(Mark One) | ||
þ
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended May 1, 2011 | ||
or
|
||
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to |
Delaware | 94-1655526 | |
(State or other jurisdiction
of incorporation or organization) |
(I.R.S. Employer Identification No.) |
|
3050 Bowers Avenue, P.O. Box 58039 Santa Clara, California (Address of principal executive offices) |
95052-8039 (Zip Code) |
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o |
Item 1. | Financial Statements |
Three Months Ended | Six Months Ended | |||||||||||||||
May 1, |
May 2, |
May 1, |
May 2, |
|||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(Unaudited) |
||||||||||||||||
(In millions, except per share amounts) | ||||||||||||||||
Net sales
|
$ | 2,862 | $ | 2,296 | $ | 5,549 | $ | 4,144 | ||||||||
Cost of products sold
|
1,673 | 1,369 | 3,224 | 2,506 | ||||||||||||
Gross margin
|
1,189 | 927 | 2,325 | 1,638 | ||||||||||||
Operating expenses:
|
||||||||||||||||
Research, development and engineering
|
297 | 306 | 567 | 575 | ||||||||||||
General and administrative
|
112 | 126 | 224 | 250 | ||||||||||||
Marketing and selling
|
107 | 100 | 216 | 198 | ||||||||||||
Restructuring charges and asset impairments (Note 10)
|
(4 | ) | 9 | (33 | ) | 113 | ||||||||||
Total operating expenses
|
512 | 541 | 974 | 1,136 | ||||||||||||
Income from operations
|
677 | 386 | 1,351 | 502 | ||||||||||||
Impairment of strategic investments
|
| 4 | | 5 | ||||||||||||
Interest expense
|
5 | 5 | 10 | 10 | ||||||||||||
Interest income and other income, net
|
14 | 10 | 25 | 19 | ||||||||||||
Income before income taxes
|
686 | 387 | 1,366 | 506 | ||||||||||||
Provision for income taxes
|
197 | 123 | 371 | 159 | ||||||||||||
Net income
|
$ | 489 | $ | 264 | $ | 995 | $ | 347 | ||||||||
Earnings per share:
|
||||||||||||||||
Basic and Diluted
|
$ | 0.37 | $ | 0.20 | $ | 0.75 | $ | 0.26 | ||||||||
Weighted average number of shares:
|
||||||||||||||||
Basic
|
1,320 | 1,345 | 1,322 | 1,343 | ||||||||||||
Diluted
|
1,333 | 1,352 | 1,333 | 1,351 |
2
May 1, |
October 31, |
|||||||
2011 | 2010 | |||||||
(In millions) | ||||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents (Notes 3 and 4)
|
$ | 2,558 | $ | 1,858 | ||||
Short-term investments (Notes 3 and 4)
|
750 | 727 | ||||||
Accounts receivable, net (Note 6)
|
1,916 | 1,831 | ||||||
Inventories (Note 7)
|
1,794 | 1,547 | ||||||
Deferred income taxes, net
|
545 | 513 | ||||||
Prepaid income taxes
|
110 | | ||||||
Other current assets
|
271 | 289 | ||||||
Total current assets
|
7,944 | 6,765 | ||||||
Long-term investments (Notes 3 and 4)
|
1,269 | 1,307 | ||||||
Property, plant and equipment, net (Note 7)
|
898 | 963 | ||||||
Goodwill (Note 8)
|
1,336 | 1,336 | ||||||
Purchased technology and other intangible assets, net
(Note 8)
|
236 | 287 | ||||||
Deferred income taxes and other assets
|
274 | 285 | ||||||
Total assets
|
$ | 11,957 | $ | 10,943 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY | ||||||||
Current liabilities:
|
||||||||
Current portion of long-term debt
|
$ | 1 | $ | 1 | ||||
Accounts payable and accrued expenses (Note 7)
|
1,760 | 1,766 | ||||||
Customer deposits and deferred revenue (Note 7)
|
1,279 | 847 | ||||||
Income taxes payable
|
211 | 274 | ||||||
Total current liabilities
|
3,251 | 2,888 | ||||||
Long-term debt
|
204 | 204 | ||||||
Employee benefits and other liabilities (Note 12)
|
320 | 315 | ||||||
Total liabilities
|
3,775 | 3,407 | ||||||
Commitments and contingencies (Note 14)
|
||||||||
Stockholders equity (Note 11):
|
||||||||
Common stock
|
13 | 13 | ||||||
Additional paid-in capital
|
5,524 | 5,406 | ||||||
Retained earnings
|
12,308 | 11,511 | ||||||
Treasury stock
|
(9,664 | ) | (9,396 | ) | ||||
Accumulated other comprehensive income
|
1 | 2 | ||||||
Total stockholders equity
|
8,182 | 7,536 | ||||||
Total liabilities and stockholders equity
|
$ | 11,957 | $ | 10,943 | ||||
* | Amounts as of May 1, 2011 are unaudited. Amounts as of October 31, 2010 are derived from the October 31, 2010 audited consolidated financial statements. |
3
Accumulated |
||||||||||||||||||||||||||||||||
Additional |
Other |
|||||||||||||||||||||||||||||||
Common Stock |
Paid-In |
Retained |
Treasury Stock |
Comprehensive |
||||||||||||||||||||||||||||
Six Months Ended May 1, 2011 | Shares | Amount | Capital | Earnings | Shares | Amount | Income | Total | ||||||||||||||||||||||||
(Unaudited) |
||||||||||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||
Balance at October 31, 2010
|
1,328 | $ | 13 | $ | 5,406 | $ | 11,511 | 537 | $ | (9,396 | ) | $ | 2 | $ | 7,536 | |||||||||||||||||
Components of comprehensive income, net of tax:
|
||||||||||||||||||||||||||||||||
Net income
|
| | | 995 | | | | 995 | ||||||||||||||||||||||||
Change in unrealized net gain on investments
|
| | | | | | (2 | ) | (2 | ) | ||||||||||||||||||||||
Change in unrealized net gain on derivative instruments
|
| | | | | | 2 | 2 | ||||||||||||||||||||||||
Change in defined benefit plan liability
|
| | | | | | (1 | ) | (1 | ) | ||||||||||||||||||||||
Comprehensive income
|
994 | |||||||||||||||||||||||||||||||
Dividends
|
| | | (198 | ) | | | | (198 | ) | ||||||||||||||||||||||
Share-based compensation
|
| | 72 | | | | | 72 | ||||||||||||||||||||||||
Issuance under stock plans, net of a tax benefit of
$4 million and other
|
9 | | 46 | | | | | 46 | ||||||||||||||||||||||||
Common stock repurchases
|
(19 | ) | | | | 19 | (268 | ) | | (268 | ) | |||||||||||||||||||||
Balance at May 1, 2011
|
1,318 | $ | 13 | $ | 5,524 | $ | 12,308 | 556 | $ | (9,664 | ) | $ | 1 | $ | 8,182 | |||||||||||||||||
4
Six Months Ended | ||||||||
May 1, |
May 2, |
|||||||
2011 | 2010 | |||||||
(Unaudited) |
||||||||
(In millions) | ||||||||
Cash flows from operating activities:
|
||||||||
Net income
|
$ | 995 | $ | 347 | ||||
Adjustments required to reconcile net income to cash provided by
operating activities:
|
||||||||
Depreciation and amortization
|
128 | 163 | ||||||
Loss on fixed asset retirements
|
1 | 12 | ||||||
Provision for bad debts
|
| 6 | ||||||
Restructuring charges and asset impairments
|
(33 | ) | 113 | |||||
Deferred income taxes
|
(17 | ) | (75 | ) | ||||
Net recognized loss on investments
|
5 | 14 | ||||||
Share-based compensation
|
72 | 62 | ||||||
Changes in operating assets and liabilities, net of amounts
acquired:
|
||||||||
Accounts receivable
|
(85 | ) | (365 | ) | ||||
Inventories
|
(246 | ) | (1 | ) | ||||
Prepaid income taxes
|
(110 | ) | 185 | |||||
Other current assets
|
20 | (1 | ) | |||||
Other assets
|
(2 | ) | (9 | ) | ||||
Accounts payable and accrued expenses
|
25 | 211 | ||||||
Customer deposits and deferred revenue
|
432 | 111 | ||||||
Income taxes payable
|
(64 | ) | 138 | |||||
Employee benefits and other liabilities
|
8 | (12 | ) | |||||
Cash provided by operating activities
|
1,129 | 899 | ||||||
Cash flows from investing activities:
|
||||||||
Capital expenditures
|
(81 | ) | (98 | ) | ||||
Proceeds from sale of facility
|
39 | | ||||||
Cash paid for acquisition, net of cash acquired
|
| (323 | ) | |||||
Proceeds from sales and maturities of investments
|
904 | 540 | ||||||
Purchases of investments
|
(896 | ) | (829 | ) | ||||
Cash used in investing activities
|
(34 | ) | (710 | ) | ||||
Cash flows from financing activities:
|
||||||||
Debt repayments, net
|
(1 | ) | (5 | ) | ||||
Proceeds from common stock issuances
|
59 | 97 | ||||||
Common stock repurchases
|
(268 | ) | (100 | ) | ||||
Payment of dividends to stockholders
|
(186 | ) | (161 | ) | ||||
Cash used in financing activities
|
(396 | ) | (169 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents
|
1 | | ||||||
Increase in cash and cash equivalents
|
700 | 20 | ||||||
Cash and cash equivalents beginning of period
|
1,858 | 1,576 | ||||||
Cash and cash equivalents end of period
|
$ | 2,558 | $ | 1,596 | ||||
Supplemental cash flow information:
|
||||||||
Cash payments for income taxes
|
$ | 556 | $ | 98 | ||||
Cash refunds for income taxes
|
$ | 2 | $ | 196 | ||||
Cash payments for interest
|
$ | 7 | $ | 7 |
5
Note 1 | Basis of Presentation |
6
Note 2 | Earnings Per Share |
7
Three Months Ended | Six Months Ended | |||||||||||||||
May 1, |
May 2, |
May 1, |
May 2, |
|||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In millions, except per share amounts) | ||||||||||||||||
Numerator:
|
||||||||||||||||
Net income
|
$ | 489 | $ | 264 | $ | 995 | $ | 347 | ||||||||
Denominator:
|
||||||||||||||||
Weighted average common shares outstanding
|
1,320 | 1,345 | 1,322 | 1,343 | ||||||||||||
Effect of dilutive stock options, restricted stock units and
employee stock purchase plans shares
|
13 | 7 | 11 | 8 | ||||||||||||
Denominator for diluted income per share
|
1,333 | 1,352 | 1,333 | 1,351 | ||||||||||||
Basic and diluted earnings per share
|
$ | 0.37 | $ | 0.20 | $ | 0.75 | $ | 0.26 | ||||||||
Potentially dilutive securities
|
18 | 40 | 18 | 43 |
8
Note 3 | Cash, Cash Equivalents and Investments |
Gross |
Gross |
|||||||||||||||
Unrealized |
Unrealized |
Estimated |
||||||||||||||
May 1, 2011 | Cost | Gains | Losses | Fair Value | ||||||||||||
(In millions) | ||||||||||||||||
Cash
|
$ | 478 | $ | | $ | | $ | 478 | ||||||||
Cash equivalents:
|
||||||||||||||||
Money market funds
|
1,746 | | | 1,746 | ||||||||||||
U.S. commercial paper, corporate bonds and medium-term notes
|
169 | | | 169 | ||||||||||||
U.S. Treasury and agency securities
|
150 | | | 150 | ||||||||||||
Obligations of states and political subdivisions
|
15 | | | 15 | ||||||||||||
Total Cash equivalents
|
2,080 | | | 2,080 | ||||||||||||
Total Cash and Cash equivalents
|
$ | 2,558 | $ | | $ | | $ | 2,558 | ||||||||
Short-term and long-term investments:
|
||||||||||||||||
U.S. Treasury and agency securities
|
$ | 543 | $ | 3 | $ | | $ | 546 | ||||||||
Obligations of states and political subdivisions
|
516 | 3 | | 519 | ||||||||||||
U.S. commercial paper, corporate bonds and medium-term notes
|
456 | 4 | | 460 | ||||||||||||
Other debt securities*
|
400 | 3 | 1 | 402 | ||||||||||||
Total fixed income securities
|
1,915 | 13 | 1 | 1,927 | ||||||||||||
Publicly traded equity securities
|
8 | 25 | | 33 | ||||||||||||
Equity investments in privately-held companies
|
59 | | | 59 | ||||||||||||
Total short-term and long-term investments
|
$ | 1,982 | $ | 38 | $ | 1 | $ | 2,019 | ||||||||
Total Cash, Cash equivalents and Investments
|
$ | 4,540 | $ | 38 | $ | 1 | $ | 4,577 | ||||||||
9
Gross |
Gross |
|||||||||||||||
Unrealized |
Unrealized |
Estimated |
||||||||||||||
October 31, 2010 | Cost | Gains | Losses | Fair Value | ||||||||||||
(In millions) | ||||||||||||||||
Cash
|
$ | 701 | $ | | $ | | $ | 701 | ||||||||
Cash equivalents:
|
||||||||||||||||
Money market funds
|
1,139 | | | 1,139 | ||||||||||||
Obligations of states and political subdivisions
|
18 | | | 18 | ||||||||||||
Total Cash equivalents
|
1,157 | | | 1,157 | ||||||||||||
Total Cash and Cash equivalents
|
$ | 1,858 | $ | | $ | | $ | 1,858 | ||||||||
Short-term and long-term investments:
|
||||||||||||||||
U.S. Treasury and agency securities
|
$ | 665 | $ | 8 | $ | | $ | 673 | ||||||||
Obligations of states and political subdivisions
|
500 | 5 | | 505 | ||||||||||||
U.S. commercial paper, corporate bonds and medium-term notes
|
502 | 7 | | 509 | ||||||||||||
Other debt securities*
|
261 | 3 | 1 | 263 | ||||||||||||
Total fixed income securities
|
1,928 | 23 | 1 | 1,950 | ||||||||||||
Publicly traded equity securities
|
9 | 16 | | 25 | ||||||||||||
Equity investments in privately-held companies
|
59 | | | 59 | ||||||||||||
Total short-term and long-term investments
|
$ | 1,996 | $ | 39 | $ | 1 | $ | 2,034 | ||||||||
Total Cash, Cash equivalents and Investments
|
$ | 3,854 | $ | 39 | $ | 1 | $ | 3,892 | ||||||||
* | Other debt securities consist primarily of investment grade asset-backed and mortgage-backed securities. |
Estimated |
||||||||
Cost | Fair Value | |||||||
(In millions) | ||||||||
Due in one year or less
|
$ | 710 | $ | 712 | ||||
Due after one through five years
|
803 | 811 | ||||||
Due after five years
|
3 | 3 | ||||||
No single maturity date
|
466 | 493 | ||||||
$ | 1,982 | $ | 2,019 | |||||
10
Three Months Ended | Six Months Ended | |||||||||||||||
May 1, |
May 2, |
May 1, |
May 2, |
|||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Gross realized gains
|
$ | 8 | $ | 2 | $ | 13 | $ | 2 | ||||||||
Gross realized losses
|
$ | 1 | $ | | $ | 1 | $ | 1 |
In Loss Position for |
||||||||||||||||
Less Than 12 Months | Total | |||||||||||||||
Gross |
Gross |
|||||||||||||||
Unrealized |
Unrealized |
|||||||||||||||
Fair Value | Losses | Fair Value | Losses | |||||||||||||
(In millions) | ||||||||||||||||
Other debt securities
|
$ | 127 | $ | 1 | $ | 127 | $ | 1 | ||||||||
Total
|
$ | 127 | $ | 1 | $ | 127 | $ | 1 | ||||||||
Note 4 | Fair Value Measurements |
11
| Level 1 Quoted prices in active markets for identical assets or liabilities; | |
| Level 2 Observable 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. |
12
May 1, 2011 | October 31, 2010 | |||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||
(In millions) | (In millions) | |||||||||||||||||||||||||||||||
Assets:
|
||||||||||||||||||||||||||||||||
Money market funds
|
$ | 1,746 | $ | | $ | | $ | 1,746 | $ | 1,139 | $ | | $ | | $ | 1,139 | ||||||||||||||||
U.S. Treasury and agency securities
|
84 | 612 | | 696 | 153 | 520 | | 673 | ||||||||||||||||||||||||
U.S. commercial paper, corporate bonds and medium-term notes
|
| 629 | | 629 | | 509 | | 509 | ||||||||||||||||||||||||
Obligations of states and political subdivisions
|
| 534 | | 534 | | 523 | | 523 | ||||||||||||||||||||||||
Other debt securities
|
| 402 | | 402 | | 263 | | 263 | ||||||||||||||||||||||||
Publicly traded equity securities
|
33 | | | 33 | 25 | | | 25 | ||||||||||||||||||||||||
Foreign exchange derivative assets
|
| 10 | | 10 | | 6 | | 6 | ||||||||||||||||||||||||
Total
|
$ | 1,863 | $ | 2,187 | $ | | $ | 4,050 | $ | 1,317 | $ | 1,821 | $ | | $ | 3,138 | ||||||||||||||||
Liabilities:
|
||||||||||||||||||||||||||||||||
Foreign exchange derivative liabilities
|
$ | | $ | | $ | | $ | | $ | | $ | (1 | ) | $ | | $ | (1 | ) | ||||||||||||||
Total
|
$ | | $ | | $ | | $ | | $ | | $ | (1 | ) | $ | | $ | (1 | ) | ||||||||||||||
13
Total |
Total |
|||||||||||||||||||
Impairment for |
Impairment for |
|||||||||||||||||||
the Three |
the Six Months |
|||||||||||||||||||
Months Ended |
Ended |
|||||||||||||||||||
Level 1 | Level 2 | Level 3 | May 1, 2011 | May 1, 2011 | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Equity investments in privately-held companies measured at fair
value on a non-recurring basis during fiscal 2011
|
$ | | $ | | $ | 13 | $ | | $ | | ||||||||||
Total |
Total |
|||||||||||||||||||
Impairment for |
Impairment for |
|||||||||||||||||||
the Three |
the Six Months |
|||||||||||||||||||
Months Ended |
Ended |
|||||||||||||||||||
