(Mark One) | ||
þ
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended July 31, 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 |
Nine Months |
|||||||||||||||
Ended | Ended | |||||||||||||||
July 31, |
August 1, |
July 31, |
August 1, |
|||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(Unaudited) |
||||||||||||||||
(In millions, except per share amounts) | ||||||||||||||||
Net sales
|
$ | 2,787 | $ | 2,518 | $ | 8,336 | $ | 6,662 | ||||||||
Cost of products sold
|
1,603 | 1,658 | 4,827 | 4,164 | ||||||||||||
Gross margin
|
1,184 | 860 | 3,509 | 2,498 | ||||||||||||
Operating expenses:
|
||||||||||||||||
Research, development and engineering
|
282 | 290 | 850 | 865 | ||||||||||||
Selling, general and administrative
|
240 | 252 | 679 | 700 | ||||||||||||
Restructuring charges and asset impairments (Note 11)
|
3 | 135 | (30 | ) | 248 | |||||||||||
Gain on sale of facilities, net (Note 7)
|
(28 | ) | | (27 | ) | | ||||||||||
Total operating expenses
|
497 | 677 | 1,472 | 1,813 | ||||||||||||
Income from operations
|
687 | 183 | 2,037 | 685 | ||||||||||||
Impairment of strategic investments
|
| 8 | | 13 | ||||||||||||
Interest and other expense (Note 10)
|
25 | 5 | 35 | 15 | ||||||||||||
Interest and other income, net
|
7 | 8 | 33 | 27 | ||||||||||||
Income before income taxes
|
669 | 178 | 2,035 | 684 | ||||||||||||
Provision for income taxes
|
193 | 55 | 564 | 214 | ||||||||||||
Net income
|
$ | 476 | $ | 123 | $ | 1,471 | $ | 470 | ||||||||
Earnings per share:
|
||||||||||||||||
Basic
|
$ | 0.36 | $ | 0.09 | $ | 1.11 | $ | 0.35 | ||||||||
Diluted
|
$ | 0.36 | $ | 0.09 | $ | 1.10 | $ | 0.35 | ||||||||
Weighted average number of shares:
|
||||||||||||||||
Basic
|
1,318 | 1,340 | 1,321 | 1,342 | ||||||||||||
Diluted
|
1,330 | 1,349 | 1,333 | 1,351 |
2
July 31, |
October 31, |
|||||||
2011 | 2010 | |||||||
(In millions) | ||||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents (Notes 3 and 4)
|
$ | 5,018 | $ | 1,858 | ||||
Short-term investments (Notes 3 and 4)
|
739 | 727 | ||||||
Accounts receivable, net (Note 6)
|
1,812 | 1,831 | ||||||
Inventories (Note 7)
|
1,849 | 1,547 | ||||||
Deferred income taxes, net
|
541 | 513 | ||||||
Other current assets
|
314 | 289 | ||||||
Total current assets
|
10,273 | 6,765 | ||||||
Long-term investments (Notes 3 and 4)
|
1,052 | 1,307 | ||||||
Property, plant and equipment, net (Note 7)
|
854 | 963 | ||||||
Goodwill (Note 8)
|
1,335 | 1,336 | ||||||
Purchased technology and other intangible assets, net
(Note 8)
|
223 | 287 | ||||||
Deferred income taxes and other assets
|
366 | 285 | ||||||
Total assets
|
$ | 14,103 | $ | 10,943 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY | ||||||||
Current liabilities:
|
||||||||
Current portion of long-term debt (Note 10)
|
$ | | $ | 1 | ||||
Accounts payable and accrued expenses (Note 7)
|
1,653 | 1,766 | ||||||
Customer deposits and deferred revenue (Note 7)
|
1,347 | 847 | ||||||
Income taxes payable
|
278 | 274 | ||||||
Total current liabilities
|
3,278 | 2,888 | ||||||
Long-term debt (Note 10)
|
1,947 | 204 | ||||||
Employee benefits and other liabilities (Note 13)
|
327 | 315 | ||||||
Total liabilities
|
5,552 | 3,407 | ||||||
Commitments and contingencies (Note 15)
|
||||||||
Stockholders equity (Note 12):
|
||||||||
Common stock
|
13 | 13 | ||||||
Additional paid-in capital
|
5,553 | 5,406 | ||||||
Retained earnings
|
12,678 | 11,511 | ||||||
Treasury stock
|
(9,689 | ) | (9,396 | ) | ||||
Accumulated other comprehensive income (loss)
|
(4 | ) | 2 | |||||
Total stockholders equity
|
8,551 | 7,536 | ||||||
Total liabilities and stockholders equity
|
$ | 14,103 | $ | 10,943 | ||||
* | Amounts as of July 31, 2011 are unaudited. Amounts as of October 31, 2010 are derived from the October 31, 2010 audited consolidated financial statements. |
3
Accumulated |
||||||||||||||||||||||||||||||||
Other |
||||||||||||||||||||||||||||||||
Additional |
Comprehensive |
|||||||||||||||||||||||||||||||
Common Stock |
Paid-In |
Retained |
Treasury Stock |
Income |
||||||||||||||||||||||||||||
Nine Months Ended July 31, 2011 | Shares | Amount | Capital | Earnings | Shares | Amount | (Loss) | 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
|
| | | 1,471 | | | | 1,471 | ||||||||||||||||||||||||
Change in unrealized net gain on investments
|
| | | | | | (2 | ) | (2 | ) | ||||||||||||||||||||||
Change in unrealized net gain on derivative instruments
|
| | | | | | (4 | ) | (4 | ) | ||||||||||||||||||||||
Change in defined benefit plan liability
|
| | | | | | (1 | ) | (1 | ) | ||||||||||||||||||||||
Translation adjustments
|
| | | | | | 1 | 1 | ||||||||||||||||||||||||
Comprehensive income
|
1,465 | |||||||||||||||||||||||||||||||
Dividends
|
| | | (304 | ) | | | | (304 | ) | ||||||||||||||||||||||
Share-based compensation
|
| | 110 | | | | | 110 | ||||||||||||||||||||||||
Issuance under stock plans, net of a tax detriment of $5 and
other
|
10 | | 37 | | | | | 37 | ||||||||||||||||||||||||
Common stock repurchases
|
(20 | ) | | | | 20 | (293 | ) | | (293 | ) | |||||||||||||||||||||
Balance at July 31, 2011
|
1,318 | $ | 13 | $ | 5,553 | $ | 12,678 | 557 | $ | (9,689 | ) | $ | (4 | ) | $ | 8,551 | ||||||||||||||||
4
Nine Months Ended | ||||||||
July 31, |
August 1, |
|||||||
2011 | 2010 | |||||||
(Unaudited) |
||||||||
(In millions) | ||||||||
Cash flows from operating activities:
|
||||||||
Net income
|
$ | 1,471 | $ | 470 | ||||
Adjustments required to reconcile net income to cash provided by
operating activities:
|
||||||||
Depreciation and amortization
|
187 | 236 | ||||||
Net loss (gain) on dispositions and fixed asset retirements
|
(24 | ) | 14 | |||||
Provision for bad debts
|
| 7 | ||||||
Restructuring charges and asset impairments
|
(30 | ) | 248 | |||||
Deferred income taxes
|
(100 | ) | (215 | ) | ||||
Net recognized loss on investments
|
13 | 15 | ||||||
Impairment of strategic investments
|
| 13 | ||||||
Share-based compensation
|
110 | 95 | ||||||
Changes in operating assets and liabilities, net of amounts
acquired:
|
||||||||
Accounts receivable
|
17 | (648 | ) | |||||
Inventories
|
(310 | ) | 100 | |||||
Prepaid income taxes
|
| 185 | ||||||
Other current assets
|
(36 | ) | (38 | ) | ||||
Other assets
|
1 | (7 | ) | |||||
Accounts payable and accrued expenses
|
(92 | ) | 374 | |||||
Customer deposits and deferred revenue
|
498 | 167 | ||||||
Income taxes payable
|
4 | 192 | ||||||
Employee benefits and other liabilities
|
19 | (10 | ) | |||||
Cash provided by operating activities
|
1,728 | 1,198 | ||||||
Cash flows from investing activities:
|
||||||||
Capital expenditures
|
(136 | ) | (134 | ) | ||||
Proceeds from sale of facilities and dispositions, net of cash
sold
|
126 | | ||||||
Cash paid for acquisition, net of cash acquired
|
| (323 | ) | |||||
Proceeds from sales and maturities of investments
|
1,173 | 967 | ||||||
Purchases of investments
|
(945 | ) | (1,357 | ) | ||||
Cash provided by (used in) investing activities
|
218 | (847 | ) | |||||
Cash flows from financing activities:
|
||||||||
Debt borrowings (repayments), net
|
1,744 | (6 | ) | |||||
Payments of debt issuance costs
|
(14 | ) | | |||||
Proceeds from common stock issuances
|
64 | 99 | ||||||
Common stock repurchases
|
(293 | ) | (200 | ) | ||||
Payments of dividends to stockholders
|
(291 | ) | (255 | ) | ||||
Cash provided by (used in) financing activities
|
1,210 | (362 | ) | |||||
Effect of exchange rate changes on cash and cash equivalents
|
4 | (1 | ) | |||||
Increase (decrease) in cash and cash equivalents
|
3,160 | (12 | ) | |||||
Cash and cash equivalents beginning of period
|
1,858 | 1,576 | ||||||
Cash and cash equivalents end of period
|
$ | 5,018 | $ | 1,564 | ||||
Supplemental cash flow information:
|
||||||||
Cash payments for income taxes
|
$ | 661 | $ | 255 | ||||
Cash refunds for income taxes
|
$ | 4 | $ | 199 | ||||
Cash payments for interest
|
$ | 7 | $ | 7 |
5
Note 1 | Basis of Presentation |
6
7
Note 2 | Earnings Per Share |
Three Months Ended | Nine Months Ended | |||||||||||||||
July 31, |
August 1, |
July 31, |
August 1, |
|||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In millions, except per share amounts) | ||||||||||||||||
Numerator:
|
||||||||||||||||
Net income
|
$ | 476 | $ | 123 | $ | 1,471 | $ | 470 | ||||||||
Denominator:
|
||||||||||||||||
Weighted average common shares outstanding
|
1,318 | 1,340 | 1,321 | 1,342 | ||||||||||||
Effect of dilutive stock options, restricted stock units and
employee stock purchase plans shares
|
12 | 9 | 12 | 9 | ||||||||||||
Denominator for diluted earnings per share
|
1,330 | 1,349 | 1,333 | 1,351 | ||||||||||||
Basic earnings per share
|
$ | 0.36 | $ | 0.09 | $ | 1.11 | $ | 0.35 | ||||||||
Diluted earnings per share
|
$ | 0.36 | $ | 0.09 | $ | 1.10 | $ | 0.35 | ||||||||
Potentially dilutive securities
|
17 | 34 | 17 | 34 |
8
Note 3 | Cash, Cash Equivalents and Investments |
Gross |
Gross |
|||||||||||||||
Unrealized |
Unrealized |
Estimated |
||||||||||||||
July 31, 2011 | Cost | Gains | Losses | Fair Value | ||||||||||||
(In millions) | ||||||||||||||||
Cash
|
$ | 918 | $ | | $ | | $ | 918 | ||||||||
Cash equivalents:
|
||||||||||||||||
Money market funds
|
3,895 | | | 3,895 | ||||||||||||
U.S. commercial paper, corporate bonds and medium-term notes
|
190 | | | 190 | ||||||||||||
Obligations of states and political subdivisions
