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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED OCTOBER 29, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM_______________ TO ________________
COMMISSION FILE NO. 1-7819
ANALOG DEVICES, INC.
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2348234
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE TECHNOLOGY WAY, NORWOOD, MA 02062-9106
(Address of principal executive offices) (Zip Code)
(617) 329-4700
(Registrant's telephone number, including area code)
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SECURITIES REGISTERED PURSUANT TO SECTION 12 (B) OF THE ACT:
COMMON STOCK $.16 2/3 PAR VALUE NEW YORK STOCK EXCHANGE
Title of Each Class Name of Each Exchange on
Which Registered
SECURITIES REGISTERED PURSUANT TO SECTION 12 (G) OF THE ACT:
NONE
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
The aggregate market value of the voting stock held by non-affiliates of
the registrant was approximately $1,695,071,277 based on the closing price of
the Common Stock on the New York Stock Exchange Composite Tape reporting system
on December 30, 1994.
Indicate the number of shares outstanding of each class of Common Stock:
75,383,933 shares of $.16 2/3 par value Common Stock as of December 30, 1994.
DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENT DESCRIPTION 10-K PART
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Portions of the Registrant's Proxy Statement for the Annual
Meeting of Stockholders to be held March 14, 1995 ................ III
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PART I
ITEM 1. BUSINESS
Analog Devices, Inc. ("Analog" or the "Company") designs, manufactures and
markets a broad line of high-performance linear, mixed-signal and digital
integrated circuits ("ICs") that address a wide range of real-world signal
processing applications. The Company's principal products include
special-purpose linear and mixed-signal ICs ("SPLICs"), digital signal
processing ICs ("DSP ICs") and general-purpose, standard-function linear and
mixed-signal ICs ("SLICs"). The Company also manufactures and markets devices
using assembled product technology, the largest portion of which are hybrid
ICs, which combine unpackaged IC chips and other chip-level components in a
single package.
Nearly all of the Company's products are components, which are typically
incorporated by original equipment manufacturers (OEMs) in a wide range of
equipment and systems for use in computer, telecommunication, industrial,
instrumentation, military/aerospace and high-performance consumer electronics
applications. The Company sells its products worldwide; approximately 44% of
the Company's fiscal 1994 net sales were made to customers in North America,
while most of the balance was to customers in Western Europe and the Far East.
INDUSTRY OVERVIEW
Real-world phenomena, such as temperature, pressure, sound, images, speed,
acceleration, position and rotation angle, are inherently analog in nature,
consisting of continuously varying information. This information can be
detected and measured using analog sensors, which represent real-world
phenomena by generating continuously varying voltages and currents. The signals
from these sensors are initially processed using analog methods, e.g.,
amplification, filtering and shaping. They are then usually converted to
digital form for input to a microprocessor, which is used to manipulate, store
or display the information. In many cases the signals are further processed
after conversion to digital form using a technology called "digital signal
processing." In addition, digital signals are frequently converted to analog
form to provide signals for analog display, sound, or control functions. These
manipulations and transformations are collectively known as "real-world signal
processing."
Significant advances in semiconductor technology over the past ten to fifteen
years have led to substantial increases in the performance and functionality of
ICs used for signal processing applications. Key among these advances is the
ability to create VLSI (Very Large Scale Integration) mixed-signal ICs that
contain both high-performance analog circuitry and large amounts of high-
density digital circuitry. The analog circuitry portion of the IC is used for
manipulating real-world signals while still in analog form and for converting
analog signals into digital form (or vice versa), and the digital portion is
used for further processing analog signals subsequent to their conversion to
digital form. The ICs resulting from these advances are used as components in
equipment and systems to achieve more effective interaction with natural
phenomena and the human senses.
TRENDS IN THE COMPANY'S BUSINESS
Analog has long been a leader in the development, production and marketing of
linear and mixed-signal ICs, particularly technology-driven, high-performance,
general-purpose, standard-function ICs (or SLICs). Building on its core
technical competencies, Analog believes that it is a leading worldwide supplier
of data converters and operational amplifiers and that data converters and
operational amplifiers collectively account for approximately half of the
semiconductor industry's total SLIC sales. SLICs are sold to a very large
customer base for a wide variety of applications. Early markets for these
products were primarily manufacturers of equipment and systems for the
industrial, instrumentation and military/aerospace markets, and these markets
still account for a significant part of the Company's business.
As linear IC technology has evolved within the industry, it has been employed
to develop market-driven, special-purpose linear and mixed-signal ICs (or
SPLICs) tailored to specific high-volume applications. Early-generation SPLICs
were generally low-performance devices for applications in automotive,
computer, consumer and certain communications applications. These devices were
subject to commodity-like pricing pressures, and the Company therefore chose
initially not to compete in this area. However, the emerging demand for the
highest levels of performance in many high-volume applications has provided the
Company an opportunity to leverage its expertise by diversifying into SPLICs
and DSP ICs for selected applications in these market segments. Products for
such applications must also have a high level of functionality (i.e., many
functions on one chip) to satisfy OEMs' requirements for low cost per function.
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Over the past four years, Analog has been engaged in a transition from being
primarily a supplier of SLICs (and to a lesser extent, assembled products)
serving a very fragmented market to a company whose strategy is to balance its
traditionally stable, profitable SLIC business with the growth opportunities
available for SPLICs and DSP ICs, which are typically sold in high volume to a
relatively small number of customers. Toward this end, the Company has
refocused much of its direct sales force and marketing resources on the needs
of SPLIC and DSP IC customers and moved a significant portion of its
traditional SLIC business into the distribution sales channel to better serve
the fragmented customer base characteristic of the instrumentation, industrial
and military/aerospace markets.
PRINCIPAL PRODUCTS
The Company operates predominantly in one industry segment: the design,
manufacture and marketing of a broad line of high-performance linear,
mixed-signal and digital integrated circuits that address a wide range of
real-world signal processing applications. Analog's products can be divided
into three classifications: standard-function linear and mixed-signal ICs
(SLICs); special-purpose linear and mixed-signal ICs (SPLICs) and digital
signal processing ICs (DSP ICs); and assembled products.
A substantial portion of the Company's products are proprietary (available only
from Analog), while equivalents to most of its other products are available
from a limited number of other suppliers. Many of the Company's products tend
to be less price sensitive than other types of ICs, such as DRAM (Dynamic
Random Access Memory) ICs, primarily because there are fewer suppliers and
because OEMs, in many cases, after qualifying one manufacturer's
high-performance linear or mixed-signal IC for a specific application, are
reluctant to switch manufacturers due to the risk of degradation in the
performance of their product and/or the effort required to qualify additional
suppliers.
The following table sets forth the approximate percentage of revenue
attributable to each of the Company's product groups for the past three fiscal
years:
PRODUCTS 1994 1993 1992
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SLICs 59% 60% 64%
SPLICs and DSP ICs 30 26 18
Assembled Products 11 14 18
SLICS
SLICs have been the foundation of the Company's business for more than 20
years, and the Company expects that they will continue to be its core products
for much of the 1990s. Analog believes that it is currently one of the world's
largest suppliers of SLIC products. The Company's SLIC products are primarily
high-performance, single-function devices. The majority of the Company's SLIC
revenue is attributable to data converters (analog-to-digital and
digital-to-analog) and amplifiers. Other products within this category with
significant sales are analog signal-processing devices (such as analog
multipliers), voltage references and comparators. The Company is currently
expanding its SLIC product offerings in areas where it traditionally has had
limited focus, principally interface circuits and power management ICs. It is
also expanding its SLIC product line to include a much larger number of
products designed to operate from single-supply 3- or 5-volt power sources to
better meet the needs of customers designing portable, battery-operated
equipment.
Analog's SLIC products tend to be general purpose in nature, which allows
customers to incorporate them in a wide variety of equipment and systems.
Analog's product portfolio includes several hundred SLICs, any one of which can
have as many as several hundred customers. The Company's SLIC customers include
both OEMs and customers who build equipment for their own use. Historically,
most SLICs have been purchased by OEMs which serve the industrial and
military/aerospace markets, but they are now also being used for applications
in personal computers (PCs), peripheral equipment used with PCs and computers,
and commercial and consumer communications equipment.
Design engineers employed by the Company's OEM customers typically select SLIC
products based on information in the Company's catalogs, datasheets and other
promotional materials. By using standard, high-performance, readily available,
off-the-shelf components in their designs, Analog's customers can reduce the
time required to develop and bring new products to market. Given the high cost
of developing customized ICs, SLICs usually provide the most cost-
effective solutions for low- to medium-volume applications. In addition,
combinations of SLICs connected together on a printed circuit board can provide
functionality that cannot currently be implemented with a single-chip device.
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SPLICS AND DSP ICS
SPLICs and DSP ICs, which are collectively referred to as system-level ICs, are
multi-function devices that feature high levels of functional integration on a
single chip. Most SPLICs are mixed-signal devices (some of which include DSP
capability) and the balance are linear-only devices. SPLICs are almost always
designed to the requirements of a specific application, and the design process
often includes significant input from one or more potential key customers.
Market demand for SPLICs is driven by the benefits that result from using one
of these devices rather than a combination of SLICs and other ICs. These
benefits include higher performance, lower cost per function, smaller size,
lower weight, fewer parts, decreased power consumption, easier design-ins and
faster time to market. These benefits are becoming more important to the
Company's OEM customers as they increase their focus on high-performance,
small, lightweight products, many of which are battery powered. Many of the
products they are designing could not be developed without these types of ICs.
The Company's DSP ICs are designed to efficiently execute specialized programs
(algorithms) associated with processing real-time, real-world data. The
Company's fixed-point and floating-point DSP ICs share a common architecture
and code compatibility, which allows system designers to make cost, performance
and time-to-market trade-offs. By reducing the manufacturing cost of its fixed-
point DSP ICs, the Company has been able to reduce the selling prices of these
devices, which has made it possible to incorporate them in mass-market products
such as PCs and modems. Analog's DSP ICs are supported with specialized
applications and easy-to-use, low-cost design tools, which reduce product
development cost and time to market. The Company's DSP IC revenue growth has
been aided by the availability of analog and mixed-signal "front-end" ICs such
as data converters from the Company.
The Company's DSP IC revenues are derived from both digital-only devices and
mixed-signal ICs that include a DSP core along with data conversion and analog
signal processing circuitry. Demand for system-level ICs that incorporate both
DSP functionality and sophisticated mixed-signal capability is expected to
increase as customers continue to demand as much functionality as possible from
a single chip.
ASSEMBLED PRODUCTS
The Company's assembled products consist primarily of hybrid products (devices
with several IC chips mounted and wired together on a substrate) and modules
(ICs and other components soldered to a small printed circuit board, which is
mounted inside a small plastic case). These are primarily older products, which
include devices such as amplifiers and data converters used in data acquisition
applications. Revenue from this product group began declining in fiscal 1989,
due in part to the deliberate obsolescence of certain products (in conjunction
with a manufacturing consolidation program implemented by the Company) and
their replacement with newer- generation ICs from the Company. Assembled
products revenue is expected to continue declining at a moderate rate. However,
given the proprietary nature of the majority of the products in this line, the
Company expects that these products will continue providing a positive
contribution to cash flow and profits.
PRINCIPAL MARKET AND APPLICATIONS
The Company's principal market is comprised of original equipment manufacturers
(OEMs) that incorporate the Company's products in equipment, instruments and
systems sold to end users for a wide variety of applications, including
computers and computer peripherals; communications equipment; engineering,
medical and scientific instruments; industrial automation equipment;
military/aerospace equipment; and high-end consumer electronics products. The
Company's growth has been aided both by the expansion of the markets
represented by these end-use applications and by the increasing use of computer
technology in the equipment and systems offered for sale in these markets.
Analog believes that for fiscal 1994 its 20 largest customers accounted for
approximately 27% of the Company's net sales. The largest single customer
represented less than 5% of net sales. Sales of the Company's products are not
highly seasonal.
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Listed below are some of the characteristics of each of the Company's major
served markets:
INSTRUMENTATION--includes manufacturers of engineering, medical and scientific
instruments. These products are usually designed using the highest performance
SLICs available, where the end product must be substantially more accurate than
the equipment or phenomena it is expected to measure, and where production
volumes generally do not warrant custom or application-specific ICs. The
Company's products sold into this market usually have long product life cycles.
INDUSTRIAL AUTOMATION--includes data acquisition systems, automatic process
control systems, robotics, environmental control systems and automatic test
equipment (ATE). These products generally require ICs that offer performance
greater than that available from commodity-level ICs, but generally do not have
production volumes that warrant custom or application-specific ICs.
Combinations of SLICs are therefore usually employed to achieve the necessary
functionality (ATE being an exception, where the high level of electronic
circuitry required per tester has created opportunities for SPLICs). ICs sold
into this market tend to have long product life cycles.
MILITARY/AEROSPACE--includes the military, commercial avionics and space
markets, all of which require high-performance ICs that meet rigorous
environmental and reliability specifications. Nearly all of the Company's SLICs
can be supplied in versions that meet the requirements of MIL-STD-883C, Class
B, and many can be supplied to Class S, an even more stringent specification
that governs ICs used for spaceflight applications. Most of the Company's
products sold into this market are derived from standard commercial grade ICs,
although the Company sometimes develops products expressly for
military/aerospace applications.
COMPUTERS AND COMPUTER PERIPHERALS--includes high-performance personal
computers, workstations and peripheral devices such as hard disk drives. The
Company currently supplies a variety of ICs used in this market for functions
such as graphic displays; interfaces between PCs and peripherals such as modems
and printers; power and battery management; processing analog signals from a
hard disk drive's read head and positioning the read head over a hard disk
drive platter; and providing enhanced sound input and output capability for
business and entertainment applications. This market is characterized by
rapidly developing technology.
COMMUNICATIONS--includes data and fax modems, digital cellular telephones and
portable, wireless communications equipment. The need for ever higher speed,
coupled with more reliable, more bandwidth-efficient communications is creating
increasing demand for systems that include both digital and analog signal
processing capability. Demand for signal processing ICs for this market is also
being driven by the equipment manufacturers' need for components that enable
them to develop cost-effective products that feature high performance, small
size, low weight and minimal power consumption.
CONSUMER ELECTRONICS--The emergence of high-performance consumer products, such
as compact disc players, digital VCRs, digital audio tape equipment and digital
camcorders, has led to the need for high-performance SPLICs with a high level
of functionality. Although the Company's revenue from this market is not
currently significant, the Company expects to supply ICs for sophisticated
products used by consumers for computing, communications and entertainment
applications, and believes that many of these applications will involve digital
signal processing.
In addition to the above markets, Analog is pursuing the automotive market.
Although this market has historically been served with low-cost,
low-performance ICs, demand has developed for higher performance devices for a
wide range of applications. In response, Analog is developing products
specifically for the automotive market. The Company began shipments of its
first automotive product, a micromachined IC employed as a crash sensor in
airbag systems, in 1993. In 1994 the Company began shipments of this device to
Delco for airbag systems in several 1995 model-year General Motors "W body"
cars, including the Pontiac Grand Prix, Oldsmobile Cutlass and Buick Century.
Revenues from this device were not significant in 1994, but are expected to
increase substantially beginning in 1995.
