Stock Analysis on Net
Stock Analysis on Net
Microsoft Excel LibreOffice Calc

Applied Materials Inc. (NASDAQ:AMAT)

Analysis of Income Taxes

Advanced level

Income Tax Expense (Benefit)

Applied Materials Inc., income tax expense (benefit), continuing operations

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended: Oct 25, 2020 Oct 27, 2019 Oct 28, 2018 Oct 29, 2017 Oct 30, 2016 Oct 25, 2015
U.S. 196  240  1,035  67  (36) 134 
Foreign 263  260  126  233  351  199 
State 20  12  22  (2) 18 
Current 479  512  1,183  309  313  351 
U.S. (3) 151  (11) 55  (194)
Foreign 76  46  57  (7) (89) 69 
State (5) (3) (10) 13  (5)
Deferred 68  51  198  (12) (21) (130)
Provision for income taxes 547  563  1,381  297  292  221 

Based on: 10-K (filing date: 2020-12-11), 10-K (filing date: 2019-12-13), 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).

Item Description The company
Current Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations. Applied Materials Inc.’s current decreased from 2018 to 2019 and from 2019 to 2020.
Deferred Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations. Applied Materials Inc.’s deferred decreased from 2018 to 2019 but then slightly increased from 2019 to 2020.
Provision for income taxes Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. Applied Materials Inc.’s provision for income taxes decreased from 2018 to 2019 and from 2019 to 2020.

Effective Income Tax Rate (EITR)

Applied Materials Inc., effective income tax rate (EITR) reconciliation

Microsoft Excel LibreOffice Calc
Oct 25, 2020 Oct 27, 2019 Oct 28, 2018 Oct 29, 2017 Oct 30, 2016 Oct 25, 2015
Tax provision at U.S. statutory rate 21.00% 21.00% 23.40% 35.00% 35.00% 35.00%
Effect of foreign operations taxed at various rates -5.90% -5.90% -15.60% -24.90% -24.10% -16.30%
Changes in prior years’ unrecognized tax benefits 0.50% 2.60% 0.00% 0.00% 0.00% 0.00%
Resolutions of prior years’ income tax filings -1.00% -0.10% -0.70% -1.90% 3.90% -4.90%
Research and other tax credits -1.30% -1.10% -0.70% -0.70% -1.30% -0.20%
State income taxes, net of federal benefit 0.00% 0.00% 0.20% 0.30% 0.60% 0.90%
U.S. domestic production deduction 0.00% 0.00% -0.10% -0.20% -0.20% -0.60%
Share-based compensation 0.00% 0.00% -0.70% 0.40% 0.40% 0.80%
Other -0.20% 0.70% -0.10% 0.00% 0.20% -0.90%
Effective income tax rate, before changes in U.S. tax law 13.10% 17.20% 5.70% 8.00% 14.50% 13.80%
Changes in U.S. tax law 0.00% 0.00% 23.70% 0.00% 0.00% 0.00%
Effective income tax rate 13.10% 17.20% 29.40% 8.00% 14.50% 13.80%

Based on: 10-K (filing date: 2020-12-11), 10-K (filing date: 2019-12-13), 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).

Item Description The company
Effective income tax rate, before changes in U.S. tax law Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. Applied Materials Inc.’s effective income tax rate, before changes in U.S. tax law increased from 2018 to 2019 but then slightly decreased from 2019 to 2020.

Components of Deferred Tax Assets and Liabilities

Applied Materials Inc., components of deferred tax assets and liabilities

US$ in millions

Microsoft Excel LibreOffice Calc
Oct 25, 2020 Oct 27, 2019 Oct 28, 2018 Oct 29, 2017 Oct 30, 2016 Oct 25, 2015
Allowance for doubtful accounts 13  20  20 
Inventory reserves and basis difference 119  117  117  156  151  155 
Installation and warranty reserves 14  11  11 
Intangible assets 1,355  1,472  —  —  —  — 
Accrued liabilities 24  15  20  31  53  106 
Deferred revenue 32  36  15  17  17 
Tax credits 326  264  236  317  210  196 
Deferred compensation 130  98  79  81  45  79 
Share-based compensation 30  36  37  53  55  53 
Lease liability 55  —  —  —  —  — 
Other 96  58  48  67  176  150 
Gross deferred tax assets 2,185  2,115  561  734  730  787 
Valuation allowance (314) (257) (230) (227) (207) (207)
Deferred tax assets 1,871  1,858  331  507  523  580 
Fixed assets (76) (65) (48) (36) (29) (15)
Right of use assets (54) —  —  —  —  — 
Intangible assets —  —  (38) (76) (81) (91)
Undistributed foreign earnings (39) (38) (32) (11) (42) (68)
Foreign exchange —  —  (3) (4) —  (4)
Deferred tax liabilities (169) (103) (121) (127) (152) (178)
Net deferred tax assets (liabilities) 1,702  1,755  210  380  371  402 

Based on: 10-K (filing date: 2020-12-11), 10-K (filing date: 2019-12-13), 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).

