Document and Company Informatio
Document and Company Information (USD $) | ||
3 Months Ended
Jan. 31, 2010 | Apr. 26, 2009
| |
Document and Company Information [Abstract] | ||
Entity Registrant Name | APPLIED MATERIALS INC /DE | |
Entity Central Index Key | 0000006951 | |
Document Type | 10-Q | |
Document Period End Date | 2010-01-31 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --10-31 | |
Entity Well Known Seasoned Issuer | Yes | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Public Float (actual number) | $15,579,209,892 | |
Entity Common Stock Shares Outstanding (actual number) | 1,343,270,238 |
Consolidated Condensed Statemen
Consolidated Condensed Statements of Operations (Unaudited) (USD $) | ||
In Thousands, except Per Share data | 3 Months Ended
Jan. 31, 2010 | 3 Months Ended
Jan. 25, 2009 |
Statements of Operations | ||
Net sales | $1,848,902 | $1,333,396 |
Cost of products sold | 1,137,718 | 941,820 |
Gross margin | 711,184 | 391,576 |
Operating expenses: | ||
Research, development and engineering | 269,003 | 229,540 |
General and administrative | 124,799 | 141,241 |
Marketing and selling | 97,195 | 84,115 |
Restructuring and asset impairments | 103,844 | 132,772 |
Income (loss) from operations | 116,343 | (196,092) |
Pretax loss of equity-method investment | 15,808 | |
Impairment of investments | 1,190 | |
Interest expense | 5,060 | 5,994 |
Interest income | 8,641 | 15,235 |
Income (loss) before income taxes | 118,734 | (202,659) |
Provision (benefit) for income taxes | 35,983 | (69,725) |
Net income (loss) | $82,751 | ($132,934) |
Earnings (loss) per share: | ||
Basic | 0.06 | -0.1 |
Diluted | 0.06 | -0.1 |
Weighted average number of shares: | ||
Basic | 1,341,941 | 1,329,223 |
Diluted | 1,349,567 | 1,329,223 |
Consolidated Condensed Balance
Consolidated Condensed Balance Sheets (USD $) | |||||||||||||||||||
In Thousands | Jan. 31, 2010
| Oct. 25, 2009
| |||||||||||||||||
Current assets: | |||||||||||||||||||
Cash and cash equivalents | $1,399,054 | [1] | $1,576,381 | [2] | |||||||||||||||
Short-term investments | 755,122 | [1] | 638,349 | [2] | |||||||||||||||
Accounts receivable, net | 1,267,409 | [1] | 1,041,495 | [2] | |||||||||||||||
Inventories | 1,664,269 | [1] | 1,627,457 | [2] | |||||||||||||||
Deferred income taxes, net | 417,986 | [1] | 356,336 | [2] | |||||||||||||||
Income taxes receivable | 102,711 | [1] | 184,760 | [2] | |||||||||||||||
Other current assets | 242,712 | [1] | 264,169 | [2] | |||||||||||||||
Total current assets | 5,849,263 | [1] | 5,688,947 | [2] | |||||||||||||||
Long-term investments | 1,046,116 | [1] | 1,052,165 | [2] | |||||||||||||||
Property, plant and equipment | 2,964,028 | [1] | 2,906,957 | [2] | |||||||||||||||
Less: accumulated depreciation and amortization | (1,835,359) | [1] | (1,816,524) | [2] | |||||||||||||||
Net property, plant and equipment | 1,128,669 | [1] | 1,090,433 | [2] | |||||||||||||||
Goodwill, net | 1,336,426 | [1] | 1,170,932 | [2] | |||||||||||||||
Purchased technology and other intangible assets, net | 374,000 | [1] | 306,416 | [2] | |||||||||||||||
Deferred income taxes and other assets | 269,364 | [1] | 265,350 | [2] | |||||||||||||||
Total assets | 10,003,838 | [1] | 9,574,243 | [2] | |||||||||||||||
Current liabilities: | |||||||||||||||||||
Current portion of long-term debt | 2,400 | [1] | 1,240 | [2] | |||||||||||||||
Accounts payable and accrued expenses | 1,252,031 | [1] | 1,061,502 | [2] | |||||||||||||||
Customer deposits and deferred revenue | 993,357 | [1] | 864,280 | [2] | |||||||||||||||
Income taxes payable | 30,160 | [1] | 12,435 | [2] | |||||||||||||||
Total current liabilities | 2,277,948 | [1] | 1,939,457 | [2] | |||||||||||||||
Long-term debt | 210,547 | [1] | 200,654 | [2] | |||||||||||||||
Other liabilities | 367,200 | [1] | 339,524 | [2] | |||||||||||||||
Total liabilities | 2,855,695 | [1] | 2,479,635 | [2] | |||||||||||||||
Stockholders' equity: | |||||||||||||||||||
Common stock | 13,433 | [1] | 13,409 | [2] | |||||||||||||||
Additional paid-in capital | 5,245,634 | [1] | 5,195,437 | [2] | |||||||||||||||
Retained earnings | 10,936,149 | [1] | 10,934,004 | [2] | |||||||||||||||
Treasury stock | (9,046,562) | [1] | (9,046,562) | [2] | |||||||||||||||
Accumulated other comprehensive loss | (511) | [1] | (1,680) | [2] | |||||||||||||||
Total stockholders' equity | 7,148,143 | [1] | 7,094,608 | [2] | |||||||||||||||
Total liabilities and stockholders' equity | $10,003,838 | [1] | $9,574,243 | [2] | |||||||||||||||
[1]Amounts as of January 31, 2010 are unaudited. | |||||||||||||||||||
[2]Amounts as of October 25, 2009 are derived from the October 25, 2009 audited consolidated financial statements. |
1_Consolidated Condensed Statem
Consolidated Condensed Statements of Cash Flows (Unaudited) (USD $) | |||||||||||||||||||
In Thousands | 3 Months Ended
Jan. 31, 2010 | 3 Months Ended
Jan. 25, 2009 | |||||||||||||||||
Cash flows from operating activities: | |||||||||||||||||||
Net income (loss) | $82,751 | ($132,934) | |||||||||||||||||
Adjustments required to reconcile net income (loss) to cash provided by (used in) operating activities: | |||||||||||||||||||
Depreciation and amortization | 76,412 | 71,228 | |||||||||||||||||
Loss on fixed asset retirements | 3,435 | 3,447 | |||||||||||||||||
Provision for bad debts | 6,000 | 47,526 | |||||||||||||||||
Restructuring and asset impairments | 103,844 | 132,772 | |||||||||||||||||
Deferred income taxes | (43,636) | (13,054) | |||||||||||||||||
Net recognized loss on investments | 5,185 | 5,398 | |||||||||||||||||
