<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 3, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition period from _______________ to ________________
Commission File No. 1-7819
Analog Devices, Inc.
(Exact name of registrant as specified in its charter)
Massachusetts 04-2348234
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Technology Way, Norwood, MA 02062-9106
(Address of principal executive offices) (Zip Code)
(617) 329-4700
(Registrant's telephone number, including area code)
----------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
The number of shares outstanding of each of the issuer's classes of Common
Stock as of May 30, 1997 was 160,389,645 shares of Common Stock.
<PAGE> 2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ANALOG DEVICES, INC.
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(thousands except per share amounts)
<CAPTION>
Three Months Ended
-------------------------
May 3, 1997 May 4, 1996
----------- -----------
<S> <C> <C>
Net sales $300,813 $303,328
Cost of sales 150,544 150,362
-------- --------
Gross margin 150,269 152,966
Operating expenses:
Research and development 47,768 44,848
Selling, marketing, general and
administrative 46,859 50,017
-------- --------
94,627 94,865
-------- --------
Operating income 55,642 58,101
Nonoperating expenses (income):
Interest expense 2,973 3,040
Interest income (3,976) (4,807)
Other 477 417
-------- --------
(526) (1,350)
-------- --------
Income before income taxes 56,168 59,451
Provision for income taxes 14,051 15,458
-------- --------
Net income $ 42,117 $ 43,993
======== ========
Shares used to compute earnings per share 176,721 172,576
======== ========
Earnings per share of common stock $ 0.25 $ 0.26
======== ========
</TABLE>
See accompanying notes.
2
<PAGE> 3
ANALOG DEVICES, INC.
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(thousands except per share amounts)
<CAPTION>
Six Months Ended
-------------------------
May 3, 1997 May 4, 1996
----------- -----------
<S> <C> <C>
Net sales $592,876 $584,097
Cost of sales 299,165 288,581
-------- --------
Gross margin 293,711 295,516
Operating expenses:
Research and development 93,472 85,705
Selling, marketing, general and
administrative 91,990 98,820
-------- --------
185,462 184,525
-------- --------
Operating income 108,249 110,991
Nonoperating expenses (income):
Interest expense 6,753 4,868
Interest income (7,370) (8,706)
Other 470 1,200
-------- --------
(147) (2,638)
-------- --------
Income before income taxes 108,396 113,629
Provision for income taxes 27,099 29,544
-------- --------
Net income $ 81,297 $ 84,085
======== ========
Shares used to compute earnings per share 176,336 169,080
======== ========
Earnings per share of common stock $ 0.48 $ 0.51
======== ========
</TABLE>
See accompanying notes.
3
<PAGE> 4
ANALOG DEVICES, INC.
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
Assets May 3, 1997 November 2, 1996 May 4, 1996
----------- ---------------- -----------
<S> <C> <C> <C>
Cash and cash equivalents $ 234,393 $ 210,109 $ 224,903
Short-term investments 68,198 89,810 112,573
Accounts receivable, net 242,733 241,847 212,825
Inventories:
Finished goods 59,243 72,039 55,078
Work in process 129,092 115,799 107,046
Raw materials 29,444 31,039 29,351
---------- ---------- ----------
217,779 218,877 191,475
Deferred tax assets 54,500 44,879 42,000
Prepaid expenses 16,060 14,728 13,181
---------- ---------- ----------
Total current assets 833,663 820,250 796,957
---------- ---------- ----------
Property, plant and equipment,
at cost:
Land and buildings 143,677 140,776 140,740
Machinery and equipment 856,606 800,086 725,172
Office equipment 53,230 46,307 43,239
Leasehold improvements 81,599 80,099 58,482
---------- ---------- ----------
1,135,112 1,067,268 967,633
Less accumulated depreciation
and amortization 525,933 483,946 452,225
---------- ---------- ----------
Net property, plant and
equipment 609,179 583,322 515,408
---------- ---------- ----------
Investments 122,343 68,382 24,135
Intangible assets, net 15,817 16,846 16,214
Deferred charges and other
assets 31,838 26,885 18,986
---------- ---------- ----------
Total other assets 169,998 112,113 59,335
---------- ---------- ----------
$1,612,840 $1,515,685 $1,371,700
========== ========== ==========
</TABLE>
See accompanying notes.
4
<PAGE> 5
ANALOG DEVICES, INC.
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(thousands except share amounts)
<CAPTION>
Liabilities and Stockholders'
Equity May 3, 1997 November 2, 1996 May 4, 1996
----------- ---------------- -----------
<S> <C> <C> <C>
Short-term borrowings and current
portion of long-term debt $ 2,472 $ 178 $ 4,013
Obligations under capital leases 11,651 10,960 8,422
Accounts payable 84,566 90,177 93,507
Deferred income on shipments to
domestic distributors 36,311 38,400 35,931
Income taxes payable 56,586 46,459 29,632
Accrued liabilities 81,001 84,062 94,097
---------- ---------- ----------
Total current liabilities 272,587 270,236 265,602
---------- ---------- ----------
Long-term debt 310,000 310,000 310,000
Noncurrent obligations under
capital leases 44,627 43,666 33,037
Deferred income taxes 20,000 16,992 6,500
Other noncurrent liabilities 17,024 11,956 9,418
---------- ---------- ----------
Total noncurrent liabilities 391,651 382,614 358,955
---------- ---------- ----------
Commitments and Contingencies
Stockholders' equity:
Preferred stock, $1.00 par value,
500,000 shares authorized,
none outstanding - - -
Common stock, $.16 2/3 par value,
600,000,000 shares authorized,
160,285,212 shares issued
(158,745,219 in November 1996,
115,580,780 in May 1996) 26,715 26,458 19,264
Capital in excess of par value 182,678 176,357 157,455
Retained earnings 734,663 653,365 565,549
Cumulative translation adjustment 5,199 6,655 5,379
---------- ---------- ---------
949,255 862,835 747,647
Less 26,464 shares in treasury,
at cost (none in November 1996,
and 57,730 in May 1996) 653 - 504
---------- ---------- ----------
Total stockholders' equity 948,602 862,835 747,143
---------- ---------- ----------
$1,612,840 $1,515,685 $1,371,700
========== ========== ==========
</TABLE>
See accompanying notes.
5
<PAGE> 6
ANALOG DEVICES, INC.
