1
Exhibit 13.2
ANALOG DEVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME
Years ended October 30, 1999, October 31, 1998 and November 1, 1997
(thousands except per share amounts) 1999 1998 1997
- ------------------------------------ ---- ---- ----
REVENUE Net sales.............................................. $ 1,450,379 $ 1,230,571 $ 1,243,494
COSTS AND Cost of sales.......................................... 735,643 642,085 622,531
------------ ------------- ------------
EXPENSES
Gross margin........................................... 714,736 588,486 620,963
Operating expenses:
Research and development............................ 257,039 219,354 196,148
Write-off of purchased in-process research and
development....................................... 5,140 - -
Selling, marketing, general
and administrative................................ 209,639 207,487 191,613
Restructuring charge................................ - 17,000 -
Gain on sale of business............................ - (13,100) -
------------ ------------- ------------
471,818 430,741 387,761
Operating income....................................... 242,918 157,745 233,202
Equity in loss (income) of WaferTech................... 1,149 9,780 (214)
Nonoperating (income) expenses:
Interest expense.................................... 8,071 11,229 12,507
Interest income..................................... (26,726) (16,838) (16,178)
Other............................................... 2,884 3,115 1,208
------------ ------------- ------------
(15,771) (2,494) (2,463)
------------ ------------- ------------
EARNINGS Income before income taxes............................. 257,540 150,459 235,879
Provision for income taxes:
Payable currently................................... 44,139 43,343 63,794
Deferred ........................................... 16,582 (12,372) (6,134)
------------ ------------- ------------
60,721 30,971 57,660
------------ ------------- ------------
Net income before cumulative effect of change in
accounting principle................................ 196,819 119,488 178,219
------------ ------------- ------------
Cumulative effect of change in accounting principle,
net of $20 million of income taxes................ - (37,080) -
------------ ------------- ------------
Net income after cumulative effect of change in
accounting principle................................ $ 196,819 $ 82,408 $ 178,219
============ ============= ============
Shares used to compute earnings per share - Basic...... 168,241 161,574 159,594
============ ============= ============
Shares used to compute earnings per share - Diluted.... 181,452 177,875 177,309
============ ============= ============
Earnings per share before cumulative effect of change
in accounting principle
Earnings per share - Basic............................. $1.16 $0.74 $1.13
============ ============= ============
Earnings per share - Diluted........................... $1.10 $0.71 $1.04
============ ============= ============
Earnings per share after cumulative effect of change
in accounting principle
Earnings per share - Basic............................. $1.16 $0.51 $1.13
============ ============= ===========
Earnings per share - Diluted........................... $1.10 $0.50 $1.04
============ ============= ===========
See accompanying notes.
8
2
ANALOG DEVICES, INC.
CONSOLIDATED BALANCE SHEETS
October 30, 1999 and October 31, 1998
(thousands except share amounts)
ASSETS 1999 1998
CURRENT Cash and cash equivalents............................................. $ 355,891 $ 263,331
ASSETS Short-term investments................................................ 406,553 41,575
Accounts receivable less allowances of $14,238
($32,332 in 1998)................................................... 267,127 207,361
Inventories........................................................... 248,936 275,076
Deferred tax assets................................................... 89,780 98,148
Prepaid expenses and other current assets............................. 10,823 18,038
---------- ----------
Total current assets.................................................. 1,379,110 903,529
---------- ----------
PROPERTY, Land and buildings.................................................... 166,130 158,792
PLANT AND Machinery and equipment............................................... 1,088,939 1,034,619
EQUIPMENT, Office equipment...................................................... 74,530 70,576
AT COST Leasehold improvements................................................ 108,530 103,482
---------- ----------
1,438,129 1,367,469
Less accumulated depreciation and amortization........................ 795,323 664,038
---------- ----------
Net property, plant and equipment..................................... 642,806 703,431
---------- ----------
OTHER Investments........................................................... 119,301 187,224
ASSETS Intangible assets, net................................................ 30,563 15,815
Other assets.......................................................... 46,574 51,731
---------- ----------
Total other assets.................................................... 196,438 254,770
---------- ----------
$2,218,354 $1,861,730
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT Short-term borrowings and current portion of
LIABILITIES long-term debt...................................................... $ 82,344 $ 193
Obligations under capital leases...................................... 14,717 14,266
Accounts payable...................................................... 103,368 59,115
Deferred income on shipments to distributors.......................... 100,788 113,784
Income taxes payable.................................................. 66,761 53,595
Accrued liabilities................................................... 111,285 79,906
---------- ----------
Total current liabilities............................................. 479,263 320,859
---------- ----------
NONCURRENT Long-term debt........................................................ - 309,985
LIABILITIES Noncurrent obligations under capital leases........................... 16,214 30,773
Deferred income taxes................................................. 40,002 31,789
Other noncurrent liabilities.......................................... 66,844 39,935
---------- ----------
Total noncurrent liabilities.......................................... 123,060 412,482
---------- ----------
Commitments and Contingencies
STOCKHOLDERS' Preferred stock, $1.00 par value, 471,934 shares
EQUITY authorized, none outstanding........................................ - -
Common stock, $0.16 2/3 par value, 600,000,000
shares authorized, 178,049,189 shares issued
(164,092,719 in 1998)............................................... 29,675 27,349
Capital in excess of par value, net of deferred
compensation of $6,211 ($9,291 in 1998)............................ 523,106 248,970
Retained earnings..................................................... 1,110,811 913,992
Accumulated other comprehensive income................................ 12,209 6,025
---------- ----------
1,675,801 1,196,336
Less 3,161,774 shares in treasury, at cost
(3,782,763 in 1998)................................................. 59,770 67,947
---------- ----------
Total stockholders' equity............................................ 1,616,031 1,128,389
---------- ----------
$2,218,354 $1,861,730
========== ==========
See accompanying notes.
9
3
ANALOG DEVICES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
ACCUMULATED
Years ended October 30, 1999, CAPITAL IN OTHER
October 31, 1998 and November 1, 1997 COMMON STOCK EXCESS OF RETAINED COMPREHENSIVE TREASURY STOCK
(thousands) SHARES AMOUNT PAR VALUE EARNINGS INCOME* SHARES AMOUNT
- ----------- ------ ------ --------- -------- ------- ------ ------
Balance, November 2,
1996 158,745 $26,458 $176,357 $ 653,365 $ 6,655 - $ -
------- ------- -------- ---------- -------- ------ --------
ACTIVITY Net income - 1997 178,219
IN FISCAL Issuance of stock under
1997 stock plans and other,
net of repurchases 3,196 533 19,446 (35) (1,054)
Compensation recognized
under Restricted Stock Plan 2,309
Tax benefit on exercise of non-
qualified stock options and
disqualifying dispositions
under stock plans 25,773
Translation adjustment 69
------- ------- -------- ---------- -------- ------ --------
Balance, November 1,
1997 161,941 26,991 223,885 831,584 6,724 (35) (1,054)
------- ------- -------- ---------- -------- ------ --------
ACTIVITY Net income - 1998 82,408
IN FISCAL Issuance of stock under
1998 stock plans and other,
net of repurchases 2,152 358 8,738 652 17,299
Compensation recognized
under Restricted Stock Plan 2,918
Tax benefit on exercise of non-
qualified stock options and
disqualifying dispositions
under stock plans 13,429
Repurchase of common stock (4,400) (84,192)
Translation adjustment (699)
------- ------- -------- ---------- -------- ------ --------
Balance, October 31,
1998 164,093 27,349 248,970 913,992 6,025 (3,783) (67,947)
------- ------- -------- ---------- -------- ------ --------
ACTIVITY Net income - 1999 196,819
IN FISCAL Issuance of stock under
1999 stock plans and other,
net of repurchases 2,974 496 28,159 621 8,177
Conversion of 3-1/2%
Subordinated notes 10,982 1,830 228,074
Compensation recognized
under Restricted Stock Plan 2,799
Tax benefit on exercise of non-
qualified stock options and
disqualifying dispositions
under stock plans 15,104
Securities valuation
adjustment 6,629
Translation adjustment (445)
------- ------- -------- ---------- -------- ------ --------
Balance, October 30,
1999 178,049 $29,675 $523,106 $1,110,811 $ 12,209 (3,162) $(59,770)
======= ======= ======== ========== ======== ====== ========
* Comprehensive income, i.e., net income plus other comprehensive income,
totaled $203 million in 1999, $82 million in 1998 and $178 million in 1997.
See accompanying notes.