|
15 | | | 15 | ||||||||||||
Total Cash equivalents
|
4,100 | | | 4,100 | ||||||||||||
Total Cash and Cash equivalents
|
$ | 5,018 | $ | | $ | | $ | 5,018 | ||||||||
Short-term and long-term investments:
|
||||||||||||||||
U.S. Treasury and agency securities
|
$ | 483 | $ | 3 | $ | | $ | 486 | ||||||||
Obligations of states and political subdivisions
|
452 | 3 | | 455 | ||||||||||||
U.S. commercial paper, corporate bonds and medium-term notes
|
390 | 5 | | 395 | ||||||||||||
Other debt securities*
|
363 | 3 | 1 | 365 | ||||||||||||
Total fixed income securities
|
1,688 | 14 | 1 | 1,701 | ||||||||||||
Publicly traded equity securities
|
8 | 21 | | 29 | ||||||||||||
Equity investments in privately-held companies
|
61 | | | 61 | ||||||||||||
Total short-term and long-term investments
|
$ | 1,757 | $ | 35 | $ | 1 | $ | 1,791 | ||||||||
Total Cash, Cash equivalents and Investments
|
$ | 6,775 | $ | 35 | $ | 1 | $ | 6,809 | ||||||||
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
|
$ | 704 | $ | 707 | ||||
Due after one through five years
|
618 | 626 | ||||||
Due after five years
|
3 | 3 | ||||||
No single maturity date
|
432 | 455 | ||||||
$ | 1,757 | $ | 1,791 | |||||
10
Three Months Ended | Nine Months Ended | |||||||||||||||
July 31, |
August 1, |
July 31, |
August 1, |
|||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In millions) | ||||||||||||||||
Gross realized gains
|
$ | 1 | $ | 1 | $ | 14 | $ | 3 | ||||||||
Gross realized losses
|
$ | 1 | $ | 1 | $ | 2 | $ | 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
|
$ | 71 | $ | 1 | $ | 71 | $ | 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
July 31, 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
|
$ | 3,895 | $ | | $ | | $ | 3,895 | $ | 1,139 | $ | | $ | | $ | 1,139 | ||||||||||||||||
U.S. Treasury and agency securities
|
116 | 370 | | 486 | 153 | 520 | | 673 | ||||||||||||||||||||||||
U.S. commercial paper, corporate bonds and medium-term notes
|
| 585 | | 585 | | 509 | | 509 | ||||||||||||||||||||||||
Obligations of states and political subdivisions
|
| 470 | | 470 | | 523 | | 523 | ||||||||||||||||||||||||
Other debt securities
|
| 365 | | 365 | | 263 | | 263 | ||||||||||||||||||||||||
Publicly traded equity securities
|
29 | | | 29 | 25 | | | 25 | ||||||||||||||||||||||||
Foreign exchange derivative assets
|
| 2 | | 2 | | 6 | | 6 | ||||||||||||||||||||||||
Total
|
$ | 4,040 | $ | 1,792 | $ | | $ | 5,832 | $ | 1,317 | $ | 1,821 | $ | | $ | 3,138 | ||||||||||||||||
Liabilities:
|
||||||||||||||||||||||||||||||||
Foreign exchange derivative liabilities
|
$ | | $ | (4 | ) | $ | | $ | (4 | ) | $ | | $ | (1 | ) | $ | | $ | (1 | ) | ||||||||||||
Total
|
$ | | $ | (4 | ) | $ | | $ | (4 | ) | $ | | $ | (1 | ) | $ | | $ | (1 | ) | ||||||||||||
13
Total |
Total |
|||||||||||||||||||
Impairment for |
Impairment for |
|||||||||||||||||||
the Three |
the Nine |
|||||||||||||||||||
Months Ended |
Months Ended |
|||||||||||||||||||
Level 1 | Level 2 | Level 3 | July 31, 2011 | July 31, 2011 | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Equity investments in privately-held companies measured at fair
value on a non-recurring basis during fiscal 2011
|
$ | | $ | | $ | 22 | $ | | $ | | ||||||||||
Total |
Total |
|||||||||||||||||||
Impairment for |
Impairment for |
|||||||||||||||||||
the Three |
the Nine |
|||||||||||||||||||
Months Ended |
Months Ended |
|||||||||||||||||||
Level 1 | Level 2 | Level 3 | August 1, 2010 | August 1, 2010 | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Equity investments in privately-held companies measured at fair
value on a non-recurring basis during fiscal 2010
|
$ | | $ | | $ | 23 | $ | 8 | $ | 13 | ||||||||||
Note 5 | Derivative Instruments and Hedging Activities |
14
Asset Derivatives | Liability Derivatives | |||||||||||||||||||
Balance Sheet |
July 31, |
Balance Sheet |
July 31, |
|||||||||||||||||
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 |
$ | 1 | $ | 5 |
Accrued expenses |
$ | 4 | $ | 1 | ||||||||||
Derivatives Not Designated as Hedging Instruments
|
||||||||||||||||||||
Foreign exchange contracts
|
Other current assets |
$ | 1 | $ | 1 |
Accrued expenses |
$ | | $ | | ||||||||||
Total derivatives
|
$ | 2 | $ | 6 | $ | 4 | $ | 1 | ||||||||||||
15
Three Months Ended July 31, 2011 | Three Months Ended August 1, 2010 | |||||||||||||||||||||||||
Ineffective Portion |
Ineffective Portion |
|||||||||||||||||||||||||
and Amount |
and Amount |
|||||||||||||||||||||||||
Location of Gain |
Excluded from |
Excluded from |
||||||||||||||||||||||||
or (Loss) |
Effectiveness |
Effectiveness |
||||||||||||||||||||||||
Reclassified from |
Effective Portion | Testing | Effective Portion | Testing | ||||||||||||||||||||||
AOCI into Income |
Gain or (Loss) |
Gain or (Loss) |
Gain or (Loss) |
Gain or (Loss) |
Gain or (Loss) |
Gain or (Loss) |
||||||||||||||||||||
or Recognized in |
Recognized in |
Reclassified from |
Recognized in |
Recognized in |
Reclassified from |
Recognized in |
||||||||||||||||||||
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 |
$ | (7 | ) | $ | 1 | $ | (2 | ) | $ | (3 | ) | $ | (1 | ) | $ | (2 | ) | ||||||||
Foreign exchange contracts
|
General and administrative |
| 2 | | | (3 | ) | | ||||||||||||||||||
Total
|
$ | (7 | ) | $ | 3 | $ | (2 | ) | $ | (3 | ) | $ | (4 | ) | $ | (2 | ) | |||||||||
Nine Months Ended July 31, 2011 | Nine Months Ended August 1, 2010 | |||||||||||||||||||||||||
Ineffective Portion |
Ineffective Portion |
|||||||||||||||||||||||||
and Amount |
and Amount |
|||||||||||||||||||||||||
Location of Gain |
Excluded from |
Excluded from |
||||||||||||||||||||||||
or (Loss) |
Effectiveness |
Effectiveness |
||||||||||||||||||||||||
Reclassified from |
Effective Portion | Testing | Effective Portion | Testing | ||||||||||||||||||||||
AOCI into Income |
Gain or (Loss) |
Gain or (Loss) |
Gain or (Loss) |
Gain or (Loss) |
Gain or (Loss) |
Gain or (Loss) |
||||||||||||||||||||
or Recognized in |
Recognized in |
Reclassified from |
Recognized in |
Recognized in |
Reclassified from |
Recognized in |
||||||||||||||||||||
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 |
$ | 5 | $ | 6 | $ | (5 | ) | $ | (5 | ) | $ | (3 | ) | $ | (2 | ) | |||||||||
Foreign exchange contracts
|
General and administrative |
| 5 | (1 | ) | | (4 | ) | (1 | ) | ||||||||||||||||
Total
|
$ | 5 | $ | 11 | $ | (6 | ) | $ | (5 | ) | $ | (7 | ) | $ | (3 | ) | ||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||
July 31, |
August 1, |
July 31, |
August 1, |
|||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||||
Location of Gain |
||||||||||||||||||
or (Loss) |
Amount of Gain or |
Amount of Gain or |
||||||||||||||||
Recognized in |
(Loss) |
(Loss) |
||||||||||||||||
Income | Recognized in Income | Recognized in Income | ||||||||||||||||
(In millions) | (In millions) | |||||||||||||||||
Derivatives Not Designated as Hedging Instruments
|
||||||||||||||||||
Foreign exchange contracts
|
General and administrative |
$ | (5 | ) | $ | (8 | ) | $ | (2 | ) | $ | (12 | ) | |||||
Total
|
$ | (5 | ) | $ | (8 | ) | $ | (2 | ) | $ | (12 | ) | ||||||
16
Note 6 | Accounts Receivable, Net |
Three Months Ended | Nine Months Ended | |||||||||||||||
July 31, |
August 1, |
July 31, |
August 1, |
|||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In millions) | ||||||||||||||||
Discounted letters of credit
|
$ | 38 | $ | 81 | $ | 211 | $ | 134 | ||||||||
Factored accounts receivable and discounted promissory notes
|
25 | 56 | 80 | 106 | ||||||||||||
Total
|
$ | 63 | $ | 137 | $ | 291 | $ | 240 | ||||||||
Note 7 | Balance Sheet Detail |
July 31, |
October 31, |
|||||||
2011 | 2010 | |||||||
(In millions) | ||||||||
Inventories
|
||||||||
Customer service spares
|
$ | 328 | $ | 324 | ||||
Raw materials
|
408 | 260 | ||||||
Work-in-process
|
457 | 500 | ||||||
Finished goods
|
656 | 463 | ||||||
$ | 1,849 | $ | 1,547 | |||||
17
July 31, |
October 31, |
|||||||||||
Useful Life | 2011 | 2010 | ||||||||||
(In years) | (In millions) | |||||||||||
Property, Plant and Equipment, Net
|
||||||||||||
Land and improvements
|
$ | 169 | $ | 227 | ||||||||
Buildings and improvements
|
3-30 | 1,170 | 1,234 | |||||||||
Demonstration and manufacturing equipment
|
3-5 | 679 | 670 | |||||||||
Furniture, fixtures and other equipment
|
3-15 | 715 | 719 | |||||||||
Construction in progress
|
24 | 19 | ||||||||||
Gross property, plant and equipment
|
2,757 | 2,869 | ||||||||||
Accumulated depreciation
|
(1,903 | ) | (1,906 | ) | ||||||||
$ | 854 | $ | 963 | |||||||||
July 31, |
October 31, |
|||||||
2011 | 2010 | |||||||
(In millions) | ||||||||
Accounts Payable and Accrued Expenses
|
||||||||
Accounts payable
|
$ | 656 | $ | 658 | ||||
Compensation and employee benefits
|
405 | 435 | ||||||
Warranty
|
188 | 155 | ||||||
Dividends payable
|
105 | 93 | ||||||
Other accrued taxes
|
76 | 99 | ||||||
Restructuring reserve
|
16 | 104 | ||||||
Interest payable
|
15 | 1 | ||||||
Other
|
192 | 221 | ||||||
$ | 1,653 | $ | 1,766 | |||||
July 31, |
October 31, |
|||||||
2011 | 2010 | |||||||
(In millions) | ||||||||
Customer Deposits and Deferred Revenue
|
||||||||
Customer deposits
|
$ | 442 | $ | 407 | ||||
Deferred revenue
|
905 | 440 | ||||||
$ | 1,347 | $ | 847 | |||||
18
Note 8 | Goodwill, Purchased Technology and Other Intangible Assets |
19
