Q1 FY2020 | Q1 FY2019 | Change | |||||||||||||||
(In millions, except per share amounts and percentages) | |||||||||||||||||
Net sales | $ | 4,162 | $ | 3,753 | 11% | ||||||||||||
Gross margin | 44.6 | % | 44.4 | % | 0.2 points | ||||||||||||
Operating margin | 25.0 | % | 24.2 | % | 0.8 points | ||||||||||||
Net income | $ | 892 | $ | 771 | 16% | ||||||||||||
Diluted earnings per share | $ | 0.96 | $ | 0.80 | 20% | ||||||||||||
Non-GAAP Adjusted Results | |||||||||||||||||
Non-GAAP adjusted gross margin | 44.9 | % | 44.6 | % | 0.3 points | ||||||||||||
Non-GAAP adjusted operating margin | 25.7 | % | 24.6 | % | 1.1 points | ||||||||||||
Non-GAAP adjusted net income | $ | 904 | $ | 779 | 16% | ||||||||||||
Non-GAAP adjusted diluted EPS | $ | 0.98 | $ | 0.81 | 21% |
Semiconductor Systems | Q1 FY2020 | Q1 FY2019 | |||||||||
(In millions, except percentages) | |||||||||||
Net sales | $ | 2,814 | $ | 2,268 | |||||||
Foundry, logic and other | 68 | % | 44 | % | |||||||
DRAM | 15 | % | 21 | % | |||||||
Flash | 17 | % | 35 | % | |||||||
Operating income | 915 | 631 | |||||||||
Operating margin | 32.5 | % | 27.8 | % | |||||||
Non-GAAP Adjusted Results | |||||||||||
Non-GAAP adjusted operating income | $ | 925 | $ | 642 | |||||||
Non-GAAP adjusted operating margin | 32.9 | % | 28.3 | % |
Applied Global Services | Q1 FY2020 | Q1 FY2019 | |||||||||
(In millions, except percentages) | |||||||||||
Net sales | $ | 997 | $ | 962 | |||||||
Operating income | 278 | 285 | |||||||||
Operating margin | 27.9 | % | 29.6 | % | |||||||
Non-GAAP Adjusted Results | |||||||||||
Non-GAAP adjusted operating income | $ | 278 | $ | 285 | |||||||
Non-GAAP adjusted operating margin | 27.9 | % | 29.6 | % |
Display and Adjacent Markets | Q1 FY2020 | Q1 FY2019 | |||||||||
(In millions, except percentages) | |||||||||||
Net sales | $ | 332 | $ | 507 | |||||||
Operating income | 38 | 115 | |||||||||
Operating margin | 11.4 | % | 22.7 | % | |||||||
Non-GAAP Adjusted Results | |||||||||||
Non-GAAP adjusted operating income | $ | 41 | $ | 118 | |||||||
Non-GAAP adjusted operating margin | 12.3 | % | 23.3 | % |
Three Months Ended | |||||||||||
(In millions, except per share amounts) | January 26, 2020 | January 27, 2019 | |||||||||
Net sales | $ | 4,162 | $ | 3,753 | |||||||
Cost of products sold | 2,304 | 2,088 | |||||||||
Gross profit | 1,858 | 1,665 | |||||||||
Operating expenses: | |||||||||||
Research, development and engineering | 552 | 516 | |||||||||
Marketing and selling | 135 | 131 | |||||||||
General and administrative | 129 | 110 | |||||||||
Total operating expenses | 816 | 757 | |||||||||
Income from operations | 1,042 | 908 | |||||||||
Interest expense | 59 | 60 | |||||||||
Interest and other income, net | 22 | 40 | |||||||||
Income before income taxes | 1,005 | 888 | |||||||||
Provision for income taxes | 113 | 117 | |||||||||
Net income | $ | 892 | $ | 771 | |||||||
Earnings per share: | |||||||||||
Basic | $ | 0.97 | $ | 0.81 | |||||||
Diluted | $ | 0.96 | $ | 0.80 | |||||||
Weighted average number of shares: | |||||||||||
Basic | 916 | 957 | |||||||||
Diluted | 927 | 965 |
(In millions) | January 26, 2020 | October 27, 2019 | |||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 3,424 | $ | 3,129 | |||||||
Short-term investments | 536 | 489 | |||||||||
Accounts receivable, net | 2,679 | 2,533 | |||||||||
Inventories | 3,472 | 3,474 | |||||||||
Other current assets | 658 | 581 | |||||||||
Total current assets | 10,769 | 10,206 | |||||||||
Long-term investments | 1,713 | 1,703 | |||||||||
Property, plant and equipment, net | 1,555 | 1,529 | |||||||||
Goodwill | 3,399 | 3,399 | |||||||||
Purchased technology and other intangible assets, net | 142 | 156 | |||||||||
Deferred income taxes and other assets | 2,189 | 2,031 | |||||||||
Total assets | $ | 19,767 | $ | 19,024 | |||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
Current liabilities: | |||||||||||
Current portion of long-term debt | $ | 600 | $ | 600 | |||||||
Accounts payable and accrued expenses | 2,569 | 2,511 | |||||||||