10
4
ANALOG DEVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended October 30, 1999, October 31, 1998 and November 1, 1997
(thousands) 1999 1998 1997
OPERATIONS Cash flows from operations:
Net income ............................................ $ 196,819 $ 82,408 $ 178,219
Adjustments to reconcile net income
to net cash provided by operations:
Cumulative effect of change in accounting
principle, net of $20 million of income taxes... - 37,080 -
Depreciation and amortization....................... 142,598 127,560 103,554
Noncash portion of restructuring costs.............. - 10,000 -
Gain on sale of business............................ - (13,100) -
Write-off of purchased in-process research and
development..................................... 5,140 - -
Equity in loss of WaferTech, net of dividends....... 1,149 10,907 211
Deferred income taxes............................... 16,582 (12,372) (6,134)
Change in operating assets and liabilities:
(Increase) decrease in accounts receivable.......... (59,019) 51,061 (25,129)
Decrease (increase) in inventories.................. 28,424 (48,883) (7,739)
Decrease (increase) in prepaid expenses and other
current assets.................................. 7,331 240 (3,605)
Increase in investments - trading................... (28,098) (7,319) (8,965)
Increase (decrease) in accounts payable,
deferred income and accrued liabilities......... 57,096 (31,840) 4,828
Increase in income taxes payable.................... 27,774 14,476 32,916
Increase in other liabilities....................... 31,525 4,467 17,584
---------- ---------- ----------
Total adjustments...................................... 230,502 142,277 107,521
---------- ---------- ----------
Net cash provided by operations........................... 427,321 224,685 285,740
---------- ---------- ----------
INVESTMENTS Cash flows from investments:
Additions to property, plant and equipment, net........ (77,500) (166,911) (179,374)
Purchase of short-term investments available-for-sale.. (628,823) (143,449) (153,269)
Maturities of short-term investments available-for-sale 263,845 152,880 192,073
Change in long-term investments........................ 101,501 (56,110) (51,599)
Payments for acquisitions, net of cash acquired........ (20,499) - -
Proceeds from sale of business......................... - 27,000 -
Decrease (increase) in other assets.................... 3,435 (370) (33,650)
---------- ---------- ----------
Net cash used for investments............................. (358,041) (186,960) (225,819)
---------- ---------- ----------
FINANCING Cash flows from financing activities:
ACTIVITIES Repurchase of common stock............................. - (84,192) -
Proceeds from employee stock plans..................... 34,154 27,638 19,283
Payments on capital lease obligations.................. (14,109) (11,640) (11,164)
Proceeds from equipment financing...................... - 6,094 7,123
Net increase (decrease) in variable rate borrowings.... 1,776 60 (109)
---------- ---------- ----------
Net cash provided by (used for) financing activities...... 21,821 (62,040) 15,133
---------- ---------- ----------
Effect of exchange rate changes on cash................... 1,459 (1,955) 4,438
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents...... 92,560 (26,270) 79,492
Cash and cash equivalents at beginning of year............ 263,331 289,601 210,109
---------- ---------- ----------
Cash and cash equivalents at end of year.................. $ 355,891 $ 263,331 $ 289,601
========== ========== ==========
SUPPLE- Cash paid during the year for:
MENTAL Income taxes........................................... $ 19,582 $ 23,582 $ 27,621
========== ========== ==========
INFORMATION Interest............................................... $ 10,808 $ 15,535 $ 16,158
========== ========== ==========
See accompanying notes.
11
5
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED OCTOBER 30, 1999, OCTOBER 31, 1998 AND NOVEMBER 1, 1997
(ALL TABULAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
1. DESCRIPTION OF BUSINESS
Analog Devices, Inc. (Analog, ADI or the Company) is a world leader in the
design, manufacture and marketing of high-performance analog, mixed-signal and
digital signal processing (DSP) integrated circuits (ICs) used in signal
processing applications.
As of the end of fiscal 1999, approximately 40% of Analog's revenues came from
the communications market, making it the Company's largest and fastest-growing
served market. Communications applications include wireless handsets and base
stations, as well as products used for high-speed access to the Internet,
including ICs used in ADSL and cable modems and central office networking
equipment.
Analog serves the PC market with products that monitor and manage power usage,
process signals used in flat panel displays and LCD projectors and enable PCs to
provide CD-quality audio. Analog also serves the high-end consumer market with
products used in digital cameras and camcorders, DVD players and surround sound
audio systems. Analog provides a broad array of products to the industrial
market, including products for automatic test equipment and for the digital
speed control of AC motors.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
all of its wholly owned subsidiaries. Upon consolidation, all significant
intercompany accounts and transactions are eliminated. The Company's fiscal year
ends on the Saturday closest to the last day in October. Fiscal years 1999, 1998
and 1997 were each 52-week years.
Certain amounts reported in previous years have been reclassified to conform to
the 1999 presentation, such reclassifications were immaterial.
b. CASH, CASH EQUIVALENTS AND INVESTMENTS
Cash and cash equivalents are highly liquid investments with insignificant
interest rate risk and maturities of three months or less at the time of
acquisition. Investments with maturities between three and twelve months at time
of acquisition are considered short-term investments. Cash, cash equivalents and
short-term investments consist primarily of commercial paper, but also include
certificates of deposit, bank time deposits, institutional money market funds
and bankers' acceptances. Long-term investments consist of mutual funds and bank
money market funds that are acquired to generate returns that offset changes in
certain liabilities related to deferred compensation arrangements, as well as
equity securities.
The Company classifies its investments in readily marketable debt and equity
securities as "held-to-maturity," "available-for-sale" and "trading" at the time
of purchase and such designation is evaluated as of each balance sheet date.
Held-to-maturity securities, which are carried at amortized cost, include only
those securities the Company has the positive intent and ability to hold to
maturity. Securities, such as bank time deposits, which by their nature are
typically held to maturity, are classified as such. The Company's other readily
marketable investments are classified as either available-for-sale or trading.
Available-for-sale securities are carried at fair value with unrealized gains
and losses, net of related tax, if any, reported as a separate component of
stockholders' equity. Realized gains and losses, as well as interest, dividends
and capital gains distributions on all securities, are included in earnings.
12
6
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Cash equivalents and short-term investments classified as available-for-sale
were $707 million and $241 million at October 30, 1999 and October 31, 1998,
respectively and those classified as held-to-maturity were $28 million and $42
million at October 30, 1999 and October 31, 1998, respectively. All of these
securities have contractual maturities of twelve months or less at time of
acquisition. Because of the short term to maturity, and hence relative price
insensitivity to changes in market interest rates, amortized cost approximates
fair value for all of these securities. As such, no realized or unrealized gains
or losses were recorded during each of these years.
Long-term investments classified as trading were $59 million and $30 million at
October 30, 1999 and October 31, 1998, respectively and were based on published
market quotes on October 29, 1999 and October 30, 1998. Gross realized and
unrealized gains and losses from trading securities were not material in fiscal
1999, fiscal 1998 and fiscal 1997. There was approximately $27 million and $0 at
October 30, 1999 and October 31, 1998, respectively, of long-term investments
classified as available-for-sale. Gross unrealized gains were not material in
fiscal 1999 and fiscal 1998. There were no long-term investments classified as
held-to-maturity at October 30, 1999 and October 31, 1998.
c. ADDITIONAL CASH FLOW STATEMENT INFORMATION
The Company's non-cash financing activities consisted solely of the conversion
of its 3-1/2% Convertible Subordinated Notes into common stock as described in
Note 9.
d. INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out method) or
market. Inventories at October 30, 1999 and October 31, 1998 were as follows:
1999 1998
---- ----
Raw materials $ 13,735 $ 25,624
Work in process 150,427 142,139
Finished goods 84,774 107,313
---------- ----------
Total inventories $ 248,936 $ 275,076
========== ==========
e. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at cost less allowances for
depreciation and amortization. The straight-line method of depreciation is used
for all classes of assets for financial statement purposes; both straight-line
and accelerated methods are used for income tax purposes. Capitalized leases and
leasehold improvements are amortized based upon the lesser of the term of the
lease or the useful life of the asset. Depreciation and amortization are based
on the following useful lives:
Buildings & Building Equipment Up to 25 years
Machinery & Equipment 3-10 years
Office Equipment 3-8 years
Total depreciation and amortization of property, plant and equipment was
$138,530,000, $124,735,000 and $101,432,000 in fiscal 1999, 1998 and 1997,
respectively. Property, plant and equipment included $75,034,000 and $75,006,000
of capitalized leases in 1999 and 1998, net of $35,588,000 and $23,679,000
respectively, of accumulated depreciation.
13
7
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
f. GRANT ACCOUNTING
The Company's manufacturing facility in Limerick, Ireland has received various
grants from the Industrial Development Authority of the Republic of Ireland.
These grants include capital, employment and research and development grants.