Pretax loss of equity-method investment | 15,808 | ||||||||||||||||||
Impairment of investments | 1,190 | ||||||||||||||||||
Equity-based compensation | 33,689 | 33,608 | |||||||||||||||||
Changes in operating assets and liabilities, net of amounts acquired: | |||||||||||||||||||
Accounts receivable | (193,953) | 368,648 | |||||||||||||||||
Inventories | 25,026 | (144,075) | |||||||||||||||||
Other current assets | 23,260 | 10,890 | |||||||||||||||||
Other assets | (9,525) | 1,311 | |||||||||||||||||
Accounts payable and accrued expenses | 42,290 | (353,672) | |||||||||||||||||
Customer deposits and deferred revenue | 123,218 | (164,701) | |||||||||||||||||
Income taxes | 99,864 | (94,337) | |||||||||||||||||
Other liabilities | (7,177) | 26,920 | |||||||||||||||||
Cash provided by (used in) operating activities | 371,873 | (185,217) | |||||||||||||||||
Cash flows from investing activities: | |||||||||||||||||||
Capital expenditures | (53,167) | (73,318) | |||||||||||||||||
Cash paid for acquisition, net of cash acquired | (322,599) | ||||||||||||||||||
Proceeds from sales and maturities of investments | 183,881 | 541,689 | |||||||||||||||||
Purchases of investments | (297,683) | (227,348) | |||||||||||||||||
Cash provided by (used in) investing activities | (489,568) | 241,023 | |||||||||||||||||
Cash flows from financing activities: | |||||||||||||||||||
Debt borrowings | 977 | 510 | |||||||||||||||||
Proceeds from common stock issuances | 19,855 | 182 | |||||||||||||||||
Common stock repurchases | (22,906) | ||||||||||||||||||
Payment of dividends to stockholders | (80,464) | (79,762) | |||||||||||||||||
Cash used in financing activities | (59,632) | (101,976) | |||||||||||||||||
Effect of exchange rate changes on cash and cash equivalents | 742 | ||||||||||||||||||
Decrease in cash and cash equivalents | (177,327) | (45,428) | |||||||||||||||||
Cash and cash equivalents - beginning of period | 1,576,381 | [1] | 1,411,624 | ||||||||||||||||
Cash and cash equivalents - end of period | 1,399,054 | [2] | 1,366,196 | ||||||||||||||||
Supplemental cash flow information: | |||||||||||||||||||
Cash payments (refunds) for income taxes | (32,791) | 12,064 | |||||||||||||||||
Cash payments for interest | $42 | $42 | |||||||||||||||||
[1]Amounts as of October 25, 2009 are derived from the October 25, 2009 audited consolidated financial statements. | |||||||||||||||||||
[2]Amounts as of January 31, 2010 are unaudited. |
Basis of Presentation
Basis of Presentation | |
3 Months Ended
Jan. 31, 2010 | |
Basis of Presentation [Abstract] | |
Basis of Presentation | Note1 Basis of Presentation Basis of Presentation In the opinion of management, the unaudited interim consolidated condensed financial statements of Applied Materials, Inc. and its subsidiaries (Applied or the Company) included herein have been prepared on a basis consistent with the October25, 2009 audited consolidated financial statements and include all material adjustments, consisting of normal recurring adjustments, necessary to fairly present the information set forth therein. These unaudited interim consolidated condensed financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in Applieds Annual Report on Form10-K for the fiscal year ended October25, 2009 (2009 Form10-K). Applieds results of operations for the three months ended January31, 2010 are not necessarily indicative of future operating results. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ materially from those estimates. Applieds fiscal year ends on the last Sunday in October of each year. Fiscal 2010 contains 53weeks, while fiscal 2009 contained 52weeks, and the first fiscal quarter of 2010 contained 14weeks, while the first fiscal quarter of 2009 contained 13weeks. Revenue Recognition Applied recognizes revenue when all four revenue recognition criteria have been met: persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; sellers price to buyer is fixed or determinable; and collectability is probable. Applieds shipping terms are customarily FOB Applied shipping point or equivalent terms. Applieds revenue recognition policy generally results in revenue recognition at the following points: (1)for all transactions where legal title passes to the customer upon shipment, Applied recognizes revenue upon shipment for all products that have been demonstrated to meet product specifications prior to shipment; the portion of revenue associated with certain installation-related tasks is deferred, and that revenue is recognized upon completion of the installation-related tasks; (2)for products that have not been demonstrated to meet product specifications prior to shipment, revenue is recognized at customer technical acceptance; (3)for transactions where legal title does not pass at shipment, revenue is recognized when legal title passes to the customer, which is generally at customer technical acceptance; (4) for arrangements initiated prior to fiscal 2010 containing multiple elements, the revenue relating to the undelivered elements is deferred at their estimated relative fair values until delivery of the deferred elements; and (5)for arrangements initiated or materially modified during fiscal 2010 containing multiple elements, the revenue relating to the undelivered elements is deferred using the relative selling price method utilizing estimated sales prices until del |
Treasury Stock
Treasury Stock | |
3 Months Ended
Jan. 31, 2010 | |
Treasury Stock [Abstract] | |