Contract liabilities | 1,400 | 1,336 | |||||||||
Total current liabilities | 4,569 | 4,447 | |||||||||
Long-term debt | 4,714 | 4,713 | |||||||||
Income taxes payable | 1,298 | 1,275 | |||||||||
Other liabilities | 526 | 375 | |||||||||
Total liabilities | 11,107 | 10,810 | |||||||||
Total stockholders’ equity | 8,660 | 8,214 | |||||||||
Total liabilities and stockholders’ equity | $ | 19,767 | $ | 19,024 |
(In millions) | Three Months Ended | ||||||||||
January 26, 2020 | January 27, 2019 | ||||||||||
Cash flows from operating activities: | |||||||||||
Net income | $ | 892 | $ | 771 | |||||||
Adjustments required to reconcile net income to cash provided by operating activities: | |||||||||||
Depreciation and amortization | 94 | 88 | |||||||||
Share-based compensation | 93 | 65 | |||||||||
Deferred income taxes | 30 | 41 | |||||||||
Other | 15 | 1 | |||||||||
Net change in operating assets and liabilities | (137) | (132) | |||||||||
Cash provided by operating activities | 987 | 834 | |||||||||
Cash flows from investing activities: | |||||||||||
Capital expenditures | (102) | (133) | |||||||||
Proceeds from sales and maturities of investments | 368 | 464 | |||||||||
Purchases of investments | (428) | (397) | |||||||||
Cash used in investing activities | (162) | (66) | |||||||||
Cash flows from financing activities: | |||||||||||
Proceeds from common stock issuances | 15 | — | |||||||||
Common stock repurchases | (200) | (750) | |||||||||
Tax withholding payments for vested equity awards | (153) | (74) | |||||||||
Payments of dividends to stockholders | (192) | (192) | |||||||||
Cash used in financing activities | (530) | (1,016) | |||||||||
Increase (decrease) in cash and cash equivalents | 295 | (248) | |||||||||
Cash and cash equivalents — beginning of period | 3,129 | 3,440 | |||||||||
Cash and cash equivalents — end of period | $ | 3,424 | $ | 3,192 | |||||||
Supplemental cash flow information: | |||||||||||
Cash payments for income taxes | $ | 82 | $ | 34 | |||||||
Cash refunds from income taxes | $ | 1 | $ | 8 | |||||||
Cash payments for interest | $ | 34 | $ | 34 |
(In millions) | Q1 FY2020 | Q1 FY2019 | |||||||||
Unallocated net sales | $ | 19 | $ | 16 | |||||||
Unallocated cost of products sold and expenses | (115) | (74) | |||||||||
Share-based compensation | (93) | (65) | |||||||||
Total | $ | (189) | $ | (123) |
Q1 FY2020 | Q1 FY2019 | ||||||||||
Net Sales by Geography (In millions) | |||||||||||
United States | 441 | 450 | |||||||||
% of Total | 10 | % | 12 | % | |||||||
Europe | 153 | 296 | |||||||||
% of Total | 4 | % | 8 | % | |||||||
Japan | 351 | 651 | |||||||||
% of Total | 8 | % | 17 | % | |||||||
Korea | 508 | 572 | |||||||||
% of Total | 12 | % | 15 | % | |||||||
Taiwan | 1,365 | 656 | |||||||||
% of Total | 33 | % | 18 | % | |||||||
Southeast Asia | 72 | 160 | |||||||||
% of Total | 2 | % | 4 | % | |||||||
China | 1,272 | 968 | |||||||||
% of Total | 31 | % | 26 | % | |||||||
Employees (In thousands) | |||||||||||
Regular Full Time | 22.3 | 21.2 |
Three Months Ended | |||||||||||
(In millions, except percentages) | January 26, 2020 | January 27, 2019 | |||||||||
Non-GAAP Adjusted Gross Profit | |||||||||||
Reported gross profit - GAAP basis | $ | 1,858 | $ | 1,665 | |||||||
Certain items associated with acquisitions1 | 9 | 10 | |||||||||
Non-GAAP adjusted gross profit | $ | 1,867 | $ | 1,675 | |||||||
Non-GAAP adjusted gross margin | 44.9 | % | 44.6 | % | |||||||
Non-GAAP Adjusted Operating Income | |||||||||||
Reported operating income - GAAP basis | $ | 1,042 | $ | 908 | |||||||
Certain items associated with acquisitions1 | 13 | 14 | |||||||||
Acquisition integration and deal costs | 13 | 3 | |||||||||
Non-GAAP adjusted operating income | $ | 1,068 | $ | 925 | |||||||
Non-GAAP adjusted operating margin | 25.7 | % | 24.6 | % | |||||||
Non-GAAP Adjusted Net Income | |||||||||||
Reported net income - GAAP basis | $ | 892 | $ | 771 | |||||||
Certain items associated with acquisitions1 | 13 | 14 | |||||||||