Capital grants for the acquisition of property and equipment are netted against
the related capital expenditures and amortized as a credit to depreciation
expense over the useful life of the related asset. Employment grants, which
relate to employee hiring and training, and research and development grants are
recognized in earnings in the period in which the related expenditures are
incurred by the Company.
g. TRANSLATION OF FOREIGN CURRENCIES
The functional currency for the Company's foreign sales operations is the
applicable local currency. Gains and losses resulting from translation of these
foreign currencies into U.S. dollars are accumulated in a separate component of
stockholders' equity. Transaction gains and losses are included in income
currently, including those at the Company's principal foreign manufacturing
operations where the functional currency is the U.S. dollar. Foreign currency
transaction gains or losses included in other expenses, net, were not material
in fiscal 1999, 1998 and 1997.
h. FOREIGN CURRENCY INSTRUMENTS AND INTEREST RATE AGREEMENTS
The Company enters into forward foreign exchange contracts, foreign currency
option contracts and currency swap agreements to offset certain operational and
balance sheet exposures from changes in foreign currency exchange rates. Such
exposures result from the portion of the Company's operations, assets and
liabilities that are denominated in currencies other than the U.S. dollar,
primarily Japanese yen and European currencies. These foreign exchange contract,
option and swap transactions are entered into to support product sales,
purchases and financing transactions made in the normal course of business, and
accordingly, are not speculative in nature.
Forward foreign exchange contracts are utilized to manage the risk associated
with currency fluctuations on certain firm sales and purchase commitments
denominated in foreign currencies and certain non-U.S. dollar denominated asset
and liability positions. The Company's forward foreign exchange contracts are
primarily denominated in Japanese yen and certain European currencies and are
for periods consistent with the terms of the underlying transactions, generally
one year or less. The forward foreign exchange contracts that relate to firm,
foreign currency sales and purchase commitments are designated and effective as
hedges of firm, identifiable foreign currency commitments, and accordingly, the
gains and losses resulting from the impact of currency exchange rate movements
on these contracts are not recognized in operations until the underlying hedged
transactions are recognized. Upon recognition, such gains and losses are
recorded in operations as an adjustment to the carrying amount of the underlying
transactions in the period in which these transactions are recognized.
Unrealized gains and losses resulting from the impact of currency exchange rate
movements on forward foreign exchange contracts designated to offset certain
non-U.S. dollar denominated assets and liabilities are recognized as other
income or expense in the period in which the exchange rates change and offset
the foreign currency gains and losses on the underlying exposures being hedged.
The contract amounts of forward foreign exchange contracts outstanding were $178
million and $140 million at October 30, 1999 and October 31, 1998, respectively.
The Company also may periodically enter into foreign currency option contracts
to offset certain probable anticipated, but not firmly committed, foreign
currency transactions related to the sale of product during the ensuing nine
months. When the dollar strengthens significantly against the foreign
currencies, the decline in value of future currency cash flows is partially
offset by the gains in value of the purchased currency options designated as
hedges. Conversely, when the dollar weakens, the increase in value of future
foreign currency cash flows is reduced only by the premium paid to acquire the
options. The Company's foreign currency option contracts are primarily
denominated in Japanese yen and generally have maturities that do not exceed six
months. These foreign currency option contracts are designated and effective as
hedges of anticipated foreign currency sales transactions, and accordingly, the
premium cost and any realized gains associated with these contracts are deferred
and included in the consolidated balance sheet as prepaid expenses and accrued
liabilities, respectively, until such time as the underlying sales transactions
are recognized. Upon recognition, such premium costs and any realized gains are
recorded in sales as a component of the underlying sales transactions being
hedged. The contract amounts of foreign currency option contracts outstanding
were $39 million and
14
8
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
$26 million, at October 30, 1999 and October 31, 1998, respectively. Deferred
gains or losses attributable to foreign currency option contracts were not
material at October 30, 1999 and October 31, 1998.
The Company uses currency swap agreements to hedge the value of its net
investment in certain of its foreign subsidiaries. Realized and unrealized gains
and losses on such agreements related to the net foreign investment being hedged
are recognized in the cumulative translation adjustment component of
stockholders' equity, with the related amounts due to or from counterparties
included in accrued liabilities or other current assets. The contract amount of
currency swap agreements outstanding, which were principally denominated in
Japanese yen, was $10 million at October 30, 1999 and October 31, 1998. The
currency swap agreement outstanding at October 30, 1999 has a remaining maturity
of 4 months and is expected to remain in effect until expiration.
The Company enters into interest rate swap and cap agreements to manage its
exposure to interest rate movements by effectively converting a portion of its
debt and certain financing arrangements from fixed to variable rates. Maturity
dates of interest rate swap and cap agreements generally match those of the
underlying debt or financing arrangements. These agreements, which have
maturities of up to eight years, involve the exchange of fixed rate payments for
variable rate payments without the exchange of the underlying principal amounts.
Variable rates are based on six-month U.S. dollar LIBOR and are reset on a
semiannual basis. The differential between fixed and variable rates to be paid
or received is accrued as interest rates change in accordance with the
agreements and recognized over the life of the agreements as an adjustment to
interest expense. The notional principal amounts of interest rate swap and cap
agreements outstanding were approximately $50 million at October 30, 1999 and
October 31, 1998.
The cash requirements of the above-described financial instruments approximate
their fair value. Cash flows associated with these financial instruments are
classified consistent with the cash flows from the transactions being hedged.
Derivative financial instruments involve, to a varying degree, elements of
market and credit risk not recognized in the consolidated financial statements.
The market risk associated with these instruments resulting from currency
exchange rate or interest rate movements is expected to offset the market risk
of the underlying transactions, assets and liabilities being hedged. The
counterparties to the agreements relating to the Company's foreign exchange and
interest rate instruments consist of a number of major international financial
institutions with high credit ratings. The Company does not believe that there
is significant risk of nonperformance by these counterparties because the
Company continually monitors the credit ratings of such counterparties, and
limits the financial exposure and the amount of agreements entered into with any
one financial institution. While the contract or notional amounts of derivative
financial instruments provide one measure of the volume of these transactions,
they do not represent the amount of the Company's exposure to credit risk. The
amounts potentially subject to credit risk (arising from the possible inability
of counterparties to meet the terms of their contracts) are generally limited to
the amounts, if any, by which the counterparties' obligations under the
contracts exceed the obligations of the Company to the counterparties.
i. FAIR VALUES OF FINANCIAL INSTRUMENTS
The following estimated fair value amounts have been determined by the Company
using available market information and appropriate valuation methodologies.
However, considerable judgment is required in interpreting market data to
develop the estimates of fair value. Accordingly, the estimates presented herein
are not necessarily indicative of the amounts that the Company could realize in
a current market exchange.
15
9
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 30, 1999 OCTOBER 31, 1998
--------------------- ---------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
------ ----- ------ -----
Assets:
Cash and cash equivalents $ 355,891 $ 355,891 $ 263,331 $ 263,331
Short-term investments 406,553 406,553 41,575 41,575
Long-term investments 85,999 85,999 30,488 30,488
Liabilities:
Short-term borrowings (2,344) (2,344) (193) (193)
Long-term debt, including current portion (80,000) (79,978) (309,985) (328,290)
Foreign Currency Instruments and
Interest Rate Agreements:
Interest rate swap and cap agreements 13 (36) 14 1,201
Forward foreign currency exchange contracts (4,260) (7,658) (3,045) (1,575)
Foreign currency option contracts 340 220 479 211
Currency swap agreements 375 325 1,325 1,324
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:
Cash, cash equivalents and short-term investments-The carrying amounts of these
items are a reasonable estimate of their fair value due to the short term to
maturity and readily available market for these types of investments.
Long-term investments-The fair value of long-term investments is based on quoted
market values.
Short-term borrowings-The carrying amounts of these variable-rate borrowings
approximate fair value due to the short period of time to maturity.
Long-term debt-The fair value of long-term debt is estimated based on current
interest rates available to the Company for debt instruments with similar terms,
degrees of risk and remaining maturities.
Interest rate swap and cap agreements-The fair value of interest rate swap and
cap agreements is obtained from dealer quotes. These values represent the
estimated amount the Company would receive or pay to terminate the agreements
taking into consideration current interest rates.
Forward foreign currency exchange contracts-The estimated fair value of forward
foreign currency exchange contracts is based on the estimated amount at which
they could be settled based on forward market exchange rates.
Foreign currency option contracts and currency swap agreements-The fair values
of foreign currency option contracts and currency swap agreements are obtained
from dealer quotes. These values represent the estimated net amount the Company
would receive or pay to terminate the agreements.
j. USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingencies at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Such estimates relate to
the useful lives of fixed assets, allowances for doubtful accounts and customer
returns, inventory reserves, potential reserves relating to litigation matters,
accrued liabilities and other reserves. Actual results could differ from those
estimates, and such differences may be material to the financial statements.
16
10
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
k. CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of investments and trade accounts receivable.
The Company maintains cash, cash equivalents and short-term investments with
high credit quality financial institutions and monitors the amount of credit
exposure to any one financial institution.
