es/aad9bee5-4cd7-4b3c-bdb3-4d0f987852b7 APPLIED MATERIALS, INC CONSOLIDATED BALANCE SHEETS (al, exeept per share amont) October 28, 2818 October 29, 2017 ASSETS Current assets: Cash and cash equivalents. 3,440 $ 5,010 Short-term investments 590 2,266 Accounts receivable, net. Inventories.. 2,565 2338 3,722 2,930 Other current assets. 430 374 Total current assets. 10,747 12,918 Long-term investments 1,568 1,143 Property, plant and equipment, net 1,407 1,066 Goodwill 3,368 3,368 Purchased technology and other intangible assets, net 213 412 Deferred income taxes and other assets.. 470 512 Total assets 19419 S 17,773 S LIABILITIES AND STOCKHOLDERS EQUITY Current liabilities: Accounts payable and accrued expenses. Customer deposits and deferred revenue. 2,721 S 2,450 1,347 1,665 Total current liabilities 4,068 4,115 Long-term debt. Income taxes payable. 5,309 5,304 1,254 392 Other liabilities 303 259 Total liabilities 10,934 10,070 Commitments and contingencies (Note 14) Stockholders' equity Preferred stock: $.01 par value per share; I shares authorized; no shares issued Common stock: $.01 par value per share; 2,500 shares authorized: 967 and 1,060 shares outstanding at 2018 and 2017, respectively Additional paid-in capital 10 II 7,274 7,056 Retained earnings Treasury stock: 1,019 and 917 shares at 2018 and 2017, respectively 20,874 18,258 (21,194) (15,912) Accumulated other comprehensive loss (125) (64) Total stockholders' equity 9,349 6,839 Total liabilities and stockholders' equity 17,773 S 19419 APPLIED MATERIALS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per share amounts) Fiscal Year 2018 2017 2016 Net sales 17,253 S 14,537 S 10,825 Cost of products sold Gross profit. Operating expenses Research, development and engineering Marketing and selling 8,005 9,436 6,314 7,817 6,532 4,511 2,019 1,774 1,540 521 456 429 General and administrative 481 434 390 Total operating expenses Income from operations Interest expense 3,021 2,359 2,664 4,796 3,868 2,152 234 198 155 Interest and other income, net 132 61 16 Income before income taxes. 4,694 3,731 2,013 Provision for income taxes 1,381 297 292 Net income 3,313 S 3,434 S 1,721 Earnings per share Basic 3.27 S 1 56 3.20 S Diluted 3.23 S 3.17 S 154 Weighted average number of shares: Basic 1,013 1,073 1,107 Diluted 1,026 1,084 1,116 *BE APPLIED MATERIALS, INC CONSOLIDATED STATEMENTS OF CASH FLOWS (a mllens) Flscal Year 2013 2017 2016 Cash flows from operating activities: Net income $ 3313 $ 3,434 S 1,721 Adjustments required to reconcile net income to cash provided by operating activities. Depreciation and amortization . Deferred income taxes 457 389 407 94 (11) 21 I4 Other. (9) 38 Share-based compensation . Changes in operating assets and liabilities, net of amounts acquired: Accounts receivable. Inventories Other current and non-current assets 258 220 201 (226) (37) (542) (792) (879) (157) (216) (93) 30 Accounts payable and accrued expenses Customer deposits and deferred revenue. Income taxes payable 179 370 184 (318) 289 611 886 121 173 Other liabilities . 25 41 (44) 3,787 Cash provided by operating activities. Cash flows from investing activities Capital expenditures.. Cash paid for acquisitions, net of cash acquired. 3,789 2,566 (253) (622) (345) (68) 2,743 (6) (16) Proceeds from sales and maturities of investments 3,276 1,234 (2,077) Purchases of investments (4,856) (1,390) Cash provided by (used in) investing activities 571 (2,526) (425) Cash flows from financing activities Debt borrowings, net of issuance costs 2,176 Debt repayments (205) (1,207) Proceeds from common stock issuances 124 97 88 Common stock repurchases Tax withholding payments for vested equity awards Payments of dividends to stockholders. Cash provided by (used in) financing activities (1,892) (77) (5,283) (1,172) (125) (164) (605) (430) (444) (3,532) (5,928) 341 (1570) Increase (decrease) in cash and cash equivalents Cash and cash equivalents- beginning of year 1,604 (1391) 4,797 3,010 3406 3,406 5,010 S Cash and cash equivalents- end of year 3440 S S Supplemental cash flow information Cash payments for income taxes S 300 S 157 194 S 63 S 61 S 113 Cash refunds from income taxes 219S 186 S 151 Cash payments for interest 7-4b3c-bdb3-4d0f x aad9bee5-4cd7-4b3c-bdb3-4dOf987852b7 APPLIED MATERIALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Property, Plant and Equipment Property, plant and equipment is stated at cost, Depreciation is provided over the estimated useful lives of the assets using the straight-line method. Estimated useful lives for financial reporting purposes are as follows: buildings and improvements, 3 to 30 years, demonstration and manufacturing equipment, 3 to 5 years; software, 3 to 5 years; and flarniture, fixtures and other equipment, 3 to 5 years. Land improvements are amortized over the shorter of 15 years or the estimated useful life. Leasehold improvements are amortized over the shorter of five years or the lease term Intangible Assets 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 I to 15 years using the straight-line method. Long-Lhved Assets Applied reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets or asset group may not be recoverable. Applied assesses these assets for impairment based on estimated future cash flows from these assets Research, Development and Engineering Costs Research, development and engineering costs are expensed as incurred Sales and Value Added Taxes Taxes collected from customers and remitted to govermmental authorities are presentod on a net basis in the