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NEW PRODUCTS
Analog's revenue growth is driven by a continuing flow of new products. More
than 40% of the Company's orders in fiscal 1994 were for products introduced
within the preceding five years. Among the key new products introduced and/or
first actively marketed in 1994 were:
SHARC 32-BIT, FLOATING-POINT DSP--A high-performance 32-bit, floating-point
digital signal processor (DSP), with 40 MIPS (millions of instructions/second)
capability. It is available in two versions: the ADSP-21060 with 4 Mb of
on-board static memory and the ADSP-21062 with 2 Mb. This device achieved a
broad range of design-ins during 1994, and is well suited for applications such
as digital mobile radio base stations, speech processing, graphics and imaging
systems and high-performance arcade games.
ADSP-2171 HIGH-PERFORMANCE 16-BIT, FIXED-POINT DSP--Analog's
highest-performance fixed-point DSP. Because of its low power, high MIPS and
added functionality, this device is particularly well suited for handling
speech coding requirements for digital radio communications. It is also well
suited for PC applications for processing real-time signals such as those used
in voice, audio and telephone applications.
AD899 COMPLETE READ CHANNEL--A fully integrated read-channel IC for hard disk
drives. It replaces multiple-chip solutions with a single device that
significantly reduces power and space requirements, as well as overall function
cost, while supporting data transfer rates of up to 32 Mbits per second.
AD8001 HIGH-SPEED, LOW-POWER AMPLIFIER--A very fast general-purpose operational
amplifier. It provides operation at 800 MHz while consuming only 50 mW of
power. The AD8001 is well suited for use as an A/D converter driver, in
numerous video applications, and in the RF (radio frequency) section of
receivers.
AD1845/46 STEREO CODECS--Third-generation 16-bit codec ICs that provide
low-cost, single-chip audio solution for business audio and multimedia
applications for both computer motherboard and add-in card implementations.
Both devices are compatible with the Windows Sound System (a trademark of
Microsoft Corp.). The AD1846 provides a parallel computer interface, while the
AD1845 has an asynchronous interface and includes sample rate conversion
technology, which permits audio signals digitized at different sample rates to
be used in the same system.
AD20MSP815 PERSONAL SOUNDCOMM CHIPSET--A five-chip chipset for implementing
many popular PC functions, including 14.4 Kbps fax and data modem capability,
industry-standard 16-bit audio capability, and telephone functions such as
answering machine and speaker phone capability. The chipset consists of a DSP
IC, a stereo audio codec IC, a complete, high-performance analog front-end and
two custom logic chips. A complete design guide is also available that greatly
simplifies the customer's design-in task.
ADM663/666 VOLTAGE REGULATORS--Five-volt regulators used for power management
in end products such as communications equipment and computers. These products
are representative of Analog's increased focus on ICs designed expressly for
power management applications.
AD835 MULTIPLIER AND AD831 MIXER --These two analog ICs are used as building
blocks for RF (radio frequency) front-ends in receivers. They are among the
first parts introduced by Analog aimed specifically at RF front-end
applications for products such as digital mobile radio base stations and
handsets, RF modems, and communications and aircraft receivers.
AD420 4-20 mA D/A CONVERTER--A serial-input 16-bit digital-to-analog converter
used to generate a 4-to-20 mA analog output signal that is proportional to its
digital input signal. It provides a high-precision, fully integrated, low-cost,
single-chip solution for generating the industry-standard control loop signals
required in industrial automation systems.
LOW VOLTAGE, LOW POWER ICs--During 1994 Analog Devices introduced a substantial
number of ICs designed to operate from single-supply 3- and 5-volt power
sources. Some of these products represent new functionality, while many are
lower-voltage, lower-power versions of existing products. They are much better
suited for many emerging computer and communication applications in
battery-powered portable products where power consumption is a primary concern.
Products in this catergory included amplifiers, data converters and DSPs.
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RESEARCH AND DEVELOPMENT
The markets served by Analog are characterized by rapid technological changes
and advances. Accordingly, the Company makes substantial investments in the
design and development of new products and processes, and for significant
improvement of existing products and processes. Analog spent $106.9 million
during fiscal 1994 for the design, development and improvement of new and
existing products and processes, compared to $94.1 million during fiscal 1993
and $88.2 million during 1992.
In fiscal 1994, approximately half of the Company's R&D expenditures were
devoted to the design and development of SPLICs and DSP ICs, and the
development and improvement of processes used for these products. The Company
believes that it will be able to leverage its core technological competencies
and leadership position in linear and DSP technology to design and develop a
wide range of highly integrated, high-performance, cost-effective mixed-signal
SPLICs, many of which will include DSP capability. At the same time, however,
the Company expects to continue developing new and improved SLIC products to
increase its share of the SLIC market.
As of December 1, 1994, the Company owned 262 U.S. patents and had 91 patent
applications on file with the United States patent office. The Company believes
that while its patents may provide some advantage, its competitive position is
largely determined by such factors as the knowledge, ability and experience of
the Company's personnel, new product development, market recognition and
ongoing marketing efforts, customer service and technical support.
SALES CHANNELS
Analog sells its products in both North America and internationally through a
direct sales force, third-party distributors and independent sales
representatives. Approximately 44% of fiscal 1994 revenue was derived from
customers in North America. As of December 1, 1994, the Company had 17 sales
offices in the United States, and its third-party distribution channel
consisted of nine national and regional third-party distributors and several
independent sales representatives with numerous locations throughout the U.S.
and Canada.
Approximately 26% of the Company's fiscal 1994 revenue was derived from sales
to customers in Europe; 17% to customers in Japan; and 13% to customers in
other international markets. As of December 1, 1994, the Company had direct
sales offices in Austria, Belgium, Denmark, France, Germany, Hong Kong, India,
Israel, Italy, Japan, Korea, The Netherlands, Sweden, Switzerland, Taiwan and
the United Kingdom. The Company also had sales representatives and/or
distributors in approximately 25 countries outside North America, including
countries where the Company also has direct sales offices.
Approximately one-third of Analog's fiscal 1994 revenue was derived from sales
made through distributors. The Company's distributors typically maintain an
inventory of Analog products. Some of these distributors also sell products
competitive with the Company's products, including those for which the Company
is an alternate source. Sales to distributors are made under agreements which
provide protection to the distributors for their inventory of Company products
against price reductions and products that are slow-moving or have been
discontinued by the Company. These agreements generally contain a provision for
the return of the products to the Company in the event the relationship with
the distributor is terminated.
Sales to North American distributors are not recognized until the products are
resold by distributors to their customers. Sales made to distributors outside
North America are recognized upon shipment to the distributor, but the Company
provides specific reserves for possible returns and allowances.
The Company's worldwide sales efforts are supported by an extensive promotional
program that includes editorial coverage and paid advertising in trade
publications; direct mail programs; promotional brochures; technical seminars;
and participation in trade shows. The Company publishes and distributes
full-length databooks, short-form catalogs, applications guides, technical
handbooks and detailed data sheets for individual products. The Company also
maintains a staff of application engineers who aid customers in incorporating
Analog's products into their products during their product development cycles.
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PRODUCTION AND RAW MATERIALS
Monolithic integrated circuit components are manufactured in a sequence of
production steps that include wafer fabrication, wafer testing, cutting the
wafer into individual "chips" (or dice), assembly of the dice into packages and
electrical testing of the devices in final packaged form. The raw materials
used to manufacture these devices include silicon wafers, processing chemicals
(including liquefied gases), precious metals, ceramic packages and plastic used
for plastic packaging.
In addition to using industry-standard bipolar and CMOS wafer fabrication
processes, Analog employs a number of Company-developed proprietary processes
specifically tailored for use in fabricating high-performance linear and
mixed-signal SLICs and SPLICs.
Analog's IC products are fabricated both at the Company's production facilities
and by third-party wafer fabricators. Assuming that the Company can continue to
maintain favorable relationships with its third-party wafer fabricators, it
intends to continue using such suppliers for meeting most of its needs for
wafers that can be fabricated using industry-standard digital processes. The
Company intends to meet most of its needs for wafers fabricated with linear and
mixed-signal processes with wafers fabricated at the Company's production
facilities.
Hybrid products are manufactured by mounting and connecting together several
integrated circuit chips in a single package. Some of the chips used in the
Company's hybrids are manufactured by the Company and some are purchased from
outside suppliers. The production process for modular components, subsystems
and systems consists primarily of assembly, packaging and testing. Some of the
Company's assembled products are assembled and tested within the Company's U.S.
manufacturing facilities, while others are assembled and tested at
Company-owned facilities outside the United States or by subcontractors,
principally in the Far East.
In general, the Company uses standard supplies and components in the
manufacture of its products and most are available from a number of suppliers.
Certain items are made to the Company's specifications and are available from a
limited number of suppliers. However, the Company believes that, if necessary,
alternative sources of supply for these items could be developed, and that any
delays in obtaining alternative sources would be temporary and would not have a
material adverse effect on the Company's business.
WORKING CAPITAL REQUIREMENTS
The Company manufactures and sells a wide variety of products, a significant
portion of which are standard products delivered from inventory on a current
basis. As a result, the Company generally maintains finished goods inventories
sufficient to meet customer delivery requirements within a short time following
receipt of an order.
BACKLOG
The Company defines its backlog at any point in time as those orders for which
customers have requested shipment within the next 13 weeks. The quantities of
the Company's products to be delivered and their delivery schedules, as covered
by customer purchase orders, are frequently revised by customers to reflect
changes in their needs. As is customary in the semiconductor industry, most
such orders can be canceled or deliveries delayed by the customer without
significant penalty.
Backlog at the end of fiscal 1994 was approximately $152.8 million; it was
approximately $127.1 million at the end of the prior fiscal year. In the past,
backlog at the end of one quarter has typically represented about 60% to 70% of
the next quarter's sales. For example, the backlog at the end of the third
quarter of fiscal 1994 was approximately $140.1 million; sales for the fourth
quarter of fiscal 1994 were $203.3 million. Standard products, which are
typically delivered from current inventory, usually account for much of the
difference between one quarter's ending backlog and the next quarter's sales.
Agreements between the Company and its third-party stocking distributors
provide price protection for the distributors and certain rights of return for
merchandise unsold by the distributors; as a result, sales to domestic
distributors are not recognized until the products are resold by the
distributors to their customers. For these reasons, and the previously
mentioned ability of customers to cancel orders or delay deliveries without
significant penalty, the Company believes that its backlog is not necessarily a
reliable indicator of future revenue.
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GOVERNMENT CONTRACTS
The Company estimates that approximately 15% of its total worldwide revenue is
attributable to sales to the U.S. government and government contractors and
subcontractors. Analog's government contract-related business is predominantly
in the form of negotiated, firm fixed-priced subcontracts. All such contracts
and subcontracts contain standard provisions related to termination at the
election of the United States government. The Company expects that the U.S.
government's intention to further reduce U.S. military spending will result in
a continuing gradual reduction in the percentage of the Company's total sales
going to governmental users and contractors.
COMPETITION
Analog competes with a large number of semiconductor companies in markets that
are highly competitive. The Company believes it is one of the largest suppliers
of high-performance linear and mixed-signal signal-processing components. These
types of products fall into both the SLIC and SPLIC product categories.
Competitors for the Company's linear and mixed-signal products include
Brooktree Corp., Burr-Brown Corp., Cirrus Logic Inc., Exar Corp., Harris Corp.,
Linear Technology Corp., Maxim Integrated Products, Inc., National
Semiconductor Corp., Sierra Semiconductor Corp., Siliconix Inc., Silicon
Systems (a subsidiary of TDK Corp), Texas Instruments, Inc. and others.
Sales of DSP ICs represent a growing percentage of the Company's total sales.
Analog's competitors for DSP ICs include AT&T, Integrated Device Technology,
Inc., Motorola Semiconductor Products and Texas Instruments, Inc.
Many other companies offer components that compete with Analog's products; some
also offer other electronic products, and some have financial resources
substantially larger than Analog's. Also, some formerly independent competitors
have been purchased by larger companies (which in some cases may be viewed as a
means by which the acquiring company gains in-house capability). However, to
the Company's knowledge, no manufacturer competes with Analog across all of the
product types offered by the Company in its signal-processing components
product line.
Analog believes that competitive performance in the marketplace for real-world
signal-processing components depends upon several factors, including product
price, technical innovation, product quality and reliability, range of
products, customer service and technical support. Analog believes its
aggressive technical innovation emphasizing product performance and
reliability, supported by its commitment to strong customer service and
technical support, will allow the Company to continue to compete successfully
in its chosen markets against both foreign and domestic semiconductor
manufacturers.
ENVIRONMENT
Analog's manufacturing facilities are subject to numerous environmental laws
and regulations, particularly with respect to industrial waste and emissions.
Compliance with these laws and regulations has not had a material impact on the
Company's capital expenditures, earnings or competitive position.
EMPLOYEES
As of October 29, 1994, the Company employed approximately 5,400 persons. The
Company believes that relations with its employees are good.
INTERNATIONAL OPERATIONS
Analog has direct sales offices in 16 countries outside the United States. In
addition, the Company has manufacturing facilities in Ireland, Japan, the
Philippines and Taiwan. The Company also has arrangements with subcontractors,
principally in the Far East, for the wafer fabrication, assembly and testing of
certain products. The majority of Analog's international sales in the past
fiscal year were made through its direct international sales offices while the
balance, approximately one-third of the total, were made through distributors.
8
10
A significant portion of Analog's revenues and operating profits are derived
from international operations, and the Company is therefore subject to the
economic and political risks inherent in international operations generally,
including expropriation, air transportation disruptions, currency controls and
changes in currency exchange rates, tax and tariff rates and freight rates. The
Company has taken steps it deems prudent in its international operations to
diversify and otherwise insure and protect against these risks. Financial
information concerning domestic and international operations appears in Notes
1(f), 1(g) and 2 in the Notes to Consolidated Financial Statements included as
part of this report.
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ITEM 2. PROPERTIES
The Company's corporate headquarters is located in Norwood, Massachusetts.
Manufacturing and other operations are carried on in several locations
worldwide. The following tables provide certain information as to the Company's
principal general offices and manufacturing facilities:
PLANT LOCATION
--------------
OWNED: USE FLOOR SPACE
------ ---- -----------
Wilmington, Wafer fabrication, components assembly and testing, engineering 245,200 sq. ft.
Massachusetts and administrative offices
Wilmington, Components engineering, marketing and administrative offices 67,200 sq. ft.
Massachusetts
Limerick, Wafer fabrication, components assembly and testing, engineering 236,200 sq. ft.
Ireland and administrative offices
Greensboro, Components and board assembly and testing, engineering and 90,000 sq. ft.
North Carolina administrative offices
Manila, Philippines Components assembly and testing, engineering and administrative 81,800 sq. ft.
offices
Tokyo, Japan Components assembly and testing, engineering and administrative 69,200 sq. ft.
offices
PRINCIPAL LEASE
--------- ------
PROPERTIES USE FLOOR SPACE EXPIRATION RENEWALS
---------- --- ----------- ---------- --------
LEASED (FISCAL YEAR)
------
Norwood, Corporate headquarters, engineering, components 135,000 sq. ft. 2007 3, five-yr.
