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What changed in Analog Devices's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Analog Devices's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+286 added−294 removedSource: 10-K (2023-11-21) vs 10-K (2022-11-22)

Top changes in Analog Devices's 2023 10-K

286 paragraphs added · 294 removed · 245 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeThe Third Wave of Information and Communications Technology, as we refer to it at Analog Devices, is characterized by ubiquitous sensing, hyper-scale and edge computing and pervasive connectivity. These technological trends are driving a continuous evolution of new generations of applications that are increasing the demand for Analog Devices’ high-performance analog, mixed-signal, power and RF ICs.
Biggest changeThese technological trends are driving a continuous evolution of new generations of applications that are increasing the demand for Analog Devices’ high-performance analog, mixed-signal, power and RF ICs. We have positioned our business to capitalize on the secular growth opportunities across our markets and to deliver innovative solutions.
In wireless and wireline communication applications, our products are incorporated into: • Cellular base station equipment • Satellite and terrestrial broadband access equipment • Microwave backhaul systems • Optical and cable networking equipment for data center and carrier providers • Data centers and data storage Consumer — To address the market demand for state of the art personal and professional entertainment systems and the consumer demand for high quality user interfaces, music, movies and photographs, we have developed analog, digital and mixed-signal and power solutions that meet the rigorous cost and time-to-market requirements of the consumer electronics market.
In wireless and wireline communication applications, our products are incorporated into: • Cellular base station equipment • Satellite and terrestrial broadband access equipment • Microwave backhaul systems • Optical and cable networking equipment for data center and carrier providers • Data centers and data storage 6 Consumer — To address the market demand for state of the art personal and professional entertainment systems and the consumer demand for high quality user interfaces, music, movies and photographs, we have developed analog, digital and mixed-signal and power solutions that meet the rigorous cost and time-to-market requirements of the consumer electronics market.
These products include: • Portable devices (smart phones, tablets and wearable devices) for media and vital signs monitoring applications • Prosumer audio/video equipment 6 See Note 4, Industry, Segment and Geographic Information , of the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report on Form 10-K for further information about our products by end market.
These products include: • Portable devices (smart phones, tablets and wearable devices) for media and vital signs monitoring applications • Prosumer audio/video equipment See Note 4, Industry, Segment and Geographic Information , of the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report on Form 10-K for further information about our products by end market.
If any of our key suppliers are unable or unwilling to manufacture and deliver sufficient quantities of components to us on the time schedule and of the quality that we require, we may be forced to seek to engage additional or replacement suppliers, which could result in significant expenses and disruptions or delays in manufacturing, 7 product development and shipment of product to our customers.
If any of our key suppliers are unable or unwilling to manufacture and deliver sufficient quantities of components to us on the time schedule and of the quality that we require, we may be forced to seek to engage additional or replacement suppliers, which could result in significant expenses and disruptions or delays in manufacturing, product development and shipment of product to our customers.
Our converter products combine sampling rates and accuracy with the low noise, power, price and small package size required by industrial, automotive, consumer, and communications electronics. 3 • Power Management & Reference —Power management and reference products, which include functions such as power conversion, driver monitoring, sequencing and energy management, provide efficient solutions for power management and conversion applications in the automotive, communications, industrial and high-end consumer markets.
Our converter products combine sampling rates and accuracy with the low noise, power, price and small package size required by industrial, automotive, consumer, and communications electronics. • Power Management & Reference —Power management and reference products, which include functions such as power conversion, driver monitoring, sequencing and energy management, provide efficient solutions for power management and conversion applications in the automotive, communications, industrial and high-end consumer markets.
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 4 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 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.
Customer 5 products include applications such as: • Navigation systems • Radar systems • Space and satellite communications • Security devices • Communication systems • Electronic surveillance and countermeasures Healthcare — The healthcare market is evolving in response to the need for increased access to better and more affordable care, as well as a growing focus on preventative healthcare and the need to better manage chronic conditions.
Customer products include applications such as: • Navigation systems • Radar systems • Space and satellite communications • Security devices • Communication systems • Electronic surveillance and countermeasures Healthcare — The healthcare market is evolving in response to the need for increased access to better and more affordable care, as well as a growing focus on preventative healthcare and the need to better manage chronic conditions.
We currently source more than half of our wafer requirements annually from third-party wafer fabrication foundries, such as Taiwan Semiconductor Manufacturing Company (TSMC) and others, and the remainder is sourced internally. In addition, we operate an assembly, wafer sort and testing facility in Penang, Malaysia, and test facilities in the Philippines and Thailand.
We currently source more than half of our wafer requirements annually from third-party wafer fabrication foundries, such as Taiwan Semiconductor Manufacturing Company (TSMC) and others, and 7 the remainder is sourced internally. In addition, we operate an assembly, wafer sort and testing facility in Penang, Malaysia and wafer sort and test facilities in the Philippines and Thailand.
Examples of benefits offered in the U.S. include a 401(k) plan with employer contributions; health benefits; life, business travel and disability insurance; additional voluntary insurance; paid time off and parental leave; education assistance; paid counseling 9 assistance; backup child and adult care; adoption support; and family college planning.
Examples of benefits offered in the U.S. include a 401(k) plan with employer contributions; health benefits; life, business travel and disability insurance; additional voluntary insurance; paid time off and parental leave; education assistance; paid counseling assistance; backup child and adult care; adoption support; and family college planning.
We make sales to distributors under agreements that allow certain 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.
We make sales to distributors under agreements that allow certain distributors to receive price adjustment credits and to return qualifying products for credit, as determined by us, in order 4 to reduce the amounts of slow-moving, discontinued or obsolete product from their inventory.
Many of our ICs can be supplied in versions that meet these standards. In addition, many products can be supplied to meet the standards required for broadcast satellites and other commercial space applications. Most of our products sold in this market are specially tested versions of products derived from our standard product offering.
Many of our ICs can be supplied in versions that meet these standards. In addition, many products can be supplied to meet the standards required for broadcast satellites and other commercial space 5 applications. Most of our products sold in this market are specially tested versions of products derived from our standard product offering.
Highlights of the program include: • A comprehensive set of enterprise security policies and procedures that guide our protection strategy. • Protecting against threats through use of the following measures: identifying critical assets and high-risk threats; implementing cybersecurity detection, controls and remediation practices; implementing a third-party risk management program to evaluate our critical partners’ cyber posture; and evaluating our program effectiveness by performing internal and external audits.
Highlights of the program include: • A comprehensive set of enterprise security policies and procedures that guide our protection strategy. • Protecting against threats through use of the following measures: identifying critical assets and high-risk threats; implementing cybersecurity detection, controls and remediation practices; implementing a third-party risk management program to evaluate our critical partners’ cyber posture; and evaluating our program effectiveness by performing internal and external assessments.
Our 2021 Environment, Social and Governance (ESG) Report states our goals to be carbon neutral by calendar year 2030, to achieve net zero emissions by calendar year 2050 or sooner, to achieve a water recycling rate of at least 50% in manufacturing facilities by 2025, to comply with our code of business conduct and ethics and to apply fair labor standards.
Our 2022 Environment, Social and Governance (ESG) Report states our goals to be carbon neutral by calendar year 2030, to achieve net zero emissions by calendar year 2050 or sooner, to achieve a water recycling rate of at least 50% in manufacturing facilities by 2025, to comply with our code of business conduct and ethics and to apply fair labor standards.
More specifically, our analog ICs monitor, condition, amplify or transform continuous analog signals associated with physical properties, such as temperature, pressure, weight, light, sound or motion, and play an important role in bridging real world phenomena to a variety of electronic systems. Our analog ICs also provide voltage regulation and power control to electronic systems.
Our analog ICs monitor, condition, amplify or transform continuous analog signals associated with physical properties, such as temperature, pressure, weight, light, sound or motion, and play an important role in bridging real world phenomena to a variety of electronic systems. Our analog ICs also provide voltage regulation and power control to electronic systems.
Historically, 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.
Historically, sales to customers during our first fiscal quarter may be lower than other quarters due to plant shutdowns at some of our customers. In general, the seasonality for any specific period of time has not had a material impact on our results of operations.
We deliver innovations that connect technology to human breakthroughs and play a critical role at the intersection of the physical and digital world by providing the building blocks to sense, measure, interpret, connect and power.
We deliver innovations that connect technology to human breakthroughs and play a critical role at the intersection of the physical and digital worlds by providing the building blocks to sense, measure, interpret, connect and power.
Because we have already developed the core technology platform for our general-purpose products, we can create application-specific solutions quickly and efficiently. Our analog and mixed-signal IC technology has been the foundation of our business for over five decades, and we are one of the world’s largest suppliers of high-performance analog ICs.
In certain cases, because we have already developed the core technology platform for our general-purpose products, we can create application-specific solutions quickly and efficiently. Our analog and mixed-signal IC technology have been the foundation of our business for over five decades, and we are one of the world’s largest suppliers of high-performance analog ICs.
ITEM 1. BUSINESS Company Overview, Strategy and Mission Analog Devices, Inc. (we, Analog Devices or the Company) is a leading semiconductor company dedicated to solving our customers' most complex engineering challenges.
ITEM 1. BUSINESS Company Overview, Strategy and Mission Analog Devices, Inc. (we, Analog Devices or the Company) is a global semiconductor leader dedicated to solving our customers' most complex engineering challenges.
We also focus on working with leading customers to design application-specific solutions. We begin with our existing core technologies, which leverage our analog and mixed signal, power management, RF and microwave, edge processors and other sensors, and devise solutions that more closely meet the needs of a specific customer or group of customers.
We also work with customers to design application-specific solutions. We begin with our existing core technologies, which leverage our analog and mixed signal, power management, RF and microwave, edge processors and other sensors, and devise solutions that more closely meet the needs of a specific customer or group of customers.
As noted in "Environment, Health and Safety Compliance" above, we published our 2021 ESG report which details our sustainability efforts, operations efficiency, employee engagement, and governance, and also provides a look at the state of our organization and an overview of some of the initiatives we have launched to drive continuous improvements across diversity and inclusion.
As noted in "Environment, Social and Governance" above, we published our 2022 ESG Report which details our sustainability efforts, operations efficiency, employee engagement and governance, and also provides a look at the state of our organization and an overview of some of the initiatives we have launched to drive continuous improvements across diversity and inclusion.
For fiscal 2022, our voluntary employee turnover rate was approximately 11.2%. Our human capital resource objectives include identifying, recruiting, retaining, incentivizing and integrating our existing and future employees. We strive to attract and retain the most talented employees in the industry and across the globe by offering competitive compensation and benefits that support their health, financial and emotional well-being.
For fiscal 2023, our voluntary employee turnover rate was approximately 7.6%. Our human capital resource objectives include identifying, recruiting, retaining, incentivizing and integrating our existing and future employees. We strive to attract and retain the most talented employees in the industry and across the globe by 9 offering competitive compensation and benefits that support their health, financial and emotional well-being.
We have obtained a substantial number of patents and trademarks in the United States and in other countries. As of October 29, 2022, we held approximately 4,800 U.S. patents and approximately 440 published pending U.S. patent applications. There can be no assurance, however, that the rights obtained can be successfully enforced against infringing products in every jurisdiction.
We have obtained a substantial number of patents and trademarks in the United States and in other countries. As of October 28, 2023, we held approximately 4,842 U.S. patents and approximately 416 published pending U.S. patent applications. There can be no assurance, however, that the rights obtained can be successfully enforced against infringing products in every jurisdiction.
Further, those orders or forecasts may be for products that meet the customer’s unique requirements so that those canceled orders would, in addition, result in an inventory of unsaleable products, resulting in potential inventory write-offs.
Further, those orders or forecasts may be for products that meet the customer’s unique requirements such that those canceled orders would result in an inventory of unsaleable products, causing potential inventory write-offs.
Our dual focus of being a great place to work and providing industry-leading benefits and work culture has led to strong employee satisfaction and pride that has been recognized across the globe, as evidenced with the following awards: Forbes World's Top Female Friendly Companies (2022, 2021), Forbes World’s Best Employer List (2020) and The Boston Globe’s Top Places to Work (2021, 2020). 10
Our dual focus of being a great place to work and providing industry-leading benefits and work culture has led to strong employee satisfaction and pride that has been recognized across the globe, as evidenced with the following awards: TIME World's Best Companies (2023), Forbes America's Best Employers by State (2023), Forbes World's Top Female Friendly Companies (2022, 2021) and The Boston Globe’s Top Places to Work (2021). 10
We use two industry standard metrics to assess injury performance and trends worldwide. In fiscal 2021 and the fiscal year ended October 29, 2022 (fiscal 2022), our global injury rates were lower than the U.S. semiconductor industry benchmark.
We use two industry standard metrics to assess injury performance and trends worldwide. In fiscal 2023 and fiscal 2022, our global injury rates were lower than the U.S. semiconductor industry benchmark.
Senior leadership and our internal audit team regularly provide the Audit Committee of the Board of Directors with updates on the performance of our program. At least annually, the Chief Information Officer updates the full Board of Directors on information security matters and risk, including cybersecurity.
Senior leadership and our internal audit team provides the Audit Committee of the Board of Directors with quarterly updates on the performance of our program. The Chief Information Officer regularly updates the full Board of Directors on information security matters and risk, including cybersecurity.
Markets The breakdown of our annual revenue by end market is set out in the table below: End Market* Percent of Fiscal 2022 Revenue Percent of Fiscal 2021 Revenue Percent of Fiscal 2020 Revenue Industrial 51% 55% 54% Automotive 21% 17% 14% Communications 16% 16% 21% Consumer 13% 11% 11% *The sum of the individual percentages may not equal 100% due to rounding.
Markets The breakdown of our annual revenue by end market is set out in the table below: End Market* Percent of Fiscal 2023 Revenue Percent of Fiscal 2022 Revenue Percent of Fiscal 2021 Revenue Industrial 53% 51% 55% Automotive 24% 20% 17% Communications 13% 16% 17% Consumer 10% 13% 11% *The sum of the individual percentages may not equal 100% due to rounding.
In addition, we have a product security team focused on integrating risk and security best practices into our product development life cycle. Periodically, we are audited by an independent information systems expert to determine both the adequacy of, and compliance with, controls and standards.
In addition, we have a product security team focused on integrating risk and security best practices into our product development life cycle. Periodically, we are audited by an independent information systems expert to determine both the adequacy of, and compliance with, controls and standards. We self-insure for cybersecurity risks and continue to monitor mitigation strategies.
Our manufacturing facilities are subject to numerous and increasingly strict federal, state, local and foreign EHS laws and regulations, particularly with respect to the transportation, storage, handling, use, emission, discharge and disposal of certain chemicals used or produced in the semiconductor manufacturing process. Our products are subject to increasingly stringent regulations regarding substance content in jurisdictions where we sell products.
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 8 chemicals used or produced in the semiconductor manufacturing process.
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. We have experienced increased demand over the past two years leading to a constrained supply environment.
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.
Our latest survey, which was completed in fiscal 2021 prior to the Acquisition, had a participation rate of over 83% of legacy employees of Analog Devices. The survey results indicated that we excel in areas including purpose, respectful treatment, commitment to diversity/inclusion and accountability.
Our latest survey completed in fiscal 2022 had a participation rate of over 83% of all our employees and the survey results indicated that we excel in areas including purpose, respectful treatment, commitment to diversity/inclusion and accountability.
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.
Data converters translate real-world analog signals into digital data and also translate digital data into analog signals. Data converters remain our largest and most diverse product family and an area where we are continuously innovating to enable our customers to redefine and differentiate their products.
Our comprehensive product portfolio, deep domain expertise and advanced manufacturing capabilities extend across high-performance precision and high-speed mixed-signal, power management and processing technologies – including data converters, amplifiers, power management, radio frequency (RF) ICs, edge processors and other sensors.
Our comprehensive product portfolio, deep domain expertise and advanced manufacturing capabilities extend across high-performance precision and high-speed mixed-signal, power management and processing technologies – including data converters, amplifiers, power management, radio frequency (RF) ICs, edge processors and other sensors. The Intelligent Edge is characterized by ubiquitous sensing, hyper-scale and edge computing and pervasive connectivity.
We are also deeply committed to extracting value from our recent acquisitions to complement our R&D and drive long-term value creation. Through the development of cutting-edge innovations and our ability to solve difficult problems across a broad array of applications, we generate significant cash flow and are deeply committed to delivering strong shareholder returns. • Deepening customer-centricity.
Through the development of cutting-edge innovations and our ability to solve difficult problems across a broad array of applications, we generate significant cash flow and are deeply committed to delivering strong shareholder returns. • Deepening customer-centricity.
Although we have experienced shortages of components, materials and external foundry services from time to time, we are working to balance these constraints as we shift our global resources and change capacity where appropriate.
Although we have experienced shortages of components, materials and external foundry services from time to time, we work to balance these constraints by shifting global resources and capacity where appropriate.
In addition to driving organic growth, our strategy involves expansion through the acquisition of businesses, assets or technologies that allow us to complement our existing product offerings, expand our market coverage, increase our engineering talent or enhance our technological capabilities.
In addition to driving organic growth, our strategy involves expansion through the acquisition of businesses, assets or technologies, including the acquisition of Maxim Integrated Products, Inc. (Maxim) in the fiscal year ended October 30, 2021 (fiscal 2021) which allow us to complement our existing product offerings, expand our market coverage, increase our engineering talent or enhance our technological capabilities.
