<PAGE> 1
FILED PURSUANT TO RULE 424(B)(4)
REGISTRATION NO. 33-64043
$200,000,000
[ANALOG LOGO]
3 1/2% CONVERTIBLE SUBORDINATED NOTES DUE 2000
------------------------
The Notes offered hereby will be convertible into Common Stock of Analog
Devices, Inc. ("Analog" or the "Company") at any time after 60 days following
the latest date of original issuance thereof and prior to maturity, unless
previously redeemed, at a conversion price of $41 7/8 per share, subject to
adjustment in certain events. See "Description of Notes -- Conversion Rights"
for a description of events that may cause an adjustment to the conversion
price. The Common Stock of the Company is traded on the New York Stock Exchange
under the symbol "ADI." On December 12, 1995, the last reported sale price of
the Common Stock on the New York Stock Exchange was $33 1/2 per share. See
"Price Range of Common Stock."
Interest on the Notes is payable on June 1 and December 1 of each year,
commencing on June 1, 1996. The Notes are redeemable, in whole or in part, at
the option of the Company at any time on or after December 1, 1998 at the
redemption prices set forth herein, plus accrued interest, if any, to the
redemption date. If a Change in Control (as defined herein) occurs, each holder
of Notes will have the right, subject to certain conditions and restrictions, to
require the Company to offer to repurchase all outstanding Notes, in whole or in
part, owned by such holder at 100% of their principal amount, plus accrued
interest, if any, to the date of repurchase. See "Description of Notes" for a
more complete description of the Indenture's provisions. The Notes are
subordinated to all existing and future Senior Indebtedness (as defined herein)
of the Company and will be effectively subordinated to all indebtedness and
other obligations of the Company's subsidiaries. At July 29, 1995, the Company
had approximately $80.1 million of outstanding Senior Indebtedness, and the
subsidiaries of the Company had approximately $75.1 million of indebtedness and
other liabilities (other than indebtedness to the Company). The Indenture
governing the Notes does not restrict the ability of the Company or its
subsidiaries to incur additional indebtedness, including Senior Indebtedness.
The Notes have been approved for listing on the New York Stock Exchange
subject to notice of issuance.
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE NOTES OFFERED HEREBY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<CAPTION>
Price to Underwriting Proceeds to
Public(1) Discount(2) Company(1)(3)
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
Per Note.............................. 100% 2.25% 97.75%
Total(4).............................. $200,000,000 $4,500,000 $195,500,000
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from the date of initial issuance.
(2) See "Underwriting" for information concerning indemnification of the
Underwriters and other matters.
(3) Before deducting expenses payable by the Company, estimated at $525,000.
(4) The Company has granted the Underwriters a 30-day option to purchase up to
an additional $30,000,000 aggregate principal amount of Notes at the Price
to Public, less the Underwriting Discount, solely to cover over-allotments,
if any. If the Underwriters exercise this option in full, the Price to
Public will total $230,000,000, the Underwriting Discount will total
$5,175,000, and the Proceeds to Company will total $224,825,000. See
"Underwriting."
The Notes are offered by the Underwriters when, as and if delivered to and
accepted by the Underwriters and subject to the right to reject any order in
whole or in part. It is expected that delivery of the certificates representing
the Notes will be made against payment therefor at the office of Montgomery
Securities on or about December 18, 1995.
------------------------
MONTGOMERY SECURITIES GOLDMAN, SACHS & CO.
December 12, 1995
<PAGE> 2
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). The reports and other information filed by the
Company with the Commission can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Regional Offices of the Commission at Seven World Trade
Center, New York, New York 10048 and Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material
also can be obtained from the Public Reference Section of the Commission,
Washington, D.C. 20549 at prescribed rates. The Company's Common Stock is listed
on the New York Stock Exchange. Reports, proxy materials and other information
concerning the Company may also be inspected at the offices of the New York
Stock Exchange, 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act with respect to the Notes offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto, certain portions of which are
omitted as permitted by the rules and regulations of the Commission. For further
information with respect to the Company and the Notes, reference is made to the
Registration Statement, including the exhibits and schedules. The Registration
Statement, together with its exhibits and schedules thereto, may be inspected,
without charge, at the Commission's principal office at 450 Fifth Street, N.W.,
Washington, D.C. 20459, and also at the regional offices of the Commission
listed above. Copies of such material may also be obtained from the Commission
upon the payment of prescribed fees.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
In accordance with the requirements of the Exchange Act, certain reports
and other information are filed by the Company periodically with the Commission.
The following documents filed by the Company with the Commission are
incorporated herein by reference: (1) the Company's Annual Report on Form 10-K
for the fiscal year ended October 29, 1994, (2) the Company's Quarterly Report
on Form 10-Q for the quarter ended January 28, 1995, (3) the Company's Quarterly
Report on Form 10-Q for the quarter ended April 29, 1995, (4) the Company's
Quarterly Report on Form 10-Q for the quarter ended July 29, 1995 and (5) all
documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act after November 7, 1995 and prior to the date of this
Prospectus.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and before the
termination of the offering shall be deemed incorporated herein by reference,
and such documents shall be deemed to be a part hereof from the date of filing
such documents. Any statement contained herein or in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement as so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, on the request of any such person, a copy of any or all
of the above documents incorporated herein by reference (other than exhibits to
such documents, unless such exhibits are specifically incorporated by reference
into the documents that this Prospectus incorporates). Requests should be
directed to Joseph E. McDonough, Vice President, Finance of Analog Devices,
Inc., One Technology Way, Norwood, MA 02062-9106, telephone number (617)
329-4700.
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN MARKET PRICES OF THE NOTES OFFERED
HEREBY OR SHARES OF THE COMPANY'S COMMON STOCK AT LEVELS ABOVE THOSE WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE
NEW YORK STOCK EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE> 3
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information and Consolidated Financial Statements, including the notes
thereto, appearing elsewhere in or incorporated by reference in this Prospectus.
Unless the context indicates or requires otherwise, references in this
Prospectus to the "Company" or "Analog" are to Analog Devices, Inc. and its
subsidiaries. Unless otherwise indicated, all information in this Prospectus
assumes that the Underwriters' over-allotment option is not exercised. See
"Underwriting." All share and per share information in this Prospectus does not
reflect the three-for-two split of the Company's Common Stock effected in the
form of a 50% stock dividend to be distributed on January 3, 1996 to
stockholders of record on December 12, 1995.
THE COMPANY
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
general-purpose, standard-function linear and mixed-signal ICs ("SLICs"),
special-purpose linear and mixed-signal ICs ("SPLICs") and digital signal
processing ICs ("DSP ICs"). The Company also manufactures and markets devices
using assembled product technology.
Analog believes it is 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 SLIC products offered by the Company include analog
signal-processing devices (such as analog multipliers), voltage references and
comparators. SLICs are sold to a very large customer base for a wide variety of
applications, including applications in the medical, engineering and scientific
instruments market, factory automation market and military/aerospace market.
Over the past five years, Analog has sought to balance its traditionally
stable SLIC business with the growth opportunities available for SPLICs and DSP
ICs, particularly in the communications and computer markets. Analog's SPLIC and
DSP IC products feature high levels of functional integration on a single chip
and are designed to address customers' needs to incorporate increasingly greater
levels of real-world signal processing capability in their products. The
Company's SPLIC and DSP ICs include products used in wireless communication
applications, such as digital mobile phones and base stations, and computer
applications, such as audio enhancement in multimedia PCs.
To build upon its position as a leader in real-world signal processing, the
Company is pursuing strategies that include: (i) expanding its traditional SLIC
business, (ii) becoming a major supplier of general-purpose DSP ICs, (iii)
pursuing growth opportunities for system-level signal-processing ICs, and (iv)
leveraging its core technologies to develop innovative products.
RECENT OPERATING RESULTS
On November 29, 1995, the Company reported its results for the fourth
quarter of fiscal 1995. The Company reported that for the fourth quarter its
sales were $257.2 million and its earnings per share were $0.44. The Company
also reported bookings of approximately $301 million in the fourth quarter. The
Company reported that for fiscal 1995 its sales were $941.5 million and that its
earnings per share were $1.50.
3
<PAGE> 4
THE OFFERING
<TABLE>
<S> <C>
Securities Offered................... $200,000,000 aggregate principal amount of 3 1/2%
Convertible Subordinated Notes due 2000 (the
"Notes").
Interest Payment Dates............... June 1 and December 1, commencing June 1, 1996.
Maturity............................. December 1, 2000.
Conversion........................... The Notes are convertible into the Company's Common
Stock at any time after 60 days following the latest
date of original issuance thereof and prior to
maturity, unless previously redeemed, at a conversion
price of $41 7/8 per share, subject to adjustment in
certain events.
Redemption at Option of Company...... The Notes are redeemable at the prices set forth
herein, in whole or in part, at the option of the
Company, at any time on or after December 1, 1998.
See "Description of Notes -- Optional Redemption."
Company Repurchase at Option of
Holders............................ The Notes are repurchaseable at the option of the
holder upon a Change in Control (as defined under
"Description of Notes -- Repurchase at Option of
Holders Upon a Change in Control") at 100% of the
principal amount thereof, plus accrued interest to
the repurchase date.
Subordination........................ The Notes are subordinated to all existing and future
Senior Indebtedness (as defined herein) of the
Company, and will be effectively subordinated to all
indebtedness and other liabilities of the Company's
subsidiaries. At July 29, 1995, the Company had
approximately $80.1 million of outstanding Senior
Indebtedness (excluding Senior Indebtedness
constituting liabilities of a type not required to be
reflected as a liability on the balance sheet of the
Company in accordance with generally accepted
accounting principles, such as contingent
obligations, forward foreign exchange contracts and
interest rate swap agreements, which are senior to
the Notes). As of July 29, 1995, the subsidiaries of
the Company had approximately $75.1 million of
outstanding indebtedness and other liabilities (other
than indebtedness to the Company). The Indenture
governing the Notes does not restrict the ability of
the Company or its subsidiaries to incur additional
indebtedness, including Senior Indebtedness. See
"Description of Notes -- Subordination."
Use of Proceeds...................... The Company intends to use the net proceeds from the
sale of the Notes for expansion of manufacturing
capacity and other general corporate purposes,
including working capital. See "Use of Proceeds."
Listing.............................. The Notes have been approved for listing on the New
York Stock Exchange, subject to notice of issuance.
The Common Stock is listed on the New York Stock
Exchange under the symbol "ADI."