Treasury Stock | Note2 Treasury Stock Applied records treasury stock purchases under the cost method using the first-in, first-out (FIFO) method. Upon reissuance of treasury stock, amounts in excess of the acquisition cost are credited to additional paid in capital. If Applied reissues treasury stock at an amount below its acquisition cost and additional paid in capital associated with prior treasury stock transactions is insufficient to cover the difference between the acquisition cost and the reissue price, this difference is recorded against retained earnings. No shares of treasury stock were reissued during the three months ended January31, 2010 or January25, 2009. |
Earning
Earning (Loss) Per Share | |
3 Months Ended
Jan. 31, 2010 | |
Earning (Loss) Per Share | |
Earning (Loss) Per Share | Note3 Earnings (Loss) Per Share Basic earnings (loss) 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 ESPP shares) outstanding during the period. Applieds net income (loss) has not been adjusted for any period presented for purposes of computing basic or diluted earnings (loss) per share due to the Companys 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. Accordingly, options to purchase 46,441,000shares of common stock were excluded from the computation for the three months ended January31, 2010. Potential common shares have not been included in the calculation of diluted net loss per share for the three months ended January25, 2009 as the effect would be anti-dilutive. As such, the numerator and the denominator used in computing both basic and diluted net loss per share for the three months ended January25, 2009 are the same. The number of potential common shares that were excluded from the computation of diluted earnings per share was 74,745,000 for the three months ended January25, 2009. |
Investments
Investments | |
3 Months Ended
Jan. 31, 2010 | |
Investments [Abstract] | |
Investments | Note4 Investments Summary of Investments The following tables summarizes Applieds investments by security type: Gross Gross Unrealized Unrealized Estimated January31, 2010 Cost Gains Losses Fair Value (In thousands) U.S. Treasury and agency securities $ 710,523 $ 8,534 $ 107 $ 718,950 Obligations of states and political subdivisions 444,885 7,757 23 452,619 U.S. commercial paper, corporate bonds and medium-term notes 396,606 7,104 42 403,668 Other debt securities* 136,064 1,629 663 137,030 Total fixed income securities 1,688,078 25,024 835 1,712,267 Publicly traded equity securities 10,569 10,420 20,989 Equity investments in privately-held companies 67,982 67,982 Total $ 1,766,629 $ 35,444 $ 835 $ 1,801,238 Gross Gross Unrealized Unrealized Estimated October25, 2009 Cost Gains Losses Fair Value (In thousands) U.S. Treasury and agency securities $ 653,627 $ 8,013 $ 170 $ 661,470 Obligations of states and political subdivisions 419,640 7,597 427,237 U.S. commercial paper, corporate bonds and medium-term notes 382,550 5,676 281 387,945 Other debt securities* 103,193 1,430 391 104,232 Total fixed income securities 1,559,010 22,716 842 1,580,884 Publicly traded equity securities 9,572 9,439 19,011 Equity investments in privately-held companies 90,619 90,619 Total $ 1,659,201 $ 32,155 $ 842 $ 1,690,514 * Other debt securities consist primarily of investment grade asset-backed and mortgage-backed securities. Included in cash and cash equivalents are investments in money market funds totaling $0.9billion at January31, 2010 and $1.2billion at October25, 2009. Maturities of Investments The following table summarizes the contractual maturities of Applieds investments at January31, 2010: Estimated Cost Fair Value (In thousands) Due in one year or less $ 730,222 $ 734,133 Due after one thr |
Fair Value Measurements
Fair Value Measurements | |
3 Months Ended
Jan. 31, 2010 | |
Fair Value Measurements [Abstract] | |
Fair Value Measurements | Note5 Fair Value Measurements Effective October27, 2008, Applied adopted authoritative guidance for fair value measurements and the fair value option for financial assets and liabilities. This authoritative guidance defines fair value, establishes a framework for measuring fair value and enhances disclosure requirements for fair value measurements. Fair value is defined under this authoritative guidance as the exchange price that would be received for an asset, or paid to transfer a liability (an exit price), in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. On October26, 2009, Applied adopted the newly issued accounting standard for fair value measurements of all nonfinancial assets and nonfinancial liabilities not recognized or disclosed at fair value in the financial statements on a recurring basis. Applieds 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 indicates that an other-than-temporary decline in value may have occurred. Applieds nonfinancial assets, such as goodwill, intangible assets, and property, plant and equipment, are recorded at cost and are assessed for impairment when an event or circumstance indicates 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: Level1 Quoted prices in active markets for identical assets or liabilities; Level2 Observable inputs other than Level1 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 Level3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Applieds investments are comprised primarily of debt securities that are classified as available-for-sale and recorded at their fair value. 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 pric |
Derivative Instruments and Hedg
Derivative Instruments and Hedging Activities | |
3 Months Ended
Jan. 31, 2010 | |
