Goodwill and Intangible Assets Accounting Policy
Goodwill and Intangible Assets Disclosure
Analyst Adjustments: Removal of Goodwill
Adjusted Ratios: Removal of Goodwill (Summary)
Adjusted Net Profit Margin
Adjusted Total Asset Turnover
Adjusted Financial Leverage
Adjusted Return on Equity (ROE)
Adjusted Return on Assets (ROA)

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).

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

US$ in millions

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

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.

Applied Materials Inc., adjustments to financial data

US$ in millions

		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)
	Less: Goodwill
	Total assets (adjusted)
	Adjustment to Stockholders’ Equity
	Stockholders’ equity (as reported)
	Less: Goodwill
	Stockholders’ equity (adjusted)
	Adjustment to Net Income
	Net income (as reported)
	Add: Impairment of goodwill
	Net income (adjusted)

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

Applied Materials Inc., adjusted ratios

		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
	Adjusted net profit margin
	Total Asset Turnover
	Reported total asset turnover
	Adjusted total asset turnover
	Financial Leverage
	Reported financial leverage
	Adjusted financial leverage
	Return on Equity (ROE)
	Reported ROE
	Adjusted ROE
	Return on Assets (ROA)
	Reported ROA
	Adjusted ROA

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

		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
	Net sales
	Ratio
	Net profit margin¹
	Adjusted for Goodwill
	Selected Financial Data (US$ in millions)
	Adjusted net income
	Net sales
	Ratio
	Adjusted net profit margin²

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.

		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
	Total assets
	Ratio
	Total asset turnover¹
	Adjusted for Goodwill
	Selected Financial Data (US$ in millions)
	Net sales
	Adjusted total assets
	Ratio
	Adjusted total asset turnover²

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.

		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
	Stockholders’ equity
	Ratio
	Financial leverage¹
	Adjusted for Goodwill
	Selected Financial Data (US$ in millions)
	Adjusted total assets
	Adjusted stockholders’ equity
	Ratio
	Adjusted financial leverage²

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.

		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
	Stockholders’ equity
	Ratio
	ROE¹
	Adjusted for Goodwill
	Selected Financial Data (US$ in millions)
	Adjusted net income
	Adjusted stockholders’ equity
	Ratio
	Adjusted ROE²

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.

		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
	Total assets
	Ratio
	ROA¹
	Adjusted for Goodwill
	Selected Financial Data (US$ in millions)
	Adjusted net income
	Adjusted total assets
	Ratio
	Adjusted ROA²

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.

	Applied Materials Inc.	Other companies (not purchased previously)
Financial Statements
Common-Size Financial Statements
Ratios
Relative Valuation
Discounted Cash Flow (DCF) Valuation
Economic Value Added (EVA)
Long-term Trends
Analysis
Financial Reporting Quality

	All companies
Financial Statements
Common-Size Financial Statements
Ratios
Relative Valuation
Discounted Cash Flow (DCF) Valuation
Economic Value Added (EVA)
Long-term Trends
Analysis
Financial Reporting Quality

Applied Materials Inc. (AMAT)

Analysis of Goodwill and Intangible Assets

Goodwill and Intangible Assets Accounting Policy

Goodwill and Intangible Assets Disclosure

Analyst Adjustments: Removal of Goodwill

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

Adjusted Ratios: Removal of Goodwill (Summary)

Applied Materials Inc., Ratios: Reported vs. Adjusted

Adjusted Net Profit Margin

Adjusted Total Asset Turnover

Adjusted Financial Leverage

Adjusted Return on Equity (ROE)

Adjusted Return on Assets (ROA)