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
(thousands) Six Months Ended
------------------------
May 3, 1997 May 4, 1996
----------- -----------
<S> <C> <C>
OPERATIONS
Cash flows from operations:
Net income $ 81,297 $ 84,085
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation and amortization 48,564 37,106
Deferred income taxes 2,985 1,477
Other noncash income (116) (674)
Changes in operating assets and liabilities (6,232) (76,235)
--------- ---------
Total adjustments 45,201 (38,326)
--------- ---------
Net cash provided by operations 126,498 45,759
--------- ---------
INVESTMENTS
Cash flows from investments:
Maturities of short-term investments
available for sale 89,810 118,495
Additions to property, plant and equipment, net (73,748) (120,056)
Purchases of short-term investments
available for sale (68,198) (154,258)
Long-term investments (53,961) -
Maturities of short-term investments
held to maturity - 5,000
Increase in other assets (5,524) (11,550)
--------- ---------
Net cash used for investments (111,621) (162,369)
--------- ---------
FINANCING ACTIVITIES
Cash flows from financing activities:
Proceeds from equipment financing 7,123 44,028
Payments on capital lease obligations (5,505) (2,629)
Proceeds from employee stock plans 4,791 2,661
Net increase (decrease) in variable rate borrowings (1,964) 1,914
Net proceeds from issuance of long-term debt - 224,385
--------- ---------
Net cash used for financing activities 4,445 270,359
--------- ---------
Effect of exchange rate changes on cash 4,962 1,851
--------- ---------
Net increase in cash and cash equivalents 24,284 155,600
Cash and cash equivalents at beginning of period 210,109 69,303
--------- ---------
Cash and cash equivalents at end of period $ 234,393 $ 224,903
========= =========
SUPPLEMENTAL INFORMATION
Cash paid during the period for:
Income taxes $ 21,640 $ 44,981
========= =========
Interest $ 8,114 $ 3,115
========= =========
</TABLE>
See accompanying notes.
6
<PAGE> 7
Analog Devices, Inc.
Notes to Condensed Consolidated Financial Statements
May 3, 1997
Note 1 - In the opinion of management, the information furnished in the
accompanying financial statements reflects all adjustments, consisting only of
normal recurring adjustments, which are necessary to fairly state the results
for this interim period and should be read in conjunction with the most recent
Annual Report to Stockholders.
Note 2 - Certain amounts reported in the previous year have been reclassified to
conform to the 1997 presentation.
Note 3 - Impairment of Long-Lived Assets
The adoption by the Company on November 3, 1996 of the Statement of Financial
Accounting Standards No. 121 "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of", did not materially affect the
Company's consolidated financial statements.
In the event that facts and circumstances indicate the Company's assets may be
impaired, an evaluation of recoverability would be performed. If an evaluation
is required, the estimated future undiscounted cash flows associated with the
asset would be compared to the asset's carrying amount to determine if a
write-down to market value or discounted cash flow value is required.
Note 4 - Stock-Based Compensation
Effective November 3, 1996, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 123 "Accounting for Stock-Based Compensation".
SFAS No. 123 requires the recognition of, or disclosure of, compensation expense
for grants of stock options or other equity instruments issued to employees
based on their fair value at the date of grant. As permitted by SFAS No. 123,
the Company elected the disclosure requirements instead of recognition of
compensation expense and therefore will continue to apply existing accounting
rules.
Note 5 - Investments
During fiscal 1996 the Company entered into a joint venture agreement with
Taiwan Semiconductor Manufacturing Company and other investors for the
construction and operation of a semiconductor fabrication facility in Camas,
Washington. The Company acquired an 18% equity ownership in the joint venture,
known as WaferTech, in return for a $140 million investment. In December 1996,
the Company paid the second installment of $42 million to WaferTech. The
remaining installment of $56 million is due on November 3, 1997.
Note 6 - Pro Forma Earnings Per Share
The Company computes its earnings per share in accordance with the provisions of
the Accounting Principles Board's Opinion No. 15 ("APB 15"), "Earnings Per
Share". In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share", which supersedes APB 15 and is required
to be adopted in financial statements issued after December 31, 1997. For the
first quarter of fiscal 1998, the Company will be required to change the method
currently used to compute earnings per share and to restate all prior periods.
Under the new requirements, primary and fully diluted earnings per share will be
replaced by basic and diluted earnings per share. Basic earnings per share is
computed based only on the weighted average number of common shares outstanding
during the period and the dilutive effect of stock options is excluded. Diluted
earnings per share is computed in essentially the same manner as fully diluted
earnings per share with some exceptions. The primary exception affecting the
Company is that the dilutive effect of stock options is always based on the
average market price of the stock during the period, not the higher of the
average and period end market price as required under APB 15.
7
<PAGE> 8
Analog Devices, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
May 3, 1997
Note 6 - Pro Forma Earnings Per Share (Continued)
Had the Company computed its earnings per share based on SFAS No. 128, the pro
forma amounts for basic and diluted earnings per share would have been as
follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
May 3, 1997 May 4, 1996 May 3, 1997 May 4, 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Basic Earnings Per Share $0.27 $0.29 $0.52 $0.55
Diluted Earnings Per Share $0.25 $0.26 $0.48 $0.51
</TABLE>
Note 7 - Commitments and Contingencies
As previously reported in the Company's Annual Report on Form 10-K for the
fiscal year ended November 2, 1996, the Company is no longer engaged in an
enforcement proceeding brought by the International Trade Commission ("ITC")
related to previously settled patent infringement litigation with Texas
Instruments, Inc. However, the ITC has referred certain related matters to the
Department of Justice. The Company is unable to determine what, if any, action
may be taken by the Department of Justice, but the Company plans to vigorously
defend itself in the event that any enforcement action is taken by the
Department of Justice on any of the matters referred to it by the ITC.
8
<PAGE> 9
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Second Quarter of Fiscal 1997 Compared to the Second Quarter of Fiscal 1996
Net sales for the second quarter of 1997 were $301 million, as compared to net
sales of $303 million for the second quarter of fiscal 1996. Standard linear IC
("SLICs") revenues increased 3% from the prior year period, as demand for
communications and industrial-related products increased. SLIC revenues
comprised approximately 61% of total second quarter revenues compared to 58% of
revenues for the second quarter of fiscal 1996. Revenues from system-level
products decreased from the year earlier period due primarily to a decline in
demand for computer audio products. Sales in the Southeast Asia region, which
increased 23% from last year, were driven principally by increased sales of
communications products. Sales in Japan decreased 20% from the second quarter
of 1996 due partly to a stronger average dollar to yen exchange rate and
weakness in the Japanese industrial markets. Sales in North America and Europe
remained virtually flat over the same period last year.
Gross margin decreased slightly from 50.4% of sales for the prior year to 50.0%
of sales for the second quarter of fiscal 1997. The reduction in gross margin
was principally due to a change in the mix of products sold, increased costs
associated with the new manufacturing facilities and competitive pricing
pressures.
