Income Taxes (Tables)

12 Months Ended

Oct. 27, 2013

Components of income from operations before income taxes

The components of income before income taxes for fiscal 2013, 2012 and 2011 were as follows:



	2013		2012			2011

	(In millions)
U.S.	$	194	$	381		$	1,257
Foreign	156		(65		)	1,121
	$	350	$	316		$	2,378

Components of the provision for income taxes

The components of the provision for income taxes for fiscal 2013, 2012 and 2011 were as follows:



	2013			2012			2011

	(In millions)
Current:
U.S.	$	3		$	74		$	290
Foreign	72			75			206
State	2			8			5
	77			157			501
Deferred:
U.S.	34			52			(95		)
Foreign	(19		)	(4		)	(23		)
State	2			2			69
	17			50			(49		)
	$	94		$	207		$	452

Effective income tax rate continuing operations tax rate reconciliation

A reconciliation between the statutory U.S. federal income tax rate of 35 percent and Applied’s actual effective income tax rate for fiscal 2013, 2012 and 2011 is presented below:



	2013		2012		2011
Tax provision at U.S. statutory rate	35.0	%	35.0	%	35.0	%
Resolutions from prior years’ income tax filings	(4.7	)	(6.0	)	(6.9	)
Effect of foreign operations taxed at various rates	(19.4	)	(8.5	)	(8.1	)
State income taxes, net of federal benefit	0.8		2.0		1.6
Research and other tax credits	(5.4	)	(1.0	)	(1.2	)
Production benefit	(1.0	)	(8.0	)	(0.8	)
Goodwill impairment	22.5		47.0		—
Share-based compensation	2.2		4.0		0.4
Other	(3.1	)	1.0		(1.0	)
	26.9	%	65.5	%	19.0	%

Components of deferred income tax assets and liabilities

The components of deferred income tax assets and liabilities are as follows:



	October 27, 2013			October 28, 2012

	(In millions)
Deferred tax assets:
Inventory reserves and basis difference	$	134		$	124
Installation and warranty reserves	14			27
Accrued liabilities	201			211
Restructuring reserves	5			23
Deferred revenue	27			36
Tax credits and net operating losses	182			111
Deferred compensation	33			41
Share-based compensation	60			51
Gross deferred tax assets	656			624
Valuation allowance	(116		)	(46		)
Total deferred tax assets	540			578
Deferred tax liabilities:
Fixed assets	(54		)	(71		)
Intangible assets	(94		)	(178		)
Undistributed foreign earnings	(75		)	(92		)
Other	(14		)	(18		)
Total gross deferred tax liabilities	(237		)	(359		)
Net deferred tax assets	$	303		$	219

The following table presents the breakdown between current and non-current net deferred tax assets and liabilities:



	October 27, 2013			October 28, 2012

	(In millions)
Current deferred tax asset	$	323		$	369
Non-current deferred tax asset	53			51
Current deferred tax liability	(2		)	(1		)
Non-current deferred tax liability	(71		)	(200		)
	$	303		$	219

A reconciliation of gross unrecognized tax benefits

A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows:



	2013			2012

	(In millions)
Beginning balance of gross unrecognized tax benefits	$	174		$	59
Uncertainties arising from the acquisition of Varian	—			70
Settlements with tax authorities	(15		)	(15		)
Lapses of statutes of limitation	(15		)	—
Increases in tax positions for current years	48			42
Increases in tax positions for prior years	2			51
Decreases in tax positions for prior years	—			(33		)
Ending balance of gross unrecognized tax benefits	$	194		$	174