July 31, 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
|
193 | | 193 | 177 | 18 | 195 | ||||||||||||||||||
Display
|
116 | | 116 | 116 | | 116 | ||||||||||||||||||
Energy and Environmental Solutions
|
645 | | 645 | 662 | | 662 | ||||||||||||||||||
Carrying amount
|
$ | 1,335 | $ | | $ | 1,335 | $ | 1,336 | $ | 18 | $ | 1,354 | ||||||||||||
20
July 31, 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 | 40 | 68 | 32 | 61 | 93 | ||||||||||||||||||
Display
|
110 | 33 | 143 | 110 | 33 | 143 | ||||||||||||||||||
Energy and Environmental Solutions
|
105 | 232 | 337 | 105 | 232 | 337 | ||||||||||||||||||
Gross carrying amount
|
$ | 553 | $ | 325 | $ | 878 | $ | 557 | $ | 346 | $ | 903 | ||||||||||||
Silicon Systems Group
|
$ | (255 | ) | $ | (8 | ) | $ | (263 | ) | $ | (247 | ) | $ | (6 | ) | $ | (253 | ) | ||||||
Applied Global Services
|
(19 | ) | (31 | ) | (50 | ) | (19 | ) | (43 | ) | (62 | ) | ||||||||||||
Display
|
(100 | ) | (24 | ) | (124 | ) | (96 | ) | (23 | ) | (119 | ) | ||||||||||||
Energy and Environmental Solutions
|
(45 | ) | (173 | ) | (218 | ) | (37 | ) | (163 | ) | (200 | ) | ||||||||||||
Accumulated amortization
|
$ | (419 | ) | $ | (236 | ) | $ | (655 | ) | $ | (399 | ) | $ | (235 | ) | $ | (634 | ) | ||||||
Carrying amount
|
$ | 134 | $ | 89 | $ | 223 | $ | 158 | $ | 111 | $ | 269 | ||||||||||||
Amortization Expense | ||||
(In millions) | ||||
2011
|
$ | 12 | ||
2012
|
50 | |||
2013
|
48 | |||
2014
|
40 | |||
2015
|
25 | |||
Thereafter
|
48 | |||
$ | 223 | |||
Note 9 | Business Combinations |
21
Note 10 | Borrowing Facilities and Long-Term Debt |
Principal |
Stated |
Effective |
Interest |
Interest |
||||||||||||
Due Date | Amount | Interest Rate | Interest Rate | Pay Date | Pay Date | |||||||||||
(In millions) | ||||||||||||||||
June 15, 2016
|
$ | 400 | 2.650 | % | 2.666 | % | June 15 | December 15 | ||||||||
October 15, 2017
|
200 | 7.125 | % | 7.190 | % | April 15 | October 15 | |||||||||
June 15, 2021
|
750 | 4.300 | % | 4.326 | % | June 15 | December 15 | |||||||||
June 15, 2041
|
600 | 5.850 | % | 5.879 | % | June 15 | December 15 | |||||||||
Other debt
|
1 | |||||||||||||||
1,951 | ||||||||||||||||
Total unamortized discount
|
(4 | ) | ||||||||||||||
Current portion
|
| |||||||||||||||
Total long-term debt
|
$ | 1,947 | ||||||||||||||
22
Principal |
Stated |
Effective |
Interest |
Interest |
||||||||||||||||
Due Date | Amount | Interest Rate | Interest Rate | Pay Date | Pay Date | |||||||||||||||
(In millions) | ||||||||||||||||||||
October 15, 2017
|
$ | 200 | 7.125 | % | 7.190 | % | April 15 | October 15 | ||||||||||||
Other debt
|
5 | |||||||||||||||||||
205 | ||||||||||||||||||||
Total unamortized discount
|
| |||||||||||||||||||
Current portion
|
(1 | ) | ||||||||||||||||||
Total long-term debt
|
$ | 204 | ||||||||||||||||||
Note 11 | Restructuring and Asset Impairments |
23
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 | |||
Consumption of reserves
|
(7 | ) | ||
Balance, July 31, 2011
|
$ | 11 | ||
Note 12 | Stockholders Equity, Comprehensive Income and Share-Based Compensation |
Three Months Ended | Nine Months Ended | |||||||||||||||
July 31, |
August 1, |
July 31, |
August 1, |
|||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In millions) | ||||||||||||||||
Net income
|
$ | 476 | $ | 123 | $ | 1,471 | $ | 470 | ||||||||
Change in unrealized net gain on investments
|
(1 | ) | 5 | (2 | ) | 7 | ||||||||||
Change in unrealized net gain on derivative instruments
|
||||||||||||||||
qualifying as cash flow hedges
|
(6 | ) | 1 | (4 | ) | 1 | ||||||||||
Change in defined benefit plan liability
|
| | (1 | ) | | |||||||||||
Foreign currency translation adjustments
|
1 | 1 | 1 | | ||||||||||||
Comprehensive income
|
$ | 470 | $ | 130 | $ | 1,465 | $ | 478 | ||||||||
24
July 31, |
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
|
| 4 | ||||||
Cumulative translation adjustments
|
13 | 12 | ||||||
Accumulated other comprehensive income (loss)
|
$ | (4 | ) | $ | 2 | |||
Three Months Ended | Nine Months Ended | |||||||||||||||
July 31, |
August 1, |
July 31, |
August 1, |
|||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In millions, except per share amounts) | ||||||||||||||||
Shares of common stock repurchased
|
2 | 8 | 20 | 16 | ||||||||||||
Cost of stock repurchased
|
$ | 25 | $ | 100 | $ | 293 | $ | 200 | ||||||||
Average price paid per share
|
$ | 12.77 | $ | 12.65 | $ | 14.31 | $ | 12.87 |
Date Declared | Record Date | Payable Date | Amount per Share | |||||
December 7, 2010
|
March 2, 2011 | March 23, 2011 | $ | 0.07 | ||||
March 8, 2011
|
June 1, 2011 | June 22, 2011 | $ | 0.08 | ||||
June 6, 2011
|
August 31, 2011 | September 21, 2011 | $ | 0.08 |
25
Three Months Ended | Nine Months Ended | |||||||||||||||
July 31, |
August 1, |
July 31, |
August 1, |
|||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In millions) | ||||||||||||||||
Share-based compensation
|
$ | 38 | $ | 32 | $ | 110 | $ | 95 | ||||||||
Tax benefit recognized
|
$ | 11 | $ | 10 | $ | 33 | $ | 28 |
Three Months Ended | Nine Months Ended | |||||||||||||||
July 31, |
August 1, |
July 31, |
August 1, |
|||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In millions) | ||||||||||||||||
Cost of products sold
|
$ | 13 | $ | 10 | $ | 36 | $ | 23 | ||||||||
Research, development, and engineering
|
12 | 11 | 35 | 33 | ||||||||||||
General and administrative
|
9 | 8 | 27 | 24 | ||||||||||||
Marketing and selling
|
4 | 3 | 12 | 15 | ||||||||||||
Total share-based compensation
|
$ | 38 | $ | 32 | $ | 110 | $ | 95 | ||||||||
26
Weighted |
||||||||
Average |
||||||||
Exercise |
||||||||
Shares | Price | |||||||
(In millions, except per share amounts) | ||||||||
Outstanding, at October 31, 2010
|
51 | $ | 15.04 | |||||
Granted
|
| $ | | |||||
Exercised
|
(4 | ) | $ | 9.29 | ||||
Canceled and forfeited
|
(15 | ) | $ | 20.76 | ||||
Outstanding at July 31, 2011
|
32 | $ | 13.10 | |||||
Exercisable at July 31, 2011
|
26 | $ | 14.22 |
27
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
|
17 | $ | 12.65 | |||||||||
Vested
|
(4 | ) | $ | 13.59 | ||||||||
Canceled
|
(2 | ) | $ | 13.18 | ||||||||
Non-vested restricted stock units and restricted stock at
July 31, 2011
|
29 | $ | 12.90 | 2.9 Years | ||||||||
Nine Months Ended | ||||||||
July 31, |
August 1, |
|||||||
2011 | 2010 | |||||||
ESPP:
|
||||||||
Dividend yield
|
1.98 | % | 2.24 | % | ||||
Expected volatility
|
27 | % | 33 | % | ||||
Risk-free interest rate
|
0.17 | % | 0.18 | % | ||||
Expected life (in years)
|
0.5 | 0.5 |
28
Note 13 | Employee Benefit Plans |
Three Months Ended | Nine Months Ended | |||||||||||||||
July 31, |
August 1, |
July 31, |
August 1, |
|||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In millions) | ||||||||||||||||
Service cost
|
$ | 4 | $ | 3 | $ | 11 | $ | 10 | ||||||||
Interest cost
|
3 | 4 | 10 | 10 | ||||||||||||
Expected return on plan assets
|
(3 | ) | (2 | ) | (8 | ) | (6 | ) | ||||||||
Amortization of actuarial loss
|
1 | | 2 | 1 | ||||||||||||
Net periodic benefit cost
|
$ | 5 | $ | 5 | $ | 15 | $ | 15 | ||||||||
Note 14 | Income Taxes |
29
Note 15 | Commitments and Contingencies |
Three Months Ended | Nine Months Ended | |||||||||||||||
July 31, |
August 1, |
July 31, |
August 1, |
|||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In millions) | ||||||||||||||||
Beginning balance
|
$ | 184 | $ | 140 | $ | 155 | $ | 117 | ||||||||
Provisions for warranty
|
43 | 37 | 142 | 103 | ||||||||||||
Consumption of reserves
|
(39 | ) | (30 | ) | (109 | ) | (73 | ) | ||||||||
Ending balance
|
$ | 188 | $ | 147 | $ | 188 | $ | 147 | ||||||||
30
31
Note 16 | Industry Segment Operations |
32
33
Three Months Ended | Nine Months Ended | |||||||||||||||
Operating |
Operating |
|||||||||||||||
Net Sales | Income (Loss) | Net Sales | Income (Loss) | |||||||||||||
(In millions) | ||||||||||||||||
July 31, 2011:
|
||||||||||||||||
Silicon Systems Group
|
$ | 1,398 | $ | 452 | $ | 4,348 | $ | 1,486 | ||||||||
Applied Global Services
|
603 | 146 | 1,784 | 322 | ||||||||||||
Display
|
223 | 58 | 528 | 116 | ||||||||||||
Energy and Environmental Solutions
|
563 | 123 | 1,676 | 436 | ||||||||||||
Total Segment
|
$ | 2,787 | $ | 779 | $ | 8,336 | $ | 2,360 | ||||||||
August 1, 2010:
|
||||||||||||||||
Silicon Systems Group
|
$ | 1,447 | $ | 525 | $ | 3,821 | $ | 1,328 | ||||||||
Applied Global Services
|
468 | 84 | 1,349 | 237 | ||||||||||||
Display
|
216 | 64 | 618 | 179 | ||||||||||||
Energy and Environmental Solutions
|
387 | (371 | ) | 874 | (552 | ) | ||||||||||
Total Segment
|
$ | 2,518 | $ | 302 | $ | 6,662 | $ | 1,192 | ||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
July 31, |
August 1, |
July 31, |
August 1, |
|||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In millions) | ||||||||||||||||
Total segment operating income
|
$ | 779 | $ | 302 | $ | 2,360 | $ | 1,192 | ||||||||
Corporate and unallocated costs
|
(120 | ) | (139 | ) | (371 | ) | (414 | ) | ||||||||
Restructuring and asset impairment benefit (charges), net
|
| 20 | 21 | (93 | ) | |||||||||||
Gain on sale of facilities, net
|
28 | | 27 | | ||||||||||||
Income from operations
|
$ | 687 | $ | 183 | $ | 2,037 | $ | 685 | ||||||||
July 31, |
||||
2011 | ||||
Samsung Electronics Co., Ltd.
|
12 | % | ||
Taiwan Semiconductor Manufacturing Company Limited
|
11 | % |
34
July 31, |
||||
2011 | ||||
Samsung Electronics Co., Ltd.