The Company sells its products to distributors and original equipment
manufacturers involved in a variety of industries including industrial
automation, instrumentation, military/aerospace and, to an increasing degree,
communications, computers and peripherals, and high-performance consumer
electronics. The Company has adopted credit policies and standards to
accommodate growth in these markets. The Company performs continuing credit
evaluations of its customers' financial condition and although the Company
generally does not require collateral, letters of credit may be required from
its customers in certain circumstances. Reserves are provided for estimated
amounts of accounts receivable that may not be collected.
l. CONCENTRATION OF OTHER RISKS
The semiconductor industry is characterized by rapid technological change,
competitive pricing pressures and cyclical market patterns. The Company's
financial results are affected by a wide variety of factors, including general
economic conditions worldwide, economic conditions specific to the semiconductor
industry, the timely implementation of new manufacturing technologies, the
ability to safeguard patents and intellectual property in a rapidly evolving
market and reliance on assembly and test subcontractors, third-party wafer
fabricators and independent distributors. In addition, the semiconductor market
has historically been cyclical and subject to significant economic downturns at
various times. The Company is exposed to the risk of obsolescence of its
inventory depending on the mix of future business. As a result, the Company may
experience significant period-to-period fluctuations in future operating results
due to the factors mentioned above or other factors.
m. REVENUE RECOGNITION
Revenue from product sales to end users is recognized upon shipment. As further
explained in Note 5, commencing in 1998, revenue on shipments to all
distributors is deferred until products are resold by the distributors to end
users. Prior to 1998, revenue on most shipments to domestic distributors was
deferred until resale to end users because arrangements with these distributors
included returns and price concessions that could not be reasonably estimated.
Revenue on all shipments to international distributors and certain shipments to
domestic distributors were recognized upon shipment to the distributor, with
appropriate provision of reserves for returns and allowances.
n. COMPREHENSIVE INCOME
In the first quarter of fiscal 1999 the Company adopted Statement of Financial
Accounting Standards No. 130, (FAS 130), "Reporting Comprehensive Income". FAS
130 establishes new rules for the reporting and display of comprehensive income
and its components. Components of comprehensive income include net income and
certain transactions that have generally been reported in the consolidated
statement of shareholders' equity. Other comprehensive income is comprised of
net income, currency translation adjustments and available-for-sale securities
valuation adjustments.
o. INCOME TAXES
Deferred tax assets and liabilities are determined based on the differences
between financial reporting and tax bases of assets and liabilities and are
measured using the enacted income tax rates and laws that will be in effect when
the temporary differences are expected to reverse. Additionally, deferred tax
assets and liabilities are separated into current and noncurrent amounts based
on the classification of the related assets and liabilities for financial
reporting purposes.
17
11
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
p. STOCK-BASED COMPENSATION
The Company grants stock options for a fixed number of shares to employees with
an exercise price equal to the fair value of the shares at the date of grant.
The Company accounts for stock option grants in accordance with APB Opinion No.
25, "Accounting for Stock Issued to Employees" and accordingly, recognizes no
compensation expense for the stock option grants.
q. EARNINGS PER SHARE OF COMMON STOCK
Basic earnings per share is computed based only on the weighted average number
of common shares outstanding during the period. Diluted earnings per share is
computed using the weighted average number of common shares outstanding during
the period, plus the dilutive effect of future issues of common stock relating
to stock option programs and convertible debt financing. In calculating diluted
earnings per share, the dilutive effect of stock options is computed using the
average market price for the period. The following table sets forth the
computation of basic and diluted earnings per share:
1999 1998 1997
----------- ----------- -----------
Basic:
Income before cumulative effect of change in
accounting principle $ 196,819 $ 119,488 $ 178,219
Cumulative effect of change in accounting principle - (37,080) -
----------- ----------- -----------
Net income 196,819 82,408 178,219
=========== =========== ===========
Weighted shares outstanding 168,241 161,574 159,594
=========== =========== ===========
Earnings per share:
Income before cumulative effect of change in
accounting principle $1.16 $0.74 $1.13
Cumulative effect of change in accounting principle - (0.23) -
----------- ----------- -----------
Net income $1.16 $0.51 $1.13
=========== =========== ===========
Diluted:
Income before cumulative effect of change in
accounting principle $ 196,819 $ 119,488 $ 178,219
Interest related to convertible subordinated notes,
net of tax 1,906 5,686 5,700
----------- ----------- -----------
Income before cumulative effect of change in accounting
principle including the effect of dilutive securities 198,725 125,174 183,919
----------- ----------- -----------
Cumulative effect of change in accounting principle - (37,080) -
----------- ----------- -----------
Net income $ 198,725 $ 88,094 $ 183,919
=========== =========== ===========
Weighted shares outstanding 168,241 161,574 159,594
Assumed exercise of common stock equivalents 9,411 5,317 6,730
Assumed conversion of subordinated notes 3,800 10,984 10,985
----------- ----------- -----------
Weighted average common and common equivalent shares 181,452 177,875 177,309
=========== =========== ===========
Earnings per share:
Income before cumulative effect of change in
accounting principle $1.10 $0.71 $1.04
Cumulative effect of change in accounting principle - (0.21) -
----------- ----------- -----------
Net income $1.10 $0.50 $1.04
=========== =========== ===========
18
12
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
r. NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, (FAS 133), "Accounting for Derivative
Instruments and Hedging Activities", which required adoption in periods
beginning after June 15, 1999. FAS 133 was subsequently amended by Statement of
Financial Accounting Standards No. 137, "Accounting for Derivative Instruments
and Hedging Activities - Deferral of the Effective Date of FASB Statement No.
133" and will now be effective for fiscal years beginning after June 15, 2000,
with earlier adoption permitted. The Company will adopt FAS 133 on a cumulative
basis during fiscal 2001, as required. The Company is currently evaluating the
effect of adopting FAS 133 and has not determined the impact of FAS 133 on its
financial statements. In March 1998, Statement of Position 98-1, (SOP 98-1),
"Accounting for the Cost of Computer Software Developed for or Obtained for
Internal Use" was issued. The Company will adopt SOP 98-1 in fiscal 2000. The
Company does not expect SOP 98-1 to have a material impact on the results of
operations or financial position. In December 1999, the Securities and Exchange
Commission issued Staff Accounting Bulletin 101, (SAB 101), "Revenue Recognition
in Financial Statements." SAB 101 summarizes the application of generally
accepted accounting principles to revenue recognition in financial statements.
The Company will adopt SAB 101 in the second quarter of fiscal 2000 and does not
expect SAB 101 to have a material effect on its financial position or results of
operations.
3. ACQUISITIONS AND DISPOSITIONS
During the second quarter of fiscal 1999, the Company acquired two DSP tools
companies, White Mountain DSP, Inc. (WM) of Nashua, New Hampshire, and Edinburgh
Portable Compilers Limited (EPC), of Edinburgh, Scotland. The total cost of
these acquisitions was approximately $21 million in cash and $2 million in
common stock of the Company, with additional cash consideration of up to a
maximum of $10 million (to be accounted for as additional goodwill) payable if
the acquired companies achieve certain revenue and operational objectives. These
acquisitions were accounted for as purchases, and the excess of the purchase
price over the fair value of the assets acquired was allocated to existing
technology, workforce in place, trade names and goodwill, which are being
amortized on the straight-line basis over periods ranging from six to ten years.
In connection with these acquisitions, the Company recorded a charge of $5.1
million representing the write-off of in-process research and development.
Pro forma results of operations for WM and EPC have not been provided herein as
they were not material to the Company on either an individual or an aggregate
basis. The results of operations of each acquisition are included in the
Company's consolidated statement of income from the date of each acquisition.
During fiscal 1998, the Company completed the sale of its disk drive IC business
to Adaptec, Inc. The Company received approximately $27 million in cash for the
disk drive product line and, after providing for the write-off of inventory,
fixed assets and other costs incurred to complete the transaction, recorded a
net gain of approximately $13 million. The Company also entered into other
arrangements with Adaptec that provided for payments to the Company aggregating
$13 million, of which $3 million was earned in fiscal 1999 and $10 million was
earned in fiscal 1998, for assisting Adaptec in research and development
efforts.
4. INDUSTRY AND GEOGRAPHIC SEGMENT INFORMATION
The Company adopted Statement of Financial Accounting Standards No. 131, (FAS
131), "Disclosures about Segments of an Enterprise and Related Information" in
fiscal 1999. The Company operates in two segments: the design, manufacture and
marketing of a broad range of integrated circuits, which comprises approximately
97% of the Company's revenue, and the design, manufacture and marketing of a
range of assembled products, which accounts for the remaining 3% of the
Company's revenue. Effectively, the Company operates in one reportable segment.
19
13
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
GEOGRAPHIC INFORMATION
The Company operates in three major geographic areas. The following geographic
area data include trade sales based upon point of sale and long lived assets
based upon physical location. The predominant countries comprising European
operations are England, France, Germany and Ireland. The predominant country
comprising Asian operations is Japan. For segment reporting purposes, sales
generated by North American operations include export sales of $262.4 million in
fiscal 1999, $128.2 million in fiscal 1998 and $147.6 million in fiscal 1997.