Level 1 | Level 2 | Level 3 | May 2, 2010 | May 2, 2010 | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Equity investments in privately-held companies measured at fair
value on a non-recurring basis during fiscal 2010
|
$ | | $ | | $ | 16 | $ | 4 | $ | 5 | ||||||||||
Note 5 | Derivative Instruments and Hedging Activities |
14
Asset Derivatives | Liability Derivatives | |||||||||||||||||||
Balance Sheet |
May 1, |
Balance Sheet |
May 1, |
|||||||||||||||||
Location | 2011 | October 31, 2010 | Location | 2011 | October 31, 2010 | |||||||||||||||
(In millions) | (In millions) | |||||||||||||||||||
Derivatives Designated as Hedging Instruments
|
||||||||||||||||||||
Foreign exchange contracts
|
Other current assets |
$ | 9 | $ | 5 |
Accrued expenses |
$ | | $ | 1 | ||||||||||
Derivatives Not Designated as Hedging Instruments
|
||||||||||||||||||||
Foreign exchange contracts
|
Other current assets |
$ | 1 | $ | 1 |
Accrued expenses |
$ | | $ | | ||||||||||
Total derivatives
|
$ | 10 | $ | 6 | $ | | $ | 1 | ||||||||||||
15
Three Months Ended May 1, 2011 | Three Months Ended May 2, 2010 | |||||||||||||||||||||||||
Ineffective Portion |
Ineffective Portion |
|||||||||||||||||||||||||
and Amount |
and Amount |
|||||||||||||||||||||||||
Excluded from |
Excluded from |
|||||||||||||||||||||||||
Effectiveness |
Effectiveness |
|||||||||||||||||||||||||
Location of Gain |
Effective Portion | Testing | Effective Portion | Testing | ||||||||||||||||||||||
or (Loss) |
Gain or (Loss) |
Gain or (Loss) |
Gain or (Loss) |
Gain or (Loss) |
Gain or (Loss) |
Gain or (Loss) |
||||||||||||||||||||
Reclassified from |
Recognized in |
Reclassified from |
Recognized in |
Recognized in |
Reclassified from |
Recognized in |
||||||||||||||||||||
AOCI into Income | AOCI | AOCI into Income | Income | AOCI | AOCI into Income | Income | ||||||||||||||||||||
(In millions) | (In millions) | |||||||||||||||||||||||||
Derivatives in Cash Flow Hedging Relationships
|
||||||||||||||||||||||||||
Foreign exchange contracts
|
Cost of products sold |
$ | 8 | $ | 1 | $ | (1 | ) | $ | 1 | $ | | $ | | ||||||||||||
Foreign exchange contracts
|
General and administrative |
| 2 | (1 | ) | | (2 | ) | | |||||||||||||||||
Total
|
$ | 8 | $ | 3 | $ | (2 | ) | $ | 1 | $ | (2 | ) | $ | | ||||||||||||
Six Months Ended May 1, 2011 | Six Months Ended May 2, 2010 | |||||||||||||||||||||||||
Ineffective Portion |
Ineffective Portion |
|||||||||||||||||||||||||
and Amount |
and Amount |
|||||||||||||||||||||||||
Excluded from |
Excluded from |
|||||||||||||||||||||||||
Effectiveness |
Effectiveness |
|||||||||||||||||||||||||
Location of Gain |
Effective Portion | Testing | Effective Portion | Testing | ||||||||||||||||||||||
or (Loss) |
Gain or (Loss) |
Gain or (Loss) |
Gain or (Loss) |
Gain or (Loss) |
Gain or (Loss) |
Gain or (Loss) |
||||||||||||||||||||
Reclassified from |
Recognized in |
Reclassified from |
Recognized in |
Recognized in |
Reclassified from |
Recognized in |
||||||||||||||||||||
AOCI into Income | AOCI | AOCI into Income | Income | AOCI | AOCI into Income | Income | ||||||||||||||||||||
(In millions) | (In millions) | |||||||||||||||||||||||||
Derivatives in Cash Flow Hedging Relationships
|
||||||||||||||||||||||||||
Foreign exchange contracts
|
Cost of products sold |
$ | 12 | $ | 5 | $ | (3 | ) | $ | (2 | ) | $ | (1 | ) | $ | | ||||||||||
Foreign exchange contracts
|
General and administrative |
| 3 | (1 | ) | | (1 | ) | (1 | ) | ||||||||||||||||
Total
|
$ | 12 | $ | 8 | $ | (4 | ) | $ | (2 | ) | $ | (2 | ) | $ | (1 | ) | ||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||
May 1, |
May 2, |
May 1, |
May 2, |
|||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||||
Location of Gain |
||||||||||||||||||
or (Loss) |
||||||||||||||||||
Recognized in |
Amount of Gain or (Loss) |
Amount of Gain or (Loss) |
||||||||||||||||
Income | Recognized in Income | Recognized in Income | ||||||||||||||||
(In millions) | (In millions) | |||||||||||||||||
Derivatives Not Designated as Hedging Instruments
|
||||||||||||||||||
Foreign exchange contracts
|
General and administrative |
$ | 1 | $ | 7 | $ | 3 | $ | (4 | ) | ||||||||
Total
|
$ | 1 | $ | 7 | $ | 3 | $ | (4 | ) | |||||||||
16
Note 6 | Accounts Receivable, Net |
Three Months Ended | Six Months Ended | |||||||||||||||
May 1, |
May 2, |
May 1, |
May 2, |
|||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In millions) | ||||||||||||||||
Discounted letters of credit
|
$ | 50 | $ | 26 | $ | 173 | $ | 53 | ||||||||
Factored accounts receivable and discounted promissory notes
|
19 | 24 | 55 | 50 | ||||||||||||
Total
|
$ | 69 | $ | 50 | $ | 228 | $ | 103 | ||||||||
Note 7 | Balance Sheet Detail |
May 1, |
October 31, |
|||||||
2011 | 2010 | |||||||
(In millions) | ||||||||
Inventories
|
||||||||
Customer service spares
|
$ | 313 | $ | 324 | ||||
Raw materials
|
413 | 260 | ||||||
Work-in-process
|
476 | 500 | ||||||
Finished goods
|
592 | 463 | ||||||
$ | 1,794 | $ | 1,547 | |||||
17
May 1, |
October 31, |
|||||||||||
Useful Life | 2011 | 2010 | ||||||||||
(In years) | (In millions) | |||||||||||
Property, Plant and Equipment, Net
|
||||||||||||
Land and improvements
|
$ | 204 | $ | 227 | ||||||||
Buildings and improvements
|
3-30 | 1,184 | 1,234 | |||||||||
Demonstration and manufacturing equipment
|
3-5 | 677 | 670 | |||||||||
Furniture, fixtures and other equipment
|
3-15 | 705 | 719 | |||||||||
Construction in progress
|
24 | 19 | ||||||||||
Gross property, plant and equipment
|
2,794 | 2,869 | ||||||||||
Accumulated depreciation
|
(1,896 | ) | (1,906 | ) | ||||||||
$ | 898 | $ | 963 | |||||||||
Accounts Payable and Accrued Expenses
|
||||||||||||
Accounts payable
|
$ | 814 | $ | 658 | ||||||||
Compensation and employee benefits
|
377 | 435 | ||||||||||
Warranty
|
184 | 155 | ||||||||||
Dividends payable
|
105 | 93 | ||||||||||
Other accrued taxes
|
60 | 99 | ||||||||||
Restructuring reserve
|
23 | 104 | ||||||||||
Other
|
197 | 222 | ||||||||||
$ | 1,760 | $ | 1,766 | |||||||||
Customer Deposits and Deferred Revenue
|
||||||||||||
Customer deposits
|
$ | 475 | $ | 407 | ||||||||
Deferred revenue
|
804 | 440 | ||||||||||
$ | 1,279 | $ | 847 | |||||||||
Note 8 | Goodwill, Purchased Technology and Other Intangible Assets |
18
May 1, 2011 | October 31, 2010 | |||||||||||||||||||||||
Other |
Other |
|||||||||||||||||||||||
Intangible |
Intangible |
|||||||||||||||||||||||
Goodwill | Assets | Total | Goodwill | Assets | Total | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Silicon Systems Group
|
$ | 381 | $ | | $ | 381 | $ | 381 | $ | | $ | 381 | ||||||||||||
Applied Global Services
|
194 | | 194 | 177 | 18 | 195 | ||||||||||||||||||
Display
|
116 | | 116 | 116 | | 116 | ||||||||||||||||||
Energy and Environmental Solutions
|
645 | | 645 | 662 | | 662 | ||||||||||||||||||
Carrying amount
|
$ | 1,336 | $ | | $ | 1,336 | $ | 1,336 | $ | 18 | $ | 1,354 | ||||||||||||
19
May 1, 2011 | October 31, 2010 | |||||||||||||||||||||||
Other |
Other |
|||||||||||||||||||||||
Purchased |
Intangible |
Purchased |
Intangible |
|||||||||||||||||||||
Technology | Assets | Total | Technology | Assets | Total | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Silicon Systems Group
|
$ | 310 | $ | 20 | $ | 330 | $ | 310 | $ | 20 | $ | 330 | ||||||||||||
Applied Global Services
|
28 | 50 | 78 | 32 | 61 | 93 | ||||||||||||||||||
Display
|
110 | 33 | 143 | 110 | 33 | 143 | ||||||||||||||||||
Energy and Environmental Solutions
|
105 | 232 | 337 | 105 | 232 | 337 | ||||||||||||||||||
Gross carrying amount
|
$ | 553 | $ | 335 | $ | 888 | $ | 557 | $ | 346 | $ | 903 | ||||||||||||
Silicon Systems Group
|
$ | (252 | ) | $ | (8 | ) | $ | (260 | ) | $ | (247 | ) | $ | (6 | ) | $ | (253 | ) | ||||||
Applied Global Services
|
(18 | ) | (40 | ) | (58 | ) | (19 | ) | (43 | ) | (62 | ) | ||||||||||||
Display
|
(99 | ) | (23 | ) | (122 | ) | (96 | ) | (23 | ) | (119 | ) | ||||||||||||
Energy and Environmental Solutions
|
(42 | ) | (170 | ) | (212 | ) | (37 | ) | (163 | ) | (200 | ) | ||||||||||||
Accumulated amortization
|
$ | (411 | ) | $ | (241 | ) | $ | (652 | ) | $ | (399 | ) | $ | (235 | ) | $ | (634 | ) | ||||||
Carrying amount
|
$ | 142 | $ | 94 | $ | 236 | $ | 158 | $ | 111 | $ | 269 | ||||||||||||
20
Amortization Expense | ||||
(In millions) | ||||
2011
|
$ | 25 | ||
2012
|
50 | |||
2013
|
48 | |||
2014
|
40 | |||
2015
|
25 | |||
Thereafter
|
48 | |||
$ | 236 | |||
Note 9 | Borrowing Facilities |
Note 10 | Restructuring and Asset Impairments |
21
Severance | ||||
(In millions) | ||||
Balance, October 31, 2010
|
$ | 99 | ||
Consumption of reserves
|
(14 | ) | ||
Adjustment of restructuring reserves
|
(32 | ) | ||
Balance, January 30, 2011
|
53 | |||
Consumption of reserves
|
(7 | ) | ||
Adjustment of restructuring reserves
|
(28 | ) | ||
Balance, May 1, 2011
|
$ | 18 | ||
Note 11 | Stockholders Equity, Comprehensive Income and Share-Based Compensation |
Three Months Ended | Six Months Ended | |||||||||||||||
May 1, |
May 2, |
May 1, |
May 2, |
|||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In millions) | ||||||||||||||||
Net income
|
$ | 489 | $ | 264 | $ | 995 | $ | 347 | ||||||||
Change in unrealized net gain on investments
|
(1 | ) | | (2 | ) | 2 | ||||||||||
Change in unrealized net gain on derivative instruments
|
||||||||||||||||
qualifying as cash flow hedges
|
3 | 2 | 2 | 1 | ||||||||||||
Change in defined benefit plan liability
|
(1 | ) | | (1 | ) | | ||||||||||
Foreign currency translation adjustments
|
| (2 | ) | | (2 | ) | ||||||||||
Comprehensive income
|
$ | 490 | $ | 264 | $ | 994 | $ | 348 | ||||||||
22
May 1, |
October 31, |
|||||||
2011 | 2010 | |||||||
(In millions) | ||||||||
Pension liability
|
$ | (40 | ) | $ | (39 | ) | ||
Unrealized gain on investments, net
|
23 | 25 | ||||||
Unrealized gain on derivative instruments qualifying as cash
flow hedges
|
6 | 4 | ||||||
Cumulative translation adjustments
|
12 | 12 | ||||||
$ | 1 | $ | 2 | |||||
23
Three Months Ended | Six Months Ended | |||||||||||||||
May 1, |
May 2, |
May 1, |
May 2, |
|||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In millions) | (In millions) | |||||||||||||||
Equity-based compensation
|
$ | 38 | $ | 29 | $ | 72 | $ | 62 | ||||||||
Tax benefit recognized
|
$ | 11 | $ | 9 | $ | 21 | $ | 18 |
Three Months Ended | Six Months Ended | |||||||||||||||
May 1, |
May 2, |
May 1, |
May 2, |
|||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In millions) | (In millions) | |||||||||||||||
Cost of products sold
|
$ | 13 | $ | 8 | $ | 24 | $ | 13 | ||||||||
Research, development, and engineering
|
12 | 10 | 22 | 22 | ||||||||||||
General and administrative
|
9 | 7 | 18 | 16 | ||||||||||||
Marketing and selling
|
4 | 4 | 8 | 11 | ||||||||||||
Total share-based compensation
|
$ | 38 | $ | 29 | $ | 72 | $ | 62 | ||||||||
24
Weighted |
||||||||
Average |
||||||||
Exercise |
||||||||
Shares | Price | |||||||
(In millions, except per share amounts) | ||||||||
Outstanding, at October 31, 2010
|
51 | $ | 15.04 | |||||
Granted
|
| $ | | |||||
Exercised
|
(4 | ) | $ | 9.39 | ||||
Canceled and forfeited
|
(13 | ) | $ | 21.16 | ||||
Outstanding at May 1, 2011
|
34 | $ | 13.21 | |||||
Exercisable at May 1, 2011
|
28 | $ | 14.30 |
25
Weighted |
Weighted |
|||||||||||
Average |
Average |
|||||||||||
Grant Date |
Remaining |
|||||||||||
Shares | Fair Value | Contractual Term | ||||||||||
(In millions, except per share amounts) | ||||||||||||
Non-vested restricted stock units and restricted stock at
October 31, 2010
|
18 | $ | 13.33 | 2.8 Years | ||||||||
Granted
|
14 | $ | 12.66 | |||||||||
Vested
|
(3 | ) | $ | 13.59 | ||||||||
Canceled
|
(1 | ) | $ | 13.27 | ||||||||
Non-vested restricted stock units and restricted stock at
May 1, 2011
|
28 | $ | 12.96 | 3.0 Years | ||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
May 1, |
May 2, |
May 1, |
May 2, |
|||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
ESPP:
|
||||||||||||||||
Dividend yield
|
1.98 | % | 2.24 | % | 1.98 | % | 2.24 | % | ||||||||
Expected volatility
|
27 | % | 33 | % | 27 | % | 33 | % | ||||||||
Risk-free interest rate
|
0.17 | % | 0.18 | % | 0.17 | % | 0.18 | % | ||||||||
Expected life (in years)
|
0.5 | 0.5 | 0.5 | 0.5 |
Note 12 | Employee Benefit Plans |
26
Three Months Ended | Six Months Ended | |||||||||||||||
May 1, |
May 2, |
May 1, |
May 2, |
|||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In millions) | (In millions) | |||||||||||||||
Service cost
|
$ | 4 | $ | 3 | $ | 8 | $ | 7 | ||||||||
Interest cost
|
3 | 4 | 7 | 7 | ||||||||||||
Expected return on plan assets
|
(3 | ) | (2 | ) | (6 | ) | (4 | ) | ||||||||
Amortization of actuarial loss
|
1 | | 1 | | ||||||||||||
Net periodic benefit cost
|
$ | 5 | $ | 5 | $ | 10 | $ | 10 | ||||||||
Note 13 | Income Taxes |
27
Note 14 | Commitments and Contingencies |
Three Months Ended | Six Months Ended | |||||||||||||||
May 1, |
May 2, |
May 1, |
May 2, |
|||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In millions) | ||||||||||||||||
Beginning balance
|
$ | 173 | $ | 137 | $ | 155 | $ | 117 | ||||||||
Provisions for warranty
|
48 | 32 | 99 | 66 | ||||||||||||
Consumption of reserves
|
(37 | ) | (29 | ) | (70 | ) | (43 | ) | ||||||||
Ending balance
|
$ | 184 | $ | 140 | $ | 184 | $ | 140 | ||||||||
28
29
Note 15 | Industry Segment Operations |
30
Three Months Ended | Six Months Ended | |||||||||||||||
Operating |
Operating |
|||||||||||||||
Net Sales | Income (Loss) | Net Sales | Income (Loss) | |||||||||||||
(In millions) | (In millions) | |||||||||||||||
May 1, 2011:
|
||||||||||||||||
Silicon Systems Group
|
$ | 1,453 | $ | 491 | $ | 2,950 | $ | 1,034 | ||||||||
Applied Global Services
|
614 | 91 | 1,181 | 176 | ||||||||||||
Display
|
158 | 31 | 305 | 58 | ||||||||||||
Energy and Environmental Solutions
|
637 | 170 | 1,113 | 313 | ||||||||||||
Total Segment
|
$ | 2,862 | $ | 783 | $ | 5,549 | $ | 1,581 | ||||||||
May 2, 2010:
|
||||||||||||||||
Silicon Systems Group
|
$ | 1,404 | $ | 498 | $ | 2,374 | $ | 803 | ||||||||
Applied Global Services
|
456 | 89 | 881 | 153 | ||||||||||||
Display
|
270 | 90 | 402 | 115 | ||||||||||||
Energy and Environmental Solutions
|
166 | (145 | ) | 487 | (181 | ) | ||||||||||
Total Segment
|
$ | 2,296 | $ | 532 | $ | 4,144 | $ | 890 | ||||||||
31
Three Months Ended | Six Months Ended | |||||||||||||||
May 1, |
May 2, |
May 1, |
May 2, |
|||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In millions) | (In millions) | |||||||||||||||
Total segment operating income
|
$ | 783 | $ | 532 | $ | 1,581 | $ | 890 | ||||||||
Corporate and unallocated costs
|
(126 | ) | (137 | ) | (251 | ) | (275 | ) | ||||||||
Restructuring and asset impairment benefit (charges), net
|
20 | (9 | ) | 21 | (113 | ) | ||||||||||
Income from operations
|
$ | 677 | $ | 386 | $ | 1,351 | $ | 502 | ||||||||
May 1, |
||||
2011 | ||||
Taiwan Semiconductor Manufacturing Company Limited
|
13 | % | ||
Samsung Electronics Co., Ltd.
