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2.0.0.10 false Basis of Presentation 0601 - Disclosure - Basis of Presentation true false false false 1 usd $ false false Shares Standard http://www.xbrl.org/2003/instance shares xbrli 0 USD Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 USDEPS Divide http://www.xbrl.org/2003/iso4217 USD iso4217 http://www.xbrl.org/2003/instance shares xbrli 0 2 Basis of Presentation [Abstract] 0 us-gaap_GeneralPoliciesAbstract us-gaap true na duration string No definition available. false false false false false true false false false false false false 1 false false false false 0 0 false false false No definition available. false 3 Basis of Presentation 1 us-gaap_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock us-gaap true na duration string No definition available. false false false false false false false false false false false verboselabel false 1 false false false false 0 0   <div style="margin-left: 0%"> <div style="margin-top: 0pt; font-size: 1pt"></div> <div align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #ffffff"> <b><font style="font-family: 'Times New Roman', Times"> </font></b> </div> <div style="margin-top: 0pt; font-size: 1pt"></div> <div align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #ffffff">  <b><font style="font-family: 'Times New Roman', Times"> </font></b> </div> <div align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #ffffff"> <b><font style="font-family: 'Times New Roman', Times"></font></b> </div> <div style="margin-top: 12pt; font-size: 1pt">  </div> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #ffffff; text-align: left"> <tr> <td width="7%"></td> <td width="93%"></td> </tr> <tr valign="top"> <td> <b><font style="font-family: 'Times New Roman', Times">Note 1  </font></b> </td> <td> <b><font style="font-family: 'Times New Roman', Times">Basis of Presentation</font></b> </td> </tr> </table> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #ffffff"> <b><i><font style="font-family: 'Times New Roman', Times">Basis of Presentation</font></i></b> </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #ffffff"> 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 October 25, 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 Applied’s Annual Report on <font style="white-space: nowrap">Form 10-K</font> for the fiscal year ended October 25, 2009 (2009 <font style="white-space: nowrap">Form 10-K).</font> Applied’s results of operations for the three months ended January 31, 2010 are not necessarily indicative of future operating results. </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #ffffff"> 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. </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #ffffff"> Applied’s fiscal year ends on the last Sunday in October of each year. Fiscal 2010 contains 53 weeks, while fiscal 2009 contained 52 weeks, and the first fiscal quarter of 2010 contained 14 weeks, while the first fiscal quarter of 2009 contained 13 weeks. </div> <div style="margin-top: 12pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #ffffff"> <b><i><font style="font-family: 'Times New Roman', Times">Revenue Recognition</font></i></b> </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #ffffff"> 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; seller’s price to buyer is fixed or determinable; and collectability is probable. Applied’s shipping terms are customarily FOB Applied shipping point or equivalent terms. Applied’s 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<i>) </i>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 delivery of the deferred elements. Applied limits the amount of revenue recognition for delivered elements to the amount that is not contingent on the future delivery of products or services, future performance obligations or subject to customer-specified return or adjustment. In cases where Applied has sold products that have been demonstrated to meet product specifications prior to shipment, Applied believes that at the time of delivery, it has an enforceable claim to amounts recognized as revenue. The completed contract method is used for SunFab<sup style="font-size: 85%; vertical-align: top"><font style="font-variant: small-caps">tm</font></sup> thin film lines. Certain SunFab thin film contracts have provisions for additional amounts to become due to Applied if the line achieves certain output criteria subsequent to factory acceptance. Any additional amounts earned under these contracts are recognized upon achievement. Spare parts revenue is generally recognized upon shipment, and services revenue is generally recognized over the period that the services are provided. </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #ffffff"> In fiscal 2010, Applied elected to early adopt amended accounting standards issued by the Financial Accounting Standards Board (FASB) for multiple deliverable revenue arrangements on a prospective basis for applicable transactions originating or materially modified after October 25, 2009. The new standard changes the requirements for establishing separate units of accounting in a multiple element arrangement and requires the allocation of arrangement consideration to each deliverable to be based on the relative selling price. The FASB also amended the accounting standards for revenue recognition to exclude software that is contained in a tangible product from the scope of software revenue guidance if the software is essential to the tangible product’s functionality. Implementation of this new