GEOGRAPHIC SEGMENT INFORMATION 1999 1998 1997
----------- ----------- -----------
SALES North America, including export............. $ 929,971 $ 748,283 $ 711,252
Europe...................................... 313,598 312,523 359,333
Asia........................................ 206,810 169,765 172,909
----------- ----------- -----------
Total sales............................... $ 1,450,379 $ 1,230,571 $ 1,243,494
=========== =========== ===========
LONG-LIVED North America............................... $ 417,854 $ 448,384 $ 405,511
ASSETS Europe...................................... 178,361 187,921 195,685
Asia........................................ 77,154 82,941 75,207
----------- ----------- -----------
Total long-lived assets................... $ 673,369 $ 719,246 $ 676,403
=========== =========== ===========
5. ACCOUNTING CHANGE - RECOGNITION OF REVENUE ON CERTAIN SALES TO DISTRIBUTORS
In the fourth quarter of fiscal 1998, the Company changed its accounting method
for recognizing revenue on all shipments to international distributors and
certain shipments to domestic distributors. The change was made with an
effective date of November 2, 1997 (the beginning of fiscal 1998). While the
Company has historically deferred revenue on most shipments made to domestic
distributors until the products were resold by the distributors to end users, it
recognized revenue on shipments to international distributors and certain
shipments to domestic distributors upon shipment to the distributors, net of
appropriate reserves for returns and allowances. As a result of this accounting
change, revenue recognition on shipments to distributors worldwide is deferred
until the products are resold to the end users. The Company believes that
deferral of revenue and related gross margin on shipments to distributors until
the product is shipped by the distributors is a more meaningful measurement of
results of operations because it better conforms to the substance of the
transaction considering the changing business environment in the international
marketplace; is consistent with industry practice; and will, accordingly, better
focus the entire organization on sales to end users and, therefore, is a
preferable method of accounting. The cumulative effect in 1998 of the change in
accounting principle was a charge of approximately $37 million (net of $20
million of income taxes) or $0.21 per diluted share. The estimated pro forma
effect of the accounting change on the prior years' results is as follows:
1998 1997
---- ----
As reported:
Net sales $ 1,230,571 $ 1,243,494
Net income 82,408 178,219
Basic earnings per share $ 0.51 $ 1.13
Diluted earnings per share $ 0.50 $ 1.04
Pro forma amounts with the change in accounting
principle related to revenue recognition
applied retroactively: (unaudited)
Net sales $ 1,230,571 $ 1,214,602
Net income 119,488 167,515
Basic earnings per share $ 0.74 $ 1.06
Diluted earnings per share $ 0.71 $ 0.98
20
14
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. RESTRUCTURING CHARGE
The Company recorded a restructuring charge of $17 million during the third
quarter of fiscal 1998. Of this charge, $7 million related to a worldwide
workforce reduction of approximately 350 employees, which was completed during
the fourth quarter of fiscal 1998, in the manufacturing, selling and general and
administrative areas. In addition, the Company performed a review of its
business strategy and concluded that the key to success in the DSP market was to
focus on opportunities in the general-purpose DSP market that could provide
consistent growth, while at the same time being more selective in pursuing
vertical market DSP opportunities. As a result of this review, the Company
scaled back its efforts in some of the higher volume, lower margin, shorter life
cycle product areas and wrote off $10 million, which was the carrying value of
specific assets associated with these businesses.
7. INVESTMENTS
Investments at October 30, 1999 and October 31, 1998 were as follows:
1999 1998
---- ----
WaferTech, LLC $ 32,852 $ 135,002
CSM 27,413 20,784
Other 59,036 31,438
---------- ----------
$ 119,301 $ 187,224
========== ==========
In January 1999, the Company concluded an agreement to sell to other WaferTech
partners 78% of its 18% equity ownership in WaferTech for cash equal to the
carrying value of the 78% equity ownership at October 31, 1998. During fiscal
1999, the Company invested an additional $4 million in WaferTech. The Company no
longer exercises significant influence over WaferTech's operating and financial
policies and, accordingly, accounts for its remaining 4% investment under the
cost method. Changes in the value of the investment are not recognized unless an
impairment in the value of the investment is deemed by management to be "other
than temporary."
The Company has an equity investment in Chartered Semiconductor Manufacturing
Pte., Ltd., (CSM), in Singapore of approximately $27 million which represents a
less than 5% ownership interest. During fiscal 1999, CSM's stock became publicly
traded. As a result, the Company changed the classification of its equity
investment to available-for-sale. Previously, the investment was accounted for
under the cost method.
Other investments consist primarily of long-term investments in mutual funds and
bank money market funds, which are related to the Company's deferred
compensation plan and are largely offset by a corresponding noncurrent liability
to the plan participants. These investments are classified as trading.
Investments are stated at fair value, which is based on market quotes, interest
rates or management estimates, as appropriate. Adjustments to fair value of
investments classified as available-for-sale are recorded as an increase or
decrease in stockholders' equity. Adjustments to fair value of and income
pertaining to other investments are recorded in operating expense.
8. ACCRUED LIABILITIES
Accrued liabilities at October 30, 1999 and October 31, 1998 consisted of the
following:
1999 1998
---- ----
Accrued compensation
and benefits $ 65,997 $ 36,582
Other 45,288 43,324
---------- ----------
Total accrued liabilities $ 111,285 $ 79,906
========== ==========
21
15
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. DEBT AND CREDIT FACILITIES
Long-term debt at October 30, 1999 and October 31, 1998 consisted of the
following:
1999 1998
----------- ----------
3 1/2% Convertible Subordinated
Notes due December 1, 2000 $ - $ 229,985
6 5/8% Notes due March 1, 2000 80,000 80,000
----------- ----------
Long-term debt 80,000 309,985
Less: Current portion long-term debt (80,000) -
----------- ----------
Total $ - $ 309,985
=========== ==========
As of March 11, 1999, the Company had converted $229,967,000 of the $230 million
principal amount of its 3 1/2% Convertible Subordinated Notes (Notes) due 2000
into an aggregate of 10,983,163 shares of the Company's common stock, and the
remaining Notes were redeemed by a cash payment of $33,000. This conversion did
not have an impact on diluted earnings per share.
Simultaneous with the sale of the 6 5/8% Notes, the Company entered into an
interest rate swap and cap agreement for the term of the Notes having a notional
principal amount of $40 million whereby the effective net interest rate on $40
million of the Notes will be the six-month LIBOR rate (up to a maximum of 7%)
plus 1.4%. For the year ended October 30, 1999, the net effective interest rate
on $40 million of the Notes was 7.3% after giving effect to the interest rate
swap agreement.
The Company has a revolving credit agreement with several banks that commits
them to lend up to $60 million. The Company did not borrow against this
agreement at any time during fiscal 1999 or fiscal 1998. There was $2.3 million
and $0.2 million of foreign currency borrowings outstanding at October 30, 1999
and October 31, 1998, respectively, which were at prevailing market rates for
the respective currencies. Borrowings under the Company's credit agreement and
lines of credit are generally due within six months.
10. LEASE COMMITMENTS
The Company leases certain of its facilities and equipment under various
operating and capital leases that expire at various dates through 2030. The
lease agreements frequently include renewal and purchase provisions and require
the Company to pay taxes, insurance and maintenance costs.
Total rental expense under operating leases was approximately $17 million in
fiscal 1999, $16 million in fiscal 1998 and $13 million in fiscal 1997.
The following is a schedule of future minimum lease payments under capital
leases and rental payments required under long-term operating leases at October
30, 1999:
OPERATING CAPITAL
FISCAL YEARS LEASES LEASES
- ------------ ------ ------
2000 $ 11,649 $ 15,807
2001 8,402 8,903
2002 5,920 4,804
2003 3,027 3,607
2004 2,501 57
Later Years 13,994 -
--------- ---------
Total $ 45,493 33,178
=========
Less amount representing interest (2,247)
---------
Present value of minimum lease payments $ 30,931
=========
22
16
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. COMMITMENTS AND CONTINGENCIES
LITIGATION
The Company was a defendant in a federal lawsuit brought in Arizona by the
Lemelson Medical, Education & Research Foundation, L.P. (Lemelson). On July 31,
1998, Lemelson commenced an action in federal court against the Company and 26
other companies alleging infringement of 16 patents allegedly covering various
manufacturing processes and techniques used in the fabrication of semiconductor
products. Lemelson served the Company with a complaint on November 24, 1998
seeking unspecified damages, treble damages for willful infringement and
injunctive relief. Subsequent to fiscal 1999, the Company entered into a
settlement agreement with Lemelson that was not material.
