þ
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
94-1655526
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer
Identification No.)
|
|
|
3050 Bowers Avenue,
|
95052-8039
|
P.O. Box 58039
Santa Clara, California
(Address of principal executive offices)
|
(Zip Code)
|
|
|
Page
|
|
PART I. FINANCIAL INFORMATION
|
|
Item 1:
|
||
|
||
|
||
|
||
|
||
|
||
|
||
Item 2:
|
||
Item 3:
|
||
Item 4:
|
||
|
|
|
|
PART II. OTHER INFORMATION
|
|
Item 1:
|
||
Item 1A:
|
||
Item 2:
|
||
Item 6:
|
||
|
|
Three Months Ended
|
||||||
|
January 28,
2018 |
|
January 29,
2017 |
||||
|
|
|
|
||||
|
(Unaudited)
|
||||||
Net sales
|
$
|
4,204
|
|
|
$
|
3,278
|
|
Cost of products sold
|
2,284
|
|
|
1,833
|
|
||
Gross profit
|
1,920
|
|
|
1,445
|
|
||
Operating expenses:
|
|
|
|
||||
Research, development and engineering
|
488
|
|
|
417
|
|
||
Marketing and selling
|
126
|
|
|
118
|
|
||
General and administrative
|
110
|
|
|
103
|
|
||
Total operating expenses
|
724
|
|
|
638
|
|
||
Income from operations
|
1,196
|
|
|
807
|
|
||
Interest expense
|
59
|
|
|
38
|
|
||
Interest and other income, net
|
25
|
|
|
2
|
|
||
Income before income taxes
|
1,162
|
|
|
771
|
|
||
Provision for income taxes
|
1,027
|
|
|
68
|
|
||
Net income
|
$
|
135
|
|
|
$
|
703
|
|
Earnings per share:
|
|
|
|
||||
Basic and diluted
|
$
|
0.13
|
|
|
$
|
0.65
|
|
Weighted average number of shares:
|
|
|
|
||||
Basic
|
1,056
|
|
|
1,078
|
|
||
Diluted
|
1,071
|
|
|
1,089
|
|
|
Three Months Ended
|
||||||
|
January 28,
2018 |
|
January 29,
2017 |
||||
|
|
|
|
||||
|
(Unaudited)
|
||||||
Net income
|
$
|
135
|
|
|
$
|
703
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
||||
Change in unrealized net gain on investments
|
6
|
|
|
1
|
|
||
Change in unrealized net loss on derivative instruments
|
(19
|
)
|
|
15
|
|
||
Change in defined and postretirement benefit plans
|
(2
|
)
|
|
(7
|
)
|
||
Other comprehensive (loss) income, net of tax
|
(15
|
)
|
|
9
|
|
||
Comprehensive income
|
$
|
120
|
|
|
$
|
712
|
|
|
Common Stock
|
|
Additional
Paid-In
Capital
|
|
Retained
Earnings
|
|
Treasury Stock
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Total
|
||||||||||||||||||
Three Months Ended January 28, 2018
|
Shares
|
|
Amount
|
|
|
|
Shares
|
|
Amount
|
|
|
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
(Unaudited)
|
||||||||||||||||||||||||||||
Balance at October 29, 2017
|
1,060
|
|
|
$
|
11
|
|
|
$
|
7,056
|
|
|
$
|
18,258
|
|
|
917
|
|
|
$
|
(15,912
|
)
|
|
$
|
(64
|
)
|
|
$
|
9,349
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
135
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
135
|
|
||||||
Other comprehensive loss, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(15
|
)
|
|
(15
|
)
|
||||||
Dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
(105
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(105
|
)
|
||||||
Share-based compensation
|
—
|
|
|
—
|
|
|
65
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
65
|
|
||||||
Issuance under stock plans
|
5
|
|
|
—
|
|
|
(141
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(141
|
)
|
||||||
Common stock repurchases
|
(15
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15
|
|
|
(782
|
)
|
|
—
|
|
|
(782
|
)
|
||||||
Balance at January 28, 2018
|
1,050
|
|
|
$
|
11
|
|
|
$
|
6,980
|
|
|
$
|
18,288
|
|
|
932
|
|
|
$
|
(16,694
|
)
|
|
$
|
(79
|
)
|
|
$
|
8,506
|
|
|
Common Stock
|
|
Additional
Paid-In
Capital
|
|
Retained
Earnings
|
|
Treasury Stock
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Total
|
||||||||||||||||||
Three Months Ended January 29, 2017
|
Shares
|
|
Amount
|
|
|
|
Shares
|
|
Amount
|
|
|
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
(Unaudited)
|
||||||||||||||||||||||||||||
Balance at October 30, 2016
|
1,078
|
|
|
$
|
11
|
|
|
$
|
6,809
|
|
|
$
|
15,252
|
|
|
889
|
|
|
$
|
(14,740
|
)
|
|
$
|
(115
|
)
|
|
$
|
7,217
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
703
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
703
|
|
||||||
Other comprehensive income, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9
|
|
|
9
|
|
||||||
Dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
(108
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(108
|
)
|
||||||
Share-based compensation
|
—
|
|
|
—
|
|
|
54
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
54
|
|
||||||
Issuance under stock plans, net of tax benefit of $44 and other
|
6
|
|
|
—
|
|
|
(58
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(58
|
)
|
||||||
Common stock repurchases
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
(130
|
)
|
|
—
|
|
|
(130
|
)
|
||||||
Balance at January 29, 2017
|
1,080
|
|
|
$
|
11
|
|
|
$
|
6,805
|
|
|
$
|
15,847
|
|
|
893
|
|
|
$
|
(14,870
|
)
|
|
$
|
(106
|
)
|
|
$
|
7,687
|
|
|
Three Months Ended
|
||||||
|
January 28,
2018 |
|
January 29,
2017 |
||||
|
|
|
|
||||
|
(Unaudited)
|
||||||
Cash flows from operating activities:
|
|
|
|
||||
Net income
|
$
|
135
|
|
|
$
|
703
|
|
Adjustments required to reconcile net income to cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
119
|
|
|
97
|
|
||
Share-based compensation
|
65
|
|
|
54
|
|
||
Deferred income taxes
|
41
|
|
|
25
|
|
||
Other
|
—
|
|
|
9
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
156
|
|
|
(89
|
)
|
||
Inventories
|
(195
|
)
|
|
(231
|
)
|
||
Other current and non-current assets
|
78
|
|
|
(42
|
)
|
||
Accounts payable and accrued expenses
|
(125
|
)
|
|
(56
|
)
|
||
Customer deposits and deferred revenue
|
353
|
|
|
293
|
|
||
Income taxes payable
|
807
|
|
|
15
|
|
||
Other liabilities
|
32
|
|
|
14
|
|
||
Cash provided by operating activities
|
1,466
|
|
|
792
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Capital expenditures