We strive to be the destination for the world's best engineering talent with a team of more than 11,400 engineers. Together, our products and our engineering talent enable us to partner with our customers, leveraging our analog domain expertise and receiving the full benefit of our technology capabilities to develop complete and innovative solutions. • Capitalizing on secular trends.
Together, our products and our engineering talent enable us to partner with our customers, leveraging our analog domain expertise and receiving the full benefit of our technology capabilities to develop complete and innovative solutions. • Capitalizing on secular trends.
We are a member of the Responsible Business Alliance, which was formerly known as the Electronic Industry Citizenship Coalition, as well as a signatory to the United Nations Global Compact and the Business Ambition for 1.5°C campaign.
Environment, Social and Governance We are a member of the Responsible Business Alliance as well as a signatory to the United Nations Global Compact and the Business Ambition for 1.5°C campaign.
Close customer relationships influence aspects of our business: from our broad range of product portfolios and applications expertise to manufacturing capabilities in high-performance power management and precision and high-speed signal processing technologies. At the same time, our engineering talent continues to be an important competitive differentiator in the semiconductor space.
Close customer relationships influence aspects of our business: from our broad range of product portfolios and applications expertise to manufacturing capabilities in high-performance power management and precision and high-speed signal processing technologies.
As of October 29, 2022, we had approximately 24,450 employees, of whom approximately 11,400 are in engineering roles. Approximately 59% of our workforce is male and 41% female. Our senior leadership team is 73% male and 27% female, while manager roles are approximately 75% male and 25% female. 30% of the members of our Board of Directors are female.
As of October 28, 2023, we had approximately 26,000 employees, of whom approximately 13,000 are in engineering roles. Approximately 60% of our workforce is male and 40% female. Our senior leadership team is 73% male and 27% female, while manager roles are approximately 75% male and 25% female. 33% of the members of our Board of Directors are female.
We strive to achieve excellence in EHS management practices as an integral part of our total quality management system. Our EHS management systems in all of our manufacturing facilities are certified to ISO 14001:2015 for environmental management.
We strive to achieve excellence in EHS management practices as an integral part of our total quality management system. Our EHS management systems in all of our manufacturing facilities are certified to ISO 14001:2015 for environmental management and ISO 45001:2018 for occupation health and safety. Our industrial hygiene surveillance program is designed to minimize and prevent exposures in the workplace.
Our product offerings include more than 75,000 stock keeping units (SKUs) that can be aggregated into the following general categories: • Analog and Mixed Signal —We are a leading supplier of data converter products. Data converters translate real-world analog signals into digital data and also translate digital data into analog signals.
Our customers include original equipment manufacturers (OEMs) and customers who build electronic subsystems for integration into larger systems. 3 Our product offerings include more than 75,000 stock keeping units (SKUs) that can be aggregated into the following general categories: • Analog and Mixed Signal —We are a leading supplier of data converter products.
That is built around the following three key priorities, which will continue to drive our long-term success: • Efficient use of capital. Research and development (R&D) is critical to continue our cycle of innovation-driven success. We target the most attractive opportunities, particularly across our business-to-business (B2B) markets including Industrial, Automotive and Communications.
Central to our strategy is our focus on challenges that our customers have across the most impactful application areas. That is built around the following three key priorities, which will continue to drive our long-term success: • Efficient use of capital. Research and development (R&D) is critical to continue our cycle of innovation-driven success.
In addition, we intend to disclose on our website any amendments to, or waivers from, our code of business conduct and ethics that are required to be publicly disclosed pursuant to rules of the SEC or Nasdaq. Products Semiconductor components are the building blocks used in electronic systems and equipment.
Such information is available in print and free of charge to any shareholder of Analog Devices who requests it. In addition, we intend to disclose on our website any amendments to, or waivers from, our code of business conduct and ethics that are required to be publicly disclosed pursuant to rules of the SEC or Nasdaq.
Our product portfolio includes several thousand analog ICs, many of which can have several hundred end customers. Our analog ICs typically have long product life cycles. Our customers include original equipment manufacturers (OEMs) and customers who build electronic subsystems for integration into larger systems.
Our product portfolio includes several thousand analog ICs, many of which can have several hundred end customers. Our analog ICs typically have long product life cycles.
We are positioned to capitalize on important secular growth trends, including the Intelligent Edge, industrial automation, ubiquitous connectivity, electric vehicles, in-cabin experience, digital healthcare and space, as we are well-aligned with the key B2B markets driving this increase in data and we will continue to be a critical partner in the collection, creation and communication of our customers’ edge data.
In addition, we are well-aligned with the key B2B markets driving the increase in data at the Intelligent Edge and we will continue to be a critical partner in the collection, creation and communication of our customers’ edge data.
Contracts with many of our customers reflect these and additional EHS compliance standards. Substance content of our products includes materials that are subject to conflict mineral reporting requirements. Compliance with these laws and regulations has not had a material impact on our capital expenditures, earnings, financial condition or competitive position.
Our products are subject to increasingly stringent regulations regarding substance content in jurisdictions where we sell products. Contracts with many of our customers reflect these and additional EHS compliance standards. Substance content of our products includes materials that are subject to conflict mineral reporting requirements.
Our common stock is listed on the Nasdaq Global Select Market under the symbol ADI and is included in the Standard & Poor’s 500 Index. 2 Acquisition of Maxim Integrated Products, Inc. On August 26, 2021 (Acquisition Date), we completed the acquisition of Maxim, an independent manufacturer of innovative analog and mixed-signal products and technologies.
On August 26, 2021 (Acquisition Date), we completed the acquisition of Maxim, an independent manufacturer of innovative analog and mixed-signal products and technologies.
The acquisition of Maxim is referred to as the Acquisition. Available Information 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.
The acquisition of Maxim is referred to as the Acquisition. Available Information We maintain a website with the address www.analog.com.
There can be no assurance, however, that current or future environmental laws and regulations will not impose costly requirements upon us. Any failure by us to comply with applicable environmental laws, regulations and contractual obligations could result in fines, suspension of production, the need to alter manufacturing processes and legal liability.
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 manufacturing processes and legal liability. Cybersecurity and Information Security Risk Oversight We regularly perform risk assessments relating to cybersecurity and technology risks.
We have determined that an information security risk insurance policy would not be effective, and that we should continue to self-insure for cybersecurity risks. We have not experienced a material security breach in the last three years, and as a result, we have not incurred any net expenses from such a breach.
We have not experienced a material security breach in the last three years, and as a result, we have not incurred any net expenses from such a breach. Furthermore, we have not been penalized or paid any amount under an information security breach settlement over the last three years.
We also make available on our website our by-laws, 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.
We also make available on our website our by-laws, corporate governance guidelines, the charters for the committees of our Board of Directors and our code of business conduct and ethics which applies to our directors, officers and employees and other governance documents.
Furthermore, we have not been penalized or paid any amount under an information security breach settlement over the last three years. Human Capital and Empowerment Our company was founded on the principle that people are our greatest asset.
Human Capital and Empowerment Our company was founded on the principle that people are our greatest asset.
(Maxim) in the fiscal year ended October 30, 2021 (fiscal 2021), which strengthens our position as a high-performance analog semiconductor company. We were incorporated in Massachusetts in 1965 with our corporate headquarters near Boston in Wilmington, Massachusetts. We have manufacturing facilities primarily in the United States, Ireland and Southeast Asia.
We were incorporated in Massachusetts in 1965 with our corporate headquarters near Boston in Wilmington, Massachusetts. We have manufacturing facilities primarily in the United States, Ireland and Southeast Asia. Our common stock is listed on the Nasdaq Global Select Market under the symbol ADI and is included in the Standard & Poor’s 500 Index.
Environment, Health and Safety Compliance We are committed to protecting the environment and the health and safety of our employees, customers and the public.
These quarterly reports include updates on progress against targets, as well as updates on topics such as stakeholder value, risks and opportunities, regulatory preparedness, ESG ratings and key ESG focus areas. We are committed to protecting the environment and the health and safety of our employees, customers and the public.
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We have positioned our business to capitalize on the secular growth opportunities across our markets and to deliver innovative solutions. Central to our strategy is our focus on challenges that our customers have across the most impactful application areas.
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We target the most attractive opportunities, particularly across our business-to-business (B2B) markets including Industrial, Automotive and Communications. We are also deeply committed to realizing targeted shareholder value creation from our recent acquisitions to complement our R&D and drive long-term value creation.
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For example, we have executed on this strategy through: • the acquisition of Hittite Microwave Corporation in the fiscal year ended November 1, 2014, which strengthened our market leadership in high-performance RF and broadened our portfolio across the entire frequency spectrum from DC to 100 gigahertz; • the acquisition of Linear Technology Corporation (Linear) in the fiscal year ended October 28, 2017, which added high-performance power management and additional precision signal processing to our portfolio, expanding and diversifying our offerings to deliver more complete solutions; and • the acquisition of Maxim Integrated Products, Inc.
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We believe that our engineering talent continues to be an important competitive differentiator in the semiconductor space that will enable us to continue to deepen our relationships with customers. We strive to be the destination for the world's best engineering talent with a team of more than 13,000 engineers.
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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.
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We are positioned to capitalize on important secular growth trends to drive advancements in digitized factories, mobility and digital healthcare, combat climate change and reliably connect humans and the world.
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In response, we have added manufacturing capacity to address some of the increased demand.
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Our fiscal year is the 52-week or 53-week period ending on the Saturday closest to the last day in October; October 28, 2023 (fiscal 2023), the fiscal year ended October 29, 2022 (fiscal 2022) and the fiscal year ended October 30, 2021 were 52-week fiscal periods. 2 Acquisition of Maxim Integrated Products, Inc.
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In addition, our legacy Analog Devices facilities are certified to ISO 45001 for occupational health and safety, and as part of our integration efforts, we are developing a path to certification for our legacy Maxim sites as well. Our industrial hygiene surveillance program minimizes and prevents exposures in the workplace.
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We have included our website address in this Annual Report on Form 10-k as an inactive textual reference. We are not including the information contained on our website as a part of, or incorporating it by reference into, this Annual Report on Form 10-K. Products Semiconductor components are the building blocks used in electronic systems and equipment.
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These quarterly reports include updates on progress against goals, assessment of regulatory preparedness, stakeholder engagement feedback, and programmatic progress and challenges. 8 Cybersecurity and Information Security Risk Oversight We regularly perform risk assessments relating to cybersecurity and technology risks.
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Compliance with these laws and regulations has not had a material impact on our capital expenditures, earnings, financial condition or competitive position. There can be no assurance, however, that current or future environmental laws and regulations will not impose costly requirements upon us.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAs a result of our international operations, our business, financial condition and results of operations could be negatively impacted by the following: • political, legal and economic changes, crises or instability and civil unrest in markets in which we do business, such as potential macroeconomic weakness related to trade and political disputes between the United States and China, changes in China-Taiwan relations that may adversely affect our operations in Taiwan, our customers, and the technology industry supply chain, the United Kingdom's withdrawal from the European Union, the implementation of the United States-Mexico-Canada Agreement and the ongoing conflict between Russia and Ukraine; • compliance requirements of U.S. customs and export regulations, including the Export Administration Regulations and the International Traffic and Arms Regulations; • currency conversion risks and exchange rate and interest rate fluctuations, including the potential impact of the transition from LIBOR and the current increasing interest rate environment; • instability of global credit and financial markets due to adverse macroeconomic conditions such as rising inflation, increasing interest rates and slower economic growth or recession that could, among other impacts, affect our ability to access external financing sources on acceptable terms or lead to financial difficulties or uncertainty of our customers, suppliers and distributors exposing us to late payments, cancelled orders and inventory challenges, among others; • trade policy, commercial, travel, export or taxation disputes or restrictions, import or export tariffs, changes to export classifications or other restrictions imposed by the U.S. government or by the governments of the countries in which we do business, particularly in China; • sanctions imposed by governments in countries in which we do business, including those imposed on Russia by, among others, the European Union, the U.S. and the United Kingdom in response to the ongoing conflict between Russia and Ukraine, which sanctions restrict a wide range of trade and financial dealings with Russian and Russian persons, as well as certain regions in Ukraine; • complex, varying and changing government regulations and legal standards and requirements, particularly with respect to tax regulations, price protection, competition practices, export control regulations and restrictions, customs and tax requirements, immigration, anti-boycott regulations, data privacy, cyber security, sustainability and climate-related regulations, intellectual property, anti-corruption and environmental compliance, including the Foreign Corrupt Practices Act; • economic disruption from terrorism and threats of terrorism and the response to them by the U.S. and its allies; • increased managerial complexities, including different employment practices and labor issues; • changes in immigration laws, regulations and procedures and enforcement practices of various government agencies; • greater difficulty enforcing intellectual property rights and weaker laws protecting such rights; • natural disasters or public health emergencies, such as the current COVID-19 pandemic; • transportation disruptions and delays and increases in labor and transportation costs; • changes to foreign taxes, tariffs and freight rates; • fluctuations in raw material costs and energy costs due to general market factors and conditions such as inflation and supply chain constraints; • greater difficulty in accounts receivable collections and longer collection periods; and • increased costs associated with our foreign defined benefit pension plans. 11 Many of these factors and risks are present within our business operations in China.
Biggest changeAs a result of our international operations, our business, financial condition and results of operations could be negatively impacted by, among others, the following factors: • political, legal and economic changes, crises or instability and civil unrest that may impact markets in which we do business, such as macroeconomic weakness related to trade and political disputes between the United States and China, tensions across the Taiwan Strait that may adversely affect our operations in Taiwan, our customers and the technology industry supply chain, and the ongoing conflicts between Israel and Hamas and between Russia and Ukraine; • compliance requirements of customs and export regulations, including the Export Administration Regulations and the International Traffic and Arms Regulations; • currency conversion risks and exchange rate and interest rate fluctuations, including the potential impact of elevated interest rates; • instability of global credit and financial markets due to adverse macroeconomic conditions such as rising inflation, high interest rates, bank failures and slower economic growth or recession that could, among other impacts, affect our ability to access external financing sources on acceptable terms or lead to financial difficulties or uncertainty of our customers, suppliers and distributors exposing us to late payments, cancelled orders and inventory challenges; • trade policy, commercial, travel, export or taxation disputes or restrictions, import or export tariffs, changes to export classifications or other restrictions imposed by the U.S. government or by the governments of the countries in which we do business, particularly with respect to China; • sanctions imposed by governments in countries in which we do business, including those imposed on Russia by, among others, the European Union, the United States and the United Kingdom in response to the ongoing conflict between Russia and Ukraine, which sanctions restrict a wide range of trade and financial dealings with Russian and Russian persons, as well as with certain regions in Ukraine; • complex, varying and changing government regulations and legal standards and requirements, particularly with respect to tax, price protection, competition practices, export control, customs, immigration, anti-boycott, data privacy, cyber and product security, sustainability, climate and other ESG matters, intellectual property, anti-corruption, including the Foreign Corrupt Practices Act, and environmental compliance; • economic disruption from terrorism and threats of terrorism and the response to them by the United States and its allies; • increased managerial complexities, including different employment practices and labor issues; • changes in immigration laws, regulations and procedures and enforcement practices of various government agencies; • greater difficulty enforcing intellectual property rights and weaker laws protecting such rights; • natural disasters, public health emergencies, such as the COVID-19 pandemic, or other catastrophic events; • transportation disruptions and delays and increases in labor and transportation costs; • fluctuations in raw material costs and energy costs due to general market factors and conditions such as inflationary pressures and supply chain constraints; • greater difficulty in accounts receivable collections and longer collection periods; and • increased costs associated with our foreign defined benefit pension plans. 11 Many of these factors and risks are present and may be exacerbated within our business operations in China.
For example, changes in U.S.-China relations, the political environment or international trade policies and relations could result in further revisions to laws or regulations or their interpretation and enforcement, increased taxation, trade sanctions, the imposition of import or export duties and tariffs, restrictions on imports or exports, currency revaluations, or retaliatory actions, which have had and may continue to have an adverse effect on our business plans and operating results.
For example, changes in U.S.-China relations, the political environment or international trade policies could result in further revisions to laws or regulations or their interpretation and enforcement, increased taxation, trade sanctions, the imposition of import or export duties and tariffs, restrictions on imports or exports, currency revaluations or retaliatory actions, which have had and may continue to have an adverse effect on our business plans and operating results.
Our semiconductor products are complex and we may be subject to warranty, indemnity and/or product liability claims, which could result in significant costs and damage to our reputation and adversely affect customer relationships, the market acceptance of our products and our operating results. Semiconductor products are highly complex and may contain defects that affect their quality or performance.
Our semiconductor products are complex and we may be subject to warranty, indemnity or product liability claims, which could result in significant costs and damage to our reputation and adversely affect customer relationships, the market acceptance of our products and our operating results. Semiconductor products are highly complex and may contain defects that affect their quality or performance.
Any failure to control such materials adequately or to comply with existing or future EHS statutory or regulatory standards, requirements or contractual obligations could result in any of the following, each of which could have a material adverse effect on our business and operating results: • liability for damages and remediation; • the imposition of regulatory penalties and civil and criminal fines; • the suspension or termination of the development, manufacture, sale, or use of certain of our products; • changes to our manufacturing processes or a need to substitute materials that may cost more or be less available; • damage to our reputation; and/or • increased expenses associated with compliance.
