þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 94-1655526 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
3050 Bowers Avenue, | 95052-8039 |
P.O. Box 58039 Santa Clara, California (Address of principal executive offices) | (Zip Code) |
Large accelerated filer þ | Accelerated filer ¨ | |
Non-accelerated filer ¨ (Do not check if a smaller reporting company) | Smaller reporting company ¨ | |
Emerging growth company ¨ | ||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ |
Page | ||
PART I. FINANCIAL INFORMATION | ||
Item 1: | ||
Item 2: | ||
Item 3: | ||
Item 4: | ||
PART II. OTHER INFORMATION | ||
Item 1: | ||
Item 1A: | ||
Item 2: | ||
Item 6: | ||
Three Months Ended | Nine Months Ended | ||||||||||||||
July 29, 2018 | July 30, 2017 | July 29, 2018 | July 30, 2017 | ||||||||||||
(Unaudited) | |||||||||||||||
Net sales | $ | 4,468 | $ | 3,744 | $ | 13,239 | $ | 10,568 | |||||||
Cost of products sold | 2,441 | 2,044 | 7,202 | 5,823 | |||||||||||
Gross profit | 2,027 | 1,700 | 6,037 | 4,745 | |||||||||||
Operating expenses: | |||||||||||||||
Research, development and engineering | 504 | 454 | 1,501 | 1,308 | |||||||||||
Marketing and selling | 138 | 117 | 394 | 351 | |||||||||||
General and administrative | 128 | 106 | 362 | 316 | |||||||||||
Total operating expenses | 770 | 677 | 2,257 | 1,975 | |||||||||||
Income from operations | 1,257 | 1,023 | 3,780 | 2,770 | |||||||||||
Interest expense | 59 | 59 | 174 | 141 | |||||||||||
Interest and other income, net | 41 | 14 | 90 | 28 | |||||||||||
Income before income taxes | 1,239 | 978 | 3,696 | 2,657 | |||||||||||
Provision for income taxes | 66 | 53 | 1,259 | 205 | |||||||||||
Net income | $ | 1,173 | $ | 925 | $ | 2,437 | $ | 2,452 | |||||||
Earnings per share: | |||||||||||||||
Basic | $ | 1.18 | $ | 0.86 | $ | 2.37 | $ | 2.28 | |||||||
Diluted | $ | 1.17 | $ | 0.85 | $ | 2.35 | $ | 2.26 | |||||||
Weighted average number of shares: | |||||||||||||||
Basic | 994 | 1,071 | 1,026 | 1,076 | |||||||||||
Diluted | 1,005 | 1,083 | 1,039 | 1,087 |
Three Months Ended | Nine Months Ended | ||||||||||||||
July 29, 2018 | July 30, 2017 | July 29, 2018 | July 30, 2017 | ||||||||||||
(Unaudited) | |||||||||||||||
Net income | $ | 1,173 | $ | 925 | $ | 2,437 | $ | 2,452 | |||||||
Other comprehensive income (loss), net of tax: | |||||||||||||||
Change in unrealized net gain on investments | (18 | ) | 10 | (19 | ) | 25 | |||||||||
Change in unrealized net loss on derivative instruments | 16 | 1 | 5 | 1 | |||||||||||
Change in defined and postretirement benefit plans | — | (2 | ) | (2 | ) | (12 | ) | ||||||||
Other comprehensive income (loss), net of tax | (2 | ) | 9 | (16 | ) | 14 | |||||||||
Comprehensive income | $ | 1,171 | $ | 934 | $ | 2,421 | $ | 2,466 |
July 29, 2018 | October 29, 2017 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 3,374 | $ | 5,010 | |||
Short-term investments | 610 | 2,266 | |||||
Accounts receivable, net | 2,882 | 2,338 | |||||
Inventories | 3,681 | 2,930 | |||||
Other current assets | 342 | 374 | |||||
Total current assets | 10,889 | 12,918 | |||||
Long-term investments | 1,613 | 1,143 | |||||
Property, plant and equipment, net | 1,321 | 1,066 | |||||
Goodwill | 3,368 | 3,368 | |||||
Purchased technology and other intangible assets, net | 263 | 412 | |||||
Deferred income taxes and other assets | 429 | 512 | |||||
Total assets | $ | 17,883 | $ | 19,419 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable and accrued expenses | $ | 2,741 | $ | 2,450 | |||
Customer deposits and deferred revenue | 1,581 | 1,665 | |||||
Total current liabilities | 4,322 | 4,115 | |||||
Income taxes payable | 1,148 | 392 | |||||
Long-term debt | 5,308 | 5,304 | |||||
Other liabilities | 280 | 259 | |||||
Total liabilities | 11,058 | 10,070 | |||||
Stockholders’ equity: | |||||||
Common stock | 10 | 11 | |||||
Additional paid-in capital | 7,145 | 7,056 | |||||
Retained earnings | 20,191 | 18,258 | |||||
Treasury stock | (20,444 | ) | (15,912 | ) | |||
Accumulated other comprehensive loss | (77 | ) | (64 | ) | |||
Total stockholders’ equity | 6,825 | 9,349 | |||||
Total liabilities and stockholders’ equity | $ | 17,883 | $ | 19,419 |
Common Stock | Additional Paid-In Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Total | ||||||||||||||||||||||||
Nine Months Ended July 29, 2018 | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||
Balance as of October 29, 2017 | 1,060 | $ | 11 | $ | 7,056 | $ | 18,258 | 917 | $ | (15,912 | ) | $ | (64 | ) | $ | 9,349 | |||||||||||||
Adoption of new accounting standards (a) | — | — | — | (3 | ) | — | — | 3 | — | ||||||||||||||||||||
Net income | — | — | — | 2,437 | — | — | — | 2,437 | |||||||||||||||||||||
Other comprehensive loss, net of tax | — | — | — | — | — | — | (16 | ) | (16 | ) | |||||||||||||||||||
Dividends | — | — | — | (501 | ) | — | — | — | (501 | ) | |||||||||||||||||||
Share-based compensation | — | — | 193 | — | — | — | — | 193 | |||||||||||||||||||||
Issuance under stock plans | 7 | — | (104 | ) | — | — | — | — | (104 | ) | |||||||||||||||||||
Common stock repurchases | (84 | ) | (1 | ) | — | — | 84 | (4,532 | ) | — | (4,533 | ) | |||||||||||||||||
Balance as of July 29, 2018 | 983 | $ | 10 | $ | 7,145 | $ | 20,191 | 1,001 | $ | (20,444 | ) | $ | (77 | ) | $ | 6,825 |
Common Stock | Additional Paid-In Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Total | ||||||||||||||||||||||||
Nine Months Ended July 30, 2017 | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||
Balance as of October 30, 2016 | 1,078 | $ | 11 | $ | 6,809 | $ | 15,252 | 889 | $ | (14,740 | ) | $ | (115 | ) | $ | 7,217 | |||||||||||||
Net income | — | — | — | 2,452 | — | — | — | 2,452 | |||||||||||||||||||||
Other comprehensive income, net of tax | — | — | — | — | — | — | 14 | 14 | |||||||||||||||||||||
Dividends | — | — | — | (321 | ) | — | — | — | (321 | ) | |||||||||||||||||||
Share-based compensation | — | — | 162 | — | — | — | — | 162 | |||||||||||||||||||||
Issuance under stock plans, net of tax benefit of $51 and other | 8 | — | (21 | ) | — | — | — | — | (21 | ) | |||||||||||||||||||
Common stock repurchases | (20 | ) | — | — | — | 20 | (787 | ) | — | (787 | ) | ||||||||||||||||||
Balance as of July 30, 2017 | 1,066 | $ | 11 | $ | 6,950 | $ | 17,383 | 909 | $ | (15,527 | ) | $ | (101 | ) | $ | 8,716 |
Nine Months Ended | |||||||
July 29, 2018 | July 30, 2017 | ||||||
(Unaudited) | |||||||
Cash flows from operating activities: | |||||||
Net income | $ | 2,437 | $ | 2,452 | |||
Adjustments required to reconcile net income to cash provided by operating activities: | |||||||
Depreciation and amortization | 337 | 302 | |||||
Share-based compensation | 193 | 162 | |||||
Deferred income taxes | 112 | 6 | |||||
Other | 4 | 15 | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | (543 | ) | 26 | ||||
Inventories | (751 | ) | (825 | ) | |||
Other current and non-current assets | 2 | (114 | ) | ||||
Accounts payable and accrued expenses | 214 | 272 | |||||
Customer deposits and deferred revenue | (84 | ) | 740 | ||||
Income taxes payable | 764 | 13 | |||||
Other liabilities | 25 | 31 | |||||
Cash provided by operating activities | 2,710 | 3,080 | |||||
Cash flows from investing activities: | |||||||
Capital expenditures | (457 | ) | (221 | ) | |||
Cash paid for acquisitions, net of cash acquired | (5 | ) | (56 | ) | |||
Proceeds from sales and maturities of investments | 2,823 | 1,822 | |||||
Purchases of investments | (1,661 | ) | (3,542 | ) | |||
Cash provided by (used in) investing activities | 700 | (1,997 | ) | ||||
Cash flows from financing activities: | |||||||
Debt borrowings, net of issuance costs | — | 2,176 | |||||
Debt repayments | — | (205 | ) | ||||
Proceeds from common stock issuances | 56 | 47 | |||||
Common stock repurchases | (4,532 | ) | (787 | ) | |||
Tax withholding payments for vested equity awards | (160 | ) | (119 | ) | |||
Payments of dividends to stockholders | (410 | ) | (323 | ) | |||
Cash provided by (used in) financing activities | (5,046 | ) | 789 | ||||
Increase (decrease) in cash and cash equivalents | (1,636 | ) | 1,872 | ||||
Cash and cash equivalents — beginning of period | 5,010 | 3,406 | |||||
Cash and cash equivalents — end of period | $ | 3,374 | $ | 5,278 | |||
Supplemental cash flow information: | |||||||
Cash payments for income taxes | $ | 281 | $ | 168 | |||
Cash refunds from income taxes | $ | 51 | $ | 17 | |||
Cash payments for interest | $ | 143 | $ | 110 |
• | Revenue related to the sale of equipment and spares will generally continue to be recognized at a point in time upon the transfer of control. Under this new guidance, the point of time at which revenue is recognized for certain of these products is expected to be earlier than under current revenue recognition guidance as there will be fewer constraints related to customer acceptance. |
Note 2 | Earnings Per Share |
Three Months Ended | Nine Months Ended | ||||||||||||||
July 29, 2018 | July 30, 2017 | July 29, 2018 | July 30, 2017 | ||||||||||||
(In millions, except per share amounts) | |||||||||||||||
Numerator: | |||||||||||||||
Net income | $ | 1,173 | $ | 925 | $ | 2,437 | $ | 2,452 | |||||||
Denominator: | |||||||||||||||
Weighted average common shares outstanding | 994 | 1,071 | 1,026 | 1,076 | |||||||||||
Effect of dilutive stock options, restricted stock units and employee stock purchase plan shares | 11 | 12 | 13 | 11 | |||||||||||
Denominator for diluted earnings per share | 1,005 | 1,083 | 1,039 | 1,087 | |||||||||||
Basic earnings per share | $ | 1.18 | $ | 0.86 | $ | 2.37 | $ | 2.28 | |||||||
Diluted earnings per share | $ | 1.17 | $ | 0.85 | $ | 2.35 | $ | 2.26 | |||||||
Potentially dilutive securities | — | — | — | — |
Note 3 | Cash, Cash Equivalents and Investments |
July 29, 2018 | Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||
(In millions) | |||||||||||||||
Cash | $ | 1,364 | $ | — | $ | — | $ | 1,364 | |||||||
Cash equivalents: | |||||||||||||||
Money market funds | 1,596 | — | — | 1,596 | |||||||||||
Non-U.S. government securities* | 2 | — | — | 2 | |||||||||||
Municipal securities | 119 | — | — | 119 | |||||||||||
Commercial paper, corporate bonds and medium-term notes | 292 | — | — | 292 | |||||||||||
Asset-backed and mortgage-backed securities | 1 | — | — | 1 | |||||||||||
Total Cash equivalents | 2,010 | — | — | 2,010 | |||||||||||
Total Cash and Cash equivalents | $ | 3,374 | $ | — | $ | — | $ | 3,374 | |||||||
Short-term and long-term investments: | |||||||||||||||
U.S. Treasury and agency securities | $ | 336 | $ | — | $ | 2 | $ | 334 | |||||||
Non-U.S. government securities* | 10 | — | — | 10 | |||||||||||
Municipal securities | 417 | — | 2 | 415 | |||||||||||
Commercial paper, corporate bonds and medium-term notes | 722 | — | 3 | 719 | |||||||||||
Asset-backed and mortgage-backed securities | 586 | — | 4 | 582 | |||||||||||
Total fixed income securities | 2,071 | — | 11 | 2,060 | |||||||||||
Publicly traded equity securities | 20 | 61 | — | 81 | |||||||||||
Equity investments in privately-held companies | 82 | — | — | 82 | |||||||||||
Total short-term and long-term investments | $ | 2,173 | $ | 61 | $ | 11 | $ | 2,223 | |||||||
Total Cash, Cash equivalents and Investments | $ | 5,547 | $ | 61 | $ | 11 | $ | 5,597 |
October 29, 2017 | Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||
(In millions) | |||||||||||||||
Cash | $ | 1,346 | $ | — | $ | — | $ | 1,346 | |||||||
Cash equivalents: | |||||||||||||||
Money market funds | 2,658 | — | — | 2,658 | |||||||||||
U.S. Treasury and agency securities | 15 | — | — | 15 | |||||||||||
Non-U.S. government securities* | 55 | — | — | 55 | |||||||||||
Municipal securities | 341 | — | — | 341 | |||||||||||
Commercial paper, corporate bonds and medium-term notes | 595 | — | — | 595 | |||||||||||
Total Cash equivalents | 3,664 | — | — | 3,664 | |||||||||||
Total Cash and Cash equivalents | $ | 5,010 | $ | — | $ | — | $ | 5,010 | |||||||
Short-term and long-term investments: | |||||||||||||||
U.S. Treasury and agency securities | $ | 667 | $ | — | $ | 1 | $ | 666 | |||||||
Non-U.S. government securities* | 161 | — | — | 161 | |||||||||||
Municipal securities | 1,007 | — | — | 1,007 | |||||||||||
Commercial paper, corporate bonds and medium-term notes | 1,024 | 1 | 1 | 1,024 | |||||||||||
Asset-backed and mortgage-backed securities | 379 | — | 1 | 378 | |||||||||||
Total fixed income securities | 3,238 | 1 | 3 | 3,236 | |||||||||||
Publicly traded equity securities | 22 | 78 | 1 | 99 | |||||||||||
Equity investments in privately-held companies | 74 | — | — | 74 | |||||||||||
Total short-term and long-term investments | $ | 3,334 | $ | 79 | $ | 4 | $ | 3,409 | |||||||
Total Cash, Cash equivalents and Investments | $ | 8,344 | $ | 79 | $ | 4 | $ | 8,419 |
Cost | Estimated Fair Value | ||||||
(In millions) | |||||||
Due in one year or less | $ | 556 | $ | 555 | |||
Due after one through five years | 929 | 923 | |||||
No single maturity date** | 688 | 745 | |||||
$ | 2,173 | $ | 2,223 |
Note 4 | Fair Value Measurements |
• | Level 1 — Quoted prices in active markets for identical assets or liabilities; |
• | Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and |
• | Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
July 29, 2018 | October 29, 2017 | ||||||||||||||||||||||
Level 1 | Level 2 | Total | Level 1 | Level 2 | Total | ||||||||||||||||||
(In millions) | |||||||||||||||||||||||
Assets: | |||||||||||||||||||||||
Money market funds | $ | 1,596 | $ | — | $ | 1,596 | $ | 2,658 | $ | — | $ | 2,658 | |||||||||||
U.S. Treasury and agency securities | 303 | 31 | 334 | 192 | 489 | 681 | |||||||||||||||||
Non-U.S. government securities | — | 12 | 12 | — | 216 | 216 | |||||||||||||||||
Municipal securities | — | 534 | 534 | — | 1,348 | 1,348 | |||||||||||||||||
Commercial paper, corporate bonds and medium-term notes | — | 1,011 | 1,011 | — | 1,619 | 1,619 | |||||||||||||||||
Asset-backed and mortgage-backed securities | — | 583 | 583 | — | 378 | 378 | |||||||||||||||||
Publicly traded equity securities | 81 | — | 81 | 99 | — | 99 | |||||||||||||||||
Total | $ | 1,980 | $ | 2,171 | $ | 4,151 | $ | 2,949 | $ | 4,050 | $ | 6,999 |
Note 5 | Derivative Instruments and Hedging Activities |
Three Months Ended | |||||||||||||||||||||||||
July 29, 2018 | July 30, 2017 | ||||||||||||||||||||||||
Effective Portion | Ineffective Portion and Amount Excluded from Effectiveness Testing | Effective Portion | Ineffective Portion and Amount Excluded from Effectiveness Testing | ||||||||||||||||||||||
Location of Gain or (Loss) | Gain or (Loss) | Gain or (Loss) Reclassified from AOCI into Income | Gain or (Loss) Recognized in Income | Gain or (Loss) | Gain or (Loss) Reclassified from AOCI into Income | Gain or (Loss) Recognized in Income | |||||||||||||||||||
(In millions) | |||||||||||||||||||||||||
Derivatives in Cash Flow Hedging Relationships | |||||||||||||||||||||||||
Foreign exchange contracts | AOCI | $ | 11 | $ | — | $ | — | $ | 6 | $ | — | $ | — | ||||||||||||
Foreign exchange contracts | Cost of products sold | — | (3 | ) | 7 | — | 1 | — | |||||||||||||||||
Foreign exchange contracts | General and administrative | — | (6 | ) | (2 | ) | — | 3 | (1 | ) | |||||||||||||||
Interest rate contracts | Interest expense | — | (1 | ) | — | — | (1 | ) | — | ||||||||||||||||
Total | $ | 11 | $ | (10 | ) | $ | 5 | $ | 6 | $ | 3 | $ | (1 | ) |
Nine Months Ended | |||||||||||||||||||||||||
July 29, 2018 | July 30, 2017 | ||||||||||||||||||||||||
Effective Portion | Ineffective Portion and Amount Excluded from Effectiveness Testing | Effective Portion | Ineffective Portion and Amount Excluded from Effectiveness Testing | ||||||||||||||||||||||
Location of Gain or (Loss) | Gain or (Loss) | Gain or (Loss) Reclassified from AOCI into Income | Gain or (Loss) Recognized in Income | Gain or (Loss) | Gain or (Loss) Reclassified from AOCI into Income | Gain or (Loss) Recognized in Income | |||||||||||||||||||
(In millions) | |||||||||||||||||||||||||
Derivatives in Cash Flow Hedging Relationships | |||||||||||||||||||||||||
Foreign exchange contracts | AOCI | $ | (5 | ) | $ | — | $ | — | $ | 24 | $ | — | $ | — | |||||||||||
Foreign exchange contracts | Cost of products sold | — | (7 | ) | 13 | — | 7 | (3 | ) | ||||||||||||||||
Foreign exchange contracts | General and administrative | — | (2 | ) | (5 | ) | — | 3 | (2 | ) | |||||||||||||||
Interest rate contracts | Interest expense | — | (3 | ) | — | (14 | ) | (2 | ) | — | |||||||||||||||
Total | $ | (5 | ) | $ | (12 | ) | $ | 8 | $ | 10 | $ | 8 | $ | (5 | ) |
Amount of Gain or (Loss) Recognized in Income | |||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
Location of Gain or (Loss) Recognized in Income | July 29, 2018 | July 30, 2017 | July 29, 2018 | July 30, 2017 | |||||||||||||
(In millions) | |||||||||||||||||
Derivatives Not Designated as Hedging Instruments | |||||||||||||||||
Foreign exchange contracts | General and administrative | $ | 2 | $ | 9 | $ | (8 | ) | $ | 34 | |||||||
Total | $ | 2 | $ | 9 | $ | (8 | ) | $ | 34 |
Note 6 | Accounts Receivable, Net |
Note 7 | Balance Sheet Detail |
July 29, 2018 | October 29, 2017 | ||||||
(In millions) | |||||||
Inventories | |||||||
Customer service spares | $ | 829 | $ | 595 | |||
Raw materials | 978 | 603 | |||||
Work-in-process | 603 | 468 | |||||
Finished goods | 1,271 | 1,264 | |||||
$ | 3,681 | $ | 2,930 |
July 29, 2018 | October 29, 2017 | ||||||
(In millions) | |||||||
Other Current Assets | |||||||
Prepaid income taxes and income taxes receivable | $ | 53 | $ | 57 | |||
Prepaid expenses and other | 289 | 317 | |||||
$ | 342 | $ | 374 |
Useful Life | July 29, 2018 | October 29, 2017 | |||||||
(In years) | (In millions) | ||||||||
Property, Plant and Equipment, Net | |||||||||
Land and improvements | $ | 221 | $ | 160 | |||||
Buildings and improvements | 3-30 | 1,419 | 1,315 | ||||||
Demonstration and manufacturing equipment | 3-5 | 1,261 | 1,129 | ||||||
Furniture, fixtures and other equipment | 3-5 | 625 | 572 | ||||||
Construction in progress | 198 | 135 | |||||||
Gross property, plant and equipment | 3,724 | 3,311 | |||||||
Accumulated depreciation | (2,403 | ) | (2,245 | ) | |||||
$ | 1,321 | $ | 1,066 |
July 29, 2018 | October 29, 2017 | ||||||
(In millions) | |||||||
Accounts Payable and Accrued Expenses | |||||||
Accounts payable | $ | 1,094 | $ | 945 | |||
Compensation and employee benefits | 625 | 666 | |||||
Warranty | 220 | 199 | |||||
Dividends payable | 197 | 106 | |||||
Income taxes payable | 121 | 112 | |||||
Other accrued taxes | 64 | 70 | |||||
Interest payable | 59 | 38 | |||||
Other | 361 | 314 | |||||
$ | 2,741 | $ | 2,450 |
July 29, 2018 | October 29, 2017 | ||||||
(In millions) | |||||||
Customer Deposits and Deferred Revenue | |||||||
Customer deposits | $ | 410 | $ | 381 | |||
Deferred revenue | 1,171 | 1,284 | |||||
$ | 1,581 | $ | 1,665 |
July 29, 2018 | October 29, 2017 | ||||||
(In millions) | |||||||
Other Liabilities | |||||||
Defined and postretirement benefit plans | $ | 159 | $ | 160 | |||
Other | 121 | 99 | |||||
$ | 280 | $ | 259 |
Note 8 | Business Combinations |
Estimated Fair Values | ||||
(In millions) | ||||
Fair value of net assets acquired | $ | 17 | ||
Goodwill | 44 | |||
Purchased technology | 31 | |||
Purchase price allocated | $ | 92 |
Note 9 | Goodwill, Purchased Technology and Other Intangible Assets |
July 29, 2018 | October 29, 2017 | ||||||
(In millions) | |||||||
Semiconductor Systems | $ | 2,151 | $ | 2,151 | |||
Applied Global Services | 1,018 | 1,018 | |||||
Display and Adjacent Markets | 199 | 199 | |||||
Carrying amount | $ | 3,368 | $ | 3,368 |
July 29, 2018 | October 29, 2017 | ||||||
(In millions) | |||||||
Purchased technology, net | $ | 154 | $ | 288 | |||
Intangible assets - finite-lived, net | 109 | 124 | |||||
Total | $ | 263 | $ | 412 |
July 29, 2018 | October 29, 2017 | ||||||||||||||||||||||
Purchased Technology | Other Intangible Assets | Total | Purchased Technology | Other Intangible Assets | Total | ||||||||||||||||||
(In millions) | |||||||||||||||||||||||
Gross carrying amount: | |||||||||||||||||||||||
Semiconductor Systems | $ | 1,449 | $ | 252 | $ | 1,701 | $ | 1,449 | $ | 252 | $ | 1,701 | |||||||||||
Applied Global Services | 33 | 44 | 77 | 33 | 44 | 77 | |||||||||||||||||
Display and Adjacent Markets | 163 | 38 | 201 | 163 | 38 | 201 | |||||||||||||||||
Corporate and Other | — | 9 | 9 | — | 9 | 9 | |||||||||||||||||
Gross carrying amount | $ | 1,645 | $ | 343 | $ | 1,988 | $ | 1,645 | $ | 343 | $ | 1,988 | |||||||||||
Accumulated amortization: | |||||||||||||||||||||||
Semiconductor Systems | $ | (1,334 | ) | $ | (145 | ) | $ | (1,479 | ) | $ | (1,210 | ) | $ | (131 | ) | $ | (1,341 | ) | |||||
Applied Global Services | (29 | ) | (44 | ) | (73 | ) | (28 | ) | (44 | ) | (72 | ) | |||||||||||
Display and Adjacent Markets | (128 | ) | (36 | ) | (164 | ) | (119 | ) | (35 | ) | (154 | ) | |||||||||||
Corporate and Other | — | (9 | ) | (9 | ) | — | (9 | ) | (9 | ) | |||||||||||||
Accumulated amortization | $ | (1,491 | ) | $ | (234 | ) | $ | (1,725 | ) | $ | (1,357 | ) | $ | (219 | ) | $ | (1,576 | ) | |||||
Carrying amount | $ | 154 | $ | 109 | $ | 263 | $ | 288 | $ | 124 | $ | 412 |
Three Months Ended | Nine Months Ended | ||||||||||||||
July 29, 2018 | July 30, 2017 | July 29, 2018 | July 30, 2017 | ||||||||||||
(In millions) | |||||||||||||||
Semiconductor Systems | $ | 47 | $ | 46 | $ | 138 | $ | 138 | |||||||
Applied Global Services | — | — | 1 | 1 | |||||||||||
Display and Adjacent Markets | 3 | 3 | 10 | 4 | |||||||||||
Total | $ | 50 | $ | 49 | $ | 149 | $ | 143 |
Three Months Ended | Nine Months Ended | ||||||||||||||
July 29, 2018 | July 30, 2017 | July 29, 2018 | July 30, 2017 | ||||||||||||
(In millions) | |||||||||||||||
Cost of products sold | $ | 44 | $ | 44 | $ | 134 | $ | 128 | |||||||
Research, development and engineering | 1 | — | 1 | 1 | |||||||||||
Marketing and selling | 5 | 5 | 14 | 14 | |||||||||||
Total | $ | 50 | $ | 49 | $ | 149 | $ | 143 |
Amortization Expense | |||
(In millions) | |||
2018 (remaining 3 months) | $ | 49 | |
2019 | 57 | ||
2020 | 52 | ||
2021 | 40 | ||
2022 | 65 | ||
Total | $ | 263 |
Note 10 | Borrowing Facilities and Debt |
Principal Amount | |||||||||||
July 29, 2018 | October 29, 2017 | Effective Interest Rate | Interest Pay Dates | ||||||||
(In millions) | |||||||||||
Long-term debt: | |||||||||||
2.625% Senior Notes Due 2020 | $ | 600 | $ | 600 | 2.640% | April 1, October 1 | |||||
4.300% Senior Notes Due 2021 | 750 | 750 | 4.326% | June 15, December 15 | |||||||
3.900% Senior Notes Due 2025 | 700 | 700 | 3.944% | April 1, October 1 | |||||||
3.300% Senior Notes Due 2027 | 1,200 | 1,200 | 3.342% | April 1, October 1 | |||||||
5.100% Senior Notes Due 2035 | 500 | 500 | 5.127% | April 1, October 1 | |||||||
5.850% Senior Notes Due 2041 | 600 | 600 | 5.879% | June 15, December 15 | |||||||
4.350% Senior Notes Due 2047 | 1,000 | 1,000 | 4.361% | April 1, October 1 | |||||||
5,350 | 5,350 | ||||||||||
Total unamortized discount | (11 | ) | (12 | ) | |||||||
Total unamortized debt issuance costs | (31 | ) | (34 | ) | |||||||
Total long-term debt | 5,308 | 5,304 | |||||||||
Total debt | $ | 5,308 | $ | 5,304 |
Note 11 | Stockholders’ Equity, Comprehensive Income and Share-Based Compensation |
Unrealized Gain on Investments, Net | Unrealized Gain (Loss) on Derivative Instruments Qualifying as Cash Flow Hedges | Defined and Postretirement Benefit Plans | Cumulative Translation Adjustments | Total | |||||||||||||||
(in millions) | |||||||||||||||||||
Balance as of October 29, 2017 | $ | 53 | $ | (11 | ) | $ | (120 | ) | $ | 14 | $ | (64 | ) | ||||||
Adoption of new accounting standards (a) | 5 | (2 | ) | — | — | 3 | |||||||||||||
Other comprehensive loss before reclassifications | (7 | ) | (4 | ) | — | — | (11 | ) | |||||||||||
Amounts reclassified out of AOCI | (12 | ) | 9 | (2 | ) | — | (5 | ) | |||||||||||
Other comprehensive loss, net of tax | (19 | ) | 5 | (2 | ) | — | (16 | ) | |||||||||||
Balance as of July 29, 2018 | $ | 39 | $ | (8 | ) | $ | (122 | ) | $ | 14 | $ | (77 | ) |
Unrealized Gain on Investments, Net | Unrealized Gain (Loss) on Derivative Instruments Qualifying as Cash Flow Hedges | Defined and Postretirement Benefit Plans | Cumulative Translation Adjustments | Total | |||||||||||||||
(in millions) | |||||||||||||||||||
Balance as of October 30, 2016 | $ | 30 | $ | (18 | ) | $ | (141 | ) | $ | 14 | $ | (115 | ) | ||||||