|
(203
|
)
|
|
(64
|
)
|
||
Cash paid for acquisitions, net of cash acquired
|
(5
|
)
|
|
—
|
|
||
Proceeds from sales and maturities of investments
|
1,944
|
|
|
286
|
|
||
Purchases of investments
|
(384
|
)
|
|
(589
|
)
|
||
Cash provided by (used in) investing activities
|
1,352
|
|
|
(367
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Common stock repurchases
|
(782
|
)
|
|
(130
|
)
|
||
Tax withholding payments for vested equity awards
|
(141
|
)
|
|
(102
|
)
|
||
Payments of dividends to stockholders
|
(106
|
)
|
|
(108
|
)
|
||
Cash used in financing activities
|
(1,029
|
)
|
|
(340
|
)
|
||
Increase in cash and cash equivalents
|
1,789
|
|
|
85
|
|
||
Cash and cash equivalents — beginning of period
|
5,010
|
|
|
3,406
|
|
||
Cash and cash equivalents — end of period
|
$
|
6,799
|
|
|
$
|
3,491
|
|
Supplemental cash flow information:
|
|
|
|
||||
Cash payments for income taxes
|
$
|
78
|
|
|
$
|
35
|
|
Cash refunds from income taxes
|
$
|
40
|
|
|
$
|
2
|
|
Cash payments for interest
|
$
|
34
|
|
|
$
|
34
|
|
Note 2
|
Earnings Per Share
|
|
Three Months Ended
|
||||||
|
January 28,
2018 |
|
January 29,
2017 |
||||
|
|
|
|
||||
|
(In millions, except per share amounts)
|
||||||
Numerator:
|
|
|
|
||||
Net income
|
$
|
135
|
|
|
$
|
703
|
|
Denominator:
|
|
|
|
||||
Weighted average common shares outstanding
|
1,056
|
|
|
1,078
|
|
||
Effect of dilutive stock options, restricted stock units and employee stock purchase plan shares
|
15
|
|
|
11
|
|
||
Denominator for diluted earnings per share
|
1,071
|
|
|
1,089
|
|
||
Basic and diluted earnings per share
|
$
|
0.13
|
|
|
$
|
0.65
|
|
Potentially dilutive securities
|
—
|
|
|
—
|
|
Note 3
|
Cash, Cash Equivalents and Investments
|
January 28, 2018
|
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Estimated
Fair Value
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
(In millions)
|
||||||||||||||
Cash
|
$
|
1,469
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,469
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
3,766
|
|
|
—
|
|
|
—
|
|
|
3,766
|
|
||||
Non-U.S. government securities*
|
40
|
|
|
—
|
|
|
—
|
|
|
40
|
|
||||
Municipal securities
|
836
|
|
|
—
|
|
|
—
|
|
|
836
|
|
||||
Commercial paper, corporate bonds and medium-term notes
|
688
|
|
|
—
|
|
|
—
|
|
|
688
|
|
||||
Total Cash equivalents
|
5,330
|
|
|
—
|
|
|
—
|
|
|
5,330
|
|
||||
Total Cash and Cash equivalents
|
$
|
6,799
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,799
|
|
Short-term and long-term investments:
|
|
|
|
|
|
|
|
||||||||
U.S. Treasury and agency securities
|
$
|
255
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
254
|
|
Non-U.S. government securities*
|
10
|
|
|
—
|
|
|
—
|
|
|
10
|
|
||||
Municipal securities
|
452
|
|
|
—
|
|
|
2
|
|
|
450
|
|
||||
Commercial paper, corporate bonds and medium-term notes
|
563
|
|
|
—
|
|
|
2
|
|
|
561
|
|
||||
Asset-backed and mortgage-backed securities
|
397
|
|
|
—
|
|
|
3
|
|
|
394
|
|
||||
Total fixed income securities
|
1,677
|
|
|
—
|
|
|
8
|
|
|
1,669
|
|
||||
Publicly traded equity securities
|
22
|
|
|
93
|
|
|
1
|
|
|
114
|
|
||||
Equity investments in privately-held companies
|
75
|
|
|
—
|
|
|
—
|
|
|
75
|
|
||||
Total short-term and long-term investments
|
$
|
1,774
|
|
|
$
|
93
|
|
|
$
|
9
|
|
|
$
|
1,858
|
|
Total Cash, Cash equivalents and Investments
|
$
|
8,573
|
|
|
$
|
93
|
|
|
$
|
9
|
|
|
$
|
8,657
|
|
October 29, 2017
|
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Estimated
Fair Value
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
(In millions)
|
||||||||||||||
Cash
|
$
|
1,346
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,346
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
2,658
|
|
|
—
|
|
|
—
|
|
|
2,658
|
|
||||
U.S. Treasury and agency securities
|
15
|
|
|
—
|
|
|
—
|
|
|
15
|
|
||||
Non-U.S. government securities*
|
55
|
|
|
—
|
|
|
—
|
|
|
55
|
|
||||
Municipal securities
|
341
|
|
|
—
|
|
|
—
|
|
|
341
|
|
||||
Commercial paper, corporate bonds and medium-term notes
|
595
|
|
|
—
|
|
|
—
|
|
|
595
|
|
||||
Total Cash equivalents
|
3,664
|
|
|
—
|
|
|
—
|
|
|
3,664
|
|
||||
Total Cash and Cash equivalents
|
$
|
5,010
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,010
|
|
Short-term and long-term investments:
|
|
|
|
|
|
|
|
||||||||
U.S. Treasury and agency securities
|
$
|
667
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
666
|
|
Non-U.S. government securities*
|
161
|
|
|
—
|
|
|
—
|
|
|
161
|
|
||||
Municipal securities
|
1,007
|
|
|
—
|
|
|
—
|
|
|
1,007
|
|
||||
Commercial paper, corporate bonds and medium-term notes
|
1,024
|
|
|
1
|
|
|
1
|
|
|
1,024
|
|
||||
Asset-backed and mortgage-backed securities
|
379
|
|
|
—
|
|
|
1
|
|
|
378
|
|
||||
Total fixed income securities
|
3,238
|
|
|
1
|
|
|
3
|
|
|
3,236
|
|
||||
Publicly traded equity securities
|
22
|
|
|
78
|
|
|
1
|
|
|
99
|
|
||||
Equity investments in privately-held companies
|
74
|
|
|
—
|
|
|
—
|
|
|
74
|
|
||||
Total short-term and long-term investments
|
$
|
3,334
|
|
|
$
|
79
|
|
|
$
|
4
|
|
|
$
|
3,409
|
|
Total Cash, Cash equivalents and Investments
|
$
|
8,344
|
|
|
$
|
79
|
|
|
$
|
4
|
|
|
$
|
8,419
|
|
|
Cost
|
|
Estimated
Fair Value
|
||||
|
|
|
|
||||
|
(In millions)
|
||||||
Due in one year or less
|
$
|
606
|
|
|
$
|
606
|
|
Due after one through five years
|
674
|
|
|
668
|
|
||
No single maturity date**
|
494
|
|
|
584
|
|
||
|
$
|
1,774
|
|
|
$
|
1,858
|
|
Note 4
|
Fair Value Measurements
|
•
|
Level 1 — Quoted prices in active markets for identical assets or liabilities;
|
•
|
Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and
|
•
|
Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
|
|
