutional money market funds. They also include 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. There were no
transfers between investment classifications
48
ANALOG
DEVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
in any of the fiscal years presented.
Held-to-maturity
securities, which are carried at amortized cost, include only
those securities the Company has the positive intent and ability
to hold to maturity. Securities, such as bank time deposits,
which by their nature are typically held to maturity, are
classified as such. The Companys other 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.
The Companys deferred compensation plan investments are
classified as trading. See Note 7 for additional
information on the Companys deferred compensation plan
investments. There were no cash equivalents or short-term
investments classified as trading at October 30, 2010 and
October 31, 2009.
The Company periodically evaluates its investments for
impairment. There were no
other-than-temporary
impairments of short-term investments in any of the fiscal years
presented.
No realized gains or losses were recorded during any of the
fiscal years presented.
Unrealized gains and losses on
available-for-sale
securities classified as short-term investments at
October 30, 2010 and October 31, 2009 are as follows:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Unrealized gains on securities classified as short-term
investments
|
|
$
|
165
|
|
|
$
|
128
|
|
Unrealized losses on securities classified as short-term
investments
|
|
|
(217
|
)
|
|
|
(124
|
)
|
|
|
|
|
|
|
|
|
|
Net unrealized (losses) gains on securities classified as
short-term investments
|
|
$
|
(52
|
)
|
|
$
|
4
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains and losses in 2010 and 2009 relate to corporate
obligations.
The components of the Companys cash and cash equivalents
and short-term investments as of October 30, 2010 and
October 31, 2009 were as follows:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Cash and cash equivalents:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
37,460
|
|
|
$
|
30,744
|
|
Available-for-sale
|
|
|
1,020,993
|
|
|
|
604,276
|
|
Held-to-maturity
|
|
|
11,547
|
|
|
|
4,709
|
|
|
|
|
|
|
|
|
|
|
Total cash and cash equivalents
|
|
$
|
1,070,000
|
|
|
$
|
639,729
|
|
|
|
|
|
|
|
|
|
|
Short-term investments:
|
|
|
|
|
|
|
|
|
Available-for-sale
|
|
$
|
1,587,768
|
|
|
$
|
1,176,244
|
|
Held-to-maturity
(less than one year to maturity)
|
|
|
30,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total short-term investments
|
|
$
|
1,617,768
|
|
|
$
|
1,176,244
|
|
|
|
|
|
|
|
|
|
|
See Note 2j. for additional information on the
Companys cash equivalents and short-term investments.
|
|
c.
|
Supplemental
Cash Flow Statement Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Cash paid during the fiscal year for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$
|
137,149
|
|
|
$
|
60,609
|
|
|
$
|
201,974
|
|
Interest
|
|
$
|
9,603
|
|
|
$
|
2,502
|
|
|
$
|
|
|
49
ANALOG
DEVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Inventories are valued at the lower of cost
(first-in,
first-out method) or market. 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 market 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 Companys 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 market.
Inventories at October 30, 2010 and October 31, 2009
are as follows:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Raw materials
|
|
$
|
22,008
|
|
|
$
|
13,373
|
|
Work in process
|
|
|
171,390
|
|
|
|
173,696
|
|
Finished goods
|
|
|
84,080
|
|
|
|
66,092
|
|
|
|
|
|
|
|
|
|
|
Total inventories
|
|
$
|
277,478
|
|
|
$
|
253,161
|
|
|
|
|
|
|
|
|
|
|
|
|
e.
|
Property,
Plant and Equipment
|
Property, plant and equipment is recorded at cost less
allowances for depreciation. The straight-line method of
depreciation is used for all classes of assets for financial
statement purposes; both straight-line and accelerated methods
are used for income tax purposes. Leasehold improvements are
amortized based upon the lesser of the term of the lease or the
useful life of the asset. Repairs and maintenance charges are
expensed as incurred. Depreciation and amortization are based on
the following useful lives:
|
|
|
Buildings & building equipment
|
|
Up to 25 years
|
Machinery & equipment
|
|
3-8 years
|
Office equipment
|
|
3-8 years
|
Depreciation expense from continuing operations of property,
plant and equipment was $116.1 million, $132.5 million
and $144.2 million in fiscal 2010, 2009 and 2008,
respectively.
The Company reviews property, plant, and equipment for
impairment whenever events or changes in circumstances indicate
that the carrying amount of assets may not be recoverable.
Recoverability of these assets is measured 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 amortized over the
revised useful life.
|
|
f.
|
Goodwill
and Intangible Assets
|
Goodwill
The Company annually evaluates goodwill for impairment as well
as whenever events or changes in circumstances suggest that the
carrying value of goodwill may not be recoverable. The Company
tests goodwill for impairment at the reporting unit level
(operating segment or one level below an operating segment) on
an annual basis in the fourth quarter or more frequently if
indicators of impairment exist. The performance of the test
involves a two-step process. The first step of the impairment
test involves comparing the fair values of the applicable
50
ANALOG
DEVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
reporting units with their aggregate carrying values, including
goodwill. The Company determines the fair value of its reporting
units using the income approach methodology of valuation that
includes the discounted cash flow method as well as other
generally accepted valuation methodologies. If the carrying
amount of a reporting unit exceeds the reporting units
fair value, the Company performs the second step of the goodwill
impairment test to determine the amount of impairment loss. The
second step of the goodwill impairment test involves comparing
the implied fair value of the affected reporting units
goodwill with the carrying value of that goodwill. No impairment
of goodwill resulted from the Companys most recent
evaluation, which occurred in the fourth quarter of fiscal 2010.
No impairment of goodwill resulted in any of the fiscal years
presented. The Companys next annual impairment assessment
will be made in the fourth quarter of fiscal 2011 unless
indicators arise that would require the Company to reevaluate at
an earlier date. The following table presents the changes in
goodwill during fiscal 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Balance at beginning of year
|
|
$
|
250,881
|
|
|
$
|
235,175
|
|
Acquisition of AudioAsics(1)
|
|
|
|
|
|
|
3,071
|
|
Acquisition of Integrant Technologies(2)
|
|
|
|
|
|
|
2,098
|
|
Foreign currency translation adjustment
|
|
|
4,699
|
|
|
|
10,537
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
255,580
|
|
|
$
|
250,881
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The Company made its final milestone payment related to this
2006 acquisition during fiscal 2009. |
|
(2) |
|
The Company purchased the remaining outstanding minority shares
related to this 2006 acquisition during fiscal 2009. |
Intangible
Assets
The Company reviews identified intangible assets for impairment
whenever events or changes in circumstances indicate that the
carrying value of assets may not be recoverable. Recoverability
of these assets is measured by comparison of their carrying
value to 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.
Intangible assets, which will continue to be amortized,
consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 30, 2010
|
|
|
October 31, 2009
|
|
|
|
Gross
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
|
Amortization
|
|
|
Technology-based
|
|
$
|
7,166
|
|
|
$
|
6,323
|
|
|
$
|
23,326
|
|
|
$
|
17,615
|
|
Customer relationships
|
|
|
2,858
|
|
|
|
2,358
|
|
|
|
5,103
|
|
|
|
3,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
10,024
|
|
|
$
|
8,681
|
|
|
$
|
28,429
|
|
|
$
|
21,574
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets are amortized on a straight-line basis over
their estimated useful lives or on an accelerated method of
amortization that is expected to reflect the estimated pattern
of economic use. The remaining amortization expense will be
recognized over a weighted-average period of approximately
0.6 years.
Amortization expense from continuing operations related to
intangibles was $4.8 million, $7.4 million and
$9.3 million in fiscal 2010, 2009 and 2008, respectively.
51
ANALOG
DEVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company expects annual amortization expense for these
intangible assets to be:
|
|
|
|
|
Fiscal Year
|
|
Amortization Expense
|
|
2011
|
|
$
|
1,343
|
|
Certain of the Companys foreign subsidiaries have received
various grants from governmental agencies. These grants include
capital, employment and research and development grants. Capital
grants for the acquisition of property and equipment are netted
against the related capital expenditures and amortized as a
credit to depreciation expense over the 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.
|
|
h.
|
Translation
of Foreign Currencies
|
The functional currency for the Companys foreign sales and
research and development operations is the applicable local
currency. Gains and losses resulting from translation of these
foreign currencies into U.S. dollars are recorded in
accumulated other comprehensive (loss) income. Transaction gains
and losses and remeasurement of foreign currency denominated
assets and liabilities are included in income currently,
including those at the Companys principal foreign
manufacturing operations where the functional currency is the
U.S. dollar. Foreign currency transaction gains or losses
included in other expenses, net, were not material in fiscal
2010, 2009 or 2008.
|
|
i.
|
Derivative
Instruments and Hedging Agreements
|
Foreign Exchange Exposure Management The
Company enters into forward foreign currency exchange contracts
to offset certain operational and balance sheet exposures from
the impact of changes in foreign currency exchange rates. Such
exposures result from the portion of the Companys
operations, assets and liabilities that are denominated in
currencies other than the U.S. dollar, primarily the Euro;
other exposures include the Philippine Peso and the British
Pound. 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 designated and
documented at the inception of the respective hedges as cash
flow hedges and are evaluated for effectiveness monthly.
Derivative instruments are employed to eliminate or minimize
certain foreign currency exposures that can be confidently
identified and quantified. As the terms of the contract and the
underlying transaction are matched at inception, forward
contract effectiveness is calculated by comparing the change in
fair value of the contract to the change in the forward value of
the anticipated transaction, with the effective portion of the
gain or loss on the derivative instrument reported as a
component of accumulated other comprehensive (loss) income (OCI)
in shareholders equity and reclassified into earnings in
the same period during which the hedged transaction affects
earnings. Any residual change in fair value of the instruments,
or ineffectiveness, is recognized immediately in other (income)
expense. Additionally, the Company enters into forward foreign
currency contracts that economically hedge the gains and losses
generated by the remeasurement 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
October 30, 2010 and October 31, 2009, the total
notional amount of these undesignated hedges was
$42.1 million and $38 million, respectively. The fair
value of these hedging instruments in the Companys
condensed consolidated balance sheets as of October 30,
2010 and October 31, 2009 was immaterial.
Interest Rate Exposure Management On
June 30, 2009, the Company entered into interest rate swap
transactions related to its outstanding 5% senior unsecured
notes where the Company swapped the notional amount of its
$375 million of fixed rate debt at 5.0% into floating
interest rate debt through July 1, 2014. Under the terms of
the swaps, the Company will (i) receive on the
$375 million notional amount a 5.0% annual interest payment
that is
52
ANALOG
DEVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
paid in two installments on the 1st of every January and
July, commencing January 1, 2010 through and ending on the
maturity date; and (ii) pay on the $375 million
notional amount an annual three-month LIBOR plus 2.05% (2.34% as
of October 30, 2010) interest payment, payable in four
installments on the 1st of every January, April, July and
October, commencing on October 1, 2009 and ending on the
maturity date. The LIBOR-based rate is set quarterly three
months prior to the date of the interest payment. The Company
designated these swaps as fair value hedges. 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 gain or loss on the
hedged item (that is fixed-rate borrowings) attributable to the
hedged benchmark interest rate risk and the offsetting gain or
loss on the related interest rate swaps for fiscal year 2010 and
fiscal year 2009 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Statement
|
|
October 30, 2010
|
|
October 31, 2009
|
Classification
|
|
Gain on Swaps
|
|
Loss on Note
|
|
Net Income Effect
|
|
Gain on Swaps
|
|
Loss on Note
|
|
Net Income Effect
|
|
Other income
|
|
$
|
20,692
|
|
|
$
|
(20,692
|
)
|
|
$
|
|
|
|
$
|
6,109
|
|
|
$
|
(6,109
|
)
|
|
$
|
|
|
The amounts earned and owed under the swap agreements are
accrued each period and are reported in interest expense. There
was no ineffectiveness recognized in any of the periods
presented.
The market risk associated with the Companys 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
Companys derivative instruments consist of a number of
major international financial institutions with high credit
ratings. The Company does not believe that there is significant
risk of nonperformance by these counterparties because the
Company continually monitors the credit ratings of such
counterparties. Furthermore, none of the Companys
derivative transactions are subject to collateral or other
security arrangements and none contain provisions that are
dependent on the Companys 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 Companys 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 the consolidated financial statements in other
current assets, other assets or accrued liabilities, depending
on their net position, regardless of the purpose or intent for
holding the derivative contract. Changes in the fair value of
the derivative financial instruments are either recognized
periodically in earnings or in shareholders equity as a
component of OCI. Changes in the fair value of cash flow hedges
are recorded in OCI and reclassified into earnings when the
underlying contract matures. Changes in the fair values of
derivatives not qualifying for hedge accounting are reported in
earnings as they occur.
The total notional amount of derivative instruments designated
as hedging instruments as of October 30, 2010 and
October 31, 2009 was as follows: $375 million of
interest rate swap agreements accounted for as fair value
hedges, and $140 million and $128 million,
respectively, of cash flow hedges denominated in Euros, British
Pounds and Philippine Pesos. The fair value of these hedging
instruments in the Companys condensed consolidated balance
sheets as of October 30, 2010 and October 31, 2009 was
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value at
|
|
Fair Value at
|
|
|
Balance Sheet Location
|
|
October 30, 2010
|
|
October 31, 2009
|
|
Interest rate swap agreements
|
|
Other assets
|
|
$
|
26,801
|
|
|
$
|
6,109
|
|
Forward foreign currency exchange contracts
|
|
Prepaid expenses and other current assets
|
|
$
|
7,542
|
|
|
$
|
8,400
|
|
53
ANALOG
DEVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The effect of derivative instruments designated as cash flow
hedges on the condensed consolidated statements of income for
fiscal 2010 and fiscal 2009 are as follows:
|
|
|
|
|
|
|
|
|
|
|
October 30, 2010
|
|
|
October 31, 2009
|
|
|
(Loss) gain recognized in OCI on derivative (net of tax of $449
in 2010 and $2,278 in 2009)
|
|
$
|
(1,339
|
)
|
|
$
|
16,215
|
|
Loss reclassified from OCI into income (net of tax of $458 in
2010 and $1,609 in 2009)
|
|
$
|
1,863
|
|
|
$
|
9,657
|
|
The amounts reclassified into earnings before tax are recognized
in cost of sales and operating expenses as follows:
|
|
|
|
|
|
|
|
|
|
|
October 30, 2010
|
|
|
October 31, 2009
|
|
|
Cost of sales
|
|
$
|
(112
|
)
|
|
$
|
4,920
|
|
Research and development
|
|
$
|
1,259
|
|
|
$
|
3,564
|
|
Selling, marketing, general and administrative
|
|
$
|
1,174
|
|
|
$
|
2,782
|
|
All derivative gains and losses included in OCI will be
reclassified into earnings within the next 12 months. There
was no ineffectiveness during fiscal year ended October 30,
2010 or October 31, 2009.
Accumulated
Derivative Gains or Losses
The following table summarizes activity in accumulated other
comprehensive (loss) income related to derivatives classified as
cash flow hedges held by the Company during the period from
November 2, 2008 through October 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Balance at beginning of year
|
|
$
|
5,609
|
|
|
$
|
(20,263
|
)
|
Changes in fair value of derivatives (loss) gain,
net of tax
|
|
|
(1,339
|
)
|
|
|
16,215
|
|
Reclassifications into earnings from other comprehensive loss,
net of tax
|
|
|
1,863
|
|
|
|
9,657
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
6,133
|
|
|
$
|
5,609
|
|
|
|
|
|
|
|
|
|
|
All of the accumulated gain will be reclassified into earnings
over the next twelve months.
The Company defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the
measurement date. The Company applies the following fair value
hierarchy, which prioritizes the inputs used to measure fair
value into three levels and bases the categorization within the
hierarchy upon the lowest level of input that is available and
significant to the fair value measurement. The hierarchy gives
the highest priority to unadjusted quoted prices in active
markets for identical assets or liabilities (Level 1
measurements) and the lowest priority to unobservable inputs
(Level 3 measurements).
Level 1 Level 1 inputs are quoted
prices (unadjusted) in active markets for identical assets or
liabilities that the reporting entity has the ability to access
at the measurement date.
Level 2 Level 2 inputs are inputs
other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or
indirectly. If the asset or liability has a specified
(contractual) term, a Level 2 input must be observable for
substantially the full term of the asset or liability.
Level 3 Level 3 inputs are
unobservable inputs for the asset or liability in which there is
little, if any, market activity for the asset or liability at
the measurement date. As of October 30, 2010 and
October 31, 2009 the Company held no assets or liabilities
valued using Level 3 inputs.