Item Description The company
Gross deferred tax assets Amount before allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. Applied Materials Inc.’s gross deferred tax assets increased from 2018 to 2019 and from 2019 to 2020.
Deferred tax assets Amount after allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. Applied Materials Inc.’s deferred tax assets increased from 2018 to 2019 and from 2019 to 2020.
Net deferred tax assets (liabilities) Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, without jurisdictional netting. Applied Materials Inc.’s net deferred tax assets (liabilities) increased from 2018 to 2019 but then slightly decreased from 2019 to 2020.

Deferred Tax Assets and Liabilities, Classification

Applied Materials Inc., deferred tax assets and liabilities, classification

US$ in millions

Microsoft Excel LibreOffice Calc
Oct 25, 2020 Oct 27, 2019 Oct 28, 2018 Oct 29, 2017 Oct 30, 2016 Oct 25, 2015
Current deferred tax asset —  —  —  —  —  403 
Non-current deferred tax asset (included in Deferred income taxes and other assets) 1,711  1,766  222  385  372  55 
Non-current deferred tax liability (included in Other liabilities) 11  12  56 

Based on: 10-K (filing date: 2020-12-11), 10-K (filing date: 2019-12-13), 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).

Item Description The company
Non-current deferred tax asset (included in Deferred income taxes and other assets) Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, with jurisdictional netting and classified as noncurrent. Applied Materials Inc.’s non-current deferred tax asset (included in Deferred income taxes and other assets) increased from 2018 to 2019 but then slightly decreased from 2019 to 2020.
Non-current deferred tax liability (included in Other liabilities) Amount, after deferred tax asset, of deferred tax liability attributable to taxable differences, with jurisdictional netting and classified as noncurrent. Applied Materials Inc.’s non-current deferred tax liability (included in Other liabilities) decreased from 2018 to 2019 and from 2019 to 2020.

Adjustments to Financial Statements: Removal of Deferred Taxes

Applied Materials Inc., adjustments to financial statements

US$ in millions

Microsoft Excel LibreOffice Calc
Oct 25, 2020 Oct 27, 2019 Oct 28, 2018 Oct 29, 2017 Oct 30, 2016 Oct 25, 2015
Adjustment to Current Assets
Current assets (as reported) 13,369  10,206  10,747  12,918  8,353  9,261 
Less: Current deferred tax assets, net —  —  —  —  —  403 
Current assets (adjusted) 13,369  10,206  10,747  12,918  8,353  8,858 
Adjustment to Total Assets
Total assets (as reported) 22,353  19,024  17,773  19,419  14,588  15,308 
Less: Current deferred tax assets, net —  —  —  —  —  403 
Less: Noncurrent deferred tax assets, net 1,711  1,766  222  385  372  55 
Total assets (adjusted) 20,642  17,258  17,551  19,034  14,216  14,850 
Adjustment to Total Liabilities
Total liabilities (as reported) 11,775  10,810  10,934  10,070  7,371  7,695 
Less: Noncurrent deferred tax liabilities, net 11  12  56 
Total liabilities (adjusted) 11,766  10,799  10,922  10,065  7,370  7,639 
Adjustment to Stockholders’ Equity
Stockholders’ equity (as reported) 10,578  8,214  6,839  9,349  7,217  7,613 
Less: Net deferred tax assets (liabilities) 1,702  1,755  210  380  371  402 
Stockholders’ equity (adjusted) 8,876  6,459  6,629  8,969  6,846  7,211 
Adjustment to Net Income
Net income (as reported) 3,619  2,706  3,313  3,434  1,721  1,377 
Add: Deferred income tax expense (benefit) 68  51  198  (12) (21) (130)
Net income (adjusted) 3,687  2,757  3,511  3,422  1,700  1,247 

Based on: 10-K (filing date: 2020-12-11), 10-K (filing date: 2019-12-13), 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).