The Company is a defendant in a federal lawsuit brought in California by Linear
Technology Corporation (LTC). On June 26, 1997, LTC filed suit against the
Company, Impala Linear Corporation, Toyoda Automatic Loom Works, Ltd., Maxim
Integrated Products, Inc. and Unitrode Corporation alleging patent infringement
and seeking injunctive relief and unspecified damages. The parties are presently
engaged in discovery. The case was originally scheduled for trial on liability
issues beginning on September 7, 1999. The original district judge recused
himself and the case has not yet been rescheduled for trial. While the Company
can give no assurance that it will prevail in this litigation, it believes that
resolution of this litigation will not have a material adverse effect on the
Company's consolidated financial position, although an unfavorable outcome could
have a material adverse effect on the Company's results of operations or cash
flow in the quarter, or annual period in which this matter is resolved.
Patent infringement suits are pending against the Company by Sextant Avionique,
S.A. in France and the United States and Commissariat A. L'energie Atomique
C.E.A. in France, claiming that the Company's accelerometer infringes certain
patents. In the United States proceeding commenced by Sextant Avionique, S.A. on
August 8, 1995, the federal district court entered judgment following trial in
favor of the Company finding the Company did not infringe Sextant's patents.
Sextant appealed the decision and the case was heard on appeal. The parties are
awaiting the appellate court's determination. In the French proceeding commenced
by Sextant Avionique, S.A., the French court found that the Company infringed
Sextant's French patents, and therefore, unless the decision is reversed, the
Company will be unable to manufacture or sell any infringing accelerometers in
France. The Company does not believe that the French court's decision will have
any material adverse effect on its consolidated financial position or
consolidated results of operations.
On January 18, 2000, the Company became aware that Silicon Laboratories, Inc.
had named ADI as a defendant in a lawsuit filed in the United States District
Court for the Western District of Texas, which alleges misappropriation of trade
secrets and patent infringement by Analog. As of January 21, 2000, the Company
had not yet been served by the plaintiff and therefore has not had the
opportunity to review the plaintiff's complaint. Accordingly, the Company is not
in a position to assess the validity of the allegations or the effect of the
lawsuit on the Company.
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, trademarks,
personal injury, environmental matters, product liability, and personnel and
employment disputes. As to such claims and litigation, the Company can give no
assurance that it will prevail. However, the Company does not believe that these
matters will have a material adverse effect on the Company's consolidated
financial position, although an adverse outcome of any of these matters could
have a material adverse effect on the Company's consolidated results of
operations or cash flow in the quarter, or annual period in which one or more of
these matters are resolved.
WAFER SUPPLY AGREEMENTS
The Company maintains a deposit of $20 million with Chartered Semiconductor
Manufacturing Pte., Ltd., (CSM). This deposit is classified in the balance sheet
line item "Other assets." Under the terms of this agreement, the deposit will
guarantee access to certain quantities of sub-micron wafers through fiscal 2004.
If the Company does not purchase the minimum quantities under the agreement, the
deposit will be forfeited for the value of the wafer shortfall up to the total
amount of $20 million. The outstanding balance of the deposit is refunded in
proportion to the Company's purchases of wafers from CSM and, at this time, the
Company expects to have the entire deposit refunded.
23
17
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. STOCKHOLDERS' EQUITY
STOCK PLANS
In fiscal 1998, the stockholders approved the 1998 Stock Option Plan, which
provides for the issuance of nonstatutory and incentive stock options to
purchase up to 15,000,000 shares of common stock. Officers, employees,
directors, consultants and advisors of the Company and its subsidiaries are
eligible to be granted options under this plan at a price not less than 100%
(110% in the case of incentive stock options granted to 10% or greater
stockholders) of the fair market value of the common stock at the time the
option is granted. The Company's 1988 Stock Option Plan was terminated upon
adoption of the 1998 Stock Option Plan; however, options to purchase common
stock remain outstanding under the plan. There are no remaining options
outstanding under the Company's 1980 Stock Option Plan.
While the Company may grant options to employees, which become exercisable at
different times or within different periods, the Company has generally granted
options to employees that are exercisable on a cumulative basis in annual
installments of 33 1/3% each on the third, fourth and fifth anniversaries of the
date of grant.
Under the 1994 Director Option Plan, which was amended in 1998, each
non-employee director is granted annually a non-statutory option to purchase
10,500 shares of common stock at an exercise price equal to the fair market
value on the date of grant. Up to 1999, each newly elected non-employee director
received a grant of an option to purchase 10,500 shares of Common Stock upon his
or her election to the Board (the "Initial Grant"). The 1994 Director Plan was
amended in 1999 whereby the number of shares of Common Stock underlying the
Initial Grant was increased from 10,500 to 30,000. A total of 550,000 shares of
common stock may be issued under this plan. These options are exercisable on a
cumulative basis in annual installments of 33 1/3% each on the first, second and
third anniversaries of the date of grant. The Company also has options
outstanding under the 1992 Director Option that are exercisable on a cumulative
basis in annual installments of 33 1/3% each on the third, fourth and fifth
anniversaries of the date of grant.
Information with respect to activity under the stock option plans is set forth
below:
OPTIONS OUTSTANDING
SHARES --------------------------------
AVAILABLE WEIGHTED AVERAGE
STOCK OPTION ACTIVITY FOR GRANT NUMBER PRICE PER SHARE
- --------------------- --------- ------ ---------------
Balance, November 2, 1996 10,767 15,578 $ 8.87
Options granted (4,081) 4,081 $ 23.33
Options exercised - (2,432) $ 4.21
Options canceled 312 (322) $ 14.13
------- ------ -------
Balance, November 1, 1997 6,998 16,905 $ 12.92
------- ------ -------
Shares authorized for 1998 Stock Option Plan 15,000 - -
Additional shares authorized for 1994 Director Stock
Option Plan 150 - -
Shares authorized for Medialight acquisition 102 - -
Options granted (19,946) 19,946 $ 16.73
Options exercised - (2,014) $ 6.35
Options canceled 9,128 (9,128) $ 23.15
Shares canceled upon termination of 1988 Stock
Option Plan (2,579) - -
------- ------ -------
Balance, October 31, 1998 8,853 25,709 $ 12.78
------- ------ -------
Options granted (660) 660 $ 34.52
Options exercised - (3,027) $ 8.51
Options canceled 651 (651) $ 15.29
------- ------ -------
Balance, October 30, 1999 8,844 22,691 $ 13.93
======= ====== =======
24
18
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OPTION AMENDMENT
In September 1998 the Board of Directors approved a stock option program
amendment pursuant to which all employees with stock options granted during the
period beginning December 1, 1996 and ending on August 3, 1998 could elect to
reduce the option exercise price to $14.75 per share (equal to the then fair
market value). Upon such election, the vesting schedule for the affected options
was reset, whereby one-third vest on September 8, 2001, one-third on September
8, 2002 and the final one-third on September 8, 2003. A total of 8,221,498
options with exercise prices ranging from $22.25 to $34.25 per share were
amended under the program. The activity as a result of this option program
amendment is presented in the preceding table as cancellations and subsequent
grants.
The following table summarizes information about options outstanding at October
30, 1999:
OUTSTANDING OPTIONS OPTIONS EXERCISABLE
------------------------------------------------- -------------------------------
WEIGHTED AVERAGE WEIGHTED WEIGHTED
RANGE OF NUMBER REMAINING AVERAGE NUMBER AVERAGE
EXERCISE OUTSTANDING AT CONTRACTUAL EXERCISE EXERCISABLE EXERCISE
PRICE 10/30/99 LIFE (YEARS) PRICE AT 10/30/99 PRICE
- ----- -------- ------------ -------- ----------- --------
$ 1.96 - $ 5.62 950 2.1 $ 2.81 950 $ 2.81
$ 5.62 - $ 11.24 3,515 4.8 $ 9.11 2,414 $ 8.59
$ 11.24 - $ 22.48 17,191 7.9 $ 14.48 711 $ 16.26
$ 22.48 - $ 39.33 842 8.3 $ 26.41 76 $ 25.95
$ 39.33 - $ 56.19 193 9.9 $ 51.45 0 $ 0
- ------------------ ------ --- -------- ----- -------
$ 1.96 - $ 56.19 22,691 7.2 $ 13.93 4,151 $ 8.90
================== ====== === ======== ===== =======
The Company has an employee stock purchase plan (ESPP) that allows eligible
employees to purchase, through payroll deductions, shares of the Company's
common stock at 85% of the fair market value at specified dates. Employees
purchased 656,400 shares in 1999 (602,500 and 579,200 in 1998 and 1997,
respectively) for $12.9 million ($11.8 million and $10.2 million in 1998 and
1997, respectively). At October 30, 1999, approximately 2,201,000 common shares
remained available for issuance under the stock purchase plan.