54
ANALOG
DEVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The table below sets forth by level the Companys financial
assets and liabilities that were accounted for at fair value on
a recurring basis as of October 30, 2010 and
October 31, 2009. The table excludes cash on hand and
assets and liabilities that are measured at historical cost or
any basis other than fair value.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 30, 2010
|
|
|
October 31, 2009
|
|
|
|
Fair Value measurement at
|
|
|
|
|
|
Fair Value measurement at
|
|
|
|
|
|
|
Reporting Date using:
|
|
|
|
|
|
Reporting Date using:
|
|
|
|
|
|
|
Quoted
|
|
|
|
|
|
|
|
|
Quoted
|
|
|
|
|
|
|
|
|
|
Prices in
|
|
|
|
|
|
|
|
|
Prices in
|
|
|
|
|
|
|
|
|
|
Active
|
|
|
|
|
|
|
|
|
Active
|
|
|
|
|
|
|
|
|
|
Markets
|
|
|
Significant
|
|
|
|
|
|
Markets
|
|
|
Significant
|
|
|
|
|
|
|
for
|
|
|
Other
|
|
|
|
|
|
for
|
|
|
Other
|
|
|
|
|
|
|
Identical
|
|
|
Observable
|
|
|
|
|
|
Identical
|
|
|
Observable
|
|
|
|
|
|
|
Assets
|
|
|
Inputs
|
|
|
|
|
|
Assets
|
|
|
Inputs
|
|
|
|
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
Total
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
Total
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Institutional money market funds
|
|
$
|
921,034
|
|
|
$
|
|
|
|
$
|
921,034
|
|
|
$
|
553,295
|
|
|
$
|
|
|
|
$
|
553,295
|
|
Corporate obligations
|
|
|
|
|
|
|
99,959
|
|
|
|
99,959
|
|
|
|
|
|
|
|
50,981
|
|
|
|
50,981
|
|
Short term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities with one year or less to maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate obligations(1)
|
|
|
|
|
|
|
1,520,220
|
|
|
|
1,520,220
|
|
|
|
|
|
|
|
1,136,244
|
|
|
|
1,136,244
|
|
Floating rate notes, issued at par
|
|
|
|
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
|
|
|
|
40,000
|
|
|
|
40,000
|
|
Securities with greater than one year to maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Floating rate notes(1)
|
|
|
|
|
|
|
17,548
|
|
|
|
17,548
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward foreign currency exchange contracts(2)
|
|
|
|
|
|
|
7,256
|
|
|
|
7,256
|
|
|
|
|
|
|
|
8,367
|
|
|
|
8,367
|
|
Deferred compensation investments
|
|
|
8,690
|
|
|
|
|
|
|
|
8,690
|
|
|
|
7,943
|
|
|
|
|
|
|
|
7,943
|
|
Other investments
|
|
|
1,317
|
|
|
|
|
|
|
|
1,317
|
|
|
|
1,485
|
|
|
|
|
|
|
|
1,485
|
|
Interest rate swap agreements
|
|
|
|
|
|
|
26,801
|
|
|
|
26,801
|
|
|
|
|
|
|
|
6,109
|
|
|
|
6,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets measured at fair value
|
|
$
|
931,041
|
|
|
$
|
1,721,784
|
|
|
$
|
2,652,825
|
|
|
$
|
562,723
|
|
|
$
|
1,241,701
|
|
|
$
|
1,804,424
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt(3)
|
|
$
|
|
|
|
$
|
400,635
|
|
|
$
|
400,635
|
|
|
$
|
|
|
|
$
|
379,626
|
|
|
$
|
379,626
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities measured at fair value
|
|
$
|
|
|
|
$
|
400,635
|
|
|
$
|
400,635
|
|
|
$
|
|
|
|
$
|
379,626
|
|
|
$
|
379,626
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The amortized cost of the Companys investments classified
as
available-for-sale
as of October 30, 2010 and October 31, 2009 was
$1,639.1 million and $1,187.9 million, respectively. |
|
(2) |
|
The Company has a master netting arrangement by counterparty
with respect to derivative contracts. In fiscal 2010, contracts
in a liability position of $0.8 million were netted against
contracts in an asset position in the condensed consolidated
balance sheets. In fiscal 2009, contracts in a liability
position of $0.1 million were netted against contracts in
an asset position in the condensed consolidated balance sheets. |
|
(3) |
|
Equal to the accreted notional value of the debt plus the
mark-to-market of the interest rate component of the long-term
debt to fair value. The fair value of the long-term debt as of
October 30, 2010 and October 31, 2009 was
$416.3 million and $389.5 million, respectively. |
The following methods and assumptions were used by the Company
in estimating its fair value disclosures for financial
instruments:
Cash equivalents and short-term
investments These investments are adjusted
to fair value based on quoted market prices or are determined
using a yield curve model based on current market rates.
55
ANALOG
DEVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Deferred compensation plan investments and other
investments The fair value of these mutual
fund, money market fund and equity investments are based on
quoted market prices.
Long-term debt The fair value of
long-term debt is based on quotes received from third party
banks.
Interest rate swap agreements The fair
value of interest rate swap agreements is based on quotes
received from third party banks. These values represent the
estimated amount the Company would receive or pay to terminate
the agreements taking into consideration current interest rates
as well as the creditworthiness of the counterparty.
Forward foreign currency exchange
contracts The estimated fair value of
forward foreign currency exchange contracts, which includes
derivatives that are accounted for as cash flow hedges and those
that are not designated as cash flow hedges, is based on the
estimated amount the Company would receive if it sold these
agreements at the reporting date taking into consideration
current interest rates as well as the creditworthiness of the
counterparty for assets and the Companys creditworthiness
for liabilities.
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, accrued taxes, deferred
tax valuation allowances, assumptions pertaining to share-based
payments and other reserves. Actual results could differ from
those estimates and such differences may be material to the
financial statements.
|
|
l.
|
Concentrations
of Risk
|
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of investments
and trade accounts receivable.
The Company maintains cash, cash equivalents and short-term
investments and long-term investments with high credit quality
financial institutions and monitors the amount of credit
exposure to any one issuer.
The Company sells its products to distributors and original
equipment manufacturers involved in a variety of industries
including industrial process automation, instrumentation,
defense/aerospace, automotive, communications, computers and
computer peripherals and consumer electronics. 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.
|
|
m.
|
Concentration
of Other Risks
|
The semiconductor industry is characterized by rapid
technological change, competitive pricing pressures and cyclical
market patterns. The Companys 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, a large
portion of the Companys purchases of external wafer and
foundry services are from a limited number of suppliers,
primarily Taiwan Semiconductor Manufacturing
56
ANALOG
DEVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Company (TSMC). If TSMC or any of the Companys 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 Companys customers. Although the Company has
experienced shortages of components, materials and external
foundry services from time to time, these items have generally
been available to the Company as needed.
Revenue from product sales to customers is generally recognized
when title passes, which for shipments to certain foreign
countries is subsequent to product shipment. Title for these
shipments ordinarily passes within a week of shipment. A reserve
for sales returns and allowances for customers is recorded based
on historical experience or specific identification of an event
necessitating a reserve.
In all regions of the world, the Company defers revenue and the
related cost of sales on shipments to distributors until the
distributors resell the products to their customers. Therefore,
the Companys revenue fully reflects end customer purchases
and is not impacted by distributor inventory levels. Sales to
distributors are made under agreements that allow distributors
to receive price adjustment credits, as discussed below, and to
return qualifying products for credit, as determined by the
Company, 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 the
value of the Companys shipments to that distributor during
the prior quarter. In addition, distributors are allowed to
return unsold products if the Company terminates the
relationship with the distributor.
Distributors are granted price-adjustment credits related to
many of their sales to their customers. Price adjustment credits
are granted when the distributors standard cost (i.e., the
Companys sales price to the distributor) does not provide
the distributor with an appropriate margin on its sales to its
customers. As distributors negotiate selling prices with their
customers, the final sales price agreed to with the customer
will be influenced by many factors, including the particular
product being sold, the quantity ordered, the particular
customer, the geographic location of the distributor and the
competitive landscape. As a result, the distributor may request
and receive a price adjustment credit from the Company to allow
the distributor to earn an appropriate margin on the transaction.
Distributors are also granted price adjustment credits in the
event of a price decrease subsequent to the date the product was
shipped and billed to the distributor. Generally, the Company
will provide a credit equal to the difference between the price
paid by the distributor (less any prior credits on such
products) and the new price for the product multiplied by the
quantity of such product in the distributors inventory at
the time of the price decrease.
Given the uncertainties associated with the levels of price
adjustment credits to be granted to distributors, the sales
price to the distributor is not fixed or determinable until the
distributor resells the products to their customers. Therefore,
the Company defers revenue recognition from sales to
distributors until the distributors have sold the products to
their customers.
Title to the inventory transfers to the distributor at the time
of shipment or delivery to the distributor, and payment from the
distributor is due in accordance with the Companys
standard payment terms. These payment terms are not contingent
upon the distributors sale of the products to their
customers. Upon title transfer to distributors, inventory is
reduced for the cost of goods shipped, the margin (sales less
cost of sales) is recorded as deferred income on shipments
to distributors, net and an account receivable is recorded.
The deferred costs of sales to distributors have historically
had very little risk of impairment due to the margins the
Company earns on sales of its products and the relatively long
life-cycle of the Companys products. Product returns from
distributors that are ultimately scrapped have historically been
immaterial. In addition, price protection and price adjustment
credits granted to distributors historically have not exceeded
the margins the Company earns on sales of its products. The
Company continuously monitors the level and nature of product
returns and is in continuous contact with the distributors to
ensure reserves are established for all known material issues.
57
ANALOG
DEVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
As of October 30, 2010 and October 31, 2009, the
Company had gross deferred revenue of $327.2 million and
$230.8 million, respectively, and gross deferred cost of
sales of $84.4 million and $81.5 million,
respectively. Deferred income on shipments to distributors
increased by $93.5 million in fiscal 2010 primarily, as a
result of the Companys shipments to its distributors in
fiscal 2010 exceeding the distributors sales to their
customers during this same time period.
Shipping costs are charged to cost of sales as incurred.
The Company generally offers a
12-month
warranty for its products. The Companys warranty policy
provides for replacement of the defective product. Specific
accruals are recorded for known product warranty issues. Product
warranty expenses during fiscal 2010, 2009 and 2008 were not
material.
|
|
o.
|
Accumulated
Other Comprehensive (Loss) Income
|
Other comprehensive (loss) income includes certain transactions
that have generally been reported in the consolidated statement
of shareholders equity. The components of accumulated
other comprehensive loss at October 30, 2010 and
October 31, 2009 consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Accumulated other comprehensive loss pension plans:
|
|
|
|
|
|
|
|
|
Transition obligation
|
|
$
|
(129
|
)
|
|
$
|
(49
|
)
|
Net actuarial loss
|
|
|
(38,839
|
)
|
|
|
(8,688
|
)
|
Unrealized gains on
available-for-sale
securities
|
|
|
822
|
|
|
|
932
|
|
Unrealized losses on
available-for-sale
securities
|
|
|
(191
|
)
|
|
|
(576
|
)
|
Foreign currency translation
|
|
|
(1,391
|
)
|
|
|
(7,476
|
)
|
Unrealized gains on derivative instruments
|
|
|
6,133
|
|
|
|
5,609
|
|
|
|
|
|
|
|
|
|
|
Total accumulated other comprehensive loss
|
|
$
|
(33,595
|
)
|
|
$
|
(10,248
|
)
|
|
|
|
|
|
|
|
|
|
The aggregate fair value of investments with unrealized losses
as of October 30, 2010 and October 31, 2009 was
$731.0 million and $535.3 million, respectively. These
unrealized losses are primarily related to commercial paper that
earns lower interest rates than current market rates. None of
these investments have been in a loss position for more than
twelve months.
Advertising costs are expensed as incurred. Advertising expense
was $3.7 million in fiscal 2010, $5.2 million in
fiscal 2009 and $10.0 million in fiscal 2008.
Deferred tax assets and liabilities are determined based on the
differences between financial reporting and tax bases of assets
and liabilities and are measured using the enacted income tax
rates and laws that are expected to be in effect when the
temporary differences are expected to reverse. Additionally,
deferred tax assets and liabilities are separated into current
and non-current amounts based on the classification of the
related assets and liabilities for financial reporting purposes.
|
|
r.
|
Earnings
Per Share of Common Stock
|
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
58
ANALOG
DEVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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
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.
This results in the assumed buyback of additional
shares, thereby reducing the dilutive impact of stock options.
Potential shares related to certain of the Companys
outstanding stock options were excluded because they were
anti-dilutive. Those potential shares, determined based on the
weighted average exercise prices during the respective years,
related to the Companys outstanding stock options could be
dilutive in the future.
The following table sets forth the computation of basic and
diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Income from continuing operations, net of tax
|
|
$
|
711,225
|
|
|
$
|
247,408
|
|
|
$
|
525,177
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income from discontinued operations, net of tax
|
|
|
859
|
|
|
|
364
|
|
|
|
261,107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
712,084
|
|
|
$
|
247,772
|
|
|
$
|
786,284
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
297,387
|
|
|
|
291,385
|
|
|
|
292,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share-basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, net of tax
|
|
$
|
2.39
|
|
|
$
|
0.85
|
|
|
$
|
1.79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income from discontinued operations, net of tax
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
0.89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income(1)
|
|
$
|
2.39
|
|
|
$
|
0.85
|
|
|
$
|
2.69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
297,387
|
|
|
|
291,385
|
|
|
|
292,688
|
|
Assumed exercise of common stock equivalents
|
|
|
8,474
|
|
|
|
1,313
|
|
|
|
4,422
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common and common equivalent shares
|
|
|
305,861
|
|
|
|
292,698
|
|
|
|
297,110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share-diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, net of tax
|
|
$
|
2.33
|
|
|
$
|
0.85
|
|
|
$
|
1.77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income from discontinued operations, net of tax
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
0.88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
2.33
|
|
|
$
|
0.85
|
|
|
$
|
2.65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average anti-dilutive shares related to:
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding stock options
|
|
|
18,206
|
|
|
|
55,827
|
|
|
|
57,364
|
|
|
|
|
(1) |
|
The sum of the individual per share amounts may not equal due to
rounding. |
|
|
s.
|
Stock-Based
Compensation
|
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 five years.
Determining the amount of stock-based compensation to be
recorded requires the Company to develop estimates used in
calculating the grant-date fair value of stock options. The
Company calculates the grant-date fair value using the
Black-Scholes valuation model. The use of valuation models
requires the Company to make estimates and assumptions such as
expected volatility, expected term, risk-free interest rate,
expected dividend yield and forfeiture rates.
See Note 3 for additional information relating to
stock-based compensation.
59
ANALOG
DEVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
t.
|
New
Accounting Pronouncements
|
Revenue
Arrangements That Include Software Elements
In October 2009, the Financial Accounting Standards Board (FASB)
issued Accounting Standards Update (ASU)
No. 2009-14
Software (Topic 985): Certain Revenue Arrangements That
Include Software Elements (formerly EITF Issue
No. 09-3).
This standard removes tangible products from the scope of
software revenue recognition guidance and also provides guidance
on determining whether software deliverables in an arrangement
that includes a tangible product are within the scope of the
software revenue guidance. More specifically, if the software
sold with or embedded within the tangible product is essential
to the functionality of the tangible product, then this
software, as well as undelivered software elements that relate
to this software, are excluded from the scope of existing
software revenue guidance. ASU
No. 2009-14
is effective for fiscal years that begin on or after
June 15, 2010, which is the Companys fiscal year
2011. The Company is currently evaluating the impact, if any,
that ASU
No. 2009-14
may have on the Companys financial condition and results
of operations.
Multiple-Deliverable
Revenue Arrangements
In October 2009, the FASB issued ASU
No. 2009-13
Revenue Recognition (Topic 605): Multiple-Deliverable Revenue
Arrangements (formerly EITF Issue
No. 08-1).
This standard modifies the revenue recognition guidance for
arrangements that involve the delivery of multiple elements,
such as product, software, services or support, to a customer at
different times as part of a single revenue generating
transaction. This standard provides principles and application
guidance to determine whether multiple deliverables exist, how
the individual deliverables should be separated and how to
allocate the revenue in the arrangement among those separate
deliverables. The standard also expands the disclosure
requirements for multiple-deliverable revenue arrangements. ASU
No. 2009-13
is effective for fiscal years that begin on or after
June 15, 2010, which is the Companys fiscal year
2011. The Company is currently evaluating the impact, if any,
that ASU
No. 2009-13
may have on the Companys financial condition and results
of operations.
Variable
Interest Entities
In December 2009, the FASB issued ASU
No. 2009-17
Consolidations (Topic 810): Improvements to Financial
Reporting by Enterprises Involved with Variable Interest
Entities, which amends ASC 810, Consolidation.
This standard requires an enterprise to perform an analysis to
determine whether the enterprises variable interest or
interests give it a controlling financial interest in a variable
interest entity. Additionally, an enterprise is required to
assess whether it has an implicit financial responsibility to
ensure that a variable interest entity operates as designed when
determining whether it has the power to direct the activities of
the variable interest entity that most significantly impact the
entitys economic performance. ASU
No. 2009-17
is effective for fiscal years that begin after November 15,
2009, which is the Companys fiscal year 2011. The Company
is currently evaluating the impact, if any, that ASU
No. 2009-17
may have on the Companys financial condition and results
of operations.
Transfers
of Financial Assets
In June 2009, the FASB issued ASU
No. 2009-16,
Accounting for Transfers of Financial Assets, (Topic 820).
This standard changes the way entities account for
securitizations and other transfers of financial instruments.
ASU
No. 2009-16
is effective for fiscal years that begin after November 15,
2009, which is the Companys fiscal year 2011. The Company
is currently evaluating the impact, if any, that ASU
No. 2009-16
may have on the Companys financial condition and results
of operations.
|
|
u.
|
Discontinued
Operations
|
In November 2007, the Company entered into a purchase and sale
agreement with certain subsidiaries of ON Semiconductor
Corporation to sell the Companys CPU voltage regulation
and PC thermal monitoring business
60
ANALOG
DEVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
which consisted of core voltage regulator products for the
central processing unit in computing and gaming applications and
temperature sensors and fan-speed controllers for managing the
temperature of the central processing unit. During the first
quarter of fiscal 2008, the Company completed the sale of this
business for net cash proceeds of $138 million, which was
net of other cash payments of approximately $1.4 million.
The Company made final additional cash payments of approximately
$2.2 million in the second quarter of fiscal 2008. In
connection with the purchase and sale agreement,
$7.5 million was placed into escrow and was excluded from
the gain calculations. The Company recorded a
pre-tax gain
in the first quarter of fiscal 2008 of $78 million, or
$43 million net of tax, which was recorded as a gain on
sale of discontinued operations. During the third quarter of
fiscal 2008, additional proceeds were released from escrow and
an additional pre-tax gain of $6.6 million, or
$3.8 million net of tax, was recorded as a gain on sale of
discontinued operations. Additionally, at the time of the sale,
the Company entered into a one-year manufacturing supply
agreement with a subsidiary of ON Semiconductor Corporation for
an additional $37 million. The Company has allocated the
proceeds from this arrangement based on the fair value of the
two elements of this transaction: (i) the sale of a
business and (ii) the obligation to manufacture product for
a one-year period. As a result, $85 million was recorded as
a liability related to the manufacturing supply agreement, all
of which has been utilized. The liability was included in
current liabilities of discontinued operations on the
Companys consolidated balance sheet. The Company recorded
the revenue associated with this manufacturing supply agreement
in discontinued operations. In the first quarter of fiscal 2010,
additional proceeds of $1 million were released from
escrow, $0.6 million net of tax, and was recorded as
additional gain from the sale of discontinued operations. The
Company does not expect any additional proceeds from this sale.