|
13 | % |
May 1, |
||||
2011 | ||||
Taiwan Semiconductor Manufacturing Company Limited
|
18 | % | ||
Samsung Electronics Co., Ltd.
|
10 | % |
Note 16 | Subsequent Event |
32
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||
May 1, |
May 2, |
Change |
May 1, |
May 2, |
Change |
|||||||||||||||||||
2011 | 2010 | 2011 over 2010 | 2011 | 2010 | 2011 over 2010 | |||||||||||||||||||
(In millions, except percentages) | ||||||||||||||||||||||||
New orders
|
$ | 3,185 | $ | 2,533 | $ | 652 | $ | 6,157 | $ | 4,498 | $ | 1,659 | ||||||||||||
Net sales
|
$ | 2,862 | $ | 2,296 | $ | 566 | $ | 5,549 | $ | 4,144 | $ | 1,405 | ||||||||||||
Gross margin
|
$ | 1,189 | $ | 927 | $ | 262 | $ | 2,325 | $ | 1,638 | $ | 687 | ||||||||||||
Gross margin percent
|
41 | % | 40 | % | 1 point | 42 | % | 40 | % | 2 points | ||||||||||||||
Operating income
|
$ | 677 | $ | 386 | $ | 291 | $ | 1,351 | $ | 502 | $ | 849 | ||||||||||||
Operating margin percent
|
24 | % | 17 | % | 7 points | 24 | % | 12 | % | 12 points | ||||||||||||||
Net income
|
$ | 489 | $ | 264 | $ | 225 | $ | 995 | $ | 347 | $ | 648 | ||||||||||||
Earnings per share
|
$ | 0.37 | $ | 0.20 | $ | 0.17 | $ | 0.75 | $ | 0.26 | $ | 0.49 |
33
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||||||||||
May 1, |
Change |
May 2, |
May 1, |
Change |
May 2, |
|||||||||||||||||||||||||||||||||||
2011 | 2011 over 2010 | 2010 | 2011 | 2011 over 2010 | 2010 | |||||||||||||||||||||||||||||||||||
($) | (%) | (%) | ($) | (%) | ($) | (%) | (%) | ($) | (%) | |||||||||||||||||||||||||||||||
(In millions, except percentages and per share amounts) | ||||||||||||||||||||||||||||||||||||||||
Taiwan
|
782 | 25 | 19 | 655 | 26 | 1,528 | 25 | 16 | 1,314 | 29 | ||||||||||||||||||||||||||||||
China
|
668 | 21 | 21 | 551 | 22 | 1,322 | 21 | 73 | 766 | 17 | ||||||||||||||||||||||||||||||
Korea
|
367 | 12 | (35 | ) | 561 | 22 | 593 | 10 | (37 | ) | 948 | 21 | ||||||||||||||||||||||||||||
Japan
|
269 | 8 | 70 | 158 | 6 | 456 | 7 | 36 | 335 | 8 | ||||||||||||||||||||||||||||||
Southeast Asia
|
143 | 4 | (6 | ) | 152 | 6 | 278 | 4 | | 277 | 6 | |||||||||||||||||||||||||||||
Asia Pacific
|
2,229 | 70 | 7 | 2,077 | 82 | 4,177 | 67 | 15 | 3,640 | 81 | ||||||||||||||||||||||||||||||
North America(*)
|
710 | 22 | 137 | 300 | 12 | 1,389 | 23 | 150 | 556 | 12 | ||||||||||||||||||||||||||||||
Europe
|
246 | 8 | 58 | 156 | 6 | 591 | 10 | 96 | 302 | 7 | ||||||||||||||||||||||||||||||
Total
|
3,185 | 100 | 26 | 2,533 | 100 | 6,157 | 100 | 37 | 4,498 | 100 | ||||||||||||||||||||||||||||||
* | Primarily the United States. |
34
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||||||||||
May 1, |
Change |
May 2, |
May 1, |
Change |
May 2, |
|||||||||||||||||||||||||||||||||||
2011 | 2011 over 2010 | 2010 | 2011 | 2011 over 2010 | 2010 | |||||||||||||||||||||||||||||||||||
($) | (%) | (%) | ($) | (%) | ($) | (%) | (%) | ($) | (%) | |||||||||||||||||||||||||||||||
(In millions, except percentages) | ||||||||||||||||||||||||||||||||||||||||
Silicon Systems Group
|
1,715 | 54 | 21 | 1,416 | 56 | 3,325 | 54 | 30 | 2,551 | 57 | ||||||||||||||||||||||||||||||
Applied Global Services
|
603 | 19 | 25 | 483 | 19 | 1,155 | 19 | 21 | 957 | 21 | ||||||||||||||||||||||||||||||
Display
|
255 | 8 | | 256 | 10 | 397 | 6 | 4 | 382 | 8 | ||||||||||||||||||||||||||||||
Energy and Environmental Solutions
|
612 | 19 | 62 | 378 | 15 | 1,280 | 21 | 111 | 608 | 14 | ||||||||||||||||||||||||||||||
Total
|
3,185 | 100 | 26 | 2,533 | 100 | 6,157 | 100 | 37 | 4,498 | 100 | ||||||||||||||||||||||||||||||
35
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||||||||||
May 1, |
Change |
May 2, |
May 1, |
Change |
May 2, |
|||||||||||||||||||||||||||||||||||
2011 | 2011 over 2010 | 2010 | 2011 | 2011 over 2010 | 2010 | |||||||||||||||||||||||||||||||||||
($) | (%) | (%) | ($) | (%) | ($) | (%) | (%) | ($) | (%) | |||||||||||||||||||||||||||||||
(In millions, except percentages) | ||||||||||||||||||||||||||||||||||||||||
China
|
741 | 26 | 219 | 232 | 10 | 1,415 | 26 | 278 | 374 | 9 | ||||||||||||||||||||||||||||||
Taiwan
|
650 | 23 | (7 | ) | 699 | 30 | 1,286 | 23 | 6 | 1,213 | 29 | |||||||||||||||||||||||||||||
Korea
|
299 | 10 | (53 | ) | 632 | 28 | 468 | 8 | (51 | ) | 964 | 23 | ||||||||||||||||||||||||||||
Japan
|
208 | 7 | (11 | ) | 233 | 10 | 374 | 7 | (8 | ) | 407 | 10 | ||||||||||||||||||||||||||||
Southeast Asia
|
185 | 7 | 76 | 105 | 5 | 339 | 6 | 41 | 241 | 6 | ||||||||||||||||||||||||||||||
Asia Pacific
|
2,083 | 73 | 10 | 1,901 | 83 | 3,882 | 70 | 21 | 3,199 | 77 | ||||||||||||||||||||||||||||||
North America(*)
|
467 | 16 | 103 | 230 | 10 | 1,077 | 19 | 129 | 471 | 11 | ||||||||||||||||||||||||||||||
Europe
|
312 | 11 | 89 | 165 | 7 | 590 | 11 | 24 | 474 | 12 | ||||||||||||||||||||||||||||||
Total
|
2,862 | 100 | 25 | 2,296 | 100 | 5,549 | 100 | 34 | 4,144 | 100 | ||||||||||||||||||||||||||||||
* | Primarily the United States. |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||||||||||
May 1, |
Change |
May 2, |
May 1, |
Change |
May 2, |
|||||||||||||||||||||||||||||||||||
2011 | 2011 over 2010 | 2010 | 2011 | 2011 over 2010 | 2010 | |||||||||||||||||||||||||||||||||||
($) | (%) | (%) | ($) | (%) | ($) | (%) | (%) | ($) | (%) | |||||||||||||||||||||||||||||||
(In millions, except percentages) | ||||||||||||||||||||||||||||||||||||||||
Silicon Systems Group
|
1,453 | 51 | 3 | 1,404 | 61 | 2,950 | 53 | 24 | 2,374 | 57 | ||||||||||||||||||||||||||||||
Applied Global Services
|
614 | 21 | 35 | 456 | 20 | 1,181 | 21 | 34 | 881 | 21 | ||||||||||||||||||||||||||||||
Display
|
158 | 6 | (41 | ) | 270 | 12 | 305 | 6 | (24 | ) | 402 | 10 | ||||||||||||||||||||||||||||
Energy and Environmental Solutions
|
637 | 22 | 284 | 166 | 7 | 1,113 | 20 | 129 | 487 | 12 | ||||||||||||||||||||||||||||||
Total
|
2,862 | 100 | 25 | 2,296 | 100 | 5,549 | 100 | 34 | 4,144 | 100 | ||||||||||||||||||||||||||||||
36
Three Months Ended | Six Months Ended | |||||||||||||||||||||||
May 1, |
May 2, |
Change |
May 1, |
May 2, |
Change |
|||||||||||||||||||
2011 | 2010 | 2011 over 2010 | 2011 | 2010 | 2011 over 2010 | |||||||||||||||||||
(In millions, except percentages) | ||||||||||||||||||||||||
Gross margin
|
$ | 1,189 | $ | 927 | $ | 262 | $ | 2,325 | $ | 1,638 | $ | 687 | ||||||||||||
Gross margin (% of net sales)
|
41 | % | 40 | % | 1 point | 42 | % | 40 | % | 2 points |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||
May 1, |
May 2, |
Change |
May 1, |
May 2, |
Change |
|||||||||||||||||||
2011 | 2010 | 2011 over 2010 | 2011 | 2010 | 2011 over 2010 | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Research, development and engineering
|
$ | 297 | $ | 306 | $ | (9 | ) | $ | 567 | $ | 575 | $ | (8 | ) |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||
May 1, |
May 2, |
Change |
May 1, |
May 2, |
Change |
|||||||||||||||||||
2011 | 2010 | 2011 over 2010 | 2011 | 2010 | 2011 over 2010 | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Marketing, selling, general and administrative
|
$ | 219 | $ | 226 | $ | (7 | ) | $ | 440 | $ | 448 | $ | (8 | ) |
37
Three Months Ended | Six Months Ended | |||||||||||||||||||||||
May 1, |
May 2, |
Change |
May 1, |
May 2, |
Change |
|||||||||||||||||||
2011 | 2010 | 2011 over 2010 | 2011 | 2010 | 2011 over 2010 | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Restructuring and asset impairments
|
$ | (4 | ) | $ | 9 | $ | (13 | ) | $ | (33 | ) | $ | 113 | $ | (146 | ) |
38
Three Months Ended | Six Months Ended | |||||||||||||||||||||||
May 1, |
May 2, |
Change |
May 1, |
May 2, |
Change |
|||||||||||||||||||
2011 | 2010 | 2011 over 2010 | 2011 | 2010 | 2011 over 2010 | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Net interest income and other income, net
|
$ | 9 | $ | 5 | $ | 4 | $ | 15 | $ | 9 | $ | 6 |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||
May 1, |
May 2, |
Change |
May 1, |
May 2, |
Change |
|||||||||||||||||||
2011 | 2010 | 2011 over 2010 | 2011 | 2010 | 2011 over 2010 | |||||||||||||||||||
(In millions, except percentages) | ||||||||||||||||||||||||
Provision for income taxes
|
$ | 197 | $ | 123 | $ | 74 | $ | 371 | $ | 159 | $ | 212 | ||||||||||||
Effective income tax rate
|
29 | % | 32 | % | (3) points | 27 | % | 31 | % | (4) points |
39
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
May 1, |
May 2, |
Change |
May 1, |
May 2, |
Change |
|||||||||||||||||||||||||||
2011 | 2010 | 2011 over 2010 | 2011 | 2010 | 2011 over 2010 | |||||||||||||||||||||||||||
(In millions, except percentages) | ||||||||||||||||||||||||||||||||
New orders
|
$ | 1,715 | $ | 1,416 | $ | 299 | 21 | % | $ | 3,325 | $ | 2,551 | $ | 774 | 30 | % | ||||||||||||||||
Net sales
|
1,453 | 1,404 | 49 | 3 | % | 2,950 | 2,374 | 576 | 24 | % | ||||||||||||||||||||||
Operating income
|
491 | 498 | (7 | ) | (1) | % | 1,034 | 804 | 230 | 29 | % | |||||||||||||||||||||
Operating margin
|
34 | % | 35 | % | (1) point | 35 | % | 34 | % | 1 point |
Three Months Ended | Six Months Ended | |||||||||||||||
May 1, |
May 2, |
May 1, |
May 2, |
|||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Foundry
|
47 | % | 37 | % | 51 | % | 39 | % | ||||||||
Memory
|
28 | % | 51 | % | 25 | % | 50 | % | ||||||||
Logic and other
|
25 | % | 12 | % | 24 | % | 11 | % | ||||||||
100 | % | 100 | % | 100 | % | 100 | % | |||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||||||||||
May 1, |
Change |
May 2, |
May 1, |
Change |
May 2, |
|||||||||||||||||||||||||||||||||||
2011 | 2011 over 2010 | 2010 | 2011 | 2011 over 2010 | 2010 | |||||||||||||||||||||||||||||||||||
($) | (%) | (%) | ($) | (%) | ($) | (%) | (%) | (%) | (%) | |||||||||||||||||||||||||||||||
(In millions, except percentages) | ||||||||||||||||||||||||||||||||||||||||
Taiwan
|
453 | 31 | (7 | ) | 489 | 35 | 866 | 29 | 1 | 859 | 36 | |||||||||||||||||||||||||||||
Korea
|
210 | 14 | (54 | ) | 453 | 32 | 328 | 11 | (55 | ) | 723 | 30 |
40
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
May 1, |
May 2, |
Change |
May 1, |
May 2, |
Change |
|||||||||||||||||||||||||||
2011 | 2010 | 2011 over 2010 | 2011 | 2010 | 2011 over 2010 | |||||||||||||||||||||||||||
(In millions, except percentages) | ||||||||||||||||||||||||||||||||
New orders
|
$ | 603 | $ | 483 | $ | 120 | 25 | % | $ | 1,155 | $ | 957 | $ | 198 | 21 | % | ||||||||||||||||
Net sales
|
614 | 456 | 158 | 35 | % | 1,181 | 881 | 300 | 34 | % | ||||||||||||||||||||||
Operating income
|
91 | 89 | 2 | 1 | % | 176 | 153 | 23 | 15 | % | ||||||||||||||||||||||
Operating margin
|
15 | % | 20 | % | (5) points | 15 | % | 17 | % | (2) points |
41
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
May 1, |
May 2, |
Change |
May 1, |
May 2, |
Change |
|||||||||||||||||||||||||||
2011 | 2010 | 2011 over 2010 | 2011 | 2010 | 2011 over 2010 | |||||||||||||||||||||||||||
(In millions, except percentages) | ||||||||||||||||||||||||||||||||
New orders
|
$ | 255 | $ | 256 | $ | (1 | ) | | $ | 397 | $ | 382 | $ | 15 | 4 | % | ||||||||||||||||
Net sales
|
158 | 270 | (112 | ) | (41) | % | 305 | 402 | (97 | ) | (24) | % | ||||||||||||||||||||
Operating income
|
31 | 90 | (59 | ) | (66) | % | 58 | 115 | (57 | ) | (50) | % | ||||||||||||||||||||
Operating margin
|
19 | % | 33 | % | (14) points | 19 | % | 29 | % | (10) points |
42
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||||||||||
May 1, |
Change |
May 2, |
May 1, |
Change |
May 2, |
|||||||||||||||||||||||||||||||||||
2011 | 2011 over 2010 | 2010 | 2011 | 2011 over 2010 | 2010 | |||||||||||||||||||||||||||||||||||
($) | (%) | (%) | ($) | (%) | ($) | (%) | (%) | ($) | (%) | |||||||||||||||||||||||||||||||
(In millions, except percentages) | ||||||||||||||||||||||||||||||||||||||||
China
|
82 | 52 | 91 | 43 | 16 | 143 | 47 | 110 | 68 | 17 | ||||||||||||||||||||||||||||||
Korea
|
20 | 13 | (85 | ) | 129 | 48 | 20 | 7 | (87 | ) | 150 | 37 | ||||||||||||||||||||||||||||
Taiwan
|
18 | 11 | (79 | ) | 85 | 32 | 99 | 32 | (26 | ) | 133 | 33 |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
May 1, |
May 2, |
Change |
May 1, |
May 2, |
Change |
|||||||||||||||||||||||||||
2011 | 2010 | 2011 over 2010 | 2011 | 2010 | 2011 over 2010 | |||||||||||||||||||||||||||
(In millions, except percentages) | ||||||||||||||||||||||||||||||||
New orders
|
$ | 612 | $ | 378 | $ | 234 | 62 | % | $ | 1,280 | $ | 608 | $ | 672 | 111 | % | ||||||||||||||||
Net sales
|
637 | 166 | 471 | 284 | % | 1,113 | 487 | 626 | 129 | % | ||||||||||||||||||||||
Operating income (loss)
|
170 | (145 | ) | 315 | 217 | % | 313 | (181 | ) | 494 | 273 | % | ||||||||||||||||||||
Operating margin
|
27 | % | (87 | )% | 114 points | 28 | % | (37 | )% | 65 points |
43
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||||||||||
May 1, |
Change |
May 2, |
May 1, |
Change |
May 2, |
|||||||||||||||||||||||||||||||||||
2011 | 2011 over 2010 | 2010 | 2011 | 2011 over 2010 | 2010 | |||||||||||||||||||||||||||||||||||
($) | (%) | (%) | ($) | (%) | ($) | (%) | (%) | ($) | (%) | |||||||||||||||||||||||||||||||
(In millions, except percentages) | ||||||||||||||||||||||||||||||||||||||||
China
|
487 | 76 | 387 | 100 | 60 | 876 | 79 | 425 | 167 | 34 | ||||||||||||||||||||||||||||||
Europe
|
22 | 3 | (21 | ) | 28 | 17 | 42 | 4 | (83 | ) | 250 | 51 |
44
May 1, |
October 31, |
|||||||
2011 | 2010 | |||||||
(In millions) | ||||||||
Cash and cash equivalents
|
$ | 2,558 | $ | 1,858 | ||||
Short-term investments
|
750 | 727 | ||||||
Long-term investments
|
1,269 | 1,307 | ||||||
Total cash, cash-equivalents and investments
|
$ | 4,577 | $ | 3,892 | ||||
May 1, |
May 2, |
|||||||
2011 | 2010 | |||||||
(In millions) | ||||||||
Cash provided by operating activities
|
$ | 1,129 | $ | 899 | ||||
Cash used in investing activities
|
$ | (34 | ) | $ | (710 | ) | ||
Cash used in financing activities
|
$ | (396 | ) | $ | (169 | ) |
45
46
47
48
49
Three Months Ended | Six Months Ended | |||||||||||||||
May 1, |
May 2, |
May 1, |
May 2, |
|||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In millions, except per share amounts) | ||||||||||||||||
Non-GAAP Operating Income
|
||||||||||||||||
Reported operating income (GAAP basis)
|
$ | 677 | $ | 386 | $ | 1,351 | $ | 502 | ||||||||
Certain items associated with
acquisitions1
|
12 | 30 | 25 | 56 | ||||||||||||
Semitool deal cost
|
| | | 10 | ||||||||||||
Restructuring and asset
impairments2,3,4,5
|
(4 | ) | 9 | (33 | ) | 113 | ||||||||||
Loss on sale of facility
|
| | 1 | | ||||||||||||
Non-GAAP operating income
|
$ | 685 | $ | 425 | $ | 1,344 | $ | 681 | ||||||||
Non-GAAP Net Income
|
||||||||||||||||
Reported net income (GAAP basis)
|
$ | 489 | $ | 264 | $ | 995 | $ | 347 | ||||||||
Certain items associated with
acquisitions1
|
12 | 30 | 25 | 56 | ||||||||||||
Semitool deal cost
|
| | | 10 | ||||||||||||
Restructuring and asset
impairments2,3,4,5
|
(4 | ) | 9 | (33 | ) | 113 | ||||||||||
Impairment of strategic investments
|
| 4 | | 5 | ||||||||||||
Loss on sale of facility
|
| | 1 | | ||||||||||||
Reinstatement of federal R&D tax credit
|
| | (13 | ) | | |||||||||||
Income tax effect of non-GAAP adjustments
|
4 | (15 | ) | 10 | (59 | ) | ||||||||||
Non-GAAP net income
|
$ | 501 | $ | 292 | $ | 985 | $ | 471 | ||||||||
Non-GAAP Net Income Per Diluted Share
|
||||||||||||||||
Reported net income per diluted share (GAAP basis)
|
$ | 0.37 | $ | 0.20 | $ | 0.75 | $ | 0.26 | ||||||||
Certain items associated with acquisitions
|
0.01 | 0.02 | 0.01 | 0.03 | ||||||||||||
Semitool deal cost
|
| | | 0.01 | ||||||||||||
Restructuring and asset impairments
|
| | (0.01 | ) | 0.05 | |||||||||||
Impairment of strategic investments
|
| | | | ||||||||||||
Loss on sale of facility
|
| | | | ||||||||||||
Reinstatement of federal R&D tax credit
|
| | (0.01 | ) | | |||||||||||
Non-GAAP net income per diluted share
|
$ | 0.38 | $ | 0.22 | $ | 0.74 | $ | 0.35 | ||||||||
Shares used in diluted shares calculation
|
1,333 | 1,352 | 1,333 | 1,351 |
1 | These items are incremental charges attributable to acquisitions consisting of inventory fair value adjustments on products sold and amortization of purchased intangible assets. | |
2 | Results for the three months ended May 1, 2011 included asset impairment charges of $24 million related to certain intangible assets, offset by favorable adjustments of $8 million related to a restructuring program announced on July 21, 2010, $19 million related to a restructuring program announced on November 11, 2009, and $1 million related to a restructuring program announced on November 12, 2008. | |
3 | Results for the six months ended May 1, 2011 included asset impairment charges of $27 million primarily related to certain intangible assets, offset by favorable adjustments of $36 million related to a restructuring |
50
program announced on July 21, 2010, $19 million related to a restructuring program announced on November 11, 2009, and $5 million related to a restructuring program announced on November 12, 2008. | ||
4 | Results for the three and six months ended May 2, 2010 included asset impairment charges of $9 million related to a facility held for sale. | |
5 | Results for the six months ended May 2, 2010 included restructuring charges of $104 million related to a restructuring program announced on November 11, 2009. |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Item 4. | Controls and Procedures |
51
Item 1. | Legal Proceedings |
Item 1A. | Risk Factors |
| increasing capital requirements for building and operating new fabrication plants and customers ability to raise the necessary capital, particularly when financial market conditions are difficult; | |
| differences in growth rates among the semiconductor, display and solar industries; | |
| the increasing importance of establishing, improving and maintaining strong relationships with customers; | |
| abrupt and unforeseen shifts in the nature and amount of customer and end-user demand; | |
| the increasing cost and complexity for customers to move from product design to volume manufacturing, which may slow the adoption rate for new manufacturing technology; | |
| the need to reduce the total cost of manufacturing system ownership, due in part to greater demand for lower-cost consumer electronics as compared to business information technology spending; | |
| 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; | |
| the increasing importance of, and difficulties in, developing products with sufficient differentiation to influence customers purchasing decisions; |
52
| requirements for shorter cycle times for the development, manufacture and installation of manufacturing equipment; | |