</TABLE>
4
<PAGE> 5
<TABLE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<CAPTION>
FISCAL YEAR ENDED(1) NINE MONTHS ENDED
---------------------------------------------------------- --------------------
NOV. 3, NOV. 2, OCT. 31, OCT. 30, OCT. 29, JULY 30, JULY 29,
1990(2)(3) 1991(2) 1992 1993 1994 1994 1995
---------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Net sales............................... $485,214 $537,738 $567,315 $666,319 $773,474 $570,173 $684,352
Gross margin............................ 240,960 265,314 265,637 315,467 379,026 277,182 346,372
Operating income........................ 6,218 17,377 26,172 62,685 101,816 72,827 111,184
Income (loss) before income taxes....... (13,563) 9,382 18,965 55,525 96,911 68,394 111,819
Net income (loss)....................... $(12,913) $ 8,203 $ 14,935 $ 44,457 $ 74,496 $ 52,823 $ 84,136
Net income (loss) per share(4).......... $ (0.18) $ 0.12 $ 0.21 $ 0.59 $ 0.96 $ 0.68 $ 1.06
Shares used in computing net income
(loss) per share(4)................... 70,415 70,329 71,624 75,695 77,271 77,004 79,064
OTHER DATA:
EBITDA(5)............................... $ 52,994 $ 70,082 $ 81,122 $122,498 $163,100 $118,895 $158,231
Cash flows from operating activities.... 82,237 51,014 33,462 89,495 183,342 114,954 120,258
Cash flows from investing activities.... (99,068) (52,270) (65,654) (67,155) (163,508) (82,127) (153,727)
Cash flows from financing activities.... (4,894) 10,001 33,653 39,593 9,971 8,671 (12,076)
Capital expenditures, net............... 39,029 52,270 65,654 67,155 90,856 42,783 145,838
Ratio of earnings to fixed charges(6)... --(7) 2.4x 3.6x 7.1x 10.0x 9.5x 18.0x
Ratio of EBITDA to gross interest
expense............................... 16.6x 14.7x 13.6x 17.1x 22.8x 21.8x 48.8x
</TABLE>
<TABLE>
<CAPTION>
JULY 29, 1995
---------------------------
ACTUAL AS ADJUSTED(8)
---------- --------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital............................................................................... $ 284,570 $ 479,545
Total assets.................................................................................. 911,536 1,111,536
Long-term obligations......................................................................... 80,000 280,000
Stockholders' equity.......................................................................... 619,647 619,647
- ---------------
(1) The Company's fiscal year ends on the Saturday closest to the last day in October. Fiscal years 1991, 1992, 1993 and
1994 were each 52-week years. Fiscal year 1990 was a 53-week year.
(2) In fiscal years 1990 and 1991, the Company recorded restructuring charges of $18.5 million and $7.0 million,
respectively, related to the consolidation of certain manufacturing, sales and administrative operations worldwide. These
charges provided for the cost of employee separations, facility consolidations, equipment write-downs and disposals and other
restructuring costs.
(3) Other expense in fiscal year 1990 includes investment valuation expense totaling $18.3 million related to reserves
recorded against investments in the Company's previously operated venture capital division.
(4) Adjusted to reflect the three-for-two stock split effected in the form of a 50% stock dividend distributed on January 4,
1995.
(5) EBITDA is defined as earnings before interest expense, interest income, other expenses, taxes on income, depreciation
and amortization. EBITDA is presented here to provide additional information about the Company's ability to meet its future
debt service, capital expenditure, and working capital requirements and should not be construed as a substitute for or a
better indicator of results of operations or liquidity than net income or cash flow from operating activities computed in
accordance with generally accepted accounting principles.
(6) The ratio of earnings to fixed charges is computed by dividing income before income taxes and fixed charges by fixed
charges. Fixed charges consist of interest on all indebtedness, amortization of debt offering costs, and the estimated
interest component of rental expense.
(7) As a result of the loss incurred in fiscal year 1990, the Company was unable to cover fixed charges. The amount of such
coverage deficiency was $14.1 million.
(8) Adjusted to reflect the sale of the Notes offered hereby and the receipt of the estimated net proceeds.
5
</TABLE>
<PAGE> 6
RISK FACTORS
Prospective purchasers of the Notes offered hereby should carefully
consider the following risk factors in addition to the other information
contained in, or incorporated by reference in, this Prospectus before purchasing
the Notes offered hereby.
POTENTIAL FLUCTUATIONS IN OPERATING RESULTS. The Company's operating
results are affected by a wide variety of factors, including the timing of new
product announcements or introductions by the Company and its competitors,
competitive pricing pressures, fluctuations in manufacturing yields,
availability of manufacturing capacity, changes in product mix and economic
conditions in the United States and international markets. In addition, the
semiconductor market has historically been cyclical and subject to significant
economic downturns at various times. While the semiconductor industry in recent
periods has experienced increased demand and production capacity constraints, it
is uncertain how long these conditions will continue. As a result of these and
other factors, there can be no assurance that the Company will not experience
material fluctuations in future operating results on a quarterly or annual
basis.
DEPENDENCE ON NEW PRODUCTS AND NEW MARKETS. The Company's success depends
in part on its continued ability to develop and market new products. There can
be no assurance that the Company will be able to develop and introduce new
products in a timely manner or that such products, if developed, will achieve
market acceptance. In addition, the Company's growth is dependent on its
continued ability to penetrate new markets such as the computer, communications
and automotive segments of the electronics market, where the Company has limited
experience and competition is intense. The electronics market is characterized
by rapidly changing technology and evolving industry standards. There can be no
assurance that the markets being served by the Company will continue to grow,
that the Company's existing and new products will meet the requirements of such
markets or that the Company's products will achieve customer acceptance in such
markets.
MANUFACTURING CAPACITY LIMITATIONS. The Company's manufacturing facilities
are operating at full capacity, and therefore Analog's business is currently
constrained. While the Company is planning in fiscal 1996 to increase
substantially its manufacturing capacity through both expansion of its
production facilities and increased access to third-party wafer foundries, there
can be no assurance that the Company will complete the expansion of its
production facilities or secure increased access to third party foundries in a
timely manner, that the Company will not encounter unanticipated production
problems at either its own facilities or at third-party foundries or that the
increased capacity will be sufficient to satisfy demand for its products. The
Company relies, and plans to continue to rely, on third-party wafer fabricators
to supply most of its wafers that can be manufactured using industry-standard
digital processes, and such reliance involves several risks, including the
absence of adequate guaranteed capacity and reduced control over delivery
schedules, manufacturing yields and costs. Continued manufacturing capacity
constraints could adversely affect the business of the Company's customers and
cause them to seek alternative sources for the products currently obtained from
the Company. In addition, the Company's capacity additions will result in a
significant increase in operating expenses, and if revenue levels do not
increase to offset these additional expense levels, the Company's future
operating results could be adversely affected. See "Business -- Manufacturing
Capacity."
The Company believes that other semiconductor manufacturers are also
expanding or planning to expand their production capacity over the next several
years, and there can be no assurance that the expansion by the Company and its
competitors will not lead to overcapacity in the Company's target markets, which
could lead to price erosion that would adversely affect the Company's operating
results.
COMPETITION. The semiconductor industry is intensely competitive. Certain
of the Company's competitors have greater technical, marketing, manufacturing
and financial resources than the Company. The Company's competitors also include
emerging companies attempting to sell products to specialized markets such as
those served by the Company. Competitors of the Company have, in some cases,
developed and marketed products having similar design and functionality as the
Company's products. There can be no assurance that the Company will be able to
compete successfully in the future against existing or new competitors or that
the Company's operating results will not be adversely affected by increased
price competition.
6
<PAGE> 7
MANUFACTURING RISKS. The fabrication of integrated circuits involves
highly complex and precise processes that are continuously being modified in an
effort to improve yields and product performance. Minute impurities or other
difficulties in the manufacturing process can lower yields. As the Company
continues to increase its manufacturing output and its use of third-party
foundries, there can be no assurance that the Company will not experience a
decrease in manufacturing yields or other manufacturing problems. Decreased
yields could adversely affect gross margin and operating results. If the Company
were unable to use any manufacturing facility, as a result of a natural disaster
or otherwise, the Company's operations would be materially adversely affected.
PATENTS AND INTELLECTUAL PROPERTY. The semiconductor industry is
characterized by frequent claims and litigation involving patent and other
intellectual property rights. The Company has from time to time received, and
may in the future receive, claims from third parties asserting that the
Company's products or processes infringe their patents or other intellectual
property rights. In the event a third party makes a valid intellectual property
claim and a license is not available on commercially reasonable terms, the
Company's operating results could be materially and adversely affected.
Litigation may be necessary to enforce patents or other intellectual property
rights of the Company or to defend the Company against claims of infringement,
and such litigation can be costly and divert the attention of key personnel. See
"Business -- Legal Proceedings" for information concerning pending litigation
involving the Company. An adverse resolution of such litigation may, in certain
cases, 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 litigation is resolved.
INTERNATIONAL OPERATIONS. For the nine months ended July 29, 1995, 57% of
Analog's revenues were derived from customers in international markets. The
Company has manufacturing facilities in Ireland, the Philippines and Taiwan. The
Company is therefore subject to the economic and political risks inherent in
international operations, including air transportation disruptions, currency
controls and changes in currency exchange rates, tax and tariff rates and
freight rates. Although the Company engages in hedging transactions to reduce
its exposure to currency exchange rate fluctuations, there can be no assurance
that such hedging efforts will be successful or that the Company's competitive
position will not be adversely affected by changes in the exchange rate of the
U.S. dollar against other currencies.
STOCK PRICE VOLATILITY. The trading price of the Company's Common Stock
may be subject to wide fluctuations in response to quarter-to-quarter variations
in operating results, announcements of new products by the Company or its
competitors, general conditions in the semiconductor industry, changes in
earnings estimates and recommendations by analysts or other events. In future
quarters, if the Company's financial performance were to fall below the
performance predicted by securities analysts, the Company's stock price could
decline. In addition, the public stock markets have experienced extreme price
and trading volume volatility that has significantly affected the market prices
of securities of many high technology companies and that has often been
unrelated or disproportionate to the operating performance of these companies.
These factors may adversely affect the market price of the Common Stock. See
"Price Range of Common Stock and Dividend Policy."
