Applied Materials (AMAT) 10-K risk factor changes: FY2018 vs FY2017

For the fiscal year ended October [removed: 29, 2017][added: 28, 2018]

Indicate by check mark whether the registrant has submitted electronically [removed: and posted on its corporate Web site, if any,] every Interactive Data File required to be submitted [removed: and posted] pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to [removed: submit and post such files).][added: submit).]

| Non-accelerated filer ¨ [removed: (Do not check if a smaller reporting company)] | | Smaller reporting company ¨ |

Aggregate market value of the voting stock held by non-affiliates of the registrant as of April [removed: 28, 2017,] [added: 29, 2018,] based upon the closing sale price reported by the NASDAQ Global Select Market on that date: [removed: $43,552,849,133][added: $49,674,881,854]

Number of shares outstanding of the registrant’s Common Stock, $.01 par value, as of December [removed: 8, 2017: 1,056,340,714][added: 7, 2018: 958,606,093]

Portions of Part III will be provided in accordance with Instruction G(3) to Form 10-K no later than February [removed: 26, 2018.][added: 25, 2019.]

Examples of forward-looking statements include those regarding Applied’s future financial or operating results, [added: customer demand and spending, end-use demand, market and industry trends and outlooks,] cash flows and cash deployment strategies, declaration of dividends, share repurchases, business strategies and priorities, costs and cost controls, products, competitive positions, management’s plans and objectives for future operations, research and development, strategic acquisitions and investments, growth opportunities, restructuring activities, backlog, working capital, liquidity, investment portfolio and policies, taxes, supply chain, manufacturing, properties, legal proceedings and claims, [removed: customer demand] and [removed: spending, end-use demand, market and industry trends and outlooks, general economic conditions and] other statements that are not historical facts, as well as their underlying assumptions.

FORM 10-K FOR THE FISCAL YEAR ENDED OCTOBER [removed: 29, 2017][added: 28, 2018]

| Item 1: | [removed: [Business](#sB67DDBE84BD85883A4D803C7A012F790)] [added: [Business](#s171908510EBA547D95742765020AE637)] | [removed: [4](#sB67DDBE84BD85883A4D803C7A012F790)] [added: [4](#s171908510EBA547D95742765020AE637)] |

| Item 1A: | [Risk [removed: Factors](#s4398AB6AC7DE5E35BB7F016111C9BCD6)] [added: Factors](#s7E5D89C73A4F59C9AE30C5AF0A9E7A75)] | [removed: [14](#s4398AB6AC7DE5E35BB7F016111C9BCD6)] [added: [14](#s7E5D89C73A4F59C9AE30C5AF0A9E7A75)] |

| Item 1B: | [Unresolved Staff [removed: Comments](#sAEABCF6B9D41512AB7793A09B1C998CC)] [added: Comments](#sB32029606FDF5B8D9655D94BEBEDF645)] | [removed: [24](#sAEABCF6B9D41512AB7793A09B1C998CC)] [added: [24](#sB32029606FDF5B8D9655D94BEBEDF645)] |

| Item 2: | [removed: [Properties](#sCED670EFE9F0599399BBE60FF858FC99)] [added: [Properties](#sAB2ABB5286C255AFBFD66394BA56C66E)] | [removed: [25](#sCED670EFE9F0599399BBE60FF858FC99)] [added: [25](#sAB2ABB5286C255AFBFD66394BA56C66E)] |

| Item 3: | [Legal [removed: Proceedings](#s97ADA66A980B5C008EBDAE98B09F8B8E)] [added: Proceedings](#s04789C6EF3175E3E9BC76CF9D7417EA3)] | [removed: [26](#s97ADA66A980B5C008EBDAE98B09F8B8E)] [added: [26](#s04789C6EF3175E3E9BC76CF9D7417EA3)] |

| Item 4: | [Mine Safety [removed: Disclosures](#sEADA171F95D65367931A1D2B3C27D383)] [added: Disclosures](#sA0D9E797F5FF50F3980472B0FDDAAE1E)] | [removed: [26](#sEADA171F95D65367931A1D2B3C27D383)] [added: [26](#sA0D9E797F5FF50F3980472B0FDDAAE1E)] |