| price and performance trends for semiconductor devices, LCDs and solar PVs, 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 cost of research and development due to many factors, including: decreasing linewidths on a chip; the use of new materials such as cobalt and yttrium; 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 growing number of types and varieties of semiconductors and number of applications across multiple substrate sizes; | |
| differing market growth rates and capital requirements for different applications, such as NAND Flash, DRAM, logic and foundry, and the resulting effect on customers spending patterns and on Applieds ability to compete in these market segments; | |
| the increasing cost and complexity for semiconductor manufacturers to move more technically advanced capability and smaller linewidths to volume manufacturing, and the resulting impact on the rates of technology transition and investment in capital equipment; | |
| semiconductor manufacturers increasing adoption of more productive 300mm systems in relation to 200mm system capacity, and the resulting effect on demand for manufacturing equipment and services; | |
| the decreasing rate of capital expenditures as a percentage of semiconductor manufacturers revenue; | |
| shorter cycle times between customers order placement and product shipment, which may lead to inventory write-offs and manufacturing inefficiencies that decrease gross margin; | |
| technology developments in related markets, such as lithography, to which Applied may need to adapt; | |
| competitive factors that make it difficult to enhance market position; | |
| the importance of growing market positions in larger market segments, such as etch and inspection; | |
| the increasing concentration of wafer starts in one country, Korea, where Applieds service penetration and service-revenue-per-wafer-start have been lower than in other regions; | |
| 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; and |
53
| the cost, technical complexity and timing of a proposed industry transition from 300mm to 450mm wafers. |
| the planned expansion of manufacturing facilities in China by Chinese display manufacturers as well as manufacturers from other countries, and the ability of non-Chinese manufacturers to obtain government approvals; | |
| technical and financial difficulties associated with transitioning to larger substrate sizes for LCDs, which may slow or prevent substrate generation scaling; | |
| the effect of a slowing rate of transition to larger substrate sizes on capital intensity and product differentiation; | |
| the increasing importance of new types of displays, such as touch panels and OLEDs (organic light-emitting devices); | |
| technical difficulties and costs associated with developing new technologies for use in LCD manufacturing, such as LEDs for backlighting; and | |
| uncertainty with respect to future LCD technology end-use applications and growth drivers. |
| the need to continually decrease the cost-per-watt of electricity produced by solar PV products to at or below grid parity by, among other things, reducing operating costs and increasing throughputs for solar PV manufacturing, and improving the conversion efficiency of solar PVs; | |
| the impact on demand for solar PV products arising from the cost of electricity generated by solar PVs compared to the cost of electricity from the existing grid or other energy sources; | |
| the varying energy policies of governments around the world and their effect in influencing the rate of growth of the solar PV market, including the availability and amount of government incentives for solar power such as tax credits, feed-in tariffs, rebates, renewable portfolio standards that require electricity providers to sell a targeted amount of energy from renewable sources, and goals for solar installations on government facilities; | |
| the growing number of solar PV manufacturers and increasing global production capacity for solar PVs, primarily in China as a result of increased solar subsidies and lower manufacturing costs; | |
| the varying levels of operating and industry experience among solar PV manufacturers and the resulting differences in the nature and extent of customer support services requested from Applied; |
54
| challenges associated with marketing and selling manufacturing equipment and services to a diverse and diffuse customer base; | |
| the cost of polysilicon and other materials; and | |
| access to affordable financing and capital by customers and end-users. |
55
| identify and address technology inflections, market changes, new applications, customer requirements and end-use demand; | |
| develop new products (including disruptive technologies), improve and/or develop new applications for existing products, and adapt similar products for use by customers in different applications and/or markets with varying technical requirements; | |
| appropriately price and achieve market acceptance of products; | |
| differentiate its products from those of competitors and any disruptive technologies, meet performance specifications, and drive efficiencies and cost reductions; | |
| maintain operating flexibility to enable different responses to different markets, customers and applications; | |
| focus on sales and marketing strategies that foster strong customer relationships; | |
| allocate resources, including people and R&D funding, among Applieds products and between the development of new products and the enhancement of existing products, as most appropriate and effective for future growth; | |
| reduce the cost of, and 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, in turn, volume manufacturing with its customers; | |
| enhance its worldwide operations to enable both continuous quality improvement and cost reductions across all business segments; and | |
| implement changes in its design engineering methodology, including those that enable reduction of material costs and cycle time, greater commonality of platforms and types of parts used in different systems, greater effectiveness of product life cycle management, and reduced energy usage and environmental impact. |
| the need to devote additional resources to develop new products for, and operate in, new markets; | |
| the need to develop new sales and marketing strategies and cultivate relationships with new customers; | |
| differing rates of profitability and growth among multiple businesses; | |
| Applieds 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; | |
| the need to undertake activities to grow demand for end-products; |
56
| the need to develop adequate new business processes and systems; | |
| Applieds ability to rapidly expand its operations to meet increased demand and the associated effect on working capital; | |
| 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 and/or limited funding, evolving business models and/or locations in regions where Applied does not have existing operations; | |
| different customer service requirements; | |
| new or different competitors with potentially more financial or other resources, industry experience and/or 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. |
| varying regional and geopolitical 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; | |
| variations among, and changes in, local, regional, national or international laws and regulations (including intellectual property, labor, tax, and import /export laws), as well as the interpretation and application of such laws and regulations; | |
| global trade issues, including those related to the interpretation and application of import and export licenses; | |
| positions taken by governmental agencies regarding possible national commercial and/or security issues posed by international business operations; | |
| fluctuating raw material, commodity and energy costs; | |
| challenges associated with managing more geographically diverse operations and projects, which requires an effective organizational structure and appropriate business processes, procedures and controls ; | |
| varying customs, practices and expectations of workers in different regions; |
57
| 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 and the euro; | |
| the need to provide sufficient levels of technical support in different locations; | |
| political instability, natural disasters (such as earthquakes, floods or storms), pandemics, 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; | |
| the need for an effective business continuity plan if a disaster or other event occurs that could disrupt business operations; | |
| the need to regularly reassess the size, capability and location of the Companys global infrastructure and make appropriate changes; | |
| cultural and language differences; | |
| shipping costs and/or delays; | |
| the need to continually improve the Companys operating cost structure; | |
| difficulties and uncertainties associated with the entry into new countries; | |
| uncertainties with respect to economic growth rates in various countries; and | |
| uncertainties with respect to growth rates for the manufacture and sales of semiconductors, LCDs and solar PVs in the developing economies of certain countries. |
58
| the failure or inability of suppliers to timely deliver 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; | |
| information technology or infrastructure failures; | |
| natural disasters (such as earthquakes, floods or storms); or | |
| other causes (such as regional economic downturns, pandemics, political instability, terrorism, or acts of war) that could result in delayed deliveries, manufacturing inefficiencies, increased costs or order cancellations. |
59
| diversion of managements attention from other operational matters; | |
| inability to complete acquisitions as anticipated or at all, which in certain circumstances may require Applied to pay a termination fee to the target company; | |
| requirements imposed by government regulators in connection with their review of a transaction, which may include, among other things, divestitures and/or restrictions on the conduct of Applieds existing business or the acquired business; | |
| ineffective integration of operations, systems, technologies, products or employees of an acquired business | |
| inability to realize anticipated synergies or other benefits; | |
| failure to commercialize purchased technologies; | |
| initial dependence on unfamiliar supply chains or relatively small supply partners; | |
| inability to capitalize on characteristics of new markets that may be significantly different from Applieds existing markets and where competitors may have stronger market positions and customer relationships; | |
| failure to attract, retain and motivate key employees from the acquired business; | |
| exposure to new operational risks, rules, regulations, worker expectations, customs and practices to the extent acquired businesses are located in countries 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 companys internal financial controls, disclosure controls and procedures, and/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 and/or undisclosed commitments or liabilities; and | |
| the inappropriate scale of acquired entities critical resources or facilities for business needs. |
60
61
62
63
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
Maximum Dollar |
||||||||||||||||
Total Number of |
Value of Shares |
|||||||||||||||
Average |
Shares Purchased as |
That May Yet be |
||||||||||||||
Total Number of |
Price Paid |
Part of Publicly |
Purchased Under |
|||||||||||||
Period | Shares Purchased | per Share | Announced Program* | the Program* | ||||||||||||
( In millions, except per share amounts) | ||||||||||||||||
Month #1
|
||||||||||||||||
(January 31, 2011 to
February 27, 2011) |
1 | $ | 16.10 | 1 | $ | 1,492 | ||||||||||
Month #2
|
||||||||||||||||
(February 28, 2011 to
March 27, 2011) |
5 | $ | 15.47 | 5 | $ | 1,419 | ||||||||||
Month #3
|
||||||||||||||||
(March 28, 2011 to
May 1, 2011) |
2 | $ | 15.57 | 2 | $ | 1,382 | ||||||||||
Total
|
8 | $ | 15.54 | 8 | ||||||||||||
* | On March 8, 2010, the Board of Directors approved a stock repurchase program for up to $2.0 billion in repurchases over the next three years, ending March 2013. |
Item 3. | Defaults Upon Senior Securities |
Item 4. | (Removed and Reserved) |
Item 5. | Other Information |
64
Item 6. | Exhibits |
Exhibit |
||||
No | Description | |||
2 | .1* | Agreement and Plan of Merger dated as of May 3, 2011, among Applied Materials, Inc., Barcelona Acquisition Corp. and Varian Semiconductor Equipment Associates, Inc., incorporated by reference to Applieds Form 8-K (file no. 000-06920) filed on May 4, 2011 | ||
31 | .1 | Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
31 | .2 | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
32 | .1 | Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
32 | .2 | Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
101 | .INS | XBRL Instance Document | ||
101 | .SCH | XBRL Taxonomy Extension Schema Document | ||
101 | .CAL | XBRL Taxonomy Extension Calculation Linkbase Document | ||
101 | .LAB | XBRL Taxonomy Extension Definition Linkbase Document | ||
101 | .PRE | XBRL Taxonomy Extension Label Linkbase Document | ||
101 | .DEF | XBRL Taxonomy Extension Presentation Linkbase Document |
* | Schedules and certain exhibits to this agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Applied hereby undertakes to furnish supplementally copies of any of the omitted schedules and exhibits upon request by the Securities and Exchange Commission. |
65
By: |
/s/ GEORGE
S. DAVIS
|
By: |
/s/ THOMAS
S. TIMKO
|
66
Consolidated Condensed Balance Sheets (USD $)
In Millions |
6 Months Ended | 12 Months Ended | ||||
---|---|---|---|---|---|---|
May 01, 2011
|
Oct. 31, 2010
|
|||||
Current assets: | ||||||
Cash and cash equivalents (Notes 3 and 4) | $ 2,558 | [1] | $ 1,858 | [1] | ||
Short-term investments (Notes 3 and 4) | 750 | [1] | 727 | [1] | ||
Accounts receivable, net (Note 6) | 1,916 | [1] | 1,831 | [1] | ||
Inventories (Note 7) | 1,794 | [1] | 1,547 | [1] | ||
Deferred income taxes, net | 545 | [1] | 513 | [1] | ||
Prepaid income taxes | 110 | [1] | 0 | [1] | ||
Other current assets | 271 | [1] | 289 | [1] | ||
Total current assets | 7,944 | [1] | 6,765 | [1] | ||
Long-term investments (Notes 3 and 4) | 1,269 | [1] | 1,307 | [1] | ||
Property, plant and equipment, net (Note 7) | 898 | [1] | 963 | [1] | ||
Goodwill (Note 8) | 1,336 | [1] | 1,336 | [1] | ||
Purchased technology and other intangible assets, net (Note 8) | 236 | [1] | 287 | [1] | ||
Deferred income taxes and other assets | 274 | [1] | 285 | [1] | ||
Total assets | 11,957 | [1] | 10,943 | [1] | ||
Current liabilities: | ||||||
Current portion of long-term debt | 1 | [1] | 1 | [1] | ||
Accounts payable and accrued expenses (Note 7) | 1,760 | [1] | 1,766 | [1] | ||
Customer deposits and deferred revenue (Note 7) | 1,279 | [1] | 847 | [1] | ||
Income taxes payable | 211 | [1] | 274 | [1] | ||
Total current liabilities | 3,251 | [1] | 2,888 | [1] | ||
Long-term debt | 204 | [1] | 204 | [1] | ||
Employee benefits and other liabilities (Note 12) | 320 | [1] | 315 | [1] | ||
Total liabilities | 3,775 | [1] | 3,407 | [1] | ||
Commitments and Contingencies (Note 14) | ||||||
Stockholders' equity (Note 11): | ||||||
Common stock | 13 | [1] | 13 | [1] | ||
Additional paid-in capital | 5,524 | [1] | 5,406 | [1] | ||
Retained earnings | 12,308 | [1] | 11,511 | [1] | ||
Treasury stock | (9,664) | [1] | (9,396) | [1] | ||
Accumulated other comprehensive income | 1 | [1] | 2 | [1] | ||
Total stockholders' equity | 8,182 | [1] | 7,536 | [1] | ||
Total liabilities and stockholders' equity | $ 11,957 | [1] | $ 10,943 | [1] | ||
|
Consolidated Condensed Statements of Stockholders' Equity and Comprehensive Income (Unaudited) (USD $)
In Millions |
Total
|
Common Stock
|
Additional Paid-In Capital
|
Retained Earnings
|
Treasury Stock
|
Accumulated Other Comprehensive Income
|
|||
---|---|---|---|---|---|---|---|---|---|
Beginning Balance at Oct. 31, 2010 | $ 7,536 | [1] | $ 13 | $ 5,406 | $ 11,511 | $ (9,396) | $ 2 | ||
Beginning Balance, Shares at Oct. 31, 2010 | 1,328 | 537 | |||||||
Components of comprehensive income, net of tax: | |||||||||
Net income | 995 | 995 | |||||||
Change in unrealized net gain on investments | (2) | (2) | |||||||
Change in unrealized net gain on derivative instruments | 2 | 2 | |||||||
Change in defined benefit plan liability | (1) | (1) | |||||||
Comprehensive income | 994 | ||||||||
Dividends | (198) | (198) | |||||||
Share-based compensation | 72 | 72 | |||||||
Issuance under stock plans, net of a tax benefit of $4 million and other | 46 | 46 | |||||||
Issuance under stock plans, net of a tax benefit of $4 million and other, Shares | 3 | 9 | |||||||
Common stock repurchases | (268) | (268) | |||||||
Common stock repurchases, Shares | 19 | (19) | 19 | ||||||
Ending Balance at May. 01, 2011 | $ 8,182 | [1] | $ 13 | $ 5,524 | $ 12,308 | $ (9,664) | $ 1 | ||
Ending Balance, Shares at May. 01, 2011 | 1,318 | 556 | |||||||
|
Commitments and Contingencies (Details) (USD $)
|
3 Months Ended | 6 Months Ended | 11 Months Ended | |||
---|---|---|---|---|---|---|
May 01, 2011
|
May 02, 2010
|
May 01, 2011
|
May 02, 2010
|
Dec. 21, 2009
|
Dec. 14, 2009
|
|
Changes in the warranty reserves | ||||||
Beginning balance | $ 173,000,000 | $ 137,000,000 | $ 155,000,000 | $ 117,000,000 | ||
Provisions for warranty | 48,000,000 | 32,000,000 | 99,000,000 | 66,000,000 | ||
Consumption of reserves | (37,000,000) | (29,000,000) | (70,000,000) | (43,000,000) | ||
Ending balance | 184,000,000 | 140,000,000 | 184,000,000 | 140,000,000 | ||
Commitments and Contingencies (Textuals) | ||||||
Products warranty period, General | 12 months | |||||
Maximum potential amount of future payments for letters of credit or other guarantee instruments | 53,000,000 | 53,000,000 | ||||
Liability in connection with guarantee arrangements | 0 | 0 | ||||
Parent guarantees to banks | 191,000,000 | 191,000,000 | ||||
Number of lawsuits were filed by Semitool shareholders against Applied and Applied's acquisition subsidiary | 3 | |||||
Percentage of common stock shares tendered | Over 95% | |||||
Maximum award of attorneys' fees and expenses | $ 200,000 |
Basis of Presentation (Policies)
|
6 Months Ended |
---|---|
May 01, 2011
|
|
Basis of Presentation (Policies) [Abstract] | |
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 31,
2010 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 31, 2010 (2010
Form 10-K).