January 28, 2018
|
|
October 29, 2017
|
||||||||||||||||||||
|
Level 1
|
|
Level 2
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Total
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
(In millions)
|
||||||||||||||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Money market funds
|
$
|
3,766
|
|
|
$
|
—
|
|
|
$
|
3,766
|
|
|
$
|
2,658
|
|
|
$
|
—
|
|
|
$
|
2,658
|
|
U.S. Treasury and agency securities
|
227
|
|
|
27
|
|
|
254
|
|
|
192
|
|
|
489
|
|
|
681
|
|
||||||
Non-U.S. government securities
|
—
|
|
|
50
|
|
|
50
|
|
|
—
|
|
|
216
|
|
|
216
|
|
||||||
Municipal securities
|
—
|
|
|
1,286
|
|
|
1,286
|
|
|
—
|
|
|
1,348
|
|
|
1,348
|
|
||||||
Commercial paper, corporate bonds and medium-term notes
|
—
|
|
|
1,249
|
|
|
1,249
|
|
|
—
|
|
|
1,619
|
|
|
1,619
|
|
||||||
Asset-backed and mortgage-backed securities
|
—
|
|
|
394
|
|
|
394
|
|
|
—
|
|
|
378
|
|
|
378
|
|
||||||
Publicly traded equity securities
|
114
|
|
|
—
|
|
|
114
|
|
|
99
|
|
|
—
|
|
|
99
|
|
||||||
Total
|
$
|
4,107
|
|
|
$
|
3,006
|
|
|
$
|
7,113
|
|
|
$
|
2,949
|
|
|
$
|
4,050
|
|
|
$
|
6,999
|
|
Note 5
|
Derivative Instruments and Hedging Activities
|
|
|
|
Three Months Ended
|
||||||||||||||||||||||
|
|
|
January 28, 2018
|
|
January 29, 2017
|
||||||||||||||||||||
Effective Portion
|
|
Ineffective Portion and Amount
Excluded from Effectiveness Testing |
|
Effective Portion
|
|
Ineffective Portion and Amount
Excluded from Effectiveness Testing |
|||||||||||||||||||
|
Location of Gain or
(Loss) |
|
Gain or
(Loss) |
|
Gain or (Loss)
Reclassified from AOCI into Income |
|
Gain or (Loss)
Recognized in Income |
|
Gain or
(Loss) Recognized in AOCI |
|
Gain or (Loss)
Reclassified from AOCI into Income |
|
Gain or (Loss)
Recognized in Income |
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
(In millions)
|
||||||||||||||||||||||
Derivatives in Cash Flow Hedging Relationships
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Foreign exchange contracts
|
AOCI
|
|
$
|
(18
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
16
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Foreign exchange contracts
|
Cost of products sold
|
|
—
|
|
|
8
|
|
|
2
|
|
|
—
|
|
|
(4
|
)
|
|
(2
|
)
|
||||||
Foreign exchange contracts
|
General and administrative
|
|
—
|
|
|
(1
|
)
|
|
(2
|
)
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
||||||
Interest rate contracts
|
Interest expense
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
||||||
Total
|
|
|
$
|
(18
|
)
|
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
16
|
|
|
$
|
(8
|
)
|
|
$
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain or (Loss)
Recognized in Income
|
||||||
|
|
Three Months Ended
|
|||||||
Location of Gain or
(Loss) Recognized in Income |
|
January 28, 2018
|
|
January 29,
2017 |
|||||
|
|
|
|
|
|
||||
|
|
|
(In millions)
|
||||||
Derivatives Not Designated as Hedging Instruments
|
|
|
|
|
|
||||
Foreign exchange contracts
|
General and administrative
|
|
$
|
(8
|
)
|
|
$
|
31
|
|
Total
|
|
|
$
|
(8
|
)
|
|
$
|
31
|
|
Note 6
|
Accounts Receivable, Net
|
Note 7
|
Balance Sheet Detail
|
|
January 28,
2018 |
|
October 29,
2017 |
||||
|
|
|
|
||||
|
(In millions)
|
||||||
Inventories
|
|
|
|
||||
Customer service spares
|
$
|
626
|
|
|
$
|
595
|
|
Raw materials
|
712
|
|
|
603
|
|
||
Work-in-process
|
524
|
|
|
468
|
|
||
Finished goods
|
1,263
|
|
|
1,264
|
|
||
|
$
|
3,125
|
|
|
$
|
2,930
|
|
|
January 28,
2018 |
|
October 29,
2017 |
||||
|
|
|
|
||||
|
(In millions)
|
||||||
Other Current Assets
|
|
|
|
||||
Prepaid income taxes and income taxes receivable
|
$
|
22
|
|
|
$
|
57
|
|
Prepaid expenses and other
|
246
|
|
|
317
|
|
||
|
$
|
268
|
|
|
$
|
374
|
|
|
Useful Life
|
|
January 28,
2018 |
|
October 29,
2017 |
||||
|
|
|
|
|
|
||||
|
(In years)
|
|
(In millions)
|
||||||
Property, Plant and Equipment, Net
|
|
|
|
||||||
Land and improvements
|
|
|
$
|
221
|
|
|
$
|
160
|
|
Buildings and improvements
|
3-30
|
|
1,371
|
|
|
1,315
|
|
||
Demonstration and manufacturing equipment
|
3-5
|
|
1,170
|
|
|
1,129
|
|
||
Furniture, fixtures and other equipment
|
3-15
|
|
576
|
|
|
572
|
|
||
Construction in progress
|
|
|
162
|
|
|
135
|
|
||
Gross property, plant and equipment
|
|
|
3,500
|
|
|
3,311
|
|
||
Accumulated depreciation
|
|
|
(2,305
|
)
|
|
(2,245
|
)
|
||
|
|
|
$
|
1,195
|
|
|
$
|
1,066
|
|
|
January 28,
2018 |
|
October 29,
2017 |
||||
|
|
|
|
||||
|
(In millions)
|
||||||
Accounts Payable and Accrued Expenses
|
|
|
|
||||
Accounts payable
|
$
|
1,041
|
|
|
$
|
945
|
|
Compensation and employee benefits
|
407
|
|
|
666
|
|
||
Warranty
|
204
|
|
|
199
|
|
||
Dividends payable
|
105
|
|
|
106
|
|
||
Income taxes payable
|
153
|
|
|
112
|
|
||
Other accrued taxes
|
64
|
|
|
70
|
|
||
Interest payable
|
59
|
|
|
38
|
|
||
Other
|
348
|
|
|
314
|
|
||
|
$
|
2,381
|
|
|
$
|
2,450
|
|
|
January 28,
2018 |
|
October 29,
2017 |
||||
|
|
|
|
||||
|
(In millions)
|
||||||
Customer Deposits and Deferred Revenue
|
|
|
|
||||
Customer deposits
|
$
|
626
|
|
|
$
|
381
|
|
Deferred revenue
|
1,392
|
|
|
1,284
|
|
||
|
$
|
2,018
|
|
|
$
|
1,665
|
|
|
January 28,
2018 |
|
October 29,
2017 |
||||
|
|
|
|
||||
|
(In millions)
|
||||||
Other Liabilities
|
|
|
|
||||
Defined and postretirement benefit plans
|
$
|
167
|
|
|
$
|
160
|
|
Other
|
128
|
|
|
99
|
|
||
|
$
|
295
|
|
|
$
|
259
|
|
Note 8
|
Goodwill, Purchased Technology and Other Intangible Assets
|
|
January 28,
2018 |
|
October 29,
2017 |
||||
|
|
|
|
||||
|
(In millions)
|
||||||
Semiconductor Systems
|
$
|
2,151
|
|
|
$
|
2,151
|
|
Applied Global Services
|
1,018
|
|
|
1,018
|
|
||
Display and Adjacent Markets
|
199
|
|
|
199
|
|
||
Carrying amount
|
$
|
3,368
|
|
|
$
|
3,368