Massachusetts assembly and sales and marketing offices periods
(1)
Westwood, Components and subsystems assembly and testing, 100,400 sq. ft. 1996 2, ten-yr.
Massachusetts engineering and administrative offices periods
(2)
Santa Clara, Wafer fabrication, components assembly and 72,800 sq. ft. 1995 3, five-yr.
California testing, engineering and administrative offices periods
Santa Clara, Administrative offices and engineering 43,500 sq. ft. 1995 3, five-yr.
California periods
Wilmington, Engineering, systems assembly and 91,000 sq. ft. 1995 -
Massachusetts administrative offices
Taipei, Components testing, engineering and 27,700 sq. ft. 1997 3 to 5 yr.
Taiwan administrative offices option to
extend
(1) See Note 6 - "Commitments and Contingencies" in the Notes to Consolidated
Financial Statements for information regarding contingent liabilities
related to the lease of the Norwood, Massachusetts property.
(2) The Westwood, Massachusetts facility is subject to a 25-year capital lease
with an option to purchase.
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In addition to the principal leased properties listed above, the Company also
leases sales offices and other premises at 24 locations in the United States
and 26 locations overseas under operating lease agreements. These leases expire
at various dates through the year 2010.
See Note 5 - "Lease Commitments" in the Notes to Consolidated Financial
Statements for information concerning the Company's obligations under all
operating and capital leases.
The Company believes that its existing and planned facilities are adequate and
suitable for the manufacture and sale of its products, and have sufficient
productive capacity to meet its current and anticipated requirements. In
addition, the Company anticipates no difficulty in retaining occupancy of any
of its manufacturing, office or sales facilities through lease renewals prior
to expiration or through month-to-month occupancy, or in replacing them with
equivalent facilities.
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ITEM 3. LEGAL PROCEEDINGS
TEXAS INSTRUMENTS LITIGATION
The Company is a defendant in a lawsuit brought by Texas Instruments, Inc.
("TI") on July 9, 1990 in the United States District Court for the Western
District of Texas (Dallas Division). The complaint alleges that certain plastic
encapsulation processes conducted by the Company's subsidiaries in Ireland and
the Philippines infringe two TI patents (both of which had expired by August
1994) and seeks an injunction and unspecified damages. The alleged infringement
of one of these patents was also the subject matter of a proceeding brought by
TI against the Company before the International Trade Commission (the "ITC") on
July 9, 1990 seeking an injunction preventing the Company from importing
allegedly infringing products into the United States.
Following a hearing in May 1991, the ITC upheld the validity of the TI patent,
determined that certain types of encapsulation processes practiced by the
Company's subsidiaries infringed the TI patent and found that alternative
encapsulation processes used by the Company's subsidiaries did not infringe the
TI patent. The ITC also determined that, upon the merger of Precision
Monolithics, Inc. ("PMI") into the Company in November 1990, the Company
acquired the benefit of a license from TI to PMI for the TI patent. Pursuant
to such license, the Company obtained what it believed was the right to import
annually up to $94 million of integrated circuits using the patented
encapsulation process. The decision of the ITC was upheld on appeal by the
United States Court of Appeals for the Federal Circuit. Even if the Company's
ability to utilize the full amount of the PMI license is upheld by the District
Court, TI could seek damages for sales of allegedly infringing products between
February 1989 and the November 1990 merger with PMI.
On January 10, 1994, the ITC brought an enforcement proceeding against the
Company alleging that the Company had violated the ITC's cease and desist
order of February 1992, as modified in July 1993. The ITC is seeking
substantial penalties against the Company for these alleged violations. The
Company has denied that it violated either of these orders. An initial hearing
in this proceeding is scheduled to begin on February 13, 1995.
On June 19, 1992, the Company commenced a lawsuit in the United States District
Court for the District of Massachusetts alleging that certain TI digital signal
processors infringed a patent owned by the Company. TI has filed counterclaims
in this action alleging that certain of the Company's products infringe four TI
patents relating to digital signal processing and electrostatic discharge
protection in integrated circuits. In its counterclaim, TI seeks an injunction
against the Company from violating the TI patents and unspecified damages. The
Company has denied the essential allegations in the TI counterclaims. A trial
in this case is currently scheduled for June 1995.
MAXIM LITIGATION
The Company is a defendant in a suit brought by Maxim Integrated Products, Inc.
("Maxim") on November 11, 1992 in the United States District Court for the
Northern District of California. The complaint alleges violations of federal
antitrust law and pendant state claims in connection with distribution
arrangements between the Company and certain distributors. Maxim alleged that a
number of these distributors ceased doing business with Maxim as a result of
the distribution arrangements between the distributors and the Company. Maxim
claims that those agreements have improperly restricted its access to channels
by which it distributes its products. Maxim seeks, among other things,
injunctive relief and actual, consequential and punitive damages. In a
pre-trial submission dated August 31, 1994, Maxim asserted actual and
consequential damages in the amount of $14.1 million. It also claims
restitution and punitive damages in an unspecified amount. Under applicable
law, Maxim would receive three times the amount of any actual damages suffered
as a result of any antitrust violation.
On September 7, 1994, the Northern District of California ruled in favor of the
Company on a summary judgment motion, dismissing all of Maxim's claim for lack
of evidence. Maxim has appealed this ruling to the Ninth Circuit Court of
Appeals, which has ordered that briefing of the appeal be concluded by
March 7, 1995.
For additional information concerning the above described lawsuits and the
potential impact of such suits upon the Company's financial condition and
results of operations, see Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
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OTHER
The Company has also received and made inquiries with regard to other possible
patent infringement claims. These inquiries have been referred to counsel and
are in various stages of discussion. If any infringements are determined to
exist, the Company may seek or extend licenses or settlements. In addition,
from time to time as a normal incidence of the nature of the Company's
business, various claims, charges and litigation are asserted or commenced
against the Company arising from or related to contractual relations, personal
injury, environmental matters and product liability. While the Company cannot
accurately predict the ultimate outcome of these other matters, at this time
management believes that the likelihood of an outcome resulting in a material
adverse effect on the Company's consolidated financial position, trends in
results of operations or cash flows is remote.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders during
the last quarter of the fiscal year ended October 29, 1994.
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EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth (i) the name and age of each present executive
officer of the Company; (ii) the position(s) presently held by each person
named; and (iii) the principal occupations held by each person named for at
least the past five years.
EXECUTIVE OFFICER AGE POSITION BUSINESS EXPERIENCE
----------------- --- -------- -------------------
Ray Stata . . . . . . . 60 Chairman of the Board and Chairman of the Board and Chief Executive
Chief Executive Officer Officer since 1973; President from 1971 to
November 1991.
Jerald G. Fishman . . . 49 President, Chief Operating President, Chief Operating Officer and
Officer and Director Director since November 1991; Executive
Vice President from 1988 to November 1991;
Group Vice President - Components from
1982 to 1988.
William A. Martin . . . 35 Treasurer Treasurer since March 1993; Assistant
. Treasurer from October 1991 to March 1993;
Manager of Treasury Finance from March
1987 to October 1991; Manager of
International Treasury from October 1985
to March 1987.
Brian P. McAloon . . . 44 Vice President, Sales Vice President, Sales since May 1992; Vice
President, Sales and Marketing - Europe
and Southeast Asia from 1990 to 1992;
General Manager, Analog Devices, B.V. -
Limerick, Ireland from 1987 to 1990.
Joseph E. McDonough . . 47 Vice President, Finance and Vice President, Finance and Chief
Chief Financial Officer Financial Officer since November 1991;
Vice President since 1988 and Treasurer
from 1985 to March 1993; Director of Taxes
from 1983 to 1985.
There is no family relationship among the named officers.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is listed on the New York Stock Exchange under the
symbol ADI. The table below sets forth the high and low prices of the Common
Stock during the two most recent fiscal years.
1994 1993
----------------------- ------------------------
PERIOD HIGH LOW HIGH LOW
------ ---- --- ---- ---
First Quarter $ 17.50 $ 12.88 $ 11.63 $ 7.75
Second Quarter $ 20.75 $ 16.38 $ 14.25 $ 10.38
Third Quarter $ 20.88 $ 16.38 $ 14.88 $ 11.88
Fourth Quarter $ 24.50 $ 17.63 $ 18.63 $ 13.13
On November 30, 1994, the Company's Board of Directors authorized a
three-for-two stock split effected in the form of a 50% stock dividend
distributed on January 4, 1995 to stockholders of record December 12, 1994. All
stock prices in the table above have been restated to reflect the split.
The Company's $60,000,000 credit agreement restricts the aggregate of all cash
dividend payments declared or made subsequent to October 29, 1994 to an amount
not exceeding $85,147,000 plus 50% of the consolidated net income of the
Company for the period from October 30, 1994 through the end of the Company's
then most recent fiscal quarter. Although prior credit agreements may not have
restricted the payment of dividends, the Company has never paid any cash
dividends on its Common Stock.
The approximate number of holders of record of the Company's Common Stock at
December 30, 1994 was 4,417. This number does not include shareholders for whom
shares are held in a "nominee" or "street" name.
ITEM 6. SELECTED FINANCIAL DATA
(thousands except per share amounts) 1994 1993 1992 1991 1990(2)
- -------------------------------------------------------------------------------------------------------------------
Statement of Operations data:
Net sales................. $773,474 $666,319 $567,315 $537,738 $485,214
Net income (loss)......... 74,496 44,457 14,935 8,203 (12,913)
Net income (loss) per
share (1)............... .96 .59 .21 .12 (.18)
Balance Sheet data:
Total assets.............. $815,871 $678,492 $561,867 $503,317 $487,188
Long term obligations..... 80,061 100,297 70,632 36,819 24,129
- -------------------------------------------------------------------------------------------------------------------
(1) All references to per share amounts have been restated to reflect the
three-for-two stock split effected in the form of a 50% stock dividend
distributed on January 4, 1995 to stockholders of record December 12, 1994.
(2) In the fourth quarter of fiscal 1990, the Company acquired Precision
Monolithics, Inc. (PMI). The Company's results include the results of
operations of PMI since August 8, 1990, the date of the acquisition.
15
17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
FISCAL 1994 COMPARED TO FISCAL 1993
Net sales of $773.5 million for fiscal 1994 increased 16% from net sales of
$666.3 million for fiscal 1993. The sales increase was due principally to
higher sales volumes of both standard linear IC and system-level IC products
which together grew approximately 20% year-over-year to comprise approximately
90% of total sales for fiscal 1994.
Standard linear IC sales rose $54.3 million or approximately 14% to $455.3
million in fiscal 1994. This increase was primarily due to the combination of
increased penetration of the distribution channel coupled with well accepted
new product offerings. As a percentage of total sales, standard linear products
accounted for 59% in fiscal 1994 compared to 60% in fiscal 1993.
Sales of system-level IC products grew $59.6 million or approximately 34% to
$234.6 million in fiscal 1994. This growth was attributable largely to
increased demand for applications in personal computers and wireless
communications products, and the Company's broader participation in these
growing markets.
Sales of assembled products declined approximately 7% from fiscal 1993 to
fiscal 1994 and as a percentage of total sales decreased from 14% to 11% over
the same period. Despite the revenue declines in assembled products over the
past few years and lower gross margins associated with these products, this
product grouping remained profitable in 1994.
Sales to North American customers increased 18% over 1993 levels to
$343.9 million with much of this increase coming from the distributor channel
as sales through North American distributors increased 36% from the prior year.
Sales to international customers grew 15% led by sales increases of
approximately 27% and 35% in Japan and Southeast Asia, respectively. Sales
growth in Japan was mainly attributable to increased demand for standard
linear IC products, aided in part by the translation of yen-denominated sales
to a weaker average U.S. dollar. The sales increase in Southeast Asia
represented continued strength in sales of personal computer products.
European sales of $197.9 million for fiscal 1994 were flat compared to the
prior year due to weaker European industrial economies as compared to fiscal
1993. Sales growth in Europe resumed in the fourth quarter of fiscal 1994,
growing again after weakness in the first nine months of the year as the
European economy showed improvement, particularly Germany. As a percentage of
total net sales, North American and international sales remained at 44% and
56%, respectively, which are comparable to fiscal 1993.
Gross margin improved to 49.0% of sales for fiscal 1994 compared to 47.3% for
fiscal 1993. This increase resulted principally from a significant improvement
in gross margin for system-level IC products as variable manufacturing costs
declined and fixed costs were allocated over greater production volumes. Gross
margin for the Company's standard linear IC products remained at a high level
and gross margin on all IC products, which include both standard linear and
system-level ICs, was approximately 50% of sales. Overall gross margin for
fiscal 1995 will depend primarily on the gross margin from system-level IC
products and the relative mix of sales between standard linear and system-level
ICs. During fiscal 1995, the Company does not anticipate overall gross margin
to improve at the same rate of improvement as achieved in fiscal 1994.
Research and development expenses for fiscal 1994 increased 13.6% from fiscal
1993 as the Company continued to invest in new product development. As a
percentage of sales, R&D expenses were 13.8% compared to 14.1% for the prior
year. R&D expenses for fiscal 1995 are expected to increase approximately 15%
to 20% over fiscal 1994 levels as the Company expands its investments in
communications, digital signal processing and micromachining technology.
Selling, marketing, general and administrative (SMG&A) expenses grew 7.4%
compared to fiscal 1993, increasing at a lower rate than sales. As a result,
SMG&A as a percentage of sales decreased to 22.0% for fiscal 1994 from 23.8%
for fiscal 1993. The increase in SMG&A expenses related mostly to increased
strategic advertising and marketing expenses associated with many new product
launches and additional incentive expense associated with the Company's
improved performance.
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18
In total, operating expenses were reduced to 35.8% of sales, down from 37.9%
one year ago, consistent with the Company's emphasis on maintaining tight
control over all costs in order to gain better operating leverage on increases
in revenues. A key factor in controlling operating expenses has been holding
worldwide employment relatively flat at levels approximately equal to that of
1990, while revenues have grown significantly since that time.
Operating income reached 13.2% of sales for fiscal 1994, an increase of nearly
four percentage points from 9.4% of sales for fiscal 1993. This performance
gain reflected the higher sales level, improvement in gross margin as a percent
of sales and a slower rate of expense growth versus sales.
Nonoperating expenses decreased $2.3 million, benefiting from increased
interest income on a higher level of invested cash as net interest expense was
reduced from $5.8 million in fiscal 1993 to $2.0 million in fiscal 1994. Due to
the funding of fiscal 1995 planned capital expenditures with cash on hand and
expected operating cash flows, the Company expects interest income to decline
in fiscal 1995.
The effective income tax rate increased to 23% in fiscal 1994 from 20% in
fiscal 1993 due to a shift in the mix of worldwide income. In the first
quarter of fiscal 1994, the Company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (FAS 109). The impact of
adopting FAS 109 was not material to the Company's consolidated financial
statements. See Note 1(k), "Income Taxes," in the Notes to Consolidated
Financial Statements for information concerning the adoption of FAS 109.
The growth in sales, improved operating performance and lower nonoperating
expenses resulted in a 68% rise in net income to $74.5 million or 9.6% of sales
compared to $44.5 million or 6.7% of sales in fiscal 1993.