Under the 1991 Restricted Stock Plan, a maximum of 2,700,000 shares of common
stock was authorized for awards by the Company to key employees for nominal
consideration. This plan succeeded the Company's 1978 Restricted Stock Plan that
provided for the issuance of up to 7,372,800 shares of common stock. Shares
awarded from both plans are restricted as to transfer, usually for a period of
five years and, under certain conditions, may be subject to repurchase by the
Company at the original purchase price per share. There were no additional
shares awarded under the restricted stock plans in fiscal 1999. Shares awarded
under the Company's restricted stock plans, net of cancellations, for fiscal
1998 and fiscal 1997 were 217,500 and 168,000, respectively. The fair market
value of the shares at the date of award was $6,293,000 and $4,002,000 in fiscal
1998 and 1997, respectively and was accounted for as deferred compensation and
is being amortized over the restricted period. During 1999, 1998 and 1997,
$2,799,000, $2,918,000 and $2,309,000, respectively, of such compensation was
charged to expense. At October 30, 1999, there were 597,500 shares of common
stock available for issuance under the 1991 Restricted Stock Plan.
As of October 30, 1999, a total of 34,332,881 common shares were reserved for
issuance under the Company's stock plans.
COMMON STOCK REPURCHASE
In May and October of 1998, the Board of Directors authorized the Company to
repurchase up to 4 million and 8 million shares, respectively, of its common
stock over the succeeding 12 months. At October 31, 1998 the Company had
purchased 4,400,000 shares of its common stock an average purchase price of
$19.13 per share. The Company did not purchase any shares in fiscal 1999. The
repurchased shares will be held as treasury shares and will be available for
issuance under the Company's stock option plans, employee stock purchase plan
and other benefit plans.
25
19
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
STOCK-BASED COMPENSATION
As permitted under Statement of Financial Accounting Standards No. 123 (FAS
123), "Accounting for Stock-Based Compensation," the Company has elected to
follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
to Employees," and related Interpretations, in accounting for stock-based awards
to employees. Under APB 25, the Company generally recognized no compensation
expense with respect to such awards.
Pro forma information regarding net income and earnings per share is required by
FAS 123 for awards granted after October 28, 1995 as if the Company had
accounted for its stock-based awards to employees under the fair value method of
FAS 123. The fair value of the Company's stock-based awards to employees was
estimated using a Black-Scholes option pricing model. The Black-Scholes option
valuation model was developed for use in estimating the fair value of traded
options that have no vesting restrictions and are fully transferable. In
addition, option valuation models require the input of highly subjective
assumptions, including the expected stock price volatility. Because the
Company's stock-based awards to employees have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its stock-based awards to employees. The fair value
of the Company's stock-based awards to employees was estimated assuming no
expected dividends and the following weighted average assumptions:
OPTIONS ESPP
------------------------------ ------------------------------
1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ----
Expected life (years) 6.1 6.1 6.2 1.0 1.0 1.0
Expected stock price volatility 52.9% 49.5% 47.7% 64.1% 57.6% 56.0%
Risk-free interest rate 5.3% 5.3% 6.2% 5.1% 5.4% 5.8%
The following is a summary of weighted average grant date values generated by
application of the Black-Scholes model:
WEIGHTED AVERAGE GRANT DATE VALUE
------------------------------------------------------
1999 1998 1997
-------- --------- -------
Stock option plans $ 19.54 $ 9.82 $ 12.68
ESPP $ 8.79 $ 8.33 $ 9.53
As required under FAS 123, the reported net income and diluted earnings per
share have been presented to reflect the impact had the Company been required to
include the amortization of the Black-Scholes option value as expense. For
purposes of this disclosure, the estimated fair value of the options is
amortized to expense over the options' vesting periods. The Company's pro forma
information follows:
1999 1998 1997
-------- ------- --------
Pro forma net income $162,872 $56,719 $170,173
Pro forma diluted earnings per share $ 0.90 $ 0.32 $ 0.97
The effects on pro forma disclosures of applying FAS 123 are not likely to be
representative of the effects on pro forma disclosures of future years. Because
FAS 123 is applicable only to options granted subsequent to October 28, 1995,
the pro forma effect will not be fully reflected until fiscal 2000.
PREFERRED STOCK
The Company has 471,934 authorized shares of $1.00 par value Preferred Stock.
The Board of Directors is authorized to fix designations, relative rights,
preferences and limitations on the preferred stock at the time of issuance.
26
20
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COMMON STOCK PURCHASE RIGHTS
In March 1998, the Board of Directors adopted a Stockholder Rights Plan (the
Stockholder Rights Plan) that replaced a plan adopted by the Board in 1988.
Pursuant to the Stockholder Rights Plan, each share of the Company's Common
Stock (Common Stock) has an associated right (the Rights). Under certain
circumstances, each Right would entitle the registered holder to purchase from
the Company one one-thousandth share of Series A Junior Participating Preferred
Stock at a Purchase Price of $180 in cash, subject to adjustment.
The Rights are not exercisable and cannot be transferred separately from the
Common Stock until ten business days (or such later date as may be determined by
the Board of Directors) after (i) the public announcement that a person or group
of affiliated or associated persons has acquired (or obtained rights to acquire)
beneficial ownership of 15% or more of Common Stock or (ii) the commencement of
a tender offer or exchange offer that would result in a person or group
beneficially owning 20% or more of the outstanding Common Stock. If and when the
Rights become exercisable, each holder of a Right shall have the right to
receive, upon exercise, that number of Common Stock (or in certain
circumstances, cash property or other securities of the Company) that equals the
price of the Right divided by 50% of the current market price (as defined in the
Stockholder Rights Plan) per share of Common Stock at the date of the occurrence
of such event. In the event at any time after any person becomes an acquiring
person, (i) the Company is consolidated with, or merged with and into, another
entity and the Company is not the surviving entity of such consolidation or
merger or if the Company is the surviving entity, but shares of its outstanding
common stock are changed or exchanged for stock or securities or cash or any
other property, or (ii) 50% or more of the Company's assets or earning power is
sold or transferred, each holder of a Right shall thereafter have the right to
receive upon exercise, that number of shares of common stock of the acquiring
company that equals the exercise price of the Right divided by 50% of the
current market price of such common stock at the date of the occurrence of the
event.
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
Rights expire on March 17, 2008 but may be redeemed by the Company for $.001 per
right at any time prior to the tenth day following a person's acquisition of 15%
or more of the Company's common stock. So long as the Rights are not separately
transferable, each new share of Common Stock issued will have a Right associated
with it.
13. RETIREMENT PLANS
The Company and its subsidiaries have various savings and retirement plans
covering substantially all employees. The Company maintains a defined
contribution plan for the benefit of its eligible United States employees. This
plan provides for Company contributions of up to 5% of each participant's total
eligible compensation. In addition, the Company contributes an amount equal to
each participant's contribution, if any, up to a maximum of 2% of each
participant's total eligible compensation, plus 50% of the contributions between
2% and 4%. The Company also has various defined benefit pension and other
retirement plans for certain foreign employees that are consistent with local
statutes and practices. The total expense related to all of the Company's
retirement plans was approximately $21 million in fiscal years 1999 and 1998 and
$19 million in fiscal 1997, which primarily consisted of costs related to the
U.S. defined contribution plan. Also included in total expense is pension
expense related to foreign defined benefit plans of approximately $3 million for
each of the fiscal years 1999, 1998 and 1997.
27
21
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NON-U.S. PLAN DISCLOSURES
The Company's funding policy for its foreign defined benefit pension plans is
consistent with the local requirements of each country. The plans' assets
consist primarily of U.S. and foreign equity securities, bonds, property and
cash.
Net annual periodic pension cost of non-U.S. plans is presented in the following
table:
1999 1998 1997
---- ---- ----
Service cost of benefits earned during the year $ 4,079 $ 3,208 $ 3,117
Interest cost on projected benefit obligation 3,273 3,246 3,295
Expected return on plan assets (6,052) (12,623) (8,109)
Amortization of prior service cost 1,846 9,440 4,889
--------- ---------- ----------
Net periodic pension cost $ 3,146 $ 3,271 $ 3,192
========= ========== ==========
Obligation and asset data of the plans at fiscal year end is presented in the
following table:
1999 1998
---- ----
Benefit Obligation:
Beginning balance $ 56,485 $ 52,648
Service cost 4,079 3,208
Interest cost 3,273 3,246
Plan participants' contributions 1,267 1,230
Benefits paid (1,540) (2,634)
Actuarial (gain)/loss (7,939) 5,982
Exchange rate adjustment (711) (7,195)
---------- ----------
Ending balance $ 54,914 $ 56,485
========== ==========
Plan Assets at Fair Value:
Beginning balance $ 58,784 $ 50,951
Actual return on plan assets 6,052 12,623
Company contributions 2,646 2,277
Plan participants' contributions 1,267 1,230
Benefits paid (1,540) (2,634)
Exchange rate adjustment (1,052) (5,663)
---------- ----------
Ending balance $ 66,157 $ 58,784
========== ==========
Reconciliation of Funded Status:
Fund status - Plan assets in excess of benefit obligation $ (11,243) $ (2,299)
Unrecognized net gain 15,148 6,543
Unrecognized prior service cost (1,077) (308)
---------- ----------
Net amount recognized $ 2,828 $ 3,936
========== ==========
Amounts recognized in the balance sheet consist of:
Prepaid benefit cost $ (4,201) $ (2,678)
Accrued benefit cost 7,029 6,614
---------- ----------
Total $ 2,828 $ 3,936
========== ==========
Accrued benefit cost at October 30, 1999 and October 31, 1998 includes projected
benefit obligations of $14.8 million and $12.7 million and accumulated benefit
obligations of $8.7 million and $7.5 million, versus plan assets of $6.4 million
and $4.7 million for four plans whose obligations exceeded their assets.