Applied’s results of operations for the three and six
months ended May 1, 2011 are not necessarily indicative of
future operating results. Applied’s fiscal year ends on the
last Sunday in October of each year. Fiscal 2011 contains
52 weeks, while fiscal 2010 contained 53 weeks, and
the first six months of fiscal 2011 contained 26 weeks,
while the first six months of fiscal 2010 contained
27 weeks.
|
Use of Estimates |
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 |
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, Applied recognizes revenue upon shipment 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, 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. The completed contract method is
used for
SunFabtm
thin film production lines. Spare parts revenue is generally
recognized upon shipment, and services revenue is generally
recognized over the period that the services are provided.
Applied elected to early adopt amended accounting standards
issued by the Financial Accounting Standards Board (FASB) for
multiple deliverable revenue arrangements on a prospective basis
for applicable transactions originating or materially modified
after October 25, 2009. The new standard changed the
requirements for establishing separate units of accounting in a
multiple element arrangement and requires the allocation of
arrangement consideration to each deliverable to be based on the
relative selling price. The FASB also amended the accounting
standards for revenue recognition to exclude software that is
contained in a tangible product from the scope of software
revenue guidance when the software is essential to the tangible
product’s functionality. Implementation of this new
authoritative guidance had an insignificant impact on reported
net sales as compared to net sales under previous guidance, as
the new guidance did not change the units of accounting within
sales arrangements and the elimination of the residual method
for the allocation of arrangement consideration had an
inconsequential impact on the amount and timing of reported net
sales.
For fiscal 2010 and subsequent periods, 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,
as amended.
|
Recent Accounting Pronouncements |
Recent
Accounting Pronouncements
In December 2010, the FASB amended its existing guidance for
goodwill and other intangible assets. This authoritative
guidance modifies Step 1 of the goodwill impairment test for
reporting units with zero or negative carrying amounts. For
those reporting units, an entity is required to perform Step 2
of the goodwill impairment test if there are qualitative factors
indicating that it is more likely than not that a goodwill
impairment exists. The qualitative factors are consistent with
the existing guidance which requires goodwill of a reporting
unit to be tested for impairment between annual tests if an
event occurs or circumstances change that would more likely than
not reduce the fair value of a reporting unit below its carrying
amount. This authoritative guidance becomes effective for
Applied in fiscal 2012. The implementation of this authoritative
guidance is not expected to have a material impact on
Applied’s financial position or results of operations.
In December 2010, the FASB issued authoritative guidance on
business combinations. This authoritative guidance requires a
public entity that presents comparative financial statements to
disclose the revenue and earnings of the combined entity as
though the business combinations that occurred during the
current year had occurred as of the beginning of the prior
annual reporting period. In addition, this authoritative
guidance expands the supplemental pro forma disclosures to
include a description of the nature and amount of material,
nonrecurring pro forma adjustments directly attributable to the
business combination included in the reported pro forma revenue
and earnings. This authoritative guidance is effective
prospectively for business combinations for which the
acquisition date is on or after the beginning of the first
annual reporting period beginning on or after December 15,
2010. Applied will comply with this authoritative guidance in
fiscal 2012.
|
Goodwill and other intangible assets |
In December 2010, the FASB amended its existing guidance for
goodwill and other intangible assets. This authoritative
guidance modifies Step 1 of the goodwill impairment test for
reporting units with zero or negative carrying amounts. For
those reporting units, an entity is required to perform Step 2
of the goodwill impairment test if there are qualitative factors
indicating that it is more likely than not that a goodwill
impairment exists. The qualitative factors are consistent with
the existing guidance which requires goodwill of a reporting
unit to be tested for impairment between annual tests if an
event occurs or circumstances change that would more likely than
not reduce the fair value of a reporting unit below its carrying
amount. This authoritative guidance becomes effective for
Applied in fiscal 2012. The implementation of this authoritative
guidance is not expected to have a material impact on
Applied’s financial position or results of operations.
|
Business Combinations |
In December 2010, the FASB issued authoritative guidance on
business combinations. This authoritative guidance requires a
public entity that presents comparative financial statements to
disclose the revenue and earnings of the combined entity as
though the business combinations that occurred during the
current year had occurred as of the beginning of the prior
annual reporting period. In addition, this authoritative
guidance expands the supplemental pro forma disclosures to
include a description of the nature and amount of material,
nonrecurring pro forma adjustments directly attributable to the
business combination included in the reported pro forma revenue
and earnings. This authoritative guidance is effective
prospectively for business combinations for which the
acquisition date is on or after the beginning of the first
annual reporting period beginning on or after December 15,
2010. Applied will comply with this authoritative guidance in
fiscal 2012.
|
Document and Entity Information (USD $)
|
6 Months Ended | |
---|---|---|
May 01, 2011
|
May 02, 2010
|
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | APPLIED MATERIALS INC /DE | |
Entity Central Index Key | 0000006951 | |
Document Type | 10-Q | |
Document Period End Date | May 01, 2011 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2011 | |
Document Fiscal Period Focus | Q2 | |
Current Fiscal Year End Date | --10-30 | |
Entity Well Known Seasoned Issuer | Yes | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Public Float | $ 20,652,343,218 | |
Entity Common Stock Shares Outstanding | 1,318,250,161 |
Restructuring Charges and Asset Impairments (Details) (USD $)
In Millions |
3 Months Ended | |
---|---|---|
May 01, 2011
|
Jan. 30, 2011
Employee Severance [Member]
|
|
Changes in restructuring reserves related to severance | ||
Balance Beginning | $ 99 | |
Adjustment of restructuring reserves | (28) | (32) |
Consumption of reserves | (7) | (14) |
Balance Ending | $ 18 | $ 53 |
Fair Value Measurements (Tables)
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 01, 2011
|
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Fair Value Measurements (Tables) [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial assets/liabilities measured at fair value on a recurring basis |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Impairment charges |
|
Borrowing Facilities (Details) (USD $)
|
6 Months Ended | |
---|---|---|
May 01, 2011
|
Oct. 31, 2010
|
|
Borrowing Facilities, Unsecured [Textuals] | ||
Credit facilities for unsecured borrowings/Revolving credit facility | $ 1,000,000,000 | |
Borrowing Facilities (Textual) [Abstract] | ||
Revolving credit period | 5 years | |
Expiration of revolving credit period | January 2012 | |
Other credit facilities | 96,000,000 | |
Outstanding credit facilities | 0 | 0 |
Unsecured Debt [Member]
|
||
Borrowing Facilities, Unsecured [Textuals] | ||
Credit facilities for unsecured borrowings/Revolving credit facility | $ 1,100,000,000 |
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Accounts Receivable, Net
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 01, 2011
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Receivable, Net [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Receivable, Net |
Applied has agreements with various financial institutions to
sell accounts receivable and discount promissory notes from
selected customers. Applied also discounts letters of credit
through various financial institutions. Applied sells its
accounts receivable without recourse. Details of discounted
letters of credit, factored accounts receivable and discounted
promissory notes for the three and six months ended May 1,
2011 and May 2, 2010 were as follows:
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 both periods presented.
Accounts receivable are presented net of allowance for doubtful
accounts of $74 million at both May 1, 2011 and
October 31, 2010. Applied sells principally to
manufacturers within the semiconductor, display and solar
industries. While Applied believes that its allowance for
doubtful accounts is adequate and represents Applied’s best
estimate as of May 1, 2011, Applied will continue to
closely monitor customer liquidity and other economic
conditions, which may result in changes to Applied’s
estimates regarding collectability.
|
Derivative Instruments and Hedging Activities (Tables)
|
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May 01, 2011
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Derivative Instruments and Hedging Activities (Tables) [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair values of derivative instruments |
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Derivative instruments on consolidated condensed statement of operations |
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Derivatives not designated as hedging instruments in statement of operations |
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Derivative Instruments and Hedging Activities (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 6 Months Ended | |||
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May 01, 2011
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May 02, 2010
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May 01, 2011
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May 02, 2010
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Oct. 31, 2010
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Fair values of derivative instruments | |||||
Asset Derivatives, Fair Value | $ 10 | $ 10 | $ 6 | ||
Liability Derivatives, Fair Value | 0 | 0 | 1 | ||
Derivative instruments on Consolidated Condensed Statement of Operations | |||||
Gain or (Loss) Recognized in AOCI, Effective Portion | 8 | 1 | 12 | (2) | |
Gain or (Loss) Reclassified from AOCI into Income, Effective Portion | 3 | (2) | 8 | (2) | |
Gain or (Loss) Reclassified in Income, Ineffective Portion and Amount Excluded from Effectiveness Testing | (2) | (4) | (1) | ||
Derivative Instruments and Hedging Activities (Textuals) [Abstract] | |||||
Time period for hedging of foreign currency transactions | 24 | ||||
Time period over which majority of after tax gain loss related to derivatives to be reclassified into earnings | 12 | ||||
Foreign Exchange Contract [Member]
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Derivative instruments on Consolidated Condensed Statement of Operations | |||||
Gain or (Loss) Recognized in AOCI, Effective Portion | 8 | 1 | 12 | (2) | |
Gain or (Loss) Reclassified in Income, Ineffective Portion and Amount Excluded from Effectiveness Testing | (1) | (3) | (1) | ||
Foreign Exchange Contract [Member] | Cost of products sold [Member]
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Derivative instruments on Consolidated Condensed Statement of Operations | |||||
Gain or (Loss) Reclassified from AOCI into Income, Effective Portion | 1 | 5 | (1) | ||
Foreign Exchange Contract [Member] | General and administrative [Member]
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Derivative instruments on Consolidated Condensed Statement of Operations | |||||
Gain or (Loss) Reclassified from AOCI into Income, Effective Portion | 2 | (2) | 3 | (1) | |
Gain or (Loss) Reclassified in Income, Ineffective Portion and Amount Excluded from Effectiveness Testing | (1) | (1) | |||
Foreign Exchange Contract [Member] | General and administrative [Member] | Derivatives Not Designated as Hedging Instruments [Member]
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Derivatives Not Designated as Hedging Instruments in Statement of Operations | |||||
Amount of Gain or (Loss) Recognized in Income | 1 | 7 | 3 | (4) | |
Foreign Exchange Contract [Member] | Other current asset [Member]
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Fair values of derivative instruments | |||||
Asset Derivatives Designated as Hedging Instruments, Fair Value | 9 | 9 | 5 | ||
Asset Derivatives Not Designated as Hedging Instruments, Fair Value | 1 | 1 | 1 | ||
Foreign Exchange Contract [Member] | Accrued expenses [Member]
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Fair values of derivative instruments | |||||
Liability Derivatives Designated as Hedging Instruments, Fair Value | 0 | 0 | 1 | ||
Liability Derivatives Not Designated as Hedging Instruments, Fair Value | 0 | 0 | 0 | ||
Derivatives Not Designated as Hedging Instruments [Member]
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Derivatives Not Designated as Hedging Instruments in Statement of Operations | |||||
Amount of Gain or (Loss) Recognized in Income | $ 1 | $ 7 | $ 3 | $ (4) |
Cash, Cash Equivalents and Investments (Details 1) (USD $)
In Millions |
May 01, 2011
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Contractual maturities of investments | |
Due in one year or less, Cost | $ 710 |
Due in one year or less, Estimated Fair value | 712 |
Due after one through five years, Cost | 803 |
Due after one through five years, Estimated Fair Value | 811 |
Due after five years, Cost | 3 |
Due after five years, Estimated Fair Value | 3 |
No single maturity date, Cost | 466 |
No single maturity date, Estimated Fair Value | 493 |
Investments maturities amortized cost | 1,982 |
Investments maturities fair value | $ 2,019 |
Cash, Cash Equivalents and Investments (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 01, 2011
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Cash, Cash Equivalents and Investments (Tables) [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of cash, cash equivalents and investments |
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Contractual maturities of investments |
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Gains and losses on investments |
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Gross unrealized losses and the fair market value of investments |
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Stockholders' Equity, Comprehensive Income and Share-Based Compensation
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 01, 2011
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Stockholders' Equity, Comprehensive Income and Share-Based Compensation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity, Comprehensive Income and Share-Based Compensation |
Comprehensive
Income
Components of comprehensive income, on an after-tax basis where
applicable, were as follows:
Components of accumulated other comprehensive income, on an
after-tax basis where applicable, were as follows:
For further details on derivative instruments, see Note 5
of the Notes to Consolidated Condensed Financial Statements.
Stock
Repurchase Program
On March 8, 2010, Applied’s Board of Directors
approved a new stock repurchase program authorizing up to
$2.0 billion in repurchases over the next three years
ending in March 2013. Under this authorization, Applied renewed
its systematic stock repurchase program and may also make
supplemental stock repurchases from time to time, depending on
market conditions, stock price and other factors. During the
three months ended May 1, 2011, Applied repurchased
8 million shares of its common stock at an average price of
$15.54 per share for a total cash outlay of $118 million.
During the six months ended May 1, 2011, Applied
repurchased 19 million shares of its common stock at an
average price of $14.48 per share for a total cash outlay of
$268 million.
During the three and six months ended May 2, 2010, Applied
repurchased 8 million shares of its common stock at an
average price of $13.10 per share for a total cash outlay of
$100 million. In light of the planned Varian acquisition
(discussed in Note 16 of Notes to Consolidated Condensed
Financial Statements), Applied expects to temporarily reduce the
amount of its stock repurchases.
Dividends
On March 8, 2011, Applied’s Board of Directors
approved an increase in the quarterly cash dividend to $0.08 per
share, payable on June 22, 2011 to stockholders of record
as of June 1, 2011. In December 2010, Applied’s Board
of Directors declared a quarterly cash dividend in the amount of
$0.07 per share that was paid on March 23, 2011 to
stockholders of record as of March 2, 2011. Applied
currently anticipates that it will continue to pay cash
dividends on a quarterly basis in the future, although the
declaration and amount of any future cash dividend are 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 that cash dividends are in the best
interest of Applied’s stockholders.
Share-Based
Compensation
Applied has adopted stock plans that permit grants to employees
of share-based awards, including stock options, restricted stock
and restricted stock units (also referred to as
“performance shares” under Applied’s principal
equity compensation plan, the Employee Stock Incentive Plan). In
addition, the Employee Stock Incentive Plan provides for the
automatic grant of restricted stock units to non-employee
directors and permits the grant of share-based awards to
consultants. 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 six months ended May 1, 2011 and
May 2, 2010, Applied recognized equity-based compensation
expense related to stock options, ESPP shares, restricted stock
units and restricted stock. Total equity-based compensation and
related tax benefits were as follows:
The effect of share-based compensation on the results of
operations for the three and six months ended May 1, 2011
and May 2, 2010 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.
At May 1, 2011, Applied had $253 million in total
unrecognized compensation expense, net of estimated forfeitures,
related to stock option, restricted stock unit, restricted stock
grants and ESPP, which will be recognized over a weighted
average period of 2.8 years. At May 1, 2011, there
were 156 million shares available for stock option,
restricted stock unit, and restricted stock grants and an
additional 56 million shares available for issuance under
the ESPP.
Stock
Options
Applied grants options to purchase shares of its common stock to
employees and consultants. The exercise price of each stock
option equals the fair market value of Applied common stock on
the date of grant. Most options are scheduled to vest over four
years and expire no later than seven years from the grant date.
The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option pricing model. This model
was developed for use in estimating the value of publicly traded
options that have no vesting restrictions and are fully
transferable. Applied’s employee stock options have
characteristics significantly different from those of publicly
traded options. There were no stock options granted in the six
months ended May 1, 2011.