|
|
|
January 28,
2018 |
|
October 29,
2017 |
||||
|
|
|
|
||||
|
(In millions)
|
||||||
Purchased technology, net
|
$
|
244
|
|
|
$
|
288
|
|
Intangible assets - finite-lived, net
|
118
|
|
|
124
|
|
||
Total
|
$
|
362
|
|
|
$
|
412
|
|
|
January 28, 2018
|
|
October 29, 2017
|
||||||||||||||||||||
|
Purchased
Technology
|
|
Other
Intangible
Assets
|
|
Total
|
|
Purchased
Technology
|
|
Other
Intangible
Assets
|
|
Total
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
(In millions)
|
||||||||||||||||||||||
Gross carrying amount:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Semiconductor Systems
|
$
|
1,449
|
|
|
$
|
252
|
|
|
$
|
1,701
|
|
|
$
|
1,449
|
|
|
$
|
252
|
|
|
$
|
1,701
|
|
Applied Global Services
|
33
|
|
|
44
|
|
|
77
|
|
|
33
|
|
|
44
|
|
|
77
|
|
||||||
Display and Adjacent Markets
|
163
|
|
|
38
|
|
|
201
|
|
|
163
|
|
|
38
|
|
|
201
|
|
||||||
Corporate and Other
|
—
|
|
|
9
|
|
|
9
|
|
|
—
|
|
|
9
|
|
|
9
|
|
||||||
Gross carrying amount
|
$
|
1,645
|
|
|
$
|
343
|
|
|
$
|
1,988
|
|
|
$
|
1,645
|
|
|
$
|
343
|
|
|
$
|
1,988
|
|
Accumulated amortization:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Semiconductor Systems
|
$
|
(1,251
|
)
|
|
$
|
(136
|
)
|
|
$
|
(1,387
|
)
|
|
$
|
(1,210
|
)
|
|
$
|
(131
|
)
|
|
$
|
(1,341
|
)
|
Applied Global Services
|
(28
|
)
|
|
(44
|
)
|
|
(72
|
)
|
|
(28
|
)
|
|
(44
|
)
|
|
(72
|
)
|
||||||
Display and Adjacent Markets
|
(122
|
)
|
|
(36
|
)
|
|
(158
|
)
|
|
(119
|
)
|
|
(35
|
)
|
|
(154
|
)
|
||||||
Corporate and Other
|
—
|
|
|
(9
|
)
|
|
(9
|
)
|
|
—
|
|
|
(9
|
)
|
|
(9
|
)
|
||||||
Accumulated amortization
|
$
|
(1,401
|
)
|
|
$
|
(225
|
)
|
|
$
|
(1,626
|
)
|
|
$
|
(1,357
|
)
|
|
$
|
(219
|
)
|
|
$
|
(1,576
|
)
|
Carrying amount
|
$
|
244
|
|
|
$
|
118
|
|
|
$
|
362
|
|
|
$
|
288
|
|
|
$
|
124
|
|
|
$
|
412
|
|
|
Three Months Ended
|
||||||
|
January 28,
2018 |
|
January 29,
2017 |
||||
|
|
|
|
||||
|
(In millions)
|
||||||
Semiconductor Systems
|
$
|
46
|
|
|
$
|
47
|
|
Display and Adjacent Markets
|
4
|
|
|
1
|
|
||
Total
|
$
|
50
|
|
|
$
|
48
|
|
|
Three Months Ended
|
||||||
|
January 28,
2018 |
|
January 29,
2017 |
||||
|
|
|
|
||||
|
(In millions)
|
||||||
Cost of products sold
|
$
|
45
|
|
|
$
|
42
|
|
Research, development and engineering
|
—
|
|
|
1
|
|
||
Marketing and selling
|
5
|
|
|
5
|
|
||
Total
|
$
|
50
|
|
|
$
|
48
|
|
|
Amortization
Expense
|
||
|
(In millions)
|
||
2018 (remaining 9 months)
|
$
|
148
|
|
2019
|
57
|
|
|
2020
|
52
|
|
|
2021
|
40
|
|
|
2022
|
65
|
|
|
Total
|
$
|
362
|
|
Note 9
|
Borrowing Facilities and Debt
|
|
Principal Amount
|
|
|
|
|
||||||
|
January 28,
2018 |
|
October 29,
2017 |
|
Effective
Interest Rate
|
|
Interest
Pay Dates
|
||||
|
|
|
|
|
|
|
|
||||
|
(In millions)
|
|
|
|
|
||||||
Long-term debt:
|
|
|
|
|
|
|
|
||||
2.625% Senior Notes Due 2020
|
$
|
600
|
|
|
$
|
600
|
|
|
2.640%
|
|
April 1, October 1
|
4.300% Senior Notes Due 2021
|
750
|
|
|
750
|
|
|
4.326%
|
|
June 15, December 15
|
||
3.900% Senior Notes Due 2025
|
700
|
|
|
700
|
|
|
3.944%
|
|
April 1, October 1
|
||
3.300% Senior Notes Due 2027
|
1,200
|
|
|
1,200
|
|
|
3.342%
|
|
April 1, October 1
|
||
5.100% Senior Notes Due 2035
|
500
|
|
|
500
|
|
|
5.127%
|
|
April 1, October 1
|
||
5.850% Senior Notes Due 2041
|
600
|
|
|
600
|
|
|
5.879%
|
|
June 15, December 15
|
||
4.350% Senior Notes Due 2047
|
1,000
|
|
|
1,000
|
|
|
4.361%
|
|
April 1, October 1
|
||
|
5,350
|
|
|
5,350
|
|
|
|
|
|
||
Total unamortized discount
|
(12
|
)
|
|
(12
|
)
|
|
|
|
|
||
Total unamortized debt issuance costs
|
(33
|
)
|
|
(34
|
)
|
|
|
|
|
||
Total long-term debt
|
5,305
|
|
|
5,304
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
||||
Total debt
|
$
|
5,305
|
|
|
$
|
5,304
|
|
|
|
|
|
Note 10
|
Stockholders’ Equity, Comprehensive Income and Share-Based Compensation
|
|
Unrealized Gain on Investments, Net
|
|
Unrealized Gain (Loss) on Derivative Instruments Qualifying as Cash Flow Hedges
|
|
Defined and Postretirement Benefit Plans
|
|
Cumulative Translation Adjustments
|
|
Total
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Balance at October 29, 2017
|
$
|
53
|
|
|
$
|
(11
|
)
|
|
$
|
(120
|
)
|
|
$
|
14
|
|
|
$
|
(64
|
)
|
Other comprehensive income (loss) before reclassifications
|
6
|
|
|
(14
|
)
|
|
—
|
|
|
—
|
|
|
(8
|
)
|
|||||
Amounts reclassified out of AOCI
|
—
|
|
|
(5
|
)
|
|
(2
|
)
|
|
—
|
|
|
(7
|
)
|
|||||
Other comprehensive income (loss), net of tax
|
6
|
|
|
(19
|
)
|
|
(2
|
)
|
|
—
|
|
|
(15
|
)
|
|||||
Balance at January 28, 2018
|
$
|
59
|
|
|
$
|
(30
|
)
|
|
$
|
(122
|
)
|
|
$
|
14
|
|
|
$
|
(79
|
)
|
|
Unrealized Gain on Investments, Net
|
|
Unrealized Gain (Loss) on Derivative Instruments Qualifying as Cash Flow Hedges
|
|
Defined and Postretirement Benefit Plans
|
|
Cumulative Translation Adjustments
|
|
Total
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Balance at October 30, 2016
|
$
|
30
|
|
|
$
|
(18
|
)
|
|
$
|
(141
|
)
|
|
$
|
14
|
|
|
$
|
(115
|
)
|
Other comprehensive income (loss) before reclassifications
|
—
|
|
|
10
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|||||
Amounts reclassified out of AOCI
|
1
|
|
|
5
|
|
|
(7
|
)
|
|
—
|
|
|
(1
|
)
|
|||||
Other comprehensive income (loss), net of tax
|
1
|
|
|
15
|
|
|
(7
|
)
|
|
—
|
|
|
9
|
|
|||||
Balance at January 29, 2017
|
$
|
31
|
|
|
$
|
(3
|
)
|
|
$
|
(148
|
)
|
|
$
|
14
|
|
|
$
|
(106
|
)
|
|
Three Months Ended
|
||||||
|
January 28,
2018 |
|
January 29,
2017 |
||||
|
|
|
|
||||
|
(in millions, except per share amount)
|
||||||
Shares of common stock repurchased
|
15
|
|
|
4
|
|
||
Cost of stock repurchased
|
$
|
782
|
|
|
$
|
130
|
|
Average price paid per share
|
$
|
53.41
|
|
|
$
|
31.80
|
|
|