The Company has not yet adopted Statement of Financial Accounting Standards
No. 112, "Employers' Accounting for Postemployment Benefits" and Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." Adoption of these statements which is required in
fiscal year 1995 is not expected to have a material impact on the Company's
consolidated financial statements.
The impact of inflation on the Company's business during the past three years
has not been significant.
FISCAL 1993 COMPARED TO FISCAL 1992
Net sales rose 17% to $666.3 million for fiscal 1993, compared to fiscal 1992
sales of $567.3 million. Sales growth in fiscal 1993 was principally
attributable to increased sales volumes. Overall market demand for integrated
circuits remained strong throughout fiscal 1993, with the Company benefiting
from this demand both in its broad-based, standard-function linear IC business
and in its application specific, system-level IC business. Total IC sales,
including both standard linear IC and system-level IC products, increased $113
million or 24% in fiscal 1993 to comprise 87% of total sales. Sales of
assembled products declined approximately 14% in fiscal 1993.
Sales of standard linear IC products increased $38 million or approximately 10%
in fiscal 1993. As a percentage of sales, standard linear IC products accounted
for 60% in fiscal 1993 compared to 64% in fiscal 1992. Increased distribution
sales, which represented approximately 40% of total standard linear IC sales,
and new product offerings led to much of the growth in sales of standard linear
IC products.
Sales of system-level ICs grew by more than 70% to $175 million, or 26% of
total sales. This growth was fueled by increasing success in fast growing
sectors of the communications and computer markets in fiscal 1993.
Assembled product sales declined by $14 million or approximately 14% in fiscal
1993. Assembled products continued to decline as a percentage of total revenues
as well, falling to 14% of total sales in fiscal 1993. Despite the 14% decline
in revenues of assembled products, this product grouping was profitable for
fiscal 1993.
Sales in North America grew approximately 8% over the prior year to $292.1
million. The distributor channel in North America was a major contributor to
this growth with sales through distributors increasing approximately 24% in
fiscal 1993. Sales to all international customers increased 26% with sales in
Europe, Japan and export sales to Southeast Asia increasing 17%, 20% and 74%,
respectively. Much of the sales growth in Southeast Asia resulted from
design-ins achieved in the U.S. and Western Europe for applications in
personal computers. Sales growth in Europe was fueled largely by strong sales
of system-level ICs used in the GSM digital cellular phone network. Demand
showed renewed strength in Japan from the depressed levels in fiscal 1992 with
the fiscal 1993 sales increase mainly attributable to increased
17
19
sales of standard linear IC products. A weaker average dollar exchange rate
year-to-year also contributed to some of the Japanese sales improvement. As a
percentage of total net sales, North American sales decreased from 47% in
fiscal 1992 to 44% in fiscal 1993 and international sales increased from 53%
in fiscal 1992 to 56% in fiscal 1993. This shift reflected a significant
increase in sales to customers in Southeast Asia.
Gross margin improved slightly to 47.3% of sales in fiscal 1993 from 46.8% in
fiscal 1992 due to continued control of manufacturing costs.
R&D expenses for fiscal 1993 grew approximately 7% over the prior year but as a
percentage of sales decreased to 14.1%, down from 15.5% of sales for fiscal
1992. This improvement was the result of continuing efforts to focus R&D on the
most promising opportunities where the Company can build a sustainable
competitive advantage and earn high return factors.
SMG&A expenses grew 5% in absolute dollars in fiscal 1993, increasing at a much
lower rate than sales. As a result, the SMG&A to sales ratio declined from
26.7% for fiscal 1992 to 23.8% for fiscal 1993. The 5% growth in SMG&A expenses
principally reflected normal increases for salaries and benefits and increased
incentive expense associated with the Company's performance.
Operating income for fiscal 1993 was $62.7 million or 9.4% of sales, more than
double the $26.2 million or 4.6% of sales for fiscal 1992. The significant
improvement in operating income was the result of increased sales, improved
gross margin performance and tight operating expense controls which allowed the
Company to gain strong operating leverage on increased revenues.
Interest expense for fiscal 1993 increased to $7.2 million from $6.0 million in
fiscal 1992. This increase resulted from a higher level of total borrowings in
fiscal 1993 which included the issuance of $80 million of long-term debt during
the year. Interest expense net of interest income was $5.8 million for fiscal
1993 compared to $5.1 million for fiscal 1992 as the increased interest expense
on a higher level of debt was offset to some degree by interest income earned
on a higher level of invested cash resulting from increased cash flows from
operations combined with the excess proceeds from the $80 million offering.
The effective income tax rate decreased slightly to 20% in fiscal 1993 from 21%
in fiscal 1992. The tax provisions for both fiscal 1993 and fiscal 1992 were
driven largely by the high proportion of income earned by the Company's Irish
operation for which earnings are taxed at a lower rate.
Net income was $44.5 million, or three times the $14.9 million earned in fiscal
1992. As a percentage of sales, net income was 6.7% in fiscal 1993 versus 2.6%
in fiscal 1992.
LIQUIDITY AND CAPITAL RESOURCES
At October 29, 1994, cash and cash equivalents and short-term investments
totaled $181.8 million, an increase of $101.1 million from $80.7 million at the
end of fiscal 1993. Increased cash and cash equivalents and short-term
investments resulted from a significant improvement in cash provided from
operations compared to fiscal 1993. During fiscal 1994, the Company invested
$72.7 million in short-term investments including commercial paper,
certificates of deposit and bankers' acceptances with maturities greater than
three months and less than one year.
Cash provided by operating activities was $183.3 million or 23.7% of sales for
fiscal 1994 compared to $89.5 million or 13.4% of sales for fiscal 1993. The
increase in operating cash flows in fiscal 1994 was mainly attributable to
higher net income together with a decrease in inventories and an increase in
accounts payable, which were offset in part by growth in accounts receivable.
Accounts receivable of $162.3 million at the end of fiscal 1994 increased $16.7
million or 11.4% from $145.7 million at the end of fiscal 1993. The primary
factors contributing to the increase in accounts receivable were the 14% growth
in fourth quarter sales between the two years and the translation of local
currency denominated receivables to a weaker U.S. dollar, particularly in
Japan. These increases were offset in part by improved collection of
receivables. Despite the increase in accounts receivable in dollars
year-to-year, accounts receivable as a percentage of annualized fourth quarter
sales decreased slightly to 20.0% at the end of fiscal 1994 compared to 20.3%
at the end of fiscal 1993.
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20
Inventories declined $19.7 million during fiscal 1994 to $130.7 million. As a
percentage of annualized fourth quarter sales, inventories were reduced from
21.0% to 16.1% which the Company believes is an appropriate level.
The increase in accounts payable compared to fiscal 1993 primarily reflected
fourth quarter fiscal 1994 expenditures associated with the expansion of the
Company's Irish facility as described below.
Net additions to property, plant and equipment of $90.9 million in fiscal 1994
were funded with internally generated cash flow from operations. Nearly half of
these expenditures occurred in the fourth quarter as expansion of the Company's
wafer fabrication facilities in Limerick, Ireland commenced. This expansion
will include the addition of 6-inch submicron wafer fabrication capability
intended primarily to meet the future demands associated with the Company's
growth. Capital expenditures for fiscal 1995 are currently expected to be
approximately $150 million, including approximately $65 million of capital
expenditures associated with the Limerick wafer fabrication expansion. The
Company expects to finance its planned fiscal 1995 capital additions with cash,
cash equivalents and short-term investments on hand, coupled with internally
generated cash flow from operations.
At October 29, 1994, substantially all of the Company's lines of credit were
unused, including its four-year, $60 million credit facility. In the first
quarter of fiscal 1995, the Company's 7.18%, $20.0 million loan matured. Upon
maturity, this loan was repaid in full with cash and cash equivalents on hand.
The Company believes that its strong financial condition, existing sources of
liquidity, available capital resources and cash expected to be generated from
operations leave it well positioned to obtain the funds required to meet its
current and future business requirements.
LITIGATION
As set forth in "Business-Legal Proceedings," the Company is engaged in patent
infringement litigation with Texas Instruments, Inc. ("TI") and antitrust
litigation with Maxim Integrated Products, Inc. ("Maxim"). See Item 3,
"Business - Legal Proceedings" for additional information concerning these
lawsuits.
If it is determined that the Company has violated the cease and desist order
entered by the ITC in February 1992, as modified in July 1993, the ITC
could seek to impose penalties of up to $100,000 per day or equal to twice the
value of the goods determined to be sold in violation of the order. If, in the
district court action, it is found that certain plastic encapsulation
processes used by the Company infringe TI's patents or that the Company did
not obtain from PMI valid license rights to import up to $94 million annually
of circuits using TI's patented process, the court could award TI substantial
damages. Even if the district court upholds the validity of the PMI license,
if it finds infringement by the Company, TI could seek damages for sales of
allegedly infringing products between February 1989 and the November 1990
merger with PMI.
The dismissal of Maxim's claims has been appealed. The Company believes it has
meritorious defenses to Maxim's antitrust allegations and intends to vigorously
defend the suit. If the dismissal is overturned on appeal and Maxim's claims
are upheld in a subsequent trial on the merits, in addition to potential damage
awards the Company may be required to modify its relationships with its
distributors.
Although the Company believes it should prevail in the matters described above,
the Company is unable to determine their ultimate outcome or estimate the
ultimate amount of liability, if any, at this time. An adverse resolution of
these matters could have a material adverse effect on the Company's
consolidated financial position or on its consolidated results of operations
or cash flows in the period in which the matters are resolved.
FACTORS AFFECTING FUTURE RESULTS
The Company's future results remain difficult to predict and may be affected by
a number of factors including business conditions within the semiconductor
industry and the world economies as a whole, competitive pressures and cyclical
market patterns. In addition, the Company's revenue growth is driven by a
continuing flow of new products; more than 40% of the orders received by the
Company in fiscal 1994 were for products introduced within the preceding five
years. The success of many of these products and the Company's growth
opportunities are dependent on successful penetration of new high volume
computer, communication, and automotive segments of the electronics market
where the Company has less experience and competition is substantial. No
assurance can be given that new products can be developed, or if developed,
will be successful; that market demand or customer acceptance will be realized;
that demand if achieved will be sustained; that competitors will not force
prices to an unacceptably low level or take market share from the Company;
19
21
or that the Company can achieve or maintain profits in these markets. Also,
some of the customers in these markets are less well established which could
subject the Company to increased credit risk. Because of these and other
factors, past financial performance should not be considered an indicator of
future performance. Investors should not use historical trends to anticipate
future results and should be aware that the Company's stock price frequently
experiences significant volatility.
20
22
ANALOG DEVICES, INC.
ANNUAL REPORT ON FORM 10-K
YEAR ENDED OCTOBER 29, 1994
ITEM 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL INFORMATION
21
23
ANALOG DEVICES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN ITEM 8:
Report of Independent Auditors............................................................... 23
Consolidated Statements of Income for the years ended October 29, 1994, October 30, 1993
and October 31, 1992....................................................................... 24
Consolidated Balance Sheets as of October 29, 1994, October 30, 1993 and October 31, 1992.... 25
Consolidated Statements of Stockholders' Equity for the years ended October 29, 1994,
October 30, 1993 and October 31, 1992...................................................... 26
Consolidated Statements of Cash Flows for the years ended October 29, 1994, October 30, 1993
and October 31, 1992....................................................................... 27
Notes to Consolidated Financial Statements................................................... 28
Supplementary Financial Information
(Quarterly Financial Information/1994 and 1993 - Unaudited)................................ 43
22
24
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Analog Devices, Inc.
We have audited the accompanying consolidated balance sheets of Analog Devices,
Inc. as of October 29, 1994, October 30, 1993 and October 31, 1992, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended October 29, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Analog
Devices, Inc. at October 29, 1994, October 30, 1993 and October 31, 1992, and
the consolidated results of its operations and its cash flows for each of the
three years in the period ended October 29, 1994, in conformity with generally
accepted accounting principles.
As discussed in Note 6 to the consolidated financial statements, claims and
actions have been brought against Analog Devices, Inc. and the ultimate outcome
of these claims and actions cannot presently be determined. Accordingly, no
provision for any liability, if any, that may result has been made in the
financial statements.
ERNST & YOUNG LLP
Boston, Massachusetts
November 29, 1994
23
25
ANALOG DEVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME
Years ended October 29, 1994, October 30, 1993 and October 31, 1992
(thousands except per share amounts) 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------
REVENUE Net sales................................... $ 773,474 $ 666,319 $ 567,315
COSTS AND Cost of sales............................... 394,448 350,852 301,678
---------- ---------- ----------
EXPENSES
Gross margin................................ 379,026 315,467 265,637
Operating expenses:
Research and development.................. 106,869 94,107 88,172
Selling, marketing, general...............
and administrative...................... 170,341 158,675 151,293
---------- ---------- ----------
277,210 252,782 239,465
---------- ---------- ----------
Operating income............................ 101,816 62,685 26,172
Nonoperating (income) expenses:
Interest expense.......................... 7,149 7,184 5,976
Interest income........................... (5,165) (1,417) (867)
Other..................................... 2,921 1,393 2,098
---------- ---------- ----------
4,905 7,160 7,207
---------- ---------- ----------
EARNINGS Income before income taxes.................. 96,911 55,525 18,965
Provision for (benefit from) income taxes:
Payable currently......................... 30,720 13,342 5,693
Deferred (prepaid)........................ (8,305) (2,274) (1,663)
--------- --------- ----------
22,415 11,068 4,030
---------- ---------- ----------
Net income.................................. $ 74,496 $ 44,457 $ 14,935
========== ========== ==========
Shares used to compute earnings per share... 77,271 75,695 71,624
========== ========== ==========
Earnings per share of common stock.......... $ .96 $ .59 $ .21
========== ========== ==========
See accompanying notes.
24
26
ANALOG DEVICES, INC.