Stock option activity for the six months ended May 1, 2011
was as follows:
Restricted
Stock Units and Restricted Stock
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
have no right to dividends and are held in escrow until the
award vests. Restricted stock units and awards of restricted
stock typically vest over three to four years. Vesting of
restricted stock units and restricted stock usually is subject
to the grantee’s continued service with Applied and, in
some cases, achievement of specified performance goals. The
compensation expense related to these 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. Beginning in fiscal 2007, Applied initiated a
performance-based equity award program for named executive
officers and other key employees. Awards of restricted stock
units or restricted stock granted under this program vest only
if specific performance goals set by the Human Resources and
Compensation Committee of Applied’s Board of Directors (the
Committee) are achieved and if the grantee remains employed by
Applied through the applicable vesting date. The performance
goals require the achievement of targeted adjusted annual
operating profit margin levels as compared to Applied’s
peer companies in at least one of the four fiscal years
beginning with the fiscal year of the grant. The fair value of
these performance-based awards is estimated using the fair
market value of Applied common stock on the date of the grant
and assumes that the specified performance goals will be
achieved. If achieved, these awards vest over a specified
remaining service period. If the performance goals are not met,
no compensation expense is recognized and any previously
recognized compensation expense is reversed. The expected cost
of each award is reflected over the service period and is
reduced for estimated forfeitures. The Committee approved the
grant of 2 million performance-based restricted stock units
and 0.1 million performance-based shares of restricted
stock under this program in the six months ended May 1,
2011. With respect to the performance-based awards granted in
fiscal 2010, as of May 1, 2011, 40 percent of the
awards had been earned, subject to additional time-based vesting
requirements. The remaining 60 percent of the awards may
still be earned, depending on future performance in one or more
of fiscal years 2011 through 2013. With respect to most of the
performance-based awards granted in fiscal 2008, as of
May 1, 2011, 78 percent of the awards had been earned,
subject to additional time-based vesting requirements. The
remaining 22 percent of the awards may still be earned
depending on performance during fiscal 2011.
Restricted stock unit and restricted stock activity for the six
months ended May 1, 2011 was as follows:
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. Based on the
Black-Scholes option pricing model, the weighted average
estimated fair value of purchase rights under the ESPP was $3.61
and $3.00 for the three and six months ended May 1, 2011
and May 2, 2010, respectively. The number of shares issued
under the ESPP during the three and six months ended May 1,
2011 and May 2, 2010 was 3 million and 2 million,
respectively. 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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Earnings Per Share
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May 01, 2011
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 plans 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. For purposes of computing diluted earnings per share,
weighted average potential common shares do not include stock
options with an exercise price greater than the average fair
market value of Applied common stock for the period as the
effect would be anti-dilutive.
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Industry Segment Operations (Tables)
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May 01, 2011
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Industry Segment Operations (Tables) [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net sales and operating income (loss) for each reportable segment |
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Reconciliations of total segment operating income to Applied's consolidated operating income (loss) |
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Companies accounted for at least 10 percent of Applied's net sales |
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Accounts receivable for those customers that accounted for at least 10% of Applied's net sales |
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Goodwill, Purchased Technology and Other Intangible Assets
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 01, 2011
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Goodwill, Purchased Technology and Other Intangible Assets [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 cost of the
acquisition 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 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. For goodwill, Applied performs a two-step
impairment test. In the first step, Applied compares the
estimated fair value of each reporting unit to its carrying
value. Applied’s reporting units are consistent with the
reportable segments identified in Note 15, based on the
manner in which Applied operates its business and the nature of
those operations. Applied determines the fair value of each of
its reporting units based on a weighting of income and market
approaches. Under the income approach, Applied calculates the
fair value of a reporting unit based on the present value of
estimated future cash flows. Estimated future cash flows will be
impacted by a number of factors including anticipated future
operating results, estimated cost of capital
and/or
discount rates. Under the market approach, Applied estimates the
fair value based on market multiples of revenue or earnings for
comparable companies, as appropriate. If the fair value of the
reporting unit exceeds the carrying value of the net assets
assigned to that unit, goodwill is not impaired and no further
testing is performed. If the carrying value of the net assets
assigned to the reporting unit exceeds the fair value of the
reporting unit, then Applied would perform the second step of
the impairment test in order to determine the implied fair value
of the reporting unit’s goodwill. Applied would then
allocate the fair value of the reporting unit to all of the
assets and liabilities of that unit, as if Applied had acquired
the reporting unit in a business combination, with the fair
value of the reporting unit being the “purchase
price.” The excess of the “purchase price” over
the carrying amounts assigned to assets and liabilities
represents the implied fair value of goodwill. If Applied
determined that the carrying value of a reporting unit’s
goodwill exceeded its implied fair value, Applied would record
an impairment charge equal to the difference.
Applied conducted impairment tests in the fourth quarter of
fiscal 2010, and the results of the first step of the impairment
test indicated that Applied’s goodwill and purchased
intangible assets with indefinite useful lives for each of its
reporting units were not impaired. The purchased intangible
assets with indefinite lives consisted primarily of a trade
name. In the second quarter of fiscal 2011, Applied negotiated
the divestiture of certain assets and determined the trade name
included in assets held for sale to be impaired, and recorded
$18 million of impairment charges.
Effective in the first quarter of fiscal 2011, Applied
transferred its SunFab thin film solar product from the Energy
and Environmental Solutions segment to the Applied Global
Services segment. As a result of this transfer, Applied
reallocated $17 million of goodwill from its Energy and
Environmental Solutions segment to its Applied Global Services
segment.
Details of goodwill and other indefinite-lived intangible assets
were as follows:
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 environment,
technological advances, and changes in cost structure.
Details of amortized intangible assets were as follows:
Aggregate amortization expense was $13 million and
$28 million for the three months ended May 1, 2011 and
May 2, 2010, respectively, and $27 million and
$53 million for the six months ended May 1, 2011 and
May 2, 2010, respectively. In the second quarter of fiscal
2011, Applied negotiated the divestiture of certain assets held
in the Applied Global Services segment and determined identified
purchased technology and finite-lived intangible assets included
in assets held for sale to be impaired, and recorded
$6 million of impairment charges.
As of May 1, 2011, future estimated amortization expense is
expected to be as follows:
|
Income Taxes
|
6 Months Ended | ||||
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May 01, 2011
|
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Income Taxes [Abstract] | |||||
Income Taxes |
Applied’s effective income tax rate for the second quarter
of fiscal 2011 and fiscal 2010 was a provision of
28.8 percent and 31.8 percent, respectively.
Applied’s effective income tax rate for the first six
months of fiscal 2011 and fiscal 2010 was a provision of
27.2 percent and 31.5 percent, respectively. The rates
for the three and six months ended May 1, 2011 were both
lower than the rates for the comparable periods in the prior
year primarily due to an increase in income in jurisdictions
outside the U.S. with lower tax rates. The tax rates for
the three and six months ended May 1, 2011 further
benefited from tax incentives offered in several jurisdictions.
The tax rates for the three and six months ended May 1,
2011 and May 2, 2010 included the impact of restructuring
charges. Applied’s future effective income tax rate depends
on various factors, such as tax legislation, the geographic
composition of Applied’s pre-tax income, and the tax rate
on equity compensation. Management carefully monitors these
factors and timely adjusts the interim income tax rate
accordingly.
At May 1, 2011, income taxes payable amounted to
$211 million as compared to $274 million at
October 31, 2010, a decrease of $63 million. During
the same period, prepaid income taxes increased by
$110 million. The changes in income taxes payable and
prepaid income taxes from October 31, 2010 to May 1,
2011 were primarily due to the timing of estimated tax payments
as required by IRS regulations.
A number of Applied’s tax returns remain subject to
examination by taxing authorities. These include
U.S. federal returns for fiscal 2005 and later years,
California returns for fiscal 2006 and later years, tax returns
for certain other states for fiscal 2005 and later years, and
tax returns in certain jurisdictions outside of the United
States for fiscal 2003 and later years.
The timing of the resolution of income tax examinations, as well
as the amounts and timing of various tax payments that may be
made as part of the resolution process, is highly uncertain.
This could cause large fluctuations in the balance sheet
classification of current assets and non-current assets and
liabilities. Applied does not expect a material change in
unrecognized tax benefits in the next 12 months.
|
Borrowing Facilities
|
6 Months Ended | ||||
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May 01, 2011
|
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Borrowing Facilities [Abstract] | |||||
Borrowing Facilities |
Applied has credit facilities for unsecured borrowings in
various currencies of up to $1.1 billion, of which
$1.0 billion is comprised of a
5-year
revolving credit agreement with a group of banks that is
scheduled to expire in January 2012. This agreement provides for
borrowings in United States dollars at interest rates keyed to
one of the two rates selected by Applied for each advance and
includes financial and other covenants with which Applied was in
compliance at May 1, 2011. Remaining credit facilities in
the amount of approximately $96 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 at both
May 1, 2011 and October 31, 2010.
|
Stockholders' Equity, Comprehensive Income and Equity-Based Compensation (Tables)
|
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May 01, 2011
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Stockholders' Equity, Comprehensive Income and Equity-Based Compensation (Tables) [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of comprehensive income (loss), after-tax basis |
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Components of accumulated other comprehensive loss, after-tax basis |
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Total share-based compensation and related tax benefits |
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Effect of share-based compensation on the results of operations |
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Stock option activity |
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Restricted stock units and restricted stock activity |
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Weighted average and underlying assumptions used in the model |
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Balance Sheet Detail
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6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 01, 2011
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Balance Sheet Detail [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance Sheet Detail |
Included in finished goods inventory is $229 million at
May 1, 2011, and $148 million at October 31,
2010, 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.
In the first quarter of fiscal 2011, Applied received
$39 million in proceeds from the sale of a property located
in North America and incurred a loss of $1 million on the
transaction. At May 1, 2011, Applied had $66 million
of assets held for sale.
Other accrued expenses included contractual termination
obligation charges of $15 million and $40 million as
of May 1, 2011 and October 31, 2010, respectively.
|
Income Taxes (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
May 01, 2011
|
May 02, 2010
|
May 01, 2011
|
May 02, 2010
|
Oct. 31, 2010
|
||||||
Income Taxes (Textual) [Abstract] | ||||||||||
Statutory U.S. federal income tax rate | 28.80% | 31.80% | 27.20% | 31.50% | ||||||
Expect no material change in unrecognized tax benefits | next 12 months | |||||||||
Income taxes payable | $ 211 | [1] | $ 211 | [1] | $ 274 | [1] | ||||
Increase (decrease) in income taxes payable | (63) | |||||||||
Increase (decrease) in prepaid income taxes | $ 110 | $ (185) | ||||||||
Domestic Country [Member]
|
||||||||||
Income Taxes (Textual) [Abstract] | ||||||||||
Tax jurisdiction and years under examination | 2005 and later years | |||||||||
Jurisdictions Outside Country [Member]
|
||||||||||
Income Taxes (Textual) [Abstract] | ||||||||||
Tax jurisdiction and years under examination | 2003 and later years | |||||||||
California [Member]
|
||||||||||
Income Taxes (Textual) [Abstract] | ||||||||||
Tax jurisdiction and years under examination | 2006 and later years | |||||||||
State and Local Jurisdiction [Member]
|
||||||||||
Income Taxes (Textual) [Abstract] | ||||||||||
Tax jurisdiction and years under examination | 2005 and later years | |||||||||
|
Consolidated Condensed Statements of Cash Flows (Unaudited) (USD $)
In Millions |
6 Months Ended | ||||
---|---|---|---|---|---|
May 01, 2011
|
May 02, 2010
|
||||
Cash flows from operating activities: | |||||
Net income | $ 995 | $ 347 | |||
Adjustments required to reconcile net income to cash provided by operating activities: | |||||
Depreciation and amortization | 128 | 163 | |||
Loss on fixed asset retirements | 1 | 12 | |||
Provision for bad debts | 6 | ||||
Restructuring charges and asset impairments | (33) | 113 | |||
Deferred income taxes | (17) | (75) | |||
Net recognized loss on investments | 5 | 14 | |||
Share-based compensation | 72 | 62 | |||
Changes in operating assets and liabilities, net of amounts acquired: | |||||
Accounts receivable | (85) | (365) | |||
Inventories | (246) | (1) | |||
Prepaid income taxes | (110) | 185 | |||
Other current assets | 20 | (1) | |||
Other assets | (2) | (9) | |||
Accounts payable and accrued expenses | 25 | 211 | |||
Customer deposits and deferred revenue | 432 | 111 | |||
Income taxes payable | (64) | 138 | |||
Employee benefits and other liabilities | 8 | (12) | |||
Cash provided by operating activities | 1,129 | 899 | |||
Cash flows from investing activities: | |||||
Capital expenditures | (81) | (98) | |||
Proceeds from sale of facility | 39 | ||||
Cash paid for acquisition, net of cash acquired | (323) | ||||
Proceeds from sales and maturities of investments | 904 | 540 | |||
Purchases of investments | (896) | (829) | |||
Cash used in investing activities | (34) | (710) | |||
Cash flows from financing activities: | |||||
Debt repayments, net | (1) | (5) | |||
Proceeds from common stock issuances | 59 | 97 | |||
Common stock repurchases | (268) | (100) | |||
Payment of dividends to stockholders | (186) | (161) | |||
Cash used in financing activities | (396) | (169) | |||
Effect of exchange rate changes on cash and cash equivalents | 1 | ||||
Increase in cash and cash equivalents | 700 | 20 | |||
Cash and cash equivalents - beginning of period | 1,858 | [1] | 1,576 | ||
Cash and cash equivalents - end of period | 2,558 | [1] | 1,596 | ||
Supplemental cash flow information: | |||||
Cash payments for income taxes | 556 | 98 | |||
Cash refunds for income taxes | 2 | 196 | |||
Cash payments for interest | $ 7 | $ 7 | |||
|
Cash, Cash Equivalents and Investments
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 01, 2011
|
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Cash, Cash Equivalents and Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash, Cash Equivalents and Investments |
Summary
of Cash, Cash Equivalents and Investments
The following tables summarizes Applied’s cash, cash
equivalents and investments by security type:
Maturities
of Investments
The following table summarizes the contractual maturities of
Applied’s investments at May 1, 2011:
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
Gross realized gains and losses on sales of investments during
the three and six months ended May 1, 2011 and May 2,
2010 were as follows:
At May 1, 2011, Applied had a gross unrealized loss of
$1 million related to its investment portfolio due to a
decrease in the fair value of certain fixed income securities.
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 was 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 has determined that
the gross unrealized losses on its marketable securities at
May 1, 2011 are temporary in nature and therefore it did
not recognize any impairment of its marketable securities for
the three and six months ended May 1, 2011. Applied did not
recognize any impairment on its equity investments in
privately-held companies for both the three and six months ended
May 1, 2011. Applied determined that the gross unrealized
losses on its marketable securities at May 2, 2010, were
temporary in nature and therefore it did not recognize any
impairment of its marketable securities for the three and six
months ended May 2, 2010. During the first six months of
fiscal 2010, Applied determined that certain of its equity
investments in privately-held companies were
other-than-temporarily
impaired and, accordingly, recognized impairment charges in the
amounts of $4 million and $5 million for the three and
six months ended May 2, 2010, respectively.
The following table provides the fair market value of
Applied’s investments with unrealized losses that are not
deemed to be
other-than-temporarily
impaired as of May 1, 2011.
Unrealized gains and temporary losses on investments classified
as
available-for-sale
are included within accumulated other comprehensive income, net
of any related tax effect. Upon realization, those amounts are
reclassified from accumulated other comprehensive income to
results of operations.
|
Cash, Cash Equivalents and Investments (Details 3) (USD $)
In Millions |
3 Months Ended |
---|---|
May 01, 2011
|
|
Gross Unrealized Losses and the Fair Market Value of Investments | |
In Loss Position for Less Than 12 Months, Fair Value | $ 127 |
In Loss Position for Less Than 12 Months, Gross Unrealized Losses | 1 |
Total, Fair Value | 127 |
Total, Gross Unrealized Losses | 1 |
Other debt securities [Member]
|
|
Gross Unrealized Losses and the Fair Market Value of Investments | |
In Loss Position for Less Than 12 Months, Fair Value | 127 |
In Loss Position for Less Than 12 Months, Gross Unrealized Losses | 1 |
Total, Fair Value | 127 |
Total, Gross Unrealized Losses | $ 1 |
Restructuring Charges and Asset Impairments (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
May 01, 2011
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring Charges and Asset Impairments (Tables) [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in restructuring reserves related to severance |
|
Subsequent Events (Details) (USD $)
|
6 Months Ended | |
---|---|---|
May 01, 2011
|
May 04, 2011
|
|
Subsequent Event [Line Items] | ||
Merger agreement termination fee | $ 200,000,000 | |
Subsequent Events (Textuals) [Abstract] | ||
Cost of Acquisition, price per share | $ 63 | |
Total approximate price of acquired entity | 4,900,000,000 | |
Secured Commitment | 2,000,000,000 | |
Amount under existing undrawn revolving credit facility | 1,000,000,000 | |
Amount under new revolving credit facility | 1,500,000,000 | |
Varian Semiconductor Equipment Associates, Inc [Member]
|
||
Subsequent Event [Line Items] | ||
Merger agreement termination fee | $ 147,000,000 |
Employee Benefit Plans (Details) (USD $)
In Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
May 01, 2011
|
May 02, 2010
|
May 01, 2011
|
May 02, 2010
|
|
Components of net periodic benefit costs of defined and postretirement benefit plans | ||||
Service cost | $ 4 | $ 3 | $ 8 | $ 7 |
Interest cost | 3 | 4 | 7 | 7 |
Expected return on plan assets | (3) | (2) | (6) | (4) |
Amortization of actuarial loss | 1 | 1 | ||
Net periodic benefit cost | $ 5 | $ 5 | $ 10 | $ 10 |
Fair Value Measurements
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 01, 2011
|
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Fair Value Measurements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements |
Applied’s financial assets are measured and recorded at
fair value, except for equity investments held 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 when events or circumstances indicate that an
other-than-temporary
decline in value may have occurred.
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 are comprised 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 May 1, 2011, 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
and Liabilities Measured at Fair Value on a Recurring
Basis
Financial assets and liabilities (excluding cash balances)
measured at fair value on a recurring basis are summarized below
as of May 1, 2011 and October 31, 2010:
There were no significant transfers in and out of Level 1
and Level 2 fair value measurements and there were no
Level 3 investments during either the three or six months
ended May 1, 2011 and May 2, 2010. Applied did not
have any financial assets measured at fair value on a recurring
basis within Level 3 fair value measurements during the
three and six months ended May 1, 2011 and May 2, 2010.
