Applied Materials Announces Second Quarter 2019 Results
- Quarterly revenue of $3.54 billion
- GAAP and non-GAAP EPS of $0.70
- Returns $814 million to shareholders
SANTA CLARA, Calif., May 16, 2019 (GLOBE NEWSWIRE) -- Applied Materials, Inc. (NASDAQ: AMAT) today reported results for its second quarter ended April 28, 2019.
Second Quarter Results
Applied generated revenue of $3.54 billion. On a GAAP basis, the company recorded gross margin of 43.2 percent, operating income of $776 million or 21.9 percent of net sales, and earnings per share (EPS) of $0.70.
On a non-GAAP adjusted basis, the company reported gross margin of 43.5 percent, operating income of $794 million or 22.4 percent of net sales, and EPS of $0.70.
The company returned $814 million to shareholders including $625 million in share repurchases and dividends of $189 million. As previously announced on March 8, 2019, Applied’s Board of Directors approved a five percent increase in the quarterly cash dividend from $0.20 to $0.21 per share.
“In the second fiscal quarter Applied Materials delivered results toward the top-end of our guidance range, reflecting solid execution across the company in a business environment that remains challenging,” said Gary Dickerson, president and CEO. “Looking ahead, we maintain a positive view of our markets as powerful new demand drivers for semiconductors and displays take shape, creating tremendous opportunities for Applied Materials.”
Quarterly Results Summary
| Q2 FY2019 | Q2 FY2018 | Change | |||||||
| (In millions, except per share amounts and percentages) | |||||||||
| Net sales | $ | 3,539 | $ | 4,579 | (23)% | ||||
| Gross margin | 43.2 | % | 44.9 | % | (1.7) points | ||||
| Operating margin | 21.9 | % | 28.2 | % | (6.3) points | ||||
| Net income | $ | 666 | $ | 1,100 | (39)% | ||||
| Diluted earnings per share | $ | 0.70 | $ | 1.06 | (34)% | ||||
| Non-GAAP Adjusted Results | |||||||||
| Non-GAAP adjusted gross margin | 43.5 | % | 45.9 | % | (2.4) points | ||||
| Non-GAAP adjusted operating margin | 22.4 | % | 29.3 | % | (6.9) points | ||||
| Non-GAAP adjusted net income | $ | 660 | $ | 1,244 | (47)% | ||||
| Non-GAAP adjusted diluted EPS | $ | 0.70 | $ | 1.19 | (41)% | ||||
Applied adopted Accounting Standards Update 2014-09, Revenue from Contracts with Customers (ASC 606), as of the first day of fiscal 2019 using the full retrospective method. Applied also adopted Accounting Standards Update 2017-07, Compensation—Retirement Benefits, as of the first day of fiscal 2019 using the retrospective method. All prior periods included in the unaudited consolidated condensed balance sheet as of Oct. 28, 2018, and the unaudited consolidated condensed statements of operations and cash flows for the three and six months ended April 29, 2018, were restated under the new standards.
A reconciliation of the GAAP and non-GAAP adjusted results is provided in the financial tables included in this release. See also “Use of Non-GAAP Adjusted Financial Measures” section.
Business Outlook
In the third quarter of fiscal 2019, Applied expects net sales to be approximately $3.525 billion, plus or minus $150 million. Non-GAAP adjusted diluted EPS is expected to be in the range of $0.67 to $0.75.
This outlook for non-GAAP adjusted diluted EPS excludes known charges related to completed acquisitions of $0.01 per share and net income tax benefit related to intra-entity intangible asset transfers of $0.03 per share, but does not reflect any items that are unknown at this time, such as any additional charges related to acquisitions or other non-operational or unusual items, as well as other tax related items, which we are not able to predict without unreasonable efforts due to their inherent uncertainty.