CONSOLIDATED BALANCE SHEETS
October 29, 1994, October 30, 1993 and October 31, 1992
(thousands except share amounts)
ASSETS 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------
CURRENT Cash and cash equivalents.............................. $ 109,113 $ 80,668 $ 17,730
ASSETS Short-term investments................................. 72,652 - -
Accounts receivable less allowances of $6,403
($2,395 in 1993 and $2,138 in 1992).................. 162,337 145,663 111,732
Inventories............................................ 130,726 150,422 142,453
Prepaid income taxes................................... 25,587 22,207 20,549
Prepaid expenses....................................... 5,042 4,240 4,502
--------- --------- ---------
Total current assets................................... 505,457 403,200 296,966
--------- --------- ---------
PROPERTY, Land and buildings..................................... 111,857 81,110 77,909
PLANT AND Machinery and equipment................................ 477,339 451,248 402,722
EQUIPMENT, Office equipment....................................... 36,613 33,170 28,441
AT COST Leasehold improvements................................. 33,070 26,429 22,231
--------- --------- ---------
658,879 591,957 531,303
Less accumulated depreciation and amortization......... 377,064 343,527 293,880
--------- --------- ---------
Net property, plant and equipment...................... 281,815 248,430 237,423
--------- --------- ---------
OTHER Intangible assets, net................................. 19,262 21,306 23,387
ASSETS Deferred charges and other assets...................... 9,337 5,556 4,091
--------- --------- ---------
Total other assets..................................... 28,599 26,862 27,478
--------- --------- ---------
$ 815,871 $ 678,492 $ 561,867
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
- -------------------------------------------------------------------------------------------------------------------
CURRENT Short-term borrowings and current portion of
LIABILITIES long-term debt....................................... $ 22,917 $ 2,006 $ 2,376
Obligations under capital leases....................... 236 335 313
Accounts payable....................................... 74,506 48,779 43,315
Deferred income on shipments to domestic distributors.. 18,881 16,417 13,094
Income taxes payable................................... 29,425 15,405 1,655
Accrued liabilities.................................... 60,221 49,893 38,809
--------- --------- ---------
Total current liabilities.............................. 206,186 132,835 99,562
--------- --------- ---------
NONCURRENT Long-term debt......................................... 80,000 100,000 70,000
LIABILITIES Noncurrent obligations under capital leases............ 61 297 632
Deferred income taxes.................................. 3,225 8,540 12,657
Other noncurrent liabilities........................... 4,484 4,802 3,999
--------- --------- ---------
Total noncurrent liabilities........................... 87,770 113,639 87,288
--------- --------- ---------
Commitments and Contingencies
STOCKHOLDERS' Preferred stock, $1.00 par value, 500,000 shares
EQUITY authorized, none outstanding......................... - - -
Common stock, $.16 2/3 par value, 150,000,000
shares authorized, 75,252,112 shares issued
(50,924,637 in 1993 and 50,192,060 in 1992).......... 12,542 8,488 8,366
Capital in excess of par value, net of deferred compen-
sation of $4,757 ($3,223 in 1993 and $5,078 in 1992) 141,159 143,502 133,714
Retained earnings...................................... 362,194 287,698 243,241
Cumulative translation adjustment...................... 6,020 5,473 4,772
--------- --------- ---------
521,915 445,161 390,093
Less shares in treasury, at cost, none in 1994
(1,727,396 in 1993 and 2,067,226 in 1992)............ - 13,143 15,076
--------- --------- ---------
Total stockholders' equity............................. $ 521,915 $ 432,018 $ 375,017
--------- --------- ---------
$ 815,871 $ 678,492 $ 561,867
========= ========= =========
See accompanying notes.
25
27
ANALOG DEVICES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended October 29, 1994,
October 30, 1993 and October 31, 1992 COMMON STOCK CAPITAL IN CUMULATIVE TREASURY STOCK
------------ EXCESS OF RETAINED TRANSLATION --------------
(thousands) SHARES AMOUNT PAR VALUE EARNINGS ADJUSTMENT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------
Balance, November 2,
1991 49,840 $ 8,307 $130,899 $228,306 $4,696 (2,368) $(17,763)
- ------------------------------------------------------------------------------------------------------------------------
ACTIVITY Net income - 1992 14,935
IN FISCAL Proceeds from sales
1992 of shares through
employee stock plans
and other 352 59 2,815 301 2,687
Currency translation
adjustment 76
- ------------------------------------------------------------------------------------------------------------------------
Balance, October 31,
1992 50,192 8,366 133,714 243,241 4,772 (2,067) (15,076)
- ------------------------------------------------------------------------------------------------------------------------
ACTIVITY Net income - 1993 44,457
IN FISCAL Proceeds from sales
1993 of shares through
employee stock plans
and other 733 122 9,788 340 1,933
Currency translation
adjustment 701
- ------------------------------------------------------------------------------------------------------------------------
Balance, October 30,
1993 50,925 8,488 143,502 287,698 5,473 (1,727) (13,143)
- ------------------------------------------------------------------------------------------------------------------------
ACTIVITY Net income - 1994 74,496
IN FISCAL Proceeds from sales
1994 of shares through
employee stock plans,
tax benefit of $2.2
and other 470 78 11,293 501 3,483
Three-for-two stock
split 23,857 3,976 (13,636) 1,226 9,660
Currency translation
adjustment 547
- ------------------------------------------------------------------------------------------------------------------------
Balance, October 29,
1994 75,252 $12,542 $141,159 $362,194 $6,020 - $ -
========================================================================================================================
See accompanying notes.
26
28
ANALOG DEVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended October 29, 1994, October 30, 1993 and October 31, 1992
(thousands) 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------
OPERATIONS Cash flows from operations:
Net income . . . . . . . . . . . . . . . . . . . . $ 74,496 $ 44,457 $ 14,935
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation and amortization . . . . . . . . . 61,284 59,813 54,950
Deferred income taxes . . . . . . . . . . . . . (5,398) (4,130) 1,003
Other noncash expenses . . . . . . . . . . . . 2,195 2,779 4,057
(Increase) in accounts receivable . . . . . . . (7,661) (35,598) (15,307)
(Increase) decrease in inventories . . . . . . 20,756 (6,268) (24,690)
(Increase) in prepaid income taxes . . . . . . (626) (1,718) (2,634)
(Increase) decrease in prepaid expenses . . . . (598) 224 (2,213)
(Increase) decrease in other assets . . . . . . (3,269) (1,406) 721
Increase in accounts payable,
deferred income and accrued liabilities . . . 28,939 16,617 5,523
Increase (decrease) in income taxes payable . . 14,063 13,922 (3,317)
Increase (decrease) in other liabilities . . . (839) 803 434
--------- --------- ----------
Total adjustments . . . . . . . . . . . . . . . . . 108,846 45,038 18,527
--------- --------- ----------
Net cash provided by operations . . . . . . . . . . . . 183,342 89,495 33,462
--------- --------- ----------
INVESTMENTS Cash flows from investments:
Additions to property, plant and equipment, net . . (90,856) (67,155) (65,654)
Purchase of short-term investments . . . . . . . . . (72,652) - -
--------- --------- ----------
Net cash used for investments . . . . . . . . . . . . . (163,508) (67,155) (65,654)
--------- --------- ----------
FINANCING Cash flows from financing activities:
ACTIVITIES Proceeds from employee stock plans . . . . . . . . . 9,821 9,995 3,243
Net increase (decrease) in variable rate borrowings. 485 (29,895) (7,020)
Payments on capital lease obligations . . . . . . . (335) (313) (376)
Proceeds from issuance of long-term debt . . . . . . - 80,000 -
Payments on fixed rate borrowings . . . . . . . . . - (20,194) (12,194)
Proceeds from issuance of short-term, fixed rate
borrowings . . . . . . . . . . . . . . . . . . . - - 50,000
--------- --------- ----------
Net cash provided by financing activities . . . . . . . 9,971 39,593 33,653
--------- --------- ----------
Effect of exchange rate changes on cash . . . . . . . . (1,360) 1,005 (263)
--------- --------- ----------
Net increase in cash and cash equivalents . . . . . . . 28,445 62,938 1,198
Cash and cash equivalents at beginning of year . . . . 80,668 17,730 16,532
--------- --------- ----------
Cash and cash equivalents at end of year . . . . . . . $ 109,113 $ 80,668 $ 17,730
========= ========= ==========
SUPPLE- Cash paid during the year for:
MENTAL Income taxes . . . . . . . . . . . . . . . . . . . . $ 12,965 $ 4,084 $ 7,709
========= ========= ==========
INFORMATION Interest . . . . . . . . . . . . . . . . . . . . . . $ 6,923 $ 6,771 $ 5,468
========= ========= ==========
See accompanying notes.
27
29
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED OCTOBER 29, 1994, OCTOBER 30, 1993 AND OCTOBER 31, 1992
(ALL TABULAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
all of its wholly owned subsidiaries. All intercompany balances and
transactions are eliminated. The Company's fiscal year ends on the Saturday
closest to the last day in October. Fiscal years 1994, 1993 and 1992 were each
52-week years.
B. CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Cash and cash equivalents are highly liquid investments with a maturity of
three months or less at the time of acquisition. Cash and cash equivalents are
stated at cost which approximates fair value.
Short-term investments consist of commercial paper, certificates of deposit and
bankers' acceptances with maturities greater than three months and less than
one year at the time of acquisition. The short-term investments are stated at
cost which approximates fair value due to the short maturity of these
instruments.
The Company is required to adopt Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities,"
(FAS 115) in fiscal 1995. Adoption of FAS 115 is not expected to have a
material impact on the Company's consolidated financial statements.
C. INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out method) or
market. Inventories at October 29, 1994, October 30, 1993 and October 31, 1992
were as follows:
1994 1993 1992
- --------------------------------------------------------------------------------
Raw materials $ 15,277 $ 18,645 $ 26,239
Work in process 69,771 80,418 73,604
Finished goods 45,678 51,359 42,610
- --------------------------------------------------------------------------------
Total inventories $130,726 $150,422 $142,453
================================================================================
A director of the Company is also a director of a raw material supplier. Total
purchases from this supplier approximated $28,435,000 in 1994, $37,990,000 in
1993 and $21,984,000 in 1992. Accounts payable to this supplier at October 29,
1994, October 30, 1993 and October 31, 1992 approximated $1,090,000, $3,639,000
and $3,655,000, respectively. Another director of the Company was also a
director of a raw material supplier through June 1993. Total purchases from
this supplier approximated $1,510,000 in 1993 and $5,216,000 in 1992. Accounts
payable to this supplier at October 31, 1992 approximated $397,000. The Company
believes that the terms of these purchases were comparable to those available
from other suppliers.
D. PROPERTY, PLANT AND EQUIPMENT
The straight-line method of depreciation is used for all classes of assets for
financial statement purposes; both straight-line and accelerated methods are
used for income tax purposes. Capitalized leases and leasehold improvements are
amortized based upon the lesser of the term of the lease or the useful life of
the asset. Depreciation and amortization are based on the following useful
lives:
Buildings & Building Equipment Up to 25 years
Machinery & Equipment 3-10 years
Office Equipment 3-8 years
28
30
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Total depreciation and amortization of property, plant and equipment was
$59,240,000, $57,732,000 and $52,858,000 in 1994, 1993 and 1992, respectively.
E. INTANGIBLE ASSETS
Intangible assets at October 29, 1994 consist of goodwill, patents and other
intangibles. Goodwill is being amortized on a straight-line basis over a
fifteen-year period. Patents and other intangibles are being amortized on a
straight-line basis over their estimated economic lives which range from four
to fifteen years. Amortization expense for all intangible assets was
$2,044,000, $2,081,000 and $2,092,000 in 1994, 1993 and 1992, respectively.
Accumulated amortization for all intangible assets was $8,636,000, $6,657,000
and $4,706,000 at October 29, 1994, October 30, 1993 and October 31, 1992,
respectively.
F. TRANSLATION OF FOREIGN CURRENCIES
The functional currency for the Company's foreign sales operations is the
applicable local currency. Gains and losses resulting from translation of these
foreign currencies into U.S. dollars are accumulated in a separate component of
stockholders' equity. Transaction gains and losses are included in income
currently, including those at the Company's principal foreign manufacturing
operations where the functional currency is the U.S. dollar.
G. FOREIGN CURRENCY INSTRUMENTS AND INTEREST RATE AGREEMENTS
The Company enters into forward foreign exchange contracts, foreign currency
option contracts and currency swap agreements to offset certain operational and
balance sheet exposures from changes in foreign currency exchange rates. Such
exposures result from the portion of the Company's operations, assets and
liabilities that are denominated in currencies other than the U.S. dollar.
These foreign exchange contract, option and swap transactions are entered into
to support normal recurring purchases, product sales and financing
transactions, and accordingly, are not speculative in nature.
Forward foreign exchange contracts are utilized to manage the risk associated
with currency fluctuations on certain firm purchase commitments, firm sales
commitments and certain non-U.S. dollar denominated asset and liability
positions. The forward foreign exchange contracts that relate to firm purchase
and sales commitments are designated as effective hedges of firm foreign
currency commitments, and accordingly, the gains and losses on these contracts
are deferred and included in the measurement of the related foreign currency
transaction. Gains and losses on forward foreign exchange contracts designated
to hedge foreign currency assets and liabilities are recognized in income as
the exchange rates change and offset the foreign currency gains and losses on
the related transactions. The face amounts of forward foreign exchange
contracts outstanding at October 29, 1994, October 30, 1993 and October 31,
1992 were $136.4 million, $107.9 million and $107.4 million, respectively.
Forward foreign exchange contracts outstanding at October 29, 1994 have
maturities of up to 14 months.
The Company also may periodically purchase foreign currency option contracts to
hedge certain probable anticipated, but not firmly committed, foreign currency
transactions related to the sale of product during the ensuing twelve months.
These foreign currency option contracts are designated as effective hedges of
such transactions, and accordingly, the costs and any gains associated with
these option contracts are deferred and included in the measurement of the
related foreign currency transaction. When the dollar strengthens significantly
against the foreign currencies, the decline in value of future foreign currency
cash flows is partially offset by the gains in the value of purchased currency
options designated as hedges. Conversely, when the dollar weakens, the increase
in the value of future foreign currency cash flows is reduced only by the
premium paid to acquire the options. The face amounts of foreign currency
option contracts outstanding at October 29, 1994, October 30, 1993 and October
31, 1992 were $28.6 million, $29.0 million and $27.3 million, respectively.
Purchased foreign currency options outstanding at October 29, 1994 have
maturities of up to 6 months.
29
31
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Currency swap agreements are utilized to hedge the net investment in certain
foreign subsidiaries. Realized and unrealized gains and losses on such
agreements related to the net foreign investment being hedged are recognized in
the cumulative translation adjustment component of stockholders' equity. The
face amount of currency swap agreements outstanding at October 29, 1994 was
$10.0 million. Currency swap agreements outstanding at October 29, 1994 have
maturities of up to one year.
The Company enters into interest rate swap and cap agreements to partially
modify the interest characteristics of its financing arrangements from a fixed
to a floating rate basis. These agreements involve the receipt of fixed rate
amounts in exchange for floating rate interest payments over the life of the
agreement without an exchange of the underlying principal amounts. The
differential to be paid or received is accrued as interest rates change and
recognized as an adjustment to interest expense related to the financing
arrangement. The related amount payable to or receivable from counterparties is
included in liabilities or assets. The notional principal amounts of interest
rate swap and cap agreements outstanding at October 29, 1994 and October 30,
1993 were $50.5 million and $40.0 million, respectively. Interest rate swap and
cap agreements outstanding at October 29, 1994 have maturities of up to 12
years.
The cash requirements of the above-described foreign currency instruments and
interest rate swap and cap agreements approximate their fair value. Cash flows
associated with these financial instruments are classified consistent with the
cash flows from the transactions being hedged.
The foreign currency instruments and interest rate swap and cap agreements
involve, to a varying degree, elements of market and interest rate risk not
recognized in the consolidated financial statements. While the contract or
notional amounts are often used to express the volume of the above-described
instruments, the amounts potentially subject to credit risk are generally
limited to the amounts, if any, by which the counterparties' obligations under
the agreements exceed the obligations of the Company to the counterparties. The
Company controls credit risk through credit approvals, limits and monitoring
procedures including the use of high credit quality counterparties.
H. CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to concentrations
of credit risk consist principally of investments and trade accounts
receivable.