SUBORDINATION OF NOTES. The Notes will be unsecured subordinated
obligations of the Company and will be subordinated to the prior payment in full
of all Senior Indebtedness (as defined in the Indenture) of the Company. The
Notes will also be effectively subordinated to all indebtedness and other
liabilities of the Company's subsidiaries. As of July 29, 1995, the Company had
approximately $80.1 million of outstanding indebtedness which constituted Senior
Indebtedness (excluding Senior Indebtedness constituting liabilities of a type
not required to be reflected as a liability on the balance sheet of the Company
in accordance with generally accepted accounting principles, such as contingent
obligations, forward foreign exchange contracts and interest rate swap
agreements, which are senior to the Notes). In addition, as of July 29, 1995,
subsidiaries of the Company had outstanding an aggregate of approximately $75.1
million of indebtedness and other liabilities to which the Notes are effectively
subordinated. The Indenture will not limit the amount of additional
indebtedness, including Senior Indebtedness, which the Company or any of its
subsidiaries can create, incur, assume or guaranty. No payment on account or
principal, premium, if any, or interest on, or redemption or repurchase of, the
Notes may be made by the Company if there is a default in the payment of
principal, premium, if any, or interest (including a default under any
repurchase or redemption obligation) with respect to any Senior Indebtedness or
if any other event of default with respect to any Senior
7
<PAGE> 8
Indebtedness permitting the holders thereof to accelerate the maturity thereof
shall have occurred and shall not have been cured or waived. Upon any
acceleration of the principal due on the Notes or payment or distribution of
assets of the Company to creditors upon any dissolution, winding-up, liquidation
or reorganization, all principal, premium, if any, and interest due on all
Senior Indebtedness must be paid in full before the holders of the Notes are
entitled to receive any payment. See "Description of Notes -- Subordination."
LIMITATION ON REPURCHASE OF NOTES. Upon a Change in Control (as defined),
each holder of Notes will have certain rights, at the holder's option, to
require the Company to repurchase all or a portion of such holder's Notes. If a
Change in Control were to occur, there can be no assurance that the Company
would have sufficient funds to pay the repurchase price for all Notes tendered
by the holders thereof. In addition, the Company's repurchase of Notes as a
result of the occurrence of a Change in Control would create an event of default
under the Company's revolving credit agreement and could create an event of
default under other future Senior Indebtedness. Also, upon certain changes in
control, holders of the Company's 6 5/8% Notes due 2000 (the "Senior Notes")
have the right to require the Company to repurchase the Senior Notes. In such
event, indebtedness of the Company under its revolving credit agreement and the
Senior Notes would be required to be repaid before holders of the Notes could be
repaid. The Indenture excludes from the definition of Change in Control
transactions that would otherwise constitute a Change in Control if (i) the
trading price of the Common Stock during specified periods equals or exceeds
105% of the conversion price of the Notes or (ii) the consideration in the
transaction consists of shares of common stock traded on a national securities
exchange or quoted on the Nasdaq National Market and the Notes maintain a
certain credit rating following the transaction. See "Description of Notes --
Repurchase at Option of Holders Upon a Change in Control."
ABSENCE OF PUBLIC MARKET FOR NOTES. The Notes will be a new issue of
securities with no established trading market. While the Notes have been
approved for listing on the New York Stock Exchange, subject to notice of
issuance, there can be no assurance that an active trading market will develop
or be maintained.
8
<PAGE> 9
USE OF PROCEEDS
The net proceeds from the sale of the Notes offered hereby are estimated to
be approximately $195 million (approximately $224 million if the Underwriters'
over-allotment option is exercised in full), after deducting the estimated
underwriting discount and offering expenses. The Company intends to use the net
proceeds for expansion of its manufacturing capacity and other general corporate
purposes, including working capital. The Company plans to make capital
expenditures of approximately $275 million in fiscal 1996, primarily in
connection with the expansion of its manufacturing capacity, and the Company
plans to use the net proceeds, together with available cash and cash expected to
be generated from future operations, for such purposes. In addition, the Company
is continuing to explore various options for increasing its manufacturing
capacity, including joint ventures, acquisitions, equity investments in or loans
to wafer suppliers and construction of additional facilities, and the Company
may use a portion of the net proceeds of this offering for such purposes.
Pending such uses, the Company intends to invest the net proceeds in investment
grade securities and interest-bearing obligations.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
<TABLE>
The Company's Common Stock is traded on the New York Stock Exchange under
the symbol "ADI." The following table sets forth, for the periods indicated, the
high and low sale prices per share of Common Stock as reported on the NYSE
Composite Transactions Tape.
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
FISCAL YEAR ENDED OCTOBER 29, 1994
First Quarter............................................ $17.50 $12.88
Second Quarter........................................... 20.75 16.38
Third Quarter............................................ 20.88 16.38
Fourth Quarter........................................... 24.50 17.63
FISCAL YEAR ENDED OCTOBER 28, 1995
First Quarter............................................ $24.38 $20.38
Second Quarter........................................... 28.13 20.00
Third Quarter............................................ 37.88 25.63
Fourth Quarter........................................... 39.38 29.75
FISCAL YEAR ENDING NOVEMBER 2, 1996
First Quarter (through December 12, 1995)................ $38.88 $31.50
</TABLE>
The last reported sale price of the Common Stock as reported on the NYSE
Composite Transactions Tape was $33 1/2 on December 12, 1995. As of October 28,
1995, there were approximately 4,474 holders of record of the Common Stock.
The Company's bank credit agreement restricts the aggregate of all cash
dividend payments declared or made subsequent to January 30, 1993 to an amount
not exceeding $29,734,000 plus 50% of the consolidated net income of the Company
for the period from January 31, 1993 through the end of the Company's then most
recent fiscal quarter. At July 29, 1995, this amount was equal to $127,215,000.
Although prior credit agreements may not have restricted the payment of
dividends, the Company has never paid any cash dividends on its Common Stock.
9
<PAGE> 10
<TABLE>
CAPITALIZATION
The following table sets forth the short-term obligations and the
capitalization of the Company as of July 29, 1995, and as adjusted to give
effect to the sale of the Notes and the receipt of the estimated net proceeds
therefrom. This table does not reflect the three-for-two split of the Company's
Common Stock effected in the form of a 50% stock dividend to be distributed on
January 3, 1996 to stockholders of record on December 12, 1995.
<CAPTION>
JULY 29, 1995
-----------------------
ACTUAL AS ADJUSTED
-------- ------------
(IN THOUSANDS)
<S> <C> <C>
Short-term obligations:
Short-term borrowings........................................... $ 2,155 $ 2,155
Current portion of capital lease obligations.................... 96 96
-------- --------
Total short-term obligations............................... $ 2,251 $ 2,251
======== ========
Long-term obligations:
6 5/8% Notes due 2000........................................... $ 80,000 $ 80,000
3 1/2% Convertible Subordinated Notes due 2000.................. -- 200,000
-------- --------
Total long-term obligations................................ 80,000 280,000
-------- --------
Stockholders' equity:
Preferred stock, $1.00 par value, 500,000 shares authorized;
none outstanding............................................... -- --
Common stock, $.16 2/3 par value, 300,000,000 shares authorized;
76,214,980 shares issued(1).................................... 12,703 12,703
Capital in excess of par value, net of deferred compensation.... 154,700 154,700
Retained earnings............................................... 446,330 446,330
Cumulative translation adjustment............................... 5,999 5,999
Common shares in treasury, at cost, 2,777 shares................ (85) (85)
-------- --------
Total stockholders' equity...................................... 619,647 619,647
-------- --------
Total capitalization.................................. $699,647 $899,647
======== ========
<FN>
- ---------------
(1) Excludes a total of 12,547,830 shares reserved for issuance as of July 29,
1995 under the Company's employee and director stock option plans (the
"Plans") and a warrant agreement. At July 29, 1995, 8,366,468 shares were
issuable upon exercise of options granted under the Plans and 1,500,000
shares were issuable upon exercise of outstanding warrants. As of October
28, 1995, there were 76,354,704 shares of Common Stock issued and
outstanding.
10
</TABLE>
<PAGE> 11
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected financial data and other
operating information of the Company. The consolidated statement of operations
data set forth below for the fiscal years ended October 31, 1992, October 30,
1993 and October 29, 1994, and the consolidated balance sheet data as of October
31, 1992, October 30, 1993 and October 29, 1994 are derived from the
consolidated financial statements of the Company which have been audited by
Ernst & Young LLP, independent auditors. Ernst & Young LLP's report on the
consolidated financial statements for the year ended October 29, 1994, which is
incorporated by reference elsewhere herein, includes an explanatory paragraph
that describes claims and actions brought against the Company discussed in Note
6 to the consolidated financial statements. The consolidated statement of
operations data for the fiscal years ended November 3, 1990 and November 2,
1991, and the consolidated balance sheet data as of November 3, 1990 and
November 2, 1991 are derived from the consolidated financial statements of the
Company that have also been audited by Ernst & Young LLP but are not
incorporated herein by reference. The financial data as of July 29, 1995 and for
the nine-month periods ended July 30, 1994 and July 29, 1995 are derived from
unaudited consolidated financial statements of the Company and reflect all
adjustments, consisting only of normal recurring accruals, which the Company
considers necessary for a fair presentation of the consolidated financial
position and the consolidated results of operations for these periods. Operating
results for the nine months ended July 29, 1995 are not necessarily indicative
of the results that may be expected for future periods or for the year ended
October 28, 1995. The following selected consolidated financial data should be
read in conjunction with the consolidated financial statements and related notes
and other financial information included or incorporated by reference herein.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED(1) NINE MONTHS ENDED
-------------------------------------------------------- --------------------
NOV. 3, NOV. 2, OCT. 31, OCT. 30, OCT. 29, JULY 30, JULY 29,
1990 1991 1992 1993 1994 1994 1995
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net sales................................ $485,214 $537,738 $567,315 $666,319 $773,474 $570,173 $684,352
Cost of sales............................ 244,254 272,424 301,678 350,852 394,448 292,991 337,980
-------- -------- -------- -------- -------- -------- --------
Gross margin............................. 240,960 265,314 265,637 315,467 379,026 277,182 346,372
Operating expenses:
Research and development............... 80,306 89,001 88,172 94,107 106,869 77,821 98,551
Selling, marketing, general and
administrative....................... 135,926 151,936 151,293 158,675 170,341 126,534 136,637
Restructuring of operations............ 18,510(2) 7,000(2) -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Total operating expenses............. 234,742 247,937 239,465 252,782 277,210 204,355 235,188
-------- -------- -------- -------- -------- -------- --------
Operating income......................... 6,218 17,377 26,172 62,685 101,816 72,827 111,184
Nonoperating expenses (income):
Interest expense....................... 3,190 4,778 5,976 7,184 7,149 5,455 3,242