Any failure to control such materials adequately or to comply with existing or future EHS statutory or regulatory standards, requirements or contractual obligations could result in any of the following, each of which could have a material adverse effect on our business and operating results: • liability for damages and remediation; • the imposition of regulatory penalties and civil and criminal fines; • the suspension or termination of the development, manufacture, sale or use of certain of our products; • changes to our manufacturing processes or a need to substitute materials that may cost more or be less available; • damage to our reputation; or • increased expenses associated with compliance.
If we breach any of the covenants under our revolving credit facility, the indentures governing our outstanding senior unsecured notes, or any future debt instruments to which we may become subject and do not obtain appropriate waivers, then, subject to applicable cure periods, our outstanding indebtedness thereunder could be declared immediately due and payable and/or we may be restricted from further borrowing under our revolving credit facility.
If we breach any of the covenants under our revolving credit facility, the indentures governing our outstanding senior unsecured notes, or any future debt instruments to which we may become subject and do not obtain appropriate waivers, then, subject to applicable cure periods, our outstanding indebtedness thereunder could be declared immediately due and payable and we may be restricted from further borrowing under our revolving credit facility.
There can be no assurance that the markets we serve and/or target based on our business strategy will grow in the future, that our existing and new products will meet the requirements of these markets, that our products, or the end-products in which our products are used, will achieve customer acceptance in these markets, that competitors will not force price reductions or take market share from us, or that we can achieve or maintain adequate gross margins or profits in these markets.
Further, there can be no assurance that the markets we serve and target based on our business strategy will grow in the future, that our existing and new products will meet the requirements of these markets, that our products, or the end-products in which our products are used, will achieve customer acceptance in these markets, that competitors will not force price reductions or take market share from us or that we can achieve or maintain adequate gross margins or profits in these markets.
We rely, and plan to continue to rely, on third-party suppliers and service providers, including raw material and components suppliers, semiconductor wafer foundries, assembly and test contractors, and freight carriers (collectively, vendors) in manufacturing our products. This reliance involves several risks, including reduced control over availability, capacity utilization, delivery schedules, manufacturing yields, costs, and supply chain allocations.
We rely, and plan to continue to rely, on third-party suppliers and service providers, including raw material and components suppliers, semiconductor wafer foundries, assembly and test contractors and freight carriers (collectively, vendors), in manufacturing and shipping our products. This reliance involves several risks, including reduced control over availability, capacity utilization, delivery schedules, manufacturing yields, costs and supply chain allocations.
Additionally, the United States government is entitled after final payment on certain negotiated contracts to examine all of our cost records with respect to such contracts and to seek a downward adjustment to the price of the contract if it determines 20 that we failed to furnish complete, accurate and current cost or pricing data in connection with the negotiation of the price of the contract.
Additionally, the United States government is entitled after final payment on certain negotiated contracts to examine all of our cost records with respect to such contracts and to seek a downward adjustment to the price of the contract if it determines that we failed to furnish complete, accurate and current cost or pricing data in connection with the negotiation of the price of the contract.
These problems may divert our technical and other resources from other product development efforts and could result in claims against us by our customers or others, including liability for costs and expenses associated with product defects, including recalls, which may adversely impact our operating results. We may also be subject to customer intellectual property indemnity claims.
These problems may divert our technical and other resources from other product development efforts and could result in claims against us by our customers or others, including liability for costs and expenses associated with product defects, including recalls, which may adversely impact our reputation and operating results. We may also be subject to customer intellectual property indemnity claims.
These restrictions have created and may continue to create uncertainty and caution with our current or prospective customers and may cause them to amass large inventories of our products, replace our products with products from another supplier that is not subject to the export restrictions, or focus on building indigenous semiconductor capacity to reduce reliance on U.S. suppliers.
These restrictions have created and these and similar restrictions may continue to create uncertainty and caution with our current or prospective customers and may cause them to amass large inventories of our products, replace our products with products from another supplier that is not subject to the export restrictions or focus on building indigenous semiconductor capacity to reduce reliance on U.S. suppliers.
There can be no assurance that we will be able to compete successfully in the future against existing or new competitors, or that our operating results will not be adversely affected by increased competition. In addition, the semiconductor industry has experienced significant consolidation over the 14 past several years.
There can be no assurance that we will be able to compete successfully in the future against existing or new competitors, or that our operating results will not be adversely affected by increased competition. In addition, the semiconductor industry has experienced significant consolidation over the past several years.
Termination of a significant distributor or a group of distributors, whether at our initiative or the distributor’s initiative or through consolidation in the distribution industry, could disrupt our current business, and if we are unable to find suitable replacements with the appropriate scale and resources, our operating results could be adversely affected.
Termination of a significant distributor or a group of distributors, whether at our initiative or the distributor’s initiative or through consolidation in the distribution industry, could disrupt our business, and if we are unable to find suitable replacements with the appropriate scale and resources, our operating results could be adversely affected.
We may be subject to reputational risks and our brand loyalty may decline if others adopt the same or confusingly similar marks in an effort to misappropriate and profit on our brand name and do not provide the same level of quality as is delivered by our solutions and services.
We may be subject to reputational risks and our brand loyalty may decline if others adopt the same or confusingly similar marks in an effort to misappropriate and profit on our brand name and do not provide the same level of quality as is delivered by our solutions and 20 services.
There can be no assurances that the two businesses can be integrated successfully in a way that maximizes the combined business to the fullest extent. If we are not able to successfully achieve our objectives, the benefits of the merger may not be fully realized or may take longer to achieve than expected.
There can be no assurances that the two businesses can be integrated successfully in a way 16 that maximizes the combined business to the fullest extent. If we are not able to successfully achieve our objectives, the benefits of the merger may not be fully realized or may take longer to achieve than expected.
Such measures might not be sufficient to enable us to service our debt, which could negatively impact our financial results. In addition, we may not be able to obtain any such financing, refinancing or complete a sale of assets on economically favorable terms.
Such measures might not be sufficient to enable us to service our debt, which could negatively impact our financial results. In addition, we may not be able to obtain any such financing, refinancing or 21 complete a sale of assets on economically favorable terms.
We generally do not require letters of credit from our distributors, including our largest distributor, and are not protected against accounts receivable default or declarations of bankruptcy by these distributors. Our inability to collect open accounts receivable could adversely affect our operating results.
We generally do not require letters of credit from our 15 distributors, including our largest distributor, and are not protected against accounts receivable default or declarations of bankruptcy by these distributors. Our inability to collect open accounts receivable could adversely affect our operating results.
The continued COVID-19 pandemic could also cause further disruption in our supply chain and customer demand, and could adversely affect the ability of our customers to perform, including in making timely payments to us, which could further impact our business, financial condition and results of operations.
The COVID-19 pandemic could also cause further disruption in our supply chain and customer demand, and could adversely affect the ability of our customers to perform, including in making timely payments to us, which could further impact our business, financial condition and results of operations.
The costs of compliance with, and other burdens imposed by, the GDPR, CCPA, and similar laws may limit the use and adoption of our products and services and/or require us to incur substantial compliance costs, which could have an adverse impact on our business.
The costs of compliance with, and other burdens imposed by, the GDPR, CCPA and similar laws may limit the use and adoption of our products and services and require us to incur substantial compliance costs, which could have an adverse impact on our business.
If we fail to police, maintain, enhance and protect our brands, if we incur excessive expenses in this effort or if customers or potential customers are confused by others’ trademarks, our business, operating results, and financial condition may be materially and adversely affected.
If we fail to maintain, enhance and protect our brands, if we incur excessive expenses in this effort or if customers or potential customers are confused by others’ trademarks, our business, operating results and financial condition may be materially and adversely affected.
Many companies have sufficient financial, manufacturing, technical, sales and marketing resources to develop and market products that compete with our products. Some of our competitors may have more advantageous supply or development relationships with our current and potential customers or suppliers.
Many companies have sufficient financial, manufacturing, technical, sales and marketing resources to develop and market products that compete with our products. Some of our competitors may 14 have more advantageous supply or development relationships with our current and potential customers or suppliers.
We may also continue to take actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, partners, and suppliers, which may cause disruption to our business.
We may also be required to take actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, partners, and suppliers, which may cause disruption to our business.
In addition, as we seek to expand our business, including the design and production of products and services for developing and emerging markets, we may encounter increased competition from our current competitors and/or new competitors.
In addition, as we seek to expand our business, including the design and production of products and services for developing and emerging markets, we may encounter increased competition from our current and new competitors.
The COVID-19 pandemic has created significant worldwide uncertainty, volatility and economic disruption and has impacted our workforce and operations, the operations of our customers, those of our respective vendors and suppliers and the global capital markets.
The COVID-19 pandemic created significant worldwide uncertainty, volatility and economic disruption and impacted our workforce and operations, the operations of our customers, those of our respective vendors and suppliers and the global capital markets.
There is an increasing focus from investors, customers, employees and potential talent, as well as other stakeholders concerning ESG matters, including climate change and sustainability, human rights, support for local communities, Board of Directors and employee diversity, human capital management, employee health and safety practices, product quality, supply chain management, and corporate governance and transparency.
There is an increasing focus from regulators, investors, customers, employees and potential talent, as well as other stakeholders, concerning ESG matters, including climate change and sustainability, human rights, support for local communities, Board of Directors and employee diversity, human capital management, employee health and safety practices, product quality, worker rights, supply chain management and corporate governance and transparency.
The market price of our common stock may be volatile, as it may be significantly affected by factors including: • global economic conditions generally; • crises in global credit, debt and financial markets; • actual or anticipated fluctuations in our revenue and operating results; • changes in financial estimates or other statements made by securities analysts or others in analyst reports or other publications, or our failure to perform in line with those estimates or statements or our published guidance; • financial results and prospects of our customers; • U.S. and foreign government actions, including with respect to trade, travel, export and taxation; • the extent of the impact and the duration of the COVID-19 pandemic; • changes in market valuations of other semiconductor companies; • rumors and speculation in the press, investment community or on social media about us, our customers or other companies in our industry; • announcements by us, our customers or our competitors of significant new products, technical innovations, material transactions, acquisitions or dispositions, litigation, capital commitments, including share repurchases and dividend policies, or revised earnings estimates; • departures of key personnel; • alleged noncompliance with laws, regulations or ethics standards by us or any of our employees, officers or directors; and • negative media publicity targeting us or our suppliers, customers or competitors.
The market price of our common stock may be volatile, as it may be significantly affected by factors including: • global economic conditions generally; • crises in global credit, debt and financial markets; • actual or anticipated fluctuations in our revenue and operating results; • changes in financial estimates or other statements made by securities analysts or others in analyst reports or other publications, or our failure to perform in line with those estimates or statements or our published guidance; • financial results and prospects of our customers; • U.S. and foreign government actions, including with respect to trade, travel, export and taxation; • changes in market valuations of other semiconductor companies; • rumors and speculation in the press, investment community or on social media about us, our customers or other companies in our industry; • announcements by us, our customers or our competitors of significant new products, technical innovations, material transactions, acquisitions or dispositions, litigation, capital commitments, including share repurchases and dividend policies, or revised earnings estimates; • departures of key personnel; • alleged noncompliance with laws, regulations or ethics standards by us or any of our employees, officers or directors; and • negative media publicity targeting us or our suppliers, customers or competitors.
We do not maintain any key person life insurance policy on any of our officers or other employees. The loss of one or more of our key employees, and any failure to have in place and execute an effective succession plan for key executives, could seriously harm our business.
We do not maintain any key person life insurance policy on any of our officers or other employees. The loss of one or more of our key employees, and any failure to have in place and execute an effective succession plan for key executives, could seriously harm our business and results of operations.
Acquisitions also involve a number of challenges and risks, including: • diversion of management’s attention in connection with both negotiating the transaction and integrating the acquired assets and businesses; • difficulty or delay integrating acquired technologies, operations, systems and infrastructure, and personnel with our existing businesses; • strain on managerial and operational resources as management tries to oversee larger or more complex operations; • the future funding requirements for acquired companies, including research and development costs, employee compensation and benefits, and operating expenses, which may be significant; • servicing significant debt that may be incurred in connection with acquisitions; • potential loss of key employees; • exposure to unforeseen liabilities or regulatory compliance issues of acquired companies; • higher than expected or unexpected costs relating to or associated with an acquisition and related integration of assets and businesses; • difficulty realizing expected cost savings, operating synergies and growth prospects of an acquisition in a timely manner or at all; and • increased risk of costly and time-consuming legal proceedings.
Acquisitions also involve a number of challenges and risks, including: • diversion of management’s attention in connection with both negotiating the transaction and integrating the acquired assets and businesses; • difficulty or delay integrating acquired technologies, operations, systems, infrastructure and personnel with our existing businesses; • strain on managerial and operational resources as management oversees larger or more complex operations; • future funding requirements for acquired companies, including research and development costs, employee compensation and benefits, and operating expenses, which may be significant; • servicing significant debt that may be incurred in connection with acquisitions; • potential loss of key employees; • exposure to unforeseen liabilities or regulatory compliance issues of acquired companies; • higher than expected or unexpected acquisition or integration costs; • difficulty realizing expected cost savings, operating synergies and growth prospects of an acquisition in a timely manner or at all; and • increased risk of costly and time-consuming legal proceedings.
There can be no assurance (i) that products stocked in our inventory will not be rendered obsolete before we ship them, or (ii) that we will be able to design, develop and produce products in a timely fashion to accommodate changing customer demand.
There can be no assurance that products stocked in our inventory will not be rendered obsolete before we ship them or that we will be able to design, develop and produce products in a timely fashion to accommodate changing customer demand.
During the course of the pandemic, many of the countries in which we operate took and continue to take measures to address the pandemic, which at times has resulted in disruptions at some of our manufacturing operations and facilities, including restrictions on our access to facilities.
During the course of the pandemic, many of the countries in which we operate took and may continue to take measures to address the pandemic, which at times has resulted and may continue to result in disruptions at some of our manufacturing operations and facilities, including restrictions on our access to facilities.
If we are not able to meet our U.S. cash requirements through operations, borrowings under our current revolving credit facility, future debt or equity offerings or other sources of cash obtained at an acceptable cost, it may be necessary for us to consider repatriation of earnings that are indefinitely reinvested, and we may be required to pay additional taxes under current tax laws, which could have a material adverse effect on our results of operations and financial condition.
If we are not able to meet our U.S. cash requirements through operations, borrowings under our current revolving credit facility, issuances under our commercial paper program, future debt or equity offerings or other sources of cash obtained at an acceptable cost, it may be necessary for us to consider repatriation of earnings that are indefinitely reinvested, and we may be required to pay additional taxes under current tax laws, which could have a material adverse effect on our results of operations and financial condition.
Changes in these laws and regulations, including those that align to or are associated with the Organization for Economic 21 Cooperation and Development's Base Erosion and Profit Shifting Actions Plans, could impact the jurisdictions where we are deemed to earn income, which could in turn adversely affect our tax liability and results of operations.
Changes in laws and regulations regarding these matters, including those that align to or are associated with the Organization for Economic Cooperation and Development's Base Erosion and Profit Shifting Actions Plans, could impact the jurisdictions where we are deemed to earn income, which could in turn adversely affect our tax liability and results of operations.
General Risk Factors Our results of operations could be affected by natural disasters in the locations in which we operate. We, like many companies in the semiconductor industry, rely on supplies, services, internal manufacturing capacity, wafer fabrication foundries and other subcontractors in locations around the world that are susceptible to natural disasters and other significant disruptions.
General Risk Factors Our results of operations could be affected by natural disasters or other catastrophic events in the locations in which we operate. We, like many companies in the semiconductor industry, rely on supplies, services, internal manufacturing capacity, wafer fabrication foundries and other subcontractors in locations around the world that are susceptible to natural disasters and other significant disruptions.
Our future revenue, gross margins, operating results, net income and earnings per share are difficult to predict and may be materially affected by a number of factors, including: • the effects of adverse economic conditions in the markets in which we sell our products, including inflationary pressures, which has resulted, and may continue to result, in increased interest rates, fuel prices, wages, and other costs; • changes in customer demand or order patterns for our products and/or for end products that incorporate our products; • the timing, delay, reduction or cancellation of significant customer orders and our ability to manage inventory; • our ability to accurately forecast distributor demand for our products; • future distributor pricing credits and/or stock rotation rights; • our ability to effectively manage our cost structure in both the short term and over a longer duration; • changes in geographic, product or customer mix; • the extent of the impact and the duration of the COVID-19 pandemic; • changes in our effective tax rates or new or revised tax legislation in the United States, Ireland or worldwide; • the effects of issued, threatened or retaliatory government sanctions, trade barriers or economic restrictions; changes in law, regulations or other restrictions, including executive orders; and changes in import and export regulations, including restrictions on exports to certain companies or to third parties that do business with such companies, export classifications, or duties and tariffs, particularly with respect to China; • the timing of new product announcements or introductions by us, our customers or our competitors and the market acceptance of such products; • pricing decisions and competitive pricing pressures; 13 • fluctuations in manufacturing yields, adequate availability of wafers and other raw materials, and manufacturing, assembly and test capacity; • the ability of our third-party suppliers, subcontractors and manufacturers to supply us with sufficient quantities of raw materials, products and/or components; • a decline in infrastructure spending by foreign governments, including China; • a decline in the U.S. government defense budget, changes in spending or budgetary priorities, a prolonged U.S. government shutdown or delays in contract awards; • a decline in our backlog; • our ability to recruit, hire, retain and motivate adequate numbers of engineers and other qualified employees to meet the demands of our customers; • our ability to generate new design opportunities and win competitive bid selection processes; • the increasing costs of providing employee benefits worldwide, including health insurance, retirement plan and pension plan contributions and retirement benefits; • our ability to utilize our manufacturing facilities at efficient levels; • fluctuations in foreign currency exchange rates; • potential litigation-related costs or product liability, warranty and/or indemnity claims, including those not covered by our suppliers or insurers; • the difficulties inherent in forecasting future operating expense levels, including with respect to costs associated with labor, utilities, transportation and raw materials; • the costs related to compliance with increasing worldwide government, environmental and social responsibility standards; • new accounting pronouncements or changes in existing accounting standards and practices; and • the effects of public health emergencies, civil unrest, natural disasters, widespread travel disruptions, security risks, terrorist activities, international conflicts and other events beyond our control.