In September 2007, the Company entered into a definitive
agreement to sell its Baseband Chipset Business to MediaTek Inc.
The decision to sell the Baseband Chipset Business was due to
the Companys decision to focus its resources in areas
where its signal processing expertise can provide unique
capabilities and earn superior returns. On January 11, 2008
the Company completed the sale of its Baseband Chipset Business
for net cash proceeds of $269 million. The cash proceeds
received were net of a refundable withholding tax of
$62 million. In connection with the purchase and sale
agreement, $10 million was placed into escrow and was
excluded from the gain calculations. The Company made additional
cash payments of $7.8 million during fiscal 2008, primarily
related to transaction fees and retention payments to employees
that transferred to MediaTek Inc. The Company made additional
cash payments of $1.7 million during fiscal 2009 related to
retention payments for employees who transferred to MediaTek
Inc. and for the reimbursement of intellectual property license
fees incurred by MediaTek Inc. In the first quarter of fiscal
2010, the Company received cash proceeds of $62 million as
a result of the refund of the withholding tax and also recorded
an additional gain on sale of $0.3 million, or
$0.2 million net of tax, due to the settlement of certain
items at less than the amounts accrued. The Company may receive
additional proceeds of up to $10 million, currently held in
escrow, upon the resolution of certain contingent items, which
would be recorded as additional gain from the sale of
discontinued operations.
The following amounts related to the CPU voltage regulation and
PC thermal monitoring and baseband chipset businesses have been
segregated from continuing operations and reported as
discontinued operations. These amounts also include the revenue
and costs of sales provided under a manufacturing supply
agreement between the
61
ANALOG
DEVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Company and a subsidiary of ON Semiconductor Corporation, which
terminated during the first quarter of fiscal year 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Total revenue
|
|
$
|
|
|
|
$
|
10,332
|
|
|
$
|
115,600
|
|
Cost of sales
|
|
|
|
|
|
|
10,847
|
|
|
|
95,070
|
|
Operating expenses
|
|
|
|
|
|
|
16
|
|
|
|
14,951
|
|
Gain on sale of discontinued operations
|
|
|
1,316
|
|
|
|
|
|
|
|
362,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
1,316
|
|
|
|
(531
|
)
|
|
|
368,173
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for (benefit from) income taxes
|
|
|
457
|
|
|
|
(895
|
)
|
|
|
107,066
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations, net of tax
|
|
$
|
859
|
|
|
$
|
364
|
|
|
$
|
261,107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 30, 2010
|
|
|
October 31, 2009
|
|
|
Refundable foreign withholding tax
|
|
$
|
|
|
|
$
|
62,037
|
|
|
|
|
|
|
|
|
|
|
Total assets reclassified to non-current assets of discontinued
operations
|
|
$
|
|
|
|
$
|
62,037
|
|
|
|
|
|
|
|
|
|
|
|
|
3.
|
Stock-Based
Compensation and Shareholders Equity
|
Equity
Compensation Plans
The Company grants, or has granted, stock options and other
stock and stock-based awards under The 2006 Stock Incentive Plan
(2006 Plan). The 2006 Plan was approved by the Companys
Board of Directors on January 23, 2006 and was approved by
shareholders on March 14, 2006 and subsequently amended in
March 2006, June 2009, September 2009 and December 2009. The
2006 Plan provides for the grant of up to 15 million shares
of the Companys common stock, plus such number of
additional shares that were subject to outstanding options under
the Companys previous plans that are not issued because
the applicable option award subsequently terminates or expires
without being exercised. The 2006 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 2006 Plan. No award may be made under the 2006
Plan after March 13, 2016, but awards previously granted
may extend beyond that date. The Company will not grant further
options under any previous plans.
While the Company may grant to employees options that become
exercisable at different times or within different periods, the
Company has generally granted to employees options that vest
over five years and become exercisable in annual installments of
20% on each of the first, second, third, fourth and fifth
anniversaries of the date of grant;
331/3%
on each of the third, fourth, and fifth anniversaries of the
date of grant; or in annual installments of 25% on each of the
second, third, fourth and fifth anniversaries of the date of
grant. The maximum contractual term of all options is ten years.
As of October 30, 2010 a total of 12,669,980 common shares
were available for future grant and 57,013,585 common shares
were reserved for issuance under the 2006 Plan.
Grant-Date
Fair Value
The Company uses the Black-Scholes option pricing model to
calculate the grant-date fair value of stock option awards. The
grant date fair value of restricted stock units represents the
value of the Companys common stock on the date of grant,
reduced by the present value of dividends expected to be paid on
the Companys common stock prior to vesting.
62
ANALOG
DEVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Information pertaining to the Companys stock option awards
and the related estimated weighted-average assumptions to
calculate the fair value of stock options granted are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 Excluding
|
|
|
|
|
|
|
|
|
Option
|
|
|
|
|
|
|
|
|
Exchange
|
|
|
|
|
|
|
2010
|
|
Program
|
|
2009*
|
|
2008
|
|
Options granted (in thousands)
|
|
|
1,866
|
|
|
|
5,675
|
|
|
|
20,873
|
|
|
|
5,827
|
|
Weighted-average exercise price-stock options
|
|
$
|
31.49
|
|
|
$
|
19.63
|
|
|
$
|
25.74
|
|
|
$
|
29.79
|
|
Weighted-average grant date fair value-stock options
|
|
$
|
7.77
|
|
|
$
|
7.42
|
|
|
$
|
5.97
|
|
|
$
|
7.90
|
|
Assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average expected volatility
|
|
|
31.4
|
%
|
|
|
58.8
|
%
|
|
|
41.3
|
%
|
|
|
32.4
|
%
|
Weighted-average expected term (in years)
|
|
|
5.3
|
|
|
|
5.3
|
|
|
|
4.7
|
|
|
|
5.1
|
|
Risk-free interest rate
|
|
|
2.5
|
%
|
|
|
1.7
|
%
|
|
|
1.4
|
%
|
|
|
3.2
|
%
|
Expected dividend yield
|
|
|
2.6
|
%
|
|
|
4.1
|
%
|
|
|
3.2
|
%
|
|
|
2.4
|
%
|
|
|
|
* |
|
Includes options granted under the stock option exchange program
which is described below. |
Expected volatility The Company is responsible for
estimating volatility and has considered a number of factors,
including third-party estimates, when estimating volatility. The
Company currently believes that the exclusive use of implied
volatility results in the best estimate of the grant-date fair
value of employee stock options because it reflects the
markets current expectations of future volatility. In
evaluating the appropriateness of exclusively relying on implied
volatility, the Company concluded that: (1) options in the
Companys common stock are actively traded with sufficient
volume on several exchanges; (2) the market prices of both
the traded options and the underlying shares are measured at a
similar point in time to each other and on a date close to the
grant date of the employee share options; (3) the traded
options have exercise prices that are both
near-the-money
and close to the exercise price of the employee share options;
and (4) the maturities of the traded options used to
estimate volatility are at least one year.
Expected term The Company uses historical employee
exercise and option expiration data to estimate the expected
term assumption for the Black-Scholes grant-date valuation. The
Company believes that this historical data is currently the best
estimate of the expected term of a new option, and that
generally its employees exhibit similar exercise behavior.
Risk-free interest rate The yield on zero-coupon
U.S. Treasury securities for a period that is commensurate
with the expected term assumption is used as the risk-free
interest rate.
Expected dividend yield Expected dividend yield is
calculated by annualizing the cash dividend declared by the
Companys Board of Directors for the current quarter and
dividing that result by the closing stock price on the date of
grant. Until such time as the Companys Board of Directors
declares a cash dividend for an amount that is different from
the current quarters cash dividend, the current dividend
will be used in deriving this assumption. Cash dividends are not
paid on options, restricted stock or restricted stock units.
Stock-based
Compensation Expense
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 4.3% to all unvested stock-based awards as of
October 30, 2010. The rate of 4.3% represents the portion
that is expected to be forfeited each year over the vesting
period. This analysis will be re-evaluated quarterly and the
forfeiture rate will be
63
ANALOG
DEVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
adjusted as necessary. Ultimately, the actual expense recognized
over the vesting period will only be for those options that vest.
Stock-option
Exchange
During fiscal 2009, shareholders approved and the Company
completed an employee stock option exchange program (Option
Exchange). The Option Exchange provided eligible employees of
the Company, except named executive officers and directors, the
opportunity to exchange eligible stock option grants for a
smaller number of new stock options with a lower exercise price,
or in some instances cash, that had approximately the same fair
value as the options surrendered.
On September 28, 2009 the Company granted stock options for
approximately 15.2 million shares in the aggregate to
approximately 3,100 employees who elected to participate in
the Option Exchange. The new stock options issued were subject
to a new vesting period and a new contractual term based on the
grant date of the original options. In addition, the Company
made cash payments of approximately $2.6 million to
approximately 5,100 employees whose exchanged options would
each have resulted in a new stock option for fewer than
100 shares. As a result of the exchange, employees elected
to surrender options for approximately 33.6 million
options, which were cancelled upon the grant of the new options
on September 28, 2009.
The exchange of options in this Option Exchange is treated as a
modification of the existing stock options for accounting
purposes. Accordingly, any unrecognized compensation expense
from the surrendered stock options will be recognized over the
original service period of the surrendered option. Because the
exchange ratios were calculated to result in the fair value of
surrendered eligible stock options that was approximately equal
to the fair value of the new stock options replacing them, the
amount of incremental expense was immaterial.
Stock-Based
Compensation Activity
A summary of the activity under the Companys stock option
plans as of October 30, 2010 and changes during the fiscal
year then ended is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
|
|
|
|
Options
|
|
|
Exercise Price
|
|
|
Contractual
|
|
|
Aggregate
|
|
|
|
Outstanding
|
|
|
Per Share
|
|
|
Term in Years
|
|
|
Intrinsic Value
|
|
|
Options outstanding at October 31, 2009
|
|
|
52,463
|
|
|
$
|
29.71
|
|
|
|
|
|
|
|
|
|
Options granted
|
|
|
1,866
|
|
|
$
|
31.49
|
|
|
|
|
|
|
|
|
|
Options exercised
|
|
|
(8,811
|
)
|
|
$
|
27.28
|
|
|
|
|
|
|
|
|
|
Options forfeited
|
|
|
(1,118
|
)
|
|
$
|
27.55
|
|
|
|
|
|
|
|
|
|
Options expired
|
|
|
(1,321
|
)
|
|
$
|
45.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding October 30, 2010
|
|
|
43,079
|
|
|
$
|
29.87
|
|
|
|
4.6
|
|
|
$
|
238,467
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at October 30, 2010
|
|
|
24,994
|
|
|
$
|
31.85
|
|
|
|
3.3
|
|
|
$
|
118,811
|
|
Options vested or expected to vest October 30,
2010(1)
|
|
|
41,975
|
|
|
$
|
29.95
|
|
|
|
4.5
|
|
|
$
|
230,805
|
|
|
|
|
(1) |
|
In addition to the vested options, the Company expects a portion
of the unvested options to vest at some point in the future.
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
2010, fiscal 2009 and fiscal 2008 was $29.6 million,
$4.7 million and $121.7 million, respectively. The
total amount of proceeds received by the Company from exercise
64
ANALOG
DEVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
of these options during fiscal 2010, fiscal 2009 and fiscal 2008
was $240.4 million, $15.1 million and
$100.6 million, respectively. The total grant-date fair
value of stock options that vested during fiscal 2010, fiscal
2009 and fiscal 2008 was approximately $67.2 million,
$73.6 million and $77.6 million, respectively.
Proceeds from stock option exercises pursuant to employee stock
plans in the Companys statement of cash flows of
$216.1 million, $12.4 million and $94.2 million
for fiscal 2010, fiscal 2009 and fiscal 2008, respectively, are
net of the value of shares surrendered by employees in certain
limited circumstances to satisfy the exercise price of options,
and to satisfy employee tax obligations upon vesting of
restricted stock or restricted stock units and in connection
with the exercise of stock options granted to the Companys
employees under the Companys equity compensation plans.
The withholding amount is based on the Companys minimum
statutory withholding requirement.
A summary of the Companys restricted stock unit award
activity as of October 30, 2010 and changes during the year
then ended is presented below:
|
|
|
|
|
|
|
|
|
|
|
Restricted
|
|
|
Weighted-
|
|
|
|
Stock
|
|
|
Average Grant-
|
|
|
|
Units
|
|
|
Date Fair Value
|
|
|
|
Outstanding
|
|
|
Per Share
|
|
|
Restricted stock units outstanding at October 31,
2009
|
|
|
135
|
|
|
$
|
22.19
|
|
Units granted
|
|
|
1,171
|
|
|
$
|
28.86
|
|
Restrictions lapsed
|
|
|
(19
|
)
|
|
$
|
24.70
|
|
Units forfeited
|
|
|
(22
|
)
|
|
$
|
29.10
|
|
|
|
|
|
|
|
|
|
|
Restricted stock units outstanding at October 30,
2010
|
|
|
1,265
|
|
|
$
|
28.21
|
|
|
|
|
|
|
|
|
|
|
As of October 30, 2010 there was $95 million of total
unrecognized compensation cost related to unvested share-based
awards comprised of stock options and restricted stock units.
That cost is expected to be recognized over a weighted-average
period of 1.4 years.
Common
Stock Repurchase Program
The Companys common stock repurchase program has been in
place since August 2004. In the aggregate, the Board of
Directors has authorized the Company to repurchase
$4 billion of the Companys common stock under the
program. Under the program, 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 Companys
Board of Directors, the repurchase program will expire when the
Company has repurchased all shares authorized under the program.
As of October 30, 2010, the Company had repurchased a total
of approximately 116.0 million shares of its common stock
for approximately $3,948.2 million under this program. An
additional $51.8 million remains available for repurchase
of shares under the current authorized program. The repurchased
shares are held as authorized but unissued shares of common
stock. Any future common stock repurchases will be dependent
upon several factors including the amount of cash available to
the Company in the United States, and the Companys
financial performance, outlook and liquidity. The Company also
from time to time repurchases shares in settlement of employee
tax withholding obligations due upon the vesting of restricted
stock or restricted stock units, or in certain limited
circumstances to satisfy the exercise price of options granted
to the Companys employees under the Companys equity
compensation plans.
Preferred
Stock
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.
65
ANALOG
DEVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
4.
|
Industry,
Segment and Geographic Information
|
The Company operates and tracks its results in one reportable
segment based on the aggregation of five operating segments. The
Company designs, develops, manufactures and markets a broad
range of integrated circuits. The Chief Executive Officer has
been identified as the Chief Operating Decision Maker.
Revenue
Trends 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 Companys
product will be incorporated. As data systems for capturing and
tracking this data evolve and improve, 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
Product
|
|
|
|
|
|
|
|
|
Product
|
|
|
|
|
|
Product
|
|
|
|
Revenue
|
|
|
Revenue*
|
|
|
Y/Y%
|
|
|
Revenue
|
|
|
Revenue
|
|
|
Revenue
|
|
|
Revenue
|
|
|
Industrial
|
|
$
|
1,266,423
|
|
|
|
46
|
%
|
|
|
48
|
%
|
|
$
|
857,950
|
|
|
|
43
|
%
|
|
$
|
1,143,333
|
|
|
|
44
|
%
|
Automotive
|
|
|
333,045
|
|
|
|
12
|
%
|
|
|
66
|
%
|
|
|
200,989
|
|
|
|
10
|
%
|
|
|
255,172
|
|
|
|
10
|
%
|
Consumer
|
|
|
513,348
|
|
|
|
19
|
%
|
|
|
23
|
%
|
|
|
417,652
|
|
|
|
21
|
%
|
|
|
538,202
|
|
|
|
21
|
%
|
Communications
|
|
|
595,709
|
|
|
|
22
|
%
|
|
|
21
|
%
|
|
|
493,409
|
|
|
|
24
|
%
|
|
|
559,006
|
|
|
|
22
|
%
|
Computer
|
|
|
52,978
|
|
|
|
2
|
%
|
|
|
18
|
%
|
|
|
44,908
|
|
|
|
2
|
%
|
|
|
87,218
|
|
|
|
3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue
|
|
$
|
2,761,503
|
|
|
|
100
|
%
|
|
|
37
|
%
|
|
$
|
2,014,908
|
|
|
|
100
|
%
|
|
$
|
2,582,931
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
The sum of the individual percentages do not equal the total due
to rounding. |
Revenue
Trends by Product
The following table summarizes revenue by product categories.
The categorization of the Companys products into broad
categories is based on the characteristics of the individual
products, the specification of the products and in some cases
the specific uses that certain products have within
applications. The categorization of products into categories is
therefore subject to judgment in some cases and can vary over
time. In instances where products move between product
categories, the Company reclassifies the amounts in the product
categories for all prior periods.