Acquisition integration and deal costs | 13 | 3 | |||||||||
Impairment (gain on sale) of strategic investments, net | 2 | (2) | |||||||||
Loss (gain) on strategic investments, net | 2 | (10) | |||||||||
Income tax effect of share-based compensation2 | (33) | (5) | |||||||||
Income tax effect of changes in applicable U.S. tax laws3 | — | (24) | |||||||||
Income tax effects related to amortization of intra-entity intangible asset transfers | 21 | (28) | |||||||||
Resolution of prior years’ income tax filings and other tax items | (1) | 59 | |||||||||
Income tax effect of non-GAAP adjustments4 | (5) | 1 | |||||||||
Non-GAAP adjusted net income | $ | 904 | $ | 779 |
1 | These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets. | ||||
2 | GAAP basis tax benefit related to share-based compensation is recognized ratably over the fiscal year on a non-GAAP basis. | ||||
3 | Charges to income tax provision related to a one-time transition tax as a result of 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 | |||||||||||
(In millions, except per share amounts) | January 26, 2020 | January 27, 2019 | |||||||||
Non-GAAP Adjusted Earnings Per Diluted Share | |||||||||||
Reported earnings per diluted share - GAAP basis | $ | 0.96 | $ | 0.80 | |||||||
Certain items associated with acquisitions | 0.01 | 0.01 | |||||||||
Acquisition integration and deal costs | 0.01 | — | |||||||||
Loss (gain) on strategic investments, net | — | (0.01) | |||||||||
Income tax effect of share-based compensation | (0.03) | — | |||||||||
Income tax effect of changes in applicable U.S. tax laws | — | (0.02) | |||||||||
Income tax effects related to amortization of intra-entity intangible asset transfers | 0.03 | (0.03) | |||||||||
Resolution of prior years’ income tax filings and other tax items | — | 0.06 | |||||||||
Non-GAAP adjusted earnings per diluted share | $ | 0.98 | $ | 0.81 | |||||||
Weighted average number of diluted shares | 927 | 965 |
Three Months Ended | |||||||||||
(In millions, except percentages) | January 26, 2020 | January 27, 2019 | |||||||||
Semiconductor Systems Non-GAAP Adjusted Operating Income | |||||||||||
Reported operating income - GAAP basis | $ | 915 | $ | 631 | |||||||
Certain items associated with acquisitions1 | 10 | 11 | |||||||||
Non-GAAP adjusted operating income | $ | 925 | $ | 642 | |||||||
Non-GAAP adjusted operating margin | 32.9 | % | 28.3 | % | |||||||
AGS Non-GAAP Adjusted Operating Income | |||||||||||
Reported operating income - GAAP basis | $ | 278 | $ | 285 | |||||||
Non-GAAP adjusted operating income | $ | 278 | $ | 285 | |||||||
Non-GAAP adjusted operating margin | 27.9 | % | 29.6 | % | |||||||
Display and Adjacent Markets Non-GAAP Adjusted Operating Income | |||||||||||
Reported operating income - GAAP basis | $ | 38 | $ | 115 | |||||||
Certain items associated with acquisitions1 | 3 | 3 | |||||||||
Non-GAAP adjusted operating income | $ | 41 | $ | 118 | |||||||
Non-GAAP adjusted operating margin | 12.3 | % | 23.3 | % | |||||||
1 | These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets. | ||||
Three Months Ended | |||||
(In millions, except percentages) | January 26, 2020 | ||||
Provision for income taxes - GAAP basis (a) | $ | 113 | |||
Income tax effect of share-based compensation | 33 | ||||
Income tax effects related to amortization of intra-entity intangible asset transfers | (21) | ||||
Resolutions of prior years’ income tax filings and other tax items | 1 | ||||
Income tax effect of non-GAAP adjustments | 5 | ||||
Non-GAAP adjusted provision for income taxes (b) | $ | 131 | |||
Income before income taxes - GAAP basis (c) | $ | 1,005 | |||
Certain items associated with acquisitions | 13 | ||||
Acquisition integration and deal costs | 13 | ||||
Impairment (gain on sale) of strategic investments, net | 2 | ||||
Loss (gain) on strategic investments, net | 2 | ||||
Non-GAAP adjusted income before income taxes (d) | $ | 1,035 | |||
Effective income tax rate - GAAP basis (a/c) | 11.2 | % | |||
Non-GAAP adjusted effective income tax rate (b/d) | 12.7 | % |