|
5 | % | ||
Taiwan Semiconductor Manufacturing Company Limited
|
9 | % |
Note 17 | Subsequent Event |
35
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
July 31, |
August 1, |
Change |
July 31, |
August 1, |
Change |
|||||||||||||||||||
2011 | 2010 | 2011 over 2010 | 2011 | 2010 | 2011 over 2010 | |||||||||||||||||||
(In millions, except percentages) | ||||||||||||||||||||||||
New orders
|
$ | 2,390 | $ | 2,725 | $ | (335 | ) | $ | 8,547 | $ | 7,723 | $ | 824 | |||||||||||
Net sales
|
$ | 2,787 | $ | 2,518 | $ | 269 | $ | 8,336 | $ | 6,662 | $ | 1,674 | ||||||||||||
Gross margin
|
$ | 1,184 | $ | 860 | $ | 324 | $ | 3,509 | $ | 2,498 | $ | 1,011 | ||||||||||||
Gross margin percentage
|
42 | % | 34 | % | 8 points | 42 | % | 37 | % | 5 points | ||||||||||||||
Operating income
|
$ | 687 | $ | 183 | $ | 504 | $ | 2,037 | $ | 685 | $ | 1,352 | ||||||||||||
Operating margin percentage
|
25 | % | 7 | % | 18 points | 24 | % | 10 | % | 14 points | ||||||||||||||
Net income
|
$ | 476 | $ | 123 | $ | 353 | $ | 1,471 | $ | 470 | $ | 1,001 | ||||||||||||
Earnings per share
|
$ | 0.36 | $ | 0.09 | $ | 0.27 | $ | 1.10 | $ | 0.35 | $ | 0.75 |
36
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||||
July 31, |
Change |
August 1, |
July 31, |
Change |
August 1, |
|||||||||||||||||||||||||||||||||||
2011 | 2011 over 2010 | 2010 | 2011 | 2011 over 2010 | 2010 | |||||||||||||||||||||||||||||||||||
($) | (%) | (%) | ($) | (%) | ($) | (%) | (%) | ($) | (%) | |||||||||||||||||||||||||||||||
(In millions, except percentages) | ||||||||||||||||||||||||||||||||||||||||
China
|
534 | 22 | 29 | 415 | 15 | 1,855 | 22 | 57 | 1,181 | 16 | ||||||||||||||||||||||||||||||
Taiwan
|
425 | 18 | (42 | ) | 733 | 27 | 1,952 | 23 | (5 | ) | 2,047 | 28 | ||||||||||||||||||||||||||||
Japan
|
372 | 15 | 60 | 233 | 8 | 828 | 10 | 46 | 568 | 8 | ||||||||||||||||||||||||||||||
Korea
|
362 | 15 | (30 | ) | 519 | 19 | 956 | 11 | (35 | ) | 1,467 | 20 | ||||||||||||||||||||||||||||
Southeast Asia
|
87 | 4 | (64 | ) | 245 | 9 | 365 | 4 | (30 | ) | 522 | 7 | ||||||||||||||||||||||||||||
Asia Pacific
|
1,780 | 74 | (17 | ) | 2,145 | 78 | 5,956 | 70 | 3 | 5,785 | 79 | |||||||||||||||||||||||||||||
North America(*)
|
356 | 15 | 4 | 342 | 13 | 1,745 | 20 | 94 | 898 | 13 | ||||||||||||||||||||||||||||||
Europe
|
254 | 11 | 7 | 238 | 9 | 846 | 10 | 57 | 540 | 8 | ||||||||||||||||||||||||||||||
Total
|
2,390 | 100 | (12 | ) | 2,725 | 100 | 8,547 | 100 | 18 | 7,223 | 100 | |||||||||||||||||||||||||||||
* | Primarily the United States. |
37
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||||
July 31, |
Change |
August 1, |
July 31, |
Change |
August 1, |
|||||||||||||||||||||||||||||||||||
2011 | 2011 over 2010 | 2010 | 2011 | 2011 over 2010 | 2010 | |||||||||||||||||||||||||||||||||||
($) | (%) | (%) | ($) | (%) | ($) | (%) | (%) | ($) | (%) | |||||||||||||||||||||||||||||||
(In millions, except percentages) | ||||||||||||||||||||||||||||||||||||||||
Silicon Systems Group
|
1,239 | 52 | (19 | ) | 1,535 | 56 | 4,563 | 53 | 12 | 4,086 | 57 | |||||||||||||||||||||||||||||
Applied Global Services
|
613 | 26 | 3 | 595 | 22 | 1,769 | 21 | 14 | 1,552 | 21 | ||||||||||||||||||||||||||||||
Display
|
220 | 9 | (9 | ) | 242 | 9 | 617 | 7 | (1 | ) | 624 | 9 | ||||||||||||||||||||||||||||
Energy and Environmental Solutions
|
318 | 13 | (10 | ) | 353 | 13 | 1,598 | 19 | 66 | 961 | 13 | |||||||||||||||||||||||||||||
Total
|
2,390 | 100 | (12 | ) | 2,725 | 100 | 8,547 | 100 | 18 | 7,223 | 100 | |||||||||||||||||||||||||||||
38
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||||
July 31, |
Change |
August 1, |
July 31, |
Change |
August 1, |
|||||||||||||||||||||||||||||||||||
2011 | 2011 over 2010 | 2010 | 2011 | 2011 over 2010 | 2010 | |||||||||||||||||||||||||||||||||||
($) | (%) | (%) | ($) | (%) | ($) | (%) | (%) | ($) | (%) | |||||||||||||||||||||||||||||||
(In millions, except percentages) | ||||||||||||||||||||||||||||||||||||||||
China
|
751 | 27 | 60 | 469 | 19 | 2,166 | 26 | 157 | 843 | 13 | ||||||||||||||||||||||||||||||
Taiwan
|
454 | 16 | (36 | ) | 707 | 28 | 1,740 | 21 | (9 | ) | 1,921 | 29 | ||||||||||||||||||||||||||||
Korea
|
432 | 16 | 9 | 398 | 16 | 900 | 11 | (34 | ) | 1,361 | 20 | |||||||||||||||||||||||||||||
Japan
|
284 | 10 | 40 | 203 | 8 | 658 | 8 | 8 | 610 | 9 | ||||||||||||||||||||||||||||||
Southeast Asia
|
156 | 6 | (4 | ) | 162 | 6 | 495 | 6 | 23 | 403 | 6 | |||||||||||||||||||||||||||||
Asia Pacific
|
2,077 | 75 | 7 | 1,939 | 77 | 5,959 | 72 | 16 | 5,138 | 77 | ||||||||||||||||||||||||||||||
North America(*)
|
451 | 16 | 53 | 294 | 12 | 1,528 | 18 | 100 | 765 | 12 | ||||||||||||||||||||||||||||||
Europe
|
259 | 9 | (9 | ) | 285 | 11 | 849 | 10 | 12 | 759 | 11 | |||||||||||||||||||||||||||||
Total
|
2,787 | 100 | 11 | 2,518 | 100 | 8,336 | 100 | 25 | 6,662 | 100 | ||||||||||||||||||||||||||||||
* | Primarily the United States. |
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||||
July 31, |
Change |
August 1, |
July 31, |
Change |
August 1, |
|||||||||||||||||||||||||||||||||||
2011 | 2011 over 2010 | 2010 | 2011 | 2011 over 2010 | 2010 | |||||||||||||||||||||||||||||||||||
($) | (%) | (%) | ($) | (%) | ($) | (%) | (%) | ($) | (%) | |||||||||||||||||||||||||||||||
(In millions, except percentages) | ||||||||||||||||||||||||||||||||||||||||
Silicon Systems Group
|
1,398 | 50 | (3 | ) | 1,447 | 57 | 4,348 | 52 | 14 | 3,821 | 58 | |||||||||||||||||||||||||||||
Applied Global Services
|
603 | 22 | 29 | 468 | 19 | 1,784 | 22 | 32 | 1,349 | 20 | ||||||||||||||||||||||||||||||
Display
|
223 | 8 | 3 | 216 | 9 | 528 | 6 | (15 | ) | 618 | 9 | |||||||||||||||||||||||||||||
Energy and Environmental Solutions
|
563 | 20 | 45 | 387 | 15 | 1,676 | 20 | 92 | 874 | 13 | ||||||||||||||||||||||||||||||
Total
|
2,787 | 100 | 11 | 2,518 | 100 | 8,336 | 100 | 25 | 6,662 | 100 | ||||||||||||||||||||||||||||||
39
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
July 31, |
August 1, |
Change |
July 31, |
August 1, |
Change |
|||||||||||||||||||
2011 | 2010 | 2011 over 2010 | 2011 | 2010 | 2011 over 2010 | |||||||||||||||||||
(In millions, except percentages) | ||||||||||||||||||||||||
Gross margin
|
$ | 1,184 | $ | 860 | $ | 324 | $ | 3,509 | $ | 2,498 | $ | 1,011 | ||||||||||||
Gross margin (% of net sales)
|
42 | % | 34 | % | 8 points | 42 | % | 37 | % | 5 points |
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
July 31, |
August 1, |
Change |
July 31, |
August 1, |
Change |
|||||||||||||||||||
2011 | 2010 | 2011 over 2010 | 2011 | 2010 | 2011 over 2010 | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Research, development and engineering
|
$ | 282 | $ | 290 | $ | (8 | ) | $ | 850 | $ | 865 | $ | (15 | ) |
40
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
July 31, |
August 1, |
Change |
July 31, |
August 1, |
Change |
|||||||||||||||||||
2011 | 2010 | 2011 over 2010 | 2011 | 2010 | 2011 over 2010 | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Selling, general and administrative
|
$ | 240 | $ | 252 | $ | (12 | ) | $ | 679 | $ | 700 | $ | (21 | ) |
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
July 31, |
August 1, |
Change |
July 31, |
August 1, |
Change |
|||||||||||||||||||
2011 | 2010 | 2011 over 2010 | 2011 | 2010 | 2011 over 2010 | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Restructuring and asset impairments
|
$ | 3 | $ | 135 | $ | (132 | ) | $ | (30 | ) | $ | 248 | $ | (278 | ) |
41
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
July 31, |
August 1, |
Change |
July 31, |
August 1, |
Change |
|||||||||||||||||||
2011 | 2010 | 2011 over 2010 | 2011 | 2010 | 2011 over 2010 | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Interest and other expense
|
$ | 25 | $ | 5 | $ | 20 | $ | 35 | $ | 15 | $ | 20 |
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
July 31, |
August 1, |
Change |
July 31, |
August 1, |
Change |
|||||||||||||||||||
2011 | 2010 | 2011 over 2010 | 2011 | 2010 | 2011 over 2010 | |||||||||||||||||||
(In millions, except percentages) | ||||||||||||||||||||||||
Provision for income taxes
|
$ | 193 | $ | 55 | $ | 138 | $ | 564 | $ | 214 | $ | 350 | ||||||||||||
Effective income tax rate
|
29 | % | 31 | % | (2) points | 28 | % | 31 | % | (3) points |
42
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||
July 31, |
August 1, |
Change |
July 31, |
August 1, |
Change |
|||||||||||||||||||||||||||
2011 | 2010 | 2011 over 2010 | 2011 | 2010 | 2011 over 2010 | |||||||||||||||||||||||||||
(In millions, except percentages) | ||||||||||||||||||||||||||||||||
New orders
|
$ | 1,239 | $ | 1,535 | $ | (296 | ) | (19) | % | $ | 4,563 | $ | 4,086 | $ | 477 | 12 | % | |||||||||||||||
Net sales
|
1,398 | 1,447 | (49 | ) | (3) | % | 4,348 | 3,821 | 527 | 14 | % | |||||||||||||||||||||
Operating income
|
452 | 525 | (73 | ) | (14) | % | 1,486 | 1,328 | 158 | 12 | % | |||||||||||||||||||||
Operating margin
|
32 | % | 36 | % | (4) points | 34 | % | 35 | % | (1) point |
Three Months Ended | Nine Months Ended | |||||||||||||||
July 31, |
August 1, |
July 31, |
August 1, |
|||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Foundry
|
37 | % | 37 | % | 47 | % | 39 | % | ||||||||
Memory
|
38 | % | 45 | % | 29 | % | 48 | % | ||||||||
Logic and other
|
25 | % | 18 | % | 24 | % | 13 | % | ||||||||
100 | % | 100 | % | 100 | % | 100 | % | |||||||||
43
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||||
July 31, |
Change |
August 1, |
July 31, |
Change |
August 1, |
|||||||||||||||||||||||||||||||||||
2011 | 2011 over 2010 | 2010 | 2011 | 2011 over 2010 | 2010 | |||||||||||||||||||||||||||||||||||
($) | (%) | (%) | ($) | (%) | ($) | (%) | (%) | (%) | (%) | |||||||||||||||||||||||||||||||
(In millions, except percentages) | ||||||||||||||||||||||||||||||||||||||||
Taiwan
|
262 | 19 | (51 | ) | 535 | 37 | 1,128 | 26 | (19 | ) | 1,395 | 36 |
44
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||
July 31, |
August 1, |
Change |
July 31, |
August 1, |
Change |
|||||||||||||||||||||||||||
2011 | 2010 | 2011 over 2010 | 2011 | 2010 | 2011 over 2010 | |||||||||||||||||||||||||||
(In millions, except percentages) | ||||||||||||||||||||||||||||||||
New orders
|
$ | 613 | $ | 595 | $ | 18 | 3 | % | $ | 1,769 | $ | 1,552 | $ | 217 | 14 | % | ||||||||||||||||
Net sales
|
603 | 468 | 135 | 29 | % | 1,784 | 1,349 | 435 | 32 | % | ||||||||||||||||||||||
Operating income
|
146 | 84 | 62 | 74 | % | 322 | 237 | 85 | 36 | % | ||||||||||||||||||||||
Operating margin
|
24 | % | 18 | % | 6 points | 18 | % | 18 | % | |
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||
July 31, |
August 1, |
Change |
July 31, |
August 1, |
Change |
|||||||||||||||||||||||||||
2011 | 2010 | 2011 over 2010 | 2011 | 2010 | 2011 over 2010 | |||||||||||||||||||||||||||
(In millions, except percentages) | ||||||||||||||||||||||||||||||||
New orders
|
$ | 220 | $ | 242 | $ | (22 | ) | (9) | % | $ | 617 | $ | 624 | $ | (7 | ) | (1) | % | ||||||||||||||
Net sales
|
223 | 216 | 7 | 3 | % | 528 | 618 | (90 | ) | (15) | % | |||||||||||||||||||||
Operating income
|
58 | 64 | (6 | ) | (9) | % | 116 | 179 | (63 | ) | (35) | % | ||||||||||||||||||||
Operating margin
|
26 | % | 30 | % | (4) points | 22 | % | 29 | % | (7) points |
45
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||||
July 31, |
Change |
August 1, |
July 31, |
Change |
August 1, |
|||||||||||||||||||||||||||||||||||
2011 | 2011 over 2010 | 2010 | 2011 | 2011 over 2010 | 2010 | |||||||||||||||||||||||||||||||||||
($) | (%) | (%) | ($) | (%) | ($) | (%) | (%) | ($) | (%) | |||||||||||||||||||||||||||||||
(In millions, except percentages) | ||||||||||||||||||||||||||||||||||||||||