66
ANALOG
DEVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Such reclassifications typically do not materially change the
sizing of, or the underlying trends of results within, each
product category.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
Product
|
|
|
|
|
|
|
|
|
Product
|
|
|
|
|
|
Product
|
|
|
|
Revenue
|
|
|
Revenue
|
|
|
Y/Y%
|
|
|
Revenue
|
|
|
Revenue*
|
|
|
Revenue
|
|
|
Revenue*
|
|
|
Converters
|
|
$
|
1,286,344
|
|
|
|
47
|
%
|
|
|
29
|
%
|
|
$
|
999,227
|
|
|
|
50
|
%
|
|
$
|
1,235,378
|
|
|
|
48
|
%
|
Amplifiers/ Radio frequency
|
|
|
703,082
|
|
|
|
25
|
%
|
|
|
40
|
%
|
|
|
502,972
|
|
|
|
25
|
%
|
|
|
666,893
|
|
|
|
26
|
%
|
Other analog
|
|
|
342,473
|
|
|
|
12
|
%
|
|
|
55
|
%
|
|
|
221,110
|
|
|
|
11
|
%
|
|
|
272,950
|
|
|
|
11
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal analog signal processing
|
|
|
2,331,899
|
|
|
|
84
|
%
|
|
|
35
|
%
|
|
|
1,723,309
|
|
|
|
86
|
%
|
|
|
2,175,221
|
|
|
|
84
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Power management & reference
|
|
|
194,761
|
|
|
|
7
|
%
|
|
|
65
|
%
|
|
|
118,258
|
|
|
|
6
|
%
|
|
|
143,572
|
|
|
|
6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total analog products
|
|
$
|
2,526,660
|
|
|
|
91
|
%
|
|
|
37
|
%
|
|
$
|
1,841,567
|
|
|
|
91
|
%
|
|
$
|
2,318,793
|
|
|
|
90
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Digital signal processing
|
|
|
234,843
|
|
|
|
9
|
%
|
|
|
35
|
%
|
|
|
173,341
|
|
|
|
9
|
%
|
|
|
264,138
|
|
|
|
10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue
|
|
$
|
2,761,503
|
|
|
|
100
|
%
|
|
|
37
|
%
|
|
$
|
2,014,908
|
|
|
|
100
|
%
|
|
$
|
2,582,931
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
The sum of the individual percentages do not equal the total due
to rounding. |
67
ANALOG
DEVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Geographic
Information
The Company operates in the following major geographic areas.
Revenue data is based upon customer location and property, plant
and equipment data is based upon physical location. In fiscal
year 2010 and 2009, the predominant countries comprising
Rest of North and South America are Canada and
Mexico; the predominant countries comprising Europe
are Germany, Sweden, France and the United Kingdom; and the
predominant countries comprising Rest of Asia are
Taiwan, South Korea and Singapore. In fiscal year 2008, the
predominant countries comprising Rest of North and South
America are Canada and Mexico; the predominant countries
comprising Europe are Germany, France and the United
Kingdom; and the predominant countries comprising Rest of
Asia are Taiwan and South Korea.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Revenue from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
508,187
|
|
|
$
|
401,608
|
|
|
$
|
524,197
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rest of North and South America
|
|
|
153,962
|
|
|
|
92,954
|
|
|
|
97,449
|
|
Europe
|
|
|
703,717
|
|
|
|
502,602
|
|
|
|
679,778
|
|
Japan
|
|
|
441,826
|
|
|
|
349,907
|
|
|
|
503,059
|
|
China
|
|
|
508,489
|
|
|
|
376,080
|
|
|
|
401,060
|
|
Rest of Asia
|
|
|
445,322
|
|
|
|
291,757
|
|
|
|
377,388
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal all foreign countries
|
|
|
2,253,316
|
|
|
|
1,613,300
|
|
|
|
2,058,734
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
2,761,503
|
|
|
$
|
2,014,908
|
|
|
$
|
2,582,931
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
188,776
|
|
|
$
|
204,758
|
|
|
$
|
251,616
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ireland
|
|
|
139,165
|
|
|
|
155,428
|
|
|
|
186,487
|
|
Philippines
|
|
|
131,963
|
|
|
|
103,209
|
|
|
|
116,622
|
|
All other countries
|
|
|
12,761
|
|
|
|
13,121
|
|
|
|
12,714
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal all foreign countries
|
|
|
283,889
|
|
|
|
271,758
|
|
|
|
315,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total property, plant and equipment
|
|
$
|
472,665
|
|
|
$
|
476,516
|
|
|
$
|
567,439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68
ANALOG
DEVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A summary of the Companys special charges and accruals
related to ongoing actions is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidation
|
|
|
|
|
|
|
|
|
|
|
|
|
Closure of Wafer
|
|
|
of a Wafer
|
|
|
|
|
|
Closure of Wafer
|
|
|
|
|
|
|
Fabrication
|
|
|
Fabrication
|
|
|
Reduction of
|
|
|
Fabrication
|
|
|
Total
|
|
|
|
Facility
|
|
|
Facility in
|
|
|
Operating
|
|
|
Facility
|
|
|
Special
|
|
Income Statement
|
|
in Sunnyvale
|
|
|
Limerick
|
|
|
Costs
|
|
|
in Cambridge
|
|
|
Charges
|
|
|
Fiscal 2005 Charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Workforce reductions
|
|
$
|
20,315
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
20,315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fiscal 2005 Charges
|
|
$
|
20,315
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
20,315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2006 Charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in estimate
|
|
|
(2,029
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,029
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fiscal 2006 Charges
|
|
$
|
(2,029
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(2,029
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2007 Charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Facility closure costs
|
|
|
10,288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,288
|
|
Workforce reductions
|
|
|
|
|
|
|
13,748
|
|
|
|
|
|
|
|
|
|
|
|
13,748
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fiscal 2007 Charges
|
|
$
|
10,288
|
|
|
$
|
13,748
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
24,036
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2008 Charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Workforce reductions
|
|
|
|
|
|
|
|
|
|
|
1,627
|
|
|
|
|
|
|
|
1,627
|
|
Change in estimate
|
|
|
|
|
|
|
1,461
|
|
|
|
|
|
|
|
|
|
|
|
1,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fiscal 2008 Charges
|
|
$
|
|
|
|
$
|
1,461
|
|
|
$
|
1,627
|
|
|
$
|
|
|
|
$
|
3,088
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2009 Charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Workforce reductions
|
|
|
|
|
|
|
|
|
|
|
26,583
|
|
|
|
7,446
|
|
|
|
34,029
|
|
Facility closure costs
|
|
|
|
|
|
|
1,191
|
|
|
|
2,411
|
|
|
|
57
|
|
|
|
3,659
|
|
Non-cash impairment charge
|
|
|
|
|
|
|
|
|
|
|
839
|
|
|
|
14,629
|
|
|
|
15,468
|
|
Other items
|
|
|
|
|
|
|
|
|
|
|
500
|
|
|
|
|
|
|
|
500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fiscal 2009 Charges
|
|
$
|
|
|
|
$
|
1,191
|
|
|
$
|
30,333
|
|
|
$
|
22,132
|
|
|
$
|
53,656
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Workforce reductions
|
|
|
|
|
|
|
|
|
|
|
10,908
|
|
|
|
|
|
|
|
10,908
|
|
Facility closure costs
|
|
|
375
|
|
|
|
|
|
|
|
|
|
|
|
4,689
|
|
|
|
5,064
|
|
Non-cash impairment charge
|
|
|
|
|
|
|
|
|
|
|
487
|
|
|
|
|
|
|
|
487
|
|
Other items
|
|
|
|
|
|
|
|
|
|
|
24
|
|
|
|
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fiscal 2010 Charges
|
|
$
|
375
|
|
|
$
|
|
|
|
$
|
11,419
|
|
|
$
|
4,689
|
|
|
$
|
16,483
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
69
ANALOG
DEVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidation
|
|
|
|
|
|
|
|
|
|
|
|
|
Closure of Wafer
|
|
|
of a Wafer
|
|
|
|
|
|
Closure of Wafer
|
|
|
|
|
|
|
Fabrication
|
|
|
Fabrication
|
|
|
Reduction of
|
|
|
Fabrication
|
|
|
Total
|
|
|
|
Facility
|
|
|
Facility in
|
|
|
Operating
|
|
|
Facility
|
|
|
Special
|
|
Accrued Restructuring
|
|
in Sunnyvale
|
|
|
Limerick
|
|
|
Costs
|
|
|
in Cambridge
|
|
|
Charges
|
|
|
Balance at November 3, 2007
|
|
$
|
4,002
|
|
|
$
|
13,748
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
17,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2008 special charges
|
|
|
|
|
|
|
1,461
|
|
|
|
1,627
|
|
|
|
|
|
|
|
3,088
|
|
Severance payments
|
|
|
(253
|
)
|
|
|
(1,727
|
)
|
|
|
(126
|
)
|
|
|
|
|
|
|
(2,106
|
)
|
Facility closure costs
|
|
|
(2,002
|
)
|
|
|
(279
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,281
|
)
|
Effect of foreign currency on accrual
|
|
|
|
|
|
|
(1,449
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,449
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at November 1, 2008
|
|
$
|
1,747
|
|
|
$
|
11,754
|
|
|
$
|
1,501
|
|
|
$
|
|
|
|
$
|
15,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2009 special charges
|
|
|
|
|
|
|
1,191
|
|
|
|
30,333
|
|
|
|
22,132
|
|
|
|
53,656
|
|
Severance payments
|
|
|
|
|
|
|
(11,802
|
)
|
|
|
(21,156
|
)
|
|
|
(756
|
)
|
|
|
(33,714
|
)
|
Facility closure costs
|
|
|
(1,578
|
)
|
|
|
(1,164
|
)
|
|
|
(1,195
|
)
|
|
|
(57
|
)
|
|
|
(3,994
|
)
|
Non-cash impairment charge
|
|
|
|
|
|
|
|
|
|
|
(839
|
)
|
|
|
(14,629
|
)
|
|
|
(15,468
|
)
|
Other payments
|
|
|
|
|
|
|
|
|
|
|
(503
|
)
|
|
|
|
|
|
|
(503
|
)
|
Effect of foreign currency on accrual
|
|
|
|
|
|
|
333
|
|
|
|
20
|
|
|
|
|
|
|
|
353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at October 31, 2009
|
|
$
|
169
|
|
|
$
|
312
|
|
|
$
|
8,161
|
|
|
$
|
6,690
|
|
|
$
|
15,332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2010 special charges
|
|
|
375
|
|
|
|
|
|
|
|
11,419
|
|
|
|
4,689
|
|
|
|
16,483
|
|
Severance payments
|
|
|
|
|
|
|
(302
|
)
|
|
|
(12,223
|
)
|
|
|
(5,337
|
)
|
|
|
(17,862
|
)
|
Facility closure costs
|
|
|
(544
|
)
|
|
|
|
|
|
|
(1,216
|
)
|
|
|
(4,079
|
)
|
|
|
(5,839
|
)
|
Non-cash impairment charge
|
|
|
|
|
|
|
|
|
|
|
(487
|
)
|
|
|
|
|
|
|
(487
|
)
|
Other payments
|
|
|
|
|
|
|
|
|
|
|
(24
|
)
|
|
|
|
|
|
|
(24
|
)
|
Effect of foreign currency on accrual
|
|
|
|
|
|
|
(10
|
)
|
|
|
(84
|
)
|
|
|
|
|
|
|
(94
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at October 30, 2010
|
|
$
|
|
|
|
$
|
|
|
|
$
|
5,546
|
|
|
$
|
1,963
|
|
|
$
|
7,509
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closure
of Wafer Fabrication Facility in Sunnyvale
The Company ceased production at its California wafer
fabrication facility in November 2006. The Company paid the
related lease obligation costs on a monthly basis over the
remaining lease term, which expired in March 2010. A one-time
settlement charge of $0.4 million was recorded in the first
quarter of fiscal 2010 related to the termination of the lease.
This action was completed during fiscal 2010.
Consolidation
of a Wafer Fabrication Facility in Limerick
In fiscal 2007, the Company recorded a special charge of
$13.7 million as a result of its decision to only use
eight-inch technology at its wafer fabrication facility in
Limerick. Certain manufacturing processes and products produced
on the Limerick facilitys six-inch production line have
transitioned to the Companys existing eight-inch
production line in Limerick while others have transitioned to
external foundries. The charge was for severance and fringe
benefit costs recorded in accordance with the Companys
ongoing benefit plan for 150 manufacturing employees associated
with this action. The Company has terminated the employment of
all employees associated with these programs and has paid out
all amounts owed to employees as severance. During fiscal 2008,
the Company recorded an additional charge of $1.5 million
related to this action, of which $1.2 million was an
70
ANALOG
DEVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
adjustment to the original estimate of the severance costs and
$0.3 million was for
clean-up and
closure costs that were expensed as incurred. During fiscal
2009, the Company recorded additional charges of
$1.2 million for
clean-up and
closure costs that were expensed as incurred. The production in
the six-inch wafer fabrication facility ceased during the fourth
quarter of fiscal 2009. This action was completed during fiscal
2010.
Reduction
of Operating Costs
During the fourth quarter of fiscal 2008, in order to further
reduce its operating cost structure, the Company recorded a
special charge of $1.6 million for severance and fringe
benefit costs recorded in accordance with its ongoing benefit
plan or statutory requirements at foreign locations for 19
engineering, and selling, marketing, general and administrative
(SMG&A) employees.
During fiscal 2009, the Company recorded an additional charge of
$30.3 million related to this cost reduction action.
Approximately $2.1 million of this charge was for lease
obligation costs for facilities that the Company ceased using
during the first quarter of fiscal 2009; approximately
$0.8 million was for the write-off of property, plant and
equipment no longer used as a result of this action; and
approximately $0.5 million was for contract termination
costs and approximately $0.3 million was for
clean-up and
closure costs that were expensed as incurred. The remaining
$26.6 million related to the severance and fringe benefit
costs recorded in accordance with the Companys ongoing
benefit plan or statutory requirements at foreign locations for
245 manufacturing employees and 302 engineering and SMG&A
employees.
During the first quarter of fiscal 2010, the Company recorded an
additional charge of $11.4 million related to the further
reduction of its operating cost structure. Approximately
$10.9 million of this charge was for severance and fringe
benefit costs recorded in accordance with the Companys
ongoing benefit plan or statutory requirements at foreign
locations for 149 engineering and SMG&A employees.
Approximately $0.5 million of the charge relates to the
Companys decision to abandon efforts to develop a
particular expertise in power management, resulting in the
impairment of related intellectual property.
The Company terminated the employment of all employees
associated with this action and is paying amounts owed to
employees for severance as income continuance.
Closure
of a Wafer Fabrication Facility in Cambridge
During the first quarter of fiscal 2009, the Company recorded a
special charge of $22.1 million as a result of its decision
to consolidate its Cambridge, Massachusetts wafer fabrication
facility into its existing Wilmington, Massachusetts facility.
In connection with the anticipated closure of this facility, the
Company evaluated the recoverability of the facilitys
manufacturing assets and concluded that there was an impairment
of approximately $12.9 million based on the revised period
of intended use. The remaining $9.2 million was for
severance and fringe benefit costs recorded in accordance with
the Companys ongoing benefit plan for 175 manufacturing
employees and 9 SMG&A employees associated with this action.
The Company finished production in the Cambridge wafer
fabrication facility and began
clean-up
activities during the fourth quarter of fiscal 2009. During the
fourth quarter of fiscal 2009, the Company reversed
approximately $1.8 million of its severance accrual. The
accrual reversal was required because 51 employees either
voluntarily left the Company or found alternative employment
within the Company. In addition, the Company recorded a special
charge of approximately $1.7 million for the impairment of
manufacturing assets that were originally going to be moved to
the Companys other wafer fabrication facilities but are no
longer needed at those facilities and therefore have no future
use. The Company also recorded a special charge of
$0.1 million for
clean-up
costs as the Company began its cleanup of the Cambridge wafer
fabrication facility at the end of the fourth quarter of fiscal
2009. The Company terminated the employment of all employees
associated with this charge and is paying amounts owed to
employees for severance as income continuance.
71
ANALOG
DEVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
During the first quarter of fiscal 2010, the Company recorded an
additional charge of $4.7 million related to this cost
reduction action. Approximately $3.4 million of the charge
related to lease obligation costs for the Cambridge wafer
fabrication facility, which the Company ceased using in the
first quarter of fiscal 2010. The remaining $1.3 million of
the charge related to
clean-up and
closure costs that were expensed as incurred.
In fiscal 2006, the Company acquired substantially all the
outstanding stock of privately-held Integrant Technologies, Inc.
(Integrant) of Seoul, Korea. The acquisition enabled the Company
to enter the mobile TV market and strengthened its presence in
the Asian region. The Company paid $8.4 million related to
the purchase of shares from the founder of Integrant during the
period from July 2007 through July 2009. The Company recorded
these payments as additional goodwill.
In fiscal 2006, the Company acquired all the outstanding stock
of privately-held AudioAsics A/S (AudioAsics) of Roskilde,
Denmark. The acquisition of AudioAsics allows the Company to
continue developing low-power audio solutions, while expanding
its presence in the Nordic and Eastern European regions. The
Company paid additional cash payments of $3.1 million
during fiscal 2009 for the achievement of revenue-based
milestones during the period from October 2006 through January
2009, which were recorded as additional goodwill. In addition,
the Company paid $3.2 million during fiscal 2009 based on
the achievement of technological milestones during the period
from October 2006 through January 2009, which were recorded as
compensation expense in fiscal 2008. All revenue and
technological milestones related to this acquisition have been
met and no additional payments will be made.
The Company has not provided pro forma results of operations for
Integrant and AudioAsics herein as they were not material to the
Company on either an individual or an aggregate basis. The
Company included the results of operations of each acquisition
in its consolidated statement of income from the date of such
acquisition.
|
|
7.
|
Deferred
Compensation Plan Investments
|
Investments in The Analog Devices, Inc. Deferred Compensation
Plan (the Deferred Compensation Plan) are classified as trading.
The components of the investments as of October 30, 2010
and October 31, 2009 were as follows:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Money market funds
|
|
$
|
1,840
|
|
|
$
|
1,730
|
|
Mutual funds
|
|
|
6,850
|
|
|
|
6,213
|
|
|
|
|
|
|
|
|
|
|
Total Deferred Compensation Plan investments short
and long-term
|
|
$
|
8,690
|
|
|
$
|
7,943
|
|
|
|
|
|
|
|
|
|
|
The fair values of these investments are based on published
market quotes on October 30, 2010 and October 31,
2009, respectively. Adjustments to the fair value of, and income
pertaining to, Deferred Compensation Plan investments are
recorded in operating expenses. Gross realized and unrealized
gains and losses from trading securities were not material in
fiscal 2010, 2009 or 2008.
The Company has recorded a corresponding liability for amounts
owed to the Deferred Compensation Plan participants (see
Note 10). These investments are specifically designated as
available to the Company solely for the purpose of paying
benefits under the Deferred Compensation Plan. However, in the
event the Company became insolvent, the investments would be
available to all unsecured general creditors.