Other comprehensive income before reclassifications | 23 | 6 | — | — | 29 | ||||||||||||||
Amounts reclassified out of AOCI | 2 | (5 | ) | (12 | ) | — | (15 | ) | |||||||||||
Other comprehensive income (loss), net of tax | 25 | 1 | (12 | ) | — | 14 | |||||||||||||
Balance as of July 30, 2017 | $ | 55 | $ | (17 | ) | $ | (153 | ) | $ | 14 | $ | (101 | ) |
Three Months Ended | Nine Months Ended | ||||||||||||||
July 29, 2018 | July 30, 2017 | July 29, 2018 | July 30, 2017 | ||||||||||||
(in millions, except per share amount) | |||||||||||||||
Shares of common stock repurchased | 25 | 9 | 84 | 20 | |||||||||||
Cost of stock repurchased | $ | 1,250 | $ | 375 | $ | 4,532 | $ | 787 | |||||||
Average price paid per share | $ | 49.31 | $ | 44.34 | $ | 53.72 | $ | 39.48 |
Three Months Ended | Nine Months Ended | ||||||||||||||
July 29, 2018 | July 30, 2017 | July 29, 2018 | July 30, 2017 | ||||||||||||
(In millions) | |||||||||||||||
Cost of products sold | $ | 22 | $ | 18 | $ | 65 | $ | 51 | |||||||
Research, development and engineering | 24 | 20 | 72 | 61 | |||||||||||
Marketing and selling | 7 | 7 | 23 | 21 | |||||||||||
General and administrative | 11 | 10 | 33 | 29 | |||||||||||
Total share-based compensation | $ | 64 | $ | 55 | $ | 193 | $ | 162 |
Shares | Weighted Average Grant Date Fair Value | |||||
(In millions, except per share amounts) | ||||||
Outstanding as of October 29, 2017 | 22 | $ | 23.96 | |||
Granted | 6 | $ | 51.63 | |||
Vested | (8 | ) | $ | 22.03 | ||
Canceled | (1 | ) | $ | 29.63 | ||
Outstanding as of July 29, 2018 | 19 | $ | 32.45 |
Nine Months Ended | |||
July 29, 2018 | July 30, 2017 | ||
ESPP: | |||
Dividend yield | 1.40% | 1.09% | |
Expected volatility | 35.5% | 24.9% | |
Risk-free interest rate | 1.83% | 0.78% | |
Expected life (in years) | 0.5 | 0.5 | |
Weighted average estimated fair value | $14.26 | $8.08 |
Note 13 | Warranty, Guarantees and Contingencies |
Three Months Ended | Nine Months Ended | ||||||||||||||
July 29, 2018 | July 30, 2017 | July 29, 2018 | July 30, 2017 | ||||||||||||
(In millions) | |||||||||||||||
Beginning balance | $ | 218 | $ | 182 | $ | 199 | $ | 153 | |||||||
Warranties issued | 48 | 41 | 147 | 123 | |||||||||||
Change in reserves related to preexisting warranty | 1 | 1 | — | 3 | |||||||||||
Consumption of reserves | (47 | ) | (32 | ) | (126 | ) | (87 | ) | |||||||
Ending balance | $ | 220 | $ | 192 | $ | 220 | $ | 192 |
Note 14 | Industry Segment Operations |
Three Months Ended | Nine Months Ended | ||||||||||||||
Net Sales | Operating Income (Loss) | Net Sales | Operating Income (Loss) | ||||||||||||
(In millions) | |||||||||||||||
July 29, 2018: | |||||||||||||||
Semiconductor Systems | $ | 2,748 | $ | 930 | $ | 8,594 | $ | 2,996 | |||||||
Applied Global Services | 954 | 281 | 2,777 | 813 | |||||||||||
Display and Adjacent Markets | 741 | 214 | 1,796 | 477 | |||||||||||
Corporate and Other | 25 | (168 | ) | 72 | (506 | ) | |||||||||
Total | $ | 4,468 | $ | 1,257 | $ | 13,239 | $ | 3,780 | |||||||
July 30, 2017: | |||||||||||||||
Semiconductor Systems | $ | 2,532 | $ | 874 | $ | 7,086 | $ | 2,372 | |||||||
Applied Global Services | 786 | 213 | 2,186 | 585 | |||||||||||
Display and Adjacent Markets | 410 | 91 | 1,223 | 290 | |||||||||||
Corporate and Other | 16 | (155 | ) | 73 | (477 | ) | |||||||||
Total | $ | 3,744 | $ | 1,023 | $ | 10,568 | $ | 2,770 |
Three Months Ended | Nine Months Ended | ||||||||||||||
July 29, 2018 | July 30, 2017 | July 29, 2018 | July 30, 2017 | ||||||||||||
(In millions) | |||||||||||||||
Unallocated net sales | $ | 25 | $ | 16 | $ | 72 | $ | 73 | |||||||
Unallocated cost of products sold and expenses | (129 | ) | (116 | ) | (385 | ) | (388 | ) | |||||||
Share-based compensation | (64 | ) | (55 | ) | (193 | ) | (162 | ) | |||||||
Total | $ | (168 | ) | $ | (155 | ) | $ | (506 | ) | $ | (477 | ) |
Percentage of Net Sales | ||
Samsung Electronics Co., Ltd. | 15 | % |
Taiwan Semiconductor Manufacturing Company Limited | 12 | % |
Intel Corporation | 11 | % |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
July 29, 2018 | July 30, 2017 | Change | July 29, 2018 | July 30, 2017 | Change | ||||||||||||||||||
(In millions, except per share amounts and percentages) | |||||||||||||||||||||||
Net sales | $ | 4,468 | $ | 3,744 | $ | 724 | $ | 13,239 | $ | 10,568 | $ | 2,671 | |||||||||||
Gross margin | 45.4 | % | 45.4 | % | —% | 45.6 | % | 44.9 | % | 0.7 points | |||||||||||||
Operating income | $ | 1,257 | $ | 1,023 | $ | 234 | $ | 3,780 | $ | 2,770 | $ | 1,010 | |||||||||||
Operating margin | 28.1 | % | 27.3 | % | 0.8 points | 28.6 | % | 26.2 | % | 2.4 points | |||||||||||||
Net income | $ | 1,173 | $ | 925 | $ | 248 | $ | 2,437 | $ | 2,452 | $ | (15 | ) | ||||||||||
Earnings per diluted share | $ | 1.17 | $ | 0.85 | $ | 0.32 | $ | 2.35 | $ | 2.26 | $ | 0.09 |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||||||
July 29, 2018 | July 30, 2017 | Change | July 29, 2018 | July 30, 2017 | Change | ||||||||||||||||||||||||||||
(In millions, except percentages) | |||||||||||||||||||||||||||||||||
Semiconductor Systems | $ | 2,748 | 62 | % | $ | 2,532 | 68 | % | 9 | % | $ | 8,594 | 65 | % | $ | 7,086 | 67 | % | 21 | % | |||||||||||||
Applied Global Services | 954 | 21 | % | 786 | 21 | % | 21 | % | 2,777 | 21 | % | 2,186 | 21 | % | 27 | % | |||||||||||||||||
Display and Adjacent Markets | 741 | 17 | % | 410 | 11 | % | 81 | % | 1,796 | 14 | % | 1,223 | 11 | % | 47 | % | |||||||||||||||||
Corporate and Other | 25 | — | % | 16 | — | % | 56 | % | 72 | — | % | 73 | 1 | % | (1 | )% | |||||||||||||||||
Total | $ | 4,468 | 100 | % | $ | 3,744 | 100 | % | 19 | % | $ | 13,239 | 100 | % | $ | 10,568 | 100 | % | 25 | % |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||||||
July 29, 2018 | July 30, 2017 | Change | July 29, 2018 | July 30, 2017 | Change | ||||||||||||||||||||||||||||
(In millions, except percentages) | |||||||||||||||||||||||||||||||||
Korea | $ | 588 | 13 | % | $ | 1,265 | 34 | % | (54 | )% | $ | 3,066 | 23 | % | $ | 2,877 | 27 | % | 7 | % | |||||||||||||
Taiwan | 641 | 14 | % | 607 | 16 | % | 6 | % | 2,124 | 16 | % | 2,573 | 24 | % | (17 | )% | |||||||||||||||||
China | 1,725 | 39 | % | 774 | 21 | % | 123 | % | 3,782 | 29 | % | 2,149 | 20 | % | 76 | % | |||||||||||||||||
Japan | 700 | 16 | % | 444 | 12 | % | 58 | % | 1,684 | 13 | % | 1,011 | 10 | % | 67 | % | |||||||||||||||||
Southeast Asia | 173 | 4 | % | 104 | 2 | % | 66 | % | 601 | 4 | % | 310 | 3 | % | 94 | % | |||||||||||||||||
Asia Pacific | 3,827 | 86 | % | 3,194 | 85 | % | 20 | % | 11,257 | 85 | % | 8,920 | 84 | % | 26 | % | |||||||||||||||||
United States | 401 | 9 | % | 359 | 10 | % | 12 | % | 1,166 | 9 | % | 1,059 | 10 | % | 10 | % | |||||||||||||||||
Europe | 240 | 5 | % | 191 | 5 | % | 26 | % | 816 | 6 | % | 589 | 6 | % | 39 | % | |||||||||||||||||
Total | $ | 4,468 | 100 | % | $ | 3,744 | 100 | % | 19 | % | $ | 13,239 | 100 | % | $ | 10,568 | 100 | % | 25 | % |
Three Months Ended | Nine Months Ended | ||||||||||||||
July 29, 2018 | July 30, 2017 | Change | July 29, 2018 | July 30, 2017 | Change | ||||||||||
Gross margin | 45.4 | % | 45.4 | % | —% | 45.6 | % | 44.9 | % | 0.7 points |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
July 29, 2018 | July 30, 2017 | Change | July 29, 2018 | July 30, 2017 | Change | ||||||||||||||||||
(In millions) | |||||||||||||||||||||||
Research, development and engineering | $ | 504 | $ | 454 | $ | 50 | $ | 1,501 | $ | 1,308 | $ | 193 |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
July 29, 2018 | July 30, 2017 | Change | July 29, 2018 | July 30, 2017 | Change | ||||||||||||||||||
(In millions) | |||||||||||||||||||||||
Marketing and selling | $ | 138 | $ | 117 | $ | 21 | $ | 394 | $ | 351 | $ | 43 |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
July 29, 2018 | July 30, 2017 | Change | July 29, 2018 | July 30, 2017 | Change | ||||||||||||||||||
(In millions) | |||||||||||||||||||||||
General and administrative | $ | 128 | $ | 106 | $ | 22 | $ | 362 | $ | 316 | $ | 46 |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
July 29, 2018 | July 30, 2017 | Change | July 29, 2018 | July 30, 2017 | Change | ||||||||||||||||||
(In millions) | |||||||||||||||||||||||
Interest expense | $ | 59 | $ | 59 | $ | — | $ | 174 | $ | 141 | $ | 33 | |||||||||||
Interest and other income, net | $ | 41 | $ | 14 | $ | 27 | $ | 90 | $ | 28 | $ | 62 |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
July 29, 2018 | July 30, 2017 | Change | July 29, 2018 | July 30, 2017 | Change | ||||||||||||||||||
(In millions, except percentages) | |||||||||||||||||||||||
Provision for income taxes | $ | 66 | $ | 53 | $ | 13 | $ | 1,259 | $ | 205 | $ | 1,054 | |||||||||||
Effective tax rate | 5.3 | % | 5.4 | % | (0.1) points | 34.1 | % | 7.7 | % | 26.4 points |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||
July 29, 2018 | July 30, 2017 | Change | July 29, 2018 | July 30, 2017 | Change | ||||||||||||||||||||||||
(In millions, except percentages and ratios) | |||||||||||||||||||||||||||||
Net sales | $ | 2,748 | $ | 2,532 | $ | 216 | 9 | % | $ | 8,594 | $ | 7,086 | $ | 1,508 | 21 | % | |||||||||||||
Operating income | $ | 930 | $ | 874 | $ | 56 | 6 | % | $ | 2,996 | $ | 2,372 | $ | 624 | 26 | % | |||||||||||||
Operating margin | 33.8 | % | 34.5 | % | (0.7) points | 34.9 | % | 33.5 | % | 1.4 points |
Three Months Ended | Nine Months Ended | ||||||||||
July 29, 2018 | July 30, 2017 | July 29, 2018 | July 30, 2017 | ||||||||
Foundry | 28 | % | 39 | % | 25 | % | 43 | % | |||
Dynamic random-access memory (DRAM) | 24 | % | 15 | % | 26 | % | 17 | % | |||
Flash memory | 36 | % | 38 | % | 37 | % | 32 | % | |||
Logic and other | 12 | % | 8 | % | 12 | % | 8 | % | |||
100 | % | 100 | % | 100 | % | 100 | % |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||
July 29, 2018 | July 30, 2017 | Change | July 29, 2018 | July 30, 2017 | Change | ||||||||||||||||||||||||
(In millions, except percentages) | |||||||||||||||||||||||||||||
Korea | $ | 424 | 15% | $ | 997 | 39% | (57 | )% | $ | 2,494 | 29% | $ | 2,254 | 32% | 11 | % | |||||||||||||
Taiwan | $ | 459 | 17% | $ | 444 | 18% | 3 | % | $ | 1,511 | 18% | $ | 2,096 | 30% | (28 | )% | |||||||||||||
China | $ | 903 | 33% | $ | 454 | 18% | 99 | % | $ | 1,904 | 22% | $ | 1,118 | 16% | 70 | % |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||
July 29, 2018 | July 30, 2017 | Change | July 29, 2018 | July 30, 2017 | Change | ||||||||||||||||||||||||
(In millions, except percentages and ratios) | |||||||||||||||||||||||||||||
Net sales | $ | 954 | $ | 786 | $ | 168 | 21 | % | $ | 2,777 | $ | 2,186 | $ | 591 | 27 | % | |||||||||||||
Operating income | $ | 281 | $ | 213 | $ | 68 | 32 | % | $ | 813 | $ | 585 | $ | 228 | 39 | % | |||||||||||||
Operating margin | 29.5 | % | 27.1 | % | 2.4 points | 29.3 | % | 26.8 | % | 2.5 points |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||
July 29, 2018 | July 30, 2017 | Change | July 29, 2018 | July 30, 2017 | Change | ||||||||||||||||||||||||
(In millions, except percentages and ratios) | |||||||||||||||||||||||||||||
Net sales | $ | 741 | $ | 410 | $ | 331 | 81 | % | $ | 1,796 | $ | 1,223 | $ | 573 | 47 | % | |||||||||||||
Operating income | $ | 214 | $ | 91 | $ | 123 | 135 | % | $ | 477 | $ | 290 | $ | 187 | 64 | % | |||||||||||||
Operating margin | 28.9 | % | 22.2 | % | 6.7 points | 26.6 | % | 23.7 | % | 2.9 points |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||
July 29, 2018 | July 30, 2017 | Change | July 29, 2018 | July 30, 2017 | Change | ||||||||||||||||||||||
(In millions, except percentages) | |||||||||||||||||||||||||||
China | $ | 635 | 86% | $ | 198 | 48% | 221% | $ | 1,342 | 75% | $ | 700 | 57% | 92% | |||||||||||||
Korea | $ | 29 | 4% | $ | 168 | 41% | (83)% | $ | 196 | 11% | $ | 376 | 31% | (48)% |
July 29, 2018 | October 29, 2017 | ||||||
(In millions) | |||||||
Cash and cash equivalents | $ | 3,374 | $ | 5,010 | |||
Short-term investments | 610 | 2,266 | |||||
Long-term investments | 1,613 | 1,143 | |||||
Total cash, cash-equivalents and investments | $ | 5,597 | $ | 8,419 |
Nine Months Ended | |||||||
July 29, 2018 | July 30, 2017 | ||||||
(In millions) | |||||||
Cash provided by operating activities | $ | 2,710 | $ | 3,080 | |||
Cash provided by (used in) investing activities | $ | 700 | $ | (1,997 | ) | ||
Cash provided by (used in) financing activities | $ | (5,046 | ) | $ | 789 |
Three Months Ended | Nine Months Ended | |||||||||||||||
(In millions, except percentages) | July 29, 2018 | July 30, 2017 | July 29, 2018 | July 30, 2017 | ||||||||||||
Non-GAAP Adjusted Gross Profit | ||||||||||||||||
Reported gross profit - GAAP basis | $ | 2,027 | $ | 1,700 | $ | 6,037 | $ | 4,745 | ||||||||
Certain items associated with acquisitions1 | 45 | 44 | 134 | 127 | ||||||||||||
Non-GAAP adjusted gross profit | $ | 2,072 | $ | 1,744 | $ | 6,171 | $ | 4,872 | ||||||||
Non-GAAP adjusted gross margin | 46.4 | % | 46.6 | % | 46.6 | % | 46.1 | % | ||||||||
Non-GAAP Adjusted Operating Income | ||||||||||||||||
Reported operating income - GAAP basis | $ | 1,257 | $ | 1,023 | $ | 3,780 | $ | 2,770 | ||||||||
Certain items associated with acquisitions1 | 49 | 49 | 147 | 142 | ||||||||||||
Acquisition integration costs | — | 1 | 2 | 3 | ||||||||||||
Other gains, losses or charges, net | — | — | — | (3 | ) | |||||||||||
Non-GAAP adjusted operating income | $ | 1,306 | $ | 1,073 | $ | 3,929 | $ | 2,912 | ||||||||
Non-GAAP adjusted operating margin | 29.2 | % | 28.7 | % | 29.7 | % | 27.6 | % | ||||||||
Non-GAAP Adjusted Net Income | ||||||||||||||||
Reported net income - GAAP basis | $ | 1,173 | $ | 925 | $ | 2,437 | $ | 2,452 | ||||||||
Certain items associated with acquisitions1 | 49 | 49 | 147 | 142 | ||||||||||||
Acquisition integration costs | — | 1 | 2 | 3 | ||||||||||||
Impairment (gain on sale) of strategic investments, net | (14 | ) | (1 | ) | (10 | ) | 4 | |||||||||
Loss on early extinguishment of debt | — | 5 | — | 5 | ||||||||||||
Other gains, losses or charges, net | — | — | — | (3 | ) | |||||||||||
Income tax effect of share-based compensation2 | 13 | — | (13 | ) | — | |||||||||||
Income tax effect of changes in applicable U.S. tax laws3 | 12 | — | 1,089 | — | ||||||||||||
Resolution of prior years’ income tax filings and other tax items | (29 | ) | (46 | ) | (32 | ) | (68 | ) | ||||||||
Income tax effect of non-GAAP adjustments4 | 1 | (6 | ) | (7 | ) | (15 | ) | |||||||||
Non-GAAP adjusted net income | $ | 1,205 | $ | 927 | $ | 3,613 | $ | 2,520 |
1 | These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets. |
2 | Applied adopted the accounting standard related to share-based compensation (ASU 2016-09) in the first quarter of fiscal 2018, which resulted in $51 million tax benefit on a GAAP basis for the nine months ended July 29, 2018; this benefit is being recognized ratably over the fiscal year on a non-GAAP basis. |
3 | Charges to income tax provision related to a one-time transition tax and a decrease in U.S. deferred tax assets as a result of the recent U.S. tax legislation. |
4 | Adjustment to provision for income taxes related to non-GAAP adjustments reflected in income before income taxes. |
Three Months Ended | Nine Months Ended | |||||||||||||||
(In millions, except per share amounts) | July 29, 2018 | July 30, 2017 | July 29, 2018 | July 30, 2017 | ||||||||||||
Non-GAAP Adjusted Earnings Per Diluted Share | ||||||||||||||||
Reported earnings per diluted share - GAAP basis | $ | 1.17 | $ | 0.85 | $ | 2.35 | $ | 2.26 | ||||||||
Certain items associated with acquisitions | 0.05 | 0.04 | 0.13 | 0.12 | ||||||||||||
Impairment (gain on sale) of strategic investments, net | (0.01 | ) | — | (0.01 | ) | — | ||||||||||
Income tax effect of share-based compensation | 0.01 | — | (0.01 | ) | — | |||||||||||
Income tax effect of changes in applicable U.S. tax laws | 0.01 | — | 1.05 | — | ||||||||||||
Resolution of prior years’ income tax filings and other tax items | (0.03 | ) | (0.04 | ) | (0.03 | ) | (0.06 | ) | ||||||||
Other gains, losses or charges, net | — | 0.01 | — | — | ||||||||||||
Non-GAAP adjusted earnings per diluted share | $ | 1.20 | $ | 0.86 | $ | 3.48 | $ | 2.32 | ||||||||
Weighted average number of diluted shares | 1,005 | 1,083 | 1,039 | 1,087 |
Three Months Ended | Nine Months Ended | |||||||||||||||
(In millions, except percentages) | July 29, 2018 | July 30, 2017 | July 29, 2018 | July 30, 2017 | ||||||||||||
Semiconductor Systems Non-GAAP Adjusted Operating Income | ||||||||||||||||
Reported operating income - GAAP basis | $ | 930 | $ | 874 | $ | 2,996 | $ | 2,372 | ||||||||
Certain items associated with acquisitions1 | 45 | 46 | 137 | 138 | ||||||||||||
Non-GAAP adjusted operating income | $ | 975 | $ | 920 | $ | 3,133 | $ | 2,510 | ||||||||
Non-GAAP adjusted operating margin | 35.5 | % | 36.3 | % | 36.5 | % | 35.4 | % | ||||||||
AGS Non-GAAP Adjusted Operating Income | ||||||||||||||||
Reported operating income - GAAP basis | $ | 281 | $ | 213 | $ | 813 | $ | 585 | ||||||||
Certain items associated with acquisitions1 | — | 1 | — | 1 | ||||||||||||
Acquisition integration costs | — | 1 | 1 | 3 | ||||||||||||
Non-GAAP adjusted operating income | $ | 281 | $ | 215 | $ | 814 | $ | 589 | ||||||||
Non-GAAP adjusted operating margin | 29.5 | % | 27.4 | % | 29.3 | % | 26.9 | % | ||||||||
Display and Adjacent Markets Non-GAAP Adjusted Operating Income | ||||||||||||||||
Reported operating income - GAAP basis | $ | 214 | $ | 91 | $ | 477 | $ | 290 | ||||||||
Certain items associated with acquisitions1 | 4 | 2 | 10 | 2 | ||||||||||||
Acquisition integration costs | — | — | 1 | — | ||||||||||||
Non-GAAP adjusted operating income | $ | 218 | $ | 93 | $ | 488 | $ | 292 | ||||||||
Non-GAAP adjusted operating margin | 29.4 | % | 22.7 | % | 27.2 | % | 23.9 | % |
1 | These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets. |
Item 3: | Quantitative and Qualitative Disclosures About Market Risk |
Item 1A: | Risk Factors |
• | uncertain global economic and political business conditions and demands; |
• | political and social attitudes, laws, rules, regulations and policies within countries that favor domestic companies over non-domestic companies, including customer- or government-supported efforts to promote the development and growth of local competitors; |
• | global trade issues and changes in and uncertainties with respect to trade policies, including the ability to obtain required import and export licenses, trade sanctions, tariffs, and international trade disputes; |
• | customer- or government-supported efforts to influence Applied to conduct more of its operations and sourcing in a particular country, such as Korea and China; |
• | variations among, and changes in, local, regional, national or international laws and regulations, including contract, intellectual property, cybersecurity, data privacy, labor, tax, and import/export laws, and the interpretation and application of such laws and regulations; |
• | ineffective or inadequate legal protection of intellectual property rights in certain countries; |
• | positions taken by governmental agencies regarding possible national commercial and/or security issues posed by international business operations; |
• | fluctuating raw material, commodity, energy and shipping costs or shipping delays; |
• | geographically diverse operations and projects, and our ability to maintain appropriate business processes, procedures and internal controls, and comply with environmental, health and safety, anti-corruption and other regulatory requirements; |
• | supply chain interruptions, and service interruptions from utilities, transportation, data hosting or telecommunications providers; |
• | a diverse workforce with different experience levels, languages, cultures, customs, business practices and worker expectations, and differing employment practices and labor issues; |
• | variations in the ability to develop relationships with local customers, suppliers and governments; |
• | fluctuations in interest rates and currency exchange rates, including the relative strength or weakness of the U.S. dollar against the Japanese yen, euro, Taiwanese dollar, Israeli shekel, Chinese yuan or Singapore dollar; |
• | the need to provide sufficient levels of technical support in different locations around the world; |
• | performance of third party providers of outsourced functions, including certain engineering, software development, manufacturing, information technology and other activities; |
• | political instability, natural disasters, pandemics, social unrest, terrorism or acts of war in locations where Applied has operations, suppliers or sales, or that may influence the value chain of the industries that Applied serves; |
• | challenges in hiring and integration of an increasing number of workers in new countries; |
• | the increasing need for a mobile workforce to work in or travel to different regions; and |
• | uncertainties with respect to economic growth rates in various countries, including for the manufacture and sale of semiconductors and displays in the developing economies of certain countries. |
• | the nature, timing and degree of visibility of changes in end demand for electronic products, including those related to fluctuations in consumer buying patterns tied to seasonality or the introduction of new products, and the effects of these changes on customers’ businesses and on demand for Applied’s products; |
• | increasing capital requirements for building and operating new fabrication plants and customers’ ability to raise the necessary capital; |
• | trade, regulatory or tax policies impacting the timing of customers’ investment in new or expanded fabrication plants; |
• | differences in growth rates among the semiconductor, display and other industries in which Applied operates; |
• | the increasing importance of establishing, improving and maintaining strong relationships with customers; |
• | the increasing cost and complexity for customers to move from product design to volume manufacturing, which may slow the adoption rate of new manufacturing technology; |
• | the need for customers to continually reduce the total cost of manufacturing system ownership; |
• | the heightened importance to customers of system reliability and productivity and the effect on demand for fabrication systems as a result of their increasing productivity, device yield and reliability; |
• | manufacturers’ ability to reconfigure and re-use fabrication systems which can reduce demand for new equipment; |
• | the increasing importance of, and difficulties in, developing products with sufficient differentiation to influence customers’ purchasing decisions; |
• | requirements for shorter cycle times for the development, manufacture and installation of manufacturing equipment; |
• | price and performance trends for semiconductor devices and displays, and the corresponding effect on demand for such products; |
• | the increasing importance of the availability of spare parts to maximize the time that customers’ systems are available for production; |
• | the increasing role for and complexity of software in Applied products; and |
• | the increasing focus on reducing energy usage and improving the environmental impact and sustainability associated with manufacturing operations. |
• | the increasing frequency and complexity of technology transitions and inflections, and Applied’s ability to timely and effectively anticipate and adapt to these changes; |
• | the increasing cost of research and development due to many factors, including shrinking geometries, the use of new materials, new and more complex device structures, more applications and process steps, increasing chip design costs, and the increasing cost and complexity of integrated manufacturing processes; |
• | the need to reduce product development time, despite the increasing difficulty of technical challenges; |
• | the growing number of types and varieties of semiconductors and number of applications across multiple substrate sizes; |
• | the increasing cost and complexity for semiconductor manufacturers to move more technically advanced capability and smaller geometries to volume manufacturing, and the resulting impact on the rates of technology transition and investment in capital equipment; |