The Company maintains cash, cash equivalents and short-term investments with
high credit quality financial institutions and monitors the amount of credit
exposure to any one financial institution.
The Company sells its products to distributors and original equipment
manufacturers involved in a variety of industries including industrial
automation, instrumentation, military/aerospace, and to an increasing degree,
computers and peripherals, telecommunications and high performance consumer
electronics. The Company has adopted credit policies and standards to
accommodate growth into these markets. The Company believes that any risk of
accounting loss with respect to trade accounts receivable is limited due to the
diversity of its products, end customers and geographic sales areas. The
Company performs continuing credit evaluations of its customers financial
condition and although the Company generally does not require collateral,
letters of credit may be required from its customers in certain circumstances.
Due to the Company's credit evaluation and collection process, bad debt losses
have been insignificant.
30
32
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
I. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial instruments
is made in accordance with the requirements of Statement of Financial
Accounting Standards No. 107, "Disclosures About Fair Value of Financial
Instruments."
The following estimated fair value amounts have been determined by the Company
using available market information and appropriate valuation methodologies.
However, considerable judgment is required in interpreting market data to
develop the estimates of fair value. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts that the Company could
realize in a current market exchange.
OCTOBER 29, 1994 OCTOBER 30, 1993
---------------- ----------------
CARRYING FAIR CARRYING FAIR
Amount Value Amount Value
- --------------------------------------------------------------------------------------------------------
Assets:
Cash and cash equivalents $ 109,113 $ 109,113 $ 80,668 $ 80,668
Short-term investments 72,652 72,652 - -
Liabilities:
Short-term borrowings (2,917) (2,917) (2,006) (2,006)
Long-term debt, including
current portion (100,000) (93,800) (100,000) (102,400)
Foreign Currency Instruments and
Interest Rate Agreements:
Interest rate swap
and cap agreements 5 (3,065) 98 89
Forward foreign currency
exchange contracts (1,458) 641 727 25
Foreign currency option
contracts 308 41 460 468
Currency swap agreement (853) (840)
- -
- --------------------------------------------------------------------------------------------------------
The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments:
Cash, cash equivalents and short-term investments -The carrying amounts of
these items are a reasonable estimate of their fair value due to the short term
to maturity and readily available market for these types of investments.
Short-term borrowings-The carrying amounts of these variable-rate borrowings
approximate fair value due to the short period of time to maturity.
Long-term debt-The fair value of long-term debt is estimated based on current
interest rates available to the Company for debt instruments with similar
terms, degree of risk and remaining maturities.
Interest rate swap and cap agreements-The fair value of interest rate swap and
cap agreements are obtained from dealer quotes. These values represent the
estimated amount the Company would receive or pay to terminate the agreements
taking into consideration current interest rates.
Forward foreign currency exchange contacts-The estimated fair value of forward
foreign currency exchange contracts is based on the estimated amount at which
they could be settled based on market exchange rates.
31
33
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Foreign currency option contracts and currency swap agreement-The fair values
of foreign currency option contracts and currency swap agreement are obtained
from dealer quotes. These values represent the estimated amount the Company
would receive or pay to terminate the agreements.
J. REVENUE RECOGNITION
Revenue from product sales to end users is recognized upon shipment. A portion
of the Company's sales are made to domestic distributors under agreements
allowing for price protection and certain rights of return on merchandise
unsold by the distributors. Because of the uncertainty associated with pricing
concessions and future returns, the Company defers recognition of such sales
and related gross margin until the merchandise is sold by the distributors. For
sales to international distributors, the Company recognizes the sale upon
shipment to the distributor, but provides specific reserves for possible
returns and allowances.
K. INCOME TAXES
In February 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (FAS
109). FAS 109 requires a change from the deferred method of accounting for
income taxes under APB Opinion 11 to the asset and liability method of
accounting for income taxes. Under the asset and liability method of FAS 109,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under FAS 109, the effect
of a change in tax rates on deferred tax assets and liabilities is recognized
in income in the period that includes the enactment date.
Effective October 31, 1993 the Company adopted FAS 109. The adoption of FAS 109
was not material to the consolidated financial statements. As permitted by FAS
109, prior years' financial statements have not been restated.
Pursuant to the deferred method under APB Opinion 11, which was applied at
October 30, 1993 and in prior fiscal years, deferred income taxes are
recognized for income and expense items that are reported in different years
for financial reporting purposes and income tax purposes using the tax rate
applicable for the year of calculation. Under the deferred method, deferred
taxes are not adjusted for subsequent changes in tax rates.
L. STOCK SPLIT
On November 30, 1994, the Company's Board of Directors authorized a
three-for-two stock split effected in the form of a 50% stock dividend
distributed on January 4, 1995 to stockholders of record December 12, 1994. The
split was accomplished through the issuance of common stock and the reissuance
of treasury stock. All references to share and per share amounts have been
restated to reflect the split.
M. EARNINGS PER SHARE OF COMMON STOCK
Primary earnings per common share are computed based on the weighted average
number of common shares outstanding during the year, adjusted for incremental
shares assumed issued for dilutive common stock equivalents. Fully diluted
earnings per share do not differ materially from primary earnings per share.
N. RECLASSIFICATIONS
Certain amounts reported in previous years have been reclassified to conform to
the 1994 presentation.
32
34
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. INDUSTRY AND GEOGRAPHIC SEGMENT INFORMATION
INDUSTRY
The Company operates predominantly in one industry segment: the design,
manufacture and marketing of a broad line of high-performance linear,
mixed-signal and digital integrated circuits that address a wide range of
real-world signal processing applications.
GEOGRAPHIC INFORMATION
The Company operates in three major geographic areas. information on the
Company's geographic operations is set forth in the table below. the
predominant countries comprising European operations are England, France,
Germany and Ireland. The predominant country comprising Asian operations is
Japan. For segment reporting purposes, sales generated by North American
operations in the table include export sales of $96,700,000, $71,542,000 and
$41,010,000 in 1994, 1993 and 1992, respectively; sales generated by European
operations include export sales of $1,267,000 in 1992. Transfers between
geographic areas are based on market comparables and are consistent with
prevailing tax regulations. Operating income reflects the allocation of
corporate expenses of $19,718,000, $17,174,000 and $14,901,000 in 1994, 1993
and 1992, respectively, to the appropriate geographic area based upon their
beneficial and causal relationship to each area. Corporate identifiable assets
consist of cash equivalents, short-term investments and intangible assets.
GEOGRAPHIC SEGMENT INFORMATION 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------
Sales NORTH AMERICA, INCLUDING EXPORT . . . . $440,609 $363,671 $309,110
EUROPE . . . . . . . . . . . . . . . . . 198,000 196,310 169,330
ASIA . . . . . . . . . . . . . . . . . . 134,865 106,338 88,875
-------- -------- --------
TOTAL SALES . . . . . . . . . . . . . $773,474 $666,319 $567,315
======== ======== ========
Transfers NORTH AMERICA, INCLUDING EXPORT . . . . $192,442 $161,081 $129,030
Between EUROPE . . . . . . . . . . . . . . . . . 110,801 94,948 64,630
Areas ASIA . . . . . . . . . . . . . . . . . . 19,603 12,569 -
-------- -------- --------
TOTAL TRANSFERS BETWEEN AREAS . . . . $322,846 $268,598 $193,660
======== ======== ========
Operating NORTH AMERICA, INCLUDING EXPORT . . . . $ 52,706 $ 26,546 $ 5,679
Income EUROPE . . . . . . . . . . . . . . . . . 47,170 35,205 18,516
ASIA . . . . . . . . . . . . . . . . . . 1,940 934 1,977
-------- -------- --------
TOTAL OPERATING INCOME . . . . . . . . $101,816 $ 62,685 $ 26,172
======== ======== ========
Identifiable NORTH AMERICA, INCLUDING EXPORT . . . . $354,881 $367,347 $333,256
Assets EUROPE . . . . . . . . . . . . . . . . . 176,755 147,979 143,042
ASIA . . . . . . . . . . . . . . . . . . 95,988 78,215 48,182
CORPORATE . . . . . . . . . . . . . . . 188,247 84,951 37,387
-------- -------- --------
TOTAL ASSETS . . . . . . . . . . . . . $815,871 $678,492 $561,867
======== ======== ========
33
35
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. ACCRUED LIABILITIES
Accrued liabilities at October 29, 1994, October 30, 1993 and October 31, 1992 consisted of the following:
1994 1993 1992
- -----------------------------------------------------------------------------------------------
Accrued compensation
and benefits $33,908 $31,652 $23,007
Other 26,313 18,241 15,802
- -----------------------------------------------------------------------------------------------
Total accrued liabilities $60,221 $49,893 $38,809
===============================================================================================
4. DEBT AND CREDIT FACILITIES
6 5/8% NOTES
ON March 11, 1993, the Company completed a public offering of $80 million of
seven-year 6 5/8% notes due March 1, 2000 with semiannual interest payments on
March 1 and September 1. The net proceeds of the offering were approximately
$79 million after payment of the underwriting discounts and expenses of the
offering which were deferred and are being amortized to interest expense over
the term of the Notes. Approximately $60.0 million of the net proceeds was used
to repay in full outstanding U.S. dollar borrowings under the Company's
revolving credit agreement. Simultaneous with the sale of the Notes, the
Company entered into an interest rate swap and cap agreement for the term of
the Notes having a notional principal amount of $40 million whereby the
effective net interest rate on $40 million of the Notes will be the six-month
libor rate (up to a maximum of 7%) plus 1.4%. For the year ended October 29,
1994, the net effective interest rate on $40 million of the Notes was 6.6%
after giving effect to the interest rate swap agreement.
FIXED RATE TERM LOAN
The Company has an unsecured, three-year term loan with a bank in the amount of
$20,000,000 at a fixed interest rate of 7.18% per annum. Under this agreement,
the Company is generally subject to the same financial covenants as are
contained in the Revolving Credit Agreement described below. The Company was in
compliance with all covenants under this agreement at October 29, 1994. This
loan was repaid in full at maturity on November 14, 1994.
REVOLVING CREDIT AGREEMENT AND LINES OF CREDIT
The Company has a revolving credit agreement with several banks which commits
them to lend up to $60,000,000. The terms of the credit agreement provide that
interest on U.S. dollar borrowings may not exceed the greater of the prime rate
or the federal funds rate plus .50%. Under this agreement, the Company also has
the option to borrow both U.S. dollars and foreign currencies at interest rates
tied to various money market instruments, customarily below the prime rate.
Under the credit agreement, the Company is currently required to pay fees of
.05 of 1% per annum on the unused portion of the lending commitment and .15 of
1% per annum on the total amount of the committed facility. All borrowings
under the credit agreement are due no later than September 8, 1998. Borrowing
from banks not participating in the agreement is permitted as long as the
Company maintains certain required financial ratios. The credit agreement
requires the Company to maintain stated minimum net worth and current ratio
levels, plus a stated maximum ratio of total liabilities to net worth. In
addition, the credit agreement restricts the aggregate of all cash dividend
payments declared or made subsequent to October 29, 1994 to an amount not
exceeding $85,147,000 plus 50% of the consolidated net income of the Company
for the period from October 30, 1994 through the end of the Company's then most
recent fiscal quarter. At October 29, 1994, the Company was in compliance with
all covenants under the credit agreement. There are no compensating balance
requirements under the credit agreement. In addition to the credit agreement,
the Company also has various unsecured, uncommitted money market lines of
credit with its credit agreement and other banks which provide for short-term
borrowings.
34
36
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The weighted average interest rates of U.S. dollar borrowings under the credit
agreement and the uncommitted money market lines of credit were 4.0% and 4.3%
during 1993 and 1992, respectively. The weighted average interest rate of U.S.
dollar borrowings under the credit agreement and the uncommitted money market
lines of credit was 4.1% at October 31, 1992. There were no variable rate U.S.
dollar borrowings under the credit agreement or the uncommitted money market
lines of credit during 1994 nor were there any such borrowings outstanding at
October 29, 1994 or October 30, 1993. The weighted average interest rates of
foreign currency borrowings under foreign lines of credit were 8.7%, 10.9% and
12.4% during 1994, 1993 and 1992, respectively. The weighted average interest
rates of foreign currency borrowings were 7.4%, 11.8% and 11.7% at October 29,
1994, October 30, 1993 and October 31, 1992, respectively. There were $2.9
million of foreign currency borrowings outstanding at October 29, 1994, which
were at prevailing money market rates for the respective currencies. Borrowings
under the Company's credit agreement and lines of credit are generally due
within six months. In 1992, however, a portion of these borrowings were
classified as long-term debt based on the Company's intention to refinance a
portion of these borrowings on a long-term basis and the ability to refinance
these borrowings under the credit agreement.
Long-term debt, including current maturities, at October 29, 1994, October 30,
1993 and October 31, 1992 consisted of the following:
1994 1993 1992
- ------------------------------------------------------------------------------------------------------
6 5/8% Notes due 2000 $ 80,000 $ 80,000 $ -
7.18% term loan 20,000 20,000 20,000
Revolving credit agreement
and other lines of credit:
U.S. dollars - - 30,000
4.73% term loan - - 20,000
Other - - 194
- ------------------------------------------------------------------------------------------------------
100,000 100,000 70,194
Less current portion of
long term debt 20,000 - 194
- ------------------------------------------------------------------------------------------------------
Long term debt $ 80,000 $100,000 $70,000
======================================================================================================
Aggregate principal payments on long-term debt and short-term borrowings for
the following fiscal years are: 1995-$22.9 million; 2000-$80.0 million.
35
37
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. LEASE COMMITMENTS
The Company leases certain of its facilities and equipment under various
operating and capital leases which expire at various dates through 2010. The
lease agreements frequently include renewal and purchase provisions and require
the Company to pay taxes, insurance and maintenance costs.
Total rental expense under operating leases was $9,985,000, $8,853,000 and
$9,268,000 in 1994, 1993 and 1992, respectively.
The following is a schedule of future minimum lease payments under capital
leases and rental payments required under long-term operating leases at October
29, 1994:
OPERATING CAPITAL
FISCAL YEARS LEASES LEASES
- -------------------------------------------------------------------------------
1995 $ 7,893 $280
1996 4,444 47
1997 3,004 -
1998 2,618 -
1999 2,530 -
Later Years 19,231 -
- -------------------------------------------------------------------------------
Total $39,720 $327
=======
Less amount representing interest (30)
----
Present value of minimum lease payments $297
====
Net property, plant and equipment includes the following for capital leases:
1994 1993 1992
- --------------------------------------------------------------------------------------------
Land and buildings $ 1,828 $ 1,828 $ 1,828
Machinery and equipment 829 829 10,012
- --------------------------------------------------------------------------------------------
2,657 2,657 11,840
Less accumulated amortization (2,468) (2,231) (11,173)
- --------------------------------------------------------------------------------------------
Net capital leases $ 189 $ 426 $ 667
============================================================================================
6. COMMITMENTS AND CONTINGENCIES
The Company is a defendant in a lawsuit brought by Texas Instruments,
Incorporated (TI) claiming damages for the Company's alleged infringement of
certain patents related to plastic encapsulation of semiconductor devices. The
lawsuit relates to sales of plastic encapsulated products sold between February
1989 and August 1994 when the patents expired. In January 1994, the
International Trade Commission (ITC) brought an enforcement proceeding against
the Company alleging that the Company had violated the terms of the
Commission's February 1992 cease and desist order (as modified in July 1993)
relating to the importation of plastic encapsulated products into the United
States from the Company's foreign subsidiaries. If the Company is found to be
in violation of the orders, it may be subject to substantial penalties. The
Company has denied the essential allegations in the complaints and believes
that it has meritorious defenses in each of these actions which it intends to
vigorously pursue. The Company also has a lawsuit pending against TI in which
the Company alleges that TI infringed one of its patents relating to digital
signal processing products, and TI has filed counterclaims.