Other investments consist of equity securities and other
long-term investments. Investments are stated at fair value,
which is based on market quotes or on a cost-basis, dependent on
the nature of the investment, as appropriate. Adjustments to the
fair value of investments classified as
available-for-sale
are recorded as an increase or decrease
72
ANALOG
DEVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
in accumulated other comprehensive (loss) income, unless the
adjustment is considered an
other-than-temporary
impairment, in which case the adjustment is recorded as a charge
in the statement of income.
During fiscal 2010 the Company recognized an
other-than-temporary
impairment of $0.7 million. The investment impairment was
related to the decline in fair value of a publicly-traded equity
investment below cost basis that was determined to be
other-than-temporary.
There were no realized gains or losses recorded in fiscal 2010,
2009 or 2008.
Unrealized gains and losses on securities classified as other
investments at of October 30, 2010 and October 31,
2009 were as follows:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Unrealized gains
|
|
$
|
1,041
|
|
|
$
|
1,258
|
|
Unrealized losses
|
|
|
|
|
|
|
(718
|
)
|
|
|
|
|
|
|
|
|
|
Net unrealized gains on securities classified as other
investments
|
|
$
|
1,041
|
|
|
$
|
540
|
|
|
|
|
|
|
|
|
|
|
Accrued liabilities at October 30, 2010 and
October 31, 2009 consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Accrued compensation and benefits
|
|
$
|
128,113
|
|
|
$
|
58,272
|
|
Special charges
|
|
|
7,509
|
|
|
|
15,332
|
|
Other
|
|
|
71,465
|
|
|
|
48,589
|
|
|
|
|
|
|
|
|
|
|
Total accrued liabilities
|
|
$
|
207,087
|
|
|
$
|
122,193
|
|
|
|
|
|
|
|
|
|
|
|
|
10.
|
Deferred
Compensation Plan Liability
|
The deferred compensation plan liability relates to obligations
due under the Deferred Compensation Plan. The Deferred
Compensation Plan 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 balance
represents Deferred Compensation Plan participant accumulated
deferrals and earnings thereon since the inception of the
Deferred Compensation Plan net of withdrawals. The
Companys liability under the Deferred Compensation Plan is
an unsecured general obligation of the Company.
The Company leases certain of its facilities, equipment and
software under various operating leases that expire at various
dates through 2022. The lease agreements frequently include
renewal and escalation clauses and require the Company to pay
taxes, insurance and maintenance costs. Total rental expense
under operating leases was approximately $40 million in
fiscal 2010, $40 million in fiscal 2009 and
$43 million in fiscal 2008.
73
ANALOG
DEVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following is a schedule of future minimum rental payments
required under long-term operating leases at October 30,
2010:
|
|
|
|
|
|
|
Operating
|
|
Fiscal Years
|
|
Leases
|
|
|
2011
|
|
$
|
21,871
|
|
2012
|
|
|
12,322
|
|
2013
|
|
|
9,078
|
|
2014
|
|
|
6,381
|
|
2015
|
|
|
5,422
|
|
Later Years
|
|
|
30,655
|
|
|
|
|
|
|
Total
|
|
$
|
85,729
|
|
|
|
|
|
|
|
|
12.
|
Commitments
and Contingencies
|
From time to time in the ordinary course of the Companys
business, various claims, charges and litigation are asserted or
commenced against the Company arising from, or related to,
contractual matters, patents, trademarks, personal injury,
environmental matters, product liability, insurance coverage and
personnel and employment disputes. As to such claims and
litigation, the Company can give no assurance that it will
prevail. The Company does not believe that any current legal
matters will have a material adverse effect on the
Companys financial position, results of operations or cash
flows.
The Company and its subsidiaries have various savings and
retirement plans covering substantially all employees. 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 participants total
eligible compensation. In addition, the Company contributes an
amount equal to each participants pre-tax contribution, if
any, up to a maximum of 3% of each participants total
eligible compensation. The total expense related to the defined
contribution plan for U.S. employees was $20.5 million
in fiscal 2010, $21.5 million in fiscal 2009 and
$22.6 million in fiscal 2008. 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 the various defined
benefit pension and other retirement plans for certain
non-U.S. employees
was $11.7 million in fiscal 2010, $10.9 million in
fiscal 2009 and $13.9 million in fiscal 2008.
During fiscal 2009, the measurement date of the plans
funded status was changed from September 30 to the
Companys fiscal year end.
Non-U.S.
Plan Disclosures
The Companys 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 benefit obligations
and related assets under these plans have been measured at
October 30, 2010 and October 31, 2009.
74
ANALOG
DEVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Components
of Net Periodic Benefit Cost
Net annual periodic pension cost of
non-U.S. plans
is presented in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Service cost
|
|
$
|
5,933
|
|
|
$
|
6,368
|
|
|
$
|
9,580
|
|
Interest cost
|
|
|
9,594
|
|
|
|
9,525
|
|
|
|
10,234
|
|
Expected return on plan assets
|
|
|
(11,079
|
)
|
|
|
(10,703
|
)
|
|
|
(12,312
|
)
|
Amortization of prior service cost
|
|
|
1
|
|
|
|
5
|
|
|
|
8
|
|
Amortization of transitional asset
|
|
|
(27
|
)
|
|
|
(40
|
)
|
|
|
(44
|
)
|
Recognized actuarial (gain) loss
|
|
|
(133
|
)
|
|
|
(519
|
)
|
|
|
189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
$
|
4,289
|
|
|
$
|
4,636
|
|
|
$
|
7,655
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Curtailment impact
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1
|
|
Settlement impact
|
|
|
(39
|
)
|
|
|
207
|
|
|
|
|
|
Special termination benefits
|
|
|
|
|
|
|
281
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension cost
|
|
$
|
4,250
|
|
|
$
|
5,124
|
|
|
$
|
7,671
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The special termination benefits presented relate to certain
early retirement benefits provided in certain jurisdictions.
75
ANALOG
DEVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Benefit
Obligations and Plan Assets
Obligation and asset data of the Companys
non-U.S. plans
at each fiscal year end is presented in the following table:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Change in Benefit Obligation
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of year
|
|
$
|
165,047
|
|
|
$
|
149,428
|
|
Adjustments due to change in defined benefit plans measurement
date:
|
|
|
|
|
|
|
|
|
a. Service cost and interest cost during gap period
|
|
|
|
|
|
|
1,204
|
|
b. Additional experience during gap period
|
|
|
|
|
|
|
(10,099
|
)
|
c. Gap period benefit payments from plan, employee
contributions, expenses, taxes and premiums paid
|
|
|
|
|
|
|
(1,222
|
)
|
Service cost
|
|
|
5,933
|
|
|
|
6,368
|
|
Interest cost
|
|
|
9,594
|
|
|
|
9,525
|
|
Settlement
|
|
|
|
|
|
|
(2,816
|
)
|
Special termination benefits
|
|
|
|
|
|
|
281
|
|
Participant contributions
|
|
|
2,378
|
|
|
|
2,496
|
|
Transfers
|
|
|
|
|
|
|
(1,298
|
)
|
Premiums paid
|
|
|
(81
|
)
|
|
|
(201
|
)
|
Actuarial loss (gain)
|
|
|
40,227
|
|
|
|
(3,244
|
)
|
Benefits paid
|
|
|
(3,170
|
)
|
|
|
(3,925
|
)
|
Exchange rate adjustment
|
|
|
(4,916
|
)
|
|
|
18,550
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at end of year
|
|
$
|
215,012
|
|
|
$
|
165,047
|
|
|
|
|
|
|
|
|
|
|
Change in Plan Assets
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of year
|
|
$
|
135,643
|
|
|
$
|
120,914
|
|
Adjustments due to change in defined benefit plans measurement
date:
|
|
|
|
|
|
|
|
|
a. Additional experience during gap period
|
|
|
|
|
|
|
(9,807
|
)
|
b. Gap period benefit payments from plan, employee
contributions, expenses, taxes and premiums paid
|
|
|
|
|
|
|
(1,222
|
)
|
Actual return on plan assets
|
|
|
17,480
|
|
|
|
8,839
|
|
Employer contributions
|
|
|
28,433
|
|
|
|
7,639
|
|
Participant contributions
|
|
|
2,378
|
|
|
|
2,496
|
|
Settlements
|
|
|
|
|
|
|
(2,816
|
)
|
Acquisitions/divestitures
|
|
|
|
|
|
|
(1,298
|
)
|
Premiums paid
|
|
|
(81
|
)
|
|
|
(201
|
)
|
Benefits paid
|
|
|
(3,170
|
)
|
|
|
(3,925
|
)
|
Exchange rate adjustment
|
|
|
(4,463
|
)
|
|
|
15,024
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end of year
|
|
$
|
176,220
|
|
|
$
|
135,643
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Funded Status
|
|
|
|
|
|
|
|
|
Funded status
|
|
$
|
(38,792
|
)
|
|
$
|
(29,404
|
)
|
|
|
|
|
|
|
|
|
|
Amounts Recognized in the Balance Sheet
|
|
|
|
|
|
|
|
|
Non-current assets
|
|
$
|
4,160
|
|
|
$
|
|
|
Current liabilities
|
|
|
(520
|
)
|
|
|
(832
|
)
|
Non-current liabilities
|
|
|
(42,432
|
)
|
|
|
(28,572
|
)
|
|
|
|
|
|
|
|
|
|
Net amount recognized
|
|
$
|
(38,792
|
)
|
|
$
|
(29,404
|
)
|
|
|
|
|
|
|
|
|
|
76
ANALOG
DEVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Reconciliation of Amounts Recognized in the Statement of
Financial Position
|
|
|
|
|
|
|
|
|
Initial net obligation
|
|
$
|
(138
|
)
|
|
$
|
(93
|
)
|
Prior service cost
|
|
|
|
|
|
|
(1
|
)
|
Net loss
|
|
|
(45,467
|
)
|
|
|
(10,720
|
)
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss
|
|
|
(45,605
|
)
|
|
|
(10,814
|
)
|
Accumulated contributions in excess of net periodic cost
(benefit)
|
|
|
6,813
|
|
|
|
(18,590
|
)
|
|
|
|
|
|
|
|
|
|
Net amount recognized
|
|
$
|
(38,792
|
)
|
|
$
|
(29,404
|
)
|
|
|
|
|
|
|
|
|
|
Changes Recognized in Other Comprehensive Income
|
|
|
|
|
|
|
|
|
Changes in plan assets and benefit obligations recognized in
other comprehensive income
|
|
|
|
|
|
|
|
|
Net loss (gain) arising during the year (includes curtailment
gains not recognized as a component of net periodic cost)
|
|
$
|
33,828
|
|
|
$
|
(1,380
|
)
|
Effect of exchange rates on amounts included in accumulated
other comprehensive income
|
|
|
765
|
|
|
|
843
|
|
Amounts recognized as a component of net periodic benefit
cost
|
|
|
|
|
|
|
|
|
Amortization, settlement or curtailment recognition of net
transition asset
|
|
|
27
|
|
|
|
40
|
|
Amortization or curtailment recognition of prior service cost
|
|
|
(1
|
)
|
|
|
(5
|
)
|
Amortization or settlement recognition of net gain
|
|
|
172
|
|
|
|
312
|
|
|
|
|
|
|
|
|
|
|
Total recognized in other comprehensive loss (income)
|
|
$
|
34,791
|
|
|
$
|
(190
|
)
|
|
|
|
|
|
|
|
|
|
Total recognized in net periodic cost and other comprehensive
loss
|
|
$
|
39,041
|
|
|
$
|
4,934
|
|
|
|
|
|
|
|
|
|
|
Changes recognized in balance sheet
|
|
|
|
|
|
|
|
|
Balance sheet recognition of change in defined benefit plans
measurement date
|
|
|
|
|
|
|
|
|
Amortization amounts during gap period
|
|
$
|
|
|
|
$
|
21
|
|
Experience gain during gap period
|
|
|
|
|
|
|
574
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
$
|
595
|
|
|
|
|
|
|
|
|
|
|
Estimated amounts that will be amortized from accumulated
other comprehensive (loss) income over the next fiscal year
|
|
|
|
|
|
|
|
|
Initial net asset
|
|
$
|
(15
|
)
|
|
$
|
33
|
|
Prior service cost
|
|
|
|
|
|
|
(1
|
)
|
Net (loss) gain
|
|
|
(1,625
|
)
|
|
|
113
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(1,640
|
)
|
|
$
|
145
|
|
|
|
|
|
|
|
|
|
|
The accumulated benefit obligation for
non-U.S. pension
plans was $168.9 million and $127.3 million at
October 30, 2010 and October 31, 2009, respectively.
Information relating to the Companys
non-U.S. plans
with projected benefit obligations in excess of plan assets and
accumulated benefit obligations in excess of plan assets at each
fiscal year end is presented in the following table:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Plans with projected benefit obligations in excess of plan
assets:
|
|
|
|
|
|
|
|
|
Projected benefit obligation
|
|
$
|
188,741
|
|
|
$
|
165,047
|
|
Fair value of plan assets
|
|
$
|
145,789
|
|
|
$
|
135,643
|
|
Plans with accumulated benefit obligations in excess of plan
assets:
|
|
|
|
|
|
|
|
|
Projected benefit obligation
|
|
$
|
23,278
|
|
|
$
|
42,549
|
|
Accumulated benefit obligation
|
|
$
|
19,360
|
|
|
$
|
38,701
|
|
Fair value of plan assets
|
|
$
|
602
|
|
|
$
|
19,473
|
|
77
ANALOG
DEVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Assumptions
The range of assumptions used for the
non-U.S. defined
benefit plans reflects the different economic environments
within the various countries. The projected benefit obligation
was determined using the following weighted-average assumptions:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
Discount rate
|
|
|
5.33
|
%
|
|
|
6.32
|
%
|
Rate of increase in compensation levels
|
|
|
3.40
|
%
|
|
|
3.72
|
%
|
Net annual periodic pension cost was determined using the
following weighted average assumptions:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
Discount rate
|
|
|
6.32
|
%
|
|
|
6.60
|
%
|
Expected long-term return on plan assets
|
|
|
6.73
|
%
|
|
|
7.16
|
%
|
Rate of increase in compensation levels
|
|
|
3.72
|
%
|
|
|
3.87
|
%
|
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 Companys investment strategy is based on an
expectation that equity securities will outperform debt
securities over the long term. Accordingly, in order to maximize
the return on assets, a majority of assets are invested in
equities. 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.
78
ANALOG
DEVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fair
value of plan assets
The following table presents plan assets measured at fair value
on a recurring basis by investment categories as of
October 30, 2010 using the same three-level hierarchy
described in Note 2j:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 30, 2010
|
|
|
|
|
|
|
Fair Value measurement at Reporting Date using:
|
|
|
|
|
|
|
Quoted
|
|
|
|
|
|
|
|
|
|
|
|
|
Prices in
|
|
|
|
|
|
|
|
|
|
|
|
|
Active
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
Markets for
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Identical
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
|
|
|
Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Total
|
|
|
Unit trust funds(1)
|
|
$
|
|
|
|
$
|
131,650
|
|
|
$
|
|
|
|
$
|
131,650
|
|
Equities(1)
|
|
|
1,589
|
|
|
|
19,963
|
|
|
|
|
|
|
|
21,552
|
|
Fixed income securities(2)
|
|
|
|
|
|
|
19,214
|
|
|
|
|
|
|
|
19,214
|
|
Property(3)
|
|
|
|
|
|
|
|
|
|
|
3,186
|
|
|
|
3,186
|
|
Cash and cash equivalents
|
|
|
618
|
|
|
|
|
|
|
|
|
|
|
|
618
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets measured at fair value
|
|
$
|
2,207
|
|
|
$
|
170,827
|
|
|
$
|
3,186
|
|
|
$
|
176,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
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. |
|
(2) |
|
The majority of the assets in this category are invested 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. |
|
(3) |
|
The majority of the assets in this category are invested in
properties in Ireland, the UK, Europe and established
international markets. Investments in properties are stated at
estimated fair values based upon valuations by external
independent property valuers. |
The table below presents a reconciliation of the plan assets
measured at fair value on a recurring basis using significant
unobservable inputs (Level 3) for fiscal year 2010.
|
|
|
|
|
|
|
Real Estate
|
|
|
Balance as of October 31, 2009
|
|
$
|
2,340
|
|
Purchases, sales, and settlements, net
|
|
|
899
|
|
Realized and unrealized return on plan assets
|
|
|
(53
|
)
|
|
|
|
|
|
Balance as of October 30, 2010
|
|
$
|
3,186
|
|
|
|
|
|
|
79
ANALOG
DEVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Estimated
future cash flows
Expected fiscal 2011 Company contributions and estimated future
benefit payments are as follows:
|
|
|
|
|
Expected Company Contributions
|
|
|
|
|
2011
|
|
$
|
8,965
|
|
Expected Benefit Payments
|
|
|
|
|
2011
|
|
$
|
3,383
|
|
2012
|
|
$
|
4,411
|
|
2013
|
|
$
|
6,025
|
|
2014
|
|
$
|
5,786
|
|
2015
|
|
$
|
5,176
|
|
2016-2018
|
|
$
|
33,966
|
|
The reconciliation of income tax computed at the
U.S. federal statutory rates to income tax expense is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
U.S. federal statutory tax rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
Income tax provision reconciliation:
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax at statutory rate:
|
|
$
|
315,583
|
|
|
$
|
104,105
|
|
|
$
|
233,136
|
|
Irish income subject to lower tax rate
|
|
|
(129,741
|
)
|
|
|
(50,972
|
)
|
|
|
(92,732
|
)
|
State income taxes, net of federal benefit
|
|
|
2,622
|
|
|
|
406
|
|
|
|
1,150
|
|
Research and development tax credits
|
|
|
(1,045
|
)
|
|
|
(5,153
|
)
|
|
|
(3,401
|
)
|
Net foreign tax in excess of U.S. federal statutory tax rate
|
|
|
1,315
|
|
|
|
1,123
|
|
|
|
2,350
|
|
Other, net
|
|
|
1,706
|
|
|
|
527
|
|
|
|
422
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax provision
|
|
$
|
190,440
|
|
|
$
|
50,036
|
|
|
$
|
140,925
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For financial reporting purposes, income before income taxes
includes the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Pretax income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
$
|
289,748
|
|
|
$
|
1,133
|
|
|
$
|
186,130
|
|
Foreign
|
|
|
611,917
|
|
|
|
296,311
|
|
|
|
479,972
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes
|
|
$
|
901,665
|
|
|
$
|
297,444
|
|
|
$
|
666,102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80
ANALOG
DEVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The components of the provision for income taxes are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal tax (benefit)
|
|
$
|
117,097
|
|
|
$
|
(5,191
|
)
|
|
$
|
79,642
|
|
Foreign
|
|
|
79,055
|
|
|
|
43,007
|
|
|
|
70,882
|
|
State
|
|
|
4,154
|
|
|
|
625
|
|
|
|
1,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current
|
|
$
|
200,306
|
|
|
$
|
38,441
|
|
|
$
|
152,294
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred (prepaid):
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
(6,332
|
)
|
|
$
|
17,033
|
|
|
$
|
(7,268
|
)
|
Foreign
|
|
|
(3,534
|
)
|
|
|
(5,438
|
)
|
|
|
(4,101
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred
|
|
$
|
(9,866
|
)
|
|
$
|
11,595
|
|
|
$
|
(11,369
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company continues to intend to reinvest certain of its
foreign earnings indefinitely. Accordingly, no U.S. income
taxes have been provided for approximately $2,327 million
of unremitted earnings of international subsidiaries. As of
October 30, 2010, the amount of unrecognized deferred tax
liability on these earnings was $611 million.