Interest income........................ (2,830) (771) (867) (1,417) (5,165) (3,059) (5,903)
Other.................................. 19,421(3) 3,988 2,098 1,393 2,921 2,037 2,026
-------- -------- -------- -------- -------- -------- --------
Total nonoperating expenses
(income)........................... 19,781 7,995 7,207 7,160 4,905 4,433 (635)
-------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes........ (13,563) 9,382 18,965 55,525 96,911 68,394 111,819
Provision for (benefit from) income
taxes.................................. (650) 1,179 4,030 11,068 22,415 15,571 27,683
-------- -------- -------- -------- -------- -------- --------
Net income (loss)........................ $(12,913) $ 8,203 $ 14,935 $ 44,457 $ 74,496 $ 52,823 $ 84,136
======== ======== ======== ======== ======== ======== ========
Net income (loss) per share(4)........... $ (0.18) $ 0.12 $ 0.21 $ 0.59 $ 0.96 $ 0.68 $ 1.06
======== ======== ======== ======== ======== ======== ========
Shares used in computing net income
(loss) per share(4).................... 70,415 70,329 71,624 75,695 77,271 77,004 79,064
======== ======== ======== ======== ======== ======== ========
OTHER DATA:
EBITDA(5)................................ $ 52,994 $ 70,082 $ 81,122 $122,498 $163,100 $118,895 $158,231
Cash flows from operating activities..... 82,237 51,014 33,462 89,495 183,342 114,954 120,258
Cash flows from investing activities..... (99,068) (52,270) (65,654) (67,155) (163,508) (82,127) (153,727)
Cash flows from financing activities..... (4,894) 10,001 33,653 39,593 9,971 8,671 (12,076)
Capital expenditures, net................ 39,029 52,270 65,654 67,155 90,856 42,783 145,838
Ratio of earnings to fixed charges(6):... --(7) 2.4x 3.6x 7.1x 10.0x 9.5x 18.0x
Ratio of EBITDA to gross interest
expense:............................... 16.6x 14.7x 13.6x 17.1x 22.8x 21.8x 48.8x
</TABLE>
11
<PAGE> 12
<TABLE>
<CAPTION>
FISCAL YEAR ENDED(1) NINE MONTHS ENDED
------------------------------------------------------ ----------------------
NOV. 3, NOV. 2, OCT. 31, OCT. 30, OCT. 29, JULY 30, JULY 29,
1990 1991 1992 1993 1994 1994 1995
------- ------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA AS A
PERCENTAGE OF NET SALES:
Net sales................................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales............................... 50.3 50.7 53.2 52.7 51.0 51.4 49.4
----- ----- ----- ----- ----- ----- -----
Gross margin................................ 49.7 49.3 46.8 47.3 49.0 48.6 50.6
Operating expenses:
Research and development.................. 16.6 16.5 15.5 14.1 13.8 13.6 14.4
Selling, marketing, general and
administrative.......................... 28.0 28.3 26.7 23.8 22.0 22.2 20.0
Restructuring of operations............... 3.8 1.3 -- -- -- -- --
----- ----- ----- ----- ----- ----- -----
Total operating expenses................ 48.4 46.1 42.2 37.9 35.8 35.8 34.4
----- ----- ----- ----- ----- ----- -----
Operating income............................ 1.3 3.2 4.6 9.4 13.2 12.8 16.2
Interest expense, interest income and other,
net....................................... 4.1 1.5 1.3 1.1 0.7 0.8 (0.1)
----- ----- ----- ----- ----- ----- -----
Income (loss) before income taxes........... (2.8) 1.7 3.3 8.3 12.5 12.0 16.3
Provision for (benefit from) income taxes... (0.1) 0.2 0.7 1.6 2.9 2.7 4.0
----- ----- ----- ----- ----- ----- -----
Net income (loss)........................... (2.7)% 1.5% 2.6% 6.7% 9.6% 9.3% 12.3%
===== ===== ===== ===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
NOV. 3, NOV. 2, OCT. 31, OCT. 30, OCT. 29, JULY 29,
1990 1991 1992 1993 1994 1995
-------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital.............................. $126,054 $151,886 $197,404 $270,365 $299,271 $284,570
Property, plant and equipment, net........... 223,862 223,962 237,423 248,430 281,815 383,581
Total assets................................. 487,188 503,317 561,867 678,492 815,871 911,536
Long-term obligations........................ 24,129 36,819 70,632 100,297 80,061 80,000
Stockholders' equity......................... 342,724 354,445 375,017 432,018 521,915 619,647
<FN>
- ---------------
(1) The Company's fiscal year ends on the Saturday closest to the last day in
October. Fiscal years 1991, 1992, 1993 and 1994 were each 52-week years.
Fiscal year 1990 was a 53-week year.
(2) In fiscal years 1990 and 1991, the Company recorded restructuring charges of
$18.5 million and $7.0 million, respectively, related to the consolidation
of certain manufacturing, sales and administrative operations worldwide.
These charges provided for the cost of employee separations, facility
consolidations, equipment write-downs and disposals and other restructuring
costs.
(3) Other expense in fiscal year 1990 includes investment valuation expense
totaling $18.3 million related to reserves recorded against investments in
the Company's previously operated venture capital division.
(4) Adjusted to reflect the three-for-two stock split effected in the form of a
50% stock dividend distributed on January 4, 1995.
(5) EBITDA is defined as earnings before interest expense, interest income,
other expenses, taxes on income, depreciation and amortization. EBITDA is
presented here to provide additional information about the Company's
ability to meet its future debt service, capital expenditure, and working
capital requirements and should not be construed as a substitute for or a
better indicator of results of operations or liquidity than net income or
cash flow from operating activities computed in accordance with generally
accepted accounting principles.
(6) The ratio of earnings to fixed charges is computed by dividing income before
income taxes and fixed charges by fixed charges. Fixed charges consist of
interest on all indebtedness, amortization of debt offering costs, and the
estimated interest component of rental expense.
(7) As a result of the loss incurred in fiscal year 1990, the Company was unable
to cover fixed charges. The amount of such coverage deficiency was $14.1
million.
</TABLE>
12
<PAGE> 13
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
general-purpose, standard-function linear and mixed-signal ICs ("SLICs"),
special-purpose linear and mixed-signal ICs ("SPLICs") and digital signal
processing ICs ("DSP ICs"). The Company also manufactures and markets devices
using assembled product technology.
INDUSTRY BACKGROUND
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, such as 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 10 to 15
years have led to substantial increases in the performance and functionality of
ICs used for signal processing applications. These advances include 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 higher performance and more efficient signal processing.
COMPANY OVERVIEW AND STRATEGY
Analog believes it is 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. SLICs are sold to a very large customer base for a wide variety of
applications, including applications in the medical, engineering and scientific
instruments market, factory automation market and military/aerospace market.
Over the past five years, Analog has sought to balance its traditionally
stable SLIC business with the growth opportunities available for SPLICs and DSP
ICs. Building upon its expertise in linear IC technology, the Company has
developed special-purpose linear and mixed-signal ICs tailored to specific
high-volume applications in target markets. The Company also has extended its
expertise in analog signal processing and data conversion to develop DSP ICs.
The Company's SPLICs and DSP ICs address the emerging demand for high levels of
performance in many computer, communications and other high volume applications.
These products have a high level of functionality (i.e., many functions on one
chip) to satisfy OEMs' requirements for an integrated solution with low cost per
function.
To build upon its position as a leader in real-world signal processing,
Analog is pursuing strategies that include the following:
- Expand Traditional SLIC Business. The Company has taken a three-pronged
approach to grow its SLIC business. First, it is seeking to solidify its
leading position in the market for general purpose operational amplifiers
and data converters, particularly in instrumentation and factory
automation applications. Second, it is expanding its SLIC product
portfolio to address other market segments, such as power management ICs
for laptop computers and mobile phones and interface ICs for modems and
printers. Third, the Company is developing SLICs for new high volume
applications in the computer,
13
<PAGE> 14
communications and consumer markets, including radio frequency ("RF") products
for both wireless and broadband wired communication applications.
-Become a Major Supplier of General-Purpose DSP ICs. The Company's
general-purpose DSP ICs consist of a family of programmable 16-bit fixed
point and 32-bit floating point DSPs. These products offer processing
speed, ease of programming and on-chip memory that allow system designers
to cost effectively implement complex algorithms for signal processing
applications. Analog believes that this product line will enable it to
build a leading position in the general-purpose DSP market, principally
for computer and communications applications.
-Pursue Growth Opportunities for System-Level Signal-Processing ICs. The
Company is leveraging its expertise in both analog signal processing and
data conversion to develop SPLICs and DSP ICs that provide system-level
solutions for various growth applications, particularly in the
communications and computer markets. The Company's system-level ICs often
replace a combination of SLICs and general-purpose DSPs that are used by
customers in their initial product designs. The Company offers
system-level ICs for wireless communications applications such as digital
mobile phones and base stations, and for computer applications such as
audio enhancement in multimedia PCs.
-Leverage Core Technologies to Develop Innovative Products. The Company
plans to continue applying its core technologies to develop a continuous
flow of new products. In addition, the Company plans to continue to extend
its core technologies to include new technologies, such as RF signal
processing, which Analog has used primarily for wireless communications
applications, and surface micromachining, which Analog has used to develop
its accelerometer for automobile airbag systems. The Company intends to
use its micromachining technology to address other applications outside
the automotive industry.
PRINCIPAL PRODUCTS
Analog's products can be divided into four classifications: SLICs; SPLICs
and DSP ICs; hard disk drive ICs; and assembled products. The following table
sets forth the approximate percentage of revenue attributable to each of the
Company's four product groups for the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS
FISCAL YEAR ENDED JULY
--------------- 29,
PRODUCTS 1993 1994 1995
-------- ---- ---- -----------
<S> <C> <C> <C>
SLICs..................................... 60% 59% 64%
SPLICs and DSP ICs........................ 20 21 23
Hard Disk Drive ICs....................... 6 9 4
Assembled Products........................ 14 11 9
</TABLE>
SLICs
Analog believes that it is one of the world's largest suppliers of SLIC
products. SLICs have been the foundation of the Company's business for more than
20 years. 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 SLIC products offered by the Company include 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. SLICs typically have long product
life cycles. 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 mili-
14
<PAGE> 15
tary/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.
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.
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 combining a
number of functions on a single circuit as opposed to a combination of SLICs and
other ICs. These benefits include higher performance, lower cost per function,
smaller size, lower weight, fewer parts and decreased power consumption. These
products enable customers to achieve easier design-ins and faster time to
market. The Company believes that 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.
The Company's general-purpose 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
address cost, performance and time-to-market constraints. 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 ICs include general purpose DSPs 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 tailored to specific applications is
increasing as customers continue to demand as much functionality as possible
from a single chip.
Hard Disk Drive ICs
ICs in this product category are used in hard disk drives that serve as
rotating mass storage devices in end products such as PCs, workstations and
network servers. These ICs process analog signals from a hard disk drive's
read/write head during read operations and position the read/write head over the
desired track on a hard disk drive platter during read and write operations.