• | challenges in generating organic growth given semiconductor manufacturers’ levels of capital expenditures and the allocation of capital investment to market segments that Applied does not serve, such as lithography, or segments where Applied’s products have lower relative market presence; |
• | the importance of increasing market positions in segments with growing demand; |
• | semiconductor manufacturer’s ability to reconfigure and re-use equipment, and the resulting effect on their need to purchase new equipment and services; |
• | shorter cycle times between order placements by customers and product shipment require greater reliance on forecasting of customer investment, which may lead to inventory write-offs and manufacturing inefficiencies that decrease gross margin; |
• | competitive factors that make it difficult to enhance position, including challenges in securing development-tool-of-record (DTOR) and production-tool-of-record (PTOR) positions with customers; |
• | consolidation in the semiconductor industry, including among semiconductor manufacturers and among manufacturing equipment suppliers; |
• | shifts in sourcing strategies by computer and electronics companies that impact the equipment requirements of Applied’s foundry customers; |
• | the concentration of new wafer starts in Korea and Taiwan, where Applied’s service penetration and service-revenue-per-wafer-start have been lower than in other regions; |
• | investment in semiconductor manufacturing capabilities in China, which may be affected by changes in economic conditions and governmental policies in China; and |
• | the increasing fragmentation of semiconductor markets, leading certain markets to become too small to support the cost of a new fabrication plant, while others require less technologically advanced products. |
• | the importance of new types of display technologies, such as organic light-emitting diode (OLED), low temperature polysilicon (LTPS), flexible displays and metal oxide, and new touch panel films; |
• | the increasing cost of research and development, and complexity of technology transitions and inflections, and Applied’s ability to timely and effectively anticipate and adapt to these changes; |
• | the timing and extent of an expansion of manufacturing facilities in China, which may be affected by changes in economic conditions and governmental policies in China; |
• | the importance of increasing market positions in products and technologies with growing demand; |
• | the rate of transition to larger substrate sizes for TVs and to new display technologies for TVs and mobile applications, and the resulting effect on capital intensity in the industry and on Applied’s product differentiation, gross margin and return on investment; and |
• | the variability in demand for display manufacturing equipment, concentration of display manufacturer customers and their ability to successfully commercialize new products and technologies, and uncertainty with respect to future display technology end-use applications and growth drivers. |
• | identify and address technology inflections, market changes, new applications, customer requirements and end-use demand; |
• | develop new products and disruptive technologies, improve and develop new applications for existing products, and adapt products for use by customers in different applications and markets with varying technical requirements; |
• | differentiate its products from those of competitors, meet customers’ performance specifications, appropriately price products, and achieve market acceptance; |
• | maintain operating flexibility to enable responses to changing markets, applications, customers and customer requirements; |
• | enhance its worldwide operations across its businesses to reduce cycle time, enable continuous quality improvement, reduce costs, and enhance design for manufacturability and serviceability; |
• | focus on product development and sales and marketing strategies that address customers’ high value problems and strengthen customer relationships; |
• | effectively allocate resources between its existing products and markets, the development of new products, and expanding into new and adjacent markets; |
• | improve the productivity of capital invested in R&D activities; |
• | accurately forecast demand, work with suppliers and meet production schedules for its products; |
• | improve its manufacturing processes and achieve cost efficiencies across product offerings; |
• | adapt to changes in value offered by companies in different parts of the supply chain; |
• | qualify products for evaluation and volume manufacturing with its customers; and |
• | implement changes in its design engineering methodology to reduce material costs and cycle time, increase commonality of platforms and types of parts used in different systems, and improve product life cycle management. |
• | diversion of management’s attention and disruption of ongoing businesses; |
• | contractual restrictions on the conduct of Applied’s business during the pendency of a proposed transaction; |
• | inability to complete proposed transactions due to the failure to obtain regulatory or other approvals, litigation or other disputes, and any ensuing obligation to pay a termination fee; |
• | the failure to realize expected returns from acquired businesses; |
• | requirements imposed by government regulators in connection with their review of a transaction, which may include, among other things, divestitures and restrictions on the conduct of Applied’s existing business or the acquired business; |
• | ineffective integration of operations, systems, technologies, products or employees, which can impact the ability to realize anticipated synergies or other benefits; |
• | failure to commercialize technologies from acquired businesses or developed through strategic investments; |
• | dependence on unfamiliar supply chains or relatively small supply partners; |
• | inability to capitalize on characteristics of new markets that may be significantly different from Applied’s existing markets and where competitors may have stronger market positions and customer relationships; |
• | failure to retain and motivate key employees of acquired businesses; |
• | the potential impact of the announcement or consummation of a proposed transaction on relationships with third parties; |
• | potential changes in Applied’s credit rating, which could adversely impact the Company’s access to and cost of capital; |
• | reductions in cash balances or increases in debt obligations to finance activities associated with a transaction, which reduce the availability of cash flow for general corporate or other purposes, including share repurchases and dividends; |
• | exposure to new operational risks, rules, regulations, worker expectations, customs and practices to the extent acquired businesses are located in regions where Applied has not historically conducted business; |
• | challenges associated with managing new, more diverse and more widespread operations, projects and people; |
• | inability to obtain and protect intellectual property rights in key technologies; |
• | inadequacy or ineffectiveness of an acquired company’s internal financial controls, disclosure controls and procedures, cybersecurity, privacy policies and procedures, or environmental, health and safety, anti-corruption, human resource, or other policies or practices; |
• | impairment of acquired intangible assets and goodwill as a result of changing business conditions, technological advancements or worse-than-expected performance of the segment; |
• | the risk of litigation or claims associated with a proposed or completed transaction; |
• | unknown, underestimated or undisclosed commitments or liabilities; and |
• | the inappropriate scale of acquired entities’ critical resources or facilities for business needs. |
• | the need to devote additional resources to develop new products for, and operate in, new markets; |
• | the need to develop new sales and technical marketing strategies, cultivate relationships with new customers and meet different customer service requirements; |
• | differing rates of profitability and growth among multiple businesses; |
• | Applied’s ability to anticipate demand, capitalize on opportunities, and avoid or minimize risks; |
• | the complexity of managing multiple businesses with variations in production planning, execution, supply chain management and logistics; |
• | the adoption of new business models, business processes and systems; |
• | the complexity of entering into and effectively managing strategic alliances or partnering opportunities; |
• | new materials, processes and technologies; |
• | the need to attract, motivate and retain employees with skills and expertise in these new areas; |
• | new and more diverse customers and suppliers, including some with limited operating histories, uncertain or limited funding, evolving business models or locations in regions where Applied does not have, or has limited, operations; |
• | new or different competitors with potentially more financial or other resources, industry experience and established customer relationships; |
• | entry into new industries and countries, with differing levels of government involvement, laws and regulations, and business, employment and safety practices; |
• | third parties’ intellectual property rights; and |
• | the need to comply with, or work to establish, industry standards and practices. |
• | the failure or inability to accurately forecast demand and obtain sufficient quantities of quality parts on a cost-effective basis; |
• | volatility in the availability and cost of materials; |
• | difficulties or delays in obtaining required import or export approvals; |
• | shipment delays due to transportation interruptions or capacity constraints; |
• | information technology or infrastructure failures, including those of a third party supplier or service provider; and |
• | natural disasters or other events beyond Applied’s control (such as earthquakes, floods or storms, regional economic downturns, pandemics, social unrest, political instability, terrorism, or acts of war), particularly where it conducts manufacturing. |
Period | Total Number of Shares Purchased | Average Price Paid per Share | Aggregate Price Paid | Total Number of Shares Purchased as Part of Publicly Announced Program* | Maximum Dollar Value of Shares That May Yet be Purchased Under the Program* | ||||||||||||
(In millions, except per share amounts) | |||||||||||||||||
Month #1 | |||||||||||||||||
(April 30, 2018 to May 27, 2018) | 10.7 | $ | 51.62 | $ | 554 | 10.7 | $ | 5,774 | |||||||||
Month #2 | |||||||||||||||||
(May 28, 2018 to June 24, 2018) | 5.2 | $ | 50.09 | 257 | 5.2 | $ | 5,517 | ||||||||||
Month #3 | |||||||||||||||||
(June 25, 2018 to July 29, 2018) | 9.5 | $ | 46.28 | 439 | 9.5 | $ | 5,078 | ||||||||||
Total | 25.4 | $ | 49.31 | $ | 1,250 | 25.4 |
* | In September 2017, the Board of Directors approved a common stock repurchase program authorizing up to $3.0 billion in repurchases. In February 2018, the Board of Directors approved a new common stock repurchase program authorizing up to an additional $6.0 billion in repurchases. |
Incorporated by Reference | |||||||||
Exhibit No. | Description | Form | File No. | Exhibit No. | Filing Date | ||||
101.INS | XBRL Instance Document‡ | ||||||||
101.SCH | XBRL Taxonomy Extension Schema Document‡ | ||||||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document‡ | ||||||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document‡ | ||||||||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document‡ | ||||||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document‡ |
† | Filed herewith. |
‡ | Furnished herewith. |
APPLIED MATERIALS, INC. | |
By: | /s/ DANIEL J. DURN |
Daniel J. Durn Senior Vice President, Chief Financial Officer (Principal Financial Officer) |
By: | /s/ CHARLES W. READ |
Charles W. Read Corporate Vice President, Corporate Controller and Chief Accounting Officer (Principal Accounting Officer) |
Vesting of Restricted Stock Units: | Please refer to the UBS One Source website for the vesting schedule related to this grant of Restricted Stock Units (click on the specific grant under the tab labeled “Grants/Awards/Units.”).* |
/s/ GARY E. DICKERSON |
Gary E. Dickerson |
President, Chief Executive Officer |
/s/ DANIEL J. DURN |
Daniel J. Durn |
Senior Vice President, Chief Financial Officer |
/s/ GARY E. DICKERSON |
Gary E. Dickerson |
President, Chief Executive Officer |
/s/ DANIEL J. DURN |
Daniel J. Durn |
Senior Vice President, Chief Financial Officer |
Document and Entity Information |
9 Months Ended |
---|---|
Jul. 29, 2018
shares
| |
Document and Entity Information [Abstract] | |
Entity Registrant Name | APPLIED MATERIALS INC /DE |
Entity Central Index Key | 0000006951 |
Current Fiscal Year End Date | --10-28 |
Entity Filer Category | Large Accelerated Filer |
Document Type | 10-Q |
Document Period End Date | Jul. 29, 2018 |
Document Fiscal Year Focus | 2018 |
Document Fiscal Period Focus | Q3 |
Amendment Flag | false |
Entity Common Stock, Shares Outstanding | 982,990,521 |
Consolidated Condensed Statements of Operations - USD ($) shares in Millions, $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jul. 29, 2018 |
Jul. 30, 2017 |
Jul. 29, 2018 |
Jul. 30, 2017 |
|
Income Statement [Abstract] | ||||
Net sales | $ 4,468 | $ 3,744 | $ 13,239 | $ 10,568 |
Cost of products sold | 2,441 | 2,044 | 7,202 | 5,823 |
Gross profit | 2,027 | 1,700 | 6,037 | 4,745 |
Operating expenses: | ||||
Research, development and engineering | 504 | 454 | 1,501 | 1,308 |
Marketing and selling | 138 | 117 | 394 | 351 |
General and administrative | 128 | 106 | 362 | 316 |
Total operating expenses | 770 | 677 | 2,257 | 1,975 |
Income from operations | 1,257 | 1,023 | 3,780 | 2,770 |
Interest expense | 59 | 59 | 174 | 141 |
Interest and other income, net | 41 | 14 | 90 | 28 |
Income before income taxes | 1,239 | 978 | 3,696 | 2,657 |
Provision for income taxes | 66 | 53 | 1,259 | 205 |
Net income | $ 1,173 | $ 925 | $ 2,437 | $ 2,452 |
Earnings per share: | ||||
Basic earnings per share (in dollars per share) | $ 1.18 | $ 0.86 | $ 2.37 | $ 2.28 |
Diluted earnings per share (in dollars per share) | $ 1.17 | $ 0.85 | $ 2.35 | $ 2.26 |
Weighted average number of shares: | ||||
Basic (in shares) | 994 | 1,071 | 1,026 | 1,076 |
Diluted (in shares) | 1,005 | 1,083 | 1,039 | 1,087 |
Consolidated Condensed Statements of Comprehensive Income - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jul. 29, 2018 |
Jul. 30, 2017 |
Jul. 29, 2018 |
Jul. 30, 2017 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 1,173 | $ 925 | $ 2,437 | $ 2,452 |
Other comprehensive income (loss), net of tax: | ||||
Change in unrealized net gain on investments | (18) | 10 | (19) | 25 |
Change in unrealized net loss on derivative instruments | 16 | 1 | 5 | 1 |
Change in defined and postretirement benefit plans | 0 | (2) | (2) | (12) |
Other comprehensive income (loss), net of tax | (2) | 9 | (16) | 14 |
Comprehensive income | $ 1,171 | $ 934 | $ 2,421 | $ 2,466 |
Consolidated Condensed Statements of Stockholders' Equity (Parenthetical) $ in Millions |
9 Months Ended |
---|---|
Jul. 30, 2017
USD ($)
| |
Statement of Stockholders' Equity [Abstract] | |
Tax benefit included in issuance under stock plans | $ 51 |
Consolidated Condensed Statements of Cash Flows - USD ($) $ in Millions |
9 Months Ended | |
---|---|---|
Jul. 29, 2018 |
Jul. 30, 2017 |
|
Cash flows from operating activities: | ||
Net income | $ 2,437 | $ 2,452 |
Adjustments required to reconcile net income to cash provided by operating activities: | ||
Depreciation and amortization | 337 | 302 |
Share-based compensation | 193 | 162 |
Deferred income taxes | 112 | 6 |
Other | 4 | 15 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (543) | 26 |
Inventories | (751) | (825) |
Other current and non-current assets | 2 | (114) |
Accounts payable and accrued expenses | 214 | 272 |
Customer deposits and deferred revenue | (84) | 740 |
Income taxes payable | 764 | 13 |
Other liabilities | 25 | 31 |
Cash provided by operating activities | 2,710 | 3,080 |
Cash flows from investing activities: | ||
Capital expenditures | (457) | (221) |
Cash paid for acquisitions, net of cash acquired | (5) | (56) |
Proceeds from sales and maturities of investments | 2,823 | 1,822 |
Purchases of investments | (1,661) | (3,542) |
Cash provided by (used in) investing activities | 700 | (1,997) |
Cash flows from financing activities: | ||
Debt borrowings, net of issuance costs | 0 | 2,176 |
Debt repayments | 0 | (205) |
Proceeds from common stock issuances | 56 | 47 |
Common stock repurchases | (4,532) | (787) |
Tax withholding payments for vested equity awards | (160) | (119) |
Payments of dividends to stockholders | (410) | (323) |
Cash provided by (used in) financing activities | (5,046) | 789 |
Increase (decrease) in cash and cash equivalents | (1,636) | 1,872 |
Cash and cash equivalents — beginning of period | 5,010 | 3,406 |
Cash and cash equivalents — end of period | 3,374 | 5,278 |
Supplemental cash flow information: | ||
Cash payments for income taxes | 281 | 168 |
Cash refunds from income taxes | 51 | 17 |
Cash payments for interest | $ 143 | $ 110 |
Basis of Presentation |
9 Months Ended | ||||
---|---|---|---|---|---|
Jul. 29, 2018 | |||||
Accounting Policies [Abstract] | |||||
Basis of Presentation | Basis of Presentation Basis of Presentation In the opinion of management, the unaudited interim consolidated condensed financial statements of Applied Materials, Inc. and its subsidiaries (Applied or the Company) included herein have been prepared on a basis consistent with the October 29, 2017 audited consolidated financial statements and include all material adjustments, consisting of normal recurring adjustments, necessary to fairly present the information set forth therein. These unaudited interim consolidated condensed financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in Applied’s Annual Report on Form 10-K for the fiscal year ended October 29, 2017 (2017 Form 10-K). Applied’s results of operations for the three and nine months ended July 29, 2018 are not necessarily indicative of future operating results. Applied’s fiscal year ends on the last Sunday in October of each year. Fiscal 2018 and 2017 each contain 52 weeks, and the first nine months of fiscal 2018 and 2017 each contained 39 weeks. Certain prior year amounts have been reclassified to conform to current year presentation. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ materially from those estimates. On an ongoing basis, Applied evaluates its estimates, including those related to accounts receivable and sales allowances, fair values of financial instruments, inventories, intangible assets and goodwill, useful lives of intangible assets and property and equipment, fair values of share-based awards, and income taxes, among others. Applied bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Revenue Recognition Applied recognizes revenue when all four revenue recognition criteria have been met: persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; seller’s price to buyer is fixed or determinable; and collectability is probable. Applied’s shipping terms are customarily FOB Applied shipping point or equivalent terms. Applied’s revenue recognition policy generally results in revenue recognition at the following points: (1) for all transactions where legal title passes to the customer upon shipment or delivery, Applied recognizes revenue upon passage of title for all products that have been demonstrated to meet product specifications prior to shipment; the portion of revenue associated with certain installation-related tasks is deferred, and that revenue is recognized upon completion of the installation-related tasks; (2) for products that have not been demonstrated to meet product specifications prior to shipment, revenue is recognized at customer technical acceptance; (3) for transactions where legal title does not pass at shipment or delivery, revenue is recognized when legal title passes to the customer, which is generally at customer technical acceptance; and (4) for arrangements containing multiple elements, the revenue relating to the undelivered elements is deferred using the relative selling price method utilizing estimated sales prices until delivery of the deferred elements. Applied limits the amount of revenue recognition for delivered elements to the amount that is not contingent on the future delivery of products or services, future performance obligations or subject to customer-specified return or adjustment. In cases where Applied has sold products that have been demonstrated to meet product specifications prior to shipment, Applied believes that at the time of delivery, it has an enforceable claim to amounts recognized as revenue. Spare parts revenue is generally recognized upon shipment, and services revenue is generally recognized over the period that the services are provided. When a sales arrangement contains multiple elements, such as hardware and services and/or software products, Applied allocates revenue to each element based on a selling price hierarchy. The selling price for a deliverable is based on its vendor specific objective evidence (VSOE) if available, third party evidence (TPE) if VSOE is not available, or estimated selling price (ESP) if neither VSOE nor TPE is available. Applied generally utilizes the ESP due to the nature of its products. In multiple element arrangements where more-than-incidental software deliverables are included, revenue is allocated to each separate unit of accounting for each of the non-software deliverables, and to the software deliverables as a group, using the relative selling prices of each of the deliverables in the arrangement based on the aforementioned selling price hierarchy. If the arrangement contains more than one software deliverable, the arrangement consideration allocated to the software deliverables as a group is then allocated to each software deliverable using the guidance for recognizing software revenue. Recent Accounting Pronouncements Accounting Standards Adopted Inventory Measurement. In July 2015, the Financial Accounting Standard Board (FASB) issued authoritative guidance that requires inventory to be measured at the lower of cost and net realizable value instead of at lower of cost or market. This guidance does not apply to inventory that is measured using last-in, first out (LIFO) or the retail inventory method but applies to all other inventory including those measured using first-in, first-out (FIFO) or the average cost method. Applied adopted this authoritative guidance in the first quarter of fiscal 2018 prospectively to the measurement of inventory after the effective date. The adoption of this guidance did not have a material impact on Applied’s consolidated financial statements. Share-Based Compensation. In March 2016, the FASB issued authoritative guidance that simplifies several aspects of the accounting for share-based payment transactions, including forfeitures, income tax, and classification on the statement of cash flows. Applied adopted this guidance in the first quarter of fiscal 2018. Upon adoption, Applied elected to continue to estimate forfeitures expected to occur to determine the amount of compensation costs to be recognized in each period. The new standard also required recognition of excess tax benefits in the provision for income taxes rather than additional paid-in capital prospectively. In the nine months ended July 29, 2018, Applied recognized an excess tax benefit of $51 million in the Consolidated Condensed Statements of Operations. Additionally, Applied elected to apply the presentation requirements for cash flows related to excess tax benefits and employee taxes paid for withheld shares retrospectively. Adopting this guidance increased cash provided by operating activities by a net $170 million with a corresponding net decrease in cash provided by financing activities for the nine months ended July 30, 2017. Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. In February 2018, the FASB issued authoritative guidance that allows stranded tax effects of the Tax Cuts and Jobs Act (the “Tax Act”) to be reclassified from accumulated other comprehensive income to retained earnings. Applied adopted this guidance at the beginning of the third quarter of fiscal 2018. The stranded income tax effects related to the Tax Act were reclassified from accumulated other comprehensive income to retained earnings in the consolidated statements of stockholders' equity as of July 29, 2018. Share-Based Compensation: Modification Accounting. In May 2017, the FASB issued an update to clarify when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award changes as a result of the change in terms or conditions. Applied adopted this guidance in the third quarter of fiscal 2018 on a prospective basis. The impact of the adoption of this guidance will depend on whether the Company makes any future modifications of share-based payment awards. Accounting Standards Not Yet Adopted Derivatives and Hedging. In August 2017, the FASB issued authoritative guidance that modifies the recognition and presentation of hedge accounting to better align an entity’s risk management strategies and financial reporting for hedging relationships. The authoritative guidance expands the application of hedge accounting for non-financial and financial risk components and eases certain hedge effectiveness assessment requirements. The authoritative guidance will be effective for Applied in the first quarter of fiscal 2020, with early adoption permitted. Applied is currently evaluating the effect of this new guidance on Applied’s consolidated financial statements. Receivables: Nonrefundable Fees and Other Costs. In March 2017, the FASB issued authoritative guidance that will shorten the amortization period for certain callable debt securities held at a premium to the earliest call date to more closely align with expectations incorporated in market pricing. This authoritative guidance will be effective for Applied in the first quarter of fiscal 2020 on a modified retrospective basis, with early adoption permitted. Applied is currently evaluating the impact of adopting this new accounting guidance on Applied’s consolidated financial statements. Retirement Benefits. In March 2017, the FASB issued authoritative guidance which requires companies to present the service cost component of net benefit cost in the same line items in which they report compensation cost. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. The authoritative guidance will be effective for Applied in the first quarter of fiscal 2019 on a retrospective basis, with early adoption permitted. The adoption of this guidance is only expected to result in reclassification of other components of net benefit costs outside of income from operations and is not expected to have a significant impact on Applied’s consolidated financial statements. Goodwill Impairment. In January 2017, the FASB issued authoritative guidance that simplifies the process required to test goodwill for impairment. The authoritative guidance will be effective for Applied in the first quarter of fiscal 2021, with early adoption permitted. The adoption of this guidance is not expected to have a significant impact on Applied’s consolidated financial statements. Business Combinations. In January 2017, the FASB issued authoritative guidance that clarifies the definition of a business to help companies evaluate whether acquisition or disposal transactions should be accounted for as asset groups or as businesses. The authoritative guidance will be effective for Applied in the first quarter of fiscal 2019 on a prospective basis, with early adoption permitted. The impact of the adoption depends on the facts and circumstances of future acquisition or disposal transactions. Income Taxes: Intra-Entity Asset Transfers. In October 2016, the FASB issued authoritative guidance that requires entities to recognize at the transaction date the income tax effects of intercompany asset transfers other than inventory. The authoritative guidance will be effective for Applied in the first quarter of fiscal 2019. Applied is currently evaluating the effect of this new guidance on Applied’s consolidated financial statements. Classification of Certain Cash Receipts and Cash Payments. In August 2016, a new authoritative guidance was issued which addresses classification of certain cash receipts and cash payments related to the statement of cash flows. The authoritative guidance will be effective for Applied in the first quarter of fiscal 2019. The adoption of this guidance is not expected to have a significant impact on Applied’s consolidated financial statements. Financial Instruments: Credit Losses. In June 2016, the FASB issued authoritative guidance that modifies the impairment model for certain financial assets by requiring use of an expected loss methodology, which will result in more timely recognition of credit losses. The authoritative guidance will be effective for Applied in the first quarter of fiscal 2021. Early adoption is permitted beginning in the first quarter of fiscal 2020. Applied is currently evaluating the effect of this new guidance on Applied’s consolidated financial statements. Leases. In February 2016, the FASB issued authoritative guidance for lease accounting, which requires lessees to recognize lease assets and liabilities on the balance sheet for certain lease arrangements that are classified as operating leases under the previous standard, and to provide for enhanced disclosures. The authoritative guidance will be effective for Applied in the first quarter of fiscal 2020 and should be applied using a modified retrospective approach. Early adoption is permitted. Applied is currently evaluating the effect of this new guidance on Applied’s consolidated financial statements. Financial Instruments: Classification and Measurement. In January 2016, the FASB issued authoritative guidance that requires equity investments that do not result in consolidation, and are not accounted for under the equity method, to be measured at fair value, and requires recognition of any changes in fair value in net income unless the investments qualify for a new practicability exception. For financial liabilities measured at fair value, the change in fair value caused by a change in instrument-specific credit risk will be required to be presented separately in other comprehensive income. The authoritative guidance will be effective for Applied in the first quarter of fiscal 2019. Early adoption is permitted only for the provisions related to the recognition of changes in fair value of financial liabilities caused by instrument-specific credit risk. Applied is currently evaluating the effect of this new guidance on Applied’s consolidated financial statements. Revenue Recognition. In May 2014, the FASB issued authoritative guidance that requires revenue recognition to depict the transfer of promised goods or services to a customer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services, and requires certain additional disclosures. This new standard will supersede most current revenue recognition guidance, including industry-specific guidance. Entities will have the option of using either a full retrospective or modified retrospective approach to adopting the guidance. In August 2015, the FASB issued an amendment to defer the effective date by one year and allow entities to early adopt no earlier than the original effective date. With this amendment, the guidance will be effective for Applied in the first quarter of fiscal 2019, which is the Company’s planned adoption date. Applied currently anticipates adopting this new guidance using the full retrospective approach, although this continues to be assessed as part of the overall evaluation. In fiscal 2016, Applied established a project steering committee and cross-functional implementation team that has identified potential differences that would result from applying the requirements of the new standard to Applied’s revenue contracts. In addition, the implementation team has identified and is now implementing changes to business processes, systems and controls to support recognition and disclosure under the new standard. While the Company’s evaluation of the impact of this new guidance is not complete, Applied currently expects that the new standard will have the following impact:
•Revenue related to the sale of services will generally continue to be recognized over time as the services are performed. •Disclosures related to revenue recognition, including contract balances and revenue disaggregation, will be expanded. Applied will continue to complete its evaluation of the effect of this new guidance on the Company’s financial position, results of operations and its ongoing financial reporting, and its preliminary assessments are subject to change. |
Earnings Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | 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.
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. |
Cash, Cash Equivalents and Investments |
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Cash, Cash Equivalents and Investments | Cash, Cash Equivalents and Investments Summary of Cash, Cash Equivalents and Investments The following tables summarize Applied’s cash, cash equivalents and investments by security type:
_________________________ * Includes agency debt securities guaranteed by Canada.
_________________________ * Includes agency debt securities guaranteed by non-U.S. governments, which consist of Canada and Germany. Maturities of Investments The following table summarizes the contractual maturities of Applied’s investments as of July 29, 2018:
_________________________ ** Securities with no single maturity date include publicly-traded and privately-held equity securities and asset-backed and mortgage-backed securities. Gains and Losses on Investments During the three and nine months ended July 29, 2018, gross realized gains on investments were $13 million and $14 million, respectively, and the gross realized losses on investments for these periods were not material. During the three and nine months ended July 30, 2017, gross realized gains and losses on investments were not material. As of July 29, 2018 and October 29, 2017, gross unrealized losses related to Applied’s investment portfolio were not material. Applied regularly reviews its investment portfolio to identify and evaluate investments that have indications of possible impairment. Factors considered in determining whether an unrealized loss is considered to be temporary, or other-than-temporary and therefore impaired, include: the length of time and extent to which fair value has been lower than the cost basis; the financial condition, credit quality and near-term prospects of the investee; and whether it is more likely than not that Applied will be required to sell the security prior to recovery. Generally, the contractual terms of investments in marketable securities do not permit settlement at prices less than the amortized cost of the investments. Applied determined that the gross unrealized losses on its marketable fixed-income securities as of July 29, 2018 and July 30, 2017 were temporary in nature and therefore it did not recognize any impairment of its marketable fixed-income securities during the three and nine months ended July 29, 2018 or July 30, 2017. Impairment charges on equity investments in privately-held companies during the three and nine months ended July 29, 2018 and July 30, 2017 were not material. These impairment charges are included in interest and other income, net in the Consolidated Condensed Statement of Operations. Unrealized gains and temporary losses on investments classified as available-for-sale are included within accumulated other comprehensive income (loss), net of any related tax effect. Upon realization, those amounts are reclassified from accumulated other comprehensive income (loss) to results of operations. |
Fair Value Measurements |
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Fair Value Measurements | Fair Value Measurements Applied’s financial assets are measured and recorded at fair value, except for equity investments in privately-held companies. These equity investments are generally accounted for under the cost method of accounting and are periodically assessed for other-than-temporary impairment when events or circumstances indicate that an other-than-temporary decline in value may have occurred. Applied’s nonfinancial assets, such as goodwill, intangible assets, and property, plant and equipment, are recorded at cost and are assessed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Fair Value Hierarchy Applied uses the following fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:
Applied’s investments consist primarily of debt securities that are classified as available-for-sale and recorded at their fair values. In determining the fair value of investments, Applied uses pricing information from pricing services that value securities based on quoted market prices and models that utilize observable market inputs. In the event a fair value estimate is unavailable from a pricing service, Applied generally obtains non-binding price quotes from brokers. Applied then reviews the information provided by the pricing services or brokers to determine the fair value of its short-term and long-term investments. In addition, to validate pricing information obtained from pricing services, Applied periodically performs supplemental analysis on a sample of securities. Applied reviews any significant unanticipated differences identified through this analysis to determine the appropriate fair value. Investments with remaining effective maturities of 12 months or less from the balance sheet date are classified as short-term investments. Investments with remaining effective maturities of more than 12 months from the balance sheet date are classified as long-term investments. As of July 29, 2018, substantially all of Applied’s available-for-sale, short-term and long-term investments were recognized at fair value that was determined based upon observable inputs. Assets Measured at Fair Value on a Recurring Basis Financial assets (excluding cash balances) measured at fair value on a recurring basis are summarized below:
There were no transfers between Level 1 and Level 2 fair value measurements during the three and nine months ended July 29, 2018 or July 30, 2017. Applied did not have any financial assets measured at fair value on a recurring basis within Level 3 fair value measurements as of July 29, 2018 or October 29, 2017. Assets and Liabilities Measured at Fair Value on a Non-recurring Basis Equity investments in privately-held companies are generally accounted for under the cost method of accounting and are periodically assessed for other-than-temporary impairment when an event or circumstance indicates that an other-than-temporary decline in value may have occurred. If Applied determines that an other-than-temporary impairment has occurred, the investment will be written down to its estimated fair value based on available information, such as pricing in recent rounds of financing, current cash positions, earnings and cash flow forecasts, recent operational performance and any other readily available market data. As of July 29, 2018, equity investments in privately-held companies totaled $82 million, of which $65 million of these investments were accounted for under the cost method of accounting and $17 million of investments had been measured at fair value on a non-recurring basis within Level 3 fair value measurements due to an other-than-temporary decline in value. As of October 29, 2017, equity investments in privately-held companies totaled $74 million, of which $65 million of these investments were accounted for under the cost method of accounting and $9 million of investments had been measured at fair value on a non-recurring basis within Level 3 fair value measurements due to an other-than-temporary decline in value. Impairment charges on equity investments in privately-held companies during the three and nine months ended July 29, 2018 and July 30, 2017 were not material. Other The carrying amounts of Applied’s financial instruments, including cash and cash equivalents, accounts receivable, notes payable - short term, and accounts payable and accrued expenses, approximate fair value due to their short maturities. As of July 29, 2018 the aggregate principal amount of long-term debt was $5.4 billion and the estimated fair value was $5.6 billion. As of October 29, 2017, the aggregate principal amount of long-term debt was $5.4 billion and the estimated fair value was $5.8 billion. The estimated fair value of long-term debt is determined by Level 2 inputs and is based primarily on quoted market prices for the same or similar issues. See Note 10 of the Notes to the Consolidated Condensed Financial Statements for further detail of existing debt. |
Derivative Instruments and Hedging Activities |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities | Derivative Instruments and Hedging Activities Derivative Financial Instruments Applied conducts business in a number of foreign countries, with certain transactions denominated in local currencies, such as the Japanese yen, euro, Israeli shekel and Taiwanese dollar. Applied uses derivative financial instruments, such as forward exchange contracts and currency option contracts, to hedge certain forecasted foreign currency denominated transactions expected to occur typically within the next 24 months. The purpose of Applied’s foreign currency management is to mitigate the effect of exchange rate fluctuations on certain foreign currency denominated revenues, costs and eventual cash flows. The terms of currency instruments used for hedging purposes are generally consistent with the timing of the transactions being hedged. During fiscal 2017, Applied entered into and settled interest rate lock agreements, with a total notional amount of $700 million to hedge against the variability of cash flows due to changes in the benchmark interest rate of fixed rate debt. These instruments were designated as cash flow hedges at inception and settled in conjunction with the issuance of debt in March 2017. The $14 million loss from the settlement of the interest rate lock agreement, which was included in accumulated other comprehensive loss (AOCI) in stockholders’ equity, is being amortized to interest expense over the term of the senior unsecured 10-year notes issued in March 2017. Applied does not use derivative financial instruments for trading or speculative purposes. Derivative instruments and hedging activities, including foreign currency exchange and interest rate contracts, are recognized on the balance sheet at fair value. Changes in the fair value of derivatives that do not qualify for hedge treatment, as well as the ineffective portion of any hedges, are recognized currently in earnings. All of Applied’s derivative financial instruments are recorded at their fair value in other current assets or in accounts payable and accrued expenses. Hedges related to anticipated transactions are designated and documented at the inception of the hedge as cash flow hedges and foreign exchange derivatives are typically entered into once per month. Cash flow hedges are evaluated for effectiveness quarterly. The effective portion of the gain or loss on these hedges is reported as a component of AOCI in stockholders’ equity and is reclassified into earnings when the hedged transaction affects earnings. The majority of the after-tax net income or loss related to foreign exchange derivative instruments included in AOCI as of July 29, 2018 is expected to be reclassified into earnings within 12 months. Changes in the fair value of currency forward exchange and option contracts due to changes in time value are excluded from the assessment of effectiveness. Both ineffective hedge amounts and hedge components excluded from the assessment of effectiveness are recognized in earnings. If the transaction being hedged is no longer probable to occur, or if a portion of any derivative is deemed to be ineffective, Applied promptly recognizes the gain or loss on the associated financial instrument in earnings. The amount recognized due to discontinuance of cash flow hedges that were probable not to occur by the end of the originally specified time period was not significant for the three and nine months ended July 29, 2018 and July 30, 2017. Additionally, forward exchange contracts are generally used to hedge certain foreign currency denominated assets or liabilities. These derivatives are typically entered into once per month and are not designated for hedge accounting treatment. Accordingly, changes in the fair value of these hedges are recorded in earnings to offset the changes in the fair value of the assets or liabilities being hedged. The fair values of foreign exchange derivative instruments as of July 29, 2018 and October 29, 2017 were not material. The effects of derivative instruments and hedging activities on the Consolidated Condensed Statements of Operations were as follows:
Credit Risk Contingent Features If Applied’s credit rating were to fall below investment grade, it would be in violation of credit risk contingent provisions of the derivative instruments discussed above, and certain counterparties to the derivative instruments could request immediate payment on derivative instruments in net liability positions. The aggregate fair value of all derivative instruments with credit-risk related contingent features that were in a net liability position was immaterial as of July 29, 2018. Entering into derivative contracts with banks exposes Applied to credit-related losses in the event of the banks’ nonperformance. However, Applied’s exposure is not considered significant. |
Accounts Receivable, Net |
9 Months Ended |
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Jul. 29, 2018 | |
Receivables [Abstract] | |
Accounts Receivable, Net | Accounts Receivable, Net Applied has agreements with various financial institutions to sell accounts receivable and discount promissory notes from selected customers. Applied sells its accounts receivable without recourse. Applied, from time to time, also discounts letters of credit issued by customers through various financial institutions. The discounting of letters of credit depends on many factors, including the willingness of financial institutions to discount the letters of credit and the cost of such arrangements. Applied sold $271 million and $1 billion of accounts receivable during the three and nine months ended July 29, 2018, respectively. Applied sold $211 million and $360 million of accounts receivable during the three and nine months ended July 30, 2017, respectively. Applied did not discount letters of credit issued by customers or discount promissory notes during the three and nine months ended July 29, 2018 and July 30, 2017. Financing charges on the sale of receivables and discounting of letters of credit are included in interest expense in the accompanying Consolidated Condensed Statements of Operations and were not material for all periods presented. Accounts receivable are presented net of allowance for doubtful accounts of $34 million as of July 29, 2018 and October 29, 2017. Applied sells its products principally to manufacturers within the semiconductor and display industries. While Applied believes that its allowance for doubtful accounts is adequate and represents its best estimate as of July 29, 2018, it continues to closely monitor customer liquidity and industry and economic conditions, which may result in changes to Applied’s estimates. |
Balance Sheet Detail |
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Balance Sheet Detail [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance Sheet Detail | Balance Sheet Detail
Included in finished goods inventory are $129 million as of July 29, 2018, and $331 million as of October 29, 2017, of newly-introduced systems at customer locations where the sales transaction did not meet Applied’s revenue recognition criteria as set forth in Note 1. Finished goods inventory includes $342 million and $281 million of evaluation inventory as of July 29, 2018 and October 29, 2017, respectively.