R&D expense was $48 million, an increase of $3 million or 7% from the second
quarter of fiscal 1996, as the Company continued to increase its R&D investment
in opportunities in communications, computers, digital signal processing,
accelerometer and linear ICs.
Selling, marketing, general & administrative ("SMG&A") expense of $47 million
was $3 million or 6% lower than the prior year quarter. The SMG&A
expense-to-sales ratio was reduced to 15.6% of sales compared to 16.5% for the
year-ago quarter. This decline is a result of the Company's commitment to
constrain spending during a cyclical softening of demand.
As a result of the above, the operating income ratio declined to 18.5% of sales
compared to 19.2% for the second quarter of fiscal 1996.
In total, nonoperating income decreased $0.8 million from the year-ago period
principally due to a decrease in interest income earned on lower levels of
invested cash.
The effective income tax rate decreased from 26.0% of sales for the second
quarter of fiscal 1996 to 25.0% for the second quarter of fiscal 1997 due to a
shift in the mix of worldwide profits.
Net income decreased 4%, from $44 million or $0.26 per share for the second
quarter of fiscal 1996 to $42 million or $0.25 per share for the second quarter
of fiscal 1997.
9
<PAGE> 10
Second Quarter of Fiscal 1997 Compared to the First Quarter of Fiscal 1997
Net sales increased from $292 million for the first quarter of fiscal 1997 to
$301 million for the second quarter of fiscal 1997, an increase of $9 million
or 3%. Strengthening SLIC demand was responsible for the quarter-to-quarter
increase. This increase more than offset a decrease in system-level IC sales
which was due to a decline in demand for computer audio products and the
transition of product generations for GSM (Global Systems for Mobile
Communications) chipsets during the second quarter of fiscal 1997. Revenues
increased in North America and Europe as sales through the OEM channel
strengthened from the first quarter, particularly for SLIC and DSP products.
Sales in Japan decreased from the first quarter due partly to a stronger
average dollar to yen exchange rate and weakness in the Japanese industrial
markets. Sales in the Southeast Asia region decreased from the prior quarter
primarily as a result of the declines in system-level products described above.
Gross margin increased from 49.1% for the prior quarter to 50.0% for the
second quarter of fiscal 1997, driven by a modest shift in the mix of products
sold towards higher-margin SLIC products.
R&D expenses for the second quarter of fiscal 1997 of $48 million were $2
million or 4% higher than the first quarter, as the funding of new product
development continued.
SMG&A expenses of $47 million were $2 million or 4% greater than the preceding
quarter, primarily due to the fact that the first quarter of fiscal 1997
included scheduled vacation shutdowns which reduced expenses in that period.
Operating profit increased to 18.5% of sales versus 18.0% of sales for the
immediately preceding quarter.
After nonoperating income of $0.5 million and an unchanged effective income tax
rate of 25%, the Company recorded a 7.5% increase in net income to $42 million
or 14.0% of sales compared to $39 million or 13.4% of sales for the first
quarter of fiscal 1997. Earnings per share increased from $0.23 to $0.25 over
this same period.
First Six Months of Fiscal 1997 Compared to the First Six Months of Fiscal 1996
Net sales of $593 million rose $9 million from the same period of fiscal 1996.
The increase in sales was mainly attributable to an increase in sales of the
Company's communication products which more than offset declines in sales of
computer audio products. Sales of SLICs were approximately flat in comparison to
the prior year. For the first half of fiscal 1997, sales to North American
customers remained essentially flat, whereas sales to international customers
increased 2% over the same period of fiscal 1996 with an increase experienced in
the Southeast Asia region being partially offset by a decline in Japan.
Gross margin was 49.5% for the first six months of fiscal 1997 down from 50.6%
for the comparable period of fiscal 1996. The reduction in gross margin was
principally due to a change in the mix of products sold, increased costs
associated with the new manufacturing facilities and competitive pricing
pressures.
R&D expenses increased approximately $8 million or 9% over the prior year, as
the Company continued to increase its R&D investment in opportunities in
communications, computers, digital signal processing, accelerometer and linear
ICs.
SMG&A expenses declined 7%, a result of the Company's commitment to constrain
spending, additional vacation shutdowns during the first quarter of fiscal 1997
and the fact that the first six months of fiscal 1997 was 26 weeks versus 27
weeks for the first six months of fiscal 1996. As a result, SMG&A expense as a
percentage of sales fell to 15.5% from 16.9% for the year-earlier period.
Operating profit was $108 million or 18.3% of sales for the first half of fiscal
1997 down from $111 million or 19.0% of sales for the first half of fiscal 1996.
10
<PAGE> 11
Interest expense increased $2 million from the year earlier period due to the
outstanding $230 million of 3 1/2% Convertible Subordinated Notes which were
issued during the first quarter of fiscal 1996, and increased expense related to
capitalized leases. Interest income decreased $1 million from the prior year
period as a result of a lower average level of invested cash during the first
six months of fiscal 1997 as compared to the same period in the prior year.
The effective income tax rate decreased to 25.0% from 26.0% for the year-ago
period due to a change in the mix of worldwide profits.
Liquidity and Capital Resources
At May 3, 1997, cash, cash equivalents and short-term investments totaled $303
million, a decrease of $35 million from the second quarter of fiscal 1996 and
an increase of $3 million from the fourth quarter of fiscal 1996. The decrease
in cash, cash equivalents and short-term investments from the prior year was
due primarily to the use of cash for investing activities, including capital
expenditures and investments made to secure wafer supply. The increase from the
fourth quarter, resulted primarily from the fact that cash flow from operations
was greater than cash outlays for investing activities.
The Company's operating activities generated net cash of $126 million, or 21% of
sales, for the first six months of fiscal 1997 compared to $46 million, or 8% of
sales, for the first six months of fiscal 1996. The $80 million increase in
operating cash flows from the year-earlier period was principally due to
greater working capital requirements, in the prior period, associated with
growth in accounts receivable and inventories and the payment of income taxes,
offset partly by increased accounts payable and accrued liabilities. Cash flow
from operations generated in the second quarter of fiscal 1997 was $80 million
or 26% of sales versus $47 million or 16% of sales for the prior quarter and $13
million or 4% of sales for the second quarter of fiscal 1996. The increase in
operating cash flows compared to the prior year quarter was due mainly to lower
net working capital requirements in the second quarter of fiscal 1997, as the
prior year had substantial growth in accounts receivable and inventories. The
change from the first quarter of fiscal 1997 was due primarily to increased
accounts payable and accrued liabilities. The noncash effect of depreciation
and amortization expense was $49 million for the first half of fiscal 1997 and
$25 million for the second quarter of fiscal 1997, higher than the $37 million
and $20 million, respectively, for the comparable periods of fiscal 1996,
primarily as a result of increased property, plant and equipment related to the
Company's internal capacity expansion programs. As a percentage of sales,
depreciation and amortization expense was 8% for the first six months of fiscal
1997 compared to 6% for the first six months of fiscal 1996.
