| APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS | |||||||||||||||
| Three Months Ended | Twelve Months Ended | ||||||||||||||
| (In millions, except percentages) | October 29,
2017 | October 30,
2016 | October 29,
2017 | October 30,
2016 | |||||||||||
| Non-GAAP Adjusted Gross Profit | |||||||||||||||
| Reported gross profit - GAAP basis | $ | 1,787 | $ | 1,399 | $ | 6,532 | $ | 4,511 | |||||||
| Certain items associated with acquisitions1 | 45 | 42 | 172 | 167 | |||||||||||
| Inventory reversals related to restructuring2 | — | — | — | (2 | ) | ||||||||||
| Non-GAAP adjusted gross profit | $ | 1,832 | $ | 1,441 | $ | 6,704 | $ | 4,676 | |||||||
| Non-GAAP adjusted gross margin | 46.2 | % | 43.7 | % | 46.1 | % | 43.2 | % | |||||||
| Non-GAAP Adjusted Operating Income | |||||||||||||||
| Reported operating income - GAAP basis | $ | 1,098 | $ | 777 | $ | 3,868 | $ | 2,152 | |||||||
| Certain items associated with acquisitions1 | 49 | 47 | 191 | 188 | |||||||||||
| Acquisition integration costs | — | — | 3 | 2 | |||||||||||
| Reversals related to restructuring, net2 | — | — | — | (3 | ) | ||||||||||
| Other gains, losses or charges, net3,4 | (9 | ) | 8 | (12 | ) | 8 | |||||||||
| Non-GAAP adjusted operating income | $ | 1,138 | $ | 832 | $ | 4,050 | $ | 2,347 | |||||||
| Non-GAAP adjusted operating margin | 28.7 | % | 25.2 | % | 27.9 | % | 21.7 | % | |||||||
| Non-GAAP Adjusted Net Income | |||||||||||||||
| Reported net income - GAAP basis | $ | 982 | $ | 610 | $ | 3,434 | $ | 1,721 | |||||||
| Certain items associated with acquisitions1 | 49 | 47 | 191 | 188 | |||||||||||
| Acquisition integration costs | — | — | 3 | 2 | |||||||||||
| Reversals related to restructuring, net 2 | — | — | — | (3 | ) | ||||||||||
| Impairment (gain on sale) of strategic investments, net | (7 | ) | 6 | (3 | ) | 3 | |||||||||
| Loss on early extinguishment of debt | — | — | 5 | 5 | |||||||||||
| Other gains, losses or charges, net 3, 4 | (9 | ) | 8 | (12 | ) | 8 | |||||||||
| Resolution of prior years’ income tax filings, reinstatement of federal R&D tax credit and other tax items 5 | (11 | ) | 57 | (79 | ) | 45 | |||||||||
| Income tax effect of non-GAAP adjustments 6 | 1 | (6 | ) | (14 | ) | (19 | ) | ||||||||
| Non-GAAP adjusted net income | $ | 1,005 | $ | 722 | $ | 3,525 | $ | 1,950 | |||||||
| 1 These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets. | |||||||||||||||
| 2 Results for fiscal 2016 included favorable adjustments associated with the cost reductions in the solar business. | |||||||||||||||
| 3 Results for the three and twelve months ended October 29, 2017 included immaterial correction of errors related to prior periods. | |||||||||||||||
| 4 Results for the three and twelve months ended October 30, 2016 included a loss of $8 million due to discontinuance of cash flow hedges that were probable not to occur by the end of the originally specified time period. | |||||||||||||||
| 5 Results for the three and twelve months ended October 29, 2017 included the recognition of previously unrecognized foreign tax credits. | |||||||||||||||
| 6 These amounts represent non-GAAP adjustments above multiplied by the effective tax rate within the jurisdictions that the adjustments affect. | |||||||||||||||
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