Derivative Instruments and Hedging Activities [Abstract] | |
Derivative Instruments and Hedging Activities | Note6 Derivative Instruments and Hedging Activities Derivative Financial Instruments Derivative instruments and hedging activities, including foreign currency exchange contracts, are recognized on the balance sheet at fair value. Changes in the fair value of derivatives that do not qualify for hedge treatment, as well as the ineffective portion of any hedges, are recognized currently in earnings. All of Applieds derivative financial instruments are recorded at their fair value in other current assets or accounts payable and accrued expenses. Applied conducts business in a number of foreign countries, with certain transactions denominated in local currencies, such as Japanese yen, euro, Israeli shekel and Swiss francs. The purpose of Applieds foreign currency management is to mitigate the effect of exchange rate fluctuations on certain foreign currency denominated revenues, costs and eventual cash flows. The terms of currency instruments used for hedging purposes are generally consistent with the timing of the transactions being hedged. Applied does not use derivative financial instruments for trading or speculative purposes. Applied uses derivative financial instruments, such as forward exchange contracts and currency option contracts, to hedge certain forecasted foreign currency denominated transactions expected to occur typically within the next 24months. Hedges related to anticipated transactions are designated and documented at the inception of the hedge as cash flow hedges and are typically entered into once per month. Cash flow hedges are evaluated for effectiveness quarterly. The effective portion of the gain or loss on these hedges is reported as a component of accumulated other comprehensive income or loss (AOCI) in stockholders equity and is reclassified into earnings when the hedged transaction affects earnings. The majority of the after-tax net income or loss related to derivative instruments included in AOCI at January31, 2010 is expected to be reclassified into earnings within 12months. Changes in the fair value of currency forward exchange and option contracts due to changes in time value are excluded from the assessment of effectiveness. Both ineffective hedge amounts and hedge components excluded from the assessment of effectiveness are recognized promptly in earnings. If the transaction being hedged is no longer probable to occur, or if a portion of any derivative is deemed to be ineffective, Applied promptly recognizes the gain or loss on the associated financial instrument in general and administrative expenses. The amount recognized due to discontinuance of cash flow hedges that were probable not to occur by the end of the originally specified time period was not significant for the three months ended January31, 2010 and January25, 2009. Forward exchange contracts are generally used to hedge certain foreign currency denominated assets or liabilities. These derivatives are typically entered into once per month and are not designated for hedge accounting treatment. Accordingly, changes in the fair value of these hedges are recorded promptly in earnings to offset the changes in the fair |
Accounts Receivable, Net
Accounts Receivable, Net | |
3 Months Ended
Jan. 31, 2010 | |
Accounts Receivable, Net [Abstract] | |
Accounts Receivable, Net | Note7 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. Under these agreements, Applied discounted letters of credit in the amounts of $27million and $13million for the three months ended January31, 2010 and January25, 2009, respectively. For the three months ended January31, 2010 and January25, 2009, Applied factored accounts receivable and discounted promissory notes totaling $26million and $4million, respectively. 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 $73million at January31, 2010 and $67million at October25, 2009. Applied sells principally to manufacturers within the semiconductor, display and solar industries. As a result of challenging economic and industry conditions, certain of these manufacturers may experience difficulties in meeting their obligations in a timely manner. While Applied believes that its allowance for doubtful accounts is adequate and represents Applieds best estimate at January31, 2010, Applied will continue to closely monitor customer liquidity and other economic conditions, which may result in changes to Applieds estimates regarding collectability. |
Inventories
Inventories | |
3 Months Ended
Jan. 31, 2010 | |
Inventories [Abstract] | |
Inventories | Note8 Inventories Inventories are stated at the lower of cost or market, with cost determined on a FIFO basis. Components of inventories were as follows: January31, October25, 2010 2009 (In thousands) Customer service spares $ 258,158 $ 263,688 Raw materials 373,754 351,824 Work-in-process 648,084 667,484 Finished goods 384,273 344,461 $ 1,664,269 $ 1,627,457 Included in finished goods inventory is $140million at January31, 2010, and $133million at October25, 2009, of newly-introduced systems at customer locations where the sales transaction did not meet Applieds revenue recognition criteria, which are set forth in Note1. Applied adjusts inventory carrying value for estimated obsolescence equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. Applied fully reserves for inventories and noncancelable purchase orders for inventory deemed obsolete. Applied performs periodic reviews of inventory items to identify excess inventories on hand by comparing on-hand balances to anticipated usage using recent historical activity as well as anticipated or forecasted demand. If estimates of customer demand diminish further or market conditions become less favorable than those projected by Applied, additional inventory adjustments may be required. |