Assembled Products
The Company's assembled products consist of hybrids, printed-board modules
and multi-chip modules ("MCMs"). A hybrid consists of several chips and discrete
components mounted and wired together on a substrate. A printed-board module
consists of surface-mount components assembled on a small printed board that is
then encapsulated in a small plastic case. An MCM consists of several chips
assembled in an automated fashion in a multilayer package that provides high
interconnect density at low cost.
Revenues from this product group have been declining since 1989, as hybrids
have been replaced in many new designs with smaller, lower-cost monolithic ICs
that offer higher levels of performance and integration. The Company plans to
continue to market printed-board modules (primarily input/output modules used
for industrial control and factory automation) as it pursues selected
opportunities for new MCMs with growth potential.
15
<PAGE> 16
MARKET AND APPLICATIONS
The Company's products are sold primarily to 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; factory automation equipment;
military/aerospace equipment; and high-end consumer electronics products. The
Company's growth has been aided both by the expansion of these markets and the
increasing use of computer technology in the equipment and systems sold in these
markets.
For the first nine months of fiscal 1995, Analog's 20 largest customers
accounted for approximately 26% of the Company's net sales. The largest single
customer represented less than 5% of net sales.
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 production volumes generally do not warrant
custom or application-specific ICs.
FACTORY 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,
except in ATE applications where the high level of electronic circuitry required
per tester has created opportunities for SPLICs.
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 appropriate military standards. In
addition, many products can be supplied to meet the standards required for
broadcast satellites and other commercial space 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; and enhanced sound input and output
capability for business and entertainment applications.
COMMUNICATIONS -- includes data and fax modems, digital cellular telephones
and portable, wireless communications equipment and broadband wired
applications. 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.
AUTOMOTIVE -- Although the automotive market has historically been served
with low-cost, low-performance ICs, demand has emerged 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. This product serves as an alternative to an
electromechanical sensor. The Company began shipments
16
<PAGE> 17
of this device to Delco in 1994 for use in several 1995 model-year General
Motors "W body" cars. It is also being used in, or has been selected for,
several other manufacturers' airbag systems.
MANUFACTURING CAPACITY
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 rely primarily on such suppliers to supply wafers
that can be fabricated using industry-standard digital processes. The Company
intends to rely primarily on its own facilities for production of wafers
fabricated with linear and mixed-signal processes.
The Company operates wafer fabrication facilities in Wilmington,
Massachusetts; Santa Clara, California; and Limerick, Ireland for production of
linear and mixed-signal devices. The Company also operates assembly and test
facilities located in the United States, Ireland, the Philippines and Taiwan.
The Company uses two principal foundries, Taiwan Semiconductor Manufacturing
Company ("TSMC") and Chartered Semiconductor Corporation, for the production of
digital and VLSI mixed-signal devices.
As a result of strong demand for its products, the Company was
manufacturing capacity constrained throughout the second half of fiscal 1995.
The Company is pursuing a multi-faceted manufacturing capacity expansion program
to substantially increase the number of fabricated wafers available to it in
fiscal 1996 and beyond.
The construction of Analog's first six-inch wafer fabrication module was
completed in fiscal 1995 at the Company's Limerick, Ireland manufacturing site.
This module is now undergoing test and qualification, and is expected to begin
supplying production wafers before the end of the first half of fiscal 1996. It
will be used initially to fabricate mixed-signal VLSI products on a 0.6 micron
digital CMOS process.
In 1995 the Company purchased an existing six-inch wafer fabrication module
located close to its Santa Clara, California site. This facility is being
upgraded and modernized to produce advanced linear technology ICs, and is
expected to go into production in the latter half of fiscal 1996.
The Company has also begun upgrading its existing Wilmington, Massachusetts
wafer fabrication facility from four-inch to six-inch wafer production. This
additional capacity, which will also become available in the latter half of
fiscal 1996, will be used primarily for high-speed linear products.
In addition, Analog has taken steps to secure additional foundry capacity
for the fabrication of sub-micron digital CMOS wafers, which are used in large
part for products that go into the communications and computer markets. The
Company has expanded its relationship with its primary foundry, TSMC, so that
TSMC will make available significantly higher capacity to Analog over the period
from 1996 to 1999. Under the agreement with TSMC, the Company will pay option
fees aggregating $22.4 million through 1999 to secure rights to use additional
capacity at TSMC's facilities. The Company has also made an equity investment of
$14 million in Chartered Semiconductor Corporation in Singapore and expects to
invest an additional $6 million in 1996, in exchange for a less than 5%
ownership interest. This investment is structured to provide access to that
company's new eight-inch, 0.5 micron wafer fabrication facility beginning in
1996. The Company is also actively pursuing various types of relationships with
both its existing foundries and others to provide additional capacity for 1996
and future years.
LEGAL PROCEEDINGS
The Company was a defendant in two lawsuits brought in Texas by Texas
Instruments, Inc. ("TI"), alleging patent infringement, including patent
infringement arising from certain plastic encapsulation processes, and seeking
an injunction and unspecified damages against the Company. The alleged
infringement of one of these patents is also the subject matter of a proceeding
brought by TI against the Company before the International Trade Commission
("ITC"). 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), which prohibited the
Company's importation of certain plastic encapsulated circuits, and seeking
substantial penalties against the Company for these alleged violations. If it
17
<PAGE> 18
is determined that the Company has violated the cease and desist order, the ITC
could seek to impose penalties of up to $100,000 per day of violation from the
date of the cease and desist order (February 1992) or a sum equal to twice the
value of the goods determined to be sold in violation of the order. In addition,
in June 1992, the Company commenced a lawsuit against TI in Massachusetts
alleging certain TI digital signal processors infringed one of the Company's
patents.
Effective April 1, 1995, the Company and TI settled both Texas lawsuits and
the Massachusetts lawsuit principally by means of a royalty-free cross license
of certain of the Company's and TI's patents. On April 25, 1995, the Company
filed with the ITC a motion to terminate the ITC enforcement proceeding on the
grounds that further action by the ITC is unnecessary in light of the Company's
settlement with TI. On May 8, 1995, an Administrative Law Judge issued a
recommended determination to the ITC to grant the Company's motion to terminate
the ITC proceeding. The investigative office of the ITC has opposed the motion,
claiming that, notwithstanding the Company's settlement with TI, the Company's
alleged violation of the ITC's cease and desist order warrants the imposition of
substantial penalties. The Company's motion is pending before the ITC.
The Company is a defendant in a lawsuit brought by Maxim Integrated
Products, Inc. ("Maxim") in the United States District Court for the Northern
District of California 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 improper restrictions 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 claimed 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, Maxim's claim was dismissed for lack of evidence. Maxim has
appealed this ruling and briefing of the appeal was concluded in March 1995. No
hearing on this appeal has yet been scheduled.
Although the Company believes it should prevail in these matters, 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.
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 matters,
patents, personal injury, environmental matters and product liability. Such
litigation includes patent infringement actions brought against the Company by
Sextant Avionique, S.A. ("Sextant") in Paris, France, which claims that the
Company's accelerometer infringes certain Sextant patents and seeks to enjoin
such infringement. While the Company is vigorously defending such claims by
Sextant, there can be no assurance that the Company will prevail.
18
<PAGE> 19
DESCRIPTION OF NOTES
The Notes are to be issued under an Indenture, to be dated as of December
18, 1995 (the "Indenture"), between the Company and State Street Bank and Trust
Company, as Trustee (the "Trustee"), a copy of which is filed as an exhibit to
the Registration Statement. The following is a summary of certain provisions of
the Indenture. As used in this "Description of Notes," the "Company" refers to
Analog Devices, Inc. and does not include its subsidiaries.
GENERAL
The Notes will be unsecured convertible subordinated obligations of the
Company, will be limited to $200,000,000 aggregate principal amount, plus such
additional principal amount of Notes, not to exceed $30,000,000, to cover
over-allotments in the public offering to which this Prospectus relates, and
will mature on December 1, 2000. The Notes will bear interest at the rate per
annum shown on the front cover of this Prospectus from December 18, 1995 or from
the most recent Interest Payment Date to which interest has been paid or duly
provided for, payable semiannually on June 1 and December 1 of each year,
commencing on June 1, 1996, to the Person in whose name the Note (or any
predecessor Note) is registered at the close of business on the preceding May 15
or November 15, as the case may be. (sec.3.1 and 3.7) Principal of, and premium,
if any, and interest on the Notes will be payable at the offices or agencies of
the Company in New York, New York or Boston, Massachusetts, and the transfer of
Notes will be registrable at the office of the Trustee in Boston, Massachusetts.
In addition, payment of interest may, at the option of the Company, be made by
check mailed to the address of the person entitled thereto as it appears in the
Security Register. (sec.sec.3.1, 3.5 and 10.2)
The Notes will be issued only in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple thereof. (sec.3.2) No service
charge will be made for any registration of transfer or exchange of Notes, but
the Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. (sec.3.5)
CONVERSION RIGHTS
The Holder of any Note will have the right, at the Holder's option, to
convert any portion of the principal amount thereof that is an integral multiple
of $1,000 into shares of Common Stock at any time after 60 days following the
latest date of original issuance thereof and prior to maturity (unless earlier
redeemed or repurchased) at the conversion price set forth on the cover page
hereof (subject to adjustment as described below). The right to convert a Note
called for redemption or delivered for repurchase will terminate at the close of
business on the fifth Business Day prior to the Redemption Date for such Note or
the second trading day preceding the Repurchase Date, as the case may be.