Accounts receivable of $243 million remained essentially flat in comparison to
the fourth quarter of fiscal 1996 and the first quarter of fiscal 1997, but
increased $30 million or 14% from the end of the second quarter of fiscal 1996.
The number of days sales outstanding was 73 at the end of the second quarter of
fiscal 1997 as compared to 64, 72 and 76, for the second and fourth quarters of
1996 and the first quarter of fiscal 1997, respectively. The increase in the
number of days sales outstanding from the prior year period was primarily due to
a change in the geographic mix of sales from the second quarter of fiscal 1996
to the second quarter of 1997 which resulted in increased sales in areas with
typically longer payment terms.
11
<PAGE> 12
Inventories of $218 million at the end of the first six months of fiscal 1997
rose $26 million and $5 million as compared to the end of the second quarter of
fiscal 1996 and the first quarter of fiscal 1997, respectively. Inventories
declined $1 million from the fourth quarter of fiscal 1996. The growth in
inventories over the past year was principally due to the fact that the second
quarter of fiscal 1996 was a period when the Company was expanding internal
manufacturing capacity, in response to capacity shortages which had reduced
inventory to below optimum levels. A build in inventory levels was needed to
service increasing sales volumes. Inventories as a percentage of annualized
quarterly sales remained at approximately 18% compared to both the first
quarter of fiscal 1997 and the fourth quarter of fiscal 1996 and rose from
approximately 16% for the second quarter of fiscal 1996.
Accounts payable and accrued liabilities declined $22 million or 12% compared to
the balance at the end of the second quarter of fiscal 1996 due principally to
decreased capital spending as the Company's capacity expansion programs were
more extensive in the prior year.
Net additions to property, plant and equipment of $74 million or 12% of sales
for the first six months of fiscal 1997 and $32 million or 11% of sales for the
second quarter of fiscal 1997 were funded with a combination of cash on hand,
cash generated from financing activities and internally generated cash flow from
operations. The majority of these expenditures in fiscal 1997 were related to
the ongoing improvement of the Company's existing wafer fabrication facilities
in Wilmington, Massachusetts and Limerick, Ireland. The Company is continuing to
develop its facility in Cambridge, Massachusetts which will be used for the
production of the accelerometer and other micromachined products. In addition,
the Company continued the development of the six-inch wafer fabrication module
located in Sunnyvale, California. This facility is still in the process of being
upgraded and modernized and a CBCMOS process is being developed and production
output is expected in the fourth quarter of fiscal 1997. During the second
quarter of fiscal 1997 production output began in the new assembly and test
site in the Philippines. Production at this site is expected to increase during
the remainder of fiscal 1997. These expansion programs have caused depreciation
expense to increase in comparison to the prior year.
In December 1996, based on the joint venture agreement with Taiwan
Semiconductor Manufacturing Company and other investors, the Company paid the
second installment of $42 million to WaferTech. During fiscal 1996 the Company
entered into this joint venture agreement for the construction and operation of
a semiconductor fabrication facility in Camas, Washington. The Company acquired
an 18% equity ownership in the joint venture, known as WaferTech, in return for
a $140 million investment. The remaining installment of $56 million is due on
November 3, 1997.
The Company currently plans to make capital expenditures of approximately $185
million during fiscal 1997, primarily in connection with the continued expansion
of its manufacturing capacity.
At May 3, 1997, the Company's principal sources of liquidity included $234
million of cash and cash equivalents and $68 million of short-term investments.
Short-term investments at the end of the second quarter of fiscal 1997 consisted
of commercial paper, banker's acceptances, certificates of deposit and Euro time
deposits with maturities greater than three months and less than six months at
time of acquisition. The Company also has various lines of credit both in the
U.S. and overseas, including a $60 million credit facility in the U.S. which
expires in 2000, all of which were substantially unused at May 3, 1997. At May
3, 1997, the Company's debt-to-equity ratio was 39%.
The Company believes that its existing sources of liquidity and cash expected to
be generated from future operations, together with current and anticipated
available long-term financing, will be sufficient to fund operations, capital
expenditures and research and development efforts for the foreseeable future.
12
<PAGE> 13
Litigation
As set forth in Note 7 to the Condensed Consolidated Financial Statements
contained in this Form 10-Q for the fiscal quarter ended May 3, 1997, the
Company is no longer engaged in an enforcement proceeding brought by the
International Trade Commission ("ITC") related to previously settled patent
infringement litigation with Texas Instruments, Inc. However, the ITC has
referred certain related matters to the Department of Justice. The Company is
unable to determine what, if any, action may be taken by the Department of
Justice, but the Company plans to vigorously defend itself in the event that any
enforcement action is taken by the Department of Justice on any of the matters
referred to it by the ITC.
Factors Which May Affect Future Results
The Company's future operating results are difficult to predict and may be
affected by a number of factors including the timing of new product
announcements or introductions by the Company and its competitors, competitive
pricing pressures, fluctuations in manufacturing yields, adequate availability
of wafers and 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. The Company has replenished inventory
which had been depleted in the prior year. These higher inventory levels expose
the Company to the risk of obsolescence depending on the mix of future
business. 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.
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
communications, computer and automotive segments of the electronics market,
where the Company has limited experience and competition is intense. There can
be no assurance that the markets being served by the Company will grow in the
future; that the Company's existing and new products will meet the requirements
of such markets; that the Company's products will achieve customer acceptance in
such markets; that competitors will not force prices to an unacceptably low
level or take market share from the Company; or that the Company can achieve or
maintain profits in these markets. Also, some of the customers in these markets
are less well established which could subject the Company to increased credit
risk.
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.
13
<PAGE> 14
During fiscal 1996, the Company increased substantially its manufacturing
capacity through both expansion of its production facilities and increased
access to third-party foundries; there can be no assurance that the Company will
not encounter unanticipated production problems at either its own facilities or
at third-party foundries; or if the demand were to increase significantly that
the increased capacity would be sufficient to satisfy demand for its products.
The Company relies, and plans to continue to rely, on assembly and test
subcontractors and 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 reduced control over delivery
schedules, manufacturing yields and costs. 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, including the
potential adverse impact in operating results for "take or pay" covenants in
certain of its supply agreements. With its greater capacity relative to demand,
the Company has increased its levels of inventory. The Company's business is
subject to rapid technological changes and there can be no assurance that
products stocked in inventory will not be rendered obsolete before they are
utilized by the Company.