Applied typically receives deposits on future deliverables from customers in the Display and Adjacent Markets segment and, in certain instances, may also receive deposits from customers in the Applied Global Services segment.
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Business Combinations |
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Jul. 29, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations | Business Combinations During the first nine months of fiscal 2017, Applied completed two acquisitions to complement Applied's existing product offerings and to provide opportunities for future growth within Applied's Display and Adjacent Markets segment. Pro forma results of operations for these acquisitions were not presented because they were not material to Applied's consolidated results of operations. The acquired businesses were included in the results for the Display and Adjacent Markets segment. The following table represents the preliminary aggregated purchase price allocation for acquisitions completed in the nine months ended July 30, 2017:
Intangible assets are being amortized on a straight-line basis over an estimated weighted-average useful life of 3.5 years. Total transaction costs related to these acquisitions were not material and were expensed as incurred in general and administrative expenses in the Consolidated Condensed Statement of Operations. |
Goodwill, Purchased Technology and Other Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill, Purchased Technology and Other Intangible Assets | Goodwill, Purchased Technology and Other Intangible Assets Goodwill and Purchased Intangible Assets Applied’s methodology for allocating the purchase price relating to purchase acquisitions is determined through established and generally accepted valuation techniques. Goodwill is measured as the excess of the purchase price over the sum of the amounts assigned to tangible and identifiable intangible assets acquired less liabilities assumed. Applied assigns assets acquired (including goodwill) and liabilities assumed to one or more reporting units as of the date of acquisition. Typically, acquisitions relate to a single reporting unit and thus do not require the allocation of goodwill to multiple reporting units. If the products obtained in an acquisition are assigned to multiple reporting units, the goodwill is distributed to the respective reporting units as part of the purchase price allocation process. Goodwill and purchased intangible assets with indefinite useful lives are not amortized, but are reviewed for impairment annually during the fourth quarter of each fiscal year and whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. The process of evaluating the potential impairment of goodwill and intangible assets requires significant judgment, especially in emerging markets. Applied regularly monitors current business conditions and considers other factors including, but not limited to, adverse industry or economic trends, restructuring actions and lower projections of profitability that may impact future operating results. To test goodwill for impairment, Applied first performs a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If it is concluded that this is the case, Applied then performs the two-step goodwill impairment test. Otherwise, the two-step goodwill impairment test is not required. Under the two-step goodwill impairment test, Applied would in the first step compare the estimated fair value of each reporting unit to its carrying value. Applied determines the fair value of each of its reporting units based on a weighting of income and market approaches. If the carrying value of a reporting unit exceeds its fair value, Applied would then perform the second step of the impairment test in order to determine the implied fair value of the reporting unit’s goodwill. If Applied determines that the carrying value of a reporting unit’s goodwill exceeds its implied fair value, Applied would record an impairment charge equal to the difference. As of July 29, 2018, Applied’s reporting units include Semiconductor Product Group and Imaging and Process Control Group, which combine to form the Semiconductor Systems reporting segment, Applied Global Services, and Display and Adjacent Markets. The evaluation of goodwill and intangible assets for impairment requires the exercise of significant judgment. In the event of future changes in business conditions, Applied will be required to reassess and update its forecasts and estimates used in future impairment analyses. If the results of these future analyses are lower than current estimates, a material impairment charge may result at that time. Details of goodwill as of July 29, 2018 and October 29, 2017 were as follows:
A summary of Applied’s purchased technology and intangible assets is set forth below:
Finite-Lived Purchased Intangible Assets Applied amortizes purchased intangible assets with finite lives using the straight-line method over the estimated economic lives of the assets, ranging from 1 to 15 years. Applied evaluates long-lived assets for impairment whenever events or changes in circumstances indicate the carrying value of an asset group may not be recoverable. Applied assesses the fair value of the assets based on the amount of the undiscounted future cash flow that the assets are expected to generate and recognizes an impairment loss when estimated undiscounted future cash flow expected to result from the use of the asset, plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. When Applied identifies an impairment, Applied reduces the carrying value of the group of assets to comparable market values, when available and appropriate, or to its estimated fair value based on a discounted cash flow approach. Intangible assets, such as purchased technology, are generally recorded in connection with a business acquisition. The value assigned to intangible assets is usually based on estimates and judgments regarding expectations for the success and life cycle of products and technology acquired. Applied evaluates the useful lives of its intangible assets each reporting period to determine whether events and circumstances require revising the remaining period of amortization. In addition, Applied reviews intangible assets for impairment when events or changes in circumstances indicate their carrying value may not be recoverable. Management considers such indicators as significant differences in actual product acceptance from the estimates, changes in the competitive and economic environments, technological advances, and changes in cost structure. Details of finite-lived intangible assets were as follows:
Details of amortization expense by segment were as follows:
Amortization expense was charged to the following categories:
As of July 29, 2018, future estimated amortization expense is expected to be as follows:
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Borrowing Facilities and Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Borrowing Facilities and Debt | Borrowing Facilities and Debt Applied has credit facilities for unsecured borrowings in various currencies of up to $1.6 billion, of which $1.5 billion is comprised of a committed revolving credit agreement with a group of banks that is scheduled to expire in September 2021. This agreement provides for borrowings in United States dollars at interest rates keyed to one of various benchmark rates selected by Applied for each advance, plus a margin based on Applied’s public debt rating and includes financial and other covenants. Remaining credit facilities in the amount of approximately $72 million are with Japanese banks. Applied’s ability to borrow under these facilities is subject to bank approval at the time of the borrowing request, and any advances will be at rates indexed to the banks’ prime reference rate denominated in Japanese yen. No amounts were outstanding under any of these facilities as of both July 29, 2018 and October 29, 2017, and Applied has not utilized these credit facilities. In fiscal 2011, Applied established a short-term commercial paper program of up to $1.5 billion. As of July 29, 2018, Applied did not have any commercial paper outstanding. In March 2017, Applied issued senior unsecured notes in the aggregate principal amount of $2.2 billion and used a portion of the net proceeds to redeem the outstanding $200 million in principal amount of its 7.125% senior notes due in October 2017 at a redemption price of $205 million in May 2017. After adjusting for the carrying value of debt issuance costs and discounts, Applied recorded a $5 million loss on the prepayment of the $200 million debt, which is included in interest and other income, net in the Consolidated Condensed Statement of Operations for the third quarter of fiscal 2017. Debt outstanding as of July 29, 2018 and October 29, 2017 was as follows:
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Stockholders' Equity, Comprehensive Income and Share-Based Compensation |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity, Comprehensive Income and Share-Based Compensation | Stockholders’ Equity, Comprehensive Income and Share-Based Compensation Accumulated Other Comprehensive Income (Loss) Changes in the components of AOCI, net of tax, were as follows:
(a) - Represents the reclassification adjustment related to the early adoption of Accounting Standards Update (ASU) 2018-02 Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. See Note 1.
The tax effects on net income of amounts reclassified from AOCI for the three and nine months ended July 29, 2018 and July 30, 2017 were not material. Stock Repurchase Program In September 2017, the Board of Directors approved a common stock repurchase program authorizing up to $3.0 billion in repurchases. In February 2018, the Board of Directors approved a new common stock repurchase program authorizing up to an additional $6.0 billion in repurchases. As of July 29, 2018, $5.1 billion remained available for future stock repurchases under this repurchase program. The following table summarizes Applied’s stock repurchases for the three and nine months ended July 29, 2018 and July 30, 2017:
Applied records treasury stock purchases under the cost method using the first-in, first-out (FIFO) method. Upon reissuance of treasury stock, amounts in excess of the acquisition cost are credited to additional paid in capital. If Applied reissues treasury stock at an amount below its acquisition cost and additional paid in capital associated with prior treasury stock transactions is insufficient to cover the difference between the acquisition cost and the reissue price, this difference is recorded against retained earnings. Dividends In June 2018, February 2018 and December 2017, Applied’s Board of Directors declared quarterly cash dividends in the amount of $0.20, $0.20 and $0.10 per share, respectively. Dividends paid during the nine months ended July 29, 2018 and July 30, 2017 totaled $410 million and $323 million, respectively. Applied currently anticipates that cash dividends will continue to be paid on a quarterly basis, although the declaration of any future cash dividend is at the discretion of the Board of Directors and will depend on Applied’s financial condition, results of operations, capital requirements, business conditions and other factors, as well as a determination by the Board of Directors that cash dividends are in the best interests of Applied’s stockholders. Share-Based Compensation Applied has a stockholder-approved equity plan, the Employee Stock Incentive Plan, which permits grants to employees of share-based awards, including stock options, restricted stock, restricted stock units, performance shares and performance units. In addition, the plan provides for the automatic grant of restricted stock units to non-employee directors and permits the grant of share-based awards to non-employee directors and consultants. Share-based awards made under the plan may be subject to accelerated vesting under certain circumstances in the event of a change in control of Applied. Applied also has two Employee Stock Purchase Plans, one generally for United States employees and a second for employees of international subsidiaries (collectively, ESPP), which enable eligible employees to purchase Applied common stock. During the three and nine months ended July 29, 2018 and July 30, 2017, Applied recognized share-based compensation expense related to stock options, ESPP shares, restricted stock, restricted stock units, performance shares and performance units. The effect of share-based compensation on the results of operations was as follows:
The cost associated with share-based awards that are subject solely to time-based vesting requirements, less expected forfeitures, is recognized over the awards’ service period for the entire award on a straight-line basis. The cost associated with performance-based equity awards is recognized for each tranche over the service period, based on an assessment of the likelihood that the applicable performance goals will be achieved. As of July 29, 2018, Applied had $399 million in total unrecognized compensation expense, net of estimated forfeitures, related to grants of share-based awards and shares issued under Applied’s ESPP, which will be recognized over a weighted average period of 2.6 years. As of July 29, 2018, there were 81 million shares available for grants of share-based awards under the Employee Stock Incentive Plan, and an additional 19 million shares available for issuance under the ESPP. Restricted Stock Units, Restricted Stock, Performance Shares and Performance Units A summary of the changes in restricted stock units, restricted stock, performance shares and performance units outstanding under Applied’s equity compensation plans during the nine months ended July 29, 2018 is presented below:
As of July 29, 2018, 1 million additional performance-based awards could be earned based upon achievement of certain levels of specified performance goals. During the first quarter of fiscal 2018, certain executive officers were granted awards that are subject to the achievement of specified performance goals. These awards become eligible to vest only if performance goals are achieved and will vest only if the grantee remains employed by Applied through each applicable vesting date. Certain awards require the achievement of positive adjusted operating profit and vest ratably over three years. Other awards require the achievement of targeted levels of adjusted operating margin and wafer fabrication equipment market share, and the number of shares that may vest in full after three years ranges from 0% to 200% of the target amount. The fair value of these awards is estimated on the date of grant. If the goals are achieved, the awards will vest, provided that the grantee remains employed by Applied through each applicable vesting date. If the performance goals are not met as of the end of the performance period, no compensation expense is recognized and any previously recognized compensation expense is reversed. The expected cost is based on the awards that are probable to vest and is reflected over the service period and reduced for estimated forfeitures. Employee Stock Purchase Plans Under the ESPP, substantially all employees may purchase Applied common stock through payroll deductions at a price equal to 85 percent of the lower of the fair market value of Applied common stock at the beginning or end of each 6-month purchase period, subject to certain limits. Applied issued 1 million shares during the nine months ended July 29, 2018 and 2 million shares during the nine months ended July 30, 2017. Compensation expense is calculated using the fair value of the employees’ purchase rights under the Black-Scholes model. Underlying assumptions used in the model are outlined in the following table:
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Income Taxes |
9 Months Ended |
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Jul. 29, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes On December 22, 2017, the U.S. government enacted the Tax Cuts and Jobs Act. The Tax Act includes a reduction to the U.S. federal corporate tax rate from 35.0 percent to 21.0 percent and requires a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries payable over eight years. U.S. deferred tax assets and liabilities were subject to remeasurement due to the reduction of the U.S. federal corporate tax rate. Applied has a blended U.S. federal corporate tax rate of 23.4 percent for fiscal 2018 based on the number of days before and after the effective date of the Tax Act. The U.S. Securities and Exchange Commission issued Staff Accounting Bulletin No. 118 (SAB 118), which provides guidance on accounting for the income tax effects of the Tax Act. SAB 118 provides a measurement period for companies to complete this accounting. Pursuant to this guidance, provisional adjustments were recorded when reasonable estimates could be determined. No adjustments were recorded when reasonable estimates could not be determined. These provisional estimates will be revised as information becomes available and as guidance is issued by the Internal Revenue Service. The accounting for the income tax effects of the Tax Act will be completed during the measurement period, which will not extend beyond one year from the Tax Act enactment date. The transition tax is a tax on previously untaxed accumulated earnings and profits (“E&P”) of foreign subsidiaries. To determine the amount of the transition tax, the amount of post-1986 E&P of foreign subsidiaries, as well as the amount of foreign income taxes paid on such earnings, must be calculated. Additional information is being gathered to more precisely compute the transition tax. The Tax Act also includes provisions that do not affect Applied in fiscal 2018, including a provision designed to tax global intangible low-taxed income (“GILTI”). Due to the complexity of the GILTI tax rules, this provision and related tax accounting will continue to be evaluated. An accounting policy choice is allowed to either treat taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the “period cost method”) or factor such amounts into the measurement of deferred taxes (the “deferred method”). The calculation of the deferred balance with respect to the new GILTI tax provisions will depend, in part, on analyzing global income to determine whether future U.S. inclusions in taxable income are expected related to GILTI and, if so, what the impact is expected to be. An accounting policy choice has not yet been made. Applied’s effective tax rates for the third quarter of fiscal 2018 and 2017 were 5.3 percent and 5.4 percent, respectively. The third quarter of fiscal 2018 included tax benefits from the resolution of tax liabilities for uncertain tax positions, the lower U.S. federal corporate tax rate, and changes in the geographical composition of income. The third quarter of the prior fiscal year included tax benefits from the recognition of previously unrecognized foreign tax credits. Applied’s effective tax rates for the first nine months fiscal 2018 and 2017 were 34.1 percent and 7.7 percent, respectively. The first nine months of fiscal 2018 included tax expense of $1.1 billion for the transition tax and remeasurement of deferred tax assets partially offset by tax benefits from the lower U.S. federal corporate tax rate, changes in the geographical composition of income, adoption of authoritative guidance for share-based compensation, and the resolution of tax liabilities for uncertain tax positions. The first nine months of the prior fiscal year included tax benefits from the recognition of previously unrecognized foreign tax credits. |
Warranty, Guarantees and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Warranty, Guarantees and Contingencies | Warranty, Guarantees and Contingencies Warranty Changes in the warranty reserves are presented below:
Applied products are generally sold with a warranty for a 12-month period following installation. The provision for the estimated cost of warranty is recorded when revenue is recognized. Parts and labor are covered under the terms of the warranty agreement. The warranty provision is based on historical experience by product, configuration and geographic region. Quarterly warranty consumption is generally associated with sales that occurred during the preceding four quarters, and quarterly warranty provisions are generally related to the current quarter’s sales. Guarantees In the ordinary course of business, Applied provides standby letters of credit or other guarantee instruments to third parties as required for certain transactions initiated by either Applied or its subsidiaries. As of July 29, 2018, the maximum potential amount of future payments that Applied could be required to make under these guarantee agreements was approximately $62 million. Applied has not recorded any liability in connection with these guarantee agreements beyond that required to appropriately account for the underlying transaction being guaranteed. Applied does not believe, based on historical experience and information currently available, that it is probable that any amounts will be required to be paid under these guarantee agreements. Applied also has agreements with various banks to facilitate subsidiary banking operations worldwide, including overdraft arrangements, issuance of bank guarantees, and letters of credit. As of July 29, 2018, Applied has provided parent guarantees to banks for approximately $150 million to cover these arrangements. Legal Matters From time to time, Applied receives notification from third parties, including customers and suppliers, seeking indemnification, litigation support, payment of money or other actions by Applied in connection with claims made against them. In addition, from time to time, Applied receives notification from third parties claiming that Applied may be or is infringing or misusing their intellectual property or other rights. Applied also is subject to various other legal proceedings and claims, both asserted and unasserted, that arise in the ordinary course of business. Although the outcome of the above-described matters, claims and proceedings cannot be predicted with certainty, Applied does not believe that any will have a material effect on its consolidated financial condition or results of operations. |
Industry Segment Operations |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Industry Segment Operations | Industry Segment Operations Applied’s three reportable segments are: Semiconductor Systems, Applied Global Services, and Display and Adjacent Markets. As defined under the accounting literature, Applied’s chief operating decision-maker has been identified as the President and Chief Executive Officer, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Segment information is presented based upon Applied’s management organization structure as of July 29, 2018 and the distinctive nature of each segment. Future changes to this internal financial structure may result in changes to Applied’s reportable segments. The Semiconductor Systems reportable segment includes semiconductor capital equipment for etch, rapid thermal processing, deposition, chemical mechanical planarization, metrology and inspection, wafer packaging, and ion implantation. The Applied Global Services segment provides integrated solutions to optimize equipment and fab performance and productivity, including spares, upgrades, services, certain remanufactured earlier generation equipment and factory automation software for semiconductor, display and other products. The Display and Adjacent Markets segment includes products for manufacturing liquid crystal displays (LCDs), organic light-emitting diodes (OLEDs), equipment upgrades and flexible coating systems and other display technologies for TVs, personal computers, smart phones, and other consumer-oriented devices. Each operating segment is separately managed and has separate financial results that are reviewed by Applied’s chief operating decision-maker. Each reportable segment contains closely related products that are unique to the particular segment. Segment operating income is determined based upon internal performance measures used by Applied’s chief operating decision-maker. The chief operating decision-maker does not evaluate operating segments using total asset information. Applied derives the segment results directly from its internal management reporting system. The accounting policies Applied uses to derive reportable segment results are substantially the same as those used for external reporting purposes. Management measures the performance of each reportable segment based upon several metrics including net sales and operating income. Management uses these results to evaluate the performance of, and to assign resources to, each of the reportable segments. The Corporate and Other category includes revenues from products, as well as costs of products sold, for fabricating solar photovoltaic cells and modules, and certain operating expenses that are not allocated to its reportable segments and are managed separately at the corporate level. These operating expenses include costs related to share-based compensation; certain management, finance, legal, human resources, and research, development and engineering functions provided at the corporate level; and unabsorbed information technology and occupancy. In addition, Applied does not allocate to its reportable segments restructuring and asset impairment charges and any associated adjustments related to restructuring actions, unless these actions pertain to a specific reportable segment. Segment operating income also excludes interest income/expense and other financial charges and income taxes. Management does not consider the unallocated costs in measuring the performance of the reportable segments. Net sales and operating income (loss) for each reportable segment were as follows:
The reconciling items included in Corporate and Other were as follows:
The following customers accounted for at least 10 percent of Applied’s net sales for the nine months ended July 29, 2018, and sales to these customers included products and services from multiple reportable segments.