Second Quarter Reportable Segment Information
| Semiconductor Systems | Q2 FY2019 | Q2 FY2018 | |||||
| (In millions, except percentages) | |||||||
| Net sales | $ | 2,184 | $ | 2,901 | |||
| Foundry, logic and other | 58 | % | 30 | % | |||
| DRAM | 18 | % | 32 | % | |||
| Flash | 24 | % | 38 | % | |||
| Operating income | 579 | 992 | |||||
| Operating margin | 26.5 | % | 34.2 | % | |||
| Non-GAAP Adjusted Results | |||||||
| Non-GAAP adjusted operating income | $ | 589 | $ | 1,038 | |||
| Non-GAAP adjusted operating margin | 27.0 | % | 35.8 | % | |||
| Applied Global Services | Q2 FY2019 | Q2 FY2018 | |||||
| (In millions, except percentages) | |||||||
| Net sales | $ | 984 | $ | 945 | |||
| Operating income | 283 | 279 | |||||
| Operating margin | 28.8 | % | 29.5 | % | |||
| Non-GAAP Adjusted Results | |||||||
| Non-GAAP adjusted operating income | $ | 283 | $ | 279 | |||
| Non-GAAP adjusted operating margin | 28.8 | % | 29.5 | % | |||
| Display and Adjacent Markets | Q2 FY2019 | Q2 FY2018 | |||||
| (In millions, except percentages) | |||||||
| Net sales | $ | 348 | $ | 719 | |||
| Operating income | 42 | 210 | |||||
| Operating margin | 12.1 | % | 29.2 | % | |||
| Non-GAAP Adjusted Results | |||||||
| Non-GAAP adjusted operating income | $ | 46 | $ | 214 | |||
| Non-GAAP adjusted operating margin | 13.2 | % | 29.8 | % | |||
Use of Non-GAAP Adjusted Financial Measures
Applied provides investors with certain non-GAAP adjusted financial measures, which are adjusted for the impact of certain costs, expenses, gains and losses, including certain items related to mergers and acquisitions; restructuring charges and any associated adjustments; impairments of assets, or investments; gain or loss on sale of strategic investments; tax effect of share-based compensation; certain income tax items and other discrete adjustments. Additionally, non-GAAP results exclude estimated discrete income tax expense items associated with changes to recent U.S. tax legislation. Reconciliations of these non-GAAP measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are provided in the financial tables included in this release.
Management uses these non-GAAP adjusted financial measures to evaluate the company’s operating and financial performance and for planning purposes, and as performance measures in its executive compensation program. Applied believes these measures enhance an overall understanding of its performance and investors’ ability to review the company’s business from the same perspective as the company’s management, and facilitate comparisons of this period’s results with prior periods on a consistent basis by excluding items that management does not believe are indicative of Applied's ongoing operating performance. There are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles, may be different from non-GAAP financial measures used by other companies, and may exclude certain items that may have a material impact upon our reported financial results. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP.
Webcast Information
Applied Materials will discuss these results during an earnings call that begins at 1:30 p.m. Pacific Time today. A live webcast will be available at www.appliedmaterials.com. A replay will be available on the website beginning at 5:00 p.m. Pacific Time today.
Forward-Looking Statements
This press release contains forward-looking statements, including those regarding anticipated growth and trends in our businesses and markets, industry outlooks and demand drivers, technology transitions, our business and financial performance and market share positions, our capital allocation, our investment and growth strategies, our development of new products and technologies, our business outlook for the third quarter of fiscal 2019 and beyond, and other statements that are not historical facts. These statements and their underlying assumptions are subject to risks and uncertainties and are not guarantees of future performance. Factors that could cause actual results to differ materially from those expressed or implied by such statements include, without limitation: the level of demand for our products; global economic and industry conditions; global trade issues and changes in trade policies; consumer demand for electronic products; the demand for semiconductors; customers’ technology and capacity requirements; the introduction of new and innovative technologies, and the timing of technology transitions; our ability to develop, deliver and support new products and technologies; the concentrated nature of our customer base; our ability to expand our current markets, increase market share and develop new markets; market acceptance of existing and newly developed products; our ability to obtain and protect intellectual property rights in key technologies; our ability to achieve the objectives of operational and strategic initiatives, align our resources and cost structure with business conditions, and attract, motivate and retain key employees; the variability of operating expenses and results among products and segments, and our ability to accurately forecast future results, market conditions, customer requirements and business needs; changes in U.S. tax laws and regulation, and our interpretations of them; and other risks and uncertainties described in our SEC filings, including our most recent Forms 10-Q and 8-K. All forward-looking statements are based on management’s current estimates, projections and assumptions, and we assume no obligation to update them.