28
22
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The range of assumptions used for the non-U.S. defined benefit plans reflects
the different economic environments within the various countries. The projected
benefit obligation was determined using the following assumptions:
1999 1998
---- ----
Discount rate 4% - 12% 4% - 12%
Rate of increase in compensation levels 4% - 10% 3% - 10%
Expected long-term returns on assets 5% - 12% 4% - 13%
14. INCOME TAXES
The reconciliation of income tax computed at the U.S. federal statutory rates to
income tax expense is as follows:
LIABILITY METHOD
----------------
1999 1998 1997
---- ---- ----
U.S. federal statutory tax rate 35.0% 35.0% 35.0%
Income tax provision reconciliation:
Tax at statutory rate $ 90,139 $ 52,660 $ 82,578
Irish income subject to lower tax rate (25,557) (10,960) (19,880)
Change in valuation allowance - (5,559) (1,835)
State income taxes, net of federal benefit 260 502 964
Research and development tax credits (2,700) (4,400) (5,000)
Foreign Sales Corporation (4,923) (1,745) (3,161)
Amortization of goodwill 1,189 545 528
Net foreign tax in excess of
U.S. federal statutory tax rate (156) 125 2,765
Other, net 2,469 (197) 701
---------- ---------- -----------
Total income tax provision $ 60,721 $ 30,971 $ 57,660
========== ========== ===========
For financial reporting purposes, income before income taxes includes the
following components:
1999 1998 1997
---- ---- ----
Pretax income:
Domestic $ 114,333 $ 34,290 $ 84,599
Foreign 143,207 116,169 151,280
---------- ---------- ----------
$ 257,540 $ 150,459 $ 235,879
========== ========== ==========
The components of the provision for income taxes are as follows:
1999 1998 1997
---- ---- ----
Current:
Federal $ 19,949 $ 24,588 $ 35,500
Foreign 23,790 17,983 26,811
State 400 772 1,483
-------- -------- --------
Total current $ 44,139 $ 43,343 $ 63,794
======== ======== ========
Deferred (prepaid):
Federal $ 16,262 $ (7,792) $ (3,364)
Foreign 320 (4,580) (2,770)
-------- -------- --------
Total deferred (prepaid) $ 16,582 $(12,372) $ (6,134)
======== ======== ========
29
23
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company's practice is to reinvest indefinitely the earnings of certain
international subsidiaries. Accordingly, no U.S. income taxes have been provided
for approximately $588,048,000 of unremitted earnings of international
subsidiaries.
The Company had recorded a valuation allowance to reflect the estimated amount
of deferred tax assets that may not be realized due to the expiration of book
and tax capital losses. The balance for the valuation allowance for deferred
assets was $0 at October 30, 1999 and October 31, 1998, and $5.6 million at
November 1, 1997.
The significant components of the Company's deferred tax assets and liabilities
for the fiscal years ended October 30, 1999 and October 31, 1998 are as follows:
1999 1998
---- ----
Deferred tax assets:
Inventory reserves $ 32,816 $ 36,176
Deferred income on shipments to distributors 34,750 39,210
Reserves for compensation and benefits 12,769 11,968
Restricted stock 2,364 2,466
Intercompany profits in foreign inventories 5,181 5,066
Reserve for bad debts 2,821 5,694
Foreign tax credits 292 (492)
Other 3,253 4,340
---------- ----------
Total gross deferred tax assets 94,246 104,428
---------- ----------
Deferred tax liabilities:
Depreciation (44,468) (38,069)
---------- ----------
Total gross deferred tax liabilities (44,468) (38,069)
---------- ----------
Net deferred tax assets $ 49,778 $ 66,359
========== ==========
30
24
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Analog Devices, Inc.
We have audited the accompanying consolidated balance sheets of Analog Devices,
Inc. as of October 30, 1999 and October 31, 1998, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended October 30, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Analog
Devices, Inc. at October 30, 1999 and October 31, 1998, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended October 30, 1999, in conformity with accounting principles
generally accepted in the United States.
As discussed in Notes 2(m) and 5 to the consolidated financial statements, in
the fiscal year ended October 31, 1998, the Company changed its method for
recognizing revenue on certain shipments to distributors.
/s/ Ernst & Young LLP
Boston, Massachusetts
November 30, 1999
31
25
ANALOG DEVICES, INC.
SUPPLEMENTARY FINANCIAL INFORMATION (UNAUDITED)
Quarterly financial information for fiscal 1999 and fiscal 1998 (thousands of
dollars except as noted):
4Q99 3Q99 2Q99 1Q99 4Q98* 3Q98* 2Q98* 1Q98*
---- ---- ---- ---- ----- ----- ----- -----
Net sales 431,036 378,776 340,067 300,500 297,650 295,700 319,430 317,791
------- ------- ------- ------- ------- ------- ------- -------
Cost of sales 205,922 190,481 176,435 162,805 164,945 161,815 160,993 154,332
Gross margin 225,114 188,295 163,632 137,695 132,705 133,885 158,437 163,459
% of sales 52% 50% 48% 46% 45% 45% 50% 51%
------- ------- ------- ------- ------- ------- ------- -------
Operating expenses:
Research and development 75,414 67,142 61,899 52,584 53,101 55,088 56,190 54,975
Write-off of purchased in-
process research and
development - - 5,140 - - - - -
Selling, marketing, general
and administrative 59,702 54,589 49,167 46,181 46,625 48,202 57,014 55,646
Restructuring charge - - - - - 17,000 - -
Gain on sale of business - - - - - - (13,100) -
------- ------- ------- ------- ------- ------- ------- -------
Total operating expenses 135,116 121,731 116,206 98,765 99,726 120,290 100,104 110,621
% of sales 31% 32% 34% 33% 34% 41% 31% 35%
------- ------- ------- ------- ------- ------- ------- -------
Operating income 89,998 66,564 47,426 38,930 32,979 13,595 58,333 52,838
% of sales 21% 18% 14% 13% 11% 5% 18% 17%
------- ------- ------- ------- ------- ------- ------- -------
Equity in loss of WaferTech - - - 1,149 2,715 3,560 1,915 1,590
------- ------- ------- ------- ------- ------- ------- -------
Nonoperating expenses (income):
Interest expense 1,354 1,044 1,985 3,688 3,031 2,666 3,103 2,429
Interest income (9,428) (6,881) (6,117) (4,300) (4,543) (3,996) (4,318) (3,981)
Other 441 557 854 1,032 798 536 996 785
------- ------- ------- ------- ------- ------- ------- -------
Total nonoperating
(income) expense (7,633) (5,280) (3,278) 420 (714) (794) (219) (767)
------- ------- ------- ------- ------- ------- ------- -------
Income before income taxes 97,631 71,844 50,704 37,361 30,978 10,829 56,637 52,015
% of sales 23% 19% 15% 12% 10% 4% 18% 16%
------- ------- ------- ------- ------- ------- ------- -------
Provision for income taxes 24,413 17,243 11,598 7,467 4,642 1,721 12,852 11,756
------- ------- ------- ------- ------- ------- ------- -------
Net income before cumulative
effect of change in
accounting principle 73,218 54,601 39,106 29,894 26,336 9,108 43,785 40,259
% of sales 17% 14% 12% 10% 9% 3% 14% 13%
Per share - basic .42 .32 .23 .19 .16 .05 .27 .26
Per share - diluted .40 .30 .22 .18 .16 .06 .25 .24
------- ------- ------- ------- ------- ------- ------- -------
Cumulative effect of change
in accounting principle - - - - - - - (37,080)
------- ------- ------- ------- ------- ------- ------- -------
Net income after cumulative
effect of change in
accounting principle 73,218 54,601 39,106 29,894 26,336 9,108 43,785 3,179
% of sales 17% 14% 12% 10% 9% 3% 14% 1%
Per share - basic .42 .32 .23 .19 .16 .05 .27 .03
Per share - diluted .40 .30 .22 .18 .16 .06 .25 .03
------- ------- ------- ------- ------- ------- ------- -------
Shares used to compute earnings
per share (in thousands)
Basic 173,670 172,710 167,012 159,572 160,698 162,451 162,124 161,023
Diluted 184,774 183,480 180,698 176,857 175,382 178,546 179,427 178,146
------- ------- ------- ------- ------- ------- ------- -------
* Fiscal 1998 results are after cumulative effect of accounting change - see
Note 5 of the consolidated financial statements.
32