China
|
111 | 50 | 41 | 79 | 37 | 255 | 48 | 73 | 147 | 24 | ||||||||||||||||||||||||||||||
Taiwan
|
58 | 26 | (17 | ) | 70 | 33 | 156 | 30 | (23 | ) | 203 | 33 |
46
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||
July 31, |
August 1, |
Change |
July 31, |
August 1, |
Change |
|||||||||||||||||||||||||||
2011 | 2010 | 2011 over 2010 | 2011 | 2010 | 2011 over 2010 | |||||||||||||||||||||||||||
(In millions, except percentages) | ||||||||||||||||||||||||||||||||
New orders
|
$ | 318 | $ | 353 | $ | (35 | ) | (10 | )% | $ | 1,598 | $ | 961 | $ | 637 | 66 | % | |||||||||||||||
Net sales
|
563 | 387 | 176 | 45 | % | 1,676 | 874 | 802 | 92 | % | ||||||||||||||||||||||
Operating income (loss)
|
123 | (371 | ) | 494 | 133 | % | 436 | (552 | ) | 988 | 179 | % | ||||||||||||||||||||
Operating margin
|
22 | % | (96 | )% | 118 points | 26 | % | (63 | )% | 89 points |
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||||
July 31, |
Change |
August 1, |
July 31, |
Change |
August 1, |
|||||||||||||||||||||||||||||||||||
2011 | 2011 over 2010 | 2010 | 2011 | 2011 over 2010 | 2010 | |||||||||||||||||||||||||||||||||||
($) | (%) | (%) | ($) | (%) | ($) | (%) | (%) | ($) | (%) | |||||||||||||||||||||||||||||||
(In millions, except percentages) | ||||||||||||||||||||||||||||||||||||||||
China
|
485 | 86 | 106 | 236 | 61 | 1,360 | 81 | 237 | 403 | 46 | ||||||||||||||||||||||||||||||
Europe
|
7 | 1 | (94 | ) | 122 | 31 | 49 | 3 | (87 | ) | 372 | 43 |
47
July 31, |
October 31, |
|||||||
2011 | 2010 | |||||||
(In millions) | ||||||||
Cash and cash equivalents
|
$ | 5,018 | $ | 1,858 | ||||
Short-term investments
|
739 | 727 | ||||||
Long-term investments
|
1,052 | 1,307 | ||||||
Total cash, cash-equivalents and investments
|
$ | 6,809 | $ | 3,892 | ||||
July 31, |
August 1, |
|||||||
2011 | 2010 | |||||||
(In millions) | ||||||||
Cash provided by operating activities
|
$ | 1,728 | $ | 1,198 | ||||
Cash provided by (used in) investing activities
|
$ | 218 | $ | (847 | ) | |||
Cash provided by (used in) financing activities
|
$ | 1,210 | $ | (362 | ) |
48
Date Declared | Record Date | Payable Date | Amount Per Share | |||||
December 7, 2010
|
March 2, 2011 | March 23, 2011 | $ | 0.07 | ||||
March 8, 2011
|
June 1, 2011 | June 22, 2011 | $ | 0.08 | ||||
June 6, 2011
|
August 31, 2011 | September 21, 2011 | $ | 0.08 |
49
Effective |
||||||||||||||||||||
Principal |
Stated |
Interest |
Interest |
Interest |
||||||||||||||||
Due Date | Amount | Interest Rate | Rate | Pay Date | Pay Date | |||||||||||||||
(In millions) | ||||||||||||||||||||
June 15, 2016
|
$ | 400 | 2.650 | % | 2.666 | % | June 15 | December 15 | ||||||||||||
June 15, 2021
|
750 | 4.300 | % | 4.326 | % | June 15 | December 15 | |||||||||||||
June 15, 2041
|
600 | 5.850 | % | 5.879 | % | June 15 | December 15 | |||||||||||||
$ | 1,750 |
50
51
52
53
Three Months Ended | Nine Months Ended | |||||||||||||||
July 31, |
August 1, |
July 31, |
August 1, |
|||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In millions, except per share amounts) | ||||||||||||||||
Non-GAAP Operating Income
|
||||||||||||||||
Reported operating income (GAAP basis)
|
$ | 687 | $ | 183 | $ | 2,037 | $ | 685 | ||||||||
Certain items associated with
acquisitions1
|
12 | 21 | 37 | 77 | ||||||||||||
Varian and Semitool deal cost
|
9 | | 9 | 10 | ||||||||||||
Restructuring charges and asset
impairments2,3,4,5
|
3 | 135 | (30 | ) | 248 | |||||||||||
Gain on sale of facilities, net
|
(28 | ) | | (27 | ) | | ||||||||||
Non-GAAP operating income
|
$ | 683 | $ | 339 | $ | 2,026 | $ | 1,020 | ||||||||
Non-GAAP Net Income
|
||||||||||||||||
Reported net income (GAAP basis)
|
$ | 476 | $ | 123 | $ | 1,471 | $ | 470 | ||||||||
Certain items associated with
acquisitions1
|
12 | 21 | 37 | 77 | ||||||||||||
Varian and Semitool deal cost
|
9 | | 9 | 10 | ||||||||||||
Restructuring charges and asset
impairments2,3,4,5
|
3 | 135 | (30 | ) | 248 | |||||||||||
Impairment of strategic investments
|
| 8 | | 13 | ||||||||||||
Gain on sale of facilities, net
|
(28 | ) | | (27 | ) | | ||||||||||
Reinstatement of federal R&D tax credit
|
| | (13 | ) | | |||||||||||
Income tax effect of non-GAAP adjustments
|
(5 | ) | (53 | ) | 5 | (113 | ) | |||||||||
Non-GAAP net income
|
$ | 467 | $ | 234 | $ | 1,452 | $ | 705 | ||||||||
Non-GAAP Earnings Per Diluted Share
|
||||||||||||||||
Reported earnings per diluted share (GAAP basis)
|
$ | 0.36 | $ | 0.09 | $ | 1.10 | $ | 0.35 | ||||||||
Certain items associated with acquisitions
|
0.01 | 0.01 | 0.02 | 0.04 | ||||||||||||
Varian and Semitool deal cost
|
| | 0.01 | 0.01 | ||||||||||||
Restructuring charges and asset impairments
|
| 0.07 | (0.01 | ) | 0.12 | |||||||||||
Impairment of strategic investments
|
| | | | ||||||||||||
Gain on sale of facilities, net
|
(0.02 | ) | | (0.02 | ) | | ||||||||||
Reinstatement of federal R&D tax credit
|
| | (0.01 | ) | | |||||||||||
Non-GAAP earnings per diluted share
|
$ | 0.35 | $ | 0.17 | $ | 1.09 | $ | 0.52 | ||||||||
Weighted average number of diluted shares
|
1,330 | 1,349 | 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 July 31, 2011 included asset impairment charges of $3 million related to certain fixed assets. | |
3 | Results for the three months ended August 1, 2010 included asset impairment charges of $110 million and restructuring charges of $45 million related to a restructuring program announced on July 21, 2010, offset by a $20 million favorable adjustment to a restructuring program announced on November 11, 2009. | |
4 | Results for the nine months ended July 31, 2011 included asset impairment charges of $30 million primarily related to certain intangible assets, offset by favorable adjustments of $36 million related to a restructuring |
54
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. | ||
5 | Results for the nine months ended August 1, 2010 included asset impairment charges of $110 million and restructuring charges of $45 million related to a restructuring program announced on July 21, 2010, restructuring charges of $84 million associated with a restructuring program announced on November 11, 2009, and asset impairment charges of $9 million related to a facility held for sale. |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Item 4. | Controls and Procedures |
55
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; | |
| changes in end demand for electronic products over time and the effect of these changes on customers businesses and, in turn, demand for Applieds products; | |
| 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 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; |
56
| the increasing importance of, and difficulties in, developing products with sufficient differentiation to influence customers purchasing decisions; | |
| requirements for shorter cycle times for the development, manufacture and installation of manufacturing equipment; | |
| price and performance trends for semiconductor devices, 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; | |
| the cost, technical complexity and timing of a proposed industry transition from 300mm to 450mm wafers, and the resulting effect on demand for manufacturing equipment and services; | |
| the decreasing rate of capital expenditures as a percentage of semiconductor manufacturers revenue, and manufacturers increasing allocation of capital investment to markets that Applied does not serve, such as lithography; | |
| 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 increasing market positions in larger market segments, such as etch and inspection; |
57
| 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; and | |
| the increasing fragmentation of semiconductor markets, leading certain markets to become too small to support the cost of a new fabrication plant, while others require less technologically advanced products. |
| the planned expansion of manufacturing facilities in China by Chinese display manufacturers and manufacturers from other countries, and the ability of non-Chinese manufacturers to obtain government approvals on a timely basis; | |
| 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 government policies and subsidies and lower manufacturing costs; |
58
| 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; | |
| challenges associated with marketing and selling manufacturing equipment and services to a diverse and diffuse customer base; | |
| the increasing number of government-affiliated entities in China that are becoming customers; | |
| the cost of polysilicon and other materials; and | |
| access to affordable financing and capital by customers and end-users. |
59
| 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 its products; | |
| differentiate its products from those of competitors and any disruptive technologies, meet customers 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, 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; | |
| the need to develop adequate new business processes and systems; |
60
| 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, or has limited, 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; | |
| customer- or government-supported efforts to influence Applied to conduct more of its operations in a particular country, such as Korea and China; | |
| 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; |
61
| a more diverse workforce with different cultures, customs, business practices and worker expectations; | |
| variations in the ability to develop relationships with local customers, suppliers and governments; | |
| fluctuations in interest rates and currency exchange rates, including the relative strength or weakness of the U.S. dollar against the Japanese yen, euro, Taiwanese dollar, Israeli shekel or Chinese yuan; | |
| the need to provide sufficient levels of technical support in different locations around the world; | |
| 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; | |
| hiring and integration of an increasing percentage of new workers, including in countries such as India and China; | |
| the increasing need for the workforce to be more mobile and work in or travel to different regions; | |
| 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. |
62
| 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, including rare earth elements; | |
| 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. |
63
| 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 regions where Applied has not historically conducted business; | |
| challenges associated with managing new, more diverse and more widespread operations, projects and people; | |
| inability to obtain and protect intellectual property rights in key technologies; | |
| inadequacy or ineffectiveness of an acquired 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. |
64
65
66
67
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
|
||||||||||||||||
(May 2, 2011 to
May 29, 2011) |
| $ | | | $ | 1,382 | ||||||||||
Month #2
|
||||||||||||||||
(May 30, 2011 to
June 26, 2011) |
0.4 | $ | 12.58 | 0.4 | $ | 1,377 | ||||||||||
Month #3
|
||||||||||||||||
(June 27, 2011 to
July 31, 2011) |
1.6 | $ | 12.81 | 1.6 | $ | 1,357 | ||||||||||
Total
|
2.0 | $ | 12.77 | 2.0 | ||||||||||||
* | 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 |
68
Item 6. | Exhibits |
Exhibit |
||||
No | Description | |||
4 | .2 | Indenture, dated June 8, 2011, by and between Applied Materials, Inc. and U.S. Bank National Association, incorporated by reference to Applieds Form 8-K (file no. 000-06920) filed June 10, 2011. | ||