About Applied Materials
Applied Materials, Inc. (Nasdaq: AMAT) is the leader in materials engineering solutions used to produce virtually every new chip and advanced display in the world. Our expertise in modifying materials at atomic levels and on an industrial scale enables customers to transform possibilities into reality. At Applied Materials, our innovations make possible the technology shaping the future. Learn more at www.appliedmaterials.com.
Contact:
Ricky Gradwohl (editorial/media) 408.235.4676Michael Sullivan (financial community) 408.986.7977
APPLIED MATERIALS, INC.UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
| Three Months Ended | Six Months Ended | ||||||||||||||
| (In millions, except per share amounts) | April 28, 2019 | April 29, 2018 | April 28, 2019 | April 29, 2018 | |||||||||||
| Net sales | $ | 3,539 | $ | 4,579 | $ | 7,292 | $ | 8,784 | |||||||
| Cost of products sold | 2,009 | 2,523 | 4,097 | 4,788 | |||||||||||
| Gross profit | 1,530 | 2,056 | 3,195 | 3,996 | |||||||||||
| Operating expenses: | |||||||||||||||
| Research, development and engineering | 508 | 509 | 1,024 | 998 | |||||||||||
| Marketing and selling | 133 | 130 | 264 | 256 | |||||||||||
| General and administrative | 113 | 125 | 223 | 235 | |||||||||||
| Total operating expenses | 754 | 764 | 1,511 | 1,489 | |||||||||||
| Income from operations | 776 | 1,292 | 1,684 | 2,507 | |||||||||||
| Interest expense | 60 | 56 | 120 | 115 | |||||||||||
| Interest and other income, net | 43 | 25 | 83 | 52 | |||||||||||
| Income before income taxes | 759 | 1,261 | 1,647 | 2,444 | |||||||||||
| Provision for income taxes | 93 | 161 | 210 | 1,179 | |||||||||||
| Net income | $ | 666 | $ | 1,100 | $ | 1,437 | $ | 1,265 | |||||||
| Earnings per share: | |||||||||||||||
| Basic | $ | 0.71 | $ | 1.07 | $ | 1.51 | $ | 1.21 | |||||||
| Diluted | $ | 0.70 | $ | 1.06 | $ | 1.50 | $ | 1.20 | |||||||
| Weighted average number of shares: | |||||||||||||||
| Basic | 942 | 1,029 | 950 | 1,042 | |||||||||||
| Diluted | 948 | 1,040 | 957 | 1,056 | |||||||||||
APPLIED MATERIALS, INC.UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
| (In millions) | April 28, 2019 | October 28, 2018 | |||||
| ASSETS | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 3,116 | $ | 3,440 | |||
| Short-term investments | 507 | 590 | |||||
| Accounts receivable, net | 2,264 | 2,323 | |||||
| Inventories | 3,677 | 3,721 | |||||
| Other current assets | 498 | 530 | |||||
| Total current assets | 10,062 | 10,604 | |||||
| Long-term investments | 1,609 | 1,568 | |||||
| Property, plant and equipment, net | 1,494 | 1,407 | |||||
| Goodwill | 3,399 | 3,368 | |||||
| Purchased technology and other intangible assets, net | 185 | 213 | |||||
| Deferred income taxes and other assets | 2,026 | 473 | |||||
| Total assets | $ | 18,775 | $ | 17,633 | |||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
| Current liabilities: | |||||||
| Accounts payable and accrued expenses | $ | 2,212 | $ | 2,721 | |||
| Contract liabilities | 1,393 | 1,201 | |||||
| Total current liabilities | 3,605 | 3,922 | |||||
| Income taxes payable | 1,326 | 1,254 | |||||
| Long-term debt | 5,311 | 5,309 | |||||
| Other liabilities | 332 | 303 | |||||
| Total liabilities | 10,574 | 10,788 | |||||
| Total stockholders’ equity | 8,201 | 6,845 | |||||
| Total liabilities and stockholders’ equity | $ | 18,775 | $ | 17,633 | |||
