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Microsoft Excel LibreOffice Calc

Applied Materials Inc. (AMAT)


Analysis of Goodwill and Intangible Assets

Difficulty: Advanced


Goodwill and Intangible Assets Accounting Policy

Goodwill and indefinite-lived assets 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. Purchased technology and other intangible assets are presented at cost, net of accumulated amortization, and are amortized over their estimated useful lives of 1 to 15 years using the straight-line method.

Source: 10-K (filing date: 2018-12-13).


Goodwill and Intangible Assets Disclosure

Applied Materials Inc., balance sheet: goodwill and intangible assets

US$ in millions

Microsoft Excel LibreOffice Calc
Oct 28, 2018 Oct 29, 2017 Oct 30, 2016 Oct 25, 2015 Oct 26, 2014 Oct 27, 2013
Goodwill hidden hidden hidden hidden hidden hidden
Purchased technology hidden hidden hidden hidden hidden hidden
Other intangible assets hidden hidden hidden hidden hidden hidden
Finite-lived intangible assets, gross carrying amount hidden hidden hidden hidden hidden hidden
Accumulated amortization hidden hidden hidden hidden hidden hidden
Finite-lived intangible assets, carrying amount hidden hidden hidden hidden hidden hidden
Indefinite-lived intangible assets hidden hidden hidden hidden hidden hidden
Intangible assets hidden hidden hidden hidden hidden hidden
Goodwill, purchased technology and other intangible assets hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-12-13), 10-K (filing date: 2017-12-15), 10-K (filing date: 2016-12-15), 10-K (filing date: 2015-12-09), 10-K (filing date: 2014-12-17), 10-K (filing date: 2013-12-04).

Item Description The company
Goodwill Amount after accumulated impairment loss of an asset representing future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized.
Intangible assets Sum of the carrying amounts of all intangible assets, excluding goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. Applied Materials Inc.’s intangible assets declined from 2016 to 2017 and from 2017 to 2018.
Goodwill, purchased technology and other intangible assets Sum of the carrying amounts of all intangible assets, including goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. Applied Materials Inc.’s goodwill, purchased technology and other intangible assets declined from 2016 to 2017 and from 2017 to 2018.

Analyst Adjustments: Removal of Goodwill

Applied Materials Inc., adjustments to financial data

US$ in millions

Microsoft Excel LibreOffice Calc
Oct 28, 2018 Oct 29, 2017 Oct 30, 2016 Oct 25, 2015 Oct 26, 2014 Oct 27, 2013
Adjustment to Total Assets
Total assets (as reported) hidden hidden hidden hidden hidden hidden
Less: Goodwill hidden hidden hidden hidden hidden hidden
Total assets (adjusted) hidden hidden hidden hidden hidden hidden
Adjustment to Stockholders’ Equity
Stockholders’ equity (as reported) hidden hidden hidden hidden hidden hidden
Less: Goodwill hidden hidden hidden hidden hidden hidden
Stockholders’ equity (adjusted) hidden hidden hidden hidden hidden hidden
Adjustment to Net Income
Net income (as reported) hidden hidden hidden hidden hidden hidden
Add: Impairment of goodwill hidden hidden hidden hidden hidden hidden
Net income (adjusted) hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-12-13), 10-K (filing date: 2017-12-15), 10-K (filing date: 2016-12-15), 10-K (filing date: 2015-12-09), 10-K (filing date: 2014-12-17), 10-K (filing date: 2013-12-04).


Applied Materials Inc., Financial Data: Reported vs. Adjusted


Adjusted Ratios: Removal of Goodwill (Summary)

Applied Materials Inc., adjusted ratios

Microsoft Excel LibreOffice Calc
Oct 28, 2018 Oct 29, 2017 Oct 30, 2016 Oct 25, 2015 Oct 26, 2014 Oct 27, 2013
Net Profit Margin
Reported net profit margin hidden hidden hidden hidden hidden hidden
Adjusted net profit margin hidden hidden hidden hidden hidden hidden
Total Asset Turnover
Reported total asset turnover hidden hidden hidden hidden hidden hidden
Adjusted total asset turnover hidden hidden hidden hidden hidden hidden
Financial Leverage
Reported financial leverage hidden hidden hidden hidden hidden hidden
Adjusted financial leverage hidden hidden hidden hidden hidden hidden
Return on Equity (ROE)
Reported ROE hidden hidden hidden hidden hidden hidden
Adjusted ROE hidden hidden hidden hidden hidden hidden
Return on Assets (ROA)
Reported ROA hidden hidden hidden hidden hidden hidden
Adjusted ROA hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-12-13), 10-K (filing date: 2017-12-15), 10-K (filing date: 2016-12-15), 10-K (filing date: 2015-12-09), 10-K (filing date: 2014-12-17), 10-K (filing date: 2013-12-04).

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Applied Materials Inc.’s adjusted net profit margin improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018 not reaching 2016 level.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Applied Materials Inc.’s adjusted total asset turnover deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Applied Materials Inc.’s adjusted financial leverage declined from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Applied Materials Inc.’s adjusted ROE improved from 2016 to 2017 and from 2017 to 2018.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Applied Materials Inc.’s adjusted ROA improved from 2016 to 2017 and from 2017 to 2018.