Goodwill, Purchased Technology
Goodwill, Purchased Technology and Other Intangible Assets | |
3 Months Ended
Jan. 31, 2010 | |
Goodwill, Purchased Technology and Other Intangible Assets [Abstract] | |
Goodwill, Purchased Technology and Other Intangible Assets | Note9 Goodwill, Purchased Technology and Other Intangible Assets Goodwill and Purchased Intangible Assets 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. 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. Applieds reporting units are consistent with the reportable segments identified in Note18, 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. Under the market approach, Applied estimates the fair value based on market multiples of revenue or earnings for comparable companies. 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 units 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 representing the implied fair value of goodwill. If Applied determined that the carrying value of a reporting units goodwill exceeded its implied fair value, Applied would record an impairment loss equal to the difference. Applied conducted these impairment tests in the fourth quarter of fiscal 2009, and the results of these tests indicated that Applieds goodwill and purchased intangible assets with indefinite useful lives were not impaired. Applieds 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 a reporting unit 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 |
Accounts Payable and Accrued Ex
Accounts Payable and Accrued Expenses | |
3 Months Ended
Jan. 31, 2010 | |
Accounts Payable and Accrued Expenses [Abstract] | |
Accounts Payable and Accrued Expenses | Note10 Accounts Payable and Accrued Expenses Components of accounts payable and accrued expenses were as follows: January31, October25, 2010 2009 (In thousands) Accounts payable $ 466,924 $ 477,148 Compensation and employee benefits 198,919 134,949 Warranty 137,430 117,537 Dividends payable 80,596 80,455 Other accrued taxes 53,665 36,954 Restructuring reserve 106,598 31,581 Other 207,899 182,878 $ 1,252,031 $ 1,061,502 |
Customer Deposits and Deferred
Customer Deposits and Deferred Revenue | |
3 Months Ended
Jan. 31, 2010 | |
Customer Deposits and Deferred Revenue [Abstract] | |
Customer Deposits and Deferred Revenue | Note11 Customer Deposits and Deferred Revenue Details of customer deposits and deferred revenue were as follows: January31, October25, 2010 2009 (In thousands) Customer deposits $ 603,489 $ 564,412 Deferred revenue 389,868 299,868 $ 993,357 $ 864,280 |
Warranty, Guarantees and Contin
Warranty, Guarantees and Contingencies | |
3 Months Ended
Jan. 31, 2010 | |
Warranty Guarantees and Contingencies [Abstract] | |
Warranty Guarantees And Contingencies | Note12 Warranty, Guarantees and Contingencies Warranty Changes in the warranty reserves during the three months ended January31, 2010 and January25, 2009 were as follows: Three Months Ended January31, January25, 2010 2009 (In thousands) Beginning balance $ 117,537 $ 142,846 Provisions for warranty 34,476 23,546 Consumption of reserves (14,583 ) (22,669 ) Ending balance $ 137,430 $ 143,723 Applied products are generally sold with a 12-month warranty period following installation. The provision for the estimated cost of warranty is recorded when revenue is recognized. Parts and labor are covered under the terms of the warranty agreement. The warranty provision is based on historical experience by product, configuration and geographic region. Quarterly warranty consumption is generally associated with sales that occurred during the preceding four quarters, and quarterly warranty provisions are generally related to the current quarters sales. Guarantees During the ordinary course of business, Applied provides standby letters of credit or other guarantee instruments to certain parties as required for certain transactions initiated by either Applied or its subsidiaries. As of January31, 2010, the maximum potential amount of future payments that Applied could be required to make under these guarantee arrangements was $54million. Applied has not recorded any liability in connection with these guarantee arrangements beyond that required to account for the underlying transaction being guaranteed. Applied does not believe, based on historical experience and information currently available, that it is probable that any amounts will be required to be paid under these guarantee arrangements. Applied also has agreements with various global banks to facilitate subsidiary banking operations world-wide, including overdraft arrangements, bank guarantees and letters of credit. As of January31, 2010, Applied Materials, Inc. has provided parent guarantees to banks for approximately $176million to cover these arrangements. Legal matters Semitool Shareholder Litigation On November17, 2009, Applied announced that it was making a tender offer to acquire all of the outstanding shares of Semitool in accordance with an Agreement and Plan of Merger entered into with Semitool. Following this announcement, three lawsuits were filed by Semitool shareholders in the District Court of the Eleventh Judicial District Court for the State of Montana, County of Flathead, against Semitool, Semitools directors, Applied and Applieds acquisition subsidiary. The actions seek certification of a class of all holders of Semitool common stock, except the defendants and their affiliates. The complaints allege that Semitools directors breached their fiduciary duties by, among other things, failing to maximize shareholder value and failing to disclose material information, and that Applied aided and abetted such alleged bre |