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Basis of Presentation (Policies) |
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Accounting Policies [Abstract] | |||||||||||||
Basis of Presentation | In the opinion of management, the unaudited interim consolidated condensed financial statements of Applied Materials, Inc. and its subsidiaries (Applied or the Company) included herein have been prepared on a basis consistent with the October 29, 2017 audited consolidated financial statements and include all material adjustments, consisting of normal recurring adjustments, necessary to fairly present the information set forth therein. These unaudited interim consolidated condensed financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in Applied’s Annual Report on Form 10-K for the fiscal year ended October 29, 2017 (2017 Form 10-K). Applied’s results of operations for the three and nine months ended July 29, 2018 are not necessarily indicative of future operating results. Applied’s fiscal year ends on the last Sunday in October of each year. Fiscal 2018 and 2017 each contain 52 weeks, and the first nine months of fiscal 2018 and 2017 each contained 39 weeks. Certain prior year amounts have been reclassified to conform to current year presentation. |
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Use of Estimates | The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ materially from those estimates. On an ongoing basis, Applied evaluates its estimates, including those related to accounts receivable and sales allowances, fair values of financial instruments, inventories, intangible assets and goodwill, useful lives of intangible assets and property and equipment, fair values of share-based awards, and income taxes, among others. Applied bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. |
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Revenue Recognition | Applied recognizes revenue when all four revenue recognition criteria have been met: persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; seller’s price to buyer is fixed or determinable; and collectability is probable. Applied’s shipping terms are customarily FOB Applied shipping point or equivalent terms. Applied’s revenue recognition policy generally results in revenue recognition at the following points: (1) for all transactions where legal title passes to the customer upon shipment or delivery, Applied recognizes revenue upon passage of title for all products that have been demonstrated to meet product specifications prior to shipment; the portion of revenue associated with certain installation-related tasks is deferred, and that revenue is recognized upon completion of the installation-related tasks; (2) for products that have not been demonstrated to meet product specifications prior to shipment, revenue is recognized at customer technical acceptance; (3) for transactions where legal title does not pass at shipment or delivery, revenue is recognized when legal title passes to the customer, which is generally at customer technical acceptance; and (4) for arrangements containing multiple elements, the revenue relating to the undelivered elements is deferred using the relative selling price method utilizing estimated sales prices until delivery of the deferred elements. Applied limits the amount of revenue recognition for delivered elements to the amount that is not contingent on the future delivery of products or services, future performance obligations or subject to customer-specified return or adjustment. In cases where Applied has sold products that have been demonstrated to meet product specifications prior to shipment, Applied believes that at the time of delivery, it has an enforceable claim to amounts recognized as revenue. Spare parts revenue is generally recognized upon shipment, and services revenue is generally recognized over the period that the services are provided. When a sales arrangement contains multiple elements, such as hardware and services and/or software products, Applied allocates revenue to each element based on a selling price hierarchy. The selling price for a deliverable is based on its vendor specific objective evidence (VSOE) if available, third party evidence (TPE) if VSOE is not available, or estimated selling price (ESP) if neither VSOE nor TPE is available. Applied generally utilizes the ESP due to the nature of its products. In multiple element arrangements where more-than-incidental software deliverables are included, revenue is allocated to each separate unit of accounting for each of the non-software deliverables, and to the software deliverables as a group, using the relative selling prices of each of the deliverables in the arrangement based on the aforementioned selling price hierarchy. If the arrangement contains more than one software deliverable, the arrangement consideration allocated to the software deliverables as a group is then allocated to each software deliverable using the guidance for recognizing software revenue. |
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Recent Accounting Pronouncements | Accounting Standards Adopted Inventory Measurement. In July 2015, the Financial Accounting Standard Board (FASB) issued authoritative guidance that requires inventory to be measured at the lower of cost and net realizable value instead of at lower of cost or market. This guidance does not apply to inventory that is measured using last-in, first out (LIFO) or the retail inventory method but applies to all other inventory including those measured using first-in, first-out (FIFO) or the average cost method. Applied adopted this authoritative guidance in the first quarter of fiscal 2018 prospectively to the measurement of inventory after the effective date. The adoption of this guidance did not have a material impact on Applied’s consolidated financial statements. Share-Based Compensation. In March 2016, the FASB issued authoritative guidance that simplifies several aspects of the accounting for share-based payment transactions, including forfeitures, income tax, and classification on the statement of cash flows. Applied adopted this guidance in the first quarter of fiscal 2018. Upon adoption, Applied elected to continue to estimate forfeitures expected to occur to determine the amount of compensation costs to be recognized in each period. The new standard also required recognition of excess tax benefits in the provision for income taxes rather than additional paid-in capital prospectively. In the nine months ended July 29, 2018, Applied recognized an excess tax benefit of $51 million in the Consolidated Condensed Statements of Operations. Additionally, Applied elected to apply the presentation requirements for cash flows related to excess tax benefits and employee taxes paid for withheld shares retrospectively. Adopting this guidance increased cash provided by operating activities by a net $170 million with a corresponding net decrease in cash provided by financing activities for the nine months ended July 30, 2017. Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. In February 2018, the FASB issued authoritative guidance that allows stranded tax effects of the Tax Cuts and Jobs Act (the “Tax Act”) to be reclassified from accumulated other comprehensive income to retained earnings. Applied adopted this guidance at the beginning of the third quarter of fiscal 2018. The stranded income tax effects related to the Tax Act were reclassified from accumulated other comprehensive income to retained earnings in the consolidated statements of stockholders' equity as of July 29, 2018. Share-Based Compensation: Modification Accounting. In May 2017, the FASB issued an update to clarify when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award changes as a result of the change in terms or conditions. Applied adopted this guidance in the third quarter of fiscal 2018 on a prospective basis. The impact of the adoption of this guidance will depend on whether the Company makes any future modifications of share-based payment awards. Accounting Standards Not Yet Adopted Derivatives and Hedging. In August 2017, the FASB issued authoritative guidance that modifies the recognition and presentation of hedge accounting to better align an entity’s risk management strategies and financial reporting for hedging relationships. The authoritative guidance expands the application of hedge accounting for non-financial and financial risk components and eases certain hedge effectiveness assessment requirements. The authoritative guidance will be effective for Applied in the first quarter of fiscal 2020, with early adoption permitted. Applied is currently evaluating the effect of this new guidance on Applied’s consolidated financial statements. Receivables: Nonrefundable Fees and Other Costs. In March 2017, the FASB issued authoritative guidance that will shorten the amortization period for certain callable debt securities held at a premium to the earliest call date to more closely align with expectations incorporated in market pricing. This authoritative guidance will be effective for Applied in the first quarter of fiscal 2020 on a modified retrospective basis, with early adoption permitted. Applied is currently evaluating the impact of adopting this new accounting guidance on Applied’s consolidated financial statements. Retirement Benefits. In March 2017, the FASB issued authoritative guidance which requires companies to present the service cost component of net benefit cost in the same line items in which they report compensation cost. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. The authoritative guidance will be effective for Applied in the first quarter of fiscal 2019 on a retrospective basis, with early adoption permitted. The adoption of this guidance is only expected to result in reclassification of other components of net benefit costs outside of income from operations and is not expected to have a significant impact on Applied’s consolidated financial statements. Goodwill Impairment. In January 2017, the FASB issued authoritative guidance that simplifies the process required to test goodwill for impairment. The authoritative guidance will be effective for Applied in the first quarter of fiscal 2021, with early adoption permitted. The adoption of this guidance is not expected to have a significant impact on Applied’s consolidated financial statements. Business Combinations. In January 2017, the FASB issued authoritative guidance that clarifies the definition of a business to help companies evaluate whether acquisition or disposal transactions should be accounted for as asset groups or as businesses. The authoritative guidance will be effective for Applied in the first quarter of fiscal 2019 on a prospective basis, with early adoption permitted. The impact of the adoption depends on the facts and circumstances of future acquisition or disposal transactions. Income Taxes: Intra-Entity Asset Transfers. In October 2016, the FASB issued authoritative guidance that requires entities to recognize at the transaction date the income tax effects of intercompany asset transfers other than inventory. The authoritative guidance will be effective for Applied in the first quarter of fiscal 2019. Applied is currently evaluating the effect of this new guidance on Applied’s consolidated financial statements. Classification of Certain Cash Receipts and Cash Payments. In August 2016, a new authoritative guidance was issued which addresses classification of certain cash receipts and cash payments related to the statement of cash flows. The authoritative guidance will be effective for Applied in the first quarter of fiscal 2019. The adoption of this guidance is not expected to have a significant impact on Applied’s consolidated financial statements. Financial Instruments: Credit Losses. In June 2016, the FASB issued authoritative guidance that modifies the impairment model for certain financial assets by requiring use of an expected loss methodology, which will result in more timely recognition of credit losses. The authoritative guidance will be effective for Applied in the first quarter of fiscal 2021. Early adoption is permitted beginning in the first quarter of fiscal 2020. Applied is currently evaluating the effect of this new guidance on Applied’s consolidated financial statements. Leases. In February 2016, the FASB issued authoritative guidance for lease accounting, which requires lessees to recognize lease assets and liabilities on the balance sheet for certain lease arrangements that are classified as operating leases under the previous standard, and to provide for enhanced disclosures. The authoritative guidance will be effective for Applied in the first quarter of fiscal 2020 and should be applied using a modified retrospective approach. Early adoption is permitted. Applied is currently evaluating the effect of this new guidance on Applied’s consolidated financial statements. Financial Instruments: Classification and Measurement. In January 2016, the FASB issued authoritative guidance that requires equity investments that do not result in consolidation, and are not accounted for under the equity method, to be measured at fair value, and requires recognition of any changes in fair value in net income unless the investments qualify for a new practicability exception. For financial liabilities measured at fair value, the change in fair value caused by a change in instrument-specific credit risk will be required to be presented separately in other comprehensive income. The authoritative guidance will be effective for Applied in the first quarter of fiscal 2019. Early adoption is permitted only for the provisions related to the recognition of changes in fair value of financial liabilities caused by instrument-specific credit risk. Applied is currently evaluating the effect of this new guidance on Applied’s consolidated financial statements. Revenue Recognition. In May 2014, the FASB issued authoritative guidance that requires revenue recognition to depict the transfer of promised goods or services to a customer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services, and requires certain additional disclosures. This new standard will supersede most current revenue recognition guidance, including industry-specific guidance. Entities will have the option of using either a full retrospective or modified retrospective approach to adopting the guidance. In August 2015, the FASB issued an amendment to defer the effective date by one year and allow entities to early adopt no earlier than the original effective date. With this amendment, the guidance will be effective for Applied in the first quarter of fiscal 2019, which is the Company’s planned adoption date. Applied currently anticipates adopting this new guidance using the full retrospective approach, although this continues to be assessed as part of the overall evaluation. In fiscal 2016, Applied established a project steering committee and cross-functional implementation team that has identified potential differences that would result from applying the requirements of the new standard to Applied’s revenue contracts. In addition, the implementation team has identified and is now implementing changes to business processes, systems and controls to support recognition and disclosure under the new standard. While the Company’s evaluation of the impact of this new guidance is not complete, Applied currently expects that the new standard will have the following impact:
•Revenue related to the sale of services will generally continue to be recognized over time as the services are performed. •Disclosures related to revenue recognition, including contract balances and revenue disaggregation, will be expanded. Applied will continue to complete its evaluation of the effect of this new guidance on the Company’s financial position, results of operations and its ongoing financial reporting, and its preliminary assessments are subject to change. |
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Investments | Applied regularly reviews its investment portfolio to identify and evaluate investments that have indications of possible impairment. Factors considered in determining whether an unrealized loss is considered to be temporary, or other-than-temporary and therefore impaired, include: the length of time and extent to which fair value has been lower than the cost basis; the financial condition, credit quality and near-term prospects of the investee; and whether it is more likely than not that Applied will be required to sell the security prior to recovery. Generally, the contractual terms of investments in marketable securities do not permit settlement at prices less than the amortized cost of the investments. |
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Fair Value Measurement | Applied’s financial assets are measured and recorded at fair value, except for equity investments in privately-held companies. These equity investments are generally accounted for under the cost method of accounting and are periodically assessed for other-than-temporary impairment when events or circumstances indicate that an other-than-temporary decline in value may have occurred. Applied’s nonfinancial assets, such as goodwill, intangible assets, and property, plant and equipment, are recorded at cost and are assessed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Fair Value Hierarchy Applied uses the following fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:
Applied’s investments consist primarily of debt securities that are classified as available-for-sale and recorded at their fair values. In determining the fair value of investments, Applied uses pricing information from pricing services that value securities based on quoted market prices and models that utilize observable market inputs. In the event a fair value estimate is unavailable from a pricing service, Applied generally obtains non-binding price quotes from brokers. Applied then reviews the information provided by the pricing services or brokers to determine the fair value of its short-term and long-term investments. In addition, to validate pricing information obtained from pricing services, Applied periodically performs supplemental analysis on a sample of securities. Applied reviews any significant unanticipated differences identified through this analysis to determine the appropriate fair value. Investments with remaining effective maturities of 12 months or less from the balance sheet date are classified as short-term investments. Investments with remaining effective maturities of more than 12 months from the balance sheet date are classified as long-term investments. |
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Cost Method Investments | Equity investments in privately-held companies are generally accounted for under the cost method of accounting and are periodically assessed for other-than-temporary impairment when an event or circumstance indicates that an other-than-temporary decline in value may have occurred. If Applied determines that an other-than-temporary impairment has occurred, the investment will be written down to its estimated fair value based on available information, such as pricing in recent rounds of financing, current cash positions, earnings and cash flow forecasts, recent operational performance and any other readily available market data. |
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Derivatives | Applied does not use derivative financial instruments for trading or speculative purposes. Derivative instruments and hedging activities, including foreign currency exchange and interest rate contracts, are recognized on the balance sheet at fair value. Changes in the fair value of derivatives that do not qualify for hedge treatment, as well as the ineffective portion of any hedges, are recognized currently in earnings. All of Applied’s derivative financial instruments are recorded at their fair value in other current assets or in accounts payable and accrued expenses. Hedges related to anticipated transactions are designated and documented at the inception of the hedge as cash flow hedges and foreign exchange derivatives are typically entered into once per month. Cash flow hedges are evaluated for effectiveness quarterly. The effective portion of the gain or loss on these hedges is reported as a component of AOCI in stockholders’ equity and is reclassified into earnings when the hedged transaction affects earnings. The majority of the after-tax net income or loss related to foreign exchange derivative instruments included in AOCI as of July 29, 2018 is expected to be reclassified into earnings within 12 months. Changes in the fair value of currency forward exchange and option contracts due to changes in time value are excluded from the assessment of effectiveness. Both ineffective hedge amounts and hedge components excluded from the assessment of effectiveness are recognized in earnings. If the transaction being hedged is no longer probable to occur, or if a portion of any derivative is deemed to be ineffective, Applied promptly recognizes the gain or loss on the associated financial instrument in earnings. Additionally, forward exchange contracts are generally used to hedge certain foreign currency denominated assets or liabilities. These derivatives are typically entered into once per month and are not designated for hedge accounting treatment. Accordingly, changes in the fair value of these hedges are recorded in earnings to offset the changes in the fair value of the assets or liabilities being hedged. |
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Goodwill | Applied’s methodology for allocating the purchase price relating to purchase acquisitions is determined through established and generally accepted valuation techniques. Goodwill is measured as the excess of the purchase price over the sum of the amounts assigned to tangible and identifiable intangible assets acquired less liabilities assumed. Applied assigns assets acquired (including goodwill) and liabilities assumed to one or more reporting units as of the date of acquisition. Typically, acquisitions relate to a single reporting unit and thus do not require the allocation of goodwill to multiple reporting units. If the products obtained in an acquisition are assigned to multiple reporting units, the goodwill is distributed to the respective reporting units as part of the purchase price allocation process. Goodwill and purchased intangible assets with indefinite useful lives are not amortized, but are reviewed for impairment annually during the fourth quarter of each fiscal year and whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. The process of evaluating the potential impairment of goodwill and intangible assets requires significant judgment, especially in emerging markets. Applied regularly monitors current business conditions and considers other factors including, but not limited to, adverse industry or economic trends, restructuring actions and lower projections of profitability that may impact future operating results. To test goodwill for impairment, Applied first performs a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If it is concluded that this is the case, Applied then performs the two-step goodwill impairment test. Otherwise, the two-step goodwill impairment test is not required. Under the two-step goodwill impairment test, Applied would in the first step compare the estimated fair value of each reporting unit to its carrying value. Applied determines the fair value of each of its reporting units based on a weighting of income and market approaches. If the carrying value of a reporting unit exceeds its fair value, Applied would then perform the second step of the impairment test in order to determine the implied fair value of the reporting unit’s goodwill. If Applied determines that the carrying value of a reporting unit’s goodwill exceeds its implied fair value, Applied would record an impairment charge equal to the difference. |
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Goodwill and Intangible Assets | The evaluation of goodwill and intangible assets for impairment requires the exercise of significant judgment. In the event of future changes in business conditions, Applied will be required to reassess and update its forecasts and estimates used in future impairment analyses. If the results of these future analyses are lower than current estimates, a material impairment charge may result at that time. |
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Finite-Lived Purchased Intangible Assets | Applied amortizes purchased intangible assets with finite lives using the straight-line method over the estimated economic lives of the assets, ranging from 1 to 15 years. Applied evaluates long-lived assets for impairment whenever events or changes in circumstances indicate the carrying value of an asset group may not be recoverable. Applied assesses the fair value of the assets based on the amount of the undiscounted future cash flow that the assets are expected to generate and recognizes an impairment loss when estimated undiscounted future cash flow expected to result from the use of the asset, plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. When Applied identifies an impairment, Applied reduces the carrying value of the group of assets to comparable market values, when available and appropriate, or to its estimated fair value based on a discounted cash flow approach. Intangible assets, such as purchased technology, are generally recorded in connection with a business acquisition. The value assigned to intangible assets is usually based on estimates and judgments regarding expectations for the success and life cycle of products and technology acquired. Applied evaluates the useful lives of its intangible assets each reporting period to determine whether events and circumstances require revising the remaining period of amortization. In addition, Applied reviews intangible assets for impairment when events or changes in circumstances indicate their carrying value may not be recoverable. Management considers such indicators as significant differences in actual product acceptance from the estimates, changes in the competitive and economic environments, technological advances, and changes in cost structure. |
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Treasury Stock | Applied records treasury stock purchases under the cost method using the first-in, first-out (FIFO) method. Upon reissuance of treasury stock, amounts in excess of the acquisition cost are credited to additional paid in capital. If Applied reissues treasury stock at an amount below its acquisition cost and additional paid in capital associated with prior treasury stock transactions is insufficient to cover the difference between the acquisition cost and the reissue price, this difference is recorded against retained earnings. |
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Share-based Compensation | The cost associated with share-based awards that are subject solely to time-based vesting requirements, less expected forfeitures, is recognized over the awards’ service period for the entire award on a straight-line basis. The cost associated with performance-based equity awards is recognized for each tranche over the service period, based on an assessment of the likelihood that the applicable performance goals will be achieved. |
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Performance Based Awards | Compensation expense is calculated using the fair value of the employees’ purchase rights under the Black-Scholes model. The fair value of these awards is estimated on the date of grant. If the goals are achieved, the awards will vest, provided that the grantee remains employed by Applied through each applicable vesting date. If the performance goals are not met as of the end of the performance period, no compensation expense is recognized and any previously recognized compensation expense is reversed. The expected cost is based on the awards that are probable to vest and is reflected over the service period and reduced for estimated forfeitures. |
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Warranty | Applied products are generally sold with a warranty for a 12-month period following installation. The provision for the estimated cost of warranty is recorded when revenue is recognized. Parts and labor are covered under the terms of the warranty agreement. The warranty provision is based on historical experience by product, configuration and geographic region. Quarterly warranty consumption is generally associated with sales that occurred during the preceding four quarters, and quarterly warranty provisions are generally related to the current quarter’s sales. |
Earnings Per Share (Tables) |
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Jul. 29, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share |
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Cash, Cash Equivalents and Investments (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 29, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash and Cash Equivalents [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of cash, cash equivalents and investments | The following tables summarize Applied’s cash, cash equivalents and investments by security type:
_________________________ * Includes agency debt securities guaranteed by Canada.
_________________________ * Includes agency debt securities guaranteed by non-U.S. governments, which consist of Canada and Germany. |
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Contractual maturities of investments | The following table summarizes the contractual maturities of Applied’s investments as of July 29, 2018:
_________________________ ** Securities with no single maturity date include publicly-traded and privately-held equity securities and asset-backed and mortgage-backed securities. |
Fair Value Measurements (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 29, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial assets measured at fair value on a recurring basis | Financial assets (excluding cash balances) measured at fair value on a recurring basis are summarized below:
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Derivative Instruments and Hedging Activities (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 29, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Effect of derivative instruments on the consolidated statement of operations | The effects of derivative instruments and hedging activities on the Consolidated Condensed Statements of Operations were as follows:
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Derivatives not designated as hedging instruments in statement of operations |
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Balance Sheet Detail (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 29, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance Sheet Detail [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories |
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Other current assets |
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Property, plant and equipment, net |
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Accounts Payable and Accrued Expenses |
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Customer deposits and deferred revenue |
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Other liabilities |
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Business Combinations (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Jul. 29, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Purchase Price Allocation | The following table represents the preliminary aggregated purchase price allocation for acquisitions completed in the nine months ended July 30, 2017:
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Goodwill, Purchased Technology and Other Intangible Assets (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 29, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and other indefinite-lived intangible assets | Details of goodwill as of July 29, 2018 and October 29, 2017 were as follows:
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Summary of purchased technology and intangible assets | A summary of Applied’s purchased technology and intangible assets is set forth below:
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Finite-lived intangible assets | Details of finite-lived intangible assets were as follows:
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Summary of amortization expense | Details of amortization expense by segment were as follows:
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Schedule of categories amortization expense was charged to | Amortization expense was charged to the following categories:
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Future estimated amortization expense | As of July 29, 2018, future estimated amortization expense is expected to be as follows:
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Borrowing Facilities and Debt (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 29, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Outstanding | Debt outstanding as of July 29, 2018 and October 29, 2017 was as follows:
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Stockholders' Equity, Comprehensive Income and Share-Based Compensation (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 29, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of accumulated other comprehensive loss, after-tax basis | Changes in the components of AOCI, net of tax, were as follows:
(a) - Represents the reclassification adjustment related to the early adoption of Accounting Standards Update (ASU) 2018-02 Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. See Note 1.
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Summary of stock repurchases | The following table summarizes Applied’s stock repurchases for the three and nine months ended July 29, 2018 and July 30, 2017:
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Effect of share-based compensation on the results of operations | The effect of share-based compensation on the results of operations was as follows:
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Restricted stock units and restricted stock activity | A summary of the changes in restricted stock units, restricted stock, performance shares and performance units outstanding under Applied’s equity compensation plans during the nine months ended July 29, 2018 is presented below:
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Employee Stock Purchase Plan Valuation Assumptions | Compensation expense is calculated using the fair value of the employees’ purchase rights under the Black-Scholes model. Underlying assumptions used in the model are outlined in the following table:
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Warranty, Guarantees And Contingencies (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 29, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in the warranty reserves | Changes in the warranty reserves are presented below:
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Industry Segment Operations (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 29, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net sales and operating income (loss) for each reportable segment | Net sales and operating income (loss) for each reportable segment were as follows:
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Reconciliations of total segment operating income to Applied's consolidated operating income (loss) | The reconciling items included in Corporate and Other were as follows:
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Companies accounted for at least 10 percent of Applied's net sales | The following customers accounted for at least 10 percent of Applied’s net sales for the nine months ended July 29, 2018, and sales to these customers included products and services from multiple reportable segments.