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. Equity investments
in privately-held companies totaled $59 million at
May 1, 2011, of which $46 million of investments were
accounted for under the cost method of accounting and
$13 million of Level 3 investments had been measured
at fair value on a non-recurring basis due to an
other-than-temporary
decline in value. At May 2, 2010, equity investments in
privately-held companies totaled $68 million, of which
$52 million of investments were accounted for under the
cost method of accounting and $16 million of Level 3
investments had been measured at fair value on a non-recurring
basis due to an
other-than-temporary
decline in value. There were no impairments in our equity
investments in privately-held companies for the three and six
months ended May 1, 2011.
The following tables present the balances of equity securities
at May 1, 2011 and May 2, 2010 that had been measured
at fair value on a non-recurring basis, using the process
described above, and the impairment charges recorded during the
three months then ended:
At October 31, 2010, equity investments in privately-held
companies totaled $59 million, of which $40 million of
investments were accounted for under the cost method of
accounting and $19 million of Level 3 investments had
been measured at fair value on a non-recurring basis due to an
other-than-temporary
decline in value.
Other
The carrying amounts of Applied’s financial instruments,
including cash and cash equivalents, accounts receivable, notes
payable, and accounts payable and accrued expenses, approximate
fair value due to the short maturities of these financial
instruments. The carrying amount of Applied’s long-term
debt at May 1, 2011 was $205 million and the estimated
fair value was $242 million. At October 31, 2010, the
carrying amount of long-term debt was $205 million and the
estimated fair value was $238 million. 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.
|
Fair Value Measurements (Details) (USD $)
In Millions |
3 Months Ended | 6 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|
May 01, 2011
|
May 02, 2010
|
May 01, 2011
|
May 02, 2010
|
Oct. 31, 2010
|
||||
ASSETS | ||||||||
Financial Assets Measured at Fair Value on a Recurring Basis | $ 4,050 | $ 4,050 | $ 3,138 | |||||
Liabilities | ||||||||
Financial Liabilities Measured at Fair Value on a Recurring Basis | 0 | 0 | (1) | |||||
Impairment charges | ||||||||
Equity investments in privately-held companies measured at fair value on a non-recurring basis | 13 | 16 | 13 | 16 | 19 | |||
Impairment of equity method investment in privately-held companies measured at fair value on a non-recurring basis | 0 | 4 | 0 | 5 | ||||
Fair Value Measurements (Textuals) [Abstract] | ||||||||
Equity investments in privately-held companies | 59 | 68 | 59 | 68 | 59 | |||
Investments accounted for under cost method of accounting | 46 | 52 | 46 | 52 | 40 | |||
Investments measured at fair value on a non-recurring basis | 13 | 16 | 13 | 16 | 19 | |||
Long-term debt at carrying value | 205 | 205 | 205 | |||||
Estimated fair value of long-term debt | 242 | 242 | 238 | |||||
Level 1 [Member]
|
||||||||
Impairment charges | ||||||||
Equity investments in privately-held companies measured at fair value on a non-recurring basis | 0 | 0 | 0 | 0 | ||||
Fair Value Measurements (Textuals) [Abstract] | ||||||||
Investments measured at fair value on a non-recurring basis | 0 | 0 | 0 | 0 | ||||
Level 1 [Member]
|
||||||||
ASSETS | ||||||||
Financial Assets Measured at Fair Value on a Recurring Basis | 1,863 | 1,863 | 1,317 | |||||
Level 1 [Member] | Money market funds [Member]
|
||||||||
ASSETS | ||||||||
Financial Assets Measured at Fair Value on a Recurring Basis | 1,746 | 1,746 | 1,139 | |||||
Level 1 [Member] | US Treasury and agency securities [Member]
|
||||||||
ASSETS | ||||||||
Financial Assets Measured at Fair Value on a Recurring Basis | 84 | 84 | 153 | |||||
Level 1 [Member] | U.S. commercial paper, corporate bonds and medium-term notes [Member]
|
||||||||
ASSETS | ||||||||
Financial Assets Measured at Fair Value on a Recurring Basis | 0 | 0 | 0 | |||||
Level 1 [Member] | Obligations of states and political subdivisions [Member]
|
||||||||
ASSETS | ||||||||
Financial Assets Measured at Fair Value on a Recurring Basis | 0 | 0 | 0 | |||||
Level 1 [Member] | Other debt securities [Member]
|
||||||||
ASSETS | ||||||||
Financial Assets Measured at Fair Value on a Recurring Basis | 0 | 0 | 0 | |||||
Level 1 [Member] | Publicly traded equity securities [Member]
|
||||||||
ASSETS | ||||||||
Financial Assets Measured at Fair Value on a Recurring Basis | 33 | 33 | 25 | |||||
Level 1 [Member] | Foreign Exchange [Member]
|
||||||||
ASSETS | ||||||||
Financial Assets Measured at Fair Value on a Recurring Basis | 0 | 0 | 0 | |||||
Level 1 [Member]
|
||||||||
Liabilities | ||||||||
Financial Liabilities Measured at Fair Value on a Recurring Basis | 0 | 0 | 0 | |||||
Level 1 [Member] | Foreign Exchange [Member]
|
||||||||
Liabilities | ||||||||
Financial Liabilities Measured at Fair Value on a Recurring Basis | 0 | 0 | 0 | |||||
Level 2 [Member]
|
||||||||
Impairment charges | ||||||||
Equity investments in privately-held companies measured at fair value on a non-recurring basis | 0 | 0 | 0 | 0 | ||||
Fair Value Measurements (Textuals) [Abstract] | ||||||||
Investments measured at fair value on a non-recurring basis | 0 | 0 | 0 | 0 | ||||
Level 2 [Member]
|
||||||||
ASSETS | ||||||||
Financial Assets Measured at Fair Value on a Recurring Basis | 2,187 | 2,187 | 1,821 | |||||
Level 2 [Member] | Money market funds [Member]
|
||||||||
ASSETS | ||||||||
Financial Assets Measured at Fair Value on a Recurring Basis | 0 | 0 | 0 | |||||
Level 2 [Member] | US Treasury and agency securities [Member]
|
||||||||
ASSETS | ||||||||
Financial Assets Measured at Fair Value on a Recurring Basis | 612 | 612 | 520 | |||||
Level 2 [Member] | U.S. commercial paper, corporate bonds and medium-term notes [Member]
|
||||||||
ASSETS | ||||||||
Financial Assets Measured at Fair Value on a Recurring Basis | 629 | 629 | 509 | |||||
Level 2 [Member] | Obligations of states and political subdivisions [Member]
|
||||||||
ASSETS | ||||||||
Financial Assets Measured at Fair Value on a Recurring Basis | 534 | 534 | 523 | |||||
Level 2 [Member] | Other debt securities [Member]
|
||||||||
ASSETS | ||||||||
Financial Assets Measured at Fair Value on a Recurring Basis | 402 | 402 | 263 | |||||
Level 2 [Member] | Publicly traded equity securities [Member]
|
||||||||
ASSETS | ||||||||
Financial Assets Measured at Fair Value on a Recurring Basis | 0 | 0 | 0 | [1] | ||||
Level 2 [Member] | Foreign Exchange [Member]
|
||||||||
ASSETS | ||||||||
Financial Assets Measured at Fair Value on a Recurring Basis | 10 | 10 | 6 | |||||
Level 2 [Member]
|
||||||||
Liabilities | ||||||||
Financial Liabilities Measured at Fair Value on a Recurring Basis | 0 | 0 | (1) | |||||
Level 2 [Member] | Foreign Exchange [Member]
|
||||||||
Liabilities | ||||||||
Financial Liabilities Measured at Fair Value on a Recurring Basis | 0 | 0 | (1) | |||||
Level 3 [Member]
|
||||||||
Impairment charges | ||||||||
Equity investments in privately-held companies measured at fair value on a non-recurring basis | 13 | 16 | 13 | 16 | ||||
Fair Value Measurements (Textuals) [Abstract] | ||||||||
Investments measured at fair value on a non-recurring basis | 13 | 16 | 13 | 16 | ||||
Level 3 [Member]
|
||||||||
ASSETS | ||||||||
Financial Assets Measured at Fair Value on a Recurring Basis | 0 | 0 | 0 | |||||
Level 3 [Member] | Money market funds [Member]
|
||||||||
ASSETS | ||||||||
Financial Assets Measured at Fair Value on a Recurring Basis | 0 | 0 | 0 | |||||
Level 3 [Member] | US Treasury and agency securities [Member]
|
||||||||
ASSETS | ||||||||
Financial Assets Measured at Fair Value on a Recurring Basis | 0 | 0 | 0 | |||||
Level 3 [Member] | U.S. commercial paper, corporate bonds and medium-term notes [Member]
|
||||||||
ASSETS | ||||||||
Financial Assets Measured at Fair Value on a Recurring Basis | 0 | 0 | 0 | |||||
Level 3 [Member] | Obligations of states and political subdivisions [Member]
|
||||||||
ASSETS | ||||||||
Financial Assets Measured at Fair Value on a Recurring Basis | 0 | 0 | 0 | |||||
Level 3 [Member] | Other debt securities [Member]
|
||||||||
ASSETS | ||||||||
Financial Assets Measured at Fair Value on a Recurring Basis | 0 | 0 | 0 | |||||
Level 3 [Member] | Publicly traded equity securities [Member]
|
||||||||
ASSETS | ||||||||
Financial Assets Measured at Fair Value on a Recurring Basis | 0 | 0 | 0 | |||||
Level 3 [Member] | Foreign Exchange [Member]
|
||||||||
ASSETS | ||||||||
Financial Assets Measured at Fair Value on a Recurring Basis | 0 | 0 | 0 | |||||
Level 3 [Member]
|
||||||||
Liabilities | ||||||||
Financial Liabilities Measured at Fair Value on a Recurring Basis | 0 | 0 | 0 | |||||
Level 3 [Member] | Foreign Exchange [Member]
|
||||||||
Liabilities | ||||||||
Financial Liabilities Measured at Fair Value on a Recurring Basis | 0 | 0 | 0 | |||||
Money market funds [Member]
|
||||||||
ASSETS | ||||||||
Financial Assets Measured at Fair Value on a Recurring Basis | 1,746 | 1,746 | 1,139 | |||||
US Treasury and agency securities [Member]
|
||||||||
ASSETS | ||||||||
Financial Assets Measured at Fair Value on a Recurring Basis | 696 | 696 | 673 | |||||
U.S. commercial paper, corporate bonds and medium-term notes [Member]
|
||||||||
ASSETS | ||||||||
Financial Assets Measured at Fair Value on a Recurring Basis | 629 | 629 | 509 | |||||
Obligations of states and political subdivisions [Member]
|
||||||||
ASSETS | ||||||||
Financial Assets Measured at Fair Value on a Recurring Basis | 534 | 534 | 523 | |||||
Other debt securities [Member]
|
||||||||
ASSETS | ||||||||
Financial Assets Measured at Fair Value on a Recurring Basis | 402 | 402 | 263 | |||||
Publicly traded equity securities [Member]
|
||||||||
ASSETS | ||||||||
Financial Assets Measured at Fair Value on a Recurring Basis | 33 | 33 | 25 | |||||
Foreign Exchange [Member]
|
||||||||
ASSETS | ||||||||
Financial Assets Measured at Fair Value on a Recurring Basis | 10 | 10 | 6 | |||||
Liabilities | ||||||||
Financial Liabilities Measured at Fair Value on a Recurring Basis | $ 0 | $ 0 | $ (1) | |||||
|
Accounts Receivable, Net (Tables)
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 01, 2011
|
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Accounts Receivable, Net (Tables) [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sale and discounting of accounts receivable |
|
Employee Benefit Plans (Tables)
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 01, 2011
|
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Employee Benefits Plans (Tables) [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of net periodic benefit costs of defined and postretirement benefit plans |
|
Cash, Cash Equivalents and Investments (Details Textuals) (USD $)
In Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
May 01, 2011
|
May 02, 2010
|
May 01, 2011
|
May 02, 2010
|
|
Cash, Cash Equivalents and Investments (Textuals) [Abstract] | ||||
Gross unrealized loss due to a decrease in the fair value of certain fixed income securities | $ 1 | $ 1 | ||
Amount of impairment charges recognized | 0 | 4 | 0 | 5 |
Impairment charges associated with equity investments in privately-held companies | $ 0 | $ 4 | $ 0 | $ 5 |
Goodwill, Purchased Technology and Other Intangible Assets (Tables)
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 01, 2011
|
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Goodwill, Purchased Technology and Other Intangible Assets (Tables) [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Indefinite-lived intangible assets |
|
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Amortized intangible assets |
|
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Future estimated amortization expense |
|
Employee Benefit Plans
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 01, 2011
|
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Employee Benefit Plans [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Employee Benefit Plans |
Applied sponsors a number of employee benefit plans, including
defined benefit plans of certain foreign subsidiaries, and a
plan that provides certain medical and vision benefits to
eligible retirees. A summary of the
components of net periodic benefit costs of these defined and
postretirement benefit plans for the three and six months ended
May 1, 2011 and May 2, 2010 is presented below:
|
Industry Segment Operations (Details 2)
|
6 Months Ended |
---|---|
May 01, 2011
|
|
Samsung Electronics Co., Ltd. [Member]
|
|
Companies accounted for at least 10 percent of Applied's net sales | |
Accounted net sales in percent | 13.00% |
Accounts receivable for those customers that accounted for at least 10% of Applied's net sales | |
Percentage of accounts receivable total that two customers accounted for | 10.00% |
Taiwan Semiconductor Manufacturing Company Limited [Member]
|
|
Companies accounted for at least 10 percent of Applied's net sales | |
Accounted net sales in percent | 13.00% |
Accounts receivable for those customers that accounted for at least 10% of Applied's net sales | |
Percentage of accounts receivable total that two customers accounted for | 18.00% |
Derivative Instruments and Hedging Activities
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 01, 2011
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Derivative Instruments and Hedging Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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
Japanese yen, euro, Israeli shekel, Taiwanese dollar and Swiss
franc. 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. Applied does not use
derivative financial instruments for trading or speculative
purposes.
Derivative instruments and hedging activities, including foreign
currency exchange 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
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
accumulated other comprehensive income or loss (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 derivative instruments
included in AOCI at May 1, 2011 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 general and
administrative expenses. 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 six months ended May 1, 2011
and May 2, 2010.
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.
Fair values of derivative instruments were as follows:
The effect of derivative instruments on the Consolidated
Condensed Statement of Operations for the three and six months
ended May 1, 2011 and May 2, 2010 was 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 not material as of
May 1, 2011.
Entering into foreign exchange contracts with banks exposes
Applied to credit-related losses in the event of the banks’
nonperformance. However, Applied does not consider its exposure
to be significant.
|
Industry Segment Operations
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 01, 2011
|
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Industry Segment Operations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Industry Segment Operations |
Applied’s four reportable segments are: Silicon Systems
Group, Applied Global Services, Display, and Energy and
Environmental Solutions. 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
May 1, 2011 and the distinctive nature of each segment.
Future changes to this internal financial structure may result
in changes to Applied’s reportable segments.
Each reportable 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.
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 orders, net sales and operating
income. Management uses these results to evaluate the
performance of, and to assign resources to, each of the
reportable segments. Applied does not allocate to its reportable
segments certain operating expenses that it manages separately
at the corporate level, which 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 charges or adjustments
pertain to a specific reportable segment. Segment operating
income 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.
In fiscal 2010, as part of the restructuring of the Energy and
Environmental Solutions segment, Applied discontinued sales to
new customers of its fully-integrated SunFab production lines
but continued to offer individual tools for thin film solar
manufacturing. Applied is supporting existing SunFab customers
with services,
upgrades and capacity increases through its Applied Global
Services segment as these products are considered to have
reached a particular stage in the product lifecycle. Effective
in the first quarter of fiscal 2011, Applied accounts for thin
film products under its Applied Global Services segment.
The Silicon Systems Group segment includes semiconductor capital
equipment for etch, rapid thermal processing, deposition,
chemical mechanical planarization, metrology and inspection, and
wafer packaging.
The Applied Global Services segment includes technically
differentiated products and services to improve operating
efficiency, reduce operating costs and lessen the environmental
impact of semiconductor, display and solar customers’
factories. Applied Global Services’ products consist of
spares, services, certain earlier generation products,
remanufactured equipment, and products that have reached a
particular stage in the product lifecycle. Customer demand for
these products and services is fulfilled through a global
distribution system with trained service engineers located in
close proximity to customer sites.
The Display segment includes products for manufacturing LCDs for
TVs, personal computers, tablets, smart phones and other
video-enabled devices.
The Energy and Environmental Solutions segment includes products
for fabricating crystalline-silicon (c-Si) solar photovoltaic
cells and modules, high throughput
roll-to-roll
coating systems for flexible electronics and web products, and
systems used in the manufacture of energy-efficient glass.
Net sales and operating income (loss) for each reportable
segment for the three and six months ended May 1, 2011 and
May 2, 2010 were as follows:
Operating results for the three and six months ended May 1,
2011 included favorable adjustments of $8 million and
$36 million, respectively, related to a restructuring
program, announced in fiscal 2010, which was reported in the
Energy and Environmental Solutions segment.
In the second quarter of fiscal 2011, Applied negotiated the
divestiture of certain assets held in the Applied Global
Services segment and determined identified intangible assets and
purchased technology included in assets held for sale to be
impaired. Results for the three and six months ended May 1,
2011 included impairment charges of $24 million, which were
reported in the Applied Global Services segment.
Reconciliations of total segment operating income to
Applied’s consolidated operating income for the three and
six months ended May 1, 2011 and May 2, 2010 were as
follows:
The following companies accounted for at least 10 percent
of Applied’s net sales for the six months ended May 1,
2011, which were for products in multiple reportable segments.