| Item 5: | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#s8165E9F76677572C8601330C91F326A2)] [added: Securities](#sB37CB5A2290D5B0B985CFCA27DE6A21E)] | [removed: [26](#s8165E9F76677572C8601330C91F326A2)] [added: [27](#sB37CB5A2290D5B0B985CFCA27DE6A21E)] |

| Item 6: | [Selected Financial [removed: Data](#s9EC9F4326594553B85DE7D9113444B7D)] [added: Data](#s4B2946277CCD5409B3D8CD35B869824D)] | [removed: [28](#s9EC9F4326594553B85DE7D9113444B7D)] [added: [28](#s4B2946277CCD5409B3D8CD35B869824D)] |

| Item 7: | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#sFB53BC04D4A354FD8C2D034EB147292D)] [added: Operations](#sDFBEF67A18965216843EA50C428ED036)] | [removed: [29](#sFB53BC04D4A354FD8C2D034EB147292D)] [added: [29](#sDFBEF67A18965216843EA50C428ED036)] |

| Item 7A: | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#sB5AD1880484D525EBD65AE39829D8A39)] [added: Risk](#sF2D22B4BAD2D5A959D1E337F4757511C)] | [removed: [48](#sB5AD1880484D525EBD65AE39829D8A39)] [added: [48](#sF2D22B4BAD2D5A959D1E337F4757511C)] |

| Item 8: | [Financial Statements and Supplementary [removed: Data](#s0280F306B40351DF92F31CF8D06D2326)] [added: Data](#s46FB2522678D50EC91343C15E3A91C22)] | [removed: [48](#s0280F306B40351DF92F31CF8D06D2326)] [added: [48](#s46FB2522678D50EC91343C15E3A91C22)] |

| Item 9: | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#s739C9D21D6EB5D759AAB1444D7BBDC55)] [added: Disclosure](#s3AFB130B5CE05A8B8BAB577B5754F840)] | [removed: [48](#s739C9D21D6EB5D759AAB1444D7BBDC55)] [added: [48](#s3AFB130B5CE05A8B8BAB577B5754F840)] |

| Item 9A: | [Controls and [removed: Procedures](#s766B002040DC5EDD9DA3CC1F38070837)] [added: Procedures](#sD0956FFE248C5722834A8ACF7BF50D24)] | [removed: [49](#s766B002040DC5EDD9DA3CC1F38070837)] [added: [49](#sD0956FFE248C5722834A8ACF7BF50D24)] |

| Item 9B: | [Other [removed: Information](#s0B73879225F05B7C82A8127189C3B5F4)] [added: Information](#s1CB0C8B8C8D85085925CF7D6EA2049A9)] | [removed: [49](#s0B73879225F05B7C82A8127189C3B5F4)] [added: [49](#s1CB0C8B8C8D85085925CF7D6EA2049A9)] |

| Item 10: | [Directors, Executive Officers and Corporate [removed: Governance](#sDDBBEDB561DD5BBC8FEBA32F68AC6210)] [added: Governance](#s060C8CE1BCD753B6880FE823149F9C56)] | [removed: [50](#sDDBBEDB561DD5BBC8FEBA32F68AC6210)] [added: [50](#s060C8CE1BCD753B6880FE823149F9C56)] |

| Item 11: | [Executive [removed: Compensation](#s3E454854AB1F58DDAA1903F2102167F4)] [added: Compensation](#s0E67C8F710FF5256BC4C45AE53005EB1)] | [removed: [50](#s3E454854AB1F58DDAA1903F2102167F4)] [added: [50](#s0E67C8F710FF5256BC4C45AE53005EB1)] |

| Item 12: | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#s836125CE5B315F6EBE0529C2EA86251A)] [added: Matters](#sC624A10880F85B77ABE6D3B535BB28DE)] | [removed: [51](#s836125CE5B315F6EBE0529C2EA86251A)] [added: [51](#sC624A10880F85B77ABE6D3B535BB28DE)] |

| Item 13: | [Certain Relationships and Related Transactions, and Director [removed: Independence](#s1B678C0FE44453F6B32FABBA32B55E17)] [added: Independence](#sCB2B4C001CAA531792E05C540CD6CDDB)] | [removed: [52](#s1B678C0FE44453F6B32FABBA32B55E17)] [added: [52](#sCB2B4C001CAA531792E05C540CD6CDDB)] |