Three Months Ended
|
||||||
|
January 28,
2018 |
|
January 29,
2017 |
||||
|
|
|
|
||||
|
(In millions)
|
||||||
Cost of products sold
|
$
|
22
|
|
|
$
|
17
|
|
Research, development and engineering
|
24
|
|
|
20
|
|
||
Marketing and selling
|
8
|
|
|
7
|
|
||
General and administrative
|
11
|
|
|
10
|
|
||
Total share-based compensation
|
$
|
65
|
|
|
$
|
54
|
|
|
Shares
|
|
Weighted
Average
Grant Date
Fair Value
|
|||
|
|
|
|
|||
|
(In millions, except per share amounts)
|
|||||
Outstanding at October 29, 2017
|
22
|
|
|
$
|
23.96
|
|
Granted
|
5
|
|
|
$
|
51.84
|
|
Vested
|
(8
|
)
|
|
$
|
21.72
|
|
Canceled
|
—
|
|
|
$
|
26.81
|
|
Outstanding at January 28, 2018
|
19
|
|
|
$
|
31.65
|
|
|
|
|
|
Note 12
|
Warranty, Guarantees and Contingencies
|
|
Three Months Ended
|
||||||
|
January 28,
2018 |
|
January 29,
2017 |
||||
|
|
|
|
||||
|
(In millions)
|
||||||
Beginning balance
|
$
|
199
|
|
|
$
|
153
|
|
Warranties issued
|
46
|
|
|
40
|
|
||
Change in reserves related to preexisting warranty
|
2
|
|
|
3
|
|
||
Consumption of reserves
|
(43
|
)
|
|
(26
|
)
|
||
Ending balance
|
$
|
204
|
|
|
$
|
170
|
|
Note 13
|
Industry Segment Operations
|
|
Three Months Ended
|
||||||
|
Net Sales
|
|
Operating
Income (Loss)
|
||||
|
|
|
|
||||
|
(In millions)
|
||||||
January 28, 2018:
|
|
|
|
||||
Semiconductor Systems
|
$
|
2,847
|
|
|
$
|
995
|
|
Applied Global Services
|
880
|
|
|
254
|
|
||
Display and Adjacent Markets
|
455
|
|
|
101
|
|
||
Corporate and Other
|
22
|
|
|
(154
|
)
|
||
Total
|
$
|
4,204
|
|
|
$
|
1,196
|
|
January 29, 2017:
|
|
|
|
||||
Semiconductor Systems
|
$
|
2,150
|
|
|
$
|
690
|
|
Applied Global Services
|
676
|
|
|
178
|
|
||
Display and Adjacent Markets
|
422
|
|
|
115
|
|
||
Corporate and Other
|
30
|
|
|
(176
|
)
|
||
Total
|
$
|
3,278
|
|
|
$
|
807
|
|
|
Three Months Ended
|
||||||
|
January 28,
2018 |
|
January 29,
2017 |
||||
|
|
|
|
||||
|
(In millions)
|
||||||
Unallocated net sales
|
$
|
22
|
|
|
$
|
30
|
|
Unallocated cost of products sold and expenses
|
(111
|
)
|
|
(152
|
)
|
||
Share-based compensation
|
(65
|
)
|
|
(54
|
)
|
||
Total
|
$
|
(154
|
)
|
|
$
|
(176
|
)
|
|
Percentage of Net Sales
|
|
Samsung Electronics Co., Ltd.
|
20
|
%
|
Taiwan Semiconductor Manufacturing Company Limited
|
13
|
%
|
|
Three Months Ended
|
||||||||||
|
January 28,
2018 |
|
January 29,
2017 |
|
Change
|
||||||
|
|
|
|
|
|
||||||
|
(In millions, except per share amounts and percentages)
|
||||||||||
Net sales
|
$
|
4,204
|
|
|
$
|
3,278
|
|
|
$
|
926
|
|
Gross margin
|
45.7
|
%
|
|
44.1
|
%
|
|
1.6 points
|
||||
Operating income
|
$
|
1,196
|
|
|
$
|
807
|
|
|
$
|
389
|
|
Operating margin
|
28.4
|
%
|
|
24.6
|
%
|
|
3.8 points
|
||||
Net income
|
$
|
135
|
|
|
$
|
703
|
|
|
$
|
(568
|
)
|
Earnings per diluted share
|
$
|
0.13
|
|
|
$
|
0.65
|
|
|
$
|
(0.52
|
)
|
|
|
|
|
|
|
|
Three Months Ended
|
|||||||||||||||
|
January 28,
2018 |
|
January 29,
2017 |
|
Change
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||
|
(In millions, except percentages)
|
|||||||||||||||
Semiconductor Systems
|
$
|
2,847
|
|
|
68
|
%
|
|
$
|
2,150
|
|
|
65
|
%
|
|
32
|
%
|
Applied Global Services
|
880
|
|
|
21
|
%
|
|
676
|
|
|
21
|
%
|
|
30
|
%
|
||
Display and Adjacent Markets
|
455
|
|
|
11
|
%
|
|
422
|
|
|
13
|
%
|
|
8
|
%
|
||
Corporate and Other
|
22
|
|
|
—
|
%
|
|
30
|
|
|
1
|
%
|
|
(27
|
)%
|
||
Total
|
$
|
4,204
|
|
|
100
|
%
|
|
$
|
3,278
|
|
|
100
|
%
|
|
28
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
||||||||||||||
|
January 28,
2018 |
|
January 29,
2017 |
|
Change
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||
|
(In millions, except percentages)
|
||||||||||||||
Korea
|
$
|
1,230
|
|
|
29
|
%
|
|
$
|
670
|
|
|
20
|
%
|
|
84%
|
Taiwan
|
756
|
|
|
18
|
%
|
|
1,103
|
|
|
34
|
%
|
|
(31)%
|
||
China
|
917
|
|
|
22
|
%
|
|
647
|
|
|
20
|
%
|
|
42%
|
||
Japan
|
481
|
|
|
12
|
%
|
|
235
|
|
|
7
|
%
|
|
105%
|
||
Southeast Asia
|
185
|
|
|
4
|
%
|
|
97
|
|
|
3
|
%
|
|
91%
|
||
Asia Pacific
|
3,569
|
|
|
85
|
%
|
|
2,752
|
|
|
84
|
%
|
|
30%
|
||
United States
|
371
|
|
|
9
|
%
|
|
317
|
|
|
10
|
%
|
|
17%
|
||
Europe
|
264
|
|
|
6
|
%
|
|
209
|
|
|
6
|
%
|
|
26%
|
||
Total
|
$
|
4,204
|
|
|
100
|
%
|
|
$
|
3,278
|
|
|
100
|
%
|
|
28%
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
||||||
|
January 28,
2018 |
|
January 29,
2017 |
|
Change
|
||
|
|
|
|
|
|
||
|
|
||||||
Gross margin
|
45.7
|
%
|
|
44.1
|
%
|
|
1.6 points
|
|
Three Months Ended
|
||||||||||
|
January 28,
2018 |
|
January 29,
2017 |
|
Change
|
||||||
|
|
|
|
|
|
||||||
|
(In millions)
|
||||||||||
Research, development and engineering
|
$
|
488
|
|
|
$
|
417
|
|
|
$
|
71
|
|
|
Three Months Ended
|
||||||||||
|
January 28,
2018 |
|
January 29,
2017 |
|
Change
|
||||||
|
|
|
|
|
|
||||||
|
(In millions)
|
||||||||||
Marketing and selling
|
$
|
126
|
|
|
$
|
118
|
|
|
$
|
8
|
|
|
Three Months Ended
|
||||||||||
|
January 28,
2018 |
|
January 29,
2017 |
|
Change
|
||||||
|
|
|
|
|
|
||||||
|
(In millions)
|
||||||||||
General and administrative
|
$
|
110
|
|
|
$
|
103
|
|
|
$
|
7
|
|
|
Three Months Ended
|
||||||||||
January 28,
2018 |
|
January 29,
2017 |
|
Change
|
|||||||
|
|
|
|
|
|
||||||
|
(In millions)
|
||||||||||
Interest expense
|
$
|
59
|
|
|
$
|
38
|
|
|
$
|
21
|
|
Interest and other income, net
|
$
|
25
|
|
|
$
|
2
|
|
|
$
|
23
|
|
|
Three Months Ended
|
||||||||||
January 28,
2018 |
|
January 29,
2017 |
|
Change
|
|||||||
|
|
|
|
|
|
||||||
|
(In millions, except percentages)
|
||||||||||
Provision for income taxes
|
$
|
1,027
|
|
|
$
|
68
|
|
|
$
|
959
|
|
Effective tax rate
|
88.4
|
%
|
|
8.8
|
%
|
|
79.6 points
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
||||
|
January 28,
2018 |
|