(sec.12.1)
Any Note (except Notes called for redemption) surrendered for conversion
during the period from the close of business on any Regular Record Date to the
opening of business of the next succeeding Interest Payment Date must be
accompanied by payment of an amount equal to the interest payable on such
Interest Payment Date on the principal amount of Notes being surrendered for
conversion. In the case of any Note which has been converted after any Regular
Record Date but before the next Interest Payment Date, interest, the Stated
Maturity of which is due on such Interest Payment Date, shall be payable on such
Interest Payment Date notwithstanding such conversion, and such interest shall
be paid to the Holder of such Note on such Regular Record Date. As a result,
Holders that surrender Notes for conversion on a date that is not an Interest
Payment Date will not receive any interest for the period from the Interest
Payment Date next preceding the date of conversion to the date of conversion or
for any later period, even if the Notes are surrendered after a notice of
redemption (except for the payment of interest on Notes called for redemption on
a Redemption Date between a Regular Record Date and the Interest Payment Date to
which it relates). No fractional shares will be issued upon conversion but, in
lieu thereof, an appropriate amount will be paid in cash by the Company based on
the market price of Common Stock at the close of business on the day of
conversion. (sec.sec.3.7, 12.2 and 12.3)
19
<PAGE> 20
The conversion price is subject to adjustment in certain events, including:
(a) dividends (and other distributions) payable in Common Stock on shares of
capital stock of the Company, (b) the issuance to all holders of Common Stock of
rights, options or warrants entitling them to subscribe for or purchase Common
Stock at less than the then current market price (determined as provided in the
Indenture) of Common Stock, (c) subdivisions, combinations and reclassifications
of Common Stock, (d) distributions to all holders of Common Stock of evidences
of indebtedness of the Company, shares of capital stock, cash or assets
(including securities, but excluding those dividends, rights, options, warrants
and distributions referred to above, dividends and distributions paid
exclusively in cash and mergers and consolidations to which the second
succeeding paragraph applies), (e) distributions consisting exclusively of cash
(excluding any cash portion of distributions referred to in (d) above, or cash
distributed upon a merger or consolidation to which the second succeeding
paragraph applies) to all holders of Common Stock in an aggregate amount that,
combined together with (i) other such all-cash distributions made within the
preceding 12 months in respect of which no adjustment has been made and (ii) any
cash and the fair market value of other consideration payable in respect of any
tender offer by the Company or any of its subsidiaries for Common Stock
concluded within the preceding 12 months in respect of which no adjustment has
been made, exceeds 12.5% of the Company's market capitalization (being the
product of the then current market price of the Common Stock and the number of
shares of Common Stock then outstanding) on the record date for such
distribution, and (f) the successful completion of a tender offer made by the
Company or any of its subsidiaries for Common Stock which involves an aggregate
consideration that, together with (i) any cash and other consideration payable
in a tender offer by the Company or any of its subsidiaries for Common Stock
expiring within the 12 months preceding the expiration of such tender offer in
respect of which no adjustment has been made and (ii) the aggregate amount of
any such all-cash distributions referred to in (e) above to all holders of
Common Stock within the 12 months preceding the expiration of such tender offer
in respect of which no adjustments have been made, exceeds 12.5% of the
Company's market capitalization on the expiration of such tender offer. The
Company reserves the right to make such reductions in the conversion price in
addition to those required in the foregoing provisions as it considers to be
advisable in order that any event treated for federal income tax purposes as a
dividend of stock or stock rights will not be taxable to the recipients. No
adjustment of the conversion price will be required to be made until the
cumulative adjustments amount to 1.0% or more of the conversion price.
(sec.12.4)
Generally, Holders converting Notes into Common Stock will be entitled to
receive upon such conversion, in addition to the Common Stock into which the
Notes are converted, the associated rights (the "Rights") to purchase shares of
Common Stock of the Company, pursuant to the Rights Agreement dated as of
January 28, 1988, as amended, between the Company and The First National Bank of
Boston, as Rights Agent, as presently constituted or under any similar plan (see
"Description of Capital Stock -- Stockholder Rights Plan"). If for any reason
converting holders of the Notes are not entitled to receive the Rights that
would otherwise be attributable to the shares of Common Stock received upon such
conversion or such Rights are not issued to them upon conversion for any reason,
then adjustment of the conversion price shall be made under paragraph (b) of the
preceding paragraph as if the Rights were then being distributed to the
stockholders. If such an adjustment is made and the Rights are later redeemed,
invalidated, or terminated, then a corresponding reversing adjustment shall be
made to the conversion price, on an equitable basis, to take account of such
event. (sec.12.4)
In case of any consolidation or merger of the Company with or into another
Person or any merger of another Person into the Company (other than a merger
which does not result in any reclassification, conversion, exchange or
cancellation of the Common Stock), or in case of any sale or transfer of all or
substantially all of the assets of the Company, each Note then outstanding will,
without the consent of any Holder of any Note, become convertible only into the
kind and amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer by a holder of the number of shares of
Common Stock into which such Note was convertible immediately prior thereto
(assuming such holder of Common Stock failed to exercise any rights of election
and that such Note was then convertible). (sec.12.11)
If at any time the Company makes a distribution of property to its
stockholders which would be taxable to such stockholders as a dividend for
federal income tax purposes (e.g., distributions of evidences of
20
<PAGE> 21
indebtedness or assets of the Company, but generally not stock dividends on
Common Stock or rights to subscribe for Common Stock) and, pursuant to the
anti-dilution provisions of the Indenture, the number of shares into which Notes
are convertible is increased, such increase may be deemed for federal income tax
purposes to be the payment of a taxable dividend to Holders of Notes. Holders of
Notes could, therefore, have taxable income as a result of an event pursuant to
which they receive no cash or property that could be used to pay the related
income tax.
SUBORDINATION
The payment of the principal of, premium, if any, and interest on, and the
repurchase of the Notes will be subordinated in right of payment to the extent
set forth in the Indenture to the prior payment in full of the principal of (and
premium, if any), and interest on all Senior Indebtedness of the Company. Senior
Indebtedness includes (a) all indebtedness of the Company, including the
principal of and premium, if any, and interest on such indebtedness, whether
outstanding currently or hereafter created, (i) for borrowed money, (ii) for
money borrowed by others and guaranteed, directly or indirectly, by the Company,
(iii) constituting purchase money indebtedness for the payment of which the
Company is directly or contingently liable, (iv) constituting reimbursement
obligations under bank letters of credit, (v) under interest rate and currency
swaps, caps, floors, collars or similar agreements or arrangements intended to
protect the Company against fluctuations in interest or currency rates, (vi)
under any lease of any real or personal property, which obligations are
capitalized on the Company's books, unless by the terms of the instrument
creating or evidencing such indebtedness it is provided that such indebtedness
is not superior in right of payment to the Notes or to other indebtedness which
is pari passu with, or subordinated to, the Notes, or (vii) all obligations of
others of the kind described in the preceding clauses (i), (ii), (iii), (iv),
(v) and (vi) assumed by or guaranteed by the Company, and (b) any modifications,
refundings, deferrals, renewals or extensions of any such Senior Indebtedness,
or debentures, notes or other evidences of indebtedness issued in exchange for
such Senior Indebtedness. (sec.sec.13.1 and 13.2)
No payment on account of principal, premium, if any, or interest on, or
redemption or repurchase of, the Notes may be made by the Company if there is a
default in the payment of principal, premium, if any, sinking funds or interest
(including a default under any repurchase or redemption obligation) with respect
to any Senior Indebtedness or if any other event of default with respect to any
Senior Indebtedness, permitting the holders thereof to accelerate the maturity
thereof, shall have occurred and shall not have been cured or waived or shall
not have ceased to exist after written notice to the Company and the Trustee by
any holder of Senior Indebtedness. Upon any acceleration of the principal due on
the Notes or payment or distribution of assets of the Company to creditors upon
any dissolution, winding up, liquidation or reorganization, whether voluntary or
involuntary, or in bankruptcy, insolvency, receivership or other proceedings,
all principal, premium, if any, and interest due on all Senior Indebtedness must
be paid in full before the Holders of the Notes are entitled to receive any
payment. By reason of such subordination, in the event of insolvency, creditors
of the Company who are holders of Senior Indebtedness may recover more, ratably,
than the Holders of the Notes, and such subordination may result in a reduction
or elimination of payments to the Holders of the Notes. (sec.13.2)
The Notes will be effectively subordinated to all indebtedness and other
liabilities (including trade payables and lease obligations) of the Company's
subsidiaries. Any right of the Company to receive any assets of its subsidiaries
upon their liquidation or reorganization (and the consequent right of the
Holders of the Notes to participate in those assets) will be effectively
subordinated to the claims of that subsidiary's creditors (including trade
creditors), except to the extent that the Company is itself recognized as a
creditor of such subsidiary, in which case the claims of the Company would still
be subordinate to any security interest in the assets of such subsidiary and any
indebtedness of such subsidiary senior to that held by the Company.
As of July 29, 1995, the principal amount of outstanding Senior
Indebtedness was approximately $80.1 million (excluding Senior Indebtedness
constituting liabilities of a type not required to be reflected as a liability
on the balance sheet of the Company in accordance with generally accepted
accounting principles, such as contingent obligations, forward foreign exchange
contracts and interest rate swap agreements, which are senior to the Notes). The
Company's contingent obligations, at July 29, 1995, included (i) a liability to
repay up to $14.8 million of the governmental grants received by the Company in
the Republic of Ireland in
21
<PAGE> 22
the unlikely event that the Company should liquidate its Irish operation prior
to the commitment periods noted in the grant agreements which expire at various
dates through 1999 and (ii) an agreement to assume a promissory note, which was
$10.4 million at July 29, 1995, in the event that the lessor of the Company's
facility in Norwood, Massachusetts defaults on such note. As of July 29, 1995,
there was outstanding approximately $75.1 million of indebtedness and other
liabilities of subsidiaries of the Company (excluding (i) intercompany
liabilities, (ii) indebtedness included in Senior Indebtedness because it is
guaranteed directly or indirectly by the Company and (iii) liabilities of a type
not required to be reflected as a liability on the balance sheet of such
subsidiaries in accordance with generally accepted accounting principles), as to
which the Notes would have been structurally subordinated.
The Indenture does not limit the Company's ability to incur Senior
Indebtedness or any other indebtedness.
OPTIONAL REDEMPTION
The Notes may not be redeemed at the option of the Company prior to
December 1, 1998. Thereafter, the Notes may be redeemed, in whole or in part, at
the option of the Company, upon not less than 30 nor more than 60 days' notice
by mail.
<TABLE>
The Redemption Prices (expressed as a percentage of principal amount) are
as follows for the 12-month period beginning on December 1 of the following
years (sec.sec.2.3, 11.1, 11.5, 11.7):
<CAPTION>
REDEMPTION
YEAR PRICE
----------------------------------------------- ----------
<S> <C>
1998........................................... 101.4%
1999........................................... 100.7%
</TABLE>
in each case together with accrued interest to the Redemption Date.
REPURCHASE AT OPTION OF HOLDERS UPON A CHANGE IN CONTROL
If a Change in Control (as defined) occurs, each Holder of Notes shall have
the right, at the Holder's option, to require the Company to repurchase all of
such Holder's Notes, or any portion thereof that is an integral multiple of
$1,000, on the date (the "Repurchase Date") that is 45 days after the date of
the Company Notice (as defined), at a price equal to 100% of the principal
amount of the Notes to be repurchased (the "Repurchase Price"), together with
accrued interest to the Repurchase Date. (sec.14.1)
Within 30 days after the occurrence of a Change in Control, the Company is
obligated to mail to all Holders of record of the Notes a notice (the "Company
Notice") of the occurrence of such Change in Control and of the repurchase right
arising as a result thereof. The Company must deliver a copy of the Company
Notice to the Trustee and cause a copy or a summary of such notice to be
published in a newspaper of general circulation in the Borough of Manhattan, The
City of New York, and the County of Suffolk, The City of Boston. To exercise the
repurchase right, a Holder of Notes must deliver on or before the 30th day after
the date of the Company Notice irrevocable written notice to the Trustee of the
Holder's exercise of such right, together with the Notes with respect to which
the right is being exercised, duly endorsed for transfer to the Company.