APPLIED MATERIALS, INC.UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
| Three Months Ended | Six Months Ended | ||||||||||||||
| (In millions) | April 28, 2019 | April 29, 2018 | April 28, 2019 | April 29, 2018 | |||||||||||
| Cash flows from operating activities: | |||||||||||||||
| Net income | $ | 666 | $ | 1,100 | $ | 1,437 | $ | 1,265 | |||||||
| Adjustments required to reconcile net income to cash provided by operating activities: | |||||||||||||||
| Depreciation and amortization | 94 | 108 | 182 | 227 | |||||||||||
| Share-based compensation | 65 | 64 | 130 | 129 | |||||||||||
| Deferred income taxes | 8 | 40 | 49 | 72 | |||||||||||
| Other | (10 | ) | 11 | (9 | ) | 11 | |||||||||
| Net change in operating assets and liabilities | (23 | ) | (712 | ) | (155 | ) | 373 | ||||||||
| Cash provided by operating activities | 800 | 611 | 1,634 | 2,077 | |||||||||||
| Cash flows from investing activities: | |||||||||||||||
| Capital expenditures | (118 | ) | (121 | ) | (251 | ) | (324 | ) | |||||||
| Cash paid for acquisitions, net of cash acquired | (23 | ) | — | (23 | ) | (5 | ) | ||||||||
| Proceeds from sales and maturities of investments | 442 | 488 | 906 | 2,432 | |||||||||||
| Purchases of investments | (430 | ) | (345 | ) | (827 | ) | (729 | ) | |||||||
| Cash provided by (used in) investing activities | (129 | ) | 22 | (195 | ) | 1,374 | |||||||||
| Cash flows from financing activities: | |||||||||||||||
| Proceeds from common stock issuances | 73 | 56 | 73 | 56 | |||||||||||
| Common stock repurchases | (625 | ) | (2,500 | ) | (1,375 | ) | (3,282 | ) | |||||||
| Tax withholding payments for vested equity awards | (6 | ) | (13 | ) | (80 | ) | (154 | ) | |||||||
| Payments of dividends to stockholders | (189 | ) | (105 | ) | (381 | ) | (211 | ) | |||||||
| Cash used in financing activities | (747 | ) | (2,562 | ) | (1,763 | ) | (3,591 | ) | |||||||
| Decrease in cash and cash equivalents | (76 | ) | (1,929 | ) | (324 | ) | (140 | ) | |||||||
| Cash and cash equivalents — beginning of period | 3,192 | 6,799 | 3,440 | 5,010 | |||||||||||
| Cash and cash equivalents — end of period | $ | 3,116 | $ | 4,870 | $ | 3,116 | $ | 4,870 | |||||||
| Supplemental cash flow information: | |||||||||||||||
| Cash payments for income taxes | $ | 198 | $ | 139 | $ | 232 | $ | 217 | |||||||
| Cash refunds from income taxes | $ | 10 | $ | 1 | $ | 18 | $ | 41 | |||||||
| Cash payments for interest | $ | 76 | $ | 76 | $ | 110 | $ | 110 | |||||||
APPLIED MATERIALS, INC.UNAUDITED SUPPLEMENTAL INFORMATION
Corporate and Other
| (In millions) | Q2 FY2019 | Q2 FY2018 | |||||||||
| Unallocated net sales | $ | 23 | $ | 14 | |||||||
| Unallocated cost of products sold and expenses | (86 | ) | (139 | ) | |||||||
| Share-based compensation | (65 | ) | (64 | ) | |||||||
| Total | $ | (128 | ) | $ | (189 | ) | |||||
Additional Information
| Q2 FY2019 | Q2 FY2018 | |||||||||
| Net Sales by Geography (In millions) | ||||||||||
| United States | 457 | 345 | ||||||||
| % of Total | 13 | % | 8 | % | ||||||
| Europe | 215 | 292 | ||||||||
| % of Total | 6 | % | 6 | % | ||||||
| Japan | 520 | 502 | ||||||||
| % of Total | 15 | % | 11 | % | ||||||
| Korea | 441 | 1,232 | ||||||||
| % of Total | 13 | % | 27 | % | ||||||
| Taiwan | 794 | 666 | ||||||||
| % of Total | 22 | % | 15 | % | ||||||
| Southeast Asia | 119 | 242 | ||||||||
| % of Total | 3 | % | 5 | % | ||||||
| China | 993 | 1,300 | ||||||||
| % of Total | 28 | % | 28 | % | ||||||
