
	Unrealized Gain (Loss) 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 at October 28, 2018	$	7	$	(9)	$	(137)	$	14	(125)
Adoption of new accounting standards (a)	(17)		—		—		—		(17)

Other comprehensive income (loss) before reclassifications	22		(10)		(57)		(1)		(46)
Amounts reclassified out of AOCI	(1)		3		6		—		8
Other comprehensive income (loss), net of tax	21		(7)		(51)		(1)		(38)
Balance at October 27, 2019	$	11	$	(16)	$	(188)	$	13	$	(180)


Other comprehensive income (loss) before reclassifications	16		(115)		(21)		—		(120)
Amounts reclassified out of AOCI	(7)		(2)		10		—		1
Other comprehensive income, net of tax	9		(117)		(11)		—		(119)
Balance at October 25, 2020	$	20	$	(133)	$	(199)	$	13	$	(299)


Other comprehensive income (loss) before reclassifications	(14)		28		20		—		34
Amounts reclassified out of AOCI	(7)		2		10		—		5
Other comprehensive income (loss), net of tax	(21)		30		30		—		39
Balance at October 31, 2021	$	(1)	$	(103)	$	(169)	$	13	$	(260)

(a) - Represents the reclassification adjustment related to the adoption of Accounting Standard Update (ASU) 2016-01 Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.

The tax effects on the unrealized loss on derivative instruments qualifying as cash flow hedges for fiscal 2020 was $33 million. The tax effects on net income of amounts reclassified from AOCI for the fiscal years 2021, 2020 and 2019 were not material.

In March 2021, Applied’s Board of Directors approved a common stock repurchase program authorizing $7.5 billion in repurchases, which supplemented the previously existing $6.0 billion authorization approved in February 2018. At October 31, 2021, approximately $5.0 billion remained available for future stock repurchases under the repurchase program.

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.

During fiscal 2021, Applied's Board of Directors declared one quarterly cash dividend of $0.22 per share and three quarterly cash dividends of $0.24 per share. During fiscal 2020, Applied's Board of Directors declared one quarterly cash dividend of $0.21 per share and three quarterly cash dividends of $0.22 per share. During fiscal 2019, Applied’s Board of Directors declared one quarterly cash dividend of $0.20 per share and three quarterly cash dividends in the amount of $0.21 per share. Dividends paid during fiscal 2021, 2020 and 2019 amounted to $838 million, $787 million and $771 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.

Applied has a stockholder-approved equity plan, the Employee Stock Incentive Plan (ESIP), which permits grants to employees of share-based awards, including stock options, stock appreciation rights, restricted stock, restricted stock units, performance share units 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. On March 11, 2021, Applied’s shareholders approved an amendment and restatement of the ESIP to, among other changes, add 10 million shares to the number of shares of Applied common stock authorized for issuance.

In addition, prior to September 1, 2021, Applied had two Employee Stock Purchase Plans (ESPP), one generally for United States employees (U.S. ESPP) and a second for employees of international subsidiaries (Offshore ESPP), which enable eligible employees to purchase Applied common stock. On March 11, 2021, Applied’s shareholders approved an amendment and restatement of the U.S. ESPP (as amended, the Omnibus ESPP). The Omnibus ESPP became effective on September 1, 2021 (the Effective Date) in accordance with its terms, and amended the U.S. ESPP to, among other changes, (i) incorporate the Offshore ESPP as a sub-plan, and (ii) add 11.3 million shares to the number of shares of Applied common stock authorized for issuance. The Offshore ESPP was terminated as an independent plan on the Effective Date.


	2021		2020		2019

	(In millions)
Cost of products sold	$	118	$	103	$	89
Research, development, and engineering	129		116		99
Marketing and selling	43		36		31
General and administrative	56		52		44

Total share-based compensation	$	346	$	307	$	263

Income tax benefits recognized	$	43	$	39	$	37

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. Share-based awards granted to certain executive officers allow partial accelerated vesting in the event of a qualifying retirement based on age and years of service. The cost associated with performance-based equity awards, which include both performance and market goals, is recognized for each tranche over the service period. The cost of equity awards related to performance goals is based on an assessment of the likelihood that the applicable performance goals will be achieved. For the equity awards based on market goals, the cost is recognized based upon the assumption of 100% achievement of the goal.

