Earnings Per Share

Basic earnings per share is determined using the weighted average number of common shares outstanding during the period. Diluted earnings per share is determined using the weighted average number of common shares and potential common shares (representing the dilutive effect of stock options, restricted stock units, and employee stock purchase plan shares) outstanding during the period. Applied’s net income has not been adjusted for any period presented for purposes of computing basic or diluted earnings per share due to the Company’s non-complex capital structure.



	Three Months Ended				Six Months Ended
	April 29, 2018		April 30, 2017		April 29, 2018		April 30, 2017

	(In millions, except per share amounts)
Numerator:
Net income	$	1,129	$	824	$	1,264	$	1,527
Denominator:
Weighted average common shares outstanding	1,029		1,078		1,042		1,078
Effect of dilutive stock options, restricted stock units and employee stock purchase plan shares	11		9		14		10
Denominator for diluted earnings per share	1,040		1,087		1,056		1,088
Basic earnings per share	$	1.10	$	0.76	$	1.21	$	1.42
Diluted earnings per share	$	1.09	$	0.76	$	1.20	$	1.40
Potentially dilutive securities	—		—		—		—

Potentially dilutive securities attributable to outstanding stock options and restricted stock units are excluded from the calculation of diluted earnings per share where the combined exercise price and average unamortized fair value are greater than the average market price of Applied common stock, and therefore their inclusion would be anti-dilutive. Prior to the adoption of Accounting Standards Update (ASU) 2016-09 Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting in the first quarter of fiscal 2018, the assumed tax benefits upon the exercise of options and vesting of restricted stock units were also included in this calculation.