Our future revenue, gross margins, operating results, net income and earnings per share are difficult to predict and may be materially affected by a number of factors, including: • the effects of adverse economic conditions in the markets in which we sell our products, including inflationary pressures, which has resulted, and may continue to result, in increased interest rates, fuel prices, wages and other costs; • changes in customer demand or order patterns for our products or for end products that incorporate our products; • the timing, delay, reduction or cancellation of significant customer orders and our ability to manage inventory; • our ability to accurately forecast distributor demand for our products; • future distributor pricing credits or stock rotation rights; • our ability to effectively manage our cost structure in both the short term and over a longer duration; 13 • changes in geographic, product or customer mix; • changes in our effective tax rates or new or revised tax legislation in the United States, Ireland or worldwide; • the effects of issued, threatened or retaliatory government sanctions, trade barriers or economic restrictions; changes in law, regulations or other restrictions, including executive orders; and changes in import and export regulations, including restrictions on exports to certain companies or to third parties that do business with such companies, export classifications, or duties and tariffs, including with respect to China; • the timing of new product announcements or introductions by us, our customers or our competitors and the market acceptance of such products; • pricing decisions and competitive pricing pressures; • fluctuations in manufacturing yields, adequate availability of wafers and other raw materials, and manufacturing, assembly and test capacity; • the ability of our third-party suppliers, subcontractors and manufacturers to supply us with sufficient quantities of raw materials, products and components; • a decline in infrastructure spending by foreign governments, including China; • a decline in the U.S. government defense budget, changes in spending or budgetary priorities, a prolonged U.S. government shutdown or delays in contract awards; • a decline in our backlog; • our ability to recruit, hire, retain and motivate adequate numbers of engineers and other qualified employees to meet the demands of our customers; • our ability to generate new design opportunities and win competitive bid selection processes; • the increasing costs of providing employee benefits worldwide, including health insurance, retirement and pension plan contributions and other retirement benefits; • our ability to utilize our manufacturing facilities at efficient levels; • fluctuations in foreign currency exchange rates; • litigation-related costs or product liability, warranty and indemnity claims, including those not covered by our suppliers or insurers; • the difficulties inherent in forecasting future operating expense levels, including with respect to costs associated with labor, utilities, transportation and raw materials; • the costs related to compliance with increasing worldwide complex government regulations and legal standards and requirements, including those related to ESG matters; • new accounting pronouncements or changes in existing accounting standards and practices; and • the effects of public health emergencies, civil unrest, natural disasters or other severe weather events, widespread travel disruptions, security risks, terrorist activities, international conflicts and other events beyond our control.
A prolonged disruption at, or inability to utilize, one or more of our manufacturing facilities, loss of raw materials or damage to our manufacturing equipment for any reason, including due to the COVID-19 pandemic, natural or man-made disasters, civil unrest or other events outside of our control, such as widespread outbreaks of illness, or the failure to maintain our labor force at one or more of these facilities, may disrupt our operations, delay production, shipments and revenue and result in us being unable to timely satisfy customer demand.
A prolonged disruption at, or inability to utilize, one or more of our or our third parties’ manufacturing facilities, loss of raw materials or damage to our or our third parties’ manufacturing equipment for any reason, including due to natural or man-made disasters, civil unrest or other events outside of our control, such as widespread outbreaks of illness, or the failure to maintain our labor force at one or more of these facilities, may disrupt our operations, delay production, shipments and revenue and result in us being unable to timely satisfy customer demand.
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.
If we overbuild inventory in a period of decreased demand, or we expand our operations and workforce too rapidly or procure excessive resources in anticipation of increased demand for our products, and that demand does not materialize at the pace at which we expect, or declines, our operating results may be adversely affected as a result of underutilization of capacity, charges related to obsolete inventory, asset impairment or inventory write-downs, increased operating expenses or reduced margins.
In addition, investments in companies are subject to a risk of a partial or total loss of our investment. Both in the U.S. and abroad, governmental regulation of acquisitions, including antitrust and other regulatory reviews and approvals, has become more complex, increasing the costs and risks of undertaking and consummating significant acquisitions.
In addition, investments in companies are subject to a risk of a partial or total loss of our investment. Both in the United States and abroad, governmental regulation of acquisitions, including antitrust and other regulatory reviews and approvals, has become more complex, increasing the costs and risks of undertaking and consummating significant acquisitions.
If we were unable to comply with these requirements, or if personnel critical to our performance of these contracts were unable to obtain or maintain their security clearances, we might be unable to perform these contracts or compete for other projects of this nature, which could adversely affect our revenue. Damage to our reputation can damage our business.
If we are unable to comply with these requirements, or if personnel critical to our performance of these contracts are unable to obtain or maintain their security clearances, we may be unable to perform these contracts or compete for other projects of this nature, which could adversely affect our revenue. Damage to our reputation can damage our business.
Our effective tax rate for the fiscal year ended October 29, 2022 was below the U.S. federal statutory rate of 21%. This is primarily due to lower statutory tax rates applicable to our operations in the foreign jurisdictions in which we earn income.
Our effective tax rate for the fiscal year ended October 28, 2023 was below the U.S. federal statutory rate of 21%. This is primarily due to lower statutory tax rates applicable to our operations in the foreign jurisdictions in which we earn income.
Our Sustainability-Linked Senior Notes initially bear interest at a rate of 1.7% per annum and are subject to an increase of an additional 30 basis points per annum from April 1, 2026 to the maturity date unless the Sustainability Performance Target (as defined in the Sustainability-Linked Senior Notes) has been satisfied.
Our Sustainability-Linked Senior Notes initially bear interest at a rate of 1.7% per annum and are subject to an increase of an additional 30 basis points per annum from April 1, 2026 to their maturity on October 1, 2028 unless the Sustainability Performance Target (as defined in the Sustainability-Linked Senior Notes) has been satisfied.
The GDPR includes significant penalties for non-compliance, and China’s PIPL imposes additional operational requirements relating to processing personal information and provides compressive penalty and enforcement mechanisms. Most notably, in the United States, California enacted the CCPA that requires covered companies to provide additional disclosures and data rights to data subjects. The CCPA went into effect on January 1, 2020.
The GDPR includes significant penalties for non-compliance, and China’s PIPL imposes additional operational requirements relating to processing personal information and provides comprehensive penalty and enforcement mechanisms. In the United States, California enacted the CCPA that requires covered companies to provide additional disclosures and data rights to data subjects, including employees. The CCPA went into effect on January 1, 2020.
For example, we entered into a revolving credit agreement on June 23, 2021 (the “Revolving Credit Agreement”) that contains a sustainability-linked pricing component, which provides for interest rate and facility fee reductions or increases based on meeting or missing targets related to environmental sustainability, specifically greenhouse gas emissions and renewable energy usage.
For example, we entered into a revolving credit agreement on June 23, 2021, which, as amended, contains a sustainability-linked pricing component, which provides for interest rate and facility fee reductions or increases based on meeting or missing targets related to environmental sustainability, specifically greenhouse gas emissions and renewable energy usage.
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.
We invest significant resources in the testing of our products; however, if any of our products contain security vulnerabilities, defects, bugs or errors, we may be required to incur additional development and remediation costs pursuant to warranty and indemnification provisions in our customer contracts and purchase orders.
We are or may become subject to a variety of laws and regulations such as the European Union’s General Data Protection Regulation (the “GDPR”), China’s Personal Information Protection Law (the “PIPL”), or California’s Consumer Privacy Act (the “CCPA”) regarding privacy, data protection, and data security. These laws and regulations are continuously evolving and developing.
We are or may become subject to a variety of laws and regulations such as the European Union’s General Data Protection Regulation (GDPR), China’s Personal Information Protection Law (PIPL), or California’s Consumer Privacy Act (CCPA) regarding privacy, data protection and data security. These laws and regulations are continuously evolving and developing.
Earthquakes, fires, tsunamis, flooding or other natural disasters may disrupt local semiconductor-related businesses and adversely affect manufacturing capacity, availability and cost of key raw materials, utilities and equipment, and availability of key services, including transport of our products worldwide. Our insurance may not adequately cover losses resulting from such disruptions.
Earthquakes, fires, tsunamis, flooding, public health emergencies or other catastrophic events may disrupt local semiconductor-related businesses and adversely affect manufacturing capacity, availability and cost of key raw materials, utilities and equipment, and availability of key services, including transport of our products worldwide. Our insurance may not adequately cover losses resulting from such disruptions.
In addition, if our credit ratings are downgraded or put on watch for a potential downgrade, the applicable interest rate on borrowings under our current revolving credit facility may rise and our ability to obtain additional financing or refinance our existing debt may be negatively affected. Restrictions in our revolving credit facility and outstanding debt instruments may limit our activities.
In addition, if our credit ratings are downgraded or put on watch for a potential downgrade, the applicable interest rate on borrowings under our current revolving credit facility and commercial paper issuances may rise and our ability to obtain additional financing or refinance our existing debt may be negatively affected.
Our continued success depends to a significant extent upon the recruitment, retention and effective succession of our key personnel, including our leadership team, management and technical personnel, particularly our experienced engineers. The competition for these employees is intense and the labor market is tight. Further, we have recently experienced an increase in undesired attrition.
Our continued success depends to a significant extent upon the recruitment, retention and effective succession of our key personnel, including our leadership team, management and technical personnel, particularly our experienced engineers. The competition for these employees is intense and the labor market is tight.
These events could adversely impact our business, results of operations, financial condition and cash flows. To the extent the COVID-19 pandemic adversely affects our business, results of operations, financial condition and cash flows, it may also heighten many of the other risks described in this “Risk Factors” section.
To the extent the COVID-19 pandemic adversely affects our business, results of operations, financial condition and cash flows, it may also heighten many of the other risks described in this “Risk Factors” section. Our stock price may be volatile.
We also rely upon external cloud providers for certain infrastructure activities. If we were to experience a prolonged disruption in the information technology systems that involve our internal communications or our interactions with customers or suppliers, it could result in the loss of sales and customers and significant incremental costs, which could adversely affect our business.
If we were to experience a prolonged disruption in the information technology systems that involve our internal communications or our interactions with customers or suppliers, it could result in the loss of sales and customers and significant incremental costs, which could adversely affect our business.
Risks Related to Financial Markets, Indebtedness and Capital Return We have substantial existing indebtedness and the ability to incur significant additional indebtedness, which could limit our operations and our use of our cash flow and negatively impact our credit ratings. As of October 29, 2022, we had approximately $6.5 billion in outstanding indebtedness.
Risks Related to Financial Markets, Indebtedness and Capital Return We have substantial existing indebtedness and the ability to incur significant additional indebtedness, which could limit our operations and our use of our cash flow and negatively impact our credit ratings. As of October 28, 2023, we had approximately $6.9 billion in outstanding indebtedness, including $0.5 billion of short-term commercial paper.
In addition, global climate change may result in certain natural disasters occurring more frequently or with greater intensity, such as drought, wildfires, storms, sea-level rise, and flooding, and could disrupt the availability of water necessary for the operation of our fabrication facilities located in semi-arid regions.
In addition, global 22 climate change may result in certain natural disasters or other severe weather events occurring more frequently or with greater intensity, such as drought, wildfires, storms, sea-level rise, extreme temperatures and flooding, and could disrupt the availability of water necessary for the operation of our fabrication facilities.
With respect to TSMC in particular, geopolitical changes in China-Taiwan relations could disrupt TSMC’s operations, which would adversely affect our ability to manufacture certain products and as a result, could adversely affect our business and results of operations. Our manufacturing processes require availability of certain raw materials and supplies.
With respect to TSMC in particular, tensions across the Taiwan Strait or other geopolitical events could disrupt TSMC’s operations, which would adversely affect our ability to manufacture certain products and as a result, could adversely affect our business and results of operations. Our manufacturing processes require availability of certain raw materials and supplies.
Customers purchasing our products on the gray market or through other unauthorized channels may use our products for purposes for which they were not intended or that may be contrary to our ethical, legal and regulatory obligations.
Purchasers that acquire our products via the gray market or through other unauthorized channels may resell or otherwise use our products for purposes for which they were not intended or that may be contrary to our ethical, legal and regulatory obligations.
Further, our product offerings in the digital healthcare solutions space which include the collection and processing of sensitive personal information subject us to heightened requirements under data privacy laws.
Further, our product offerings in the digital healthcare solutions space, which include the collection and 18 processing of sensitive personal information, subject us to heightened requirements under data privacy laws, such as the Health Insurance Portability and Accountability Act.
We may also be subject to security breaches of our information technology systems and certain of our products caused by viruses, illegal break-ins or hacking, sabotage, other cyber attacks, or acts of vandalism by third parties or our employees or contractors.
We and our third-party service providers or strategic partners may be subject to security breaches of information technology systems or certain products caused by viruses, illegal break-ins or hacking, sabotage, other cyberattacks or acts of vandalism by third parties or our employees or contractors.
In addition, we may not be able to expand our workforce and operations in a sufficiently timely manner, procure adequate resources and raw materials, locate suitable third-party suppliers, or respond effectively to changes in demand for our existing products or to demand for new products requested by our customers, and our current or future business could be materially and adversely affected. 12 A prolonged disruption of our internal manufacturing operations could have a material adverse effect on our business, financial condition and results of operations.
In addition, we may not be able to expand our workforce and operations in a sufficiently timely manner, procure adequate resources and raw materials, locate suitable third-party suppliers or respond effectively to changes in demand for our existing products or to demand for new products requested by our customers, and our current or future business could be materially and adversely affected.
Any such suspension or debarment or other sanction could have an adverse effect on our business. Under some of our government subcontracts, we are required to maintain secure facilities and to obtain security clearances for personnel involved in performance of the contract, in compliance with applicable federal standards.
Any such suspension or debarment or other sanction could have an adverse effect on our business and reputation. Under some of our government subcontracts, we are required to maintain secure facilities and to obtain security clearances for personnel involved in performance of the contract, which can be time consuming and costly.
Our industry is subject to EHS requirements and laws, particularly those that control and restrict the sourcing, use, transportation, emission, discharge, storage and disposal of certain substances and materials used or produced in the semiconductor manufacturing process and which help ensure the health and safety of our employees.
Our industry is subject to EHS requirements and laws, particularly those that control and restrict the sourcing, use, transportation, emission, discharge, storage and disposal of certain substances and materials and those that help promote the health and safety of our employees and the communities in which we operate.
These costs may adversely impact our results of operations and financial condition. In addition, we use hazardous and other regulated materials that subject us to risks of strict liability for damages caused by potential or actual releases of such materials.
In addition, we use hazardous and other regulated materials that subject us to risks of strict liability for damages caused by potential or actual releases of such materials.
There is a risk that our products may be diverted from our authorized distribution channels and sold on the “gray market” in ways that are not in accordance with our established agreements, policies and procedures or at our established prices.
We market and sell our products directly and through third-party distributors. There is a risk that our products may be diverted from our authorized distribution channels and sold on the “gray market” in ways that are not in accordance with our established agreements, controls, policies and procedures.
Current and prospective investors are increasingly utilizing ESG data to inform their decisions, including investment and voting, using a multitude of evolving score and rating frameworks. Further, customers are also utilizing ESG data to inform their purchasing decisions. Additionally, public interest and legislative pressure related to public companies’ ESG practices continue to grow.
Current and prospective investors are increasingly utilizing ESG data to inform their decisions, including investment and voting decisions, using a multitude of evolving score and rating frameworks. Further, customers utilize ESG data to inform their purchasing decisions.
We may also incur additional debt, including debt with variable interest rates, in the future, which would increase these risks. Our ability to make payments of principal and interest on our indebtedness when due depends upon our future operating performance, which may be impacted by general economic conditions, industry cycles and other factors beyond our control.
Our ability to make payments of principal and interest on our indebtedness when due depends upon our future operating performance, which may be impacted by general economic conditions, industry cycles and other factors beyond our control.
We have significant operations and manufacturing facilities outside the United States, including in Ireland, the Philippines, Thailand, and Malaysia. A significant portion of our revenue is derived from customers in international markets, and we expect that international sales will continue to account for a significant portion of our revenue in the future.
A significant portion of our revenue is derived from customers in international markets, and we expect that international sales will continue to account for a significant portion of our revenue in the future.
If we do not adapt our strategy or execution quickly enough to meet the evolving expectations of our investors, customers, and regulators, or if our ESG data input, processing and reporting are incomplete or inaccurate, our business, financial condition, results of operations, brand and reputation could be adversely affected.