For the first six months of fiscal 1997, 58% of the Company'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 expropriation, air transportation disruptions, currency
controls and changes in currency exchange rates, tax and tariff rates and
freight rates. Although the Company engages in certain hedging transactions to
reduce its exposure to currency exchange rate fluctuations, there can be no
assurance 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.
While the Company tries to ensure that its manufacturing capacity and demand for
its products are in relative balance, no assurance can be given that from time
to time an imbalance between the Company's manufacturing capacity and the
demand for its products would not occur. Any such imbalance could adversely
affect the Company's consolidated results of operations.
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 Item 3 - "Legal Proceedings" from the Company's
Annual Report on form 10k for the fiscal year ended November 2, 1997 for
information concerning pending litigation involving the Company. An adverse
outcome in 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.
Because of these and other factors, past financial performance should not be
considered an indicator of future performance. Investors should not use
historical trends to anticipate future results and should be aware that the
trading price of the Company's common stock may be subject to wide fluctuations
in response to quarter-to-quarter variations in operating results, general
conditions in the semiconductor industry, changes in earnings estimates and
recommendations by analysts or other events.
14
<PAGE> 15
PART II - OTHER INFORMATION
ANALOG DEVICES, INC.
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders held on March 11, 1997, the stockholders
of the Company elected Messers. Charles O. Holliday, Jr., Joel Moses and Lester
C. Thurow to serve as Class I Directors for a term of three years by the
following votes:
<TABLE>
<CAPTION>
Nominee Votes for Votes Withheld Broker Non Votes
- ------- ----------- -------------- ----------------
<S> <C> <C> <C>
Charles O. Holliday, Jr. 134,412,096 1,150,371 -0-
Joel Moses 134,773,873 788,594 -0-
Lester C. Thurow 134,663,881 898,586 -0-
</TABLE>
The terms of office of Messrs. John L. Doyle, Samuel H. Fuller, Jerald G.
Fishman, Gordon C. McKeague and Ray Stata continued after the meeting.
At the same meeting, the stockholders approved an amendment to the Company's
Articles of Organization increasing the number of authorized shares of Common
Stock from 450,000,000 shares to 600,000,000 shares, by a vote of 125,944,127 in
favor, 9,286,270 opposed and 332,070 abstaining.
Stockholders also ratified the selection by the Board of Directors of Ernst &
Young LLP as the Company's independent auditors for the fiscal year ending
November 1, 1997, by a vote of 133,735,588 in favor, 173,226 opposed and
1,653,652 abstaining.
Item 6. Exhibits and reports on Form 8-K
(a) See Exhibit Index
(b) There were no reports on Form 8-K filed for the three months ended May
3, 1997.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Analog Devices, Inc.
--------------------
(Registrant)
Date: June 16, 1997 By:/s/ Jerald G. Fishman
-----------------------------
Jerald G. Fishman
President and
Chief Executive Officer
(Principal Executive Officer)
Date: June 16, 1997 By:/s/ Joseph E. McDonough
-----------------------------
Joseph E. McDonough
Vice President-Finance
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
16
<PAGE> 17
EXHIBIT INDEX
Analog Devices, Inc.
Item
10-1 Restated 1988 Stock Option Plan of Analog Devices, Inc.
11-1 Computation of Earnings per Share.
27 Financial Data Schedule
17
<PAGE> 1
Exhibit 10.1
ANALOG DEVICES, INC.
RESTATED 1988 STOCK OPTION PLAN
1. Purpose.
-------
The purpose of this plan (the "Plan") is to secure for Analog Devices,
Inc. (the "Company") and its shareholders the benefits arising from capital
stock ownership by key employees of the Company and its parent and subsidiary
corporations who are expected to contribute to the Company's future growth and
success. Except where the context otherwise requires, the term "Company" shall
include the parent and all subsidiaries of the Company.
2. Type of Options and Administration.
----------------------------------
(a) TYPES OF OPTIONS. Options granted pursuant to the Plan shall be
authorized by action of the Board of Directors of the Company (or a Committee
designated by the Board of Directors) and may be either incentive stock options
("Incentive Stock Options") meeting the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code") or non-statutory options
which are not intended to meet the requirements of Section 422.
(b) ADMINISTRATION. The Plan will be administered by the Board of
Directors of the Company, whose construction and interpretation of the terms and
provisions of the Plan shall be final and conclusive. The Board of Directors may
in its sole discretion grant options to purchase shares of the Company's Common
Stock and issue shares upon exercise of such options as provided in the Plan.
The Board shall have authority, subject to the express provisions of the Plan,
to construe the respective option agreements and the Plan, to prescribe, amend
and rescind rules and regulations relating to the Plan, to determine the terms
and provisions of the respective option agreements, which need not be identical,
and to make all other determinations in the judgment of the Board of Directors
necessary or desirable for the administration of the Plan. The Board of
Directors may correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any option agreement in the manner and to the
extent it shall deem expedient to carry the Plan into effect and it shall be the
sole and final judge of such expediency. No director shall be liable for any
action or determination made in good faith. The Board of Directors may, to the
full extent permitted by law, delegate any or all of its powers under the Plan
to a committee (the "Committee") appointed by the Board of Directors, and if the
Committee is so appointed all references to the Board of Directors in the Plan
shall mean and relate to such Committee.
1
<PAGE> 2
Exhibit 10.1
3. Eligibility.
-----------
Options shall be granted only to persons who are, at the time of grant,
key employees (including officers and directors who are employees) of the
Company. No person shall be granted any Incentive Stock Option under the Plan
who, at the time such option is granted, owns, directly or indirectly, Common
Stock of the Company possessing more than 10% of the total combined voting power
of all classes of stock of the Company, unless the requirements of paragraph (b)
of Section 11 are satisfied. The attribution of stock ownership provisions of
Section 425(d) of the Code, and any successor provisions thereto, shall be
applied in determining the shares of stock owned by a person for purposes of
applying the foregoing percentage limitation. A person who has been granted an
option may, if he or she is otherwise eligible, be granted an additional option
or options if the Board of Directors shall so determine.
4. Stock Subject to Plan.
---------------------
Subject to adjustment as provided in Section 15 below, the maximum
number of shares of Common Stock which may be issued and sold under the Plan is
29,900,000 shares. Such shares may be authorized and unissued shares or may be
shares issued and thereafter acquired by the Company. If an option granted under
the Plan shall expire or terminate for any reason without having been exercised
in full, the unpurchased shares subject to such option shall again be available
for subsequent option grants under the Plan. The number of shares of Common
Stock for which stock options may be granted under this Plan to any one employee
during any fiscal year shall not exceed 750,000 shares.