Applied Materials Inc., Ratios: Reported vs. Adjusted


Adjusted Net Profit Margin

Microsoft Excel LibreOffice Calc
Oct 28, 2018 Oct 29, 2017 Oct 30, 2016 Oct 25, 2015 Oct 26, 2014 Oct 27, 2013
As Reported
Selected Financial Data (US$ in millions)
Net income hidden hidden hidden hidden hidden hidden
Net sales hidden hidden hidden hidden hidden hidden
Ratio
Net profit margin1 hidden hidden hidden hidden hidden hidden
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Adjusted net income hidden hidden hidden hidden hidden hidden
Net sales hidden hidden hidden hidden hidden hidden
Ratio
Adjusted net profit margin2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-12-13), 10-K (filing date: 2017-12-15), 10-K (filing date: 2016-12-15), 10-K (filing date: 2015-12-09), 10-K (filing date: 2014-12-17), 10-K (filing date: 2013-12-04).

2018 Calculations

1 Net profit margin = 100 × Net income ÷ Net sales
= 100 × hidden ÷ hidden = hidden

2 Adjusted net profit margin = 100 × Adjusted net income ÷ Net sales
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Applied Materials Inc.’s adjusted net profit margin improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018 not reaching 2016 level.

Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Oct 28, 2018 Oct 29, 2017 Oct 30, 2016 Oct 25, 2015 Oct 26, 2014 Oct 27, 2013
As Reported
Selected Financial Data (US$ in millions)
Net sales hidden hidden hidden hidden hidden hidden
Total assets hidden hidden hidden hidden hidden hidden
Ratio
Total asset turnover1 hidden hidden hidden hidden hidden hidden
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Net sales hidden hidden hidden hidden hidden hidden
Adjusted total assets hidden hidden hidden hidden hidden hidden
Ratio
Adjusted total asset turnover2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-12-13), 10-K (filing date: 2017-12-15), 10-K (filing date: 2016-12-15), 10-K (filing date: 2015-12-09), 10-K (filing date: 2014-12-17), 10-K (filing date: 2013-12-04).

2018 Calculations

1 Total asset turnover = Net sales ÷ Total assets
= hidden ÷ hidden = hidden

2 Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= hidden ÷ hidden = hidden

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Applied Materials Inc.’s adjusted total asset turnover deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Oct 28, 2018 Oct 29, 2017 Oct 30, 2016 Oct 25, 2015 Oct 26, 2014 Oct 27, 2013
As Reported
Selected Financial Data (US$ in millions)
Total assets hidden hidden hidden hidden hidden hidden
Stockholders’ equity hidden hidden hidden hidden hidden hidden
Ratio
Financial leverage1 hidden hidden hidden hidden hidden hidden
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Adjusted total assets hidden hidden hidden hidden hidden hidden
Adjusted stockholders’ equity hidden hidden hidden hidden hidden hidden
Ratio
Adjusted financial leverage2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-12-13), 10-K (filing date: 2017-12-15), 10-K (filing date: 2016-12-15), 10-K (filing date: 2015-12-09), 10-K (filing date: 2014-12-17), 10-K (filing date: 2013-12-04).

2018 Calculations

1 Financial leverage = Total assets ÷ Stockholders’ equity
= hidden ÷ hidden = hidden

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted stockholders’ equity
= hidden ÷ hidden = hidden

Ratio Description The company
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Applied Materials Inc.’s adjusted financial leverage declined from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Oct 28, 2018 Oct 29, 2017 Oct 30, 2016 Oct 25, 2015 Oct 26, 2014 Oct 27, 2013
As Reported
Selected Financial Data (US$ in millions)
Net income hidden hidden hidden hidden hidden hidden
Stockholders’ equity hidden hidden hidden hidden hidden hidden
Ratio
ROE1 hidden hidden hidden hidden hidden hidden
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Adjusted net income hidden hidden hidden hidden hidden hidden
Adjusted stockholders’ equity hidden hidden hidden hidden hidden hidden
Ratio
Adjusted ROE2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-12-13), 10-K (filing date: 2017-12-15), 10-K (filing date: 2016-12-15), 10-K (filing date: 2015-12-09), 10-K (filing date: 2014-12-17), 10-K (filing date: 2013-12-04).

2018 Calculations

1 ROE = 100 × Net income ÷ Stockholders’ equity
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROE = 100 × Adjusted net income ÷ Adjusted stockholders’ equity
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Applied Materials Inc.’s adjusted ROE improved from 2016 to 2017 and from 2017 to 2018.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Oct 28, 2018 Oct 29, 2017 Oct 30, 2016 Oct 25, 2015 Oct 26, 2014 Oct 27, 2013
As Reported
Selected Financial Data (US$ in millions)
Net income hidden hidden hidden hidden hidden hidden
Total assets hidden hidden hidden hidden hidden hidden
Ratio
ROA1 hidden hidden hidden hidden hidden hidden
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Adjusted net income hidden hidden hidden hidden hidden hidden
Adjusted total assets hidden hidden hidden hidden hidden hidden
Ratio
Adjusted ROA2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-12-13), 10-K (filing date: 2017-12-15), 10-K (filing date: 2016-12-15), 10-K (filing date: 2015-12-09), 10-K (filing date: 2014-12-17), 10-K (filing date: 2013-12-04).

2018 Calculations

1 ROA = 100 × Net income ÷ Total assets
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROA = 100 × Adjusted net income ÷ Adjusted total assets
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Applied Materials Inc.’s adjusted ROA improved from 2016 to 2017 and from 2017 to 2018.