4 | .3 | First Supplemental Indenture, dated June 8, 2011, by and between Applied Materials, Inc. and U.S. Bank National Association, incorporated by reference to Applieds Form 8-K (file no. 000-06920) filed June 10, 2011. | ||
10 | .63 | Bridge Loan Agreement, dated as of May 25, 2011, among Applied Materials, Inc., JPMorgan Chase Bank, N.A., as administrative agent, and other lenders named therein, incorporated by reference to Applieds Form 8-K (file no. 000-06920) filed May 31, 2011. (Confidential treatment has been requested for redacted portions of the agreement.) | ||
10 | .64 | Credit Agreement, dated as of May 25, 2011, among Applied Materials, Inc., JPMorgan Chase Bank, N.A., as administrative agent, and other lenders named therein, incorporated by reference to Applieds Form 8-K (file no. 000-06920) filed May 31, 2011. (Confidential treatment has been requested for redacted portions of the agreement.) | ||
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 |
69
By: |
/s/ GEORGE
S. DAVIS
|
By: |
/s/ THOMAS
S. TIMKO
|
70
/s/ Michael R. Splinter | ||||
Michael R. Splinter | ||||
President and Chief Executive Officer |
/s/ George S. Davis | ||||
George S. Davis | ||||
Executive Vice President, Chief Financial Officer |
/s/ Michael R. Splinter | ||||
Michael R. Splinter | ||||
President and Chief Executive Officer |
/s/ George S. Davis | ||||
George S. Davis | ||||
Executive Vice President, Chief Financial Officer |
Derivative Instruments and Hedging Activities (Details Textuals)
|
9 Months Ended |
---|---|
Jul. 31, 2011
|
|
Derivative Instruments and Hedging Activities (Textuals) [Abstract] | |
Time period over which majority of after tax gain loss related to derivatives to be reclassified into earnings | 12 months |
Time period for hedging of foreign currency transactions | 24 months |
Consolidated Condensed Statements of Stockholders' Equity and Comprehensive Income (Loss) (Unaudited) (USD $)
In Millions |
Total
|
Common Stock
|
Additional Paid-In Capital
|
Retained Earnings
|
Treasury Stock
|
Accumulated Other Comprehensive Income (Loss)
|
|||
---|---|---|---|---|---|---|---|---|---|
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 | 1,471 | 1,471 | |||||||
Change in unrealized net gain on investments | (2) | (2) | |||||||
Change in unrealized net gain on derivative instruments | (4) | (4) | |||||||
Change in defined benefit plan liability | (1) | (1) | |||||||
Translation adjustments | 1 | 1 | |||||||
Comprehensive income | 1,465 | ||||||||
Dividends | (304) | (304) | |||||||
Share-based compensation | 110 | 110 | |||||||
Issuance under stock plans, net of a tax detriment of $5 and other | 37 | 37 | |||||||
Issuance under stock plans, net of a tax detriment of $5 and other, shares | 3 | 10 | |||||||
Common stock repurchases | (293) | (293) | |||||||
Common stock repurchases, Shares | 20 | (20) | 20 | ||||||
Ending Balance at Jul. 31, 2011 | $ 8,551 | [1] | $ 13 | $ 5,553 | $ 12,678 | $ (9,689) | $ (4) | ||
Ending Balance, Shares at Jul. 31, 2011 | 1,318 | 557 | |||||||
|
Goodwill, Purchased Technology and Other Intangible Assets (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 9 Months Ended | 9 Months Ended | 6 Months Ended | 6 Months Ended | |||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 31, 2011
|
May 01, 2011
|
Aug. 01, 2010
|
Jul. 31, 2011
|
Aug. 01, 2010
|
Jan. 30, 2011
|
Oct. 31, 2010
|
Jul. 31, 2011
Purchased Technology [Member]
Silicon Systems Group [Member]
|
Oct. 31, 2010
Purchased Technology [Member]
Silicon Systems Group [Member]
|
Jul. 31, 2011
Other Intangible Assets [Member]
Silicon Systems Group [Member]
|
Oct. 31, 2010
Other Intangible Assets [Member]
Silicon Systems Group [Member]
|
Jul. 31, 2011
Silicon Systems Group [Member]
|
Oct. 31, 2010
Silicon Systems Group [Member]
|
Jul. 31, 2011
Purchased Technology [Member]
Applied Global Services [Member]
|
Oct. 31, 2010
Purchased Technology [Member]
Applied Global Services [Member]
|
Jul. 31, 2011
Other Intangible Assets [Member]
Applied Global Services [Member]
|
Oct. 31, 2010
Other Intangible Assets [Member]
Applied Global Services [Member]
|
Jul. 31, 2011
Applied Global Services [Member]
|
Oct. 31, 2010
Applied Global Services [Member]
|
Jul. 31, 2011
Purchased Technology [Member]
Display [Member]
|
Oct. 31, 2010
Purchased Technology [Member]
Display [Member]
|
Jul. 31, 2011
Other Intangible Assets [Member]
Display [Member]
|
Oct. 31, 2010
Other Intangible Assets [Member]
Display [Member]
|
Jul. 31, 2011
Display [Member]
|
Oct. 31, 2010
Display [Member]
|
Jul. 31, 2011
Purchased Technology [Member]
Energy and Environmental Solutions [Member]
|
Oct. 31, 2010
Purchased Technology [Member]
Energy and Environmental Solutions [Member]
|
Jul. 31, 2011
Other Intangible Assets [Member]
Energy and Environmental Solutions [Member]
|
Oct. 31, 2010
Other Intangible Assets [Member]
Energy and Environmental Solutions [Member]
|
Jul. 31, 2011
Energy and Environmental Solutions [Member]
|
Oct. 31, 2010
Energy and Environmental Solutions [Member]
|
May 01, 2011
Purchased Technology [Member]
|
Jul. 31, 2011
Purchased Technology [Member]
|
Oct. 31, 2010
Purchased Technology [Member]
|
Jul. 31, 2011
Other Intangible Assets [Member]
|
Oct. 31, 2010
Other Intangible Assets [Member]
|
May 01, 2011
Trade Names [Member]
|
||||||
Indefinite-lived intangible assets | ||||||||||||||||||||||||||||||||||||||||||
Goodwill | $ 1,335 | [1] | $ 1,335 | [1] | $ 1,336 | [1] | $ 381 | $ 381 | $ 193 | $ 177 | $ 116 | $ 116 | $ 645 | $ 662 | ||||||||||||||||||||||||||||
Other Intangible Assets | 0 | 0 | 18 | 0 | 0 | 0 | 18 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||
Total | 1,335 | 1,335 | 1,354 | 381 | 381 | 193 | 195 | 116 | 116 | 645 | 662 | |||||||||||||||||||||||||||||||
Amortized intangible assets | ||||||||||||||||||||||||||||||||||||||||||
Gross carrying amount | 878 | 878 | 903 | 310 | 310 | 20 | 20 | 330 | 330 | 28 | 32 | 40 | 61 | 68 | 93 | 110 | 110 | 33 | 33 | 143 | 143 | 105 | 105 | 232 | 232 | 337 | 337 | 553 | 557 | 325 | 346 | |||||||||||
Accumulated amortization | (655) | (655) | (634) | (255) | (247) | (8) | (6) | (263) | (253) | (19) | (19) | (31) | (43) | (50) | (62) | (100) | (96) | (24) | (23) | (124) | (119) | (45) | (37) | (173) | (163) | (218) | (200) | (419) | (399) | (236) | (235) | |||||||||||
Amortized intangible assets, net | 223 | 223 | 269 | 134 | 158 | 89 | 111 | |||||||||||||||||||||||||||||||||||
Impairment charges of intangible assets and purchased technology | 24 | 24 | 6 | 18 | ||||||||||||||||||||||||||||||||||||||
Future estimated amortization expense | ||||||||||||||||||||||||||||||||||||||||||
Future estimated amortization expense, 2011 | 12 | |||||||||||||||||||||||||||||||||||||||||
Future estimated amortization expense, 2012 | 50 | |||||||||||||||||||||||||||||||||||||||||
Future estimated amortization expense, 2013 | 48 | |||||||||||||||||||||||||||||||||||||||||
Future estimated amortization expense, 2014 | 40 | |||||||||||||||||||||||||||||||||||||||||
Future estimated amortization expense, 2015 | 25 | |||||||||||||||||||||||||||||||||||||||||
Future estimated amortization expense, after 2015 | 48 | |||||||||||||||||||||||||||||||||||||||||
Total | 223 | |||||||||||||||||||||||||||||||||||||||||
Goodwill , Purchased Technology and Other Intangible Assets (Textuals) [Abstract] | ||||||||||||||||||||||||||||||||||||||||||
Goodwill from the Energy and Environmental Solutions segment | 17 | |||||||||||||||||||||||||||||||||||||||||
Useful Life, Minimum | 1 | |||||||||||||||||||||||||||||||||||||||||
Useful Life, Maximum | 15 | |||||||||||||||||||||||||||||||||||||||||
Amortization expense | $ 13 | $ 17 | $ 40 | $ 71 | ||||||||||||||||||||||||||||||||||||||
|
Subsequent Event
|
9 Months Ended | ||||
---|---|---|---|---|---|
Jul. 31, 2011
|
|||||
Subsequent Event [Abstract] | |||||
Subsequent Event |
On August 11, 2011 the stockholders of Varian approved the
Merger Agreement with Applied, which is one of the conditions to
the closing of the proposed merger.
|
Document and Entity Information (USD $)
|
9 Months Ended | |
---|---|---|
Jul. 31, 2011
|
May 01, 2011
|
|
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 | Jul. 31, 2011 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2011 | |
Document Fiscal Period Focus | Q3 | |
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 | 1,317,531,478 |
Derivative Instruments and Hedging Activities (Details 1) (Cash Flow Hedging [Member], USD $)
In Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jul. 31, 2011
|
Aug. 01, 2010
|
Jul. 31, 2011
|
Aug. 01, 2010
|
|
Derivative instruments on Consolidated Condensed Statement of Operations | ||||
Gain or (Loss) Recognized in AOCI, Effective Portion | $ (7) | $ (3) | $ 5 | $ (5) |
Gain or (Loss) Reclassified from AOCI into Income, Effective Portion | 3 | (4) | 11 | (7) |
Gain or (Loss) Reclassified in Income, Ineffective Portion and Amount Excluded from Effectiveness Testing | (2) | (2) | (6) | (3) |
Foreign Exchange Contract [Member] | Cost of products sold [Member]
|
||||
Derivative instruments on Consolidated Condensed Statement of Operations | ||||
Gain or (Loss) Recognized in AOCI, Effective Portion | (7) | (3) | 5 | (5) |
Gain or (Loss) Reclassified from AOCI into Income, Effective Portion | 1 | (1) | 6 | (3) |
Gain or (Loss) Reclassified in Income, Ineffective Portion and Amount Excluded from Effectiveness Testing | (2) | (2) | (5) | (2) |
Foreign Exchange Contract [Member] | General and administrative [Member]
|
||||
Derivative instruments on Consolidated Condensed Statement of Operations | ||||
Gain or (Loss) Reclassified from AOCI into Income, Effective Portion | 2 | (3) | 5 | (4) |
Gain or (Loss) Reclassified in Income, Ineffective Portion and Amount Excluded from Effectiveness Testing | $ (1) | $ (1) |
Cash, Cash Equivalents and Investments (Tables)
|
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 2011
|
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Cash, Cash Equivalents and Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of cash, cash equivalents and investments |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 |
|
Derivative Instruments and Hedging Activities (Details) (USD $)
In Millions |
Jul. 31, 2011
|
Oct. 31, 2010
|
---|---|---|
Fair values of derivative instruments | ||
Asset Derivatives, Fair Value | $ 2 | $ 6 |
Liability Derivatives, Fair Value | 4 | 1 |
Foreign Exchange Contract [Member] | Designated as Hedging Instrument [Member] | Other current asset [Member]
|
||
Fair values of derivative instruments | ||
Asset Derivatives, Fair Value | 1 | 5 |
Foreign Exchange Contract [Member] | Designated as Hedging Instrument [Member] | Accrued expenses [Member]
|
||
Fair values of derivative instruments | ||
Liability Derivatives, Fair Value | 4 | 1 |
Foreign Exchange Contract [Member] | Derivatives Not Designated as Hedging Instruments [Member] | Other current asset [Member]
|
||
Fair values of derivative instruments | ||
Asset Derivatives, Fair Value | 1 | 1 |
Foreign Exchange Contract [Member] | Derivatives Not Designated as Hedging Instruments [Member] | Accrued expenses [Member]
|
||
Fair values of derivative instruments | ||
Liability Derivatives, Fair Value | $ 0 | $ 0 |
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Accounts Receivable, Net
|
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 2011
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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 nine months ended
July 31, 2011 and August 1, 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 all periods presented.