5. Agreements or Confirming Memos.
------------------------------
Options granted under the Plan may but need not be evidenced by
agreements (which need not be identical) in such form and containing such
provisions consistent with the Plan as the Committee shall from time to time
approve. Options not documented by written agreement shall be memorialized by a
written confirming memorandum stating the material terms of the option and
provided to the option recipient. Each agreement or confirming memorandum shall
specify whether the subject option is an Incentive Stock Option or a
Non-Qualified Stock Option.
2
<PAGE> 3
Exhibit 10.1
6. Purchase Price.
--------------
(a) GENERAL. The purchase price per share of stock deliverable upon
the exercise of an option shall be determined by the Board of Directors;
PROVIDED, HOWEVER, that the exercise price shall not be less than 100% of the
fair market value of such stock, as determined by the Board of Directors, at the
time of grant of such option, or less than 110% of such fair market value in the
case of Incentive Stock Options described in Paragraph (b) of Section 11.
(b) PAYMENT OF PURCHASE PRICE. Options granted under the Plan may
provide for the payment of the exercise price by delivery of cash or a check to
the order of the Company in an amount equal to the exercise price of such
options, or, to the extent provided in the applicable option agreement, by
delivery to the Company of shares of Common Stock of the Company having a fair
market value equal in amount to the exercise price of the options being
exercised, or by any combination of such methods of payment. The fair market
value of any shares of the Company's Common Stock which may be delivered upon
exercise of an option shall be determined in accordance with the terms of the
applicable option agreement.
7. Option Period.
-------------
Each option and all rights thereunder shall expire on such date as the
Board of Directors shall determine, but, in the case of Incentive Stock Options,
in no event after the expiration of ten years from the day on which the option
is granted (or five years in the case of options described in paragraph (b) of
Section 11) and, in the case of non-statutory options, in no event after the
expiration of ten years plus 30 days from the day on which the option is
granted, and in either case, shall be subject to earlier termination as provided
in the Plan.
8. Exercise of Options.
-------------------
Each option granted under the Plan shall be exercisable either in full
or in installments at such time or times and during such period as shall be set
forth in the agreement evidencing such option, subject to the provisions of
Section 7 above.
8A. Deferral.
--------
An optionee who is entitled, by authority of the Board of Directors, to
defer his/her compensation pursuant to the Corporation's Deferred Compensation
Plan may elect, in accordance with rules established by the Board or the
Committee, to defer receipt of any shares of Common Stock issuable upon the
exercise of an option, provided
3
<PAGE> 4
Exhibit 10.1
that such election is irrevocable and made at least that number of days prior to
the exercise of the option which shall be determined by the Board or the
Committee. The optionee's account under the Analog Devices, Inc. Deferred
Compensation Plan shall be credited with a number of stock units equal to the
number of shares so deferred.
9. Transferability of Options.
--------------------------
Except as the Board of Directors (or a committee or persons designated
by the Board of Directors) may otherwise determine or provide in an option,
options shall not be sold, assigned, transferred, pledged or otherwise
encumbered by the person to whom they are granted, either voluntarily or by
operation of law, except by will or the laws of descent and distribution; and,
during the life of the optionee, shall be exercisable only by the optionee.
References to optionee, to the extent relevant in the context, shall include
references to authorized transferees.
10. Effect of Termination of Employment.
-----------------------------------
No option may be exercised unless, at the time of such exercise, the
optionee is, and has been continuously since the date of grant of his or her
option, employed by the Company, except that if and to the extent the option
agreement or instrument so provides:
(a) the option may be exercised within the period of three months
after the date the optionee ceases to be an employee of the
Company (or within such lesser period as may be specified in the
applicable option agreement);
(b) if the optionee dies while in the employ of the Company, the
option may be exercised in full by the person to whom it is
transferred by will or the laws of descent and distribution
within the period of one year after the date of death (or within
such lesser period as may be specified in the applicable option
agreement); and
(c) if the optionee becomes disabled, within the meaning of Section
22(e)(3) of the Code or any successor provision thereto while in
the employ of the Company, the option may be exercised in full
within the period of one (1) year after the date the optionee
ceases to be such an employee because of such disability (or
within such lesser period as may be specified in the applicable
option agreement);
PROVIDED, HOWEVER, that in no event may any option be exercised after the
expiration date of the option. With respect to statutory options, and for
purposes of the Plan, any
4
<PAGE> 5
Exhibit 10.1
option granted hereunder, the term "employment" shall be defined in accordance
with the provisions of Section 1.421-7(h) of the Income Tax Regulations (or any
successor regulations). With respect to nonqualified options, the term
"employment" shall be defined by the Company, and may provide that the
employment relationship continue when an employee is on a bona fide leave of
absence regardless of the reason or duration of such leave of absence provided
such leave of absence has been approved by the Vice President of Human Resources
of the Company.
11. Incentive Stock Options.
-----------------------
Options granted under the Plan which are intended to be Incentive Stock
Options shall be specifically designated as Incentive Stock Options and shall be
subject to the following additional terms and conditions:
(a) DOLLAR LIMITATION. Incentive Stock Options granted to any
employee under the Plan (and any other incentive stock option plans of the
Company) shall not, in the aggregate, become exercisable for the first time in
any one calendar year for shares of Common Stock with an aggregate fair market
value (determined as of the respective date or dates of grant) of more than
$100,000.
(b) 10% SHAREHOLDER. If any employee to whom an Incentive Stock
Option is to be granted under the Plan is, at the time of the grant of such
option, the owner of stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company (after taking into account the
attribution of stock ownership rules of Section 425(d) of the Code), then the
following special provisions shall be applicable to the Incentive Stock Option
granted to such individual:
(i) The purchase price per share of the Common Stock subject
to such Incentive Stock Option shall not be less than 110% of the fair
market value of one share of Common Stock at the time of grant; and
(ii) The option exercise period shall not exceed five years
from the date of grant.
12. Additional Provisions.
---------------------
(a) ADDITIONAL OPTION PROVISIONS. The Board of Directors may, in its
sole discretion, include additional provisions in any option granted under the
Plan, including without limitation restrictions on transfer, repurchase rights,
commitments to pay cash bonuses, make or arrange for loans or transfer other
property to optionees upon exercise of options, or such other provisions as
shall be determined by the Board of Directors;
5
<PAGE> 6
Exhibit 10.1
PROVIDED THAT such additional provisions shall not be inconsistent with any
other term or condition of the Plan.
(b) ACCELERATION. The Board of Directors may, in its sole
discretion, accelerate the date or dates on which all or any particular option
or options granted under the Plan may be exercised.