If we do not adapt our strategy or execution quickly enough to meet evolving regulatory requirements or the expectations of our investors, customers, employees, regulators or other stakeholders, or if our ESG disclosures, including data input, processing and reporting, are incomplete or inaccurate, our business, financial condition, results of operations, brand and reputation could be adversely affected. 19 We are subject to environment, health and safety standards and hazards which have the potential to adversely affect our business, increase our expenses and adversely affect our reputation.
If additional or replacement vendors 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 and as a result could adversely affect our business and results of operations.
If additional or replacement vendors are not available, we may also experience delays in product development or shipment which could, in turn, result in reputational harm or the temporary or permanent loss of customers, and as a result could adversely affect our business and results of operations. 12 Our industry faces challenges associated with products diverted from authorized distribution channels, which could result in reputational harm and have a material adverse effect on our business and results of operations.
If we are not able to meet our U.S. cash requirements, it may be necessary for us to consider repatriation of foreign earnings, which could have a material adverse effect on our results of operations and financial condition. 22 We carry outside basis differences in certain of our subsidiaries, primarily arising from acquisition accounting adjustments and certain undistributed earnings that are considered indefinitely reinvested.
If we are not able to meet our U.S. cash requirements, it may be necessary for us to consider repatriation of foreign earnings, which could have a material adverse effect on our results of operations and financial condition.
Certain of our products and services could also contain security vulnerabilities, defects, bugs and errors, which could also result in significant data losses, security breaches and theft of intellectual property.
Certain of our products and services, including those that may incorporate, or are based upon, software or artificial intelligence technology, could also contain security vulnerabilities, defects, bugs and errors, which could also result in significant data losses, security breaches and theft of intellectual property.
Our security measures or those of our third-party service providers may not detect or prevent security breaches, cyber attacks, defects, bugs or errors. In addition, we provide our confidential and proprietary information to our strategic partners in certain cases where doing so is necessary to conduct our business.
In addition, we provide our confidential and proprietary information to our strategic partners in certain cases, who may maintain such information on their information technology systems. Our security measures or those of our third-party service providers or strategic partners may not detect or prevent security breaches, cyberattacks, defects, bugs or errors.
Customers may also purchase counterfeit or substandard products, including products that have been altered, mishandled or damaged, or purchase used products presented as new, each of which 15 could result in damage to property or persons.
Organizations may also purchase counterfeit or substandard products, including products that have been altered, mishandled or damaged, or purchase used products presented as new, each of which could result in damage to property or persons. These situations could have a material adverse effect on our reputation and business and operating results.
This instability could result in manufacturing delays and product shortages, which could have a material adverse effect on our operating results. 16 Risk Related to Acquisitions and Strategic Transactions Our acquisition of Maxim involves a number of risks that could adversely affect our business, financial condition and operating results, and we may not realize the financial and strategic goals we anticipate.
Risk Related to Acquisitions and Strategic Transactions Our acquisition of Maxim involves a number of risks that could adversely affect our business, financial condition and operating results, and we may not realize the financial and strategic goals we anticipate. In August 2021, we completed our acquisition of Maxim, which we refer to as the acquisition or the merger.
Our competitors also include both emerging companies selling specialized products in markets we serve and companies outside of the U.S., including entities associated with well-funded efforts by foreign governments to create indigenous semiconductor industries.
Our competitors also include both emerging companies selling specialized products in markets we serve and companies outside of the United States, including entities associated with well-funded efforts by foreign governments to create indigenous semiconductor industries. From time to time, governments around the world may provide incentives or make other investments that could benefit and give competitive advantages to our competitors.
In addition to leveraging an outsourcing model for manufacturing operations, we also rely on our internal manufacturing operations located in the United States, Ireland, the Philippines, Thailand and Malaysia.
A prolonged disruption of our or our third parties’ manufacturing operations could have a material adverse effect on our business, financial condition and results of operations. In addition to leveraging an outsourcing model for certain manufacturing operations, we also rely on our internal manufacturing operations located in the United States, Ireland, the Philippines, Thailand and Malaysia.
Because litigation and the outcome of regulatory proceedings are inherently unpredictable, our business, financial condition or operating results could be materially affected by an unfavorable resolution of 19 one or more of these proceedings, claims, demands or investigations.
Allegations made in the course of regulatory or legal proceedings may also harm our reputation, regardless of whether there is merit to such claims. Because litigation and the outcome of regulatory proceedings are inherently unpredictable, our business, financial condition or operating results could be materially affected by one or more of these proceedings, claims, demands or investigations.
Such laws and regulations often vary in scope, may be subject to differing interpretations, and may be inconsistent among different jurisdictions. For example, the GDPR includes operational requirements for companies that receive or process personal data of residents of the European Union that are broader and more stringent than those in many other jurisdictions around the world.
For example, the GDPR and PIPL include operational requirements for companies that receive or process personal data of residents of the European Union or China, as applicable, that are broader and more stringent than those in many other jurisdictions around the world.
Further, there are a large number of processes, policies, procedures, operations, technologies and systems that must continue to be integrated in connection with the ongoing integration of Maxim’s business. The combined company has and may continue to incur ongoing restructuring, integration, and other costs associated with combining the operations of the two companies in connection with the merger.
The combined company has and may continue to incur ongoing restructuring, integration and other costs associated with combining the operations of the two companies in connection with the merger.
Also, former employees may seek employment with our business partners, customers or competitors, and may improperly use our proprietary information at their employer. 18 If we fail to comply with U.S. and foreign laws related to privacy, data security, and data protection, it could adversely affect our operating results and financial condition.
If we fail to comply with U.S. and foreign laws related to privacy, data security and data protection, it could adversely affect our operating results and financial condition.
There can be no assurance that we are adequately insured to protect against all claims and potential liabilities, and we may elect to self-insure with respect to certain matters.
There can be no assurance that we are adequately insured to protect against all claims and potential liabilities, and we may elect to self-insure with respect to certain matters. An adverse outcome in litigation or arbitration could have a material adverse effect on our financial position or on our operating results or cash flows.
Regardless of the individual's reasons for such purchases or sales, securities analysts and investors could view such transactions as positive or negative indicators and our stock price could be adversely affected as a result. 23 ITEM 1B. UNRESOLVED STAFF COMMENTS None. 24
Our directors and executive officers periodically buy or sell shares of our common stock in the market, including pursuant to Rule 10b5-1 trading plans. Regardless of the individual's reasons for such purchases or sales, securities analysts and investors could view such transactions as positive or negative indicators and our stock price could be adversely affected as a result. ITEM 1B.
The extent to which the novel strain of the coronavirus (COVID-19) pandemic will adversely affect our business, financial condition and results of operations is uncertain.
The long-term effects of climate change on the global economy and the semiconductor industry in particular are unclear, but could be severe. The extent to which the novel strain of the coronavirus (COVID-19) pandemic will adversely affect our business, financial condition and results of operations is uncertain.
If we are unable to successfully address these risks, we may not realize some or all of the expected benefits of our acquisitions, which may have an adverse effect on our business strategy, plans and operating results. 17 Risks Related to Cyber, IP, Legal and Regulatory Our computer systems and networks may be subject to attempted security breaches and other cybersecurity incidents and a significant disruption in, or breach in security of, our information technology systems or certain of our products could materially and adversely affect our business or reputation.
Risks Related to Cyber, Intellectual Property, Legal and Regulatory Our computer systems and networks may be subject to attempted security breaches and other cyber incidents and a significant disruption in, or breach in security of, our information technology systems or certain products could materially and adversely affect our business or reputation.
In addition, we had $2.5 billion of availability under our unsecured revolving credit facility. Our leverage could have negative consequences, including increasing our vulnerability to adverse economic and industry conditions, limiting our ability to obtain additional financing and limiting our ability to acquire new products and technologies through strategic acquisitions.
Our leverage could have negative consequences, including increasing our vulnerability to adverse economic and industry conditions, limiting our ability to obtain additional financing and limiting our ability to acquire new products and technologies through strategic acquisitions. Further, on October 5, 2021, we issued $500 million aggregate principal amount of floating rate senior notes (Floating Rate Notes).

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeLease Properties Approximate Termination Leased: Use Total Sq. Ft. (fiscal year) Renewals Bangalore, India Engineering and administrative offices 175,000 sq. ft. 2027 1, five-yr. period San Jose, CA Manufacturing, marketing, and administrative offices 103,000 sq. ft. 2035 1, five-yr. period (1) Leases on the land used for this facility expire in 2054 through 2057.
Biggest changeFt. (fiscal year) Renewals Bangalore, India Engineering and administrative offices 175,000 sq. ft. 2027 1, five-yr. period Durham, NC Testing, engineering, and administrative offices 156,000 sq. ft. 2035 2, five-yr. periods San Jose, CA Manufacturing, marketing and administrative offices 103,000 sq. ft. 2033 1, five-yr. period (1) Leases on the land used for this facility expire in 2054 through 2057.
ITEM 2. PROPERTIES Manufacturing and other operations are conducted in several locations worldwide. The following tables provide certain information about our significant general offices and manufacturing facilities: Properties Approximate Owned: Use Total Sq. Ft. Cavite, Philippines Wafer probe and testing, warehouse, engineering and administrative offices 1,518,000 sq. ft.
ITEM 2. PROPERTIES Manufacturing and other operations are conducted in several locations worldwide. The following tables provide certain information about our significant general offices and manufacturing facilities: Properties Approximate Owned: Use Total Sq. Ft. Cavite, Philippines Wafer probe and testing, warehouse, engineering and administrative offices 1,486,000 sq. ft.
For information concerning our obligations under all operating leases, see Note 9, Leases , of the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report on Form 10-K. 25
For information concerning our obligations under all operating leases, see Note 9, Leases , of the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report on Form 10-K. 24
Penang, Malaysia (1) Wafer probe and testing, assembly and engineering offices 364,000 sq. ft. Chonburi Province, Thailand Wafer probe and testing, warehouse, engineering and administrative offices 194,000 sq. ft. Chelmsford, MA Final assembly of certain module and subsystem-level products, testing, engineering and administrative offices 174,000 sq. ft. Camas, WA Wafer fabrication 105,000 sq. ft.
San Jose, CA Engineering, sales, marketing and administrative offices 435,000 sq. ft. Chonburi Province, Thailand Wafer probe and testing, warehouse, engineering and administrative offices 194,000 sq. ft. Chelmsford, MA Final assembly of certain module and subsystem-level products, testing, engineering and administrative offices 174,000 sq. ft. Camas, WA Wafer fabrication 105,000 sq. ft. Lease Properties Approximate Termination Leased: Use Total Sq.
Wilmington, MA Corporate headquarters, wafer fabrication, testing, engineering, sales, marketing and administrative offices 826,000 sq. ft. Limerick, Ireland Wafer fabrication, wafer probe and testing, warehouse and distribution, engineering and administrative offices 646,000 sq. ft. San Jose, CA Engineering, sales, marketing and administrative offices 435,000 sq. ft. Beaverton, OR Wafer fabrication, engineering and administrative offices 432,000 sq. ft.
Wilmington, MA Corporate headquarters, wafer fabrication, testing, engineering, sales, marketing and administrative offices 826,000 sq. ft. Limerick, Ireland Wafer fabrication, wafer probe and testing, warehouse and distribution, engineering and administrative offices 708,500 sq. ft. Penang, Malaysia (1) Wafer probe and testing, assembly and engineering offices 696,680 sq. ft. Beaverton, OR Wafer fabrication, engineering and administrative offices 457,917 sq. ft.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeFor information regarding material pending legal proceedings in which we are involved, see Note 10, Commitments and Contingencies of the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report on Form 10-K. ITEM 4. MINE SAFETY DISCLOSURES Not Applicable. 26 PART II
Biggest changeFor information regarding material pending legal proceedings in which we are involved, see Note 10, Commitments and Contingencies of the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report on Form 10-K. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 25 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest change(2) The average price paid for shares in connection with vesting of restricted stock units/awards are averages of the closing stock price at the vesting date which is used to calculate the number of shares to be withheld. (3) Shares repurchased pursuant to the stock repurchase program publicly announced on August 12, 2004.
Biggest change(2) The average price paid for shares in connection with vesting of restricted stock units/awards are averages of the closing stock price at the vesting date which is used to calculate the number of shares to be withheld. 26 Comparative Stock Performance Graph The following graph compares cumulative total shareholder return on our common stock since November 3, 2018 with the cumulative total return of the Standard & Poor’s (S&P) 500 Index and the S&P Semiconductors Index.
Issuer Purchases of Equity Securities The table below summarizes the activity related to stock repurchases for the three months ended October 29, 2022. We have an ongoing authorization, originally approved by our Board of Directors in 2004, and subsequently amended, to repurchase shares of our common stock in open market or negotiated transactions.
Issuer Purchases of Equity Securities The table below summarizes the activity related to stock repurchases for the three months ended October 28, 2023. We have an ongoing authorization, originally approved by our Board of Directors in 2004, and subsequently amended, to repurchase shares of our common stock in open market or negotiated transactions.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is listed on The Nasdaq Global Select Market under the symbol ADI. The number of holders of record of our common stock at November 18, 2022 was 2,382.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is listed on The Nasdaq Global Select Market under the symbol ADI. The number of holders of record of our common stock at November 17, 2023 was 2,316.
This graph assumes the investment of $100 on October 28, 2017 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. ITEM 6. RESERVED 28
This graph assumes the investment of $100 on November 3, 2018 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. ITEM 6. RESERVED 27
The dividend will be paid on December 15, 2022 to all shareholders of record at the close of business on December 5, 2022 and is expected to total approximately $387.1 million. We currently expect quarterly dividends to continue in future periods, although they remain subject to determination and declaration by our Board of Directors.
The dividend will be paid on December 14, 2023 to all shareholders of record at the close of business on December 4, 2023 and is expected to total approximately $426.8 million. We currently expect quarterly dividends to continue in future periods, although they remain subject to determination and declaration by our Board of Directors.
This number does not include shareholders for whom shares are held in a “nominee” or “street” name. On October 28, 2022, the last reported sales price of our common stock on The Nasdaq Global Select Market was $144.88 per share. On November 21, 2022, our Board of Directors declared a cash dividend of $0.76 per outstanding share of common stock.
This number does not include shareholders for whom shares are held in a “nominee” or “street” name. On October 27, 2023, the last reported sales price of our common stock on The Nasdaq Global Select Market was $160.57 per share. On November 20, 2023, our Board of Directors declared a cash dividend of $0.86 per outstanding share of common stock.
As of October 29, 2022, the Company had repurchased a total of approximately 189.6 million shares of its common stock for approximately $11.7 billion under our share repurchase program. An additional $4.9 billion remains available for repurchase of shares under the current authorized program.
As of October 28, 2023, the Company had repurchased a total of approximately 205.3 million shares of its common stock for approximately $14.5 billion under our share repurchase program. An additional $2.1 billion remains available for repurchase of shares under the current authorized program.
Period Total Number of Shares Purchased (1) Average Price Paid Per Share (2) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (3) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs July 31, 2022 through August 27, 2022 1,572,964 $ 172.62 1,515,606 $ 5,471,910,519 August 28, 2022 through September 24, 2022 1,058,260 $ 148.76 1,041,800 $ 5,316,957,211 September 25, 2022 through October 29, 2022 2,718,976 $ 143.15 2,705,200 $ 4,929,659,276 Total 5,350,200 $ 152.93 5,262,606 $ 4,929,659,276 _______________________________________ (1) Includes 87,594 shares withheld by us from employees to satisfy employee tax obligations upon vesting of restricted stock units/awards granted to our employees under our equity compensation plans.
Period Total Number of Shares Purchased (1) Average Price Paid Per Share (2) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs July 30, 2023 through August 26, 2023 1,209,834 $ 184.50 1,162,168 $ 2,338,207,217 August 27, 2023 through September 23, 2023 464,040 $ 178.97 456,466 $ 2,256,508,676 September 24, 2023 through October 28, 2023 855,157 $ 168.57 744,321 $ 2,130,110,767 Total 2,529,031 $ 178.10 2,362,955 $ 2,130,110,767 _______________________________________ (1) Includes 166,076 shares withheld by us from employees to satisfy employee tax obligations upon vesting of restricted stock units/awards granted to our employees under our equity compensation plans.
Removed
In March 2020, we temporarily suspended our share repurchase program as a result of the global macroeconomic environment. That suspension continued through the fourth quarter of fiscal 2020 given the planned acquisition of Maxim Integrated Products, Inc. We reinstated the common stock repurchase program effective November 2020.
Removed
On August 25, 2021, the Board of Directors approved an increase to the current authorization for the stock repurchase program by an additional $8.5 billion to $16.7 billion in the aggregate. 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.
Removed
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. 27 Comparative Stock Performance Graph The following graph compares cumulative total shareholder return on our common stock since October 28, 2017 with the cumulative total return of the Standard & Poor’s (S&P) 500 Index and the S&P Semiconductors Index.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeFinancial Statements and Supplementary Data 45 Consolidated Statements of Income 45 Consolidated Statements of Comprehensive Income 46 Consolidated Balance Sheets 47 Consolidated Statements of Shareholders' Equity 48 Consolidated Statements of Cash Flows 49 Notes to Consolidated Financial Statements 50
Biggest changeFinancial Statements and Supplementary Data 43 Consolidated Statements of Income 43 Consolidated Statements of Comprehensive Income 44 Consolidated Balance Sheets 45 Consolidated Statements of Shareholders' Equity 46 Consolidated Statements of Cash Flows 47 Notes to Consolidated Financial Statements 48
Item 6. Reserved 28 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 29 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 41 Report of Independent Registered Public Accounting Firm 43 Item 8.