accompanying Consolidated Statements of Operations Warranty Applied provides for the estimated cost of warranty when revenue is recognized. Estimated warranty costs are determined by analyzing specifice product, current and historical configuration statistics and regional warranty support costs Applied's warranty obligation is affected by product and component failure rates, material usage and labor costs incurred in correcting product failures during the warranty period Ifactual warranty costs differ substantially from Applied's estimates, revisions to the estimated warranty liability would be required Income Taxes Applied recognizes a current tax liability for the estimated amount of income tax payable on tax returns fof the current fiscal year. Deferred tax assets and liabilities are recognized for the estimated future tax effects of temporary differences between the book and tax bases of assets and liabilities Deferred tax asscts are also recognized for net operating loss and tax credit caryovers Deferred tax assets are offset by a valuation allowance to the extent it is more likely than not that they are not expected to be realized Applied recognizes tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained upon esamination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized from such positions are estimated based on the largest benefit that has a greater than 50%likelihood of being realized upon ultimate settlement Any changes in judgment related to uncertain lax positions are rocognized in Applied's provision for income taxes in the quarter in which such change occurs Interest and penalties related to uncertain lax positions are recognized in Applied's provision for income taxes APPLIED MATERIALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Note 7 Balance Sheet Detail October 28, 2018 October 29, 2017 (In millions) Inventories Customer service spares 989 $ 595 Raw materials 1,020 603 Work-in-process Finished goods. 505 1,208 $ 3,722 S 468 1,264 2,930 Included in finished goods inventory is $19 million at October 28, 2018 and $331 million at October 29, 2017, of newly introduced systems at customer locations where the sales transaction did not meet Applied's revenue recognition criteria as set forth in Note I. Finished goods inventory includes $350 million and $281 million of evaluation inventory at October 28, 2018 and October 29, 2017, respectively October 28, 2018 October 29, 2017 (In millions Other Current Assets Prepaid income taxes and income taxes receivable Prepaid expenses and other 40 57 390 317 430 374 October 28, 2018 October 29, 2017 Useful Life (e years (da millions) Property, Plant and Equipment, Net Land and improvements Buildings and improvements Demonstration and manufacturing equipment. 245 160 1-30 1448 1,315 3-5 1.282 1,129 Furniture, fixtures and other equipment Construction in progress Gross property, plant and equipment 3-5 634 $72 203 135 3.311 3.812 Accumulated depreciation (2405) 1407 (2.245) 1,066 Question 1 The historical cost of Applied Materials's property, plant and equipment at the most recent balance sheet date was $3,812 (in millions). True O False Question 2 The book value of Applied Materials's property, plant and equipment at the most recent balance sheet date was $1,407 (in millions). O True O False Property and equipment is the largest asset for Applied Materials. True False Question 4 Total depreciation and amortization expense recognized by Applied Materials on property.plant and equipment since the assets were acquired was 15 paints Save Answer a. $1,407 (in millions) at 10/28/18 Ob $258 $2,405 O d. $3,812 Question 5 In the most recent reporting period, the company's net income was decreased $258 a. (in millions) for depreciation expense (not including amortization). Ob, $2,245 $2,405 O c O d, $200 uestion 6 Use the following formula to calculate the company's sales to Property. Plant and Equipment for year ended 1/28/17 and year ended 2/3/18. Sales to Property and Equipment-Sales /Property, Plant and Equipment, net Round to two decimal places, for example, 1.5876329-1.59. Now answer the question below. Did Applied Materials more effectively use property and equipment to generate revenue in the year ended 10/28/18 than in the year ended 10/29/177 Yes D a. D 6. No. Question 7 How cash much did Applied Materials receive from disposal of property and equipment in the most recent reporting period (in millions)? $0. a. O b. $3,276. $622 C. O d. $571 1P Question 8 Applied Materials uses depreciation method. double-declining balance a. b.straight-line accelerated C. units of activity Question 9 1.5 points Save Armwer In the first year of useful lide for Applied Materaplansand equipment book value would be the same amount on the company's balance sheet with the depreciation method used by Appliled Macerials Compared to double-declining balance depreciation a. method net income would be lower on the company's income statement with the depreciation method used by Applied Macerials compared to double decining balance depreciation method O b. c book value would be lower on the company's balance sheet with the depreciation method used by Applied Materials compared to double-declining balance depreciation method net income would be higher on the company's income statement with the depreciation method used by Applied Materials compared to double-decining balance depreciation O d method. Question 10 Applied Materials depreciates buildings and improvements over useful lives of 5-50 years. True. . False. b