13. Compliance With Securities Laws.
-------------------------------
Each option shall be subject to the requirement that if, at any time,
counsel to the Company shall determine that the listing, registration or
qualification of the shares subject to such option upon any securities exchange
or under any state or federal law, or the consent or approval of any
governmental or regulatory body, is necessary as a condition of, or in
connection with, the issuance or purchase of shares thereunder, such option may
not be exercised, in whole or in part, unless such listing, registration,
qualification, consent or approval shall have been effected or obtained on
conditions acceptable to the Board of Directors. Nothing herein shall be deemed
to require the Company to apply for or to obtain such listing, registration or
qualification.
14. Rights as a Shareholder.
-----------------------
The holder of an option shall have no rights as a shareholder with
respect to any shares covered by the option until the date of issue of a stock
certificate to him or her for such shares. No adjustment shall be made for
dividends or other rights for which the record date is prior to the date such
stock certificate is issued.
15. Adjustments.
-----------
(a) If the outstanding shares of Common Stock are increased,
decreased or exchanged for a different number or kind of shares or other
securities, or if additional shares or new or different shares or other
securities are distributed with respect to such shares of Common Stock or other
securities, through merger, consolidation, sale of all or substantially all of
the assets of the Company, reorganization, recapitalization, reclassification,
stock dividend, stock split, reverse stock split or other distribution with
respect to such shares of Common Stock, or other securities, an appropriate and
proportionate adjustment may be made in (i) the maximum number and kind of
shares reserved for issuance under the Plan, (ii) the number and kind of shares
or other securities subject to then outstanding options under the Plan, and
(iii) the price for each share subject to any then outstanding options under the
Plan, without changing the aggregate purchase price as to which such options
remain exercisable.
6
<PAGE> 7
Exhibit 10.1
(b) Adjustments under this Section 15 will be made by the Board of
Directors, whose determination as to what adjustments, if any, will be made and
the extent thereof will be final, binding and conclusive. No fractional shares
will be issued under the Plan on account of any such adjustments.
16. Change in Control.
-----------------
(a) Notwithstanding any other provision to the contrary in this
Plan, in the event of a Change in Control (as defined below), all options
outstanding as of the date such Change in Control occurs shall become
exercisable in full, whether or not otherwise exercisable in accordance with
their terms.
(b) A "Change in Control" shall occur or be deemed to have occurred
only if any of the following events occur: (i) any "person," as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), (other than the Company, any trustee or other
fiduciary holding securities under an employee benefit plan of the Company, or
any corporation owned directly or indirectly by the stockholders of the Company
in substantially the same proportion as their ownership of stock of the Company)
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
50% or more of the combined voting power of the Company's then outstanding
securities; (ii) individuals who, as of December 13, 1988, constitute the Board
of Directors of the Company (as of the date hereof, the "Incumbent Board") cease
for any reason to constitute at least a majority of the Board, provided that any
person becoming a director subsequent to such date whose election, or nomination
for election by the Company's stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board (other than an
election or nomination of an individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of the directors of the Company, as such terms are used in Rule 14a-11
of Regulation 14A under the Exchange Act) shall be, for purposes of this
Agreement, considered as though such person were a member of the Incumbent
Board; (iii) the stockholders of the Company approve a merger or consolidation
of the Company with any other corporation, other than (A) a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 80% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation or (B) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction) in which no
"person" (as hereinabove defined) acquires more than 30% of the combined voting
power of the Company's then outstanding securities; or (iv) the
7
<PAGE> 8
Exhibit 10.1
stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets.
17. No Special Employment Rights.
----------------------------
Nothing contained in the Plan or in any option shall confer upon any
optionee any right with respect to the continuation of his or her employment by
the Company or interfere in any way with the right of the Company at any time to
terminate such employment or to increase or decrease the compensation of the
optionee. Whether an authorized leave of absence, or absence in military or
government service, shall constitute termination of employment shall be
determined by the Board of Directors at the time of such absence.
18. Other Employee Benefits.
-----------------------
The amount of any compensation deemed to be received by an employee as a
result of the exercise of an option or the sale of shares received upon such
exercise will not constitute compensation with respect to which any other
employee benefits of such employee are determined, including, without
limitation, benefits under any bonus, pension, profit-sharing, life insurance or
salary continuation plan, except as otherwise specifically determined by the
Board of Directors.
19. Amendment of the Plan.
----------------------
(a) The Board of Directors may at any time, and from time to time,
modify or amend the Plan in any respect, except that if at any time the approval
of the shareholders of the Company is required as to such modification or
amendment under (i) Section 422 of the Code or any successor provision with
respect to Incentive Stock Options or (ii) under Rule l6b-3 or any successor
rule ("Rule l6b-3") promulgated by the Securities and Exchange Commission under
the Securities Exchange Act of 1934, or (iii) under any applicable listing
requirements, the Board of Directors may not effect such modification or
amendment without such approval.
(b) The termination or any modification or amendment of the Plan
shall not, without the consent of an optionee, affect his or her rights under an
option previously granted to him or her. With the consent of the optionee
affected, the Board of Directors may amend outstanding option agreements in a
manner not inconsistent with the Plan. The Board of Directors shall have the
right to amend or modify (i) the terms and provisions of the Plan and of any
outstanding Incentive Stock Options granted under the Plan to the extent
necessary to qualify any or all such options for such favorable federal
8
<PAGE> 9
Exhibit 10.1
income tax treatment (including deferral of taxation upon exercise) as may be
afforded incentive stock options under Section 422 of the Code and (ii) the
terms and provisions of the Plan and of any outstanding option to the extent
necessary to ensure the qualification of the Plan under Rule l6b-3 or any
successor rule.
20. Withholding.
-----------
(a) The Company shall have the right to deduct from payments of any
kind otherwise due to the optionee any federal, state or local taxes of any kind
required by law to be withheld with respect to any shares issued upon exercise
of Options under the Plan. Subject to the prior approval of the Company, which
may be withheld by the Company in its sole discretion in any particular case or
cases, the optionee may elect to satisfy such obligations, in whole or in part,
(i) by causing the Company to withhold shares of Common Stock otherwise issuable
pursuant to the exercise of an Option or (ii) by delivering to the Company
shares of Common Stock already owned by the optionee. The shares so withheld or
delivered shall have a fair market value equal to the amount of such withholding
obligation. The fair market value of the shares used to satisfy such.
withholding obligation shall be determined by the Company as of the date that
the amount of tax to be withheld is to be determined. An optionee who has made
an election pursuant to this Section 20(a) may only satisfy his or her
withholding obligation with shares of Common Stock which are not subject to any
repurchase, forfeiture, unfulfilled vesting or other similar requirements.
(b) Notwithstanding the foregoing, in the case of an optionee
subject to the reporting requirements of Section 16(a) of the Exchange Act, no
election to use shares for the payment of withholding taxes shall be effective
unless made in compliance with any applicable requirements of Rule 16b-3(e) or
any successor rule under such Act.