Item 6. Reserved 27 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 28 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 39 Report of Independent Registered Public Accounting Firm 41 Item 8.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

59 edited+18 added−26 removed65 unchanged
Biggest changeNonoperating (Income) Expense Fiscal Year 2022 over 2021 2022 2021 $ Change % Change Total Nonoperating expense $ 179,951 $ 363,487 $ (183,536) (50) % The year-over-year decrease in nonoperating expense in fiscal 2022 as compared to fiscal 2021 was primarily the result of a loss on the extinguishment of debt of $215.2 million related to debt transactions in the fourth quarter of fiscal 2021, partially offset by higher interest expense in fiscal 2022 related to our debt obligations and fewer gains on investments in fiscal 2022. 32 Provision for (Benefit From) Income Taxes Fiscal Year 2022 over 2021 2022 2021 $ Change % Change Provision for (benefit from) income taxes $ 350,188 $ (61,708) $ 411,896 n/a Effective income tax rate 11.3 % (4.6) % Our effective tax rates for fiscal 2022 and fiscal 2021 were below the U.S. statutory rate of 21% due to lower statutory tax rates applicable to our operations in the foreign jurisdictions in which we earn income.
Biggest changeProvision for (Benefit From) Income Taxes Fiscal Year 2023 over 2022 2023 2022 $ Change % Change Provision for (benefit from) income taxes $ 293,424 $ 350,188 $ (56,764) (16) % Effective income tax rate 8.1 % 11.3 % Our effective tax rates for fiscal 2023 and fiscal 2022 were below the U.S. statutory rate of 21% due to lower statutory tax rates applicable to our operations in the foreign jurisdictions in which we earn income.
When using the qualitative method, we consider several factors, including the following: – the amount by which the fair values of each reporting unit exceeded their carrying values as of the date of the most recent quantitative impairment analysis, which indicated there would need to be substantial negative developments in the markets in which these reporting units operate in order for there to be potential impairment; – the carrying values of these reporting units as of the assessment date compared to their previously calculated fair values as of the date of the most recent quantitative impairment analysis; – the current forecasts as compared to the forecasts included in the most recent quantitative impairment analysis; – public information from competitors and other industry information to determine if there were any significant adverse trends in our competitors' businesses; 37 – changes in the value of major U.S. stock indices that could suggest declines in overall market stability that could impact the valuation of our reporting units; – changes in our market capitalization and overall enterprise valuation to determine if there were any significant decreases that could be an indication that the valuation of our reporting units had significantly decreased; and – whether there had been any significant increases to the weighted-average cost of capital rates for each reporting unit, which could materially lower our prior valuation conclusions under a discounted cash flow approach.
When using the qualitative method, we consider several factors, including the following: – the amount by which the fair values of each reporting unit exceeded their carrying values as of the date of the most recent quantitative impairment analysis, which indicated there would need to be substantial negative developments in the markets in which these reporting units operate in order for there to be potential impairment; – the carrying values of these reporting units as of the assessment date compared to their previously calculated fair values as of the date of the most recent quantitative impairment analysis; – the current forecasts as compared to the forecasts included in the most recent quantitative impairment analysis; – public information from competitors and other industry information to determine if there were any significant adverse trends in our competitors' businesses; – changes in the value of major U.S. stock indices that could suggest declines in overall market stability that could impact the valuation of our reporting units; – changes in our market capitalization and overall enterprise valuation to determine if there were any significant decreases that could be an indication that the valuation of our reporting units had significantly decreased; and – whether there had been any significant increases to the weighted-average cost of capital rates for each reporting unit, which could materially lower our prior valuation conclusions under a discounted cash flow approach.
Shipping costs are charged to selling, marketing, general and administrative expense as incurred. Sales taxes are excluded from revenue. Revenue from contracts with the United States government, government prime contractors and certain commercial customers is recorded over time using either units delivered or costs incurred as the measurement basis for progress toward completion.
Shipping costs are charged to selling, marketing, general and administrative expense as incurred. Sales taxes are excluded from revenue. 34 Revenue from contracts with the United States government, government prime contractors and certain commercial customers is recorded over time using either units delivered or costs incurred as the measurement basis for progress toward completion.
If the subsequent actual results and updated projections of the underlying business activity change compared with the assumptions and projections used to develop these values, we could experience impairment charges which could be material. In addition, we have estimated the economic lives of certain acquired assets and these lives are used to calculate depreciation and amortization expense.
If the subsequent actual results and updated projections of the underlying business activity change compared with the assumptions and projections used to develop these values, we could experience impairment charges which could be material. In addition, we have estimated the economic lives of certain acquired 36 assets and these lives are used to calculate depreciation and amortization expense.
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.
These differences could 35 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.
For restricted stock units with both service and performance conditions, this grant-date fair value is also impacted by the number of units that are expected to vest during the performance period and is adjusted through the related stock-based compensation expense at each reporting period based on the probability of achievement of that performance condition.
For restricted stock units with both service and performance conditions, this grant-date fair value is also impacted by the number of units that are expected to vest during the performance period and is adjusted through the related stock-based compensation expense at each reporting period based on the probability 37 of achievement of that performance condition.
Fixed consideration primarily includes sales to direct customers and sales to distributors in which both the sale to the distributor and the sale to the end customer occur within the same reporting period. Variable consideration includes sales in which the amount of consideration that we will receive is unknown as 36 of the end of a reporting period.
Fixed consideration primarily includes sales to direct customers and sales to distributors in which both the sale to the distributor and the sale to the end customer occur within the same reporting period. Variable consideration includes sales in which the amount of consideration that we will receive is unknown as of the end of a reporting period.
Significant changes during the year in enacted tax law could affect these estimates. See Note 12, Income Taxes , of the Notes to Consolidated Financial Statements contained in Item 8 of this Annual Report on Form 10-K for further discussion. Stock-Based Compensation Stock-based compensation expense associated with stock options and related awards is recognized in the Consolidated Statements of Income.
Significant changes during the year in enacted tax law could affect these estimates. See Note 12, Income Taxes , of the Notes to Consolidated Financial Statements contained in Item 8 of this Annual Report on Form 10-K for further discussion. Stock-Based Compensation Stock-based compensation expense associated with stock related awards is recognized in the Consolidated Statements of Income.
Our cash and cash equivalents consist of highly liquid investments with maturities of three months or less, including money market funds. We maintain these balances with high credit quality counterparties, continually monitor the amount of credit exposure to any one issuer and diversify our investments in order to minimize our credit risk.
Our cash and cash equivalents consist of highly liquid investments with maturities of three months or less, including money market funds. We maintain these balances with counterparties with high credit ratings, and continually monitor the amount of credit exposure to any one issuer and diversify our investments in order to minimize our credit risk.
We test goodwill for impairment at the reporting unit level, which we determined is consistent with our identified operating segments, on an annual basis on the first day of the fourth quarter (on or about July 31) or more frequently if we believe indicators of impairment exist or we reorganize our operating segments or reporting units.
We test goodwill for impairment at the reporting unit level, which we determined is consistent with our identified operating segments, on an annual basis on the first day of the fourth quarter (on or about July 30) or more frequently if we believe indicators of impairment exist or we reorganize our operating segments or reporting units.
Inventory increased in fiscal 2022 as compared to fiscal 2021, primarily as a result of our efforts to balance manufacturing production, demand and inventory levels. Our inventory levels are impacted by our need to support forecasted sales demand and variations between those forecasts and actual demand.
Inventory increased in fiscal 2023 as compared to fiscal 2022, primarily as a result of our efforts to balance manufacturing production, demand and inventory levels. Our inventory levels are impacted by our need to support forecasted sales demand and variations between those forecasts and actual demand.
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. 40
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. 38
In all periods presented, the predominant countries comprising “Rest of North and South America” are Canada and Mexico; the predominant countries comprising “Europe” are Germany, Sweden, and the Netherlands; and the predominant countries comprising “Rest of Asia” are Taiwan, Malaysia, South Korea and Singapore.
In all periods presented, the predominant regions comprising “Rest of North and South America” are Canada and Mexico; the predominant regions comprising “Europe” are Germany, Sweden and the Netherlands; and the predominant regions comprising “Rest of Asia” are Taiwan, Malaysia, South Korea and Singapore.
Our fiscal year is the 52-week or 53-week period ending on the Saturday closest to the last day in October. Fiscal 2022 and fiscal 2021 were 52-week fiscal periods.
Our fiscal year is the 52-week or 53-week period ending on the Saturday closest to the last day in October. Fiscal 2023 and fiscal 2022 were 52-week fiscal periods.
In addition, the Revolving Credit Agreement contains a consolidated leverage ratio covenant of total consolidated funded debt to consolidated earnings before interest, taxes, depreciation, and amortization (EBITDA) of not greater than 3.5 to 1.0. As of October 29, 2022, we were in compliance with these covenants.
In addition, the Revolving Credit Agreement contains a consolidated leverage ratio covenant of total consolidated funded debt to consolidated earnings before interest, taxes, depreciation, and amortization (EBITDA) of not greater than 3.5 to 1.0. As of October 28, 2023, we were in compliance with these covenants.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (all tabular amounts in thousands except per share amounts) The following discussion includes results of operations and financial condition for the fiscal year ended October 29, 2022 (fiscal 2022) and the fiscal year ended October 30, 2021 (fiscal 2021) and year-over-year comparisons between fiscal 2022 and fiscal 2021.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (all tabular amounts in thousands except per share amounts) The following discussion includes results of operations and financial condition for the fiscal year ended October 28, 2023 (fiscal 2023) and the fiscal year ended October 29, 2022 (fiscal 2022) and year-over-year comparisons between fiscal 2023 and fiscal 2022.
Since inception, our Board of Directors has authorized us to repurchase $16.7 billion of our common stock under the program, which includes the $8.5 billion authorization approved by the Board of Directors on August 25, 2021.
Stock Repurchase Program Our common stock repurchase program has been in place since August 2004. Since inception, our Board of Directors has authorized us to repurchase $16.7 billion of our common stock under the program, which includes the $8.5 billion authorization approved by the Board of Directors on August 25, 2021.
The majority of our shipping terms permit us to recognize revenue at point of shipment or delivery. Certain shipping terms require the goods to be through customs or be received by the customer before title passes. In those instances, we defer the revenue recognized until title has passed.
The majority of our shipping terms permit us to recognize revenue at point of shipment or delivery. Certain shipping terms require the goods to be through customs or be received by the customer before title passes. In those instances, we defer the revenue recognized until title and control of the promised goods have passed to the customer.
Financing Activities Financing cash flows consist primarily of payments of dividends to stockholders, repurchases of common stock, issuance and repayment of debt, and proceeds from the sale of shares of common stock pursuant to employee equity incentive plans.
Financing Activities Financing cash flows generally consist of payments of dividends to shareholders, repurchases of common stock, issuance and repayment of debt and proceeds from the sale of shares of common stock pursuant to employee equity incentive plans.
Revenue by Sales Channel The following table summarizes revenue by sales channel. We sell our products globally through a direct sales force, third party distributors, independent sales representatives and via our website. Distributors are customers that buy products with the intention of reselling them. Direct customers are non-distributor customers and consist primarily of original equipment manufacturers (OEMs).
We sell our products globally through a direct sales force, third party distributors, independent sales representatives and via our website. Distributors are customers that buy products with the intention of reselling them. Direct customers are non-distributor customers and consist primarily of original equipment manufacturers (OEMs).
In order to assess the reasonableness of the calculated reporting unit fair values, we reconcile the aggregate fair values of our reporting units determined, as described above, to our total company market capitalization, allowing for a reasonable control premium. In fiscal 2022, we used a combination of the qualitative and quantitative methods of assessing goodwill for our reporting units.
In order to assess the reasonableness of the calculated reporting unit fair values, we reconcile the aggregate fair values of our reporting units determined, as described above, to our total company market capitalization, allowing for a reasonable control premium. In fiscal 2023, we used the qualitative method of assessing goodwill for our reporting units.
For discussion on results of operations and financial condition for fiscal 2021 and the fiscal year ended October 31, 2020 (fiscal 2020) and year-over-year comparisons between fiscal 2021 and fiscal 2020, please refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our Annual Report on Form 10-K for fiscal 2021 filed with the Securities and Exchange Commission on December 3, 2021.
For discussion on results of operations and financial condition for fiscal 2022 and the fiscal year ended October 30, 2021 (fiscal 2021) and year-over-year comparisons between fiscal 2022 and fiscal 2021, please refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our Annual Report on Form 10-K for fiscal 2022 filed with the Securities and Exchange Commission on November 22, 2022.
Cost of sales amounts used in the calculation of days cost of sales in inventory include Acquisition accounting adjustments related to the sale of acquired inventory written up to fair value, amortization of developed technology intangible assets acquired and depreciation related to the write-up of fixed assets to fair value.
Cost of sales amounts used in the calculation of days cost of sales in inventory include accounting adjustments related to amortization of developed technology intangible assets acquired and depreciation related to the write-up of fixed assets to fair value as a result of the acquisition of Maxim.
The increase in cash provided by operating activities during fiscal 2022 as compared to fiscal 2021 was primarily a result of higher net income adjusted for noncash items offset by changes in working capital. 33 Investing Activities Investing cash flows generally consist of capital expenditures, cash used for acquisitions and proceeds from or purchases of investments.
The increase in cash provided by operating activities during fiscal 2023 as compared to fiscal 2022 was primarily a result of higher net income adjusted for noncash items offset by changes in working capital. Investing Activities Investing cash flows generally consist of capital expenditures and cash used for acquisitions.
As of October 29, 2022, $4.9 billion remained available for repurchase under the current authorized program. The repurchased shares are held as authorized but unissued shares of common stock. We also repurchase shares in settlement of employee tax withholding obligations due upon the vesting of restricted stock units/awards or the exercise of stock options.
As of October 28, 2023, $2.1 billion remained available for repurchase under the current authorized program. The repurchased shares are held as authorized but unissued shares of common stock. We also repurchase shares in settlement of employee tax withholding obligations due upon the vesting of restricted stock units/awards or the exercise of stock options.
In fiscal 2021, we used the quantitative method of assessing goodwill for all reporting units. In all periods presented, we concluded the reporting units' fair values exceeded their carrying amounts as of the assessment dates and no risk of impairment existed.
In fiscal 2022, we used a combination of the qualitative and quantitative methods of assessing goodwill for all reporting units. In all periods presented, we concluded the reporting units' fair values exceeded their carrying amounts as of the assessment dates and no risk of impairment existed.
See Note 13, Revolving Credit Facility , of the Notes to Consolidated Financial Statements contained in Item 8 of this Annual Report on Form 10-K for further information on our revolving credit facility. 34 Debt As of October 29, 2022, we had approximately $6.5 billion of carrying value outstanding on our debt.
See Note 13, Revolving Credit Facility , of the Notes to Consolidated Financial Statements contained in Item 8 of this Annual Report on Form 10-K for further information on our revolving credit facility. 32 Debt As of October 28, 2023, we had approximately $6.4 billion of carrying value outstanding on our senior notes.
Revolving Credit Facility Our Third Amended and Restated Revolving Credit Agreement, dated as of June 23, 2021, with Bank of America N.A. as administrative agent and the other banks identified therein as lenders (Revolving Credit Agreement) amended and restated our Second Amended and Restated Credit Agreement dated as of June 28, 2019 and provides for a five year unsecured revolving credit facility in an aggregate principal amount not to exceed $2.5 billion (subject to certain terms and conditions).
Revolving Credit Facility Our Third Amended and Restated Revolving Credit Agreement, dated as of June 23, 2021, with Bank of America N.A. as administrative agent and the other banks identified therein as lenders, which was subsequently amended on December 20, 2022 and July 24, 2023 (as amended, the Revolving Credit Agreement) provides for a five year unsecured revolving credit facility in an aggregate principal amount not to exceed $2.5 billion (subject to certain terms and conditions).
Liquidity and Capital Resources At October 29, 2022, our principal source of liquidity was $1,470.6 million of cash and cash equivalents, of which approximately $307.4 million was held in the United States and the balance of our cash and cash equivalents was held outside the United States in various foreign subsidiaries.
Liquidity and Capital Resources At October 28, 2023, our principal source of liquidity was $958.1 million of cash and cash equivalents, of which approximately $201.1 million was held in the United States and the balance of our cash and cash equivalents was held outside the United States in various foreign subsidiaries.
We believe that a continued commitment to R&D is essential to maintain product leadership with our existing products as well as to provide innovative new product offerings.
We expect to continue the development of innovative technologies and processes for new products. We believe that a continued commitment to R&D is essential to maintain product leadership with our existing products as well as to provide innovative new product offerings.
As of October 29, 2022, we were compliant with these covenants. See Note 14, Debt of the Notes to Consolidated Financial Statements contained in Item 8 of this Annual Report on Form 10-K for further information on our outstanding debt. Stock Repurchase Program Our common stock repurchase program has been in place since August 2004.
As of October 28, 2023, we were compliant with these covenants. See Note 14, Debt of the Notes to Consolidated Financial Statements contained in Item 8 of this Annual Report on Form 10-K for further information on our outstanding debt.
See Note 6, Acquisitions , of the Notes to the Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report on Form 10-K for further information.
See Note 12, Income Taxes , of the Notes to Consolidated Financial Statements contained in Item 8 of this Annual Report on Form 10-K for further discussion.