36
38
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company is a defendant in a lawsuit brought by Maxim Integrated
Products, Inc. ("Maxim") seeking an injunction against, and claiming damages
for, alleged antitrust violations and unfair competition in connection with
distribution arrangements between the Company and certain distributors. Maxim
alleged that certain distributors ceased doing business with Maxim as a result
of the distribution arrangements between the distributors and the Company,
resulting in an improper restriction to Maxim's access to channels by which it
distributes its products. Maxim asserted actual and consequential damages in
the amount of $14.1 million and unspecified claims for restitution and punitive
damages. Under applicable law, Maxim would receive three times the amount of
any actual damages suffered as a result of any antitrust violation. On
September 7, 1994, Maxim's claim was dismissed for lack of evidence. Maxim has
appealed this ruling and briefing of the appeal is scheduled to be concluded by
March 7, 1995.
Although the Company believes it should prevail in the matters described in
the previous two paragraphs, the Company is unable to determine their ultimate
outcome or estimate the ultimate amount of liability, if any, at this time.
An adverse resolution of these matters could have a material adverse effect
on the Company's consolidated financial position or on its consolidated results
of operations or cash flows in the period in which the matters are resolved.
From time to time as a normal incidence of the nature of the Company's
business, various claims, charges and litigation are asserted or commenced
against the Company arising from or related to contractual relations, personal
injury, environmental matters and product liability. The Company has also
received and made inquiries with regard to other possible patent infringement
claims. These inquiries have been referred to counsel and are in various stages
of discussion. If any infringements are determined to exist, the Company may
seek or extend licenses or settlements. While the Company cannot accurately
predict the ultimate outcome of the matters referred to in this paragraph, at
this time management believes that the likelihood of an outcome resulting in a
material adverse effect on the Company's consolidated financial position,
trends in results of operations or cash flows is remote.
The Company's wholly owned manufacturing facility in the Republic of Ireland
has received operating and capital grants. A liability to repay up to
$19.2 million of the grants received by the Company would arise in the unlikely
event the Company should liquidate its Irish operation prior to the commitment
periods noted in the grant agreements which expire at various dates through
1999.
Under the terms of the lease agreement related to the Company's headquarters
facility in Norwood, Massachusetts, the Company has agreed to assume the note
related to the property in the case of default by the lessor. Assumption of the
note, which was $10.5 million at October 29, 1994, would entitle the Company to
a first lien on the property. In addition, the Company may be subject to an
incremental rent payment if the Company were to either default on the lease or
not exercise its option to extend the lease at the end of the current
fifteen-year term. This payment would be the present value of the balance of
the lessor's debt related to the property in excess of $6.5 million at the end
of the current lease term. As of October 29, 1994, the Company's unrecorded
financial risk of loss under this agreement was $1.5 million in the unlikely
event of default.
7. STOCKHOLDERS' EQUITY
COMMON STOCK
In December 1994, the Board of Directors authorized an amendment to the
Company's Articles of Organization to increase the authorized number of shares
of common stock from 150,000,000 to 300,000,000 subject to stockholder approval
in March 1995.
STOCK PLANS
The 1988 Stock Option Plan provides for the issuance of nonstatutory and
incentive stock options to purchase up to 10,350,000 shares of common stock.
Under this plan, options may be granted to key employees of the Company and its
subsidiaries at a price not less than 100% of the fair market value of the
underlying stock on the date of grant. The Company's 1980 Stock Option Plan was
terminated upon adoption of the 1988 Stock Option Plan; however, options
to purchase common stock remain outstanding under this plan.
37
39
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Under the 1992 Director Option Plan, each nonemployee director receives
nonstatutory options to purchase 15,000 shares of common stock at an exercise
price equal to the fair market value on the date of grant. A total of 150,000
shares of common stock may be issued under this plan. In December 1994, the
Board of Directors authorized the 1994 Director Option Plan under which
each nonemployee director will receive options to purchase 5,250 shares of
common stock annually at an exercise price equal to the fair market value on
the date of grant. These options vest ratably over a three-year period. A total
of 200,000 shares of common stock are reserved for issuance under the plan
which is subject to stockholder approval in March 1995. Upon adoption of the
1994 Director Option Plan by the stockholders, no additional options will
be granted under the 1992 Director Option Plan.
While the Company may grant options to employees which become exercisable at
different times or within different periods, the Company has generally granted
options which are exercisable in annual installments of 33.3% each during the
third, fourth and fifth years after the date of grant.
Transactions under the Company's stock option plans are summarized in the table below:
OPTIONS OUTSTANDING
SHARES ---------------------------------
AVAILABLE OPTION PRICE AGGREGATE
STOCK OPTION ACTIVITY FOR GRANT NUMBER PER SHARE PRICE
- ----------------------------------------------------------------------------------------------------------------
Balance, November 2, 1991 1,765 5,217 $2.90 to $12.25 $30,282
- ----------------------------------------------------------------------------------------------------------------
Options granted (1,735) 1,735 $5.00 to $6.83 11,171
Options exercised - (252) $2.90 to $5.35 (898)
Options cancelled (1) 268 (381) $2.90 to $10.50 (2,238)
- ----------------------------------------------------------------------------------------------------------------
Balance, October 31, 1992 298 6,319 $3.92 to $ 12.25 38,317
- ----------------------------------------------------------------------------------------------------------------
Additional shares authorized for 1988 Stock Option Plan 5,250 - - -
Shares authorized For 1992 Director Option Plan 150 - - -
Options granted (174) 174 $6.59 to $16.09 1,669
Options exercised - (1,066) $3.92 to $10.50 (7,695)
Options cancelled (1) 330 (384) $3.92 to $10.50 (2,224)
Shares cancelled upon termination of 1989
Director Stock Option Plan (45) - - -
- ----------------------------------------------------------------------------------------------------------------
Balance, October 30, 1993 5,809 5,043 $3.92 to $16.09 30,067
- ----------------------------------------------------------------------------------------------------------------
Options granted (2,061) 2,061 $14.09 to $20.00 30,482
Options exercised - (683) $3.92 to $12.25 (4,250)
Options cancelled (1) 123 (124) $3.92 to $17.17 (844)
- ----------------------------------------------------------------------------------------------------------------
Balance, October 29, 1994 3,871 6,297 $3.92 to $20.00 $55,455
================================================================================================================
Options exercisable at October 29, 1994 1,404 $3.92 to $10.50 $8,010
================================================================================================================
(1) Options cancelled which were originally issued from the 1988 Stock Option
Plan are available for subsequent grants. The remaining options cancelled in
1994, 1993 and 1992 were issued from the 1980 Stock Option Plan which has
been terminated.
The Company has a stock purchase plan that allows eligible employees to
purchase, through payroll deductions, shares of the Company's common stock at
85% of the fair market value at specified dates. Employees purchased 523,800
shares in 1994 (754,500 and 513,500 in 1993 and 1992, respectively) for $6.0
million ($4.2 million and $2.8 million in 1993 and 1992, respectively). At
October 29, 1994, 1,422,000 common shares remained available for issuance under
the plan.
38
40
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Under the 1991 Restricted Stock Plan, a maximum of 1,050,000 shares of common
stock may be awarded by the Company to key employees for nominal consideration.
This plan succeeded the Company's 1978 Restricted Stock Plan which provided for
the issuance of up to 3,686,400 shares of common stock. Shares awarded from
both plans are restricted as to transfer, usually for a period of five years
and, under certain conditions, may be subject to repurchase by the Company at
the original purchase price per share. Shares awarded under the Company's
restricted stock plans, net of cancellations, for 1994, 1993 and 1992 were
243,000, 21,000 and 231,000, respectively. The fair market value of the shares
at the date of award was accounted for as deferred compensation and is being
amortized over the restricted period. During 1994, 1993 and 1992, $1,851,000,
$1,716,000 and $1,887,000, respectively, of such compensation was charged to
expense. At October 29, 1994, there were 275,250 shares of common stock
available for issuance under the 1991 Restricted Stock Plan.
WARRANTS
In 1990, the Company issued warrants for the purchase of 1,500,000 shares of
common stock. Each warrant entitles the holder to purchase one share of the
Company's common stock at an exercise price of $8 per share, subject to certain
adjustments, anytime prior to the expiration of the warrants on August 7, 1997.
At October 29, 1994, all of the warrants were outstanding.
As of October 29, 1994, a total of 13,365,000 common shares were reserved for
issuance under the company's stock plans and warrant agreement.
PREFERRED STOCK
The Company has 500,000 authorized shares of $1.00 par value Preferred Stock.
The Board of Directors is authorized to fix designations, relative rights,
preferences and limitations on the preferred stock at the time of issuance. The
Company had previously authorized 35,000 shares of such Preferred Stock as
Series A Convertible Preferred Stock, of which 28,066 shares were sold in prior
years. As of June 14, 1990, all of these shares had been fully converted to
common stock.
COMMON STOCK PURCHASE RIGHTS
In 1988, the Board of Directors adopted a Shareholder Rights Plan which
provides for a dividend distribution of one common stock purchase right for
each share of common stock outstanding on February 12, 1988. Under certain
circumstances, each right entitles the holder to purchase from the Company one
share of common stock at an exercise price of $40 per share.
The rights are not exercisable and cannot be transferred separately from the
common stock until ten days after a person acquires 20% or more or makes a
tender offer for 30% or more of the Company's common stock. If, after the
rights become exercisable, (i) any person becomes the owner of 20% or more of
the Company's common stock, or (ii) the Company is the surviving entity in a
merger with a 20% or more stockholder, or (iii) a 20% or more stockholder
engages in certain "self-dealing" transactions with the Company, each right not
owned by such person will entitle its holder to purchase, at the right's
exercise price, common stock having a value of two times the exercise price of
the right. In addition, if the Company is either (i) acquired in a merger or
other business combination in which the Company is not the surviving entity, or
(ii) sells or transfers 50% or more of its assets or earning power to another
party, each right will entitle its holder to purchase, upon exercise, common
stock of the acquiring Company having a value equal to two times the exercise
price of the right.
The rights expire on February 12, 1998 but may be redeemed by the Company for
$.0133 per right at any time prior to the tenth day following a person's
acquisition of 20% or more of the Company's common stock. So long as the rights
are not separately transferable, the Company will issue one right with each new
share of common stock issued.
39
41
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. RETIREMENT PLANS
The Company and its subsidiaries have various savings and retirement plans
covering substantially all employees. The Company maintains defined
contribution plans for the benefit of its eligible United States employees.
These plans provide for Company contributions of up to 5% of each participant's
total eligible compensation. In addition, the Company contributes an amount
equal to each participant's contribution, if any, up to a maximum of 2% of each
participant's total eligible compensation. The Company also has various defined
benefit pension and other retirement plans for certain foreign employees that
are consistent with local statutes and practices. The total expense related to
all of the Company's retirement plans in 1994, 1993 and 1992 was $12.6 million,
$11.9 million and $10.9 million, respectively, which primarily consists of
costs related to domestic defined contribution plans. Also included in total
expense is pension expense related to foreign defined benefit plans of $2.5
million for 1994, $3.0 million for 1993 and $2.8 million for 1992. Summary data
related to these foreign plans at October 29, 1994 is as follows: accumulated
benefit obligation, substantially vested, of $18.4 million; projected benefit
obligation of $31.0 million; plan assets at fair value of $28.5 million;
discount rates ranging from 5.5% to 15%; compensation increase rates ranging
from 4.5% to 12% and expected rate of return on assets ranging from 5% to 15%.
In November 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits" (FAS 112), which will become effective during fiscal
year 1995. FAS 112 requires that postemployment benefits, primarily salary
continuation and insurance continuation, be accrued for at the time the benefit
is earned by the employee. Adoption of FAS 112 is not expected to have a
material impact on the Company's consolidated financial statements.
9. INCOME TAXES
As discussed in Note 1(k), the Company adopted FAS 109 as of October 31, 1993.
The reconciliation of income tax computed at the U.S. federal statutory rates
to income tax expense is as follows:
LIABILITY METHOD DEFERRED METHOD
---------------- ---------------
1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------
U.S. federal statutory tax rate 35.0% 34.8% 34%
Income tax provision reconciliation:
Tax at statutory rate $33,919 $19,322 $ 6,448
Irish income subject to lower tax rate (7,299) (7,951) (5,762)
Change in valuation allowance (4,265) - -
State income taxes, net of federal benefit 1,076 437 78
Research and development tax credits (1,074) 347 -
Foreign Sales Corporation (731) - -
Amortization of goodwill 503 500 489
Net foreign tax in excess of (less than)
U.S. federal statutory tax rate 247 (203) (338)
Foreign tax credits (utilized) unutilized - (1,444) 3,201
Other, net 39 60 (86)
- ------------------------------------------------------------------------------------------------------------------
Total income tax provision $22,415 $11,068 $ 4,030
==================================================================================================================
For financial reporting purposes, income before income taxes includes the following components:
1994 1993 1992
- ------------------------------------------------------------------------------------------------------------
Pretax income:
Domestic $35,621 $ 8,228 $(9,985)
Foreign 61,290 47,297 28,950
- ------------------------------------------------------------------------------------------------------------
$96,911 $55,525 $18,965
============================================================================================================
40
42
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of the provision for income taxes are as follows:
1994 1993 1992
- ------------------------------------------------------------------------------------------------------------
Current:
Federal $18,479 $ 3,884 $ 2,383
Foreign 10,576 8,788 3,181
State 1,665 670 129
- ------------------------------------------------------------------------------------------------------------
Total current $30,720 $13,342 $ 5,693
============================================================================================================
Deferred (prepaid):
Federal $(7,601) $(2,313) $(2,201)
Foreign (704) 39 538
- ------------------------------------------------------------------------------------------------------------
Total deferred (prepaid) $(8,305) $(2,274) $(1,663)
============================================================================================================
The significant components of the Company's deferred tax assets and liabilities as of
October 29, 1994 are as follows:
1994
- -----------------------------------------------------------------------------------
Deferred tax assets:
Inventory reserves $ 12,261
Capital loss carryover 8,513
Deferred income on shipments to domestic distributors 5,254
Reserves for employee benefits 2,890
Restricted stock 2,123
Alternative Minimum Tax carryover 1,764
Intercompany profits in foreign inventories 1,709
Reserve for bad debts 1,650
Foreign tax credits 1,522
Other 3,314
- -----------------------------------------------------------------------------------
Total gross deferred tax assets 41,000
Valuation allowance for deferred tax assets (10,035)
- -----------------------------------------------------------------------------------
Total deferred tax assets $ 30,965
- -----------------------------------------------------------------------------------
Deferred tax liabilities:
Depreciation $ (8,603)
- -----------------------------------------------------------------------------------
Total gross deferred liabilities $ (8,603)
- -----------------------------------------------------------------------------------
Net deferred tax assets $ 22,362
===================================================================================
The valuation allowance at the beginning of fiscal 1994 was $14,300. The net
change in the valuation allowance for the year ended October 29, 1994 was a
decrease of $4,265 from the utilization of general business and foreign tax
credits. The valuation allowance as of October 29, 1994 relates primarily to
capital loss carryovers and tax credits.