authoritative guidance had an insignificant impact on reported net sales as compared to net sales under previous guidance, as the new guidance did not change the units of accounting within sales arrangements and the elimination of the residual method for the allocation of arrangement consideration had an inconsequential impact on the amount and timing of reported net sales. Accordingly, Applied does not believe that the effect of adopting these standards will have a material impact on future financial periods. </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #ffffff"> For fiscal 2010 and future periods, when a sales arrangement contains multiple elements, such as hardware and services <font style="white-space: nowrap">and/or</font> software products, Applied allocates revenue to each element based on a selling price hierarchy. The selling price for a deliverable is based on its vendor specific objective evidence (VSOE) if available, third party evidence (TPE) if VSOE is not available, or estimated selling price (ESP) if neither VSOE nor TPE is available. Applied generally utilizes the ESP due to the nature of its products. In multiple element arrangements where <font style="white-space: nowrap">more-than-incidental</font> software deliverables are included, revenue is allocated to each separate unit of accounting for each of the non-software deliverables and to the software deliverables as a group using the relative selling prices of each of the deliverables in the arrangement based on the aforementioned selling price hierarchy. If the arrangement contains more than one software deliverable, the arrangement consideration allocated to the software deliverables as a group is then allocated to each software deliverable using the guidance for recognizing software revenue, as amended. </div> <div style="margin-top: 12pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #ffffff"> <b><i><font style="font-family: 'Times New Roman', Times">Business Combinations</font></i></b> </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #ffffff"> Effective in fiscal 2010, Applied adopted revised authoritative guidance on business combinations that covers the measurement of acquirer shares issued in consideration for a business combination, the recognition of contingent consideration, the accounting for preacquisition gain and loss contingencies, the recognition of capitalized in-process research and development, the accounting for acquisition-related restructuring cost accruals, the treatment of acquisition-related transaction costs, and the recognition of changes in the acquirer’s income tax valuation allowance. This authoritative guidance also revised the accounting for both increases and decreases in a parent’s controlling ownership interest. </div> <div style="margin-top: 12pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #ffffff"> <b><i><font style="font-family: 'Times New Roman', Times">Equity-Based Compensation</font></i></b> </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #ffffff"> Applied has adopted stock plans that permit grants to employees of equity-based awards, including stock options, restricted stock and restricted stock units (also referred to as “performance shares” under the Applied Materials, Inc. Employee Stock Incentive Plan). In addition, the Employee Stock Incentive Plan provides for the automatic grant of restricted stock units to non-employee directors and permits the grant of equity-based awards to consultants. Applied also has two Employee Stock Purchase Plans, one for United States employees and a second for international employees (collectively, ESPP), which enable eligible employees to purchase Applied common stock. </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #ffffff"> During each of the three months ended January 31, 2010 and January 25, 2009, Applied recognized total equity-based compensation expense related to stock options, ESPP shares, restricted stock units and restricted stock of $34 million. The equity-based compensation expense related to restricted stock units and restricted stock for the three months ended January 31, 2010 and January 25, 2009 was $25 million and $32 million, respectively. During each of the three months ended January 31, 2010 and January 25, 2009, Applied recognized income tax benefits related to equity-based compensation of $9 million. The cost associated with Applied’s stock options and restricted stock units, less expected forfeitures, is recognized over the awards’ service period for the entire award on a straight- line basis. The cost associated with Applied’s performance-based equity awards is recognized over the service period for each tranche. </div> <div style="margin-top: 12pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #ffffff"> <i><font style="font-family: 'Times New Roman', Times">Stock Options</font></i> </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #ffffff"> The exercise price of each stock option equals the fair market value of Applied common stock on the date of grant. Most options are scheduled to vest over four years and expire no later than seven years from the grant date. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. This model was developed for use in estimating the value of publicly traded options that have no vesting restrictions and are fully transferable. Applied’s employee stock options have characteristics significantly different from those of publicly traded options. </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #ffffff"> There were no stock options granted in the three months ended January 31, 2010 or January 25, 2009. </div> <div style="margin-top: 12pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #ffffff"> <i><font style="font-family: 'Times New Roman', Times">Employee Stock Purchase Plans</font></i> </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #ffffff"> Under the ESPP, substantially all employees may purchase Applied common stock through payroll deductions at a price equal to 85 percent of the lower of the fair market value of Applied common stock at the beginning or at the end of each <font style="white-space: nowrap">6-month</font> purchase period. No shares were issued under the ESPP during the three months ended January 31, 2010 or January 25, 2009. Compensation expense associated with the ESPP is calculated using the fair value of the employees’ purchase rights under the Black-Scholes model. </div> <div style="margin-top: 12pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #ffffff"> <i><font style="font-family: 'Times New Roman', Times">Restricted Stock Units and Restricted Stock</font></i> </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #ffffff"> Restricted stock units are converted into shares of Applied common stock upon vesting on a <font style="white-space: nowrap">one-for-one</font> basis. Restricted stock units typically vest over three to four years. Vesting of restricted stock units usually is subject to the grantee’s continued service with Applied. The compensation expense related to these awards is determined using the fair market value of Applied common stock on the date of the grant, and the compensation expense is recognized over the vesting period. Restricted stock has the same rights of other issued and outstanding shares of Applied common stock except these shares have no rights to dividends and are held in escrow until the grantee’s performance goals are achieved. At January 31, 2010, Applied had $225 million total unrecognized compensation expense, net of estimated forfeitures, related to restricted stock unit grants, which will be recognized over a weighted average period of 1.5 years. There were 9,508,000 and 214,000 restricted stock units granted in the three months ended January 31, 2010 and January 25, 2009, respectively. </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #ffffff"> Beginning in fiscal 2007, Applied initiated a performance-based equity award program for named executive officers and other key employees. These awards vest only if specific performance goals set by the Human Resources and Compensation Committee of Applied’s Board of Directors (the Committee) are achieved and if the grantee remains employed by Applied through the applicable vesting date. The performance goals require the achievement of targeted relative annual operating profit margin levels as compared to Applied’s peer companies in at least one of the four fiscal years beginning with the fiscal year of the grant. The fair value of the performance-based restricted stock units and restricted stock is estimated using the fair market value of Applied common stock on the date of the grant and assumes that the performance goals will be achieved. If achieved, the award vests over a specified remaining service period. If the performance goals are not met, no compensation expense is recognized and any previously recognized compensation expense is reversed. The expected cost of each award is reflected over the service period and is reduced for estimated forfeitures. The Committee approved the grant of 1,775,000 performance-based restricted stock units and 50,000 performance-based shares of restricted stock under this program in the three months ended January 31, 2010. There were no performance-based awards granted in the three months ended January 25, 2009. As of January 31, 2010, 70% of the performance goals associated with the performance-based awards granted in fiscal 2008 were achieved. The performance goals associated with the remaining 30% may still be achieved during fiscal 2010 and fiscal 2011. </div>  </div>   <div style="margin-left: 0%">  <div style="margin-top: 0pt; font-size: 1pt"> </div> <div align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #ffffff"> <b> <font style="font-family: 'Times New Roman', Times"> </font> </b> </div> <div style="margin-top: 0pt; font-size: 1pt"> </div> <div align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #ffffff"> <b> <font style="font-family: 'Times New Roman', Times"> </font> </b> </div> <div style="margin-top: 0pt; font-size: 1pt"> </div>  </div>  <!-- Begin Block Tagged Note false false false Description containing the entire organization, consolidation and basis of presentation of financial statements disclosure. May be provided in more than one note to the financial statements, as long as users are provided with an understanding of (1) the significant judgments and assumptions made by an enterprise in determining whether it must consolidate a VIE and/or disclose information about its involvement with a VIE, (2) the nature of restrictions on a consolidated VIE's assets reported by an enterprise in its statement of financial position, including the carrying amounts of such assets, (3) the nature of, and changes in, the risks associated with an enterprise's involvement with the VIE, and (4) how an enterprise's involvement with the VIE affects the enterprise's financial position, financial performance, and cash flows. Describes procedure if disclosures are provided in more than one note to the financial statements. 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