The significant components of the Companys deferred tax
assets and liabilities for the fiscal years ended
October 30, 2010 and October 31, 2009 are as follows:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Inventory reserves
|
|
$
|
24,495
|
|
|
$
|
30,365
|
|
Deferred income on shipments to distributors
|
|
|
32,870
|
|
|
|
25,775
|
|
Reserves for compensation and benefits
|
|
|
26,199
|
|
|
|
25,182
|
|
Tax credit carryovers
|
|
|
50,384
|
|
|
|
52,443
|
|
Stock-based compensation
|
|
|
75,827
|
|
|
|
62,496
|
|
Depreciation
|
|
|
4,553
|
|
|
|
4,163
|
|
Other
|
|
|
1,251
|
|
|
|
3,578
|
|
|
|
|
|
|
|
|
|
|
Total gross deferred tax assets
|
|
|
215,579
|
|
|
|
204,002
|
|
Valuation allowance
|
|
|
(50,384
|
)
|
|
|
(51,616
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
165,195
|
|
|
|
152,386
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
(12,185
|
)
|
|
|
(13,498
|
)
|
Undistributed earnings of foreign subsidiaries
|
|
|
(24,229
|
)
|
|
|
(18,853
|
)
|
Other
|
|
|
(3,106
|
)
|
|
|
(3,881
|
)
|
|
|
|
|
|
|
|
|
|
Total gross deferred tax liabilities
|
|
|
(39,520
|
)
|
|
|
(36,232
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
125,675
|
|
|
$
|
116,154
|
|
|
|
|
|
|
|
|
|
|
The valuation allowances of $50.4 million and
$51.6 million at October 30, 2010 and October 31,
2009, respectively, are a full valuation allowance for the
Companys state credit carryovers that began expiring in
2008.
The Company has provided for potential liabilities due in the
various jurisdictions in which the Company operates. Judgment is
required in determining the worldwide income tax expense
provision. In the ordinary course
81
ANALOG
DEVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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
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 accruals. Such differences could have a
material impact on the Companys income tax provision and
operating results in the period in which such determination is
made.
On November 4, 2007 (the first day of its 2008 fiscal
year), the Company adopted new accounting principles on
accounting for uncertain tax positions. These principles require
companies to determine whether it is more likely than
not that a tax position will be sustained upon examination
by the appropriate taxing authorities before any benefit can be
recorded in the financial statements. An uncertain income tax
position will not be recognized if it has less than a 50%
likelihood of being sustained. There were no changes to the
Companys liabilities for uncertain tax positions as a
result of the adoption of these provisions. As of
October 30, 2010 and October 31, 2009, the Company had
a liability of $18.4 million and $18.2 million,
respectively, for gross unrealized tax benefits, all of which,
if settled in the Companys favor, would lower the
Companys effective tax rate in the period recorded. In
addition, as of October 30, 2010 and October 31, 2009,
the Company had a liability of approximately $9.8 million
and $8.0 million, respectively, for interest and penalties.
The total liability as of October 30, 2010 and
October 31, 2009 of $28.3 million and
$26.2 million, respectively, for uncertain tax positions is
classified as non-current, and is included in other non-current
liabilities, because the Company believes that the ultimate
payment or settlement of these liabilities will not occur within
the next twelve months. Prior to the adoption of these
provisions, these amounts were included in current income tax
payable. The Company includes interest and penalties related to
unrecognized tax benefits within the provision for taxes in the
condensed consolidated statements of income, and as a result, no
change in classification was made upon adopting these
provisions. The condensed consolidated statements of income for
fiscal years 2010, 2009 and 2008 include $1.8 million,
$1.7 million and $1.3 million, respectively, of
interest and penalties related to these uncertain tax positions.
Due to the complexity associated with its tax uncertainties, the
Company cannot make a reasonably reliable estimate as to the
period in which it expects to settle the liabilities associated
with these uncertain tax positions.
The following table summarizes the changes in the total amounts
of uncertain tax positions for fiscal 2008 through fiscal 2010.
|
|
|
|
|
Balance, November 3, 2007
|
|
$
|
9,889
|
|
Additions for tax positions of 2008
|
|
|
3,861
|
|
|
|
|
|
|
Balance, November 1, 2008
|
|
|
13,750
|
|
Additions for tax positions of 2009
|
|
|
4,411
|
|
|
|
|
|
|
Balance, October 31, 2009
|
|
|
18,161
|
|
Additions for tax positions of 2010
|
|
|
286
|
|
|
|
|
|
|
Balance, October 30, 2010
|
|
$
|
18,447
|
|
|
|
|
|
|
Fiscal
Years 2004 and 2005 IRS Examination
During the fourth quarter of fiscal 2007, the IRS completed its
field examination of the Companys fiscal years 2004 and
2005. On January 2, 2008, the IRS issued its report for
fiscal 2004 and 2005, which included proposed adjustments
related to these two fiscal years. The Company has recorded
taxes and penalties related to certain of these proposed
adjustments. There are four items with an additional potential
total tax liability of $46 million. The Company has
concluded, based on discussions with its tax advisors, that
these four items are not likely to result in any additional tax
liability. Therefore, the Company has not recorded any
additional tax liability for these items and is appealing these
proposed adjustments through the normal processes for the
resolution of differences between the IRS and taxpayers. The
Companys initial meetings with the appellate division of
the IRS were held during fiscal
82
ANALOG
DEVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
year 2009. Two of the unresolved matters are one-time issues and
pertain to Section 965 of the Internal Revenue Code related
to the beneficial tax treatment of dividends from foreign owned
companies under The American Jobs Creation Act. The other
matters pertain to the computation of research and development
(R&D) tax credits and the profits earned from manufacturing
activities carried on outside the United States. These latter
two matters could impact taxes payable for fiscal 2004 and 2005
as well as for subsequent years.
Fiscal
Years 2006 and 2007 IRS Examination
During the third quarter of fiscal 2009, the IRS completed its
field examination of the Companys fiscal years 2006 and
2007. The IRS and the Company have agreed on the treatment of a
number of issues that have been included in an Issue Resolutions
Agreement related to the 2006 and 2007 tax returns. However, no
agreement was reached on the tax treatment of a number of
issues, including the same R&D credit and foreign
manufacturing issues mentioned above related to fiscal 2004 and
2005, the pricing of intercompany sales (transfer pricing) and
the deductibility of certain stock option compensation expenses.
During the third quarter of fiscal 2009, the IRS issued its
report for fiscal 2006 and fiscal 2007, which included proposed
adjustments related to these two fiscal years. The Company has
recorded taxes and penalties related to certain of these
proposed adjustments. There are four items with an additional
potential total tax liability of $195 million. The Company
concluded, based on discussions with its tax advisors, that
these four items are not likely to result in any additional tax
liability. Therefore, the Company has not recorded any
additional tax liability for these items and is appealing these
proposed adjustments through the normal processes for the
resolution of differences between the IRS and taxpayers. The
Companys initial meetings with the appellate division of
the IRS were held during fiscal year 2010. With the exception of
the proposed adjustment related to the deductibility of certain
stock option expenses, the other three matters could impact
taxes payable for fiscal 2006 and 2007 as well as for subsequent
years.
Fiscal
Years 2008 and 2009 IRS Examination
The IRS has not started their examination of fiscal year 2008 or
fiscal year 2009.
Although the Company believes its estimates of income tax
payable are reasonable, no assurance can be given that the
Company will prevail in the matters raised and that the outcome
of one or all of these matters will not be different than that
which is reflected in the historical income tax provisions and
accruals. The Company believes such differences would not have a
material impact on the Companys financial condition but
could have a material impact on the Companys income tax
provision, operating results and operating cash flows in the
period in which such matters are resolved as well as for
subsequent years.
|
|
15.
|
Revolving
Credit Facility
|
As of October 30, 2010, the Company had
$2,687.8 million of cash and cash equivalents and
short-term investments, of which $725.4 million was held in
the United States. The balance of the Companys cash and
cash equivalents and short- term investments was held outside
the United States in various foreign subsidiaries. As the
Company intends to reinvest certain of its foreign earnings
indefinitely, this cash is not available to meet certain of the
Companys cash requirements in the United States, including
for cash dividends and common stock repurchases. The Company
entered into a five-year, $165 million unsecured revolving
credit facility with certain institutional lenders in May 2008.
To date, the Company has not borrowed under this credit facility
but the Company may borrow in the future and use the proceeds
for support of commercial paper issuance, stock repurchases,
dividend payments, acquisitions, capital expenditures, working
capital and other lawful corporate purposes. Any advances under
this credit agreement will accrue interest at rates that are
equal to LIBOR plus a margin that is based on the Companys
leverage ratio. The terms of this facility also include
financial covenants that require the Company to maintain a
minimum interest coverage ratio and not exceed a maximum
leverage ratio. As of October 30, 2010, the Company was
compliant with these covenants. The terms of the facility also
impose restrictions on the Companys ability to undertake
certain transactions, to create certain liens on assets and to
incur certain subsidiary indebtedness.
83
ANALOG
DEVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
On June 30, 2009, the Company issued $375 million
aggregate principal amount of 5.0% senior unsecured notes
due July 1, 2014 (the Notes) with semi-annual fixed
interest payments on January 1 and July 1 of each year,
commencing January 1, 2010. The sale of the Notes was made
pursuant to the terms of an underwriting agreement dated
June 25, 2009 between the Company and Credit Suisse
Securities (USA) LLC, as representative of the several
underwriters named therein. The net proceeds of the offering
were $370.4 million, after issuing at a discount and
deducting expenses, underwriting discounts and commissions,
which will be amortized over the term of the Notes. The
indenture governing the Notes contains covenants that may limit
the Companys ability to: incur, create, assume or
guarantee any debt for borrowed money secured by a lien upon a
principal property; enter into sale and lease-back transactions
with respect to a principal property; and consolidate with or
merge into, or transfer or lease all or substantially all of its
assets to, any other party.
On June 30, 2009, the Company entered into interest rate
swap transactions where the Company swapped the notional amount
of its $375 million of fixed rate debt at 5.0% into
floating interest rate debt through July 1, 2014. Under the
terms of the swaps, the Company will (i) receive on the
$375 million notional amount a 5.0% annual interest payment
that is paid in two installments on the 1st business day of
every January and July, commencing January 1, 2010 through
and ending on the maturity date; and (ii) pay on the
$375 million notional amount an annual three-month LIBOR
plus 2.05% (2.34% as of October 30, 2010) interest
payment, payable in four installments on the 1st business
day of every January, April, July and October, commencing on
October 1, 2009 and ending on the maturity date. The LIBOR-
based rate is set quarterly three months prior to the date of
the interest payment. The Company designated these swaps as fair
value hedges. The changes in the fair value of the interest rate
swaps were reflected in the carrying value of the interest rate
swaps in other assets on the balance sheet. The carrying value
of the debt on the balance sheet was adjusted by an equal and
offsetting amount.
On November 19, 2010 the Board of Directors of the Company
declared a cash dividend of $0.22 per outstanding share of
common stock. The dividend will be paid on December 22,
2010 to all shareholders of record at the close of business on
December 3, 2010. In addition, on November 19, 2010
the Board of Directors of the Company authorized the repurchase
by the Company of an additional $1 billion of the
Companys common stock under the Companys existing
share repurchase program.
84
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders
Analog Devices, Inc.
We have audited the accompanying consolidated balance sheets of
Analog Devices, Inc. as of October 30, 2010 and
October 31, 2009, and the related consolidated statements
of income, shareholders equity, comprehensive income, and
cash flows for each of the three years in the period ended
October 30, 2010. Our audits also included the financial
statement schedule listed in the Index at Item 15(c). These
financial statements and schedule are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Analog Devices, Inc. at October 30,
2010 and October 31, 2009, and the consolidated results of
its operations and its cash flows for each of the three years in
the period ended October 30, 2010, in conformity with
U.S. generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the
information set forth therein.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States),
Analog Devices, Inc.s internal control over financial
reporting as of October 30, 2010, based on criteria
established in Internal Control-Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated November 22, 2010 expressed
an unqualified opinion thereon.
Boston, Massachusetts
November 22, 2010
85
Quarterly Financial Information
ANALOG
DEVICES, INC.
SUPPLEMENTARY
FINANCIAL INFORMATION
(Unaudited)
Quarterly financial information for fiscal 2010 and fiscal 2009
(thousands, except per share amounts and as noted):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4Q10
|
|
|
3Q10
|
|
|
2Q10
|
|
|
1Q10
|
|
|
4Q09
|
|
|
3Q09
|
|
|
2Q09
|
|
|
1Q09
|
|
|
Revenue
|
|
|
769,990
|
|
|
|
720,290
|
|
|
|
668,240
|
|
|
|
602,983
|
|
|
|
571,600
|
|
|
|
491,991
|
|
|
|
474,748
|
|
|
|
476,569
|
|
Cost of sales
|
|
|
253,761
|
|
|
|
240,088
|
|
|
|
233,725
|
|
|
|
234,507
|
|
|
|
249,746
|
|
|
|
225,762
|
|
|
|
213,196
|
|
|
|
207,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
|
516,229
|
|
|
|
480,202
|
|
|
|
434,515
|
|
|
|
368,476
|
|
|
|
321,854
|
|
|
|
266,229
|
|
|
|
261,552
|
|
|
|
269,002
|
|
% of Revenue
|
|
|
67.0
|
%
|
|
|
66.7
|
%
|
|
|
65.0
|
%
|
|
|
61.1
|
%
|
|
|
56.3
|
%
|
|
|
54.1
|
%
|
|
|
55.1
|
%
|
|
|
56.4
|
%
|
Research and development
|
|
|
128,140
|
|
|
|
126,987
|
|
|
|
122,780
|
|
|
|
114,398
|
|
|
|
110,126
|
|
|
|
107,578
|
|
|
|
109,448
|
|
|
|
119,828
|
|
Selling, marketing, general and administrative
|
|
|
102,349
|
|
|
|
102,070
|
|
|
|
97,660
|
|
|
|
88,481
|
|
|
|
83,356
|
|
|
|
79,706
|
|
|
|
82,276
|
|
|
|
87,846
|
|
Special charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,483
|
|
|
|
|
|
|
|
|
|
|
|
11,919
|
|
|
|
41,737
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
230,489
|
|
|
|
229,057
|
|
|
|
220,440
|
|
|
|
219,362
|
|
|
|
193,482
|
|
|
|
187,284
|
|
|
|
203,643
|
|
|
|
249,411
|
|
Operating income from continuing operations
|
|
|
285,740
|
|
|
|
251,145
|
|
|
|
214,075
|
|
|
|
149,114
|
|
|
|
128,372
|
|
|
|
78,945
|
|
|
|
57,909
|
|
|
|
19,591
|
|
% of Revenue
|
|
|
37
|
%
|
|
|
35
|
%
|
|
|
32
|
%
|
|
|
25
|
%
|
|
|
22
|
%
|
|
|
16
|
%
|
|
|
12
|
%
|
|
|
4
|
%
|
Nonoperating (income) expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
2,709
|
|
|
|
2,614
|
|
|
|
2,568
|
|
|
|
2,538
|
|
|
|
2,726
|
|
|
|
1,368
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
(2,426
|
)
|
|
|
(3,206
|
)
|
|
|
(2,025
|
)
|
|
|
(2,180
|
)
|
|
|
(1,740
|
)
|
|
|
(2,558
|
)
|
|
|
(3,527
|
)
|
|
|
(7,796
|
)
|
Other, net
|
|
|
(2,600
|
)
|
|
|
416
|
|
|
|
(488
|
)
|
|
|
489
|
|
|
|
160
|
|
|
|
108
|
|
|
|
(797
|
)
|
|
|
(571
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonoperating (income) expense
|
|
|
(2,317
|
)
|
|
|
(176
|
)
|
|
|
55
|
|
|
|
847
|
|
|
|
1,146
|
|
|
|
(1,082
|
)
|
|
|
(4,324
|
)
|
|
|
(8,367
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes
|
|
|
288,057
|
|
|
|
251,321
|
|
|
|
214,020
|
|
|
|
148,267
|
|
|
|
127,226
|
|
|
|
80,027
|
|
|
|
62,233
|
|
|
|
27,958
|
|
% of Revenue
|
|
|
37
|
%
|
|
|
35
|
%
|
|
|
32
|
%
|
|
|
25
|
%
|
|
|
22
|
%
|
|
|
16
|
%
|
|
|
13
|
%
|
|
|
6
|
%
|
Provision for income taxes
|
|
|
63,063
|
|
|
|
51,830
|
|
|
|
46,880
|
|
|
|
28,667
|
|
|
|
21,617
|
|
|
|
14,567
|
|
|
|
10,479
|
|
|
|
3,373
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations
|
|
|
224,994
|
|
|
|
199,491
|
|
|
|
167,140
|
|
|
|
119,600
|
|
|
|
105,609
|
|
|
|
65,460
|
|
|
|
51,754
|
|
|
|
24,585
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
364
|
|
Gain on sale of discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
859
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
224,994
|
|
|
|
199,491
|
|
|
|
167,140
|
|
|
|
120,459
|
|
|
|
105,609
|
|
|
|
65,460
|
|
|
|
51,754
|
|
|
|
24,949
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Revenue
|
|
|
29
|
%
|
|
|
28
|
%
|
|
|
25
|
%
|
|
|
20
|
%
|
|
|
18
|
%
|
|
|
13
|
%
|
|
|
11
|
%
|
|
|
5
|
%
|
Earnings per share basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
0.75
|
|
|
|
0.67
|
|
|
|
0.56
|
|
|
|
0.40
|
|
|
|
0.36
|
|
|
|
0.22
|
|
|
|
0.18
|
|
|
|
0.08
|
|
Net income
|
|
|
0.75
|
|
|
|
0.67
|
|
|
|
0.56
|
|
|
|
0.41
|
|
|
|
0.36
|
|
|
|
0.22
|
|
|
|
0.18
|
|
|
|
0.09
|
|
Earnings per share diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
0.73
|
|
|
|
0.65
|
|
|
|
0.55
|
|
|
|
0.39
|
|
|
|
0.36
|
|
|
|
0.22
|
|
|
|
0.18
|
|
|
|
0.08
|
|
Net income
|
|
|
0.73
|
|
|
|
0.65
|
|
|
|
0.55
|
|
|
|
0.40
|
|
|
|
0.36
|
|
|
|
0.22
|
|
|
|
0.18
|
|
|
|
0.09
|
|
Shares used to compute earnings per share (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
298,228
|
|
|
|
298,027
|
|
|
|
297,825
|
|
|
|
295,469
|
|
|
|
291,739
|
|
|
|
291,387
|
|
|
|
291,227
|
|
|
|
291,187
|
|
Diluted
|
|
|
306,711
|
|
|
|
306,168
|
|
|
|
305,836
|
|
|
|
304,730
|
|
|
|
294,016
|
|
|
|
293,084
|
|
|
|
292,446
|
|
|
|
291,248
|
|
Dividends declared per share
|
|
|
0.22
|
|
|
|
0.22
|
|
|
|
0.20
|
|
|
|
0.20
|
|
|
|
0.20
|
|
|
|
0.20
|
|
|
|
0.20
|
|
|
|
0.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
86
|
|
ITEM 9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
|
Not applicable.