(sec.14.2)
A Change in Control shall be deemed to have occurred at such time after the
original issuance of the Notes as there shall occur:
(i) the acquisition by any Person (including any syndicate or group
deemed to be a "person" under Section 13(d)(3) of the Exchange Act) of
beneficial ownership, directly or indirectly, through a purchase, merger or
other acquisition transaction or series of transactions, of shares of
capital stock of the Company entitling such Person to exercise 50% or more
of the total voting power of all shares of capital stock of the Company
entitled to vote generally in elections of directors; or
(ii) any consolidation of the Company with, or merger of the Company
into, any other Person, any merger of another Person into the Company, or
any sale or transfer of all or substantially all of the assets
22
<PAGE> 23
of the Company to another Person (other than a merger (x) which does not
result in any reclassification, conversion, exchange or cancellation of
outstanding shares of capital stock or (y) which is effected solely to
change the jurisdiction of incorporation of the Company and results in a
reclassification, conversion or exchange of outstanding shares of Common
Stock into solely shares of common stock); or
(iii) a change in the Board of Directors of the Company in which the
individuals who constituted the Board of Directors of the Company at the
beginning of the 24-month period immediately preceding such change
(together with any other director whose election by the Board of Directors
of the Company or whose nomination for election by the stockholders of the
Company was approved by a vote of at least a majority of the directors then
in office either who were directors at the beginning of such period or
whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the directors then in office;
provided, however, that a Change in Control shall not be deemed to have occurred
if either (i) the closing price per share of the Common Stock for any five
trading days within the period of ten consecutive trading days ending
immediately after the later of the Change in Control or the public announcement
of the Change in Control (in the case of a Change in Control under clause (i)
above) or ending immediately before the Change in Control (in the case of a
Change in Control under clause (ii) above) shall equal or exceed 105% of the
conversion price of the Notes in effect on each such trading day, or (ii)(a) all
of the consideration (excluding cash payments for fractional shares) in the
transaction or transactions constituting the Change in Control consists of
shares of common stock traded on a national securities exchange or quoted on the
Nasdaq National Market and as a result of such transaction or transactions the
Notes become convertible solely into such common stock and (b) after giving
effect to such transaction or transactions and for a period of 12 months
thereafter, the Notes have a rating equivalent or better than the ratings given
to the Notes by Moody's Investors Service, Inc. and Standard & Poor's
Corporation (or their successors) in connection with this offering. "Beneficial
owner" shall be determined in accordance with Rule 13d-3 promulgated by the
Commission under the Exchange Act, as in effect on the date of execution of the
Indenture. (sec.14.3)
The right to require the Company to repurchase Notes as a result of the
occurrence of a Change in Control would create an event of default under the
Company's revolving credit agreement and could create an event of default under
future Senior Indebtedness of the Company. As a result, any repurchase would,
absent a waiver, be blocked by the subordination provisions of the Notes. See
"Subordination." Failure by the Company to repurchase the Notes when required
would result in an Event of Default with respect to the Notes whether or not
such repurchase is permitted by the subordination provisions. See "Events of
Default."
Rule 13e-4 under the Exchange Act requires the dissemination of certain
information to security holders in the event of an issuer tender offer and may
apply in the event that the repurchase option becomes available to Holders of
the Notes. The Company will comply with this rule to the extent applicable at
that time.
The foregoing provisions would not necessarily afford Holders of the Notes
protection in the event of highly leveraged or other transactions involving the
Company that may adversely affect Holders.
MERGERS AND SALES OF ASSETS BY THE COMPANY
The Company may not consolidate with or merge into any other Person or
transfer or lease its properties and assets substantially as an entirety to any
Person unless (a) the Person formed by such consolidation or into which the
Company is merged or the Person to which the properties and assets of the
Company are so transferred or leased shall be a corporation, partnership or
trust organized and existing under the laws of the United States, any State
thereof or the District of Columbia and shall expressly assume the payment of
the principal of (and premium, if any) and interest on the Notes and the
performance of the other covenants of the Company under the Indenture, and (b)
immediately after giving effect to such transaction, no Event of Default, and no
event which, after notice or lapse of time or both, would become an Event of
Default, shall have occurred and be continuing. (sec.8.1)
23
<PAGE> 24
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture: (a) failure to
pay principal of or premium, if any, on any Note when due, whether or not such
payment is prohibited by the subordination provisions of the Indenture; (b)
failure to pay any interest on any Note when due, continuing for 30 days,
whether or not such payment is prohibited by the subordination provisions of the
Indenture; (c) failure to perform any other covenant of the Company in the
Indenture, continuing for 60 days after written notice as provided in the
Indenture; (d) failure of the Company or any subsidiary to make any payment at
maturity in respect of indebtedness, which term as used in the Indenture means
obligations (other than non-recourse obligations) of, or guaranteed or assumed
by, the Company or any subsidiary for borrowed money ("Indebtedness"), in an
amount in excess of $25,000,000 and continuance of such failure for 180 days;
(e) default by the Company or any subsidiary with respect to any Indebtedness,
which default results in the acceleration of Indebtedness in an amount in excess
of $25,000,000 without such Indebtedness having been discharged or such
acceleration having been cured, waived, rescinded or annulled within 30 days
after notice as provided in the Indenture; and, (f) certain events in
bankruptcy, insolvency or reorganization. (sec.5.1) Subject to the provisions of
the Indenture relating to the duties of the Trustee in case an Event of Default
shall occur and be continuing, the Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request or
direction of any of the Holders, unless such Holders shall have offered to the
Trustee reasonable indemnity. (sec.6.3) Subject to such provisions for the
indemnification of the Trustee, the Holders of a majority in aggregate principal
amount of the Outstanding Notes will have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust or power conferred on the Trustee. (sec.5.12)
If an Event of Default shall occur and be continuing, either the Trustee or
the Holders of at least 25% in principal amount of the Outstanding Notes may
accelerate the maturity of all Notes; provided, however, that after such
acceleration, but before a judgment or decree based on acceleration, the Holders
of a majority in aggregate principal amount of Outstanding Notes may, under
certain circumstances, rescind and annul such acceleration if all Events of
Default, other than the non-payment of accelerated principal, have been cured or
waived as provided in the Indenture. (sec.5.2) For information as to waiver of
defaults, see "Modification and Waiver."
No Holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such Holder shall
have previously given to the Trustee written notice of a continuing Event of
Default and unless also the Holders of at least 25% in aggregate principal
amount of the Outstanding Notes shall have made written request, and offered
reasonable indemnity, to the Trustee to institute such proceeding as trustee,
and the Trustee shall not have received from the Holders of a majority in
aggregate principal amount of the Outstanding Notes a direction inconsistent
with such request and shall have failed to institute such proceeding within 60
days. (sec.5.7) However, such limitations do not apply to a suit instituted by a
Holder of a Note for the enforcement of payment of the principal of and premium,
if any, or interest on such Note on or after the respective due dates expressed
in such Note or of the right to convert such Note in accordance with the
Indenture. (sec.5.8)
The Company will be required to furnish to the Trustee annually a statement
as to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance. (sec.10.7)
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the Holders of a majority in aggregate
principal amount of the Outstanding Notes; provided, however, that no such
modification or amendment may, without the consent of the Holder of each
Outstanding Note affected thereby, (a) change the Stated Maturity of the
principal of, or any installment of interest on, any Note, (b) reduce the
principal amount of, or the premium or interest on, any Note, (c) reduce the
amount payable upon an optional redemption or the consideration payable to any
Holder converting after a notice of redemption has been given, (d) modify the
provisions with respect to the repurchase right of the Holders in a manner
adverse to the Holders, (e) change the place or currency of payment of principal
of, or
24
<PAGE> 25
premium or interest on, any Note, (f) impair the right to institute suit for the
enforcement of any payment on or with respect to any Note, (g) adversely affect
the right to convert Notes, (h) modify the subordination provisions in a manner
adverse to the Holders of the Notes, (i) reduce the above-stated percentage of
Outstanding Notes necessary to modify or amend the Indenture or (j) reduce the
percentage of aggregate principal amount of Outstanding Notes necessary for
waiver of compliance with certain provisions of the Indenture or for waiver of
certain defaults. (sec.9.2)
The Holders of a majority in aggregate principal amount of the Outstanding
Notes may waive compliance by the Company with certain restrictive provisions of
the Indenture. (sec.10.8) The Holders of a majority in aggregate principal
amount of the Outstanding Notes may waive any past default under the Indenture,
except a default in the payment of principal, premium or interest. (sec.5.13)
SATISFACTION AND DISCHARGE
The Company may discharge its obligations under the Indenture while Notes
remain Outstanding if (i) all Outstanding Notes will become due and payable at
their scheduled maturity within one year or (ii) all Outstanding notes are
scheduled for redemption within one year, and, in either case, the Company has
deposited with the Trustee an amount sufficient to pay and discharge all
Outstanding Notes on the date of their scheduled maturity or the scheduled date
of redemption. (sec.4.1)
GOVERNING LAW
The Indenture and the Notes provide that they are to be governed in
accordance with the laws of the Commonwealth of Massachusetts. (sec.1.12)
THE TRUSTEE
The Indenture contains certain limitations on the right of the Trustee, in
the event it becomes a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; provided, however, that if it acquires any conflicting interest
(as defined), it must eliminate such conflict or resign. (sec.sec.6.8 and 6.13)
In case an Event of Default shall occur (and shall not be cured), the
Trustee will be required to use the degree of care of a prudent person in the
conduct of his own affairs in the exercise of its powers. Subject to such
provisions, the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request of any of the Holders of
Notes, unless they shall have offered to the Trustee reasonable security or
indemnity. (sec.sec.6.1 and 6.3)
State Street Bank and Trust Company, the Trustee under the Indenture, is
the trustee under the indenture relating to the Company's 6 5/8% Notes due 2000.
25
<PAGE> 26
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 300,000,000 shares
of Common Stock, $.16 2/3 par value per share, and 500,000 shares of preferred
stock, $1.00 par value per share (the "Preferred Stock").
COMMON STOCK
As of October 28, 1995, there were 76,354,704 shares of Common Stock
outstanding and held of record by approximately 4,474 stockholders.
Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders, and do not have cumulative voting
rights. Accordingly, holders of a majority of the shares of Common Stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of Common Stock are entitled to receive ratably
such dividends, if any, as may be declared by the Board of Directors out of
funds legally available therefor, subject to any preferential dividend rights of
outstanding Preferred Stock. Upon the liquidation, dissolution or winding up of
the Company, the holders of Common Stock are entitled to receive ratably the net
assets of the Company available after the payment of all debts and other
liabilities and subject to the prior rights of any outstanding Preferred Stock.