January 29,
2017 |
||
Foundry
|
25
|
%
|
|
50
|
%
|
Dynamic random-access memory (DRAM)
|
25
|
%
|
|
16
|
%
|
Flash memory
|
37
|
%
|
|
25
|
%
|
Logic and other
|
13
|
%
|
|
9
|
%
|
|
100
|
%
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
||||||||||||
January 28,
2018 |
|
January 29,
2017 |
|
Change
|
|||||||||
|
|
|
|
|
|
|
|
||||||
|
(In millions, except percentages and ratios)
|
||||||||||||
Net sales
|
$
|
455
|
|
|
$
|
422
|
|
|
$
|
33
|
|
|
8%
|
Operating income
|
$
|
101
|
|
|
$
|
115
|
|
|
$
|
(14
|
)
|
|
(12)%
|
Operating margin
|
22.2
|
%
|
|
27.3
|
%
|
|
|
|
(5.1) points
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
||||||||||
|
January 28,
2018 |
|
January 29,
2017 |
|
Change
|
||||||
|
|
|
|
|
|
|
|
||||
|
(In millions, except percentages)
|
||||||||||
China
|
$
|
268
|
|
59%
|
|
$
|
286
|
|
68%
|
|
(6)%
|
|
|
|
|
|
|
|
|
|
|
|
January 28,
2018 |
|
October 29,
2017 |
||||
|
|
|
|
||||
|
(In millions)
|
||||||
Cash and cash equivalents
|
$
|
6,799
|
|
|
$
|
5,010
|
|
Short-term investments
|
655
|
|
|
2,266
|
|
||
Long-term investments
|
1,203
|
|
|
1,143
|
|
||
Total cash, cash-equivalents and investments
|
$
|
8,657
|
|
|
$
|
8,419
|
|
|
Three Months Ended
|
||||||
|
January 28, 2018
|
|
January 29, 2017
|
||||
|
|
|
|
||||
|
(In millions)
|
||||||
Cash provided by operating activities
|
$
|
1,466
|
|
|
$
|
792
|
|
Cash provided by (used in) investing activities
|
$
|
1,352
|
|
|
$
|
(367
|
)
|
Cash used in financing activities
|
$
|
(1,029
|
)
|
|
$
|
(340
|
)
|
|
|
|
|
|
|
|
|
Three Months Ended
|
||||||
(In millions, except percentages)
|
|
January 28,
2018 |
|
January 29,
2017 |
||||
Non-GAAP Adjusted Gross Profit
|
|
|
|
|
||||
Reported gross profit - GAAP basis
|
|
$
|
1,920
|
|
|
$
|
1,445
|
|
Certain items associated with acquisitions
1
|
|
45
|
|
|
42
|
|
||
Non-GAAP adjusted gross profit
|
|
$
|
1,965
|
|
|
$
|
1,487
|
|
Non-GAAP adjusted gross margin
|
|
46.7
|
%
|
|
45.4
|
%
|
||
Non-GAAP Adjusted Operating Income
|
|
|
|
|
||||
Reported operating income - GAAP basis
|
|
$
|
1,196
|
|
|
$
|
807
|
|
Certain items associated with acquisitions
1
|
|
49
|
|
|
47
|
|
||
Acquisition integration costs
|
|
1
|
|
|
1
|
|
||
Other gains, losses or charges, net
|
|
—
|
|
|
(3
|
)
|
||
Non-GAAP adjusted operating income
|
|
$
|
1,246
|
|
|
$
|
852
|
|
Non-GAAP adjusted operating margin
|
|
29.6
|
%
|
|
26.0
|
%
|
||
Non-GAAP Adjusted Net Income
|
|
|
|
|
||||
Reported net income - GAAP basis
|
|
$
|
135
|
|
|
$
|
703
|
|
Certain items associated with acquisitions
1
|
|
49
|
|
|
47
|
|
||
Acquisition integration costs
|
|
1
|
|
|
1
|
|
||
Impairment (gain on sale) of strategic investments, net
|
|
(1
|
)
|
|
5
|
|
||
Other gains, losses or charges, net
|
|
—
|
|
|
(3
|
)
|
||
Income tax effect of share-based compensation
2
|
|
(39
|
)
|
|
—
|
|
||
Income tax effect of changes in applicable U.S. tax laws
3
|
|
1,006
|
|
|
—
|
|
||
Resolution of prior years’ income tax filings and other tax items
|
|
(13
|
)
|
|
(16
|
)
|
||
Income tax effect of non-GAAP adjustments
4
|
|
(3
|
)
|
|
(5
|
)
|
||
Non-GAAP adjusted net income
|
|
$
|
1,135
|
|
|
$
|
732
|
|
1
|
These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets.
|
2
|
In the first quarter of fiscal 2018, Applied adopted the accounting standard related to share-based compensation (ASU 2016-09), which resulted in a $51 million tax benefit on a GAAP basis; this benefit is being recognized ratably over the fiscal year on a non-GAAP basis.
|
3
|
Charges to income tax provision related to a one-time transition tax and a decrease in U.S. deferred tax assets as a result of the recent U.S. tax legislation.
|
4
|
Adjustment to provision for income taxes related to non-GAAP adjustments reflected in income before income taxes.
|
|
|
Three Months Ended
|
||||||
(In millions, except per share amounts)
|
|
January 28,
2018 |
|
January 29,
2017 |
||||
|
|
|
||||||
Non-GAAP Adjusted Earnings Per Diluted Share
|
|
|
|
|
||||
Reported earnings per diluted share - GAAP basis
|
|
$
|
0.13
|
|
|
$
|
0.65
|
|
Certain items associated with acquisitions
|
|
0.04
|
|
|
0.04
|
|
||
Income tax effect of share-based compensation
|
|
(0.04
|
)
|
|
—
|
|
||
Income tax effect of changes in applicable U.S. tax laws
|
|
0.94
|
|
|
—
|
|
||
Resolution of prior years’ income tax filings and other tax items
|
|
(0.01
|
)
|
|
(0.02
|
)
|
||
Non-GAAP adjusted earnings per diluted share
|
|
$
|
1.06
|
|
|
$
|
0.67
|
|
Weighted average number of diluted shares
|
|
1,071
|
|
|
1,089
|
|
|
|
Three Months Ended
|
||||||
(In millions, except percentages)
|
|
January 28,
2018 |
|
January 29,
2017 |
||||
|
|
|
|
|
||||
Semiconductor Systems Non-GAAP Adjusted Operating Income
|
|
|
|
|
||||
Reported operating income - GAAP basis
|
|
$
|
995
|
|
|
$
|
690
|
|
Certain items associated with acquisitions
1
|
|
46
|
|
|
46
|
|
||
Non-GAAP adjusted operating income
|
|
$
|
1,041
|
|
|
$
|
736
|
|
Non-GAAP adjusted operating margin
|
|
36.6
|
%
|
|
34.2
|
%
|
||
AGS Non-GAAP Adjusted Operating Income
|
|
|
|
|
||||
Reported operating income - GAAP basis
|
|
$
|
254
|
|
|
$
|
178
|
|
Acquisition integration costs
|
|
1
|
|
|
1
|
|
||
Non-GAAP adjusted operating income
|
|
$
|
255
|
|
|
$
|
179
|
|
Non-GAAP adjusted operating margin
|
|
29.0
|
%
|
|
26.5
|
%
|
||
Display and Adjacent Markets Non-GAAP Adjusted Operating Income
|
|
|
|
|
||||
Reported operating income - GAAP basis
|
|
$
|
101
|
|
|
$
|
115
|
|
Certain items associated with acquisitions
1
|
|
3
|
|
|
—
|
|
||
Non-GAAP adjusted operating income
|
|
$
|
104
|
|
|
$
|
115
|
|
Non-GAAP adjusted operating margin
|
|
22.9
|
%
|
|
27.3
|
%
|
1
|
These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets.