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, restricted stock units and market-based and/or performance-based restricted stock units. We calculate the grant-date fair values of stock options using the Black-Scholes valuation model.
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 restricted stock units and market-based and performance-based awards.
The change in cash (used for) provided by investing activities during fiscal 2022 as compared to fiscal 2021 was primarily the result of cash received from the Acquisition during fiscal 2021, partially offset by an increase in cash used for capital expenditures during fiscal 2022.
The increase in cash used for investing activities during fiscal 2023 as compared to fiscal 2022 was primarily the result of an increase in cash used for capital expenditures.
Selling, Marketing, General and Administrative (SMG&A) Fiscal Year 2022 over 2021 2022 2021 $ Change % Change SMG&A expenses $ 1,266,175 $ 915,418 $ 350,757 38 % SMG&A expenses as a % of revenue 11 % 13 % 31 SMG&A expenses increased in fiscal 2022 as compared to fiscal 2021, primarily as a result of the Acquisition as well as higher salary and benefit expenses and higher variable compensation expenses, partially offset by lower acquisition-related transaction costs.
Selling, Marketing, General and Administrative (SMG&A) Fiscal Year 2023 over 2022 2023 2022 $ Change % Change SMG&A expenses $ 1,273,584 $ 1,266,175 $ 7,409 1 % SMG&A expenses as a % of revenue 10 % 11 % SMG&A expenses increased in fiscal 2023 as compared to fiscal 2022, primarily as a result of higher employee related salary and benefit expenses and discretionary spending, partially offset by lower variable compensation expenses and acquisition-related transaction costs.
Operating Income Fiscal Year 2022 over 2021 2022 2021 $ Change % Change Operating income $ 3,278,700 $ 1,692,201 $ 1,586,499 94 % Operating income as a % of revenue 27.3 % 23.1 % The increase in operating income in fiscal 2022 as compared to fiscal 2021 was primarily the result of a $3,007.5 million increase in gross margin, partially offset by a $475.8 million increase in amortization expenses, a $404.4 million increase in R&D expenses, a $350.8 million increase in SMG&A expenses and a $190.1 million increase in special charges, net as more fully described above under the headings Gross Margin, Amortization of Intangibles, Research and Development (R&D), Selling, Marketing, General and Administrative (SMG&A) and Special Charges, Net .
Operating Income Fiscal Year 2023 over 2022 2023 2022 $ Change % Change Operating income $ 3,823,112 $ 3,278,700 $ 544,412 17 % Operating income as a % of revenue 31.1 % 27.3 % The increase in operating income in fiscal 2023 as compared to fiscal 2022 was primarily the result of a $344.7 million increase in gross margin, a $113.8 million decrease in special charges, net, a $53.0 million decrease in amortization expenses and a $40.3 million decrease in R&D expenses, partially offset by a $7.4 million increase in SMG&A expenses, as more fully described above under the headings Gross Margin, Special Charges, Net, Amortization of Intangibles, Research and Development (R&D) and Selling, Marketing, General and Administrative (SMG&A).
The change in cash used for financing activities during fiscal 2022 as compared to fiscal 2021 was primarily the result of a net decrease in debt in fiscal 2022 as compared to a net increase in debt in fiscal 2021, as well as higher dividend payments, partially offset by lower common stock repurchases.
The decrease in cash used for financing activities during fiscal 2023 as compared to fiscal 2022 was primarily the result of the net proceeds from the issuance of commercial paper notes during fiscal 2023 and lower debt repayments, partially offset by higher common stock repurchases.
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.
In making this determination, we may, depending on the nature of the matter, consult with internal and external legal counsel and technical experts.
Future repurchases of common stock will be dependent upon our financial position, results of operations, outlook, liquidity, and other factors we deem relevant. Capital Expenditures Net additions to property, plant and equipment were $699.3 million in fiscal 2022 and were funded with a combination of cash on hand and cash generated from operations.
Future repurchases of common stock will be dependent upon our financial position, results of operations, outlook, liquidity and other factors we deem relevant. Capital Expenditures Net additions to property, plant and equipment were $1.3 billion in fiscal 2023 as we invested to enhance our global resiliency.
Net Income Fiscal Year 2022 over 2021 2022 2021 $ Change % Change Net income $ 2,748,561 $ 1,390,422 $ 1,358,139 98 % Net income, as a % of revenue 22.9 % 19.0 % Diluted EPS $ 5.25 $ 3.46 $ 1.79 52 % The increase in net income in fiscal 2022 as compared to fiscal 2021 was a result of a $1,586.5 million increase in operating income and a $183.5 million decrease in nonoperating expense, partially offset by a $411.9 million increase in provision for income taxes, as more fully described above under the headings Operating Income, Nonoperating (Income) Expense, and Provision for (Benefit From) Income Taxes .
Net Income Fiscal Year 2023 over 2022 2023 2022 $ Change % Change Net income $ 3,314,579 $ 2,748,561 $ 566,018 21 % Net income, as a % of revenue 26.9 % 22.9 % Diluted EPS $ 6.55 $ 5.25 $ 1.30 25 % The increase in net income in fiscal 2023 as compared to fiscal 2022 was a result of a $544.4 million increase in operating income and a $56.8 million decrease in provision for income taxes, partially offset by a $35.2 million increase in nonoperating expense, as more fully described above under the headings Operating Income, Provision for (Benefit From) Income Taxes and Nonoperating (Income) Expense.
(4) We have supplier commitments for the purchase of materials and supplies in advance or with minimum purchase quantities. As of October 29, 2022, our total liabilities associated with uncertain tax positions was $194.4 million, which are 35 included in non-current income taxes payable in our Consolidated Balance Sheets contained in Item 8 of this Annual Report on Form 10-K.
As of October 28, 2023, our total liabilities associated with uncertain tax positions was $186.2 million, which are included in non-current income taxes payable in our Consolidated Balance Sheets contained in Item 8 of this Annual Report on Form 10-K.
Working Capital Fiscal Year 2022 2021 $ Change % Change Accounts receivable, net $ 1,800,462 $ 1,459,056 $ 341,406 23 % Days sales outstanding (1) 50 52 Inventory $ 1,399,914 $ 1,200,610 $ 199,304 17 % Days cost of sales in inventory (1) 106 118 _______________________________________ (1) We use the average of the current year and prior year ending net accounts receivable and ending inventory balance in our calculation of days sales outstanding and days cost of sales in inventory, respectively.
Working Capital Fiscal Year 2023 2022 $ Change % Change Accounts receivable, net $ 1,469,734 $ 1,800,462 $ (330,728) (18) % Days sales outstanding (1) 48 50 Inventory $ 1,642,214 $ 1,399,914 $ 242,300 17 % Days cost of sales in inventory (1) 125 106 _______________________________________ (1) We use the average of the current year and prior year ending net accounts receivable and ending inventory balance in our calculation of days sales outstanding and days cost of sales in inventory, respectively.
Accordingly, future business and economic conditions, as well as changes in any of the assumptions described above, can materially impact the amount of contingent consideration expense we record in any given period. 38 Accounting for Income Taxes We make certain estimates and judgments in determining income tax expense for financial statement purposes.
Significant judgment is employed in determining the appropriateness of these assumptions as of the acquisition date and for each subsequent period. Accordingly, future business and economic conditions, as well as changes in any of the assumptions described above, can materially impact the amount of contingent consideration expense we record in any given period.
Results of Operations Overview Fiscal Year 2022 over 2021 2022 2021 $ Change % Change Revenue $ 12,013,953 $ 7,318,286 $ 4,695,667 64 % Gross margin % 62.7 % 61.8 % Net income $ 2,748,561 $ 1,390,422 $ 1,358,139 98 % Net income as a % of revenue 22.9 % 19.0 % Diluted EPS $ 5.25 $ 3.46 $ 1.79 52 % 29 Revenue Trends by End Market The following table summarizes revenue by end market.
Results of Operations Overview Fiscal Year 2023 over 2022 2023 2022 $ Change % Change Revenue $ 12,305,539 $ 12,013,953 $ 291,586 2 % Gross margin % 64.0 % 62.7 % Net income $ 3,314,579 $ 2,748,561 $ 566,018 21 % Net income as a % of revenue 26.9 % 22.9 % Diluted EPS $ 6.55 $ 5.25 $ 1.30 25 % Revenue Trends by End Market The following table summarizes revenue by end market.
Fiscal Year 2022 2021 Net cash provided by operating activities $ 4,475,402 $ 2,735,069 Net cash provided by operating activities as a % of revenue 37 % 37 % Net cash (used for) provided by investing activities $ (657,368) $ 2,143,525 Net cash used for financing activities $ (4,290,720) $ (3,959,664) The following changes contributed to the net change in cash and cash equivalents from fiscal 2021 to fiscal 2022.
Fiscal Year 2023 2022 Net cash provided by operating activities $ 4,817,634 $ 4,475,402 Net cash provided by operating activities as a % of revenue 39 % 37 % Net cash used for investing activities $ (1,266,385) $ (657,368) Net cash used for financing activities $ (4,063,760) $ (4,290,720) The following changes contributed to the net change in cash and cash equivalents from fiscal 2022 to fiscal 2023. 31 Operating Activities Cash provided by operating activities is net income adjusted for certain non-cash items and changes in assets and liabilities.
These capital expenditures will be funded with a combination of cash on hand and cash expected to be generated from future operations, together with existing and anticipated available short- and long-term financing. Dividends On November 21, 2022, our Board of Directors declared a cash dividend of $0.76 per outstanding share of common stock.
We expect capital expenditures for fiscal 2024 to be between approximately $600.0 million and $800.0 million. These capital expenditures will be funded with a combination of cash on hand and cash expected to be generated from future operations, together with existing and anticipated available short- and long-term financing.
The calculations above include the financial results of Maxim prospectively from the Acquisition Date. The increase in accounts receivable for fiscal 2022 compared to fiscal 2021 was primarily the result of variations in the timing of collections and billings and increased revenue levels.
The decrease in accounts receivable for fiscal 2023 compared to fiscal 2022 was primarily the result of variations in the timing of collections and billings and decreased revenue levels in the fourth quarter of fiscal 2023 as compared to the fourth quarter of fiscal 2022.
See Note 2r, Stock-based Compensation, and Note 3, Stock-Based Compensation and Shareholders' Equity , of the Notes to Consolidated Financial Statements contained in Item 8 of this Annual Report on Form 10-K for more information related to stock-based compensation. 39 Contingencies From time to time, in the ordinary course of business, various claims, charges and litigation are asserted or commenced against us arising from, or related to, among other things, contractual matters, patents, trademarks, personal injury, environmental matters, product liability, insurance coverage, employment or employment benefits.
Contingencies From time to time, in the ordinary course of business, various claims, charges and litigation are asserted or commenced against us arising from, or related to, among other things, contractual matters, patents, trademarks, personal injury, environmental matters, product liability, insurance coverage, employment or employment benefits. We periodically assess each matter to determine if a contingent liability should be recorded.
The dividend will be paid on December 15, 2022 to all shareholders of record at the close of business on December 5, 2022 and is expected to total approximately $387.1 million. We currently expect quarterly dividends to continue in future periods, although they remain subject to determination and declaration by our Board of Directors.
We currently expect quarterly dividends to continue in future periods, although they remain subject to determination and declaration by our Board of Directors.
Fiscal 2022 Fiscal 2021 Revenue % of Total Revenue (1) Revenue % of Total Revenue (1) Distributors $ 7,458,478 62 % $ 4,589,944 63 % Direct customers 4,423,883 37 % 2,600,353 36 % Other 131,592 1 % 127,989 2 % Total Revenue $ 12,013,953 100 % $ 7,318,286 100 % _______________________________________ (1) The sum of the individual percentages may not equal the total due to rounding.
Other customers include the U.S. government, government prime contractors and certain commercial customers for which revenue is recorded over time. 28 Fiscal 2023 Fiscal 2022 Revenue % of Total Revenue (1) Revenue % of Total Revenue (1) Distributors $ 7,534,894 61 % $ 7,458,478 62 % Direct customers 4,603,166 37 % 4,423,883 37 % Other 167,479 1 % 131,592 1 % Total Revenue $ 12,305,539 100 % $ 12,013,953 100 % _______________________________________ (1) The sum of the individual percentages may not equal the total due to rounding.
Amortization of Intangibles Fiscal Year 2022 over 2021 2022 2021 $ Change % Change Amortization expenses $ 1,012,572 $ 536,811 $ 475,761 89 % Amortization expenses as a % of revenue 8 % 7 % Amortization expenses increased in fiscal 2022 as compared to fiscal 2021, primarily as a result of amortization expense of intangible assets recorded as part of the Acquisition.
Amortization of Intangibles Fiscal Year 2023 over 2022 2023 2022 $ Change % Change Amortization expenses $ 959,618 $ 1,012,572 $ (52,954) (5) % Amortization expenses as a % of revenue 8 % 8 % Amortization expenses decreased in fiscal 2023 as compared to fiscal 2022, primarily as a result of a portion of our acquired intangible assets becoming fully amortized during fiscal 2023.
Current liabilities decreased to $2,442.7 million at October 29, 2022 from $2,770.3 million recorded at the end of fiscal 2021, primarily due to early termination of debt, partially offset by higher accounts payable and accruals.
Current liabilities increased to $3.2 billion at October 28, 2023 from $2.4 billion recorded at the end of fiscal 2022, primarily due to increases in commercial paper notes and current debt, partially offset by lower accrued liabilities.
(2) Tax obligation relates to the one-time tax on deemed repatriated earnings under the Tax Cuts and Jobs Act of 2017 enacted in fiscal 2018. (3) Certain of our operating lease obligations include escalation clauses. These escalating payment requirements are reflected in the table.
(2) Tax obligation relates to the one-time tax on deemed repatriated earnings under the Tax Cuts and Jobs Act and includes a reduction resulting from the approval granted by the Joint Committee on Taxation of our federal corporate income tax relief claim which reduced the amount of transition tax owed. (3) Certain of our operating lease obligations include escalation clauses.
For fiscal 2022 and fiscal 2021 our pretax income was primarily generated in Ireland at a tax rate of 12.5%. See Note 12, Income Taxes , of the Notes to Consolidated Financial Statements contained in Item 8 of this Annual Report on Form 10-K for further discussion.
See Note 5, Special Charges, Net , of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for more information.
We recognize the expense related to equity awards on a straight-line basis over the vesting period.
The use of valuation models requires us to make estimates of key assumptions which are based on historical information and judgment regarding market factors and trends. We recognize the expense related to equity awards on a straight-line basis over the vesting period.
R&D expenses as a percentage of revenue will fluctuate from year-to-year depending on the amount of revenue and the success of new product development efforts, which we view as critical to our future growth. We expect to continue the development of innovative technologies and processes for new products.
Research and Development (R&D) Fiscal Year 2023 over 2022 2023 2022 $ Change % Change R&D expenses $ 1,660,194 $ 1,700,518 $ (40,324) (2) % R&D expenses as a % of revenue 13 % 14 % R&D expenses decreased in fiscal 2023 as compared to fiscal 2022 primarily as a result of lower employee related variable compensation expenses, partially offset by higher salary and benefit expenses. 29 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.
As indicated in the table above, the percentage of total revenue sold via each channel has remained relatively consistent in the periods presented, but can fluctuate from time to time based on end customer demand. 30 Revenue Trends by Geographic Region Revenue by geographic region, based upon the geographic location of the distributors or OEMs who purchased the Company's products, for fiscal 2022 and fiscal 2021 was as follows: Fiscal Year 2022 over 2021 2022 2021 $ Change % Change (1) United States $ 4,025,398 $ 2,389,439 $ 1,635,959 68 % Rest of North and South America 72,497 42,830 29,667 69 % Europe 2,534,423 1,592,989 941,434 59 % Japan 1,221,549 787,966 433,583 55 % China 2,563,536 1,614,396 949,140 59 % Rest of Asia 1,596,550 890,666 705,884 79 % Total Revenue $ 12,013,953 $ 7,318,286 $ 4,695,667 64 % _______________________________________ (1) The sum of the individual percentages may not equal the total due to rounding.
Revenue Trends by Geographic Region Revenue by geographic region, based upon the geographic location of the distributors or OEMs who purchased the Company's products, for fiscal 2023 and fiscal 2022 was as follows: Fiscal Year 2023 over 2022 2023 2022 $ Change % Change (1) United States $ 4,165,296 $ 4,025,398 $ 139,898 3 % Rest of North and South America 88,579 72,497 16,082 22 % Europe 3,001,871 2,534,423 467,448 18 % Japan 1,397,119 1,221,549 175,570 14 % China 2,229,631 2,563,536 (333,905) (13) % Rest of Asia 1,423,043 1,596,550 (173,507) (11) % Total Revenue $ 12,305,539 $ 12,013,953 $ 291,586 2 % _______________________________________ (1) The sum of the individual percentages may not equal the total due to rounding.
Revenue increased across all end markets in fiscal 2022 as compared to fiscal 2021 primarily as a result of the Acquisition, which contributed approximately 65% of the increase in total revenue year over year, a broad-based increase in demand for our products across all end markets as well as inflationary price increases.
Revenue increased 2% in fiscal 2023 as compared to fiscal 2022 primarily as a result of broad-based demand for our products sold into the Industrial end market, namely aerospace and defense and instrumentation, as well as the Automotive end market, namely cabin electronics and battery management systems.