Restructuring and Asset Impairm
Restructuring and Asset Impairments | |
3 Months Ended
Jan. 31, 2010 | |
Restructuring and Asset Impairments [Abstract] | |
Restructuring and Asset Impairments | Note13 Restructuring and Asset Impairments On November11, 2009, Applied announced a restructuring program to reduce its global workforce as of October25, 2009 by approximately 1,300 to 1,500 positions, or 10 to 12percent, over a period of 18months. During the first quarter of fiscal 2010, Applied recorded restructuring charges of $104million associated with this program. Changes in restructuring reserves related to the program described above for the three months ended January31, 2010 were as follows: Severance (In thousands) Provision for restructuring reserves $ 103,780 Consumption of reserves (16,688 ) Balance, January31, 2010 $ 87,092 Changes in restructuring reserves for the three months ended January31, 2010 related to other restructuring plans and facilities realignment programs initiated in prior periods were as follows: Severance Facilities Total (In thousands) Balance, October25, 2009 $ 26,353 $ 5,228 $ 31,581 Provision for restructuring reserves 64 64 Consumption of reserves (11,915 ) (227 ) (12,142 ) Foreign currency changes 3 3 Balance, January31, 2010 $ 14,438 $ 5,068 $ 19,506 |
Stockholders Equity
Stockholders Equity | |
3 Months Ended
Jan. 31, 2010 | |
Stockholders' Equity [Abstract] | |
Stockholders' Equity | Note14 Stockholders Equity Comprehensive Income Components of comprehensive income (loss), on an after-tax basis where applicable, were as follows: Three Months Ended January31, January25, 2010 2009 (In thousands) Net income (loss) $ 82,751 $ (132,934 ) Pension liability adjustment 74 112 Change in unrealized net gain on investments 2,121 16,474 Change in unrealized net loss on derivative instruments qualifying as cash flow hedges (1,299 ) (210 ) Foreign currency translation adjustments 273 (1,310 ) Comprehensive income (loss) $ 83,920 $ (117,868 ) Components of accumulated other comprehensive loss, on an after-tax basis where applicable, were as follows: January31, October25, 2010 2009 (In thousands) Pension liability $ (32,090 ) $ (32,164 ) Retiree medical benefits 15 15 Unrealized gain on investments net 22,093 19,972 Unrealized gain (loss) on derivative instruments qualifying as cash flow hedges (989 ) 310 Cumulative translation adjustments 10,460 10,187 $ (511 ) $ (1,680 ) Stock Repurchase Program On September15, 2006, Applieds Board of Directors approved a stock repurchase program for up to $5.0billion in repurchases over the three years ending in September 2009. Under this authorization, Applied implemented a systematic stock repurchase program and also made supplemental repurchases of its common stock from time to time in the open market, depending on market conditions, stock price and other factors, for a total of $2.7billion. In November 2008, Applied announced that it was suspending stock repurchases in light of uncertain global economic and market conditions. During the three months ended January25, 2009, prior to such suspension, Applied repurchased 1,942,000shares of its common stock at an average price of $11.80 per share for a total cash outlay of $23million. Dividends In December 2009, Applieds Board of Directors declared a quarterly cash dividend in the amount of $0.06 per share that will be paid on March17, 2010 to stockholders of record as of February24, 2010. The declaration of any future cash dividend is at the discretion of the Board of Directors and will depend on Applieds financial condition, results of operations, capital requirements, business conditions and other factors, as well as a determination by the Board of Directors that cash dividends are in the best interest of Applieds stockholders. |
Employee Benefit Plans
Employee Benefit Plans | |
3 Months Ended
Jan. 31, 2010 | |
Employee Benefit Plans [Abstract] | |
Employee Benefit Plans | Note15 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 months ended January31, 2010 and January25, 2009 is presented below: Three Months Ended January31, January25, 2010 2009 (In thousands) Service cost $ 3,350 $ 3,290 Interest cost 3,444 3,007 Expected return on plan assets (1,913 ) (1,863 ) Amortization of actuarial loss 286 174 Amortization of prior service credit (63 ) (70 ) Amortization of transition obligation 14 19 Net periodic pension cost $ 5,118 $ 4,557 |
Borrowing Facilities
Borrowing Facilities | |
3 Months Ended
Jan. 31, 2010 | |
Borrowing Facilities [Abstract] | |
Borrowing Facilities | Note16 Borrowing Facilities Applied has credit facilities for unsecured borrowings in various currencies of up to $1.1billion, of which $1.0billion is comprised of a 5-year revolving credit agreement with a group of banks that is scheduled to expire in January 2012. This agreement provides for borrowings in United States dollars at interest rates keyed to one of the two rates selected by Applied for each advance and includes financial and other covenants with which Applied was in compliance at January31, 2010. Remaining credit facilities in the amount of approximately $90million are with Japanese banks. Applieds ability to borrow under these facilities is subject to bank approval at the time of the borrowing request, and any advances will be at rates indexed to the banks prime reference rate denominated in Japanese yen. No amounts were outstanding under any of these facilities at January31, 2010. |