|
|
|
Item 3:
|
Quantitative and Qualitative Disclosures About Market Risk
|
Item 1A:
|
Risk Factors
|
•
|
the nature, timing and degree of visibility of changes in end demand for electronic products, including those related to fluctuations in consumer buying patterns tied to seasonality or the introduction of new products, and the effects of these changes on customers’ businesses and on demand for Applied’s products;
|
•
|
increasing capital requirements for building and operating new fabrication plants and customers’ ability to raise the necessary capital;
|
•
|
regulatory or tax policies impacting the timing of customers’ investment in new or expanded fabrication plants;
|
•
|
differences in growth rates among the semiconductor, display and other industries in which Applied operates;
|
•
|
the increasing importance of establishing, improving and maintaining strong relationships with customers;
|
•
|
the increasing cost and complexity for customers to move from product design to volume manufacturing, which may slow the adoption rate of new manufacturing technology;
|
•
|
the need for customers to continually reduce the total cost of manufacturing system ownership;
|
•
|
the heightened importance to customers of system reliability and productivity and the effect on demand for fabrication systems as a result of their increasing productivity, device yield and reliability;
|
•
|
manufacturers’ ability to reconfigure and re-use fabrication systems which can reduce demand for new equipment;
|
•
|
the increasing importance of, and difficulties in, developing products with sufficient differentiation to influence customers’ purchasing decisions;
|
•
|
requirements for shorter cycle times for the development, manufacture and installation of manufacturing equipment;
|
•
|
price and performance trends for semiconductor devices and displays, and the corresponding effect on demand for such products;
|
•
|
the increasing importance of the availability of spare parts to maximize the time that customers’ systems are available for production;
|
•
|
the increasing role for and complexity of software in Applied products; and
|
•
|
the increasing focus on reducing energy usage and improving the environmental impact and sustainability associated with manufacturing operations.
|
•
|
the increasing frequency and complexity of technology transitions and inflections, and Applied’s ability to timely and effectively anticipate and adapt to these changes;
|
•
|
the increasing cost of research and development due to many factors, including shrinking geometries, the use of new materials, new and more complex device structures, more applications and process steps, increasing chip design costs, and the increasing cost and complexity of integrated manufacturing processes;
|
•
|
the need to reduce product development time, despite the increasing difficulty of technical challenges;
|
•
|
the growing number of types and varieties of semiconductors and number of applications across multiple substrate sizes;
|
•
|
the increasing cost and complexity for semiconductor manufacturers to move more technically advanced capability and smaller geometries to volume manufacturing, and the resulting impact on the rates of technology transition and investment in capital equipment;
|
•
|
challenges in generating organic growth given semiconductor manufacturers’ levels of capital expenditures and the allocation of capital investment to market segments that Applied does not serve, such as lithography, or segments where Applied’s products have lower relative market presence;
|
•
|
the importance of increasing market positions in segments with growing demand;
|
•
|
semiconductor manufacturer’s ability to reconfigure and re-use equipment, and the resulting effect on their need to purchase new equipment and services;
|
•
|
shorter cycle times between order placements by customers and product shipment require greater reliance on forecasting of customer investment, which may lead to inventory write-offs and manufacturing inefficiencies that decrease gross margin;
|
•
|
competitive factors that make it difficult to enhance position, including challenges in securing development-tool-of-record (DTOR) and production-tool-of-record (PTOR) positions with customers;
|
•
|
consolidation in the semiconductor industry, including among semiconductor manufacturers and among manufacturing equipment suppliers;
|
•
|
shifts in sourcing strategies by computer and electronics companies that impact the equipment requirements of Applied’s foundry customers;
|
•
|
the concentration of new wafer starts in Korea and Taiwan, where Applied’s service penetration and service-revenue-per-wafer-start have been lower than in other regions;
|
•
|
investment in semiconductor manufacturing capabilities in China, which may be affected by changes in economic conditions and governmental policies in China; and
|
•
|
the increasing fragmentation of semiconductor markets, leading certain markets to become too small to support the cost of a new fabrication plant, while others require less technologically advanced products.
|
•
|
the importance of new types of display technologies, such as organic light-emitting diode (OLED), low temperature polysilicon (LTPS), flexible displays and metal oxide, and new touch panel films;
|
•
|
the increasing cost of research and development, and complexity of technology transitions and inflections, and Applied’s ability to timely and effectively anticipate and adapt to these changes;
|
•
|
the timing and extent of an expansion of manufacturing facilities in China, which may be affected by changes in economic conditions and governmental policies in China;
|
•
|
the importance of increasing market positions in products and technologies with growing demand;
|
•
|
the rate of transition to larger substrate sizes for TVs and to new display technologies for TVs and mobile applications, and the resulting effect on capital intensity in the industry and on Applied’s product differentiation, gross margin and return on investment; and
|
•
|
the variability in demand for display manufacturing equipment, concentration of display manufacturer customers and their ability to successfully commercialize new products and technologies, and uncertainty with respect to future display technology end-use applications and growth drivers.
|
•
|
identify and address technology inflections, market changes, new applications, customer requirements and end-use demand;
|
•
|
develop new products and disruptive technologies, improve and develop new applications for existing products, and adapt products for use by customers in different applications and markets with varying technical requirements;
|
•
|
differentiate its products from those of competitors, meet customers’ performance specifications, appropriately price products, and achieve market acceptance;
|
•
|
maintain operating flexibility to enable responses to changing markets, applications, customers and customer requirements;
|
•
|
enhance its worldwide operations across its businesses to reduce cycle time, enable continuous quality improvement, reduce costs, and enhance design for manufacturability and serviceability;
|
•
|
focus on product development and sales and marketing strategies that address customers’ high value problems and strengthen customer relationships;
|
•
|
effectively allocate resources between its existing products and markets, the development of new products, and expanding into new and adjacent markets;
|
•
|
improve the productivity of capital invested in R&D activities;
|
•
|
accurately forecast demand, work with suppliers and meet production schedules for its products;
|
•
|
improve its manufacturing processes and achieve cost efficiencies across product offerings;
|
•
|
adapt to changes in value offered by companies in different parts of the supply chain;
|
•
|
qualify products for evaluation and volume manufacturing with its customers; and
|
•
|
implement changes in its design engineering methodology to reduce material costs and cycle time, increase commonality of platforms and types of parts used in different systems, and improve product life cycle management.