| Item 14: | [Principal Accounting Fees and [removed: Services](#s59933D1D5C6B5A3990C56E52A31590DC)] [added: Services](#s88B8DAEB8E8459D6B5246A555159FF54)] | [removed: [52](#s59933D1D5C6B5A3990C56E52A31590DC)] [added: [52](#s88B8DAEB8E8459D6B5246A555159FF54)] |

| Item 15: | [Exhibits, Financial Statement [removed: Schedules](#s1F532DA06C665DF1B1DCDC07481B1CEA)] [added: Schedules](#sEB41F56637815950B1B7E508B0C17660)] | [removed: [53](#s1F532DA06C665DF1B1DCDC07481B1CEA)] [added: [53](#sEB41F56637815950B1B7E508B0C17660)] |

| | [removed: 2017 | | |] [added: 2018] | | [added: 2017] | | 2016 | [removed: | | | | | | 2015 | | | | | |]

| | (In millions, except percentages) | | | | | | [removed: | | | | | | | | | | | | | |]

| Applied Global Services | [removed: 3,017] [added: 33] | | | | [removed: 21] [added: 44] | [removed: %] | | [removed: 2,589] | [added: 77] | | | [removed: 24] | [removed: %] [added: 33] | | [removed: 2,447] | | [added: 44] | | [removed: 25] | [removed: %] | [added: 77 | | |]

| Display and Adjacent Markets | [removed: 1,900 | | | | 13 | % | | 1,206 | |] [added: 14] | | [removed: 11] | [removed: %] | [added: 7] | [removed: 944] | | | [added: —] | [removed: 10] | [removed: %] |

| Corporate and Other | [removed: 103] [added: 98] | | | | [removed: 1] [added: 1%] | [removed: %] | [added: 103] | [removed: 157] | | | [added: 1%] | [removed: 1] | [removed: %] [added: 157] | | [removed: 133] | | [added: 1%] | | [removed: 1] [added: (5)%] | [removed: %] | [added: (34)% |]

| [removed: Total] [added: Consolidated total] | $ | [removed: 14,537 | | | 100] [added: 17,253] | [removed: %] | | $ | [removed: 10,825 | | | 100] [added: 14,537] | [removed: %] | | $ | [removed: 9,659 | | | 100] [added: 10,825] | [removed: %] |

Applied’s metrology, inspection and review systems’ imaging capabilities and algorithms employ optical and e-beam technologies to meet the most advanced technical demands, such as self-aligned double and quad patterning, extreme ultraviolet layers, measurement-intensive optimal proximity correction mask qualification, and [removed: emerging] [added: new] 3D architectures.

| Metrology and Inspection Metrology and inspection tools are used to locate, measure, and analyze defects and features on the wafer during various stages of the fabrication processes. Applied enables customers to characterize and control critical dimension (CD) and defect issues, especially at advanced generation technology nodes. | | SEMVision [removed: G6] [added: G7] Defect Analysis PROVision eBeam Inspection UVision [removed: 7] [added: 8] Inspection VeritySEM 5i Metrology Aera4 Mask Inspection |

Customer demand for products and services is fulfilled through a global distribution system with [removed: 90] [added: 93] locations and trained service engineers located in close proximity to customer sites in more than a dozen countries to support [removed: approximately 38,000] [added: over 40,000] installed Applied semiconductor, display and other manufacturing systems worldwide.

| [removed: Certified] [added: Technology-enabled] Services A comprehensive service product portfolio that combines service technology and tool specific performance commitments in order to optimize customer factory productivity. |

| [removed: Parts] [added: Supply Chain Assurance] Programs Spare parts [added: product] portfolio [removed: targets key manufacturing challenges and balances inventory] [added: offers options to balance inventory,] cost and risk to efficiently meet [removed: customer] fab requirements. |

| Legacy Equipment Comprehensive 200mm equipment and upgrades portfolio to address a full spectrum of production needs and extend tool lifetime. Applied [removed: legacy] [added: 200mm] equipment supports [added: market inflections and] new technology for a broad variety of devices including analog, power, and MEMS. |

10-K 1 amat1028201810-kq42018.htm AMAT FY'18 10-K

| Item 16: | [Form 10-K Summary](#sEB41F56637815950B1B7E508B0C17660) | [53](#sEB41F56637815950B1B7E508B0C17660) |

| | [Signatures](#s3F255A8B4EAD5C0EB7874C34A782F81B) | [102](#s3F255A8B4EAD5C0EB7874C34A782F81B) |

| | | | | | | |

In anticipation of the adoption of the new revenue recognition standard in the first quarter of fiscal 2019, Applied has removed the 12 month threshold in relation to backlog in order to more closely align backlog to performance obligations as defined under the new revenue recognition standard.