Income Taxes
Income Taxes | |
3 Months Ended
Jan. 31, 2010 | |
Income Taxes [Abstract] | |
Income Taxes | Note17 Income Taxes Applieds effective income tax rate for the first quarter of fiscal 2010 was a provision of 30.3percent, and the income tax rate for the first quarter of fiscal 2009 was a benefit of 34.4percent. Both periods included the impact of restructuring charges. Applieds future effective income tax rate depends on various factors, such as tax legislation, the geographic composition of Applieds pre-tax income, and the tax rate on equity compensation. Management carefully monitors these factors and timely adjusts the interim income tax rate accordingly. During fiscal 2009, the Internal Revenue Service began an examination of Applieds federal income tax returns for fiscal years 2007 and 2006. Applied believes it has adequately reserved for any income tax uncertainties that may arise as a result of this examination. A number of Applieds tax returns remain subject to examination by taxing authorities. These include U.S.federal returns for fiscal 2005 and later years, California returns for fiscal 2006 and later years, tax returns for certain states for fiscal 2002 and later years, and tax returns in certain jurisdictions outside of the United States for fiscal 2003 and later years. The timing of the resolution of income tax examinations is highly uncertain as well as the amounts and timing of various tax payments that may be part of the settlement process. This could cause large fluctuations in the balance sheet classification of current assets and non-current assets and liabilities. The Company does not expect a material change in unrecognized tax benefits in the next 12months. |
Industry Segment Operations
Industry Segment Operations | |
3 Months Ended
Jan. 31, 2010 | |
Industry Segment Operations [Abstract] | |
Industry Segment Operations | Note18 Industry Segment Operations Applieds four reportable segments are: Silicon, Applied Global Services, Display, and Energy and Environmental Solutions. Applieds chief operating decision-maker has been identified as the President and Chief Executive Officer, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Segment information is presented based upon Applieds management organization structure as of January31, 2010 and the distinctive nature of each segment. Future changes to this internal financial structure may result in changes to the Companys reportable segments. Each reportable segment is separately managed and has separate financial results that are reviewed by Applieds chief operating decision-maker. Each reportable segment contains closely related products that are unique to the particular segment. Segment operating income is determined based upon internal performance measures used by Applieds chief operating decision-maker. Applied derives the segment results directly from its internal management reporting system. The accounting policies Applied uses to derive reportable segment results are substantially the same as those used for external reporting purposes. Effective in the first quarter of fiscal 2010, Applied changed its methodology for allocating certain expenses to its reportable segments. Applied has reclassified segment operating results for the three months ended January25, 2009 to conform to the fiscal 2010 presentation. Management measures the performance of each reportable segment based upon several metrics including orders, net sales and operating income. Management uses these results to evaluate the performance of, and to assign resources to, each of the reportable segments. Applied does not allocate to its reportable segments certain operating expenses that it manages separately at the corporate level, which include costs related to equity-based compensation and certain corporate functions (certain management, finance, legal, human resources, and research, development and engineering), and unabsorbed information technology and occupancy. In addition, Applied does not allocate to its reportable segments restructuring and asset impairment charges and any associated adjustments related to restructuring actions. Segment operating income excludes interest income/expense and other financial charges and income taxes according to how a particular reportable segments management is measured. Management does not consider the unallocated costs in measuring the performance of the reportable segments. The Silicon segment includes semiconductor capital equipment for etch, rapid thermal processing, deposition, chemical mechanical planarization, and metrology and inspection. The Applied Global Services segment includes technically differentiated products and services to improve operating efficiency, reduce operating costs and lessen the environmental impact of semiconductor, display and solar customers factories. Applied Global Services products consist of spares, services, certain earlier generation products, and remanuf |
Business Combinations
Business Combinations | |
3 Months Ended
Jan. 31, 2010 | |
Business Combinations [Abstract] | |