Holders of the Common Stock have no preemptive, subscription, redemption or
conversion rights. The outstanding shares of Common Stock are fully paid and
nonassessable. The rights, preferences and privileges of holders of Common Stock
are subject to, and may be adversely affected by, the rights of the holders of
shares of any series of Preferred Stock which the Company may designate and
issue in the future. There are no shares of Preferred Stock outstanding.
PREFERRED STOCK
The Board of Directors of the Company is authorized, subject to certain
limitations prescribed by law, without further stockholder approval to issue
from time to time up to an aggregate of 500,000 shares of Preferred Stock in one
or more series and to fix or alter the designations, preferences, rights and any
qualifications, limitations or restrictions of the shares of each such series
thereof, including the dividend rights, dividend rates, conversion rights,
voting rights, terms of redemption (including sinking fund provisions),
redemption price or prices, liquidation preferences and the number of shares
constituting any series or designation of such series. The issuance of Preferred
Stock may have the effect of delaying, deferring or preventing a change of
control of the Company. The Company has no present plans to issue any shares of
Preferred Stock.
MASSACHUSETTS LAW AND CERTAIN PROVISIONS OF THE COMPANY'S RESTATED ARTICLES OF
ORGANIZATION AND BY-LAWS
Because the Company has more than 200 stockholders of record, it is subject
to Chapter 110F of the Massachusetts General Laws, an anti-takeover law. In
general, this statute prohibits a publicly held Massachusetts corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
becomes an interested stockholder, unless (i) the interested stockholder obtains
the approval of the Board of Directors prior to becoming an interested
stockholder, (ii) the interested stockholder acquires 90% of the outstanding
voting stock of the corporation (excluding shares held by certain affiliates of
the corporation) at the time it becomes an interested stockholder, or (iii) the
business combination is approved by both the Board of Directors and the holders
of two-thirds of the outstanding voting stock of the corporation (excluding
shares held by the interested stockholder). An "interested stockholder" is a
person who, together with affiliates and associates, owns (or at any time within
the prior three years did own) 5% or more of the outstanding voting stock of the
corporation. A "business combination" includes a merger, a stock or asset sale,
and certain other transactions resulting in a financial benefit to the
interested stockholders.
Massachusetts General Laws Chapter 156B, Section 50A generally requires
that publicly-held Massachusetts corporation have a classified board of
directors consisting of three classes as nearly equal in size as
26
<PAGE> 27
possible, unless the corporation elects to opt out of the statute's coverage.
The Company's By-Laws contain provisions which give effect to Section 50A.
The Company's By-Laws include a provision excluding the Company from the
applicability of Massachusetts General Laws Chapter 110D, entitled "Regulation
of Control Share Acquisitions". In general, this statute provides that any
stockholder of a corporation subject to this statute who acquires 20% or more of
the outstanding voting stock of a corporation may not vote such stock unless the
stockholders of the corporation so authorize. The Board of Directors may amend
the Company's By-Laws at any time to subject the Company to this statute
prospectively.
The Restated Articles of Organization of the Company, as amended (the
"Articles of Organization") provide that the directors and officers of the
Company shall be indemnified by the Company to the fullest extent authorized by
Massachusetts law, as it now exists or may in the future be amended, against all
liabilities and expenses incurred in connection with service for or on behalf of
the Company. In addition, the Articles of Organization provide that the
directors of the Company will not be personally liable for monetary damages to
the Company for breaches of their fiduciary duty as directors, unless they
violated their duty of loyalty to the Company or its stockholders, acted in bad
faith, knowingly or intentionally violated the law, authorized illegal dividends
or redemptions or derived an improper personal benefit from their action as
directors. This provision does not eliminate director liability under Federal
securities laws or preclude non-monetary relief under state law.
STOCKHOLDER RIGHTS PLAN
The Company adopted a Stockholder Rights Plan on January 28, 1988, which
was amended on June 14, 1989 (the "Rights Plan"). Pursuant to the Rights Plan,
each share of Common Stock has an associated right (a "Right"). Each Right
entitles the registered holder to purchase from the Company one share of Common
Stock at a purchase price of $40.00 (as adjusted to account for the 50% Common
Stock dividend distributed by the Company on January 4, 1995) per share, subject
to adjustment (the "Purchase Price").
The Rights will be exercisable upon the earlier of (i) ten business days
following a public announcement that a person or group has acquired, or obtained
the right to acquire, beneficial ownership of 20% or more of the outstanding
Common Stock of the Company (an "Acquiring Person"), or (ii) ten business days
following the commencement of a tender offer or exchange offer, the consummation
of which would result in a person or group owning 30% or more of the outstanding
Common Stock (the earlier of such dates being called the "Distribution Date").
Until a Right is exercised, the holder thereof has no rights as a stockholder of
the Company. Until the Distribution Date (or earlier redemption or expiration of
the Rights), Rights are transferred with and only with the Common Stock.
In certain circumstances specified in the Rights Plan, including certain
circumstances occurring after any person or group becomes an Acquiring Person,
each holder of a Right, other than Rights beneficially owned by the Acquiring
Person, will thereafter have the right to receive upon exercise that number of
shares of Common Stock having a market value of two times the Purchase Price,
and in the event that the Company is acquired in a business combination
transaction or 50% or more of its assets are sold, each holder of a Right will
thereafter have the right to receive upon exercise that number of shares of
Common Stock of the acquiring company which at the time of the transaction will
have a market value of two times the Purchase Price.
The Rights have certain anti-takeover effects, in that they would cause
substantial dilution to a person or group that attempts to acquire a significant
interest in the Company on terms not approved by the Board of Directors. The
Board of Directors of the Company may in certain circumstances redeem the Rights
in whole at a price of $.0133 per Right, as adjusted.
27
<PAGE> 28
<TABLE>
UNDERWRITING
The Underwriters named below have severally agreed, subject to the terms
and conditions of the Underwriting Agreement, to purchase from the Company the
respective principal amounts of Notes set forth opposite their names below. The
Underwriting Agreement provides that the obligations of the Underwriters to pay
for and accept delivery of the Notes are subject to certain conditions
precedent, and that the Underwriters are committed to purchase all of the Notes
if they purchase any of the Notes.
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT
----------- ------------
<S> <C>
Montgomery Securities................................................ $100,000,000
Goldman, Sachs & Co.................................................. $100,000,000
------------
Total........................................................... $200,000,000
============
</TABLE>
The Underwriters have advised the Company that they propose initially to
offer the Notes to the public on the terms set forth on the cover page of this
Prospectus. The Underwriters may allow to selected dealers a concession of not
more than 1.25% of the principal amount of Notes, and the Underwriters may
allow, and such dealers may reallow, a discount of not more than 0.25% of the
principal amount of the Notes to other dealers. The public offering price and
the concession and discount to dealers may be changed by the Underwriters after
the initial public offering of the Notes. The Notes are offered subject to
receipt and acceptance by the Underwriters, and to certain other conditions,
including the right to reject orders in whole or in part.
The Company has granted the Underwriters an option for 30 days to purchase
up to an additional $30,000,000 principal amount of Notes solely to cover
over-allotments, if any, at the same price per Note as the initial $200,000,000
principal amount of Notes to be purchased by the Underwriters. To the extent the
Underwriters exercise this option, each of the Underwriters will be committed to
purchase such additional Notes in approximately the same proportion as set forth
in the above table.
The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain liabilities, including civil liabilities under the
Securities Act, or will contribute to payments the Underwriters may be required
to make in respect thereof.
The Company has agreed that, for a period of 90 days after the date of this
Prospectus, it will not issue, offer, sell, grant options to purchase or
otherwise dispose of any of the Company's equity securities or any other
securities convertible into or exchangeable with its Common Stock or other
equity security, except for certain issuances under the Company's stock plans.
In addition, Mr. Ray Stata, the Chairman of the Board and Chief Executive
Officer of the Company, and Mr. Jerald G. Fishman, the President and Chief
Operating Officer of the Company, have each agreed not to publicly sell or
dispose of more than 110,000 shares of Common Stock, or any securities
convertible into or exercisable for Common Stock, for a period of 30 days after
the date of this Prospectus.
The Notes are a new issue of securities for which there is currently no
public market. The Notes have been approved for listing on the New York Stock
Exchange, subject to notice of issuance. However, no assurance can be given as
to the liquidity of or trading market for the Notes.
LEGAL MATTERS
The validity of the Notes and the shares of Common Stock issuable upon
conversion thereof will be passed upon for the Company by Hale and Dorr, Boston,
Massachusetts. Certain legal matters relating to the offering of the Notes will
be passed upon for the Underwriters by Ropes & Gray, Boston, Massachusetts. Paul
P. Brountas, a partner of Hale and Dorr, is the Clerk of the Company.
EXPERTS
The consolidated financial statements of Analog Devices, Inc. appearing in
Analog Devices, Inc.'s Annual Report (Form 10-K) for the year ended October 29,
1994 have been audited by Ernst & Young LLP, independent auditors, as set forth
in their report thereon (which includes an explanatory paragraph that describes
claims and actions brought against the Company discussed in Note 6 to the
consolidated financial statements) included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
28
<PAGE> 29
===============================================================================
No dealer, salesman or other person is authorized to give any information or
to make any representation in connection with this offering not contained in
this Prospectus, and any information or representation not contained herein must
not be relied upon as having been authorized by the Company or the Underwriters.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy of any securities other than the Notes or an offer to any person in
any jurisdiction where such an offer would be unlawful. Neither the delivery of
this Prospectus nor any sale made hereunder shall, under any circumstances,
create any implication that there has been no change in the affairs of the
Company since the date hereof.
----------------------------
TABLE OF CONTENTS
----------------------------
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Available Information..................... 2
Incorporation of Certain Documents by
Reference............................... 2
Prospectus Summary........................ 3
Risk Factors.............................. 6
Use of Proceeds........................... 9
Price Range of Common Stock and Dividend
Policy.................................. 9
Capitalization............................ 10
Selected Consolidated Financial Data...... 11
Business.................................. 13
Description of Notes...................... 19
Description of Capital Stock.............. 26
Underwriting.............................. 28
Legal Matters............................. 28
Experts................................... 28
</TABLE>
===============================================================================
===============================================================================
$200,000,000
[ANALOG DEVICES LOGO]
3 1/2% CONVERTIBLE SUBORDINATED
NOTES DUE 2000
------------------------
PROSPECTUS
------------------------
MONTGOMERY SECURITIES
GOLDMAN, SACHS & CO.
December 12, 1995
===============================================================================