As such, backlog as of October 28, 2018 consists of: (1) orders for which written authorizations have been accepted, or shipment has occurred but revenue has not been recognized; and (2) contractual service revenue and maintenance fees.

Backlog by reportable segment as of October 28, 2018 was as follows:

| | | | | | | |

| --- | --- | --- | --- | --- | --- | --- |

| | | | | | | |

| | | | | | | |

| Semiconductor Systems | $ | 2,479 | | | 41 | % |

| Total | $ | 6,092 | | | 100 | % |

Of the total backlog as of October 28, 2018, approximately 15% is not reasonably expected to be filled within the next 12 months.

| • | delays or restrictions in shipping materials or finished products between countries; |

International trade disputes could result in increases in tariffs and other trade restrictions and protectionist measures that could have an adverse impact on our operations.

We sell a significant majority of our products into countries outside of the United States and we purchase a significant portion of equipment and supplies from suppliers outside of the United States.

The United States and other countries have levied tariffs and taxes on certain goods.

Increases in tariffs, additional taxes or other trade restrictions and retaliatory measures may impact end-user demand and customer investment in manufacturing equipment, increase our manufacturing costs, decrease margins, reduce the competitiveness of our products, or inhibit our ability to sell products or purchase necessary equipment and supplies, which could have a material adverse effect on our business, results of operations, or financial condition.

Certain international sales depend on our ability to obtain export licenses, and our inability to obtain such licenses could potentially limit our markets and impact our business.

In addition, new legislation or additional regulations may affect or impair our ability to invest in certain countries or require us to obtain regulatory approvals to do so.

All information systems are subject to disruption, breach or failure.

Compliance with, and changes to, laws and regulations concerning privacy and information security could result in significant expense, and any failure to comply could result in proceedings against Applied by regulatory authorities or other third parties.

On December 22, 2017, the U.S. government enacted tax legislation referred to as the Tax Cuts and Jobs Act (the “Tax Act”).

The U.S. government may issue regulations that significantly affect how the Tax Act is interpreted.

The U.S. Securities and Exchange Commission issued Staff Accounting Bulletin No. 118 (SAB 118), which provides guidance on accounting for income tax effects of the Tax Act.

SAB 118 provides a measurement period for companies to complete this accounting, which will not extend beyond one year from the Tax Act enactment date.

Pursuant to SAB 118, provisional adjustments were recorded when reasonable estimates could be determined.

No adjustments were recorded when reasonable estimates could not be determined.

These provisional estimates will be revised as information becomes available and guidance is issued by the Internal Revenue Service, and changes in Applied’s provision for income taxes and effective tax rates could have a material impact on Applied’s results of operations and financial condition.

| Owned | 4,530 | | 2,417 | | 6,947 |

| Leased | 1,037 | | 1,341 | | 2,378 |

| Total | 5,567 | | 3,758 | | 9,325 |

| Applied Materials | 100.00 | | | 121.04 | | | 96.67 | | | 171.69 | | | 343.16 | | | 198.27 | |

| S&P 500 Index | 100.00 | | | 117.27 | | | 123.37 | | | 128.93 | | | 159.40 | | | 171.11 | |

| RDG Semiconductor Composite Index | 100.00 | | | 128.42 | | | 126.26 | | | 154.41 | | | 232.29 | | | 221.61 | |

| (July 30, 2018 to August 26, 2018) | 7.9 | | | $ | 46.69 | | | $ | 369 | | | 7.9 | | | $ | 4,709 | |

| (August 27, 2018 to September 23, 2018) | 3.7 | | | $ | 40.13 | | | 148 | | | | 3.7 | | | $ | 4,561 | |

| (September 24, 2018 to October 28, 2018) | 6.5 | | | $ | 35.78 | | | 234 | | | | 6.5 | | | $ | 4,327 | |

| Total | 18.1 | | | $ | 41.43 | | | $ | 751 | | | 18.1 | | | | | |

10-K 1 amat1029201710-kq42017.htm AMAT 10.29.2017 10-K

| | [Signatures](#s6398237FF04C5AEA967CD5E052A34F10) | [103](#s6398237FF04C5AEA967CD5E052A34F10) |