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Basis of Presentation Narrative (Details) - USD ($) $ in Millions |
9 Months Ended | |
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Jul. 29, 2018 |
Jul. 30, 2017 |
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Accounting Policies [Abstract] | ||
Excess tax benefit from share-based compensation | $ 51 | |
Accounting Standards Update 2016-09 | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Increase in cash provided by operating activities | $ 170 | |
Increase in cash used by financing activities | $ 170 |
Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions |
3 Months Ended | 9 Months Ended | ||
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Jul. 29, 2018 |
Jul. 30, 2017 |
Jul. 29, 2018 |
Jul. 30, 2017 |
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Numerator: | ||||
Net income | $ 1,173 | $ 925 | $ 2,437 | $ 2,452 |
Denominator: | ||||
Weighted average common shares outstanding (in shares) | 994 | 1,071 | 1,026 | 1,076 |
Effect of dilutive stock options, restricted stock units and employee stock purchase plan shares (in shares) | 11 | 12 | 13 | 11 |
Denominator for diluted earnings per share (in shares) | 1,005 | 1,083 | 1,039 | 1,087 |
Basic earnings per share (in dollars per share) | $ 1.18 | $ 0.86 | $ 2.37 | $ 2.28 |
Diluted earnings per share (in dollars per share) | $ 1.17 | $ 0.85 | $ 2.35 | $ 2.26 |
Potentially dilutive securities (in shares) | 0 | 0 | 0 | 0 |
Cash, Cash Equivalents and Investments (Summary of Cash, Cash Equivalents and Investments) (Details) - USD ($) $ in Millions |
Jul. 29, 2018 |
Oct. 29, 2017 |
Jul. 30, 2017 |
Oct. 30, 2016 |
---|---|---|---|---|
Summary of Cash, Cash Equivalents and Investments | ||||
Cash | $ 1,364 | $ 1,346 | ||
Total Cash equivalents | 2,010 | 3,664 | ||
Total Cash and Cash equivalents | 3,374 | 5,010 | $ 5,278 | $ 3,406 |
Equity investments in privately-held companies | 82 | 74 | ||
Cost of short-term and long-term investments | 2,173 | 3,334 | ||
Gross unrealized gains on short-term and long-term investments | 61 | 79 | ||
Gross unrealized losses on short-term and long-term investments | 11 | 4 | ||
Estimated fair value of short-term and long-term investments | 2,223 | 3,409 | ||
Cash, cash equivalents and investments, cost | 5,547 | 8,344 | ||
Cash, cash equivalents and investments, gross unrealized gains | 61 | 79 | ||
Cash, cash equivalents and investments, gross unrealized losses | 11 | 4 | ||
Cash, cash equivalents and investments, estimated fair value | 5,597 | 8,419 | ||
Total fixed income securities | ||||
Summary of Cash, Cash Equivalents and Investments | ||||
Cost of fixed income securities | 2,071 | 3,238 | ||
Gross unrealized gains on fixed income securities | 0 | 1 | ||
Gross unrealized losses on fixed income securities | 11 | 3 | ||
Estimated fair value of fixed income securities | 2,060 | 3,236 | ||
U.S. Treasury and agency securities | ||||
Summary of Cash, Cash Equivalents and Investments | ||||
Cost of fixed income securities | 336 | 667 | ||
Gross unrealized gains on fixed income securities | 0 | 0 | ||
Gross unrealized losses on fixed income securities | 2 | 1 | ||
Estimated fair value of fixed income securities | 334 | 666 | ||
Municipal securities | ||||
Summary of Cash, Cash Equivalents and Investments | ||||
Cost of fixed income securities | 417 | 1,007 | ||
Gross unrealized gains on fixed income securities | 0 | 0 | ||
Gross unrealized losses on fixed income securities | 2 | 0 | ||
Estimated fair value of fixed income securities | 415 | 1,007 | ||
Commercial paper, corporate bonds and medium-term notes | ||||
Summary of Cash, Cash Equivalents and Investments | ||||
Cost of fixed income securities | 722 | 1,024 | ||
Gross unrealized gains on fixed income securities | 0 | 1 | ||
Gross unrealized losses on fixed income securities | 3 | 1 | ||
Estimated fair value of fixed income securities | 719 | 1,024 | ||
Asset-backed and mortgage-backed securities | ||||
Summary of Cash, Cash Equivalents and Investments | ||||
Cost of fixed income securities | 586 | 379 | ||
Gross unrealized gains on fixed income securities | 0 | 0 | ||
Gross unrealized losses on fixed income securities | 4 | 1 | ||
Estimated fair value of fixed income securities | 582 | 378 | ||
Publicly traded equity securities | ||||
Summary of Cash, Cash Equivalents and Investments | ||||
Cost of publicly traded equity securities | 20 | 22 | ||
Gross unrealized gains on publicly traded equity securities | 61 | 78 | ||
Gross unrealized losses on publicly traded equity securities | 0 | 1 | ||
Estimated fair value of publicly traded equity securities | 81 | 99 | ||
Money market funds | ||||
Summary of Cash, Cash Equivalents and Investments | ||||
Total Cash equivalents | 1,596 | 2,658 | ||
U.S. Treasury and agency securities | ||||
Summary of Cash, Cash Equivalents and Investments | ||||
Total Cash equivalents | 15 | |||
Municipal securities | ||||
Summary of Cash, Cash Equivalents and Investments | ||||
Total Cash equivalents | 119 | 341 | ||
Commercial paper, corporate bonds and medium-term notes | ||||
Summary of Cash, Cash Equivalents and Investments | ||||
Total Cash equivalents | 292 | 595 | ||
Asset-backed and mortgage-backed securities | ||||
Summary of Cash, Cash Equivalents and Investments | ||||
Total Cash equivalents | 1 | |||
CANADA | Non-U.S. government securities | ||||
Summary of Cash, Cash Equivalents and Investments | ||||
Cost of fixed income securities | 10 | |||
Gross unrealized gains on fixed income securities | 0 | |||
Gross unrealized losses on fixed income securities | 0 | |||
Estimated fair value of fixed income securities | 10 | |||
CANADA | Non-U.S. Government Corporations and Agencies Securities | ||||
Summary of Cash, Cash Equivalents and Investments | ||||
Total Cash equivalents | $ 2 | |||
Canada and Germany | Non-U.S. government securities | ||||
Summary of Cash, Cash Equivalents and Investments | ||||
Cost of fixed income securities | 161 | |||
Gross unrealized gains on fixed income securities | 0 | |||
Gross unrealized losses on fixed income securities | 0 | |||
Estimated fair value of fixed income securities | 161 | |||
Canada and Germany | Non-U.S. Government Corporations and Agencies Securities | ||||
Summary of Cash, Cash Equivalents and Investments | ||||
Total Cash equivalents | $ 55 |
Cash, Cash Equivalents and Investments (Details) - USD ($) $ in Millions |
Jul. 29, 2018 |
Oct. 29, 2017 |
---|---|---|
Contractual maturities of investments | ||
Due in one year or less, Cost | $ 556 | |
Due after one through five years, Cost | 929 | |
No single maturity date, Cost | 688 | |
Cost of short-term and long-term investments | 2,173 | $ 3,334 |
Due in one year or less, Estimated Fair Value | 555 | |
Due after one through five years, Estimated Fair Value | 923 | |
No single maturity date, Estimated Fair Value | 745 | |
Estimated fair value of short-term and long-term investments | $ 2,223 | $ 3,409 |
Cash, Cash Equivalents and Investments - Narrative (Details Textual) - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jul. 29, 2018 |
Jul. 30, 2017 |
Jul. 29, 2018 |
Jul. 30, 2017 |
|
Schedule of Cash, Cash Equivalents and Investments [Line Items] | ||||
Gross realized gains on investments | $ 13,000,000 | $ 14,000,000 | ||
Fixed Income Securities | ||||
Schedule of Cash, Cash Equivalents and Investments [Line Items] | ||||
Other than temporary impairment losses, investments | $ 0 | $ 0 | $ 0 | $ 0 |
Fair Value Measurements (Details) - USD ($) $ in Millions |
Jul. 29, 2018 |
Oct. 29, 2017 |
---|---|---|
Assets: | ||
Investment securities | $ 2,223 | $ 3,409 |
Recurring fair value measurements | ||
Assets: | ||
Investment securities | 4,151 | 6,999 |
Recurring fair value measurements | Money market funds | ||
Assets: | ||
Investment securities | 1,596 | 2,658 |
Recurring fair value measurements | U.S. Treasury and agency securities | ||
Assets: | ||
Investment securities | 334 | 681 |
Recurring fair value measurements | Non-U.S. government securities | ||
Assets: | ||
Investment securities | 12 | 216 |
Recurring fair value measurements | Municipal securities | ||
Assets: | ||
Investment securities | 534 | 1,348 |
Recurring fair value measurements | Commercial paper, corporate bonds and medium-term notes | ||
Assets: | ||
Investment securities | 1,011 | 1,619 |
Recurring fair value measurements | Asset-backed and mortgage-backed securities | ||
Assets: | ||
Investment securities | 583 | 378 |
Recurring fair value measurements | Publicly traded equity securities | ||
Assets: | ||
Investment securities | 81 | 99 |
Recurring fair value measurements | Level 1 | ||
Assets: | ||
Investment securities | 1,980 | 2,949 |
Recurring fair value measurements | Level 1 | Money market funds | ||
Assets: | ||
Investment securities | 1,596 | 2,658 |
Recurring fair value measurements | Level 1 | U.S. Treasury and agency securities | ||
Assets: | ||
Investment securities | 303 | 192 |
Recurring fair value measurements | Level 1 | Non-U.S. government securities | ||
Assets: | ||
Investment securities | 0 | 0 |
Recurring fair value measurements | Level 1 | Municipal securities | ||
Assets: | ||
Investment securities | 0 | 0 |
Recurring fair value measurements | Level 1 | Commercial paper, corporate bonds and medium-term notes | ||
Assets: | ||
Investment securities | 0 | 0 |
Recurring fair value measurements | Level 1 | Asset-backed and mortgage-backed securities | ||
Assets: | ||
Investment securities | 0 | 0 |
Recurring fair value measurements | Level 1 | Publicly traded equity securities | ||
Assets: | ||
Investment securities | 81 | 99 |
Recurring fair value measurements | Level 2 | ||
Assets: | ||
Investment securities | 2,171 | 4,050 |
Recurring fair value measurements | Level 2 | Money market funds | ||
Assets: | ||
Investment securities | 0 | 0 |
Recurring fair value measurements | Level 2 | U.S. Treasury and agency securities | ||
Assets: | ||
Investment securities | 31 | 489 |
Recurring fair value measurements | Level 2 | Non-U.S. government securities | ||
Assets: | ||
Investment securities | 12 | 216 |
Recurring fair value measurements | Level 2 | Municipal securities | ||
Assets: | ||
Investment securities | 534 | 1,348 |
Recurring fair value measurements | Level 2 | Commercial paper, corporate bonds and medium-term notes | ||
Assets: | ||
Investment securities | 1,011 | 1,619 |
Recurring fair value measurements | Level 2 | Asset-backed and mortgage-backed securities | ||
Assets: | ||
Investment securities | 583 | 378 |
Recurring fair value measurements | Level 2 | Publicly traded equity securities | ||
Assets: | ||
Investment securities | $ 0 | $ 0 |
Fair Value Measurements (Details Textual) - USD ($) |
Jul. 29, 2018 |
Oct. 29, 2017 |
Jul. 30, 2017 |
---|---|---|---|
Schedule of Investment Income, Reported Amounts, by Category [Line Items] | |||
Fair value of transfers from level one to level two | $ 0 | $ 0 | |
Fair value of transfers from level two to level one | 0 | $ 0 | |
Investment securities | 2,223,000,000 | $ 3,409,000,000 | |
Long-term debt, principal amount | 5,400,000,000 | 5,400,000,000 | |
Recurring fair value measurements | |||
Schedule of Investment Income, Reported Amounts, by Category [Line Items] | |||
Investment securities | 4,151,000,000 | 6,999,000,000 | |
Recurring fair value measurements | Level 2 | |||
Schedule of Investment Income, Reported Amounts, by Category [Line Items] | |||
Investment securities | 2,171,000,000 | 4,050,000,000 | |
Recurring fair value measurements | Level 3 | |||
Schedule of Investment Income, Reported Amounts, by Category [Line Items] | |||
Investment securities | 0 | 0 | |
Estimated fair value | Level 2 | |||
Schedule of Investment Income, Reported Amounts, by Category [Line Items] | |||
Long-term debt fair value | 5,600,000,000 | 5,800,000,000 | |
Short Term And Long Term Investments | Carrying amount | Equity investments in privately-held companies | |||
Schedule of Investment Income, Reported Amounts, by Category [Line Items] | |||
Equity investments in privately-held companies measured on non-recurring basis | 82,000,000 | 74,000,000 | |
Short Term And Long Term Investments | Portion at cost | Equity investments in privately-held companies | |||
Schedule of Investment Income, Reported Amounts, by Category [Line Items] | |||
Equity investments in privately-held companies measured on non-recurring basis | 65,000,000 | 65,000,000 | |
Short Term And Long Term Investments | Estimated fair value | Equity investments in privately-held companies | Nonrecurring fair value measurements | Level 3 | |||
Schedule of Investment Income, Reported Amounts, by Category [Line Items] | |||
Equity investments in privately-held companies measured on non-recurring basis | $ 17,000,000 | $ 9,000,000 |
Derivative Instruments and Hedging Activities (Details Textual) - USD ($) |
1 Months Ended | 3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|---|
Mar. 31, 2017 |
Jul. 29, 2018 |
Jul. 30, 2017 |
Jul. 29, 2018 |
Jul. 30, 2017 |
Oct. 29, 2017 |
|
Derivative [Line Items] | ||||||
Time period for hedging of foreign currency transaction | 24 months | |||||
Effective portion - loss recognized in AOCI | $ (11,000,000) | $ (6,000,000) | $ 5,000,000 | $ (10,000,000) | ||
Time period over which majority of after tax gain loss related to derivatives to be reclassified into earnings | 12 months | |||||
Interest rate contracts | Designated as hedging instrument | Cash flow hedging | ||||||
Derivative [Line Items] | ||||||
Notional amount | $ 700,000,000 | |||||
Effective portion - loss recognized in AOCI | $ 14,000,000 | |||||
10 Year Senior Notes Issued March 2017 | Senior Notes | ||||||
Derivative [Line Items] | ||||||
Debt instrument term | 10 years |
Derivative Instruments and Hedging Activities (Derivatives in Statements of Operations) (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jul. 29, 2018 |
Jul. 30, 2017 |
Jul. 29, 2018 |
Jul. 30, 2017 |
|
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Effective portion - gain (loss) recognized in AOCI | $ 11 | $ 6 | $ (5) | $ 10 |
Effective portion - gain or (loss) reclassified from AOCI into income | (10) | 3 | (12) | 8 |
Ineffective portion and amount excluded from effectiveness testing - gain or (loss) recognized in income | 5 | (1) | 8 | (5) |
Foreign exchange contracts | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Effective portion - gain (loss) recognized in AOCI | 11 | 6 | (5) | 24 |
Effective portion - gain or (loss) reclassified from AOCI into income | 0 | 0 | 0 | 0 |
Ineffective portion and amount excluded from effectiveness testing - gain or (loss) recognized in income | 0 | 0 | 0 | 0 |
Foreign exchange contracts | Cost of products sold | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Effective portion - gain (loss) recognized in AOCI | 0 | 0 | 0 | 0 |
Effective portion - gain or (loss) reclassified from AOCI into income | (3) | 1 | (7) | 7 |
Ineffective portion and amount excluded from effectiveness testing - gain or (loss) recognized in income | 7 | 0 | 13 | (3) |
Foreign exchange contracts | General and administrative | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Effective portion - gain (loss) recognized in AOCI | 0 | 0 | 0 | 0 |
Effective portion - gain or (loss) reclassified from AOCI into income | (6) | 3 | (2) | 3 |
Ineffective portion and amount excluded from effectiveness testing - gain or (loss) recognized in income | (2) | (1) | (5) | (2) |
Interest rate contracts | Interest expense | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Effective portion - gain (loss) recognized in AOCI | 0 | 0 | 0 | (14) |
Effective portion - gain or (loss) reclassified from AOCI into income | (1) | (1) | (3) | (2) |
Ineffective portion and amount excluded from effectiveness testing - gain or (loss) recognized in income | $ 0 | $ 0 | $ 0 | $ 0 |
Derivative Instruments and Hedging Activities (Gain/Loss Recognized in Income) (Details) - Foreign exchange contracts - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jul. 29, 2018 |
Jul. 30, 2017 |
Jul. 29, 2018 |
Jul. 30, 2017 |
|
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gain (loss) on derivatives not designated as hedging instruments | $ 2 | $ 9 | $ (8) | $ 34 |
General and administrative | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gain (loss) on derivatives not designated as hedging instruments | $ 2 | $ 9 | $ (8) | $ 34 |
Accounts Receivable, Net (Details Textual) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Jul. 29, 2018 |
Jul. 30, 2017 |
Jul. 29, 2018 |
Jul. 30, 2017 |
Oct. 29, 2017 |
|
Receivables [Abstract] | |||||
Factored accounts receivable | $ 271 | $ 211 | $ 1,000 | $ 360 | |
Allowance for doubtful accounts | $ 34 | $ 34 | $ 34 |
Balance Sheet Detail (Inventories) (Details) - USD ($) $ in Millions |
Jul. 29, 2018 |
Oct. 29, 2017 |
---|---|---|
Inventories | ||
Customer service spares | $ 829 | $ 595 |
Raw materials | 978 | 603 |
Work-in-process | 603 | 468 |
Finished goods | 1,271 | 1,264 |
Total Inventories | 3,681 | 2,930 |
Inventory at customer locations included in finished goods | 129 | 331 |
Inventory, finished goods, evaluation inventory, net of reserves | $ 342 | $ 281 |
Balance Sheet Detail (Other Current Assets) (Details) - USD ($) $ in Millions |
Jul. 29, 2018 |
Oct. 29, 2017 |
---|---|---|
Other Current Assets [Abstract] | ||
Prepaid income taxes and income taxes receivable | $ 53 | $ 57 |
Prepaid expenses and other | 289 | 317 |
Other Current Assets | $ 342 | $ 374 |
Balance Sheet Detail (Property, Plant and Equipment) (Details) - USD ($) $ in Millions |
9 Months Ended | |
---|---|---|
Jul. 29, 2018 |
Oct. 29, 2017 |
|
Property, Plant and Equipment [Line Items] | ||
Gross property, plant and equipment | $ 3,724 | $ 3,311 |
Accumulated depreciation | (2,403) | (2,245) |
Property, Plant and Equipment, Net | 1,321 | 1,066 |
Land and improvements | ||
Property, Plant and Equipment [Line Items] | ||
Gross property, plant and equipment | 221 | 160 |
Buildings and improvements | ||
Property, Plant and Equipment [Line Items] | ||
Gross property, plant and equipment | $ 1,419 | 1,315 |
Buildings and improvements | Min | ||
Property, Plant and Equipment [Line Items] | ||
Useful Life | 3 years | |
Buildings and improvements | Max | ||
Property, Plant and Equipment [Line Items] | ||
Useful Life | 30 years | |
Demonstration and manufacturing equipment | ||
Property, Plant and Equipment [Line Items] | ||
Gross property, plant and equipment | $ 1,261 | 1,129 |
Demonstration and manufacturing equipment | Min | ||
Property, Plant and Equipment [Line Items] | ||
Useful Life | 3 years | |
Demonstration and manufacturing equipment | Max | ||
Property, Plant and Equipment [Line Items] | ||
Useful Life | 5 years | |
Furniture, fixtures and other equipment | ||
Property, Plant and Equipment [Line Items] | ||
Gross property, plant and equipment | $ 625 | 572 |
Furniture, fixtures and other equipment | Min | ||
Property, Plant and Equipment [Line Items] | ||
Useful Life | 3 years | |
Furniture, fixtures and other equipment | Max | ||
Property, Plant and Equipment [Line Items] | ||
Useful Life | 5 years | |
Construction in progress | ||
Property, Plant and Equipment [Line Items] | ||
Gross property, plant and equipment | $ 198 | $ 135 |
Balance Sheet Detail (Accounts Payable and Accrued Expense) (Details) - USD ($) $ in Millions |
Jul. 29, 2018 |
Oct. 29, 2017 |
---|---|---|
Accounts Payable and Accrued Expenses | ||
Accounts payable | $ 1,094 | $ 945 |
Compensation and employee benefits | 625 | 666 |
Warranty | 220 | 199 |
Dividends payable | 197 | 106 |
Income taxes payable | 121 | 112 |
Other accrued taxes | 64 | 70 |
Interest payable | 59 | 38 |
Other | 361 | 314 |
Accounts Payable and Accrued Expenses | $ 2,741 | $ 2,450 |
Balance Sheet Detail (Customer Deposits and Deferred Revenue) (Details) - USD ($) $ in Millions |
Jul. 29, 2018 |
Oct. 29, 2017 |
---|---|---|
Customer Deposits and Deferred Revenue | ||
Customer deposits | $ 410 | $ 381 |
Deferred revenue | 1,171 | 1,284 |
Customer Deposits and Deferred Revenue | $ 1,581 | $ 1,665 |
Balance Sheet Detail (Other Liabilities) (Details) - USD ($) $ in Millions |
Jul. 29, 2018 |
Oct. 29, 2017 |
---|---|---|
Other Liabilities | ||
Defined and postretirement benefit plans | $ 159 | $ 160 |
Other | 121 | 99 |
Other Liabilities | $ 280 | $ 259 |
Business Combinations Narrative (Details Textual) - 2017 Acquisitions $ in Millions |
9 Months Ended |
---|---|
Jul. 30, 2017
USD ($)
acquisition
| |
Business Acquisition [Line Items] | |
Number of businesses acquired | acquisition | 2 |
Weighted average useful life (in years) | 3 years 6 months |
Transaction costs | $ | $ 0 |
Business Combinations Purchase Price Allocation (Details) - USD ($) $ in Millions |
Jul. 29, 2018 |
Oct. 29, 2017 |
Jul. 30, 2017 |
---|---|---|---|
Business Acquisition [Line Items] | |||
Goodwill | $ 3,368 | $ 3,368 | |
2017 Acquisitions | |||
Business Acquisition [Line Items] | |||
Fair value of net assets acquired | $ 17 | ||
Goodwill | 44 | ||
Purchased technology | 31 | ||
Purchase price allocated | $ 92 |
Goodwill, Purchased Technology and Other Intangible Assets (Schedule of Goodwill and Other Indefinite-lived Intangible Assets) (Details) - USD ($) $ in Millions |
Jul. 29, 2018 |
Oct. 29, 2017 |
---|---|---|
Goodwill [Line Items] | ||
Goodwill | $ 3,368 | $ 3,368 |