| Employees (In thousands) | ||||||||||
| Regular Full Time | 21.4 | 19.8 | ||||||||
APPLIED MATERIALS, INC.UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS
| Three Months Ended | Six Months Ended | ||||||||||||||
| (In millions, except percentages) | April 28, 2019 | April 29, 2018 | April 28, 2019 | April 29, 2018 | |||||||||||
| Non-GAAP Adjusted Gross Profit | |||||||||||||||
| Reported gross profit - GAAP basis | $ | 1,530 | $ | 2,056 | $ | 3,195 | $ | 3,996 | |||||||
| Certain items associated with acquisitions1 | 9 | 44 | 19 | 89 | |||||||||||
| Non-GAAP adjusted gross profit | $ | 1,539 | $ | 2,100 | $ | 3,214 | $ | 4,085 | |||||||
| Non-GAAP adjusted gross margin | 43.5 | % | 45.9 | % | 44.1 | % | 46.5 | % | |||||||
| Non-GAAP Adjusted Operating Income | |||||||||||||||
| Reported operating income - GAAP basis | $ | 776 | $ | 1,292 | $ | 1,684 | $ | 2,507 | |||||||
| Certain items associated with acquisitions1 | 14 | 49 | 28 | 98 | |||||||||||
| Acquisition integration and deal costs | 4 | 1 | 7 | 2 | |||||||||||
| Non-GAAP adjusted operating income | $ | 794 | $ | 1,342 | $ | 1,719 | $ | 2,607 | |||||||
| Non-GAAP adjusted operating margin | 22.4 | % | 29.3 | % | 23.6 | % | 29.7 | % | |||||||
| Non-GAAP Adjusted Net Income | |||||||||||||||
| Reported net income - GAAP basis | $ | 666 | $ | 1,100 | $ | 1,437 | $ | 1,265 | |||||||
| Certain items associated with acquisitions1 | 14 | 49 | 28 | 98 | |||||||||||
| Acquisition integration and deal costs | 4 | 1 | 7 | 2 | |||||||||||
| Impairment (gain on sale) of strategic investments, net | — | 5 | — | 4 | |||||||||||
| Loss (gain) on strategic investments, net | (11 | ) | — | (23 | ) | — | |||||||||
| Income tax effect of share-based compensation2 | 1 | 13 | (4 | ) | (26 | ) | |||||||||
| Income tax effect of changes in applicable U.S. tax laws3 | — | 71 | (24 | ) | 1,077 | ||||||||||
| Income tax effects related to amortization of intra-entity intangible asset transfers | (31 | ) | — | (59 | ) | — | |||||||||
| Resolution of prior years’ income tax filings and other tax items | 17 | 10 | 76 | (3 | ) | ||||||||||
| Income tax effect of non-GAAP adjustments4 | — | (5 | ) | 1 | (8 | ) | |||||||||
| Non-GAAP adjusted net income | $ | 660 | $ | 1,244 | $ | 1,439 | $ | 2,409 | |||||||
| 1 | These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets. |
| 2 | GAAP basis tax benefit related to share-based compensation is being recognized ratably over the fiscal year on a non-GAAP basis. |
| 3 | Charges to income tax provision related to a one-time transition tax and a decrease in U.S. deferred tax assets as a result of the recent U.S. tax legislation. |
| 4 | Adjustment to provision for income taxes related to non-GAAP adjustments reflected in income before income taxes. |
APPLIED MATERIALS, INC.UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS
| Three Months Ended | Six Months Ended | ||||||||||||||
| (In millions, except per share amounts) | April 28, 2019 | April 29, 2018 | April 28, 2019 | April 29, 2018 | |||||||||||
| Non-GAAP Adjusted Earnings Per Diluted Share | |||||||||||||||
| Reported earnings per diluted share - GAAP basis | $ | 0.70 | $ | 1.06 | $ | 1.50 | $ | 1.20 | |||||||
| Certain items associated with acquisitions | 0.01 | 0.04 | 0.03 | 0.09 | |||||||||||
| Loss (gain) on strategic investments, net | — | — | (0.02 | ) | — | ||||||||||