As of May 1, 2011, accounts receivable for those customers
that accounted for at least 10 percent of Applied’s
net sales for the six months ended May 1, 2011, as a
percentage of total accounts receivable, were as follows:
|
Cash, Cash Equivalents and Investments (Details 2) (USD $)
In Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
May 01, 2011
|
May 02, 2010
|
May 01, 2011
|
May 02, 2010
|
|
Gains and Losses on Investments | ||||
Gross realized gains on investments | $ 8 | $ 2 | $ 13 | $ 2 |
Gross realized losses on investments | $ 1 | $ 1 | $ 1 |
Balance Sheet Detail (Tables)
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 01, 2011
|
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Balance Sheet Detail (Tables) [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories |
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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 |
|
Consolidated Condensed Statements of Stockholder's Equity and Comprehensive Income (Unaudited) (Parenthetical) (USD $)
In Millions |
6 Months Ended |
---|---|
May 01, 2011
|
|
Tax benefits included in issuance under stock plans | $ 4 |
Common Stock
|
|
Tax benefits included in issuance under stock plans | 4 |
Additional Paid-In Capital
|
|
Tax benefits included in issuance under stock plans | $ 4 |
Subsequent Events
|
6 Months Ended | ||||
---|---|---|---|---|---|
May 01, 2011
|
|||||
Subsequent Events [Abstract] | |||||
Subsequent Events |
On May 4, 2011, Applied and Varian Semiconductor Equipment
Associates, Inc. (Varian) announced the signing of a definitive
merger agreement (the Merger Agreement) under which Applied
agreed to acquire Varian for $63 per share in cash for a total
price of approximately $4.9 billion on a fully-diluted
basis. Varian designs, manufactures, markets and services
semiconductor processing equipment and is the leading supplier
of ion implantation equipment used by chip makers around the
world. Upon completion of the acquisition, Varian will operate
within Applied’s Silicon Systems Group and will continue to
be based in Gloucester, Massachusetts. The closing of the
acquisition is subject to customary conditions, including
approval by Varian’s shareholders and review by
U.S. and international regulators.
Applied expects to fund the transaction with a combination of
existing cash balances and debt. Subsequent to May 1, 2011,
Applied put in place a $2 billion, one-year senior bridge
loan facility and plans to arrange for long-term debt financing.
Subsequent to May 1, 2011, Applied also put in place a new
undrawn, four-year, $1.5 billion revolving credit facility,
which replaced its previous undrawn $1 billion revolving
credit facility.
The Merger Agreement contains certain termination rights and
provides that (i) upon the termination of the Merger
Agreement under specified circumstances, including, among
others, by Varian to accept a superior offer or by Applied upon
a change in the recommendation of Varian’s board of
directors, Varian will owe Applied a cash termination fee of
$147 million; and (ii) upon termination of the Merger
Agreement due to the failure to obtain certain antitrust
approvals, Applied will owe Varian a cash termination fee of
$200 million.
|
Accounts Receivable, Net (Details) (USD $)
In Millions |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
May 01, 2011
|
May 02, 2010
|
May 01, 2011
|
May 02, 2010
|
Oct. 31, 2010
|
|
Sale and Discounting of Accounts Receivable | |||||
Discounted letters of credit | $ 50 | $ 26 | $ 173 | $ 53 | |
Factored accounts receivable and discounted promissory notes | 19 | 24 | 55 | 50 | |
Total | 69 | 50 | 228 | 103 | |
Accounts Receivable, Net (Textual) [Abstract] | |||||
Allowance for doubtful accounts sold | $ 74 | $ 74 | $ 74 |
Earnings Per Share (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 01, 2011
|
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Earnings Per Share (Tables) [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Elements used in computing both basic and diluted net earnings per share |
|
Basis of Presentation
|
6 Months Ended | ||||
---|---|---|---|---|---|
May 01, 2011
|
|||||
Basis of Presentation [Abstract] | |||||
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 31,
2010 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 31, 2010 (2010
Form 10-K).
Applied’s results of operations for the three and six
months ended May 1, 2011 are not necessarily indicative of
future operating results. Applied’s fiscal year ends on the
last Sunday in October of each year. Fiscal 2011 contains
52 weeks, while fiscal 2010 contained 53 weeks, and
the first six months of fiscal 2011 contained 26 weeks,
while the first six months of fiscal 2010 contained
27 weeks.
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, Applied recognizes revenue upon shipment 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, 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. The completed contract method is
used for
SunFabtm
thin film production lines. Spare parts revenue is generally
recognized upon shipment, and services revenue is generally
recognized over the period that the services are provided.
Applied elected to early adopt amended accounting standards
issued by the Financial Accounting Standards Board (FASB) for
multiple deliverable revenue arrangements on a prospective basis
for applicable transactions originating or materially modified
after October 25, 2009. The new standard changed the
requirements for establishing separate units of accounting in a
multiple element arrangement and requires the allocation of
arrangement consideration to each deliverable to be based on the
relative selling price. The FASB also amended the accounting
standards for revenue recognition to exclude software that is
contained in a tangible product from the scope of software
revenue guidance when the software is essential to the tangible
product’s functionality. Implementation of this new
authoritative guidance had an insignificant impact on reported
net sales as compared to net sales under previous guidance, as
the new guidance did not change the units of accounting within
sales arrangements and the elimination of the residual method
for the allocation of arrangement consideration had an
inconsequential impact on the amount and timing of reported net
sales.
For fiscal 2010 and subsequent periods, 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,
as amended.
Recent
Accounting Pronouncements
In December 2010, the FASB amended its existing guidance for
goodwill and other intangible assets. This authoritative
guidance modifies Step 1 of the goodwill impairment test for
reporting units with zero or negative carrying amounts. For
those reporting units, an entity is required to perform Step 2
of the goodwill impairment test if there are qualitative factors
indicating that it is more likely than not that a goodwill
impairment exists. The qualitative factors are consistent with
the existing guidance which requires goodwill of a reporting
unit to be tested for impairment between annual tests if an
event occurs or circumstances change that would more likely than
not reduce the fair value of a reporting unit below its carrying
amount. This authoritative guidance becomes effective for
Applied in fiscal 2012. The implementation of this authoritative
guidance is not expected to have a material impact on
Applied’s financial position or results of operations.
In December 2010, the FASB issued authoritative guidance on
business combinations. This authoritative guidance requires a
public entity that presents comparative financial statements to
disclose the revenue and earnings of the combined entity as
though the business combinations that occurred during the
current year had occurred as of the beginning of the prior
annual reporting period. In addition, this authoritative
guidance expands the supplemental pro forma disclosures to
include a description of the nature and amount of material,
nonrecurring pro forma adjustments directly attributable to the
business combination included in the reported pro forma revenue
and earnings. This authoritative guidance is effective
prospectively for business combinations for which the
acquisition date is on or after the beginning of the first
annual reporting period beginning on or after December 15,
2010. Applied will comply with this authoritative guidance in
fiscal 2012.
|
Restructuring and Asset Impairments
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 01, 2011
|
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Restructuring and Asset Impairments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Asset Impairments |
On July 21, 2010, Applied announced a plan to restructure
its Energy and Environmental Solutions segment, which was
expected to impact between 400 to 500 positions globally. During
the third quarter of fiscal 2010, Applied incurred employee
severance charges of $45 million associated with this
program. During the first quarter of fiscal 2011, as a result of
changes in Applied’s operating environment and business
requirements, Applied revised its workforce reduction under this
program to approximately 200 positions and recorded a favorable
adjustment of $28 million. The improved economic
environment continued in the second quarter of fiscal 2011, and
as a result Applied recorded an additional favorable adjustment
of $8 million. As of May 1, 2011, the remaining
severance accrual associated with restructuring reserves under
this program was $2 million.
On November 11, 2009, Applied announced a restructuring
program to reduce its global workforce as of October 25,
2009 by approximately 1,300 to 1,500 positions, or 10 to
12 percent, over a period of 18 months. During the
first quarter of fiscal 2010, Applied recorded restructuring
charges of $104 million associated with this program.
During the third quarter of fiscal 2010, as a result of changes
in business requirements, Applied revised its global workforce
reduction under this program to approximately 1,000 positions
and recorded a favorable adjustment of $20 million. The
improved economic environment continued in the second quarter of
fiscal 2011, and as a result Applied recorded an additional
favorable adjustment of $19 million. As of May 1,
2011, the remaining severance accrual associated with
restructuring reserves under this program was $16 million.
During the first and second quarters of fiscal 2011, Applied
favorably adjusted the severance accrual associated with a
global restructuring program announced in the first quarter of
fiscal 2009 by $4 million and $1 million,
respectively. As of May 1, 2011, no severance accrual
remained under this program.
Changes in severance accruals associated with restructuring
reserves for the six months ended May 1, 2011 were as
follows:
In addition, as of May 1, 2011, Applied had $5 million
in restructuring reserves associated with facilities.
During the second quarter of fiscal 2011, Applied incurred
impairment charges of $24 million associated with certain
intangible assets and purchased technology. See Note 8 of
the Notes to Consolidated Condensed Financial Statement.
During the second quarter of fiscal 2010, Applied recorded an
asset impairment charge of $9 million to write down a
facility to its estimated fair value based on prices for
comparable local properties. The facility was reclassified as an
asset held for sale. In the first quarter of fiscal 2011,
Applied recorded additional impairment charges of
$3 million related to this facility.
|
Industry Segment Operations (Detail 1) (USD $)
In Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
May 01, 2011
|
May 02, 2010
|
May 01, 2011
|
May 02, 2010
|
|
Reconciliations of total segment operating income to Applied's consolidated operating income (loss) | ||||
Total segment operating income | $ 783 | $ 532 | $ 1,581 | $ 890 |
Corporate and unallocated costs | (126) | (137) | (251) | (275) |
Restructuring and asset impairment benefit (charges), net | 20 | (9) | 21 | (113) |
Income from operations | $ 677 | $ 386 | $ 1,351 | $ 502 |
Commitments and Contingencies (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 01, 2011
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Commitments and Contingencies (Tables) [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in the warranty reserves |
|
Commitments and Contingencies
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 01, 2011
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Commitments and Contingencies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies |
Warranty
Changes in the warranty reserves during the three and six months
ended May 1, 2011 and May 2, 2010 were as follows:
Applied products are generally sold with a
12-month
warranty 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 May 1, 2011, the maximum
potential amount of future payments that Applied could be
required to make under these guarantee agreements was
approximately $53 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 May 1, 2011, Applied Materials Inc. has
provided parent guarantees to banks for approximately
$191 million to cover these services.
Legal
Matters
Semitool
Shareholder Litigation
On November 17, 2009, Applied announced that it was making
a tender offer to acquire all of the outstanding shares of
Semitool, Inc. (Semitool) in accordance with an Agreement and
Plan of Merger entered into with Semitool. Following this
announcement, three lawsuits were filed by Semitool shareholders
in the District Court of the Eleventh Judicial District Court
for the State of Montana, County of Flathead, against Semitool,
Semitool’s directors, Applied Materials, Inc. and
Applied’s acquisition subsidiary. The actions sought
certification of a class of all holders of Semitool common
stock, except the defendants and their affiliates. The
complaints alleged that Semitool’s directors breached their
fiduciary duties by, among other things, failing to maximize
shareholder value and failing to disclose material information,
and that Applied aided and abetted such alleged breaches. The
actions sought injunctive relief, damages and attorneys’
fees.
On December 14, 2009, all parties in these cases reached an
agreement in principle to settle the matters. Without admitting
any wrongdoing or fault, Semitool disclosed certain additional
information in its
Schedule 14D-9
filed with the Securities and Exchange Commission on
December 14, 2009. Following the tender of shares
representing over 95 percent of the outstanding shares of
Semitool common stock, the merger of Semitool into
Applied’s acquisition subsidiary was completed on
December 21, 2009. In November 2010, the parties filed
their Stipulation and Agreement of Settlement, which provided,
among other things, that plaintiffs agreed to release all known
and unknown claims related to the tender offer and the merger
(with certain exceptions), and defendants agreed not to object
to an application by plaintiffs’ counsel for an award of
attorneys’ fees and expenses in an amount up to $200,000.
Under its order issued January 12, 2011, the Court
preliminarily approved the stipulation and settlement and
certified a class of Semitool’s public shareholders solely
for purposes of settlement, comprised of all record and
beneficial holders of Semitool common stock from
November 17, 2009 through December 21, 2009 (subject
to specified exclusions). The Court further approved, as to form
and content, the notice to the class and set a settlement
hearing for April 4, 2011. Following the hearing on
April 4, 2011, the Court issued its order and final entry
of judgment approving the settlement which, upon expiration of
the applicable time period, will result in a complete and final
discharge of all of plaintiffs’ claims.
Jusung
Applied has been engaged in several lawsuits and patent and
administrative proceedings with Jusung Engineering Co., Ltd.
and/or
Jusung Pacific Co., Ltd. (Jusung) in Taiwan and South Korea
since 2003, and more recently in China, involving technology
used in manufacturing LCDs. Applied believes that it has
meritorious claims and defenses against Jusung that it intends
to pursue vigorously.
In 2004, Applied filed a complaint for patent infringement
against Jusung in the Hsinchu District Court in Taiwan seeking
damages and a permanent injunction for infringement of a patent
related to chemical vapor deposition (CVD) equipment.
Jusung filed a counterclaim against Applied. On
December 31, 2010, the Hsinchu District Court announced
that it had ruled against Applied and dismissed the lawsuit and
Jusung’s counterclaim. Applied appealed the dismissal of
its lawsuit and Jusung appealed the dismissal of its
counterclaim. Jusung unsuccessfully sought invalidation of
Applied’s CVD patent in the Taiwanese Intellectual Property
Office (TIPO). In September 2010, the Supreme Administrative
Court dismissed Jusung’s appeal of the TIPO’s
decision. In 2009, Jusung filed a second action with the TIPO
seeking invalidation of Applied’s CVD patent, which remains
pending.
In 2006, Applied filed an action in the TIPO challenging the
validity of a Jusung patent related to separability of the
transfer chamber on a CVD tool. Jusung sued Applied and AKT
America in Hsinchu District Court in Taiwan alleging
infringement of the same patent. In March 2009, the Hsinchu
District Court dismissed Jusung’s lawsuit, and in October,
2010, the Taiwan Intellectual Property Court dismissed
Jusung’s appeal. Separately, the TIPO granted
Applied’s request for invalidation and also revoked
Jusung’s patent. In January 2010, the Taiwan Intellectual
Property Court granted Jusung’s appeal of the TIPO decision
revoking its patent and remanded the matter to the TIPO for
reconsideration of validity. TIPO subsequently granted another
party’s request for invalidation of Jusung’s patent.
Jusung appealed to the Taiwan Intellectual Property Court and
Applied has intervened in the appeal. In November 2009, Applied
filed an action in China with the Patent Reexamination Board of
the State Intellectual Property Office seeking to invalidate
this patent. On June 18, 2010, the Patent Reexamination
Board issued a decision invalidating Jusung’s patent in
China. Jusung has appealed this decision.
In 2006, Jusung filed a complaint of private prosecution in the
Taipei District Court of Taiwan alleging that Applied’s
outside counsel received from the Court and used a copy of an
expert report that Jusung had filed in the ongoing patent
infringement lawsuits that Jusung had intended to remain
confidential. The complaint names as defendants Applied’s
outside counsel in Taiwan, as well as Michael R. Splinter,
Applied’s Chairman, President and Chief Executive Officer,
as the statutory representative of Applied. The Taipei District
Court dismissed the private prosecution complaint, and the
matter was transferred to the Taipei District Attorney’s
Office. The Taipei District Attorney’s Office issued five
successive rulings not to prosecute, each of which Jusung
appealed. In each instance, the Taiwan High Court District
Attorney returned the matter to the Taipei District
Attorney’s Office for further consideration, where it is
now pending.
Korea
Criminal Proceedings
In February 2010, the Seoul Prosecutor’s Office for the
Eastern District of Korea (the Prosecutor’s Office)
indicted employees of several companies for the alleged improper
receipt and use of confidential information belonging to Samsung
Electronics Co., Ltd. (Samsung), a major Applied customer based
in Korea. The Prosecutor’s Office did not name Applied or
any of its subsidiaries as a party to the criminal action. The
individuals charged included the former head of Applied
Materials Korea (AMK), who at the time of the indictment was a
vice president of Applied Materials, Inc., and certain other AMK
employees. Hearings on these matters are ongoing in the Seoul
Eastern District Court. Applied and Samsung entered into a
settlement agreement effective as of November 1, 2010,
which resolves potential civil claims related to this matter,
which is separate from and does not affect the criminal
proceedings.
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 or these
claims and proceedings cannot be predicted with certainty,
Applied does not believe that any of these proceedings or other
claims will have a material adverse effect on its consolidated
financial condition or results of operations.
|
Consolidated Condensed Statements of Operations (Unaudited) (USD $)
In Millions, except Per Share data |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
May 01, 2011
|
May 02, 2010
|
May 01, 2011
|
May 02, 2010
|
|
Consolidated Condensed Statements of Operations [Abstract] | ||||
Net sales | $ 2,862 | $ 2,296 | $ 5,549 | $ 4,144 |
Cost of products sold | 1,673 | 1,369 | 3,224 | 2,506 |
Gross margin | 1,189 | 927 | 2,325 | 1,638 |
Operating expenses: | ||||
Research, development and engineering | 297 | 306 | 567 | 575 |
General and administrative | 112 | 126 | 224 | 250 |
Marketing and selling | 107 | 100 | 216 | 198 |
Restructuring charges and asset impairments (Note 10) | (4) | 9 | (33) | 113 |
Total operating expenses | 512 | 541 | 974 | 1,136 |
Income from operations | 677 | 386 | 1,351 | 502 |
Impairment of strategic investments | 4 | 5 | ||
Interest expense | 5 | 5 | 10 | 10 |
Interest income and other income, net | 14 | 10 | 25 | 19 |
Income before income taxes | 686 | 387 | 1,366 | 506 |
Provision for income taxes | 197 | 123 | 371 | 159 |
Net income | $ 489 | $ 264 | $ 995 | $ 347 |
Earnings per share: | ||||
Basic and Diluted | $ 0.37 | $ 0.20 | $ 0.75 | $ 0.26 |
Weighted average number of shares: | ||||
Basic | 1,320 | 1,345 | 1,322 | 1,343 |
Diluted | 1,333 | 1,352 | 1,333 | 1,351 |
Earnings Per Share (Details) (USD $)
In Millions, except Per Share data |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
May 01, 2011
|
May 02, 2010
|
May 01, 2011
|
May 02, 2010
|
|
Numerator: | ||||
Net income | $ 489 | $ 264 | $ 995 | $ 347 |
Denominator: | ||||
Weighted average common shares outstanding | 1,320 | 1,345 | 1,322 | 1,343 |
Effect of dilutive stock options, restricted stock units and employee stock purchase plans shares | 13 | 7 | 11 | 8 |
Denominator for diluted income per share | 1,333 | 1,352 | 1,333 | 1,351 |
Basic and diluted earnings per share | $ 0.37 | $ 0.20 | $ 0.75 | $ 0.26 |
Potentially dilutive securities | 18 | 40 | 18 | 43 |