Semiconductor Systems | ||
Goodwill [Line Items] | ||
Goodwill | 2,151 | 2,151 |
Applied Global Services | ||
Goodwill [Line Items] | ||
Goodwill | 1,018 | 1,018 |
Display and Adjacent Markets | ||
Goodwill [Line Items] | ||
Goodwill | $ 199 | $ 199 |
Goodwill, Purchased Technology and Other Intangible Assets (Schedule of Purchased Technology and Intangible Assets) (Details) - USD ($) $ in Millions |
Jul. 29, 2018 |
Oct. 29, 2017 |
---|---|---|
Summary of Purchased Technology and Intangible Assets [Line Items] | ||
Finite lived assets | $ 263 | $ 412 |
Purchased technology, net | ||
Summary of Purchased Technology and Intangible Assets [Line Items] | ||
Finite lived assets | 154 | 288 |
Intangible assets | ||
Summary of Purchased Technology and Intangible Assets [Line Items] | ||
Finite lived assets | $ 109 | $ 124 |
Goodwill, Purchased Technology and Other Intangible Assets Narrative (Details Textual) |
9 Months Ended |
---|---|
Jul. 29, 2018 | |
Min | |
Finite-Lived Intangible Assets [Line Items] | |
Intangible assets, useful life | 1 year |
Maximum | |
Finite-Lived Intangible Assets [Line Items] | |
Intangible assets, useful life | 15 years |
Goodwill, Purchased Technology and Other Intangible Assets (Schedule of Finite-lived Intangible Assets) (Details) - USD ($) $ in Millions |
Jul. 29, 2018 |
Oct. 29, 2017 |
---|---|---|
Finite-lived intangible assets | ||
Gross carrying amount: | $ 1,988 | $ 1,988 |
Accumulated amortization: | (1,725) | (1,576) |
Total | 263 | 412 |
Corporate and Other | ||
Finite-lived intangible assets | ||
Gross carrying amount: | 9 | 9 |
Accumulated amortization: | (9) | (9) |
Semiconductor Systems | Operating Segments | ||
Finite-lived intangible assets | ||
Gross carrying amount: | 1,701 | 1,701 |
Accumulated amortization: | (1,479) | (1,341) |
Applied Global Services | Operating Segments | ||
Finite-lived intangible assets | ||
Gross carrying amount: | 77 | 77 |
Accumulated amortization: | (73) | (72) |
Display and Adjacent Markets | Operating Segments | ||
Finite-lived intangible assets | ||
Gross carrying amount: | 201 | 201 |
Accumulated amortization: | (164) | (154) |
Purchased technology, net | ||
Finite-lived intangible assets | ||
Gross carrying amount: | 1,645 | 1,645 |
Accumulated amortization: | (1,491) | (1,357) |
Total | 154 | 288 |
Purchased technology, net | Corporate and Other | ||
Finite-lived intangible assets | ||
Gross carrying amount: | 0 | 0 |
Accumulated amortization: | 0 | 0 |
Purchased technology, net | Semiconductor Systems | Operating Segments | ||
Finite-lived intangible assets | ||
Gross carrying amount: | 1,449 | 1,449 |
Accumulated amortization: | (1,334) | (1,210) |
Purchased technology, net | Applied Global Services | Operating Segments | ||
Finite-lived intangible assets | ||
Gross carrying amount: | 33 | 33 |
Accumulated amortization: | (29) | (28) |
Purchased technology, net | Display and Adjacent Markets | Operating Segments | ||
Finite-lived intangible assets | ||
Gross carrying amount: | 163 | 163 |
Accumulated amortization: | (128) | (119) |
Intangible assets | ||
Finite-lived intangible assets | ||
Gross carrying amount: | 343 | 343 |
Accumulated amortization: | (234) | (219) |
Total | 109 | 124 |
Intangible assets | Corporate and Other | ||
Finite-lived intangible assets | ||
Gross carrying amount: | 9 | 9 |
Accumulated amortization: | (9) | (9) |
Intangible assets | Semiconductor Systems | Operating Segments | ||
Finite-lived intangible assets | ||
Gross carrying amount: | 252 | 252 |
Accumulated amortization: | (145) | (131) |
Intangible assets | Applied Global Services | Operating Segments | ||
Finite-lived intangible assets | ||
Gross carrying amount: | 44 | 44 |
Accumulated amortization: | (44) | (44) |
Intangible assets | Display and Adjacent Markets | Operating Segments | ||
Finite-lived intangible assets | ||
Gross carrying amount: | 38 | 38 |
Accumulated amortization: | $ (36) | $ (35) |
Goodwill, Purchased Technology and Other Intangible Assets (Amortization Expense by Segment) (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jul. 29, 2018 |
Jul. 30, 2017 |
Jul. 29, 2018 |
Jul. 30, 2017 |
|
Finite-Lived Intangible Assets [Line Items] | ||||
Amortization expense | $ 50 | $ 49 | $ 149 | $ 143 |
Semiconductor Systems | Operating Segments | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Amortization expense | 47 | 46 | 138 | 138 |
Applied Global Services | Operating Segments | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Amortization expense | 0 | 0 | 1 | 1 |
Display and Adjacent Markets | Operating Segments | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Amortization expense | $ 3 | $ 3 | $ 10 | $ 4 |
Goodwill, Purchased Technology and Other Intangible Assets (Amortization Expense) (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jul. 29, 2018 |
Jul. 30, 2017 |
Jul. 29, 2018 |
Jul. 30, 2017 |
|
Finite-Lived Intangible Assets [Line Items] | ||||
Amortization expense | $ 50 | $ 49 | $ 149 | $ 143 |
Cost of products sold | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Amortization expense | 44 | 44 | 134 | 128 |
Research, development and engineering | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Amortization expense | 1 | 0 | 1 | 1 |
Marketing and selling | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Amortization expense | $ 5 | $ 5 | $ 14 | $ 14 |
Goodwill, Purchased Technology and Other Intangible Assets (Estimated Amortization Expense) (Details) - USD ($) $ in Millions |
Jul. 29, 2018 |
Oct. 29, 2017 |
---|---|---|
Future estimated amortization expense | ||
2018 (remaining 3 months) | $ 49 | |
2019 | 57 | |
2020 | 52 | |
2021 | 40 | |
2022 | 65 | |
Total | $ 263 | $ 412 |
Borrowing Facilities and Debt (Details Textual) - USD ($) |
1 Months Ended | 3 Months Ended | ||||
---|---|---|---|---|---|---|
May 31, 2017 |
Jul. 30, 2017 |
Jul. 29, 2018 |
Oct. 29, 2017 |
Mar. 31, 2017 |
Oct. 30, 2011 |
|
Debt Instrument [Line Items] | ||||||
Available revolving credit agreement | $ 1,600,000,000.0 | |||||
Outstanding credit facilities | 0 | $ 0 | ||||
Commercial paper | $ 1,500,000,000 | |||||
Revolving Credit | ||||||
Debt Instrument [Line Items] | ||||||
Available revolving credit agreement | 1,500,000,000.0 | |||||
Foreign Line of Credit | ||||||
Debt Instrument [Line Items] | ||||||
Available revolving credit agreement | 72,000,000 | |||||
Commercial paper, corporate bonds and medium-term notes | ||||||
Debt Instrument [Line Items] | ||||||
Short-term debt | $ 0 | |||||
3.300% Senior Notes Due 2027 and 4.350% Senior Notes due 2047 | Senior Notes | ||||||
Debt Instrument [Line Items] | ||||||
Principal amount | $ 2,200,000,000.0 | |||||
7.125% Unsecured Senior Notes Due 2017 | Senior Notes | ||||||
Debt Instrument [Line Items] | ||||||
Principal redeemed | $ 200,000,000 | |||||
Redemption of debt | $ 205,000,000 | $ 200,000,000 | ||||
Stated interest rate (as percent) | 7.125% | |||||
Loss on extinguishment of debt | $ 5,000,000 |
Borrowing Facilities and Debt (Details) - USD ($) $ in Millions |
Jul. 29, 2018 |
Oct. 29, 2017 |
---|---|---|
Debt Instrument [Line Items] | ||
Long-term debt, principal amount | $ 5,400 | $ 5,400 |
Total long-term debt | 5,308 | 5,304 |
Total debt | 5,308 | 5,304 |
Senior Notes | ||
Debt Instrument [Line Items] | ||
Long-term debt, principal amount | 5,350 | 5,350 |
Total unamortized discount | (11) | (12) |
Total unamortized debt issuance costs | $ (31) | (34) |
Senior Notes | 2.625% Senior Notes Due 2020 | ||
Debt Instrument [Line Items] | ||
Stated interest rate (as percent) | 2.625% | |
Long-term debt, principal amount | $ 600 | 600 |
Effective Interest Rate | 2.64% | |
Senior Notes | 4.300% Senior Notes Due 2021 | ||
Debt Instrument [Line Items] | ||
Stated interest rate (as percent) | 4.30% | |
Long-term debt, principal amount | $ 750 | 750 |
Effective Interest Rate | 4.326% | |
Senior Notes | 3.900% Senior Notes Due 2025 | ||
Debt Instrument [Line Items] | ||
Stated interest rate (as percent) | 3.90% | |
Long-term debt, principal amount | $ 700 | 700 |
Effective Interest Rate | 3.944% | |
Senior Notes | 3.300% Senior Notes Due 2027 | ||
Debt Instrument [Line Items] | ||
Stated interest rate (as percent) | 3.30% | |
Long-term debt, principal amount | $ 1,200 | 1,200 |
Effective Interest Rate | 3.342% | |
Senior Notes | 5.100% Senior Notes Due 2035 | ||
Debt Instrument [Line Items] | ||
Stated interest rate (as percent) | 5.10% | |
Long-term debt, principal amount | $ 500 | 500 |
Effective Interest Rate | 5.127% | |
Senior Notes | 5.850% Senior Notes Due 2041 | ||
Debt Instrument [Line Items] | ||
Stated interest rate (as percent) | 5.85% | |
Long-term debt, principal amount | $ 600 | 600 |
Effective Interest Rate | 5.879% | |
Senior Notes | 4.350% Senior Notes Due 2047 | ||
Debt Instrument [Line Items] | ||
Stated interest rate (as percent) | 4.35% | |
Long-term debt, principal amount | $ 1,000 | $ 1,000 |
Effective Interest Rate | 4.361% |
Stockholders' Equity, Comprehensive Income and Share-Based Compensation (Changes in Components of AOCI) (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|
Jul. 29, 2018 |
Jul. 30, 2017 |
Jul. 29, 2018 |
Jul. 30, 2017 |
Oct. 29, 2017 |
||||
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward] | ||||||||
Beginning Balance | $ 9,349 | $ 7,217 | ||||||
Adoption of new accounting standards | [1] | $ 0 | ||||||
Other comprehensive loss before reclassifications | (11) | 29 | ||||||
Amounts reclassified out of AOCI | (5) | (15) | ||||||
Other comprehensive income (loss), net of tax | $ (2) | $ 9 | (16) | 14 | ||||
Ending Balance | 6,825 | 8,716 | 6,825 | 8,716 | ||||
Unrealized Gain on Investments, Net | ||||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward] | ||||||||
Beginning Balance | 53 | 30 | ||||||
Adoption of new accounting standards | 5 | |||||||
Other comprehensive loss before reclassifications | (7) | 23 | ||||||
Amounts reclassified out of AOCI | (12) | 2 | ||||||
Other comprehensive income (loss), net of tax | (19) | 25 | ||||||
Ending Balance | 39 | 55 | 39 | 55 | ||||
Unrealized Gain (Loss) on Derivative Instruments Qualifying as Cash Flow Hedges | ||||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward] | ||||||||
Beginning Balance | (11) | (18) | ||||||
Adoption of new accounting standards | (2) | |||||||
Other comprehensive loss before reclassifications | (4) | 6 | ||||||
Amounts reclassified out of AOCI | 9 | (5) | ||||||
Other comprehensive income (loss), net of tax | 5 | 1 | ||||||
Ending Balance | (8) | (17) | (8) | (17) | ||||
Defined and Postretirement Benefit Plans | ||||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward] | ||||||||
Beginning Balance | (120) | (141) | ||||||
Adoption of new accounting standards | 0 | |||||||
Other comprehensive loss before reclassifications | 0 | 0 | ||||||
Amounts reclassified out of AOCI | (2) | (12) | ||||||
Other comprehensive income (loss), net of tax | (2) | (12) | ||||||
Ending Balance | (122) | (153) | (122) | (153) | ||||
Cumulative Translation Adjustments | ||||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward] | ||||||||
Beginning Balance | 14 | 14 | ||||||
Adoption of new accounting standards | 0 | |||||||
Other comprehensive loss before reclassifications | 0 | 0 | ||||||
Amounts reclassified out of AOCI | 0 | 0 | ||||||
Other comprehensive income (loss), net of tax | 0 | 0 | ||||||
Ending Balance | 14 | 14 | 14 | 14 | ||||
AOCI Attributable to Parent | ||||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward] | ||||||||
Beginning Balance | (64) | (115) | ||||||
Adoption of new accounting standards | [1] | $ 3 | ||||||
Other comprehensive income (loss), net of tax | (16) | 14 | ||||||
Ending Balance | $ (77) | $ (101) | $ (77) | $ (101) | ||||
|
Stockholders' Equity, Comprehensive Income and Share-Based Compensation (Details Textual) $ / shares in Units, shares in Millions |
1 Months Ended | 3 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|---|
Jun. 30, 2018
$ / shares
|
Feb. 28, 2018
USD ($)
$ / shares
|
Dec. 31, 2017
$ / shares
|
Jan. 28, 2018 |
Jul. 29, 2018
USD ($)
employee_stock_purchase_plan
shares
|
Jul. 30, 2017
USD ($)
shares
|
Sep. 30, 2017
USD ($)
|
|
Equity [Line Items] | |||||||
Amount authorized by board of directors to repurchase shares | $ | $ 6,000,000,000.0 | $ 3,000,000,000.0 | |||||
Remaining authorized repurchase amount | $ | $ 5,100,000,000 | ||||||
Dividends declared per share (in dollars per share) | $ / shares | $ 0.20 | $ 0.20 | $ 0.10 | ||||
Payments of dividends | $ | 410,000,000 | $ 323,000,000 | |||||
Employee Stock | |||||||
Equity [Line Items] | |||||||
Total unrecognized compensation expense | $ | $ 399,000,000 | ||||||
Weighted average period for unrecognized compensation expense to be recognized (in years) | 2 years 6 months 29 days | ||||||
Performance Shares | |||||||
Equity [Line Items] | |||||||
Additional performance-based awards to be earned upon certain levels of achievement (in shares) | shares | 1 | ||||||
Award measurement period | 3 years | ||||||
Performance Shares | Min | |||||||
Equity [Line Items] | |||||||
Award vesting rights, percentage of target amount | 0.00% | ||||||
Performance Shares | Maximum | |||||||
Equity [Line Items] | |||||||
Award vesting rights, percentage of target amount | 200.00% | ||||||
Employee Stock Incentive Plan | Employee Stock Option | |||||||
Equity [Line Items] | |||||||
Number of shares available for grant (in shares) | shares | 81 | ||||||
Employee Stock Purchase Plan | |||||||
Equity [Line Items] | |||||||
Number of employee stock purchase plans | employee_stock_purchase_plan | 2 | ||||||
Employee stock purchase plan purchase period | 6 months | ||||||
Shares issued under employee stock purchase plans (in shares) | shares | 1 | 2 | |||||
Employee Stock Purchase Plan | Employee Stock | |||||||
Equity [Line Items] | |||||||
Purchase price of common stock | 85.00% | ||||||
Employee Stock Purchase Plan | Employee Stock Option | |||||||
Equity [Line Items] | |||||||
Number of shares available for grant (in shares) | shares | 19 | ||||||
UNITED STATES | Employee Stock Purchase Plan | |||||||
Equity [Line Items] | |||||||
Number of employee stock purchase plans | employee_stock_purchase_plan | 1 | ||||||
Non-US | Employee Stock Purchase Plan | |||||||
Equity [Line Items] | |||||||
Number of employee stock purchase plans | employee_stock_purchase_plan | 1 |
Stockholders' Equity, Comprehensive Income and Share-Based Compensation (Stock Repurchase Program) (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jul. 29, 2018 |
Jul. 30, 2017 |
Jul. 29, 2018 |
Jul. 30, 2017 |
|
Equity [Line Items] | ||||
Common stock repurchases (in shares) | 25 | 9 | 84 | 20 |
Cost of stock repurchased | $ 4,533 | $ 787 | ||
Average price paid per share (in dollars per share) | $ 49.31 | $ 44.34 | $ 53.72 | $ 39.48 |
Treasury Stock | ||||
Equity [Line Items] | ||||
Common stock repurchases (in shares) | 84 | 20 | ||
Cost of stock repurchased | $ 1,250 | $ 375 | $ 4,532 | $ 787 |
Stockholders' Equity, Comprehensive Income and Share-Based Compensation (Share-Based Compensation) (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jul. 29, 2018 |
Jul. 30, 2017 |
Jul. 29, 2018 |
Jul. 30, 2017 |
|
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Total share-based compensation | $ 64 | $ 55 | $ 193 | $ 162 |
Cost of products sold | ||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Total share-based compensation | 22 | 18 | 65 | 51 |
Research, development and engineering | ||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Total share-based compensation | 24 | 20 | 72 | 61 |
Marketing and selling | ||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Total share-based compensation | 7 | 7 | 23 | 21 |
General and administrative | ||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Total share-based compensation | $ 11 | $ 10 | $ 33 | $ 29 |
Stockholders' Equity, Comprehensive Income and Share-Based Compensation (Restricted Stock Units, Restricted Stock, Performance Shares and Performance Units) (Details) - Restricted Stock Units, Restricted Stock, Performance Shares and Performance Units shares in Millions |
9 Months Ended |
---|---|
Jul. 29, 2018
$ / shares
shares
| |
Restricted stock units, restricted stock, performance shares and performance units | |
Beginning balance (in shares) | shares | 22 |
Granted (in shares) | shares | 6 |
Vested (in shares) | shares | (8) |
Canceled (in shares) | shares | (1) |
Ending balance (in shares) | shares | 19 |
Weighted Average Grant Date Fair Value | |
Beginning of period (in dollars per share) | $ / shares | $ 23.96 |
Granted (in dollars per share) | $ / shares | 51.63 |
Vested (in dollars per share) | $ / shares | 22.03 |
Canceled (in dollars per share) | $ / shares | 29.63 |
Ending balance (in dollars per share) | $ / shares | $ 32.45 |
Stockholders' Equity Comprehensive Income and Share-Based Compensation (Employee Stock Purchase Plans) (Details) - Employee Stock Purchase Plan - $ / shares |
9 Months Ended | |
---|---|---|
Jul. 29, 2018 |
Jul. 30, 2017 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Dividend yield | 1.40% | 1.09% |
Expected volatility | 35.50% | 24.90% |
Risk-free interest rate | 1.83% | 0.78% |
Expected life (in years) | 6 months | 6 months |
Weighted average estimated fair value (in dollars per share) | $ 14.26 | $ 8.08 |
Income Taxes (Details Textual) - USD ($) $ in Billions |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Jul. 29, 2018 |
Jul. 30, 2017 |
Jul. 29, 2018 |
Jul. 30, 2017 |
Oct. 28, 2018 |
|
Income Tax Contingency [Line Items] | |||||
Effective income tax rate provision (as percent) | 5.30% | 5.40% | 34.10% | 7.70% | |
Provisional tax expense for Tax Cuts and Jobs Act of 2017 | $ 1.1 | ||||
Scenario, Forecast | |||||
Income Tax Contingency [Line Items] | |||||
Effective income tax rate | 23.40% |
Warranty, Guarantees and Contingencies (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jul. 29, 2018 |
Jul. 30, 2017 |
Jul. 29, 2018 |
Jul. 30, 2017 |
|
Movement in Standard Product Warranty Accrual [Roll Forward] | ||||
Beginning balance | $ 218 | $ 182 | $ 199 | $ 153 |
Warranties issued | 48 | 41 | 147 | 123 |
Change in reserves related to preexisting warranty | 1 | 1 | 0 | 3 |
Consumption of reserves | (47) | (32) | (126) | (87) |
Ending balance | $ 220 | $ 192 | $ 220 | $ 192 |
Warranty, Guarantees and Contingencies (Details Textual) $ in Millions |
9 Months Ended |
---|---|
Jul. 29, 2018
USD ($)
| |
Commitments and Contingencies Disclosure [Abstract] | |
Standard product warranty period | 12 months |
Maximum potential amount of future payments for letters of credit or other guarantee instruments | $ 62 |
Parent guarantees to banks | $ 150 |
Industry Segment Operations Narrative (Details Textual) |
9 Months Ended |
---|---|
Jul. 29, 2018
Segment
| |
Segment Reporting [Abstract] | |
Number of reportable segments | 3 |
Industry Segment Operations (Net Sales and Operating Income (Loss)) (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jul. 29, 2018 |
Jul. 30, 2017 |
Jul. 29, 2018 |
Jul. 30, 2017 |
|
Net sales and operating income (loss) for each reportable segment | ||||
Net Sales | $ 4,468 | $ 3,744 | $ 13,239 | $ 10,568 |
Operating Income (Loss) | 1,257 | 1,023 | 3,780 | 2,770 |
Corporate and Other | ||||
Net sales and operating income (loss) for each reportable segment | ||||
Operating Income (Loss) | (168) | (155) | (506) | (477) |
Semiconductor Systems | Operating Segments | ||||
Net sales and operating income (loss) for each reportable segment | ||||
Net Sales | 2,748 | 2,532 | 8,594 | 7,086 |
Operating Income (Loss) | 930 | 874 | 2,996 | 2,372 |
Applied Global Services | Operating Segments | ||||
Net sales and operating income (loss) for each reportable segment | ||||
Net Sales | 954 | 786 | 2,777 | 2,186 |
Operating Income (Loss) | 281 | 213 | 813 | 585 |
Display and Adjacent Markets | Operating Segments | ||||
Net sales and operating income (loss) for each reportable segment | ||||
Net Sales | 741 | 410 | 1,796 | 1,223 |
Operating Income (Loss) | $ 214 | $ 91 | $ 477 | $ 290 |
Industry Segment Operations (Reconciliations of Total Segment) (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jul. 29, 2018 |
Jul. 30, 2017 |
Jul. 29, 2018 |
Jul. 30, 2017 |
|
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||||
Net Sales | $ 4,468 | $ 3,744 | $ 13,239 | $ 10,568 |
Share-based compensation | (64) | (55) | (193) | (162) |
Income from operations | 1,257 | 1,023 | 3,780 | 2,770 |
Corporate and Other | ||||
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||||
Net Sales | 25 | 16 | 72 | 73 |
Cost of products sold and expenses | (129) | (116) | (385) | (388) |
Share-based compensation | (64) | (55) | (193) | (162) |
Income from operations | $ (168) | $ (155) | $ (506) | $ (477) |
Industry Segment Operations (Percentage by Customer) (Details) - Customer Concentration Risk - Sales Revenue |
9 Months Ended |
---|---|
Jul. 29, 2018 | |
Samsung Electronics Co., Ltd. | |
Entity-Wide Revenue, Major Customer [Line Items] | |
Percentage of net sales | 15.00% |
Taiwan Semiconductor Manufacturing Company Limited | |
Entity-Wide Revenue, Major Customer [Line Items] | |
Percentage of net sales | 12.00% |
Intel Corporation | |
Entity-Wide Revenue, Major Customer [Line Items] | |
Percentage of net sales | 11.00% |
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