| Income tax effect of share-based compensation | — | 0.01 | (0.01 | ) | (0.03 | ) | |||||||||
| Income tax effect of changes in applicable U.S. tax laws | — | 0.07 | (0.02 | ) | 1.02 | ||||||||||
| Income tax effects related to amortization of intra-entity intangible asset transfers | (0.03 | ) | — | (0.06 | ) | — | |||||||||
| Resolution of prior years’ income tax filings and other tax items | 0.02 | 0.01 | 0.08 | — | |||||||||||
| Non-GAAP adjusted earnings per diluted share | $ | 0.70 | $ | 1.19 | $ | 1.50 | $ | 2.28 | |||||||
| Weighted average number of diluted shares | 948 | 1,040 | 957 | 1,056 | |||||||||||
APPLIED MATERIALS, INC.UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS
| Three Months Ended | Six Months Ended | ||||||||||||||
| (In millions, except percentages) | April 28, 2019 | April 29, 2018 | April 28, 2019 | April 29, 2018 | |||||||||||
| Semiconductor Systems Non-GAAP Adjusted Operating Income | |||||||||||||||
| Reported operating income - GAAP basis | $ | 579 | $ | 992 | $ | 1,210 | $ | 2,016 | |||||||
| Certain items associated with acquisitions1 | 10 | 46 | 21 | 92 | |||||||||||
| Non-GAAP adjusted operating income | $ | 589 | $ | 1,038 | $ | 1,231 | $ | 2,108 | |||||||
| Non-GAAP adjusted operating margin | 27.0 | % | 35.8 | % | 27.7 | % | 36.6 | % | |||||||
| AGS Non-GAAP Adjusted Operating Income | |||||||||||||||
| Reported operating income - GAAP basis | $ | 283 | $ | 279 | $ | 568 | $ | 534 | |||||||
| Acquisition integration costs | — | — | — | 1 | |||||||||||
| Non-GAAP adjusted operating income | $ | 283 | $ | 279 | $ | 568 | $ | 535 | |||||||
| Non-GAAP adjusted operating margin | 28.8 | % | 29.5 | % | 29.2 | % | 29.3 | % | |||||||
| Display and Adjacent Markets Non-GAAP Adjusted Operating Income | |||||||||||||||
| Reported operating income - GAAP basis | $ | 42 | $ | 210 | $ | 157 | $ | 300 | |||||||
| Certain items associated with acquisitions1 | 4 | 3 | 7 | 6 | |||||||||||
| Acquisition integration costs | — | 1 | — | 1 | |||||||||||
| Non-GAAP adjusted operating income | $ | 46 | $ | 214 | $ | 164 | $ | 307 | |||||||
| Non-GAAP adjusted operating margin | 13.2 | % | 29.8 | % | 19.2 | % | 26.4 | % | |||||||
| 1 | These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets. |
Note: The reconciliation of GAAP and non-GAAP adjusted segment results above does not include certain revenues, costs of products sold and operating expenses that are reported within corporate and other and included in consolidated operating income.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED EFFECTIVE INCOME TAX RATE
| Three MonthsEnded | |||
| (In millions, except percentages) | April 28, 2019 | ||
| Provision for income taxes - GAAP basis (a) | $ | 93 | |
| Income tax effect of share-based compensation | (1 | ) | |
| Income tax effects related to amortization of intra-entity intangible asset transfers | 31 | ||
| Resolutions of prior years’ income tax filings and other tax items | (17 | ) | |
| Non-GAAP adjusted provision for income taxes (b) | $ | 106 | |
| Income before income taxes - GAAP basis (c) | $ | 759 | |
| Certain items associated with acquisitions | 14 | ||
| Acquisition integration and deal costs | 4 | ||
| Loss (gain) on strategic investments, net | (11 | ) | |
| Non-GAAP adjusted income before income taxes (d) | $ | 766 | |
| Effective income tax rate - GAAP basis (a/c) | 12.3 | % | |
| Non-GAAP adjusted effective income tax rate (b/d) | 13.8 | % | |