Business Combinations | Note19 Business Combinations On December21, 2009, Applied acquired Semitool, a public company based in the state of Montana, for a purchase price of $323million in cash, net of cash acquired, pursuant to a tender offer and subsequent short-form merger. The acquired business is a leading supplier of electrochemical plating and wafer surface preparation equipment used by semiconductor packaging and manufacturing companies globally. Applieds primary reasons for this acquisition were to complement its existing product offerings and to provide opportunities for future growth. The acquired business will be included in the Silicon segment results beginning in the second quarter of fiscal 2010. In November 2009, Applied acquired substantially all the assets, including the intellectual property, of Advent Solar, a developer of advanced technology for crystalline silicon (c-Si) PVs. This acquisition complemented Applieds portfolio of solar PV technologies and enhanced Applieds position in the c-Si equipment market. The acquisition is included in results for the Energy and Environmental Solutions segment. Applied allocated the purchase price of each of these acquisitions to tangible assets, liabilities and identifiable intangible assets acquired, based on their estimated fair values. The excess of purchase price over the aggregate fair values was recorded as goodwill. The fair value assigned to identifiable intangible assets acquired was based on estimates and assumptions made by management. These estimates were determined through established and generally accepted calculation techniques. Applied calculated the fair value of the tangible and intangible assets acquired to allocate the purchase prices at the respective acquisition dates. Based upon these calculations, the purchase prices for the above acquisitions were allocated as follows: Acquisitions Fair Market Values 2010 (In thousands) Cash and cash equivalents $ 38,744 Accounts receivable, net 37,961 Inventories 61,838 Other current assets 3,837 Property and equipment, net 45,578 Goodwill 165,495 Purchased intangible assets 93,376 Total assets acquired 446,829 Accounts payable and accrued expenses (46,246 ) Other liabilities (25,240 ) Total liabilities assumed (71,486 ) Purchase price allocated $ 375,343 Useful Acquisitions Life 2010 (In years) (In thousands) Developed technology 6-10 $ 65,700 Customer relationships 8 10,900 Trade names 3-10 5,700 Patents and trademarks 7-10 5,462 Backlog 1 4,100 Other 5 1,514 $ 93,376 |
Recent Accounting Pronouncement
Recent Accounting Pronouncements | |
3 Months Ended
Jan. 31, 2010 | |
Recent Accounting Pronouncements [Abstract] | |
Recent Accounting Pronouncements | Note20 Recent Accounting Pronouncements In January 2010, the FASB issued authoritative guidance for fair value measurements, which requires additional disclosures and clarifications to existing disclosures. This authoritative guidance requires a reporting entity to disclose separately the amounts of significant transfers in and out of Level1 and Level2 fair value measurements and also to describe the reasons for these transfers. This authoritative guidance also requires enhanced disclosure of activity in Level3 fair value measurements. The new disclosures and clarifications of existing disclosures for Level1 and Level2 fair value measurements becomes effective the first interim reporting period after December15, 2009 and will be effective for Applied in the second quarter of fiscal 2010. Disclosures regarding activity within Level3 fair value measurements becomes effective the first interim reporting period after December15, 2010 and will be effective for Applied in the second quarter of fiscal 2011. Applied is evaluating the potential impact of the implementation of this authoritative guidance on its consolidated financial statements. See Note5 for information and related disclosures regarding Applieds fair value measurements. In June 2009, the FASB issued authoritative guidance on variable interest entities, which requires revised evaluations of whether entities represent variable interest entities, ongoing assessments of control over such entities, and additional disclosures for variable interests. In December 2009, the FASB issued authoritative guidance on the financial reporting by entities involved with variable interest entities which amends previously issued guidance on variable interest entities. The amendments in this authoritative guidance replace the quantitative-based risks and rewards calculation for determining which reporting entity, if any, has a controlling financial interest in a variable interest entity with an approach focused on identifying which reporting entity has the power to direct the activities of a variable interest entity that most significantly impact the entitys economic performance and (1)the obligation to absorb losses of the entity or (2)the right to receive benefits from the entity. This authoritative guidance becomes effective the first annual reporting period after November15, 2009 and will be effective for Applied in fiscal 2011. Applied is evaluating the potential impact of the implementation of this authoritative guidance on its consolidated financial statements. |
Subsequent Events
Subsequent Events | |
3 Months Ended
Jan. 31, 2010 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note21 Subsequent Events On March8, 2010, Applieds Board of Directors approved an increase in the quarterly cash dividend to $0.07 per share, payable on June16, 2010 to stockholders of record as of May26, 2010. Applieds Board of Directors also approved a new stock repurchase program authorizing up to $2 billion in repurchases over the next three years ending in March 2013. |