Accounts receivable are presented net of allowance for doubtful
accounts of $74 million at both July 31, 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 July 31, 2011, Applied will continue to
closely monitor customer liquidity and other economic
conditions, which may result in changes to Applied’s
estimates regarding collectability.
|
Fair Value Measurements (Tables)
|
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 2011
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Fair Value Measurements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial assets/liabilities measured at fair value on a recurring basis |
|
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Impairment charges |
|
Cash, Cash Equivalents and Investments (Details Textuals) (USD $)
In Millions |
Jul. 31, 2011
|
---|---|
Cash, Cash Equivalents and Investments (Textuals) [Abstract] | |
Gross unrealized loss due to a decrease in the fair value of certain fixed income securities | $ 1 |
Earnings Per Share (Details) (USD $)
In Millions, except Per Share data |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jul. 31, 2011
|
Aug. 01, 2010
|
Jul. 31, 2011
|
Aug. 01, 2010
|
|
Numerator: | ||||
Net income | $ 476 | $ 123 | $ 1,471 | $ 470 |
Denominator: | ||||
Weighted average common shares outstanding | 1,318 | 1,340 | 1,321 | 1,342 |
Effect of dilutive stock options, restricted stock units and employee stock purchase plans shares | 12 | 9 | 12 | 9 |
Denominator for diluted earnings per share | 1,330 | 1,349 | 1,333 | 1,351 |
Basic earnings per share | $ 0.36 | $ 0.09 | $ 1.11 | $ 0.35 |
Diluted earnings per share | $ 0.36 | $ 0.09 | $ 1.10 | $ 0.35 |
Potentially dilutive securities | 17 | 34 | 17 | 34 |
Earnings Per Share (Tables)
|
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 2011
|
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Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Elements used in computing both basic and diluted net earnings per share |
|
Restructuring and Asset Impairments
|
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 31, 2011
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 July 31, 2011, the remaining
severance accrual associated with restructuring reserves under
this program was $1 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 July 31,
2011, the remaining severance accrual associated with
restructuring reserves under this program was $10 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 July 31, 2011, no severance accrual
remained under this program.
Changes in severance accruals associated with restructuring
reserves for the nine months ended July 31, 2011 were as
follows:
In addition, as of July 31, 2011, Applied had
$5 million in restructuring reserves associated with
facilities.
In 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. In the
third quarter of fiscal 2011, Applied incurred asset impairment
charges of $3 million related to certain fixed assets.
In 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.
|
Earnings Per Share
|
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 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.
|
Employee Benefit Plans (Tables)
|
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 2011
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Employee Benefit Plans [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of net periodic benefit costs of defined and postretirement benefit plans |
|
Goodwill, Purchased Technology and Other Intangible Assets
|
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 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 16, 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
$17 million for the three months ended July 31, 2011
and August 1, 2010, respectively, and $40 million and
$71 million for the nine months ended July 31, 2011
and August 1, 2010, respectively. In the second quarter of
fiscal 2011, Applied entered into an agreement to divest certain
assets held in the Applied Global Services segment and
determined certain identified purchased technology and
finite-lived intangible assets included in assets held for sale
to be impaired, and, accordingly, recorded $6 million of
impairment charges.
As of July 31, 2011, future estimated amortization expense
is expected to be as follows:
|
Employee Benefit Plans
|
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Jul. 31, 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 nine months ended July 31, 2011 and
August 1, 2010 is presented below:
|
Business Combinations
|
9 Months Ended | ||||
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Jul. 31, 2011
|
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Business Combinations [Abstract] | |||||
Business Combinations |
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. The total
consideration is approximately $4.9 billion, which includes
certain post-closing equity based compensation. 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. Varian
stockholders approved the Merger Agreement at a special meeting
held on August 11, 2011. Consummation of the proposed
merger remains subject to various other customary closing
conditions, including receipt of certain domestic and foreign
antitrust approvals (including under the
U.S. Hart-Scott-Rodino
Antitrust Improvements Act
of 1976, as amended (the HSR Act). Upon completion of the
merger, Varian will operate within Applied’s Silicon
Systems Group and will continue to be based in Gloucester,
Massachusetts.
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.
Applied expects to fund the transaction with a combination of
existing cash balances and debt. On June 8, 2011, Applied
issued senior unsecured notes (the Notes) in the aggregate
principal amount of $1.75 billion with the intent of using
the net proceeds of the Notes to fund a portion of the
consideration and certain costs associated with the proposed
merger. In the event that the Merger Agreement is terminated or
Applied does not consummate the merger on or before May 31,
2012, Applied will be required to redeem the Notes at a
redemption price of 101% of the aggregate principal amount of
the accrued and unpaid interest. The indenture governing the
Notes includes certain covenants with which Applied was in
compliance at July 31, 2011. See Note 10 for
additional discussion of long-term debt.
On June 13, 2011, Applied received a request for additional
information from the Antitrust Division of the
U.S. Department of Justice (DOJ) in connection with the
merger as part of the regulatory process under the HSR Act.
Applied is responding to the request and will continue to work
cooperatively with the DOJ as the DOJ conducts its review. The
effect of the DOJ’s request is to extend the waiting period
imposed by the HSR Act until 30 days after Applied has
substantially complied with the request and Varian has
substantially complied with the request that it received.
|
Borrowing Facilities and Long-Term Debt (Tables)
|
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Jul. 31, 2011
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Borrowing Facilities and Long-Term Debt [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long Term Debt Outstanding |
Long-term debt outstanding as of October 31, 2010 was as
follows:
|
Balance Sheet Detail
|
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 2011
|
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Balance Sheet Detail [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance Sheet Detail |
Included in finished goods inventory is $281 million at
July 31, 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. Finished goods
inventory includes $145 million and $117 million of
evaluation inventory at July 31, 2011 and October 31,
2010, respectively.
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. In the third quarter of fiscal 2011, Applied
received $60 million in proceeds from the sale of a
property located in North America and incurred a gain of
$28 million on the transaction. In the third quarter of
fiscal 2011, Applied completed the divestiture of certain assets
held for sale for proceeds of $27 million, net of cash sold.
Other accrued expenses included contractual termination
obligation charges of $10 million and $40 million as
of July 31, 2011 and October 31, 2010, respectively.
Applied typically receives deposits on future deliverables from
customers in the Energy and Environmental Solutions and Display
segments. In certain instances, customer deposits may be
received from customers in the Applied Global Services segment.
|
Balance Sheet Detail (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 9 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|---|
Jul. 31, 2011
|
Jan. 30, 2011
|
Jul. 31, 2011
|
Oct. 31, 2010
|
||||||
Inventories | |||||||||
Customer service spares | $ 328 | $ 328 | $ 324 | ||||||
Raw materials | 408 | 408 | 260 | ||||||
Work-in-process | 457 | 457 | 500 | ||||||
Finished goods | 656 | 656 | 463 | ||||||
Total Inventories | 1,849 | [1] | 1,849 | [1] | 1,547 | [1] | |||
Property, Plant and Equipment, Net | |||||||||
Land and improvements | 169 | 169 | 227 | ||||||
Buildings and improvements | 1,170 | 1,170 | 1,234 | ||||||
Demonstration and manufacturing equipment | 679 | 679 | 670 | ||||||
Furniture, fixtures and other equipment | 715 | 715 | 719 | ||||||
Construction in progress | 24 | 24 | 19 | ||||||
Gross property, plant and equipment | 2,757 | 2,757 | 2,869 | ||||||
Accumulated depreciation | (1,903) | (1,903) | (1,906) | ||||||
Net property, plant and equipment | 854 | [1] | 854 | [1] | 963 | [1] | |||
Accounts Payable and Accrued Expenses | |||||||||
Accounts payable | 656 | 656 | 658 | ||||||
Compensation and employee benefits | 405 | 405 | 435 | ||||||
Warranty | 188 | 188 | 155 | ||||||
Dividends payable | 105 | 105 | 93 | ||||||
Other accrued taxes | 76 | 76 | 99 | ||||||
Restructuring reserve | 16 | 16 | 104 | ||||||
Interest Payable | 15 | 15 | 1 | ||||||
Other | 192 | 192 | 221 | ||||||
Total Accounts Payable and Accrued Expenses | 1,653 | [1] | 1,653 | [1] | 1,766 | [1] | |||
Customer Deposits and Deferred Revenue | |||||||||
Customer deposits | 442 | 442 | 407 | ||||||
Deferred revenue | 905 | 905 | 440 | ||||||
Total Customer Deposits and Deferred Revenue | 1,347 | [1] | 1,347 | [1] | 847 | [1] | |||
Balance Sheet Detail (Textuals) [Abstract] | |||||||||
Inventory at customer locations included in finished goods | 281 | 281 | 148 | ||||||
Evaluation inventory | 145 | 145 | 117 | ||||||
Proceeds from sale of property | 60 | 39 | 126 | ||||||
Loss on proceeds from sale of property | 28 | (1) | |||||||
Proceeds of certain assets held for sale, net of cash sold | 27 | 27 | |||||||
Contractual termination obligation charges | $ 10 | $ 10 | $ 40 | ||||||
Furniture, fixtures and other equipment [Member]
|
|||||||||
Property, Plant and Equipment [Line Items] | |||||||||
Property, Plant and Equipment, Useful Life, Minimum | 3 | 3 | |||||||
Property, Plant and Equipment, Useful Life, Maximum | 15 | 15 | |||||||
Demonstration and manufacturing equipment [Member]
|
|||||||||
Property, Plant and Equipment [Line Items] | |||||||||
Property, Plant and Equipment, Useful Life, Minimum | 3 | 3 | |||||||
Property, Plant and Equipment, Useful Life, Maximum | 5 | 5 | |||||||
Building improvements [Member]
|
|||||||||
Property, Plant and Equipment [Line Items] | |||||||||
Property, Plant and Equipment, Useful Life, Minimum | 3 | 3 | |||||||
Property, Plant and Equipment, Useful Life, Maximum | 30 | 30 | |||||||
|
Consolidated Condensed Statements of Cash Flows (Unaudited) (USD $)
In Millions |
9 Months Ended | ||||
---|---|---|---|---|---|
Jul. 31, 2011
|
Aug. 01, 2010
|
||||
Cash flows from operating activities: | |||||
Net income | $ 1,471 | $ 470 | |||
Adjustments required to reconcile net income to cash provided by operating activities: | |||||
Depreciation and amortization | 187 | 236 | |||
Net loss (gain) on dispositions and fixed asset retirements | (24) | 14 | |||
Provision for bad debts | 7 | ||||
Restructuring charges and asset impairments | (30) | 248 | |||
Deferred income taxes | (100) | (215) | |||
Net recognized loss on investments | 13 | 15 | |||
Impairment of strategic investments | 13 | ||||
Share-based compensation | 110 | 95 | |||
Changes in operating assets and liabilities, net of amounts acquired: | |||||
Accounts receivable | 17 | (648) | |||
Inventories | (310) | 100 | |||
Prepaid income taxes | 185 | ||||
Other current assets | (36) | (38) | |||
Other assets | 1 | (7) | |||
Accounts payable and accrued expenses | (92) | 374 | |||
Customer deposits and deferred revenue | 498 | 167 | |||
Income taxes payable | 4 | 192 | |||
Employee benefits and other liabilities | 19 | (10) | |||
Cash provided by operating activities | 1,728 | 1,198 | |||
Cash flows from investing activities: | |||||
Capital expenditures | (136) | (134) | |||
Proceeds from sale of facilities and dispositions, net of cash sold | 126 | ||||
Cash paid for acquisition, net of cash acquired | (323) | ||||
Proceeds from sales and maturities of investments | 1,173 | 967 | |||
Purchases of investments | (945) | (1,357) | |||
Cash provided by (used in) investing activities | 218 | (847) | |||
Cash flows from financing activities: | |||||
Debt borrowings (repayments), net | 1,744 | (6) | |||
Payments of debt issuance costs | (14) | ||||
Proceeds from common stock issuances | 64 | 99 | |||
Common stock repurchases | (293) | (200) | |||
Payments of dividends to stockholders | (291) | (255) | |||
Cash provided by (used in) financing activities | 1,210 | (362) | |||
Effect of exchange rate changes on cash and cash equivalents | 4 | (1) | |||
Increase (decrease) in cash and cash equivalents | 3,160 | (12) | |||
Cash and cash equivalents - beginning of period | 1,858 | [1] | |||
Cash and cash equivalents - end of period | 5,018 | [1] | 1,564 | ||
Supplemental cash flow information: | |||||
Cash payments for income taxes | 661 | 255 | |||
Cash refunds for income taxes | 4 | 199 | |||
Cash payments for interest | $ 7 | $ 7 | |||
|
Cash, Cash Equivalents and Investments
|
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 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 July 31, 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 nine months ended July 31, 2011 and
August 1, 2010 were as follows:
At July 31, 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
July 31, 2011 are temporary in nature and therefore it did
not recognize any impairment of its marketable securities for
the three and nine months ended July 31, 2011. Applied
determined that the gross unrealized losses on its marketable
securities at August 1, 2010, were temporary in nature and
therefore it did not recognize any impairment of its marketable
securities for the three and nine months ended August 1,
2010.