Net sales by reportable segment for the past three fiscal years were as follows:

| | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Semiconductor Systems | $ | 9,517 | | | 65 | % | | $ | 6,873 | | | 64 | % | | $ | 6,135 | | | 64 | % |

| | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

Applied’s investments in RD&E for product development and engineering programs over the last three fiscal years were as follows: $1.8 billion (12 percent of net sales) in fiscal 2017, $1.5 billion (14 percent of net sales) in fiscal 2016, and $1.5 billion (15 percent of net sales) in fiscal 2015.

Applied has spent an average of 15 percent of net sales in RD&E over the last five years.

In addition to RD&E for specific product technologies, Applied maintains ongoing programs for automation control systems, materials research, environmental control and product ideation.

Net sales by geographic region for the past three fiscal years, determined by the location of customers’ facilities to which products were shipped, were as follows:

| | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

Applied further believes that China and Korea present large potential markets for its products and opportunity for growth over the long term, although at lower projected levels of profitability and margins for certain products than historically have been achieved in other regions.

As of October 29, 2017, Applied intends to indefinitely reinvest approximately $4.5 billion of cash, cash equivalents and marketable securities held by foreign subsidiaries and does not plan to repatriate these funds.

Applied would need to accrue and pay U.S. taxes if these funds were repatriated.

Income tax legislation in the U.S., the “Tax Cuts and Jobs Act”, could possibly be enacted during the first quarter of fiscal 2018, which could impact Applied’s provision for income taxes, effective tax rate, results of operations and financial condition.

For example, under legislative proposals requiring mandatory repatriation that are being considered, Applied would need to accrue U.S. taxes on previously unrepatriated earnings.

| Owned | 3,964 | | 1,652 | | 5,616 |

| Leased | 845 | | 1,153 | | 1,998 |

| Total | 4,809 | | 2,805 | | 7,614 |

The following table sets forth the high and low closing sale prices for the periods presented as reported on the NASDAQ Global Select Market.

| | Price Range | | | | | | |

| | High | | | | Low | | |

| First quarter | $ | 35.04 | | | $ | 28.18 | |

| Second quarter | $ | 41.33 | | | $ | 34.25 | |

| Third quarter | $ | 47.45 | | | $ | 41.01 | |

| Fourth quarter | $ | 56.69 | | | $ | 42.03 | |

| First quarter | $ | 19.26 | | | $ | 16.08 | |

| Second quarter | $ | 21.56 | | | $ | 15.64 | |

| Third quarter | $ | 26.90 | | | $ | 19.61 | |

| Fourth quarter | $ | 30.57 | | | $ | 25.97 | |

| Applied Materials | 100.00 | | | 171.03 | | | 207.01 | | | 165.34 | | | 293.64 | | | 586.91 | |

| S&P 500 Index | 100.00 | | | 127.18 | | | 149.14 | | | 156.89 | | | 163.97 | | | 202.72 | |

| RDG Semiconductor Composite Index | 100.00 | | | 131.94 | | | 167.25 | | | 160.80 | | | 193.36 | | | 288.96 | |

Applied currently anticipates that cash dividends will continue to be paid on a quarterly basis, although the declaration of any future cash dividend is at the discretion of the Board of Directors and will depend on Applied’s financial condition, results of operations, capital requirements, business conditions and other factors, as well as a determination by the Board of Directors that cash dividends are in the best interests of Applied’s stockholders.

| (July 31, 2017 to August 27, 2017) | 1 | | | $ | 43.68 | | | $ | 58 | | | 1 | | | $ | 937 | |

| (August 28, 2017 to September 24, 2017) | 3 | | | $ | 45.80 | | | 139 | | | | 3 | | | $ | 798 | |

| (September 25, 2017 to October 29, 2017) | 4 | | | $ | 52.96 | | | 188 | | | | 4 | | | $ | 3,610 | |