21. Cancellation and New Grant of Options.
-------------------------------------
The Board of Directors shall have the authority to effect, at any time
and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Plan and to grant in
substitution therefor new options under the Plan covering the same or different
numbers of shares of Common Stock having an option exercise price per share
which may be lower or higher than the exercise price per share of the canceled
options.
22. Effective Date and Duration of the Plan.
---------------------------------------
(a) EFFECTIVE DATE. The Plan shall become effective when adopted by
the Board of Directors, but no Incentive Stock Option granted under the Plan
shall become
9
<PAGE> 10
Exhibit 10.1
exercisable unless and until the Plan shall have been approved by the Company's
shareholders. If such shareholder approval is not obtained within twelve months
after the date of the Board's adoption of the Plan, any Incentive Stock Options
previously granted under the Plan shall terminate and no further Incentive Stock
Options shall be granted. Amendments to the Plan not requiring shareholder
approval shall become effective when adopted by the Board of Directors;
amendments requiring shareholder approval (as provided in Section 19) shall
become effective when adopted by the Board of Directors, but no Incentive Stock
Option issued after the date of such amendment shall become exercisable (to the
extent that such amendment to the Plan was required to enable the Company to
grant such incentive Stock Option to a particular optionee) unless and until
such amendment shall have been approved by the Company's shareholders. If such
shareholder approval is not obtained within twelve months of the Board's
adoption of such amendment, any Incentive Stock Options granted on or after the
date of such amendment shall terminate to the extent that such amendment to the
Plan was required to enable the Company to grant such option to a particular
optionee. Subject to this limitation, options may be granted under the Plan at
any time after the effective date and before the date fixed for termination of
the Plan.
(b) TERMINATION. The Plan shall terminate upon the earlier of (i)
the close of business on December 15, 1999, or (ii) the date on which all shares
available for issuance under the Plan shall have been issued pursuant to the
exercise or cancellation of options granted under the Plan. If the date of
termination is determined under (i) above, then options outstanding on such date
shall continue to have force and effect in accordance with the provisions of the
instruments evidencing such options.
Adopted by the Board of Directors on
December 16, 1987.
Approved as Restated on May 20, 1997.
10
<PAGE> 1
Exhibit 11-1
Analog Devices, Inc.
<TABLE>
Computation of Earnings Per Share (Unaudited)
(in thousands, except per share data)
<CAPTION>
Three Months Ended
------------------------
May 3, 1997 May 4, 1996
----------- -----------
<S> <C> <C>
PRIMARY EARNINGS PER SHARE
Weighted average common and common equivalent shares:
Weighted average common shares outstanding 158,667 151,921
Assumed exercise of common stock equivalents (1) 7,069 9,670
Assumed conversion of subordinated notes 10,985 10,985
-------- --------
Weighted average common and common
equivalent shares 176,721 172,576
======== ========
Net income $ 42,117 $ 43,993
Interest related to convertible subordinated
notes, net of tax 1,425 1,401
-------- --------
Earnings available for common stock $ 43,542 $ 45,394
======== ========
PRIMARY EARNINGS PER SHARE $ 0.25 $ 0.26
======== ========
FULLY DILUTED EARNINGS PER SHARE
Weighted average common and common equivalent shares:
Weighted average common shares outstanding 158,667 151,921
Assumed exercise of common stock equivalents (1) 7,134 9,944
Assumed conversion of subordinated notes 10,985 10,985
-------- --------
Weighted average common and common
equivalent shares 176,786 172,850
======== ========
Net income $ 42,117 $ 43,993
Interest related to convertible subordinated
notes, net of tax 1,425 1,401
-------- --------
Earnings available for common stock $ 43,542 $ 45,394
======== ========
FULLY DILUTED EARNINGS PER SHARE $ 0.25 $ 0.26
======== ========
</TABLE>
(1) Computed based on the treasury stock method.
1
<PAGE> 2
Exhibit 11-1(Continued)
Analog Devices, Inc.
<TABLE>
Computation of Earnings Per Share (Unaudited)
(in thousands, except per share data)
<CAPTION>
Six Months Ended
------------------------
May 3, 1997 May 4, 1996
----------- -----------
<S> <C> <C>
PRIMARY EARNINGS PER SHARE
Weighted average common and common equivalent shares:
Weighted average common shares outstanding 158,431 151,554
Assumed exercise of common stock equivalents (1) 6,920 9,400
Assumed conversion of subordinated notes 10,985 8,126
-------- -------
Weighted average common and common
equivalent shares 176,336 169,080
======== ========
Net income $ 81,297 $ 84,085
Interest related to convertible subordinated
notes, net of tax 2,850 2,120
-------- --------
Earnings available for common stock $ 84,147 $ 86,205
======== ========
PRIMARY EARNINGS PER SHARE $ 0.48 $ 0.51
======== ========
FULLY DILUTED EARNINGS PER SHARE
Weighted average common and common equivalent shares:
Weighted average common shares outstanding 158,431 151,554
Assumed exercise of common stock equivalents (1) 7,215 9,625
Assumed conversion of subordinated notes 10,985 8,126
-------- --------
Weighted average common and common
equivalent shares 176,631 169,305
======== ========
Net income $ 81,297 $ 84,085
Interest related to convertible subordinated
notes, net of tax 2,850 2,120
-------- --------
Earnings available for common stock $ 84,147 $ 86,205
======== ========
FULLY DILUTED EARNINGS PER SHARE $ 0.48 $ 0.51
======== ========
</TABLE>
(1) Computed based on the treasury stock method.
2
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-01-1997
<PERIOD-START> NOV-03-1996
<PERIOD-END> MAY-03-1997
<EXCHANGE-RATE> 1
<CASH> 234,393
<SECURITIES> 68,198
<RECEIVABLES> 242,733 <FN>
<ALLOWANCES> 0
<INVENTORY> 217,779
<CURRENT-ASSETS> 833,663
<PP&E> 1,135,112
<DEPRECIATION> 525,933
<TOTAL-ASSETS> 1,612,840
<CURRENT-LIABILITIES> 272,587
<BONDS> 310,000
0
0
<COMMON> 26,715
<OTHER-SE> 921,887
<TOTAL-LIABILITY-AND-EQUITY> 1,612,840
<SALES> 592,876
<TOTAL-REVENUES> 592,876
<CGS> 299,165
<TOTAL-COSTS> 299,165
<OTHER-EXPENSES> 185,462
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,753
<INCOME-PRETAX> 108,396
<INCOME-TAX> 27,099
<INCOME-CONTINUING> 81,297
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 81,297
<EPS-PRIMARY> .48
<EPS-DILUTED> .48
<FN> Asset value represents net amount
</TABLE>