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 July 31, 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 1) (USD $)
In Millions |
Jul. 31, 2011
|
---|---|
Contractual maturities of investments | |
Due in one year or less, Cost | $ 704 |
Due in one year or less, Estimated Fair value | 707 |
Due after one through five years, Cost | 618 |
Due after one through five years, Estimated Fair Value | 626 |
Due after five years, Cost | 3 |
Due after five years, Estimated Fair Value | 3 |
No single maturity date, Cost | 432 |
No single maturity date, Estimated Fair Value | 455 |
Investments maturities amortized cost | 1,757 |
Investments maturities fair value | $ 1,791 |
Goodwill, Purchased Technology and Other Intangible Assets (Tables)
|
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 2011
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Goodwill, Purchased Technology and Other Intangible Assets [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Indefinite-lived intangible assets |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortized intangible assets |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Future estimated amortization expense |
|
Restructuring Charges and Asset Impairments (Details Textuals) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 3 Months Ended | 3 Months Ended | 3 Months Ended | 9 Months Ended | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 31, 2011
|
May 01, 2011
|
Jan. 30, 2011
|
May 02, 2010
|
Jan. 31, 2010
|
Oct. 25, 2009
|
May 01, 2011
Employee Severance [Member]
|
Jan. 30, 2011
Employee Severance [Member]
|
Jul. 31, 2011
Employee Severance [Member]
|
Oct. 31, 2010
Employee Severance [Member]
|
Jul. 31, 2011
Facilities [Member]
|
May 01, 2011
Restructuring Reserves Related to Other Restructuring Plans [Member]
|
Aug. 01, 2010
Restructuring Reserves Related to Other Restructuring Plans [Member]
|
Jul. 31, 2011
Restructuring Reserves Related to Other Restructuring Plans [Member]
|
Aug. 01, 2010
Energy and Environmental Solutions [Member]
|
Jul. 31, 2011
Energy and Environmental Solutions [Member]
|
Jul. 21, 2010
Energy and Environmental Solutions [Member]
Minimum [Member]
|
Jul. 21, 2010
Energy and Environmental Solutions [Member]
Maximum [Member]
|
Oct. 25, 2009
Minimum [Member]
|
Oct. 25, 2009
Maximum [Member]
|
|
Restructuring and Asset Impairments (Textuals) [Abstract] | ||||||||||||||||||||
Reduction in global workforce | 400 | 500 | 1,300 | 1,500 | ||||||||||||||||
Restructuring Charges | $ 104 | |||||||||||||||||||
Reduction in Global Workforce in percent | 10.00% | 12.00% | ||||||||||||||||||
Length of time to implement restructuring plan announced on November 11, 2009 | 18 months | |||||||||||||||||||
Revised global workforce reduction | 200 | 1,000 | ||||||||||||||||||
Employee severance charges | 45 | |||||||||||||||||||
Favorable Adjustment as a result of Global Workforce Reduction | 8 | 28 | 19 | 20 | 36 | |||||||||||||||
Impairment charges of intangible assets and purchased technology | 24 | |||||||||||||||||||
Assets impairment charges | 3 | 3 | 9 | |||||||||||||||||
Restructuring Reserve | 18 | 53 | 11 | 99 | 5 | |||||||||||||||
Favorable adjustment as a result of restructuring program | 1 | 4 | ||||||||||||||||||
Severance accrual associated with restructuring reserves | 10 | 1 | ||||||||||||||||||
Severance accrual associated with plan announced on November 11, 2009 | $ 0 |
Employee Benefit Plans (Details) (USD $)
In Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jul. 31, 2011
|
Aug. 01, 2010
|
Jul. 31, 2011
|
Aug. 01, 2010
|
|
Components of net periodic benefit costs of defined and postretirement benefit plans | ||||
Service cost | $ 4 | $ 3 | $ 11 | $ 10 |
Interest cost | 3 | 4 | 10 | 10 |
Expected return on plan assets | (3) | (2) | (8) | (6) |
Amortization of actuarial loss | 1 | 2 | 1 | |
Net periodic benefit cost | $ 5 | $ 5 | $ 15 | $ 15 |
Accounts Receivable, Net (Details) (USD $)
In Millions |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Jul. 31, 2011
|
Aug. 01, 2010
|
Jul. 31, 2011
|
Aug. 01, 2010
|
Oct. 31, 2010
|
|
Sale and Discounting of Accounts Receivable | |||||
Discounted letters of credit | $ 38 | $ 81 | $ 211 | $ 134 | |
Factored accounts receivable and discounted promissory notes | 25 | 56 | 80 | 106 | |
Total | 63 | 137 | 291 | 240 | |
Accounts Receivable, Net (Textual) [Abstract] | |||||
Allowance for doubtful accounts sold | $ 74 | $ 74 | $ 74 |
Industry Segment Operations (Detail 1) (USD $)
In Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jul. 31, 2011
|
Aug. 01, 2010
|
Jul. 31, 2011
|
Aug. 01, 2010
|
|
Reconciliations of total segment operating income to Applied's consolidated operating income (loss) | ||||
Corporate and unallocated costs | $ (120) | $ (139) | $ (371) | $ (414) |
Restructuring and asset impairment benefit (charges), net | 20 | (21) | 93 | |
Gain on sale of facilities, net | 28 | 27 | ||
Income from operations | 687 | 183 | 2,037 | 685 |
Operating Segments [Member]
|
||||
Reconciliations of total segment operating income to Applied's consolidated operating income (loss) | ||||
Income from operations | $ 779 | $ 302 | $ 2,360 | $ 1,192 |
Fair Value Measurements
|
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 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 July 31, 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 July 31, 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 and nine months
ended July 31, 2011 or the three and nine months ended
August 1, 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 nine months ended
July 31, 2011 and August 1, 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 $61 million at
July 31, 2011, of which $39 million of investments
were accounted for under the cost method of accounting and
$22 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 August 1, 2010, equity investments in
privately-held companies totaled $62 million, of which
$39 million of investments were accounted for under the
cost method of accounting and $23 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.
Applied did not recognize any impairment on its equity
investments in privately-held companies for both the three and
nine months ended July 31, 2011. During the first nine
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 $8 million and $13 million for the three
and nine months ended August 1, 2010, respectively.
The following tables present the balances of equity securities
at July 31, 2011 and August 1, 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 and nine 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 July 31, 2011 was $1.9 billion and the
estimated fair value was $2.1 billion. 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.
|
Cash, Cash Equivalents and Investments (Details 3) (Other debt securities [Member], USD $)
In Millions |
Jul. 31, 2011
|
---|---|
Other debt securities [Member]
|
|
Gross Unrealized Losses and the Fair Market Value of Investments | |
In Loss Position for Less Than 12 Months, Fair Value | $ 71 |
In Loss Position for Less Than 12 Months, Gross Unrealized Losses | 1 |
Total, Fair Value | 71 |
Total, Gross Unrealized Losses | $ 1 |
Derivative Instruments and Hedging Activities (Tables)
|
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 31, 2011
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Derivative Instruments and Hedging Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair values of derivative instruments |
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Derivative instruments on consolidated condensed statement of operations |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivatives not designated as hedging instruments in statement of operations |
|
Industry Segment Operations (Detail Textuals) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 9 Months Ended |
---|---|---|
May 01, 2011
|
Jul. 31, 2011
|
|
Industry Segment Operations (Textuals) [Abstract] | ||
Number of reportable segments | 4 | |
Impairment charges | $ 24 | |
Minimum Percentage of net sales for which major customers are accounted | 10.00% | |
Energy and Environmental Solutions [Member]
|
||
Industry Segment Operations (Textuals) [Abstract] | ||
Favorable Adjustment as a result of Global Workforce Reduction | 36 | |
Applied Global Services [Member]
|
||
Industry Segment Operations (Textuals) [Abstract] | ||
Impairment charges | $ 24 |
Commitments and Contingencies (Details) (USD $)
|
1 Months Ended | 3 Months Ended | 9 Months Ended | 11 Months Ended | |||
---|---|---|---|---|---|---|---|
Nov. 30, 2009
|
Jul. 31, 2011
|
Aug. 01, 2010
|
Jul. 31, 2011
|
Aug. 01, 2010
|
Dec. 21, 2009
|
Dec. 14, 2009
|
|
Changes in the warranty reserves | |||||||
Beginning balance | $ 184,000,000 | $ 140,000,000 | $ 155,000,000 | $ 117,000,000 | |||
Provisions for warranty | 43,000,000 | 37,000,000 | 142,000,000 | 103,000,000 | |||
Consumption of reserves | (39,000,000) | (30,000,000) | (109,000,000) | (73,000,000) | |||
Ending balance | 188,000,000 | 147,000,000 | 188,000,000 | 147,000,000 | |||
Commitments and Contingencies (Textuals) | |||||||
Products warranty period, General | 12 months | ||||||
Maximum potential amount of future payments for letters of credit or other guarantee instruments | 52,000,000 | 52,000,000 | |||||
Liability in connection with guarantee arrangements | 0 | 0 | |||||
Parent guarantees to banks | 200,000,000 | 200,000,000 | |||||
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 | ||||||
Number of successive rulings issued on appeal | 5 |
Restructuring Charges and Asset Impairments (Tables)
|
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 31, 2011
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Restructuring and Asset Impairments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in restructuring reserves related to severance |
|
Cash, Cash Equivalents and Investments (Details 2) (USD $)
In Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jul. 31, 2011
|
Aug. 01, 2010
|
Jul. 31, 2011
|
Aug. 01, 2010
|
|
Gains and Losses on Investments | ||||
Gross realized gains | $ 1 | $ 1 | $ 14 | $ 3 |
Gross realized losses | $ 1 | $ 1 | $ 2 | $ 1 |
Balance Sheet Detail (Tables)
|
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 2011
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Balance Sheet Detail [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 |
|
Stockholders' Equity, Comprehensive Income and Share-Based Compensation
|
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 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 (loss), 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.
The following table summarizes Applied’s stock repurchases
during the three and nine months ended July 31, 2011 and
August 1, 2010:
Dividends
The following table summarizes the dividends declared by
Applied’s Board of Directors during fiscal 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 nine months ended July 31, 2011 and
August 1, 2010, Applied recognized equity-based
compensation expense related to stock options, ESPP shares,
restricted stock units and restricted stock. Total share-based
compensation and related tax benefits were as follows:
The effect of share-based compensation on the results of
operations for the three and nine months ended July 31,
2011 and August 1, 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 July 31, 2011, Applied had $243 million in total
unrecognized compensation expense, net of estimated forfeitures,
related to grants of stock options, restricted stock units and
restricted stock, and shares issued under Applied’s ESPP,
which will be recognized over a weighted average period of
2.8 years. At July 31, 2011, there were
155 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. Options typically vest over three to four
years, subject to the grantee’s continued service with
Applied through the scheduled vesting date, and expire no later
than seven years from the grant date. 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 nine months ended
July 31, 2011.
Stock option activity for the nine months ended July 31,
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 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 nine months ended July 31, 2011.
With respect to the performance-based awards granted in fiscal
2010, as of July 31, 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
July 31, 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 nine
months ended July 31, 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 nine months ended July 31, 2011 and
August 1, 2010, respectively. No shares were issued under
the ESPP during the three months ended July 31, 2011 or
August 1, 2010. The number of shares issued under the ESPP
during the nine months ended July 31, 2011 and
August 1, 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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