|
|
ITEM 9A.
|
CONTROLS
AND PROCEDURES
|
(a) Evaluation of Disclosure Controls and
Procedures. Our management, with the
participation of our Chief Executive Officer and Chief Financial
Officer, evaluated the effectiveness of Analogs disclosure
controls and procedures as of October 30, 2010. 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 SECs 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
companys 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 October 30, 2010, our Chief
Executive Officer and Chief Financial Officer concluded that, as
of such date, our disclosure controls and procedures were
effective at the reasonable assurance level.
(b) Managements Report on Internal Control Over
Financial Reporting.
Managements
Report on Internal Control Over Financial Reporting
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
companys principal executive and principal financial
officers and effected by the companys 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:
|
|
|
|
|
Pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions
of the assets of the company;
|
|
|
|
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
companys 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 October 30, 2010. In
making this assessment, the companys management used the
criteria set forth by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO) in Internal Control-Integrated
Framework.
Based on this assessment, our management concluded that, as of
October 30, 2010, our internal control over financial
reporting is effective based on those criteria.
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.
(c) Attestation Report of the Registered Public
Accounting Firm
87
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders
Analog Devices, Inc.
We have audited Analog Devices, Inc.s internal control
over financial reporting as of October 30, 2010, based on
criteria established in Internal Control Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (the COSO criteria). Analog Devices,
Inc.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
Managements Report on Internal Control Over Financial
Reporting. Our responsibility is to express an opinion on the
Companys internal control over financial reporting based
on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). 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 companys 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 companys
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
companys 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.
In our opinion, Analog Devices, Inc. maintained, in all material
respects, effective internal control over financial reporting as
of October 30, 2010, based on the COSO criteria.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Analog Devices, Inc. as of
October 30, 2010 and October 31, 2009, and the related
consolidated statements of income, shareholders equity,
comprehensive income, and cash flows for each of the three years
in the period ended October 30, 2010 of Analog Devices,
Inc. and our report dated November 22, 2010 expressed an
unqualified opinion thereon.
Boston, Massachusetts
November 22, 2010
88
(d) Changes in Internal Controls over Financial
Reporting. No change in our internal control over
financial reporting (as defined in
Rules 13a-15(f)
and
15d-15(f)
under the Securities Exchange Act) occurred during the fiscal
quarter ended October 30, 2010 that has materially
affected, or is reasonably likely to materially affect, our
internal control over financial reporting.
|
|
ITEM 9B.
|
OTHER
INFORMATION
|
Not applicable.
89
PART III
|
|
ITEM 10.
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
Information required by this item relating to our directors and
nominees is contained in our 2011 proxy statement under the
caption Proposal 1 Election of
Directors and is incorporated herein by reference.
Information required by this item relating to our executive
officers is contained under the caption EXECUTIVE OFFICERS
OF THE COMPANY in Part I of this Annual Report on
Form 10-K
and is incorporated herein by reference. Information required by
this item relating to compliance with Section 16(a) of the
Securities Exchange Act of 1934 is contained in our 2011 proxy
statement under the caption Section 16(a) Beneficial
Ownership Reporting Compliance and is incorporated herein
by reference.
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 www.analog.com. To the extent permitted by NYSE 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 www.analog.com.
During the fourth quarter of fiscal 2010, we made no material
change to the procedures by which shareholders may recommend
nominees to our Board of Directors, as described in our 2010
proxy statement.
Information required by this item relating to the audit
committee of our Board of Directors is contained in our 2011
proxy statement under the caption Corporate
Governance Board of Directors Meetings and
Committees Audit Committee and is incorporated
herein by reference.
|
|
ITEM 11.
|
EXECUTIVE
COMPENSATION
|
Information required by this item is contained in our 2011 proxy
statement under the captions Corporate
Governance Director Compensation and
Information About Executive Compensation and is
incorporated herein by reference.
|
|
ITEM 12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
|
Information required by this item relating to security ownership
of certain beneficial owners and management is contained in our
2011 proxy statement under the caption Security Ownership
of Certain Beneficial Owners and Management and is
incorporated herein by reference. Information required by this
item relating to securities authorized for issuance under equity
compensation plans is contained in our 2011 proxy statement
under the caption Information About Executive
Compensation Securities Authorized for Issuance
Under Equity Compensation Plans and is incorporated herein
by reference.
|
|
ITEM 13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
|
Information required by this item relating to transactions with
related persons is contained in our 2011 proxy statement under
the caption Corporate Governance Certain
Relationships and Related Transactions and is incorporated
herein by reference. Information required by this item relating
to director independence is contained in our 2011 proxy
statement under the caption Corporate
Governance Determination of Independence and
is incorporated herein by reference.
|
|
ITEM 14.
|
PRINCIPAL
ACCOUNTING FEES AND SERVICES
|
Information required by this item is contained in our 2011 proxy
statement under the caption Corporate
Governance Independent Registered Public Accounting
Firm Fees and Other Matters and is incorporated herein by
reference.
90
PART IV
|
|
ITEM 15.
|
EXHIBITS AND
FINANCIAL STATEMENT SCHEDULES
|
(a) The following are filed as part of this Annual
Report on
Form 10-K:
The following consolidated financial statements are included in
Item 8 of this Annual Report on
Form 10-K:
|
|
|
|
|
Consolidated Statements of Income for the years ended
October 30, 2010, October 31, 2009 and
November 1, 2008
|
|
|
|
Consolidated Balance Sheets as of October 30, 2010 and
October 31, 2009
|
|
|
|
Consolidated Statements of Shareholders Equity for the
years ended October 30, 2010, October 31, 2009 and
November 1, 2008
|
|
|
|
Consolidated Statements of Comprehensive Income for the years
ended October 30, 2010, October 31, 2009 and
November 1, 2008
|
|
|
|
Consolidated Statements of Cash Flows for the years ended
October 30, 2010, October 31, 2009 and
November 1, 2008
|
The exhibits listed in the Exhibit Index immediately
preceding the exhibits are filed or furnished with or
incorporated by reference in this Annual Report on
Form 10-K.
|
|
(c)
|
Financial
Statement Schedules
|
The following consolidated financial statement schedule is
included in Item 15(c) of this Annual Report on
Form 10-K:
Schedule II Valuation and Qualifying Accounts
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.
91
ANALOG
DEVICES, INC.
ANNUAL REPORT ON
FORM 10-K
YEAR ENDED OCTOBER 30, 2010
ITEM 15(c)
FINANCIAL STATEMENT SCHEDULE
92
Schedule Of Valuation And Qualifying Accounts Disclosure
ANALOG
DEVICES, INC.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
Years
ended October 30, 2010, October 31, 2009 and
November 1, 2008
(Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
Additions
|
|
|
|
|
|
Balance at
|
|
|
|
Beginning of
|
|
|
Charged to
|
|
|
|
|
|
End of
|
|
Description
|
|
Period
|
|
|
Income Statement
|
|
|
Deductions
|
|
|
Period
|
|
|
Accounts Receivable Reserves and Allowances:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended November 1, 2008
|
|
$
|
3,611
|
|
|
$
|
8,427
|
|
|
$
|
6,537
|
|
|
$
|
5,501
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended October 31, 2009
|
|
$
|
5,501
|
|
|
$
|
3,628
|
|
|
$
|
7,448
|
|
|
$
|
1,681
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended October 30, 2010
|
|
$
|
1,681
|
|
|
$
|
2,918
|
|
|
$
|
3,018
|
|
|
$
|
1,581
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
93
SIGNATURES
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.
ANALOG DEVICES, INC.
|
|
|
|
By:
|
/s/ JERALD
G. FISHMAN
|
Jerald G. Fishman
President, Chief Executive Officer and Director
(Principal Executive Officer)
Date: November 22, 2010
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.
|
|
|
|
|
|
|
Name
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ Ray
Stata
Ray
Stata
|
|
Chairman of the Board
|
|
November 22, 2010
|
|
|
|
|
|
/s/ Jerald
G. Fishman
Jerald
G. Fishman
|
|
President,
Chief Executive Officer
and Director
(Principal Executive Officer)
|
|
November 22, 2010
|
|
|
|
|
|
/s/ David
A. Zinsner
David
A. Zinsner
|
|
Vice President-Finance and
Chief Financial Officer
(Principal Financial Officer)
|
|
November 22, 2010
|
|
|
|
|
|
/s/ Seamus
Brennan
Seamus
Brennan
|
|
Vice President, Corporate Controller and Chief Accounting
Officer
(Principal Accounting Officer)
|
|
November 22, 2010
|
|
|
|
|
|
/s/ James
A. Champy
James
A. Champy
|
|
Director
|
|
November 22, 2010
|
|
|
|
|
|
/s/ John
L. Doyle
John
L. Doyle
|
|
Director
|
|
November 22, 2010
|
|
|
|
|
|
/s/ John
C. Hodgson
John
C. Hodgson
|
|
Director
|
|
November 22, 2010
|
|
|
|
|
|
/s/ Yves-Andre
Istel
Yves-Andre
Istel
|
|
Director
|
|
November 22, 2010
|
|
|
|
|
|
/s/ Neil
Novich
Neil
Novich
|
|
Director
|
|
November 22, 2010
|
|
|
|
|
|
/s/ F.
Grant Saviers
F.
Grant Saviers
|
|
Director
|
|
November 22, 2010
|
94
|
|
|
|
|
|
|
Name
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ Paul
J. Severino
Paul
J. Severino
|
|
Director
|
|
November 22, 2010
|
|
|
|
|
|
/s/ Kenton
J. Sicchitano
Kenton
J. Sicchitano
|
|
Director
|
|
November 22, 2010
|
95
Exhibit Index
|
|
|
|
|
Exhibit No.
|
|
Description
|
|
|
1
|
.1
|
|
Underwriting Agreement, dated June 25, 2009, between Analog
Devices, Inc. and Credit Suisse Securities (USA) LLC, as
representative of the several underwriters named therein, filed
as exhibit 1.1 to the Companys Current Report on
Form 8-K
(File
No. 1-7819),
filed with the Commission on June 30, 2009 and incorporated
herein by reference.
|
|
2
|
.1
|
|
Purchase and Sale Agreement, dated as of September 9, 2007,
among Analog Devices, Inc., various subsidiaries, and MediaTek
Inc., filed as an exhibit to the Companys Annual Report on
Form 10-K
for the fiscal year ended November 3, 2007 (File
No. 1-7819)
as filed with the Commission on November 30, 2007 and
incorporated herein by reference.
|
|
2
|
.2
|
|
Amendment No. 1 to Purchase and Sale Agreement, dated
January 11, 2008, among Analog Devices, Inc., various
subsidiaries, and MediaTek Inc. filed as an exhibit to the
Companys Current Report on
Form 8-K
(File
No. 1-7819),
as filed with the Commission on January 16, 2008 and
incorporated herein by reference.
|
|
2
|
.3
|
|
License Agreement, dated as of January 11, 2008, among
Analog Devices, Inc., Analog Devices B.V., MediaTek Inc. and
MediaTek Singapore Pte. Ltd., filed as an exhibit to the
Companys Current Report on
Form 8-K
(File
No. 1-7819),
as filed with the Commission on January 16, 2008 and
incorporated herein by reference.
|
|
3
|
.1
|
|
Restated Articles of Organization of Analog Devices, Inc., as
amended, filed as an exhibit to the Companys Quarterly
Report on
Form 10-Q
for the fiscal quarter ended May 3, 2008 (File
No. 1-7819)
as filed with the Commission on May 20, 2008 and
incorporated herein by reference.
|
|
3
|
.2
|
|
Amendment to Restated Articles of Organization of Analog
Devices, Inc., filed as exhibit 3.1 to the Companys
Current Report on
Form 8-K
filed with the Commission on December 8, 2008 (File
No. 1-7819)
and incorporated herein by reference.
|
|
3
|
.3
|
|
Amended and Restated By-Laws of Analog Devices, Inc., filed as
exhibit 3.1 to the Companys Current Report on
Form 8-K
filed with the Commission on January 28, 2010 (File
No. 1-7819)
and incorporated herein by reference.
|
|
4
|
.1
|
|
Indenture, by and between Analog Devices, Inc. and The Bank of
New York Mellon Trust Company, N.A. (as Trustee) dated as
of June 30, 2009, filed as exhibit 4.1 to the
Companys Quarterly Report on
Form 10-Q
for the fiscal quarter ended August 1, 2009 (File
No. 1-7819)
and incorporated herein by reference.
|
|
4
|
.2
|
|
Supplemental Indenture, dated June 30, 2009, between Analog
Devices, Inc. and The Bank of New York Mellon
Trust Company, N.A., as trustee, filed as exhibit 4.1
to the Companys Current Report on
Form 8-K
(File
No. 1-7819),
filed with the Commission on June 30, 2009 and incorporated
herein by reference.
|
|
4
|
.3
|
|
Form of 5.00% Global Note due July 1, 2014, filed as
exhibit 4.2 to the Companys Current Report on
Form 8-K
(File
No. 1-7819),
filed with the Commission on June 30, 2009 and incorporated
herein by reference
|
|
*10
|
.1
|
|
Analog Devices, Inc. Amended and Restated Deferred Compensation
Plan, filed as an exhibit to the Companys Quarterly Report
on
Form 10-Q
for fiscal quarter ended January 28, 2006 (File
No. 1-7819)
as filed with the Commission on February 15, 2006 and
incorporated herein by reference.
|
|
*10
|
.2
|
|
Amendment No. 1 to Analog Devices, Inc. Amended and
Restated Deferred Compensation Plan, filed as an exhibit to the
Companys Annual Report on
Form 10-K
for the fiscal year ended November 3, 2007 (File
No. 1-7819)
as filed with the Commission on November 30, 2007 and
incorporated herein by reference.
|
|
*10
|
.3
|
|
Analog Devices, Inc. Amended and Restated Deferred Compensation
Plan, incorporated herein by reference to exhibit 10.1 of
the Companys Current Report on
Form 8-K
filed with the Commission on December 8, 2008 (File
No. 1-7819)
and incorporated herein by reference.
|
|
*10
|
.4
|
|
Trust Agreement for Deferred Compensation Plan dated as of
October 1, 2003 between Analog Devices, Inc. and Fidelity
Management Trust Company, filed as an exhibit to the
Companys Annual Report on
Form 10-K
for the fiscal year ended November 1, 2003 (File
No. 1-7819)
as filed with the Commission on December 23, 2003 and
incorporated herein by reference.
|
|
|
|
|
|
Exhibit No.
|
|
Description
|
|
|
*10
|
.5
|
|
First Amendment to Trust Agreement for Deferred
Compensation Plan between Analog Devices, Inc. and Fidelity
Management Trust Company dated as of January 1, 2005,
filed as an exhibit to the Companys Annual Report on
Form 10-K
for the fiscal year ended October 28, 2006 (File
No. 1-7819)
as filed with the Commission on November 20, 2006 and
incorporated herein by reference.
|
|
*10
|
.6
|
|
Second Amendment to Trust Agreement for Deferred
Compensation Plan between Analog Devices, Inc. and Fidelity
Management Trust Company dated as of December 10,
2007, filed as exhibit 10.41 to the Companys Annual
Report on
Form 10-K
for the fiscal year ended November 1, 2008 (File
No. 1-7819)
as filed with the Commission on November 25, 2008 and
incorporated herein by reference.