41
43
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of the provision for deferred income taxes for the fiscal years ended October 30, 1993 and
October 31, 1992 are as follows:
1993 1992
- ----------------------------------------------------------------------------------------------------
Components of deferred (prepaid) tax provision (benefit):
Tax depreciation in excess of (less than) book depreciation $(2,064) $(2,428)
General business tax credits 1,814 (244)
Inventory reserves 878 (3,982)
Deferred income on shipments to domestic distributors (716) (2,877)
Restricted stock 583 (230)
Net decrease (increase) in intercompany profits in
foreign inventories (431) 926
Foreign tax credits (429) 4,977
Reserves for employee benefits (154) (274)
Restructuring reserves - 1,854
Other, net (1,755) 615
- ----------------------------------------------------------------------------------------------------
Total provision for deferred (prepaid) income taxes $(2,274) $(1,663)
====================================================================================================
The Company's practice is to reinvest indefinitely the earnings of certain
international subsidiaries. Applicable U.S. Federal and state income taxes, net
of related foreign tax credits, are provided only on amounts planned to be
remitted. Accordingly, no U.S. Federal and state income taxes have been
provided for approximately $221,893,000 of unremitted earnings of international
subsidiaries.
42
44
ANALOG DEVICES, INC.
SUPPLEMENTARY FINANCIAL INFORMATION (UNAUDITED)
Quarterly financial information for 1994 and 1993 (thousands of dollars except as noted):
4Q94 3Q94 2Q94 1Q94 4Q93 3Q93 2Q93 1Q93
- --------------------------------------------------------------------------------------------------------------------
Net sales 203,301 197,058 192,027 181,088 179,000 173,104 162,912 151,303
- --------------------------------------------------------------------------------------------------------------------
Cost of sales 101,457 99,890 98,508 94,593 94,166 91,378 86,330 78,978
Gross margin 101,844 97,168 93,519 86,495 84,834 81,726 76,582 72,325
% of sales 50% 49% 49% 48% 47% 47% 47% 48%
- --------------------------------------------------------------------------------------------------------------------
Operating expenses:
Research and development 29,048 27,205 26,360 24,256 24,954 24,307 23,094 21,752
Selling, marketing, general
and administrative 43,807 43,333 42,204 40,997 41,075 40,184 38,745 38,671
- --------------------------------------------------------------------------------------------------------------------
Total operating expenses 72,855 70,538 68,564 65,253 66,029 64,491 61,839 60,423
% of sales 36% 36% 36% 36% 37% 37% 38% 40%
- --------------------------------------------------------------------------------------------------------------------
Operating income 28,989 26,630 24,955 21,242 18,805 17,235 14,743 11,902
% of sales 14% 14% 13% 12% 11% 10% 9% 8%
- --------------------------------------------------------------------------------------------------------------------
Nonoperating expenses (income):
Interest expense 1,694 1,796 1,829 1,830 1,886 2,005 1,766 1,527
Other (1,222) (891) (103) (28) (172) (31) (36) 215
- --------------------------------------------------------------------------------------------------------------------
Total nonoperating expenses 472 905 1,726 1,802 1,714 1,974 1,730 1,742
- --------------------------------------------------------------------------------------------------------------------
Income before income taxes 28,517 25,725 23,229 19,440 17,091 15,261 13,013 10,160
% of sales 14% 13% 12% 11% 10% 9% 8% 7%
- --------------------------------------------------------------------------------------------------------------------
Provision for income taxes 6,844 6,046 5,345 4,180 3,076 3,099 2,861 2,032
- --------------------------------------------------------------------------------------------------------------------
Net income 21,673 19,679 17,884 15,260 14,015 12,162 10,152 8,128
% of sales 11% 10% 9% 8% 8% 7% 6% 5%
Per share .28 .25 .23 .20 .18 .16 .14 .11
- --------------------------------------------------------------------------------------------------------------------
Shares used to compute
earnings per share 78,075 77,485 77,071 76,455 76,303 76,270 75,747 74,455
- --------------------------------------------------------------------------------------------------------------------
43
45
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The response to this item is contained in part under the caption "EXECUTIVE
OFFICERS OF THE COMPANY" in Part I hereof, and the remainder is contained in
the Company's Proxy Statement for the Annual Meeting of Stockholders to be held
on March 14, 1995 (the "1995 Proxy Statement") under the caption "Election of
Directors" and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The response to this item is contained in the Company's 1995 Proxy Statement
under the captions "Directors' Compensation," "Executive Compensation",
"Severance and Other Agreements" and "Approval of the 1994 Director Option
Plan," and is incorporated herein by reference. Information relating to
a delinquent filing of a Form 4 by an executive officer of the Company is
contained in the Company's 1995 Proxy Statement under the caption "Delinquent
Filing of Forms 4."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The response to this item is contained in the Company's 1995 Proxy Statement
under the caption "Security Ownership of Certain Beneficial Owners and
Management" and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The response to this item is contained in the Company's 1995 Proxy Statement
under the caption "Transactions with Directors," and is incorporated herein by
reference.
44
46
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON Form 8-K
(A) 1. FINANCIAL STATEMENTS
The following consolidated financial statements are included in Item 8:
- Consolidated Statements of Income for the years ended October 29,
1994, October 30, 1993 and October 31, 1992
- Consolidated Balance Sheets as of October 29, 1994, October 30,
1993 and October 31, 1992
- Consolidated Statements of Stockholders' Equity for the years
ended October 29, 1994, October 30, 1993 and October 31, 1992
- Consolidated Statements of Cash Flows for the years ended October
29, 1994, October 30, 1993 and October 31, 1992
(A) 2. FINANCIAL STATEMENT SCHEDULES
No Financial Statement Schedules have been presented since the required
information is not present or not present in amounts sufficient to require
submission of the schedule, or because the information required is
included in the consolidated financial statements or the notes thereto.
(A) 3. LISTING OF EXHIBITS
EXHIBIT
NO. DESCRIPTION
------- -----------
3-1 Restated Articles of Organization of Analog Devices, Inc., as
amended, filed as an exhibit to the Company's Form 10-K
for the fiscal year ended October 31, 1992 and incorporated
herein by reference.
3-2 By-Laws of Analog Devices, Inc. as amended, filed as an exhibit
to the Company's Form 10-K for the fiscal year ended October
31, 1992 and incorporated herein by reference.
4-1 Rights Agreement, as amended, between Analog Devices, Inc.
and The First National Bank of Boston, as Rights Agent,
filed as an exhibit to a Form 8 filed on June 27, 1989 amending
the Registration Statement on Form 8-A relating to Common Stock
Purchase Rights, and incorporated herein by reference.
4-2 Indenture dated as of March 1, 1993 between Analog Devices, Inc.
and The First National Bank of Boston, filed herewith.
* 10-1 Bonus Plan of Analog Devices, Inc., filed herewith.
* 10-2 1978 Restricted Stock Plan of Analog Devices, Inc., as amended,
filed as an exhibit to the Company's Form 10-K for the fiscal
year ended November 3, 1990 and incorporated herein by reference.
* 10-3 1991 Restricted Stock Plan of Analog Devices, Inc., filed as an
exhibit to the Company's Form 10-K for the fiscal year ended
November 2, 1991 and incorporated herein by reference.
* 10-4 1980 Stock Option Plan of Analog Devices, Inc., as amended,
filed as an exhibit to the Company's Form 10-K for the fiscal
year ended October 29, 1988 and incorporated herein by reference.
45
47
EXHIBIT
NO. DESCRIPTION
------- -----------
* 10-5 1988 Stock Option Plan of Analog Devices, Inc., as amended,
filed as an exhibit to the Company's Form 10-K for the
fiscal year ended October 31, 1992 and incorporated herein by
reference.
* 10-6 1989 Director Stock Option Plan of Analog Devices, Inc., as
amended, filed as an exhibit to the Company's Form 10-K for
the fiscal year ended November 2, 1991 and incorporated herein
by reference.
* 10-7 1992 Director Option Plan of Analog Devices, Inc., filed as an
exhibit to the Company's Form 10-K for the fiscal year
ended October 31, 1992 and incorporated herein by reference.
* 10-8 1994 Director Option Plan of Analog Devices, Inc., filed
herewith.
10-9 Lease agreement dated February 13, 1970 between Analog Devices,
Inc. and the trustees of Campanelli Investment Trust, relating
to the premises at 30 Perwal Street, Westwood, Massachusetts,
filed herewith.
10-10 Amended and restated lease agreement dated May 1, 1992 between
Analog Devices, Inc. and the trustees of Everett Street Trust
relating to the premises at 3 Technology Way, Norwood,
Massachusetts, filed as an exhibit to the Company's Form 10-K
for the fiscal year ended October 31, 1992 and incorporated
herein by reference.
10-11 Guaranty dated as of May 1, 1994 between Analog Devices, Inc.
and Metropolitan Life Insurance Company relating to the
premises at 3 Technology Way, Norwood, Massachusetts, filed as
an exhibit to the Company's Form 10-Q for the fiscal quarter
ended April 30, 1994 and incorporated herein by reference.
10-12 Letter Agreement dated as of May 18, 1994 between Analog
Devices, Inc. and Metropolitan Life Insurance Company
relating to the premises at 3 Technology Way, Norwood,
Massachusetts, filed as an exhibit to the Company's Form 10-Q
for the fiscal quarter ended April 30, 1994 and incorporated
herein by reference.
10-13 Reimbursement Agreement dated May 18, 1992 between Analog
Devices, Inc. and the Trustees of Everett Street Trust,
filed as an exhibit to the Company's Form 10-K for the fiscal
year ended October 31, 1992 and incorporated herein by
reference.
10-14 Lease Agreement dated August 8, 1990 between Precision
Monolithics, Inc. and Bourns, Inc. relating to the premises at
1525 Comstock Road, Santa Clara, California, filed as an
exhibit to the Company's Form 10-K for the fiscal year ended
November 3, 1990 and incorporated herein by reference.
10-15 Lease agreement dated August 8, 1990, as amended, between
Precision Monolithics, Inc. and Bourns, Inc. relating to
the premises at 1500 Space Park Drive, Santa Clara, California,
filed as an exhibit to the Company's Form 10-K for the fiscal
year ended November 3, 1990 and incorporated herein by
reference.
10-16 Credit Agreement dated as of March 12, 1993 among Analog
Devices, Inc. and Morgan Guaranty Trust Company of New York,
Bank of America National Trust and Savings Association,
Continental Bank, N.A., The First National Bank of Boston and
Morgan Guaranty Trust Company of New York, as Agent, filed as
an exhibit to the Company's Form 10-Q for the fiscal
quarter ended May 1, 1993 and incorporated herein by reference.
10-17 Amendment No. 1 dated as of May 18, 1993 to the Company's
Credit Agreement dated March 12, 1993, filed as an exhibit
to the Company's Form 10-Q for the fiscal quarter ended
July 31, 1993 and incorporated herein by reference.
46
48
EXHIBIT
NO. DESCRIPTION
------- -----------
10-18 Amendment No. 2 dated as of September 8, 1994 to the Company's
Credit Agreement dated March 12, 1993, filed herewith.
10-19 Term loan agreement dated as of November 12, 1991 between Analog
Devices, Inc. and the First National Bank of Boston, filed as
an exhibit to the Company's Form 10-K for the fiscal year ended
November 2, 1991 and incorporated herein by reference.
* 10-20 Form of Employee Retention Agreement, as amended, filed as an
exhibit to the Company's Form 10-K for the fiscal year
ended October 31, 1992 and incorporated herein by reference.
* 10-21 Employee Change in Control Severance Policy of Analog Devices,
Inc., as amended, filed as an exhibit to the Company's 10-K for
the fiscal year ended October 30, 1993 and incorporated herein
by reference.
* 10-22 Senior Management Change in Control Severance Policy of Analog
Devices, Inc., as amended, filed as an exhibit to the Company's
10-K for the fiscal year ended October 30, 1993 and incorporated
herein by reference.
10-23 Warrant Agreement dated as of August 8, 1990 between Analog
Devices, Inc. and Bourns, Inc., filed as an exhibit to the
Company's Form 10-K for the fiscal year ended November 3, 1990
and incorporated herein by reference.
* 10-24 Description of Consulting Agreement between Analog Devices, Inc.
and John L. Doyle, filed as an exhibit to the Company's Form
10-K for the fiscal year ended November 2, 1991 and incorporated
herein by reference.
* 10-25 Letter Agreement between Analog Devices, Inc. and Jerald G.
Fishman dated December 15, 1994 relating to acceleration of
Stock options and restricted Stock awards upon termination of
employment, filed herewith.
21 Subsidiaries of the Company, filed herewith.
23 Consent of Ernst & Young, filed herewith.
27 Financial Data Schedule
- ---------------
* Management contract or compensation plan or arrangement required to be
filed as an exhibit pursuant to item 14(c) of Form 10-K.
(B) REPORTS ON FORM 8-K
The Company filed no reports on Form 8-K with the Securities and
Exchange Commission during the fiscal quarter ended October 29, 1994.
47
49
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ANALOG DEVICES, INC.
(Registrant)
By: /s/ Ray Stata By: /s/ Joseph E. McDonough
----------------------------- ---------------------------
Ray Stata Joseph E. McDonough
Chairman of the Board and Vice President-Finance
Chief Executive Officer and Chief Financial Officer
(Principal Executive Officer) (Principal Financial and
Accounting Officer)
Date: January 24, 1995 Date: January 24, 1995
---------------------------- ------------------------
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
NAME TITLE DATE
---- ----- ----
/s/ Ray Stata Chairman of the Board and January 24, 1995
- ------------------------------ Chief Executive Officer ----------------
Ray Stata
/s/ Jerald G. Fishman President, January 24, 1995
- ------------------------------ Chief Operating Officer ----------------
Jerald G. Fishman and Director
/s/ Morris Chang Director January 24, 1995
- ------------------------------ ----------------
Morris Chang
/s/ John L. Doyle Director January 24, 1995
- ------------------------------ ----------------
John L. Doyle
Director
- ------------------------------ ----------------
Samuel H. Fuller
/s/ Philip L. Lowe Director January 24, 1995
- ------------------------------ ----------------
Philip L. Lowe
/s/ Gordon C. McKeague Director January 24, 1995
- ------------------------------ ----------------
Gordon C. McKeague
/s/ Joel Moses Director January 24, 1995
- ------------------------------ ----------------
Joel Moses
/s/ Lester C. Thurow Director January 24, 1995
- ------------------------------ ----------------
Lester C. Thurow
48