At October 31, 2021, Applied had $512 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 2.5 years. At October 31, 2021, there were 35 million shares available for grant of share-based awards under the ESIP, and an additional 16 million shares available for issuance under the Omnibus ESPP.

Stock options are rights to purchase, at future dates, shares of Applied common stock. The exercise price of each stock option equals the fair market value of Applied common stock on the date of grant. Options typically vest over three to four years, subject to the grantee’s continued service with Applied through the scheduled vesting date, and expire no later than seven years from the grant date. There were no stock options granted during fiscal 2021, 2020 and 2019. There were no outstanding stock options at the end of fiscal 2021.

Restricted stock units are converted into shares of Applied common stock upon vesting on a one-for-one basis. Restricted stock has the same rights as other issued and outstanding shares of Applied common stock except these shares generally have no right to dividends and are held in escrow until the award vests. Performance share units and performance units are awards that result in a payment to a grantee, generally in shares of Applied common stock on a one-for-one basis, if performance goals and/or other vesting criteria established by the Human Resources and Compensation Committee of Applied’s Board of Directors are achieved or the awards otherwise vest. Restricted stock units, restricted stock, performance share units and performance units typically vest over three to four years and vesting is usually subject to the grantee’s continued service with Applied and, in some cases, achievement of specified performance goals. The compensation expense related to the service-based awards is determined using the fair market value of Applied common stock on the date of the grant, and the compensation expense is recognized over the vesting period.

Certain awards are subject to the achievement of targeted levels of adjusted operating margin and targeted levels of total shareholder return (TSR) relative to a peer group, comprised of companies in the Standard & Poor's 500 Index. Each metric will be weighted 50% and will be measured over a three-year period. The number of shares that may vest in full after three years ranges from 0% to 200% of the target amount. The 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, subject to a qualifying retirement based on age and years of service. The awards provide for a partial payout based on actual performance at the conclusion of the three-year performance period in the event of a qualifying retirement.

During fiscal 2021, certain executive officers were also granted non-recurring long-term performance-based awards that are subject to the achievement of targeted levels of Applied’s absolute TSR. The awards become eligible to vest only if targeted levels of TSR are achieved during the five-year performance period and will vest only if the grantee remains employed by Applied through the vesting date in October 2025, except in the event of involuntary termination of employment without cause, death or following a change of control. The number of shares that may vest in full after five years ranges from 0% to 200% of the target amount.

The fair value of the portion of the awards subject to targeted levels of adjusted operating margin is estimated on the date of grant. 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 portion of the awards that is probable to vest and is reflected over the service period and reduced for estimated forfeitures.

The fair value of the portion of the awards subject to targeted levels of relative TSR or absolute TSR is estimated on the date of grant using a Monte Carlo simulation model. Compensation expense is recognized based upon the assumption of 100% achievement of the TSR goal and will not be reversed even if the threshold level of TSR is never achieved, and is reflected over the service period and reduced for estimated forfeitures.


	Shares	Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value

	(In millions, except per share amounts)
Non-vested restricted stock units, restricted stock, performance shares and performance units at October 28, 2018	18	$	32.64	2.0 years	$	600
Granted	8	$	36.00
Vested	(7)	$	28.41
Canceled	(1)	$	34.59
Non-vested restricted stock units, restricted stock, performance shares and performance units at October 27, 2019	18	$	35.78	2.1 years	$	985
Granted	6	$	53.89
Vested	(8)	$	31.25
Canceled	(1)	$	42.61
Non-vested restricted stock units, restricted stock, performance shares and performance units at October 25, 2020	15	$	45.36	2.2 years	$	914
Granted	5	$	92.04
Vested	(6)	$	43.11
Canceled	(1)	$	59.41
Non-vested restricted stock units, restricted stock, performance shares and performance units at October 31, 2021	13	$	63.29	2.2 years	$	1,752
Non-vested restricted stock units, restricted stock, performance shares and performance units expected to vest	13	$	63.37	2.0 years	$	1,724

Under the Omnibus 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 3 million shares in fiscal 2021, 3 million shares in fiscal 2020 and 4 million shares in fiscal 2019, under the ESPP. 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:


	2021		2020		2019
ESPP:
Dividend yield	0.72	%	1.41	%	1.99	%
Expected volatility	41.3	%	48.2	%	35.5	%
Risk-free interest rate	0.05	%	0.58	%	2.21	%
Expected life (in years)	0.5		0.5		0.5
Weighted average estimated fair value	$33.77		$17.30		$10.61