|
|
*10
|
.7
|
|
Restated 1988 Stock Option Plan of Analog Devices, Inc., filed
as an exhibit to the Companys Quarterly Report on
Form 10-Q
for the fiscal quarter ended May 3, 1997 (File
No. 1-7819)
as filed with the Commission on June 17, 1997 and
incorporated herein by reference.
|
|
*10
|
.8
|
|
Restated 1994 Director Option Plan of Analog Devices, Inc.,
as amended, filed as an exhibit to the Companys Annual
Report on
Form 10-K
for the fiscal year ended November 2, 2002 (File
No. 1-7819)
as filed with the Commission on January 29, 2003 and
incorporated herein by reference.
|
|
*10
|
.9
|
|
1998 Stock Option Plan of Analog Devices Inc., as amended, filed
as an exhibit to the Companys Annual Report on
Form 10-K
for the fiscal year ended November 2, 2002 (File
No. 1-7819)
as filed with the Commission on January 29, 2003 and
incorporated herein by reference.
|
|
*10
|
.10
|
|
Analog Devices, Inc. 2001 Broad-Based Stock Option Plan, as
amended, filed as an exhibit to the Companys Annual Report
on
Form 10-K
for the fiscal year ended November 2, 2002 (File
No. 1-7819)
as filed with the Commission on January 29, 2003 and
incorporated herein by reference.
|
|
*10
|
.11
|
|
2006 Stock Incentive Plan of Analog Devices, Inc., filed as
Appendix A of the Companys Definitive Proxy Statement
on Schedule 14A filed with the Commission on
February 8, 2006 (File
No. 1-7819)
and incorporated herein by reference.
|
|
*10
|
.12
|
|
Amendment No. 1 to 2006 Stock Incentive Plan of Analog
Devices, Inc., filed as an exhibit to the Companys Annual
Report on
Form 10-K
for the fiscal year ended October 28, 2006 (File
No. 1-7819)
as filed with the Commission on November 20, 2006 and
incorporated herein by reference.
|
|
*10
|
.13
|
|
Second Amendment to 2006 Stock Incentive Plan of Analog Devices,
Inc., filed as exhibit 10.1 to the Companys Quarterly
Report on
Form 10-Q
for the quarter ended August 1, 2009 (File
No. 1-7819)
as filed with the Commission on August 18, 2009 and
incorporated herein by reference.
|
|
*10
|
.14
|
|
Third Amendment to 2006 Stock Incentive Plan of Analog Devices,
Inc., filed as exhibit 10.14 to the Companys Annual
Report on
Form 10-K
for the fiscal year ended October 30, 2010 (File
No. 1-7819)
as filed with the Commission on November 24, 2009 and
incorporated herein by reference.
|
|
*10
|
.15
|
|
Fourth Amendment to 2006 Stock Incentive Plan of Analog Devices,
Inc., filed as exhibit 10.1 to the Companys Quarterly
Report on
Form 10-Q
for the quarter ended January 30, 2010 (File
No. 1-7819)
as filed with the Commission on February 17, 2010 and
incorporated herein by reference.
|
|
*10
|
.16
|
|
Fifth Amendment to 2006 Stock Incentive Plan of Analog Devices,
Inc., filed as exhibit 10.2 to the Companys Quarterly
Report on
Form 10-Q
for the quarter ended January 30, 2010 (File
No. 1-7819)
as filed with the Commission on February 17, 2010 and
incorporated herein by reference.
|
|
*10
|
.17
|
|
Form of Confirming Memorandum for Grants of Non-Qualified Stock
Options to Employees for usage under the Companys 2006
Stock Incentive Plan, filed as an exhibit to the Companys
Current Report on
Form 8-K
(File
No. 1-7819),
as filed with the Commission on December 22, 2006 and
incorporated herein by reference.
|
|
*10
|
.18
|
|
Form of Confirming Memorandum for Grants of Non-Qualified Stock
Options to Directors for usage under the Companys 2006
Stock Incentive Plan, filed as an exhibit to the Companys
Quarterly Report on
Form 10-Q
for the fiscal quarter ended August 4, 2007 (File
No. 1-7819)
as filed with the Commission on August 21, 2007 and
incorporated herein by reference.
|
|
|
|
|
|
Exhibit No.
|
|
Description
|
|
|
*10
|
.19
|
|
Form of Restricted Stock Agreement for usage under the
Companys 2006 Stock Incentive Plan, filed as an exhibit to
the Companys Current Report on
Form 8-K
(File
No. 1-7819),
as filed with the Commission on September 25, 2006 and
incorporated herein by reference.
|
|
*10
|
.20
|
|
Form of Restricted Stock Unit Confirming Memorandum for US
Employees for usage under the Companys 2006 Stock
Incentive Plan, filed as exhibit 10.1 to the Companys
Current Report on
Form 8-K
(File
No. 1-7819),
as filed with the Commission on December 23, 2009 and
incorporated herein by reference.
|
|
*10
|
.21
|
|
Form of Restricted Stock Unit Confirming Memorandum for Non-US
Employees for usage under the Companys 2006 Stock
Incentive Plan, filed as exhibit 10.2 to the Companys
Current Report on
Form 8-K
(File
No. 1-7819),
as filed with the Commission on December 23, 2009 and
incorporated herein by reference.
|
|
*10
|
.22
|
|
Analog Devices BV (Ireland) Employee Stock Option Program, as
amended, filed as an exhibit to the Companys Annual Report
on
Form 10-K
for the fiscal year ended November 2, 2002 (File
No. 1-7819)
as filed with the Commission on January 29, 2003 and
incorporated herein by reference.
|
|
10
|
.23
|
|
BCO Technologies Plc Unapproved Share Option Scheme, filed as an
exhibit to the Companys Registration Statement on
Form S-8
(File
No. 333-50092)
as filed with the Commission on November 16, 2000 and
incorporated herein by reference.
|
|
10
|
.24
|
|
BCO Technologies Plc Approved Share Option Scheme, filed as an
exhibit to the Companys Registration Statement on
Form S-8
(File
No. 333-50092)
as filed with the Commission on November 16, 2000 and
incorporated herein by reference.
|
|
10
|
.25
|
|
ChipLogic, Inc. Amended and Restated 1998 Stock Plan, filed as
an exhibit to the Companys Registration Statement on
Form S-8
(File
No. 333-53314)
as filed with the Commission on January 5, 2001 and
incorporated herein by reference.
|
|
10
|
.26
|
|
Staccato Systems, Inc. 1998 Stock Plan, filed as an exhibit to
the Companys Registration Statement on
Form S-8
(File
No. 333-53828)
as filed with the Commission on January 17, 2001 and
incorporated herein by reference.
|
|
10
|
.27
|
|
Various individual stock restriction and similar agreements
between the registrant and employees thereof relating to
ChipLogic, Inc., filed as an exhibit to the Companys
Registration Statement on
Form S-8
(File
No. 333-57444)
as filed with the Commission on March 22, 2001, as amended
by Amendment No. 1 filed as an exhibit to the
Companys Post-Effective Amendment to Registration
Statement on
Form S-8
(File
No. 333-57444)
as filed with the Commission on March 23, 2001 and
incorporated herein by reference.
|
|
*10
|
.28
|
|
Amended and Restated Employment Agreement between Jerald G.
Fishman and Analog Devices, Inc., dated January 14, 2010,
filed as an exhibit to the Companys Current Report on
Form 8-K
(File
No. 1-7819)
as filed with the Commission on January 19, 2010 and
incorporated herein by reference.
|
|
*10
|
.29
|
|
Executive Retention Agreement dated October 22, 2007
between Jerald G. Fishman and Analog Devices, Inc., filed as an
exhibit to the Companys Current Report on
Form 8-K
(File
No. 1-7819)
as filed with the Commission on October 26, 2007 and
incorporated herein by reference.
|
|
*10
|
.30
|
|
Amendment to Long-Term Retention Agreement between Jerald G.
Fishman and Analog Devices, Inc., filed as exhibit 10.1 to
the Companys Current Report on
Form 8-K
(File
No. 1-7819)
as filed with the Commission on January 19, 2010 and
incorporated herein by reference.
|
|
*10
|
.31
|
|
Letter Agreement between Analog Devices Inc. and Jerald G.
Fishman dated June 21, 2000 relating to acceleration of
stock options upon the occurrence of certain events, filed as an
exhibit to the Companys Annual Report on
Form 10-K
for the fiscal year ended October 28, 2000 (File
No. 1-7819)
as filed with the Commission on January 26, 2001 and
incorporated herein by reference.
|
|
*10
|
.32
|
|
Amendment dated as of October 22, 2007 to the Employee
Retention Agreement dated as of January 16, 1989 between
Jerald G. Fishman and Analog Devices, Inc., filed as an exhibit
to the Companys Current Report on
Form 8-K
(File
No. 1-7819)
as filed with the Commission on October 26, 2007 and
incorporated herein by reference.
|
|
*10
|
.33
|
|
2011 Executive Performance Incentive Plan.
|
|
|
|
|
|
Exhibit No.
|
|
Description
|
|
|
*10
|
.34
|
|
Form of Employee Retention Agreement, as amended and restated,
filed as exhibit 10.27 to the Companys Annual Report
on
Form 10-K
for the fiscal year ended November 1, 2008 (File
No. 1-7819)
as filed with the Commission on November 25, 2008 and
incorporated herein by reference.
|
|
*10
|
.35
|
|
Form of Amendment to Employee Retention Agreement, incorporated
herein by reference to exhibit 10.3 of the Companys
Current Report on
Form 8-K
filed with the Securities and Exchange Commission on
December 8, 2008 (File
No. 1-7819).
|
|
*10
|
.36
|
|
Employee Change in Control Severance Policy of Analog Devices,
Inc., as amended, filed as an exhibit to the Companys
Annual Report on
Form 10-K
for the fiscal year ended October 30, 1999 (File
No. 1-7819)
as filed with the Commission on January 28, 2000 and
incorporated herein by reference.
|
|
*10
|
.37
|
|
Senior Management Change in Control Severance Policy of Analog
Devices, Inc., as amended, filed as an exhibit to the
Companys Annual Report on
Form 10-K
for the fiscal year ended October 30, 1999 (File
No. 1-7819)
as filed with the Commission on January 28, 2000 and
incorporated herein by reference.
|
|
*10
|
.38
|
|
Offer Letter for David A. Zinsner, dated November 18, 2008,
filed as exhibit 10.1 to the Companys Quarterly
Report on
Form 10-Q
for the quarter ended January 31, 2009 (File
No. 1-7819)
as filed with the Commission on February 18, 2009 and
incorporated herein by reference.
|
|
*10
|
.39
|
|
Form of Indemnification Agreement for Directors and Officers,
filed as exhibit 10.30 to the Companys Annual Report
on
Form 10-K
for the fiscal year ended November 1, 2008 (File
No. 1-7819)
as filed with the Commission on November 25, 2008 and
incorporated herein by reference.
|
|
10
|
.40
|
|
Amended and Restated Lease Agreement dated May 1, 1992
between Analog Devices, Inc. and the trustees of Everett Street
Trust relating to the premises at 3 Technology Way, Norwood,
Massachusetts, filed as an exhibit to the Companys Annual
Report on
Form 10-K
for the fiscal year ended November 1, 1997 (File
No. 1-7819)
as filed with the Commission on January 28, 1998 and
incorporated herein by reference.
|
|
10
|
.41
|
|
Guaranty dated as of May 1, 1994 between Analog Devices,
Inc. and Metropolitan Life Insurance Company relating to the
premises at 3 Technology Way, Norwood, Massachusetts, filed as
an exhibit to the Companys Annual Report on
Form 10-K
for the fiscal year ended October 30, 1999 (File
No. 1-7819)
as filed with the Commission on January 28, 2000 and
incorporated herein by reference.
|
|
10
|
.42
|
|
Letter Agreement dated as of May 18, 1994 between Analog
Devices, Inc. and Metropolitan Life Insurance Company relating
to the premises at 3 Technology Way, Norwood, Massachusetts,
filed as an exhibit to the Companys Annual Report on
Form 10-K
for the fiscal year ended October 30, 1999 (File
No. 1-7819)
as filed with the Commission on January 28, 2000 and
incorporated herein by reference.
|
|
10
|
.43
|
|
Reimbursement Agreement dated May 18, 1992 between Analog
Devices, Inc. and the trustees of Everett Street Trust, filed as
an exhibit to the Companys Annual Report on
Form 10-K
for the fiscal year ended November 1, 1997 (File
No. 1-7819)
as filed with the Commission on January 28, 1998 and
incorporated herein by reference.
|
|
10
|
.44
|
|
Lease Agreement dated February 8, 1996 between Analog
Devices, Inc. and Massachusetts Institute of Technology,
relating to premises located at 21 Osborn Street, Cambridge,
Massachusetts, filed as an exhibit to the Companys Annual
Report on
Form 10-K
for the fiscal year ended November 3, 2001 (File
No. 1-7819)
as filed with the Commission on January 28, 2002 and
incorporated herein by reference.
|
|
10
|
.45
|
|
First Amendment dated December 13, 1996 to Lease Agreement
dated February 8, 1996 between Analog Devices, Inc. and
Massachusetts Institute of Technology, relating to premises
located at 21 Osborn Street, Cambridge, Massachusetts, filed as
an exhibit to the Companys Annual Report on
Form 10-K
for the fiscal year ended October 28, 2006 (File
No. 1-7819)
as filed with the Commission on November 20, 2006 and
incorporated herein by reference.
|
|
10
|
.46
|
|
Second Amendment dated December 20, 1996 to Lease Agreement
dated February 8, 1996 between Analog Devices, Inc. and
Massachusetts Institute of Technology, relating to premises
located at 21 Osborn Street, Cambridge, Massachusetts, filed as
an exhibit to the Companys Annual Report on
Form 10-K
for the fiscal year ended October 28, 2006 (File
No. 1-7819)
as filed with the Commission on November 20, 2006 and
incorporated herein by reference.
|
|
|
|
|
|
Exhibit No.
|
|
Description
|
|
|
10
|
.47
|
|
Third Amendment dated May 27, 1997 to Lease Agreement dated
February 8, 1996 between Analog Devices, Inc. and
Massachusetts Institute of Technology, relating to premises
located at 21 Osborn Street, Cambridge, Massachusetts, filed as
an exhibit to the Companys Annual Report on
Form 10-K
for the fiscal year ended October 28, 2006 (File
No. 1-7819)
as filed with the Commission on November 20, 2006 and
incorporated herein by reference.
|
|
10
|
.48
|
|
Lease Agreement dated November 14, 1997, as amended,
between Analog Devices, Inc. and Liberty Property Limited
Partnership, relating to premises located at 7736 McCloud Road,
Greensboro, North Carolina, filed as an exhibit to the
Companys Annual Report on
Form 10-K
for the fiscal year ended October 28, 2006 (File
No. 1-7819)
as filed with the Commission on November 20, 2006 and
incorporated herein by reference.
|
|
10
|
.49
|
|
Fifth Amendment dated September 14, 2007 to Lease Agreement
dated November 14, 1997, as amended, between Analog
Devices, Inc. and Crown-Greensboro I, LLC (as successor to
Liberty Property Limited Partnership), relating to premises
located at 7736 McCloud Road, Greensboro, North Carolina, filed
as an exhibit to the Companys Annual Report on
Form 10-K
for the fiscal year ended November 3, 2007 (File
No. 1-7819)
as filed with the Commission on November 30, 2007 and
incorporated herein by reference.
|
|
12
|
.1
|
|
Computation of Consolidated Ratios of Earnings to Fixed Charges.
|
|
21
|
|
|
Subsidiaries of the Company.
|
|
23
|
|
|
Consent of Ernst & Young LLP, Independent Registered
Public Accounting Firm.
|
|
31
|
.1
|
|
Certification Pursuant to
Rule 13a-14(a)
and 15d-14(a) of the Exchange Act, as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 (Chief
Executive Officer).
|
|
31
|
.2
|
|
Certification Pursuant to
Rule 13a-14(a)
and 15d-14(a) of the Exchange Act, as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 (Chief
Financial Officer).
|
|
32
|
.1
|
|
Certification Pursuant to 18 U.S.C. Section 1350
(Chief Executive Officer).
|
|
32
|
.2
|
|
Certification Pursuant to 18 U.S.C. Section 1350
(Chief Financial Officer).
|
|
101
|
. INS
|
|
XBRL Instance Document.
|
|
101
|
. SCH
|
|
XBRL Schema Document.
|
|
101
|
. CAL
|
|
XBRL Calculation Linkbase Document.
|
|
101
|
. LAB
|
|
XBRL Labels Linkbase Document.
|
|
101
|
. PRE
|
|
XBRL Presentation Linkbase Document.
|
|
101
|
. DEF
|
|
XBRL Definition Linkbase Document
|
|
|
|
|
|
Filed herewith. |
|
* |
|
Management contracts and compensatory plan or arrangements
required to be filed as an Exhibit pursuant to Item 15(b)
of
Form 10-K. |
Attached as Exhibit 101 to this report are the following
formatted in XBRL (Extensible Business Reporting Language):
(i) Consolidated Statements of Income for the years ended
October 31, 2009, November 1, 2008, and
November 3, 2007, (ii) Consolidated Balance Sheets at
October 31, 2009 and November 1, 2008,
(iii) Consolidated Statements of Shareholders Equity
for the years ended October 31, 2009, November 1,
2008, and November 3, 2007, (iv) Consolidated
Statements of Comprehensive Income for the years ended
October 31, 2009, November 1, 2008, and
November 3, 2007, (v) Consolidated Statements of Cash
Flows for the years ended October 31, 2009,
November 1, 2008, and November 3, 2007 and
(vi) Notes to Consolidated Financial Statements.
In accordance with Rule 406T of
Regulation S-T,
the XBRL-related information in Exhibit 101 to this Annual
Report on
Form 10-K
is deemed not filed or part of a registration statement or
prospectus for purposes of sections 11 or 12 of the
Securities Act, is deemed not filed for purposes of
section 18 of the Exchange Act, and otherwise is not
subject to liability under these sections.