|
•
|
uncertain global economic and political business conditions and demands;
|
•
|
political and social attitudes, laws, rules, regulations and policies within countries that favor domestic companies over non-domestic companies, including customer- or government-supported efforts to promote the development and growth of local competitors;
|
•
|
customer- or government-supported efforts to influence Applied to conduct more of its operations and sourcing in a particular country, such as Korea and China;
|
•
|
variations among, and changes in, local, regional, national or international laws and regulations, including contract, intellectual property, labor, tax, and import/export laws, and the interpretation and application of such laws and regulations;
|
•
|
global trade issues, including the ability to obtain required import and export licenses, trade sanctions, tariffs, and international trade disputes;
|
•
|
ineffective or inadequate legal protection of intellectual property rights in certain countries;
|
•
|
positions taken by governmental agencies regarding possible national commercial and/or security issues posed by international business operations;
|
•
|
fluctuating raw material, commodity, energy and shipping costs or shipping delays;
|
•
|
geographically diverse operations and projects, and our ability to maintain appropriate business processes, procedures and internal controls, and comply with environmental, health and safety, anti-corruption and other regulatory requirements;
|
•
|
supply chain interruptions, and service interruptions from utilities, transportation, data hosting or telecommunications providers;
|
•
|
a diverse workforce with different experience levels, languages, cultures, customs, business practices and worker expectations, and differing employment practices and labor issues;
|
•
|
variations in the ability to develop relationships with local customers, suppliers and governments;
|
•
|
fluctuations in interest rates and currency exchange rates, including the relative strength or weakness of the U.S. dollar against the Japanese yen, euro, Taiwanese dollar, Israeli shekel, Chinese yuan or Singapore dollar;
|
•
|
the need to provide sufficient levels of technical support in different locations around the world;
|
•
|
performance of third party providers of outsourced functions, including certain engineering, software development, manufacturing, information technology and other activities;
|
•
|
political instability, natural disasters, pandemics, social unrest, terrorism or acts of war in locations where Applied has operations, suppliers or sales, or that may influence the value chain of the industries that Applied serves;
|
•
|
challenges in hiring and integration of an increasing number of workers in new countries;
|
•
|
the increasing need for a mobile workforce to work in or travel to different regions; and
|
•
|
uncertainties with respect to economic growth rates in various countries, including for the manufacture and sale of semiconductors and displays in the developing economies of certain countries.
|
•
|
diversion of management’s attention and disruption of ongoing businesses;
|
•
|
contractual restrictions on the conduct of Applied’s business during the pendency of a proposed transaction
;
|
•
|
inability to complete proposed transactions due to the failure to obtain regulatory or other approvals, litigation or other disputes, and any ensuing obligation to pay a termination fee;
|
•
|
the failure to realize expected returns from acquired businesses;
|
•
|
requirements imposed by government regulators in connection with their review of a transaction, which may include, among other things, divestitures and restrictions on the conduct of Applied’s existing business or the acquired business;
|
•
|
ineffective integration of operations, systems, technologies, products or employees, which can impact the ability to realize anticipated synergies or other benefits;
|
•
|
failure to commercialize technologies from acquired businesses or developed through strategic investments;
|
•
|
dependence on unfamiliar supply chains or relatively small supply partners;
|
•
|
inability to capitalize on characteristics of new markets that may be significantly different from Applied’s existing markets and where competitors may have stronger market positions and customer relationships;
|
•
|
failure to retain and motivate key employees of acquired businesses;
|
•
|
the potential impact of the announcement or consummation of a proposed transaction on relationships with third parties;
|
•
|
potential changes in Applied’s credit rating, which could adversely impact the Company’s access to and cost of capital;
|
•
|
reductions in cash balances or increases in debt obligations to finance activities associated with a transaction, which reduce the availability of cash flow for general corporate or other purposes, including share repurchases and dividends;
|
•
|
exposure to new operational risks, rules, regulations, worker expectations, customs and practices to the extent acquired businesses are located in regions where Applied has not historically conducted business;
|
•
|
challenges associated with managing new, more diverse and more widespread operations, projects and people;
|
•
|
inability to obtain and protect intellectual property rights in key technologies;
|
•
|
inadequacy or ineffectiveness of an acquired company’s internal financial controls, disclosure controls and procedures, or environmental, health and safety, anti-corruption, human resource, or other policies or practices;
|
•
|
impairment of acquired intangible assets and goodwill as a result of changing business conditions, technological advancements or worse-than-expected performance of the segment;
|
•
|
the risk of litigation or claims associated with a proposed or completed transaction;
|
•
|
unknown, underestimated or undisclosed commitments or liabilities; and
|
•
|
the inappropriate scale of acquired entities’ critical resources or facilities for business needs.
|
•
|
the need to devote additional resources to develop new products for, and operate in, new markets;
|
•
|
the need to develop new sales and technical marketing strategies, cultivate relationships with new customers and meet different customer service requirements;
|
•
|
differing rates of profitability and growth among multiple businesses;
|
•
|
Applied’s ability to anticipate demand, capitalize on opportunities, and avoid or minimize risks;
|
•
|
the complexity of managing multiple businesses with variations in production planning, execution, supply chain management and logistics;
|
•
|
the adoption of new business models, business processes and systems;
|
•
|
the complexity of entering into and effectively managing strategic alliances or partnering opportunities;
|
•
|
new materials, processes and technologies;
|
•
|
the need to attract, motivate and retain employees with skills and expertise in these new areas;
|
•
|
new and more diverse customers and suppliers, including some with limited operating histories, uncertain or limited funding, evolving business models or locations in regions where Applied does not have, or has limited, operations;
|
•
|
new or different competitors with potentially more financial or other resources, industry experience and established customer relationships;
|
•
|
entry into new industries and countries, with differing levels of government involvement, laws and regulations, and business, employment and safety practices;
|
•
|
third parties’ intellectual property rights; and
|
•
|
the need to comply with, or work to establish, industry standards and practices.
|
•
|
the failure or inability to accurately forecast demand and obtain sufficient quantities of quality parts on a cost-effective basis;
|
•
|
volatility in the availability and cost of materials;
|
•
|
difficulties or delays in obtaining required import or export approvals;
|
•
|
shipment delays due to transportation interruptions or capacity constraints;
|
•
|
information technology or infrastructure failures; and
|
•
|
natural disasters or other events beyond Applied’s control (such as earthquakes, floods or storms, regional economic downturns, pandemics, social unrest, political instability, terrorism, or acts of war), particularly where it conducts manufacturing.
|
Period
|
Total Number
of
Shares Purchased
|
|
Average
Price Paid
per Share
|
|
Aggregate
Price
Paid
|
|
Total Number of
Shares Purchased as
Part of Publicly
Announced Program*
|
|
Maximum Dollar
Value of Shares
That May Yet be
Purchased Under
the Program*
|
||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
(In millions, except per share amounts)
|
||||||||||||||||
Month #1
|
|
|
|
|
|
|
|
|
|
||||||||
(October 30, 2017 to November 26, 2017)
|
1.4
|
|
|
$
|
57.44
|
|
|
$
|
81
|
|
|
1.4
|
|
|
$
|
3,529
|
|
Month #2
|
|
|
|
|
|
|
|
|
|
||||||||
(November 27, 2017 to December 24, 2017)
|
7.2
|
|
|
$
|
52.28
|
|
|
375
|
|
|
7.2
|
|
|
$
|
3,154
|
|
|
Month #3
|
|
|
|
|
|
|
|
|
|
||||||||
(December 25, 2017 to January 28, 2018)
|
6.0
|
|
|
$
|
53.80
|
|
|
326
|
|
|
6.0
|
|
|
$
|
2,828
|
|
|
Total
|
14.6
|
|
|
$
|
53.41
|
|
|
$
|
782
|
|
|
14.6
|
|
|
|
*
|
In September 2017, the Board of Directors approved a common stock repurchase program authorizing up to $3.0 billion in repurchases, which was in addition to a $2.0 billion common stock repurchase program approved in June 2016.
|
†
|
Filed herewith.
|
‡
|
Furnished herewith.
|
APPLIED MATERIALS, INC.
|
|
|
|
By:
|
/s/ DANIEL J. DURN
|
|
Daniel J. Durn
Senior Vice President,
Chief Financial Officer
(Principal Financial Officer)
|
By:
|
/s/ CHARLES W. READ
|
|
Charles W. Read
Corporate Vice President,
Corporate Controller
and Chief Accounting Officer
(Principal Accounting Officer)
|
/s/ GARY E. DICKERSON
|
Gary E. Dickerson
|
President, Chief Executive Officer
|
/s/ DANIEL J. DURN
|
Daniel J. Durn
|
Senior Vice President, Chief Financial Officer
|
/s/ GARY E. DICKERSON
|
Gary E. Dickerson
|
President, Chief Executive Officer
|
/s/ DANIEL J. DURN
|
Daniel J. Durn
|
Senior Vice President, Chief Financial Officer
|