Fiscal 2022 Fiscal 2021 Revenue % of Total Revenue (1) Y/Y% Revenue % of Total Revenue (1) Industrial $ 6,069,332 51 % 51 % $ 4,026,909 55 % Automotive 2,515,513 21 % 102 % 1,248,169 17 % Communications 1,880,697 16 % 56 % 1,206,867 16 % Consumer 1,548,411 13 % 85 % 836,341 11 % Total Revenue $ 12,013,953 100 % 64 % $ 7,318,286 100 % _______________________________________ (1) The su m of the individual percentages may not equal the total due to rounding.
Fiscal 2023 Fiscal 2022 Revenue % of Total Revenue (1) Y/Y% Revenue % of Total Revenue (1) Industrial $ 6,555,222 53 % 6 % $ 6,186,114 51 % Automotive 2,915,199 24 % 19 % 2,442,705 20 % Communications 1,619,517 13 % (13) % 1,863,156 16 % Consumer 1,215,601 10 % (20) % 1,521,978 13 % Total Revenue $ 12,305,539 100 % 2 % $ 12,013,953 100 % _______________________________________ (1) The su m of the individual percentages may not equal the total due to rounding.
Removed
Impact of COVID-19 on our Business The pandemic caused by the novel strain of the coronavirus (COVID-19) and the numerous measures implemented by government authorities in response, have impacted and may continue to impact our workforce and operations, the operations of our customers and those of our respective vendors and suppliers.
Added
These increases were partially offset by a decrease in revenue in the Consumer end market primarily due to weakening market trends and a decrease in revenue in the Communications end market due to the timing of infrastructure deployment cycles. Revenue by Sales Channel The following table summarizes revenue by sales channel.
Removed
We have significant operations worldwide, including in the United States, the Philippines, Ireland, Malaysia, Thailand and India. Each of these countries has been affected by the pandemic and taken measures to try to contain it, resulting in disruptions at some of our manufacturing operations and facilities, including restrictions on our access to facilities.
Added
As indicated in the table above, the percentage of total revenue sold via each channel has remained relatively consistent in the periods presented, but can fluctuate from time to time based on end customer demand.
Removed
The spread of COVID-19 has caused us to modify our business practices (including restricting employee travel, modifying employee work locations and cancelling physical participation in meetings, events and conferences) and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, partners, suppliers and shareholders.
Added
Total revenue increased in fiscal 2023 as compared to fiscal 2022 due to the revenue trends discussed above, partially offset by weaker customer demand in China and Rest of Asia primarily due to deteriorating macroeconomic conditions in those regions.
Removed
While we are confident that our strategy and long-term contingency planning have positioned us well to weather the current uncertainty, we cannot at this time fully quantify or forecast the impact of COVID-19 on our business.
Added
Gross Margin Fiscal Year 2023 over 2022 2023 2022 $ Change % Change Gross margin $ 7,877,218 $ 7,532,474 $ 344,744 5 % Gross margin % 64.0 % 62.7 % Gross margin percentage in fiscal 2023 increased by 130 basis points compared to fiscal 2022.
Removed
The ultimate impact of the COVID-19 pandemic on our business, results of operations, financial condition and cash flows continues to largely depend on future developments, including the duration, scope and severity of the pandemic, any additional resurgences, variants and severity of variants and the ability to effectively and widely manufacture and distribute vaccines, which are not within our control and cannot be accurately predicted and are uncertain.
Added
Fiscal 2022 included $271.4 million of additional cost of goods sold that did not repeat in fiscal 2023 related to a nonrecurring fair value adjustment recorded to inventory. This increase in gross margin percentage was partially offset by lower utilization of our factories due to decreasing customer demand during fiscal 2023.
Removed
Acquisition of Maxim Integrated Products, Inc. On August 26, 2021 (Acquisition Date), we completed the acquisition of Maxim Integrated Products, Inc. (Maxim), an independent manufacturer of innovative analog and mixed-signal products and technologies.
Added
Special Charges, Net Fiscal Year 2023 over 2022 2023 2022 $ Change % Change Special charges, net $ 160,710 $ 274,509 $ (113,799) (41) % Special charges, net as a % of revenue 1 % 2 % Special charges, net decreased in fiscal 2023 as compared to fiscal 2022, primarily due to increased charges recorded in fiscal 2022 related to our Global Repositioning Actions offset by $160.7 million of charges recorded in fiscal 2023 primarily related to $114.0 million recorded for our plan committed to during the three months ended October 28, 2023, to reorganize our business (the Q4 2023 Plan).
Removed
Pursuant to the Agreement and Plan of Merger, dated as of July 12, 2020 (the Merger Agreement), Maxim stockholders received, for each outstanding share of Maxim common stock, 0.6300 of a share of the Company’s common stock as of the Acquisition Date, for total consideration of approximately $28.0 billion of our common stock.
Added
The Q4 2023 Plan, consisting of voluntary and involuntary reductions-in-force, and other cost-savings initiatives, was commenced to adjust our cost structure and business activities to better align with weaker market demand and continued economic uncertainty in our end markets, as well as make certain strategic shifts in our workforce necessary to achieve our long-term vision.
Removed
The acquisition of Maxim is referred to as the Acquisition. The consolidated financial statements included in this Annual Report on Form 10-K include the financial results of Maxim prospectively from the Acquisition Date.
Added
Nonoperating Expense (Income) Fiscal Year 2023 over 2022 2023 2022 $ Change % Change Nonoperating expense (income) $ 215,109 $ 179,951 $ 35,158 20 % The year-over-year increase in nonoperating expense in fiscal 2023 as compared to fiscal 2022 was primarily the result of 30 higher interest expense related to our debt obligations and lower net gains from other investments, partially offset by higher interest income.
Removed
Other customers include the U.S. government, government prime contractors and certain commercial customers for which revenue is recorded over time.
Added
For fiscal 2023 and fiscal 2022 our pretax income was primarily generated in Ireland at a tax rate of 12.5%. Our effective tax rate for fiscal 2023 also included the effects of the mandatory capitalization and amortization of research and development expenses which began in fiscal 2023 under the Tax Cuts and Jobs Act of 2017.
Removed
Total revenue increased in fiscal 2022 as compared to fiscal 2021 due to the incremental impact of revenue from the Acquisition, broad-based, global demand in the semiconductor industry as well as inflationary price increases.
Added
The mandatory capitalization requirement decreased our effective tax rate primarily by increasing the foreign-derived intangible income deduction.
Removed
Gross Margin Fiscal Year 2022 over 2021 2022 2021 $ Change % Change Gross margin $ 7,532,474 $ 4,525,012 $ 3,007,462 66 % Gross margin % 62.7 % 61.8 % Gross margin percentage in fiscal 2022 increased by 90 basis points compared to fiscal 2021 primarily as a result of favorable product mix, synergies related to the Acquisition and higher utilization of our factories due to increased customer demand, partially offset by additional cost of goods sold related to the Acquisition.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

16 edited+2 added−0 removed17 unchanged
Biggest changeThe fair values of our notes as of October 29, 2022 and October 30, 2021, assuming a hypothetical 100 basis point increase in market interest rates, are as follows: October 29, 2022 October 30, 2021 (thousands) Principal Amount Outstanding Fair Value Fair Value given an increase in interest rates of 100 basis points Principal Amount Outstanding Fair Value Fair Value given an increase in interest rates of 100 basis points Maxim 2023 Notes, due March 2023 $ — $ — $ — $ 500,000 $ 520,236 $ 513,273 2024 Notes, due October 2024 500,000 491,982 483,035 500,000 500,482 486,201 2025 Notes, due April 2025 400,000 383,378 374,686 400,000 423,265 409,725 2026 Notes, due December 2026 900,000 851,479 820,203 900,000 986,243 941,160 Maxim 2027 Notes, due June 2027 59,788 54,771 52,534 500,000 542,942 515,866 2027 Notes, due June 2027 440,212 410,091 393,294 — — — 2028 Notes, due October 2028 750,000 621,093 588,044 750,000 743,109 696,554 2031 Notes, due October 2031 1,000,000 786,772 727,579 1,000,000 996,702 912,196 2032 Notes, due October 2032 300,000 278,359 257,337 — — — 2036 Notes, due December 2036 144,278 126,274 114,389 144,278 176,960 158,110 2041 Notes, due October 2041 750,000 513,709 450,337 750,000 758,246 652,754 2045 Notes, due December 2045 332,587 313,931 276,820 332,587 469,592 404,287 2051 Notes, due October 2051 1,000,000 640,766 545,958 1,000,000 1,029,830 848,513 Foreign Currency Exposure As more fully described in Note 2i, Derivative and Hedging Agreements , of the Notes to Consolidated Financial Statements contained in Item 8 of this Annual Report on Form 10-K, we regularly hedge our non-U.S. dollar-based exposures by entering into forward foreign currency exchange contracts.
Biggest changeThe fair values of our notes as of October 28, 2023 and October 29, 2022, assuming a hypothetical 100 basis point increase in market interest rates, are as follows: October 28, 2023 October 29, 2022 (thousands) Principal Amount Outstanding Fair Value Fair Value given an increase in interest rates of 100 basis points Principal Amount Outstanding Fair Value Fair Value given an increase in interest rates of 100 basis points Commercial paper notes $ 547,225 $ 547,185 $ 546,875 $ — $ — $ — 2024 Notes, due October 2024 500,000 499,473 495,058 500,000 491,982 483,035 2025 Notes, due April 2025 400,000 385,231 380,013 400,000 383,378 374,686 2026 Notes, due December 2026 900,000 851,023 826,888 900,000 851,479 820,203 Maxim Notes, due June 2027 — — — 59,788 54,771 52,534 2027 Notes, due June 2027 440,212 408,595 395,208 440,212 410,091 393,294 2028 Notes, due October 2028 750,000 628,999 600,812 750,000 621,093 588,044 2031 Notes, due October 2031 1,000,000 773,404 721,064 1,000,000 786,772 727,579 2032 Notes, due October 2032 300,000 269,828 251,153 300,000 278,359 257,337 2036 Notes, due December 2036 144,278 118,554 108,085 144,278 126,274 114,389 2041 Notes, due October 2041 750,000 479,078 422,949 750,000 513,709 450,337 2045 Notes, due December 2045 332,587 292,248 259,323 332,587 313,931 276,820 2051 Notes, due October 2051 1,000,000 590,666 507,297 1,000,000 640,766 545,958 39 Foreign Currency Exposure As more fully described in Note 2i, Derivative and Hedging Agreements , of the Notes to Consolidated Financial Statements contained in Item 8 of this Annual Report on Form 10-K, we regularly hedge our non-U.S. dollar-based exposures by entering into forward foreign currency exchange contracts.
Changes in those assumptions can have a material effect on the amount recognized for price protection credits. 43 How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company's process to calculate the price protection credits.
Changes in those assumptions can have a material effect on the amount recognized for price protection credits. 41 How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company's process to calculate the price protection credits.
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 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and the Board of Directors of Analog Devices, Inc.
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. 40 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and the Board of Directors of Analog Devices, Inc.
Based on investment positions as of October 29, 2022 and October 30, 2021, a hypothetical 100 basis point increase in interest rates across all maturities would not materially impact the fair market value of the portfolio in either period. If significant, such losses would only be realized if we sold the investments prior to maturity.
Based on investment positions as of October 28, 2023 and October 29, 2022, a hypothetical 100 basis point increase in interest rates across all maturities would not materially impact the fair market value of the portfolio in either period. If significant, such losses would only be realized if we sold the investments prior to maturity.
(the Company) as of October 29, 2022 and October 30, 2021, the related consolidated statements of income, comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended October 29, 2022, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).
(the Company) as of October 28, 2023 and October 29, 2022, the related consolidated statements of income, comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended October 28, 2023, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at October 29, 2022 and October 30, 2021, and the results of its operations and its cash flows for each of the three years in the period ended October 29, 2022, in conformity with U.S. generally accepted accounting principles.
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at October 28, 2023 and October 29, 2022, and the results of its operations and its cash flows for each of the three years in the period ended October 28, 2023, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of October 29, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated November 22, 2022 expressed an unqualified opinion thereon.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of October 28, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated November 21, 2023 expressed an unqualified opinion thereon.
We also evaluated whether the Company appropriately considered new information that could significantly change the estimated future price protection credits. /s/ Ernst & Young LLP We have served as the Company’s auditor since 1967. Boston, Massachusetts November 22, 2022 44
We also evaluated whether the Company appropriately considered new information that could significantly change the estimated future price protection credits. /s/ Ernst & Young LLP We have served as the Company’s auditor since 1967. Boston, Massachusetts November 21, 2023 42
During 2022, sales to distributors were $7.5 billion net of expected price protection credits and rights of return for which the liability balance as of October 29, 2022 was $749.4 million, of which the vast majority relates to the price protection credits.
During 2023, sales to distributors were $7.5 billion net of expected price protection credits and rights of return for which the liability balance as of October 28, 2023 was $525.4 million, of which the vast majority relates to the price protection credits.
Based on our cash and marketable securities outstanding as of October 29, 2022 and October 30, 2021, our annual interest income would change by approximately $14.7 million and $19.7 million, respectively, for each 100 basis point increase in interest rates.
Based on our cash and marketable securities outstanding as of October 28, 2023 and October 29, 2022, our annual interest income would change by approximately $9.6 million and $14.7 million, respectively, for each 100 basis point increase in interest rates.
The following table illustrates the effect that an immediate 10% unfavorable or favorable movement in foreign currency exchange rates, relative to the U.S. dollar, would have on the fair value of our forward exchange contracts as of October 29, 2022 and October 30, 2021: October 29, 2022 October 30, 2021 Fair value of forward exchange contracts $ (16,984) $ (8,085) Fair value of forward exchange contracts after a 10% unfavorable movement in foreign currency exchange rates asset $ 21,193 $ 26,673 Fair value of forward exchange contracts after a 10% favorable movement in foreign currency exchange rates liability $ (51,604) $ (41,034) The calculation assumes that each exchange rate would change in the same direction relative to the U.S. dollar.
The following table illustrates the effect that an immediate 10% unfavorable or favorable movement in foreign currency exchange rates, relative to the U.S. dollar, would have on the fair value of our forward exchange contracts as of October 28, 2023 and October 29, 2022: October 28, 2023 October 29, 2022 Fair value of forward exchange contracts $ (11,575) $ (16,984) Fair value of forward exchange contracts after a 10% unfavorable movement in foreign currency exchange rates asset $ 49,284 $ 21,193 Fair value of forward exchange contracts after a 10% favorable movement in foreign currency exchange rates liability $ (70,461) $ (51,604) The calculation assumes that each exchange rate would change in the same direction relative to the U.S. dollar.
Based on the $500.0 million of our floating rate debt outstanding as of October 29, 2022, our annual interest expense would change by approximately $5.0 million for each 100 basis point increase in interest rates.
Based on our floating rate debt outstanding as of October 28, 2023 and October 29, 2022, inclusive of our commercial paper notes and interest rate swap outstanding, as applicable, our annual interest expense would change by approximately $20.5 million and $5.0 million, respectively, for each 100 basis point increase in interest rates.
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.
Based on the credit ratings of our counterparties as of October 28, 2023, we do not believe that there is significant risk of nonperformance by them. While the contract or notional amounts of derivative financial instruments provide one measure of the volume of these transactions, they do not represent the amount of our exposure to credit risk.
As of October 29, 2022, we had $6.6 billion in principal amount of senior unsecured notes outstanding, with a fair value of $5.5 billion. The fair value of our notes is subject to interest rate risk, market risk, and other factors. Generally, the fair value of our notes will increase as interest rates fall and decrease as interest rates rise.
The fair value of our notes is subject to interest rate risk, market risk and other factors. Generally, the fair value of our notes will increase as interest rates fall and decrease as interest rates rise.
Relative to the net unhedged foreign currency exposures existing at October 29, 2022 and October 30, 2021, an immediate 10% unfavorable movement in foreign currency exchange rates would result in approximately $69.5 million of losses and $39.5 million of losses, respectively, in changes in earnings or cash flows over the course of the year. 41 The market risk associated with our derivative instruments results from currency exchange rates that are expected to offset the market risk of the underlying transactions, assets and liabilities being hedged.
Relative to the net unhedged foreign currency exposures existing at October 28, 2023 and October 29, 2022, an immediate 10% unfavorable movement in foreign currency exchange rates would result in approximately $66.5 million of losses and $69.5 million of losses, respectively, in changes in earnings or cash flows over the course of the year.
The counterparties to the agreements relating to our foreign exchange instruments consist of a number of major international financial institutions with high credit ratings. Based on the credit ratings of our counterparties as of October 29, 2022, we do not believe that there is significant risk of nonperformance by them.
The market risk associated with our derivative instruments results from currency exchange rates that are expected to offset the market risk of the underlying transactions, assets and liabilities being hedged. The counterparties to the agreements relating to our foreign exchange instruments consist of a number of major international financial institutions with high credit ratings.
Added
As of October 28, 2023 we had $1.0 billion notional of fixed for floating interest rate swaps outstanding, with the swap payable having a fair value of $81.6 million. A hypothetical 100 basis point increase in interest rates would increase the swap payable by approximately $57.0 million with a corresponding adjustment to the carrying value of the related debt.
Added
As of October 28, 2023, we had $6.5 billion in principal amount of senior unsecured notes outstanding, with a fair value of $5.3 billion. We also had $547.2 million of commercial paper notes outstanding. As commercial paper notes issuances are at then-current rates and with very short maturities, the carrying value will approximate the fair value.

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