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


Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)

Applied Materials Inc., adjusted financial ratios

Microsoft Excel LibreOffice Calc
Oct 25, 2020 Oct 27, 2019 Oct 28, 2018 Oct 29, 2017 Oct 30, 2016 Oct 25, 2015
Current Ratio
Reported current ratio 3.00 2.30 2.64 3.14 2.30 2.44
Adjusted current ratio 3.00 2.30 2.64 3.14 2.30 2.33
Net Profit Margin
Reported net profit margin 21.04% 18.52% 19.20% 23.62% 15.90% 14.26%
Adjusted net profit margin 21.43% 18.87% 20.35% 23.54% 15.70% 12.91%
Total Asset Turnover
Reported total asset turnover 0.77 0.77 0.97 0.75 0.74 0.63
Adjusted total asset turnover 0.83 0.85 0.98 0.76 0.76 0.65
Financial Leverage
Reported financial leverage 2.11 2.32 2.60 2.08 2.02 2.01
Adjusted financial leverage 2.33 2.67 2.65 2.12 2.08 2.06
Return on Equity (ROE)
Reported ROE 34.21% 32.94% 48.44% 36.73% 23.85% 18.09%
Adjusted ROE 41.54% 42.68% 52.96% 38.15% 24.83% 17.29%
Return on Assets (ROA)
Reported ROA 16.19% 14.22% 18.64% 17.68% 11.80% 9.00%
Adjusted ROA 17.86% 15.98% 20.00% 17.98% 11.96% 8.40%

Based on: 10-K (filing date: 2020-12-11), 10-K (filing date: 2019-12-13), 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).

Financial ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities. Applied Materials Inc.’s adjusted current ratio deteriorated from 2018 to 2019 but then improved from 2019 to 2020 exceeding 2018 level.
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. Applied Materials Inc.’s adjusted net profit margin ratio deteriorated from 2018 to 2019 but then improved from 2019 to 2020 exceeding 2018 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 ratio deteriorated from 2018 to 2019 and from 2019 to 2020.
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 ratio increased from 2018 to 2019 but then decreased significantly from 2019 to 2020.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Applied Materials Inc.’s adjusted ROE deteriorated from 2018 to 2019 and from 2019 to 2020.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Applied Materials Inc.’s adjusted ROA deteriorated from 2018 to 2019 but then slightly improved from 2019 to 2020.

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


Adjusted Current Ratio

Microsoft Excel LibreOffice Calc
Oct 25, 2020 Oct 27, 2019 Oct 28, 2018 Oct 29, 2017 Oct 30, 2016 Oct 25, 2015
As Reported
Selected Financial Data (US$ in millions)
Current assets 13,369  10,206  10,747  12,918  8,353  9,261 
Current liabilities 4,459  4,447  4,068  4,115  3,632  3,798 
Liquidity Ratio
Current ratio1 3.00 2.30 2.64 3.14 2.30 2.44
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted current assets 13,369  10,206  10,747  12,918  8,353  8,858 
Current liabilities 4,459  4,447  4,068  4,115  3,632  3,798 
Liquidity Ratio
Adjusted current ratio2 3.00 2.30 2.64 3.14 2.30 2.33

Based on: 10-K (filing date: 2020-12-11), 10-K (filing date: 2019-12-13), 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).

2020 Calculations

1 Current ratio = Current assets ÷ Current liabilities
= 13,369 ÷ 4,459 = 3.00

2 Adjusted current ratio = Adjusted current assets ÷ Current liabilities
= 13,369 ÷ 4,459 = 3.00

Liquidity ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities. Applied Materials Inc.’s adjusted current ratio deteriorated from 2018 to 2019 but then improved from 2019 to 2020 exceeding 2018 level.

Adjusted Net Profit Margin

Microsoft Excel LibreOffice Calc
Oct 25, 2020 Oct 27, 2019 Oct 28, 2018 Oct 29, 2017 Oct 30, 2016 Oct 25, 2015
As Reported
Selected Financial Data (US$ in millions)
Net income 3,619  2,706  3,313  3,434  1,721  1,377 
Net sales 17,202  14,608  17,253  14,537  10,825  9,659 
Profitability Ratio
Net profit margin1 21.04% 18.52% 19.20% 23.62% 15.90% 14.26%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income 3,687  2,757  3,511  3,422  1,700  1,247 
Net sales 17,202  14,608  17,253  14,537  10,825  9,659 
Profitability Ratio
Adjusted net profit margin2 21.43% 18.87% 20.35% 23.54% 15.70% 12.91%

Based on: 10-K (filing date: 2020-12-11), 10-K (filing date: 2019-12-13), 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).

2020 Calculations

1 Net profit margin = 100 × Net income ÷ Net sales
= 100 × 3,619 ÷ 17,202 = 21.04%

2 Adjusted net profit margin = 100 × Adjusted net income ÷ Net sales
= 100 × 3,687 ÷ 17,202 = 21.43%

Profitability ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. Applied Materials Inc.’s adjusted net profit margin ratio deteriorated from 2018 to 2019 but then improved from 2019 to 2020 exceeding 2018 level.

Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Oct 25, 2020 Oct 27, 2019 Oct 28, 2018 Oct 29, 2017 Oct 30, 2016 Oct 25, 2015
As Reported
Selected Financial Data (US$ in millions)
Net sales 17,202  14,608  17,253  14,537  10,825  9,659 
Total assets 22,353  19,024  17,773  19,419  14,588  15,308 
Activity Ratio
Total asset turnover1 0.77 0.77 0.97 0.75 0.74 0.63
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Net sales 17,202  14,608  17,253  14,537  10,825  9,659 
Adjusted total assets 20,642  17,258  17,551  19,034  14,216  14,850 
Activity Ratio
Adjusted total asset turnover2 0.83 0.85 0.98 0.76 0.76 0.65

Based on: 10-K (filing date: 2020-12-11), 10-K (filing date: 2019-12-13), 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).

2020 Calculations

1 Total asset turnover = Net sales ÷ Total assets
= 17,202 ÷ 22,353 = 0.77

2 Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= 17,202 ÷ 20,642 = 0.83

Activity 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 ratio deteriorated from 2018 to 2019 and from 2019 to 2020.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Oct 25, 2020 Oct 27, 2019 Oct 28, 2018 Oct 29, 2017 Oct 30, 2016 Oct 25, 2015
As Reported
Selected Financial Data (US$ in millions)
Total assets 22,353  19,024  17,773  19,419  14,588  15,308 
Stockholders’ equity 10,578  8,214  6,839  9,349  7,217  7,613 
Solvency Ratio
Financial leverage1 2.11 2.32 2.60 2.08 2.02 2.01
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted total assets 20,642  17,258  17,551  19,034  14,216  14,850 
Adjusted stockholders’ equity 8,876  6,459  6,629  8,969  6,846  7,211 
Solvency Ratio
Adjusted financial leverage2 2.33 2.67 2.65 2.12 2.08 2.06

Based on: 10-K (filing date: 2020-12-11), 10-K (filing date: 2019-12-13), 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).

2020 Calculations

1 Financial leverage = Total assets ÷ Stockholders’ equity
= 22,353 ÷ 10,578 = 2.11

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted stockholders’ equity
= 20,642 ÷ 8,876 = 2.33

Solvency 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 ratio increased from 2018 to 2019 but then decreased significantly from 2019 to 2020.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Oct 25, 2020 Oct 27, 2019 Oct 28, 2018 Oct 29, 2017 Oct 30, 2016 Oct 25, 2015
As Reported
Selected Financial Data (US$ in millions)
Net income 3,619  2,706  3,313  3,434  1,721  1,377 
Stockholders’ equity 10,578  8,214  6,839  9,349  7,217  7,613 
Profitability Ratio
ROE1 34.21% 32.94% 48.44% 36.73% 23.85% 18.09%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income 3,687  2,757  3,511  3,422  1,700  1,247 
Adjusted stockholders’ equity 8,876  6,459  6,629  8,969  6,846  7,211 
Profitability Ratio
Adjusted ROE2 41.54% 42.68% 52.96% 38.15% 24.83% 17.29%

Based on: 10-K (filing date: 2020-12-11), 10-K (filing date: 2019-12-13), 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).

2020 Calculations

1 ROE = 100 × Net income ÷ Stockholders’ equity
= 100 × 3,619 ÷ 10,578 = 34.21%

2 Adjusted ROE = 100 × Adjusted net income ÷ Adjusted stockholders’ equity
= 100 × 3,687 ÷ 8,876 = 41.54%

Profitability 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 deteriorated from 2018 to 2019 and from 2019 to 2020.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Oct 25, 2020 Oct 27, 2019 Oct 28, 2018 Oct 29, 2017 Oct 30, 2016 Oct 25, 2015
As Reported
Selected Financial Data (US$ in millions)
Net income 3,619  2,706  3,313  3,434  1,721  1,377 
Total assets 22,353  19,024  17,773  19,419  14,588  15,308 
Profitability Ratio
ROA1 16.19% 14.22% 18.64% 17.68% 11.80% 9.00%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income 3,687  2,757  3,511  3,422  1,700  1,247 
Adjusted total assets 20,642  17,258  17,551  19,034  14,216  14,850 
Profitability Ratio
Adjusted ROA2 17.86% 15.98% 20.00% 17.98% 11.96% 8.40%

Based on: 10-K (filing date: 2020-12-11), 10-K (filing date: 2019-12-13), 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).

2020 Calculations

1 ROA = 100 × Net income ÷ Total assets
= 100 × 3,619 ÷ 22,353 = 16.19%

2 Adjusted ROA = 100 × Adjusted net income ÷ Adjusted total assets
= 100 × 3,687 ÷ 20,642 = 17.86%

Profitability 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 deteriorated from 2018 to 2019 but then slightly improved from 2019 to 2020.