SEC Filing | Broadcom Inc.

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avgo-20220130

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(MARK ONE)


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 30, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Broadcom Inc.

(Exact name of registrant as specified in its charter)

Delaware

001-38449

35-2617337

(State or other jurisdiction of
incorporation or organization)

(Commission file Number)

(I.R.S. Employer
Identification No.)

1320 Ridder Park Drive

San Jose,

95131-2313

(408)

433-8000

(Address, including zip code, of principal executive offices and

registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ


Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, $0.001 par value	AVGO	The NASDAQ Global Select Market
8.00% Mandatory Convertible Preferred Stock, Series A, $0.001 par value	AVGOP	The NASDAQ Global Select Market

As of February 25, 2022, there were 408,281,170 shares of our common stock outstanding.

BROADCOM INC.

Quarterly Report on Form 10-Q

For the Quarterly Period Ended January 30, 2022

TABLE OF CONTENTS


			Page
PART I — FINANCIAL INFORMATION			1
Item 1. Condensed Consolidated Financial Statements — Unaudited			1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			21
Item 3. Quantitative and Qualitative Disclosures About Market Risk			28
Item 4. Controls and Procedures			28
PART II — OTHER INFORMATION			28
Item 1. Legal Proceedings			28
Item 1A. Risk Factors			28
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			48
Item 3. Defaults Upon Senior Securities			48
Item 4. Mine Safety Disclosures			48
Item 5. Other Information			48
Item 6. Exhibits			49
SIGNATURES			50

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PART I — FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements — Unaudited

BROADCOM INC.

INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED


			Page
Condensed Consolidated Balance Sheets — Unaudited			2
Condensed Consolidated Statements of Operations - Unaudited			3
Condensed Consolidated Statements of Comprehensive Income — Unaudited			4
Condensed Consolidated Statements of Cash Flows — Unaudited			5
Condensed Consolidated Statements of Stockholders’ Equity — Unaudited			6
Notes to Unaudited Condensed Consolidated Financial Statements			8

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BROADCOM INC.

CONDENSED CONSOLIDATED BALANCE SHEETS — UNAUDITED


	January 30, 2022		October 31, 2021

	(In millions, except par value)
ASSETS
Current assets:
Cash and cash equivalents	$	10,219	$	12,163

Trade accounts receivable, net	2,539		2,071
Inventory	1,520		1,297

Other current assets	1,063		1,055
Total current assets	15,341		16,586
Long-term assets:
Property, plant and equipment, net	2,303		2,348
Goodwill	43,450		43,450
Intangible assets, net	10,244		11,374
Other long-term assets	1,886		1,812
Total assets	$	73,224	$	75,570
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	1,078	$	1,086
Employee compensation and benefits	531		1,066
Current portion of long-term debt	300		290
Other current liabilities	4,378		3,839
Total current liabilities	6,287		6,281
Long-term liabilities:
Long-term debt	39,205		39,440

Other long-term liabilities	4,738		4,860
Total liabilities	50,230		50,581
Commitments and contingencies (Note 10)
Preferred stock dividend obligation	26		27
Stockholders’ equity:
Preferred stock, $0.001 par value; 100 shares authorized; 8.00% Mandatory Convertible Preferred Stock, Series A, 4 shares issued and outstanding; aggregate liquidation value of $3,737 as of January 30, 2022 and October 31, 2021	—		—
Common stock, $0.001 par value; 2,900 shares authorized; 410 and 413 shares issued and outstanding as of January 30, 2022 and October 31, 2021, respectively	—		—
Additional paid-in capital	23,083		24,330
Retained earnings	—		748
Accumulated other comprehensive loss	(115)		(116)
Total stockholders’ equity	22,968		24,962
Total liabilities and equity	$	73,224	$	75,570

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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BROADCOM INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS — UNAUDITED


	Fiscal Quarter Ended
	January 30, 2022		January 31, 2021

	(In millions, except per share data)
Net revenue:
Products	$	6,053	$	5,081
Subscriptions and services	1,653		1,574
Total net revenue	7,706		6,655
Cost of revenue:
Cost of products sold	1,769		1,672
Cost of subscriptions and services	156		142

Amortization of acquisition-related intangible assets	730		874
Restructuring charges	2		15
Total cost of revenue	2,657		2,703
Gross margin	5,049		3,952
Research and development	1,206		1,211
Selling, general and administrative	321		339
Amortization of acquisition-related intangible assets	397		494
Restructuring, impairment and disposal charges	17		71
Total operating expenses	1,941		2,115
Operating income	3,108		1,837
Interest expense	(407)		(570)

Other income (expense), net	(14)		117
Income before income taxes	2,687		1,384
Provision for income taxes	215		6


Net income	2,472		1,378
Dividends on preferred stock	(74)		(74)

Net income attributable to common stock	$	2,398	$	1,304

Net income per share attributable to common stock:


Basic	$	5.82	$	3.20




Diluted	$	5.59	$	3.05

Weighted-average shares used in per share calculations:
Basic	412		407
Diluted	429		428

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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BROADCOM INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME — UNAUDITED


	Fiscal Quarter Ended
	January 30, 2022		January 31, 2021

	(In millions)
Net income	$	2,472	$	1,378
Other comprehensive income, net of tax:

Change in actuarial loss and prior service costs associated with defined benefit pension plans and post-retirement benefit plans	1		1
Other comprehensive income, net of tax	1		1
Comprehensive income	$	2,473	$	1,379

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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BROADCOM INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED


	Fiscal Quarter Ended
	January 30, 2022		January 31, 2021

	(In millions)
Cash flows from operating activities:
Net income	$	2,472	$	1,378
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of intangible and right-of-use assets	1,151		1,395
Depreciation	136		138
Stock-based compensation	387		444
Deferred taxes and other non-cash taxes	70		(149)
Loss on debt extinguishment	—		172
(Gain) loss on investments	16		(119)

Non-cash interest expense	32		22
Other	(1)		10
Changes in assets and liabilities, net of acquisitions and disposals:
Trade accounts receivable, net	(468)		(247)
Inventory	(223)		51
Accounts payable	—		44
Employee compensation and benefits	(528)		(375)

Other current assets and current liabilities	521		408
Other long-term assets and long-term liabilities	(79)		(59)
Net cash provided by operating activities	3,486		3,113
Cash flows from investing activities:


Purchases of property, plant and equipment	(101)		(114)

Purchases of investments	(200)		—

Other	(8)		(8)
Net cash used in investing activities	(309)		(122)
Cash flows from financing activities:
Proceeds from long-term borrowings	—		9,904
Payments on debt obligations	(255)		(9,200)



Payments of dividends	(1,764)		(1,543)
Repurchases of common stock - repurchase program	(2,724)		—
Shares repurchased for tax withholdings on vesting of equity awards	(375)		(225)
Issuance of common stock	1		35

Other	(4)		(28)
Net cash used in financing activities	(5,121)		(1,057)
Net change in cash and cash equivalents	(1,944)		1,934
Cash and cash equivalents at beginning of period	12,163		7,618
Cash and cash equivalents at end of period	$	10,219	$	9,552

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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BROADCOM INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY — UNAUDITED

Fiscal Quarter Ended January 30, 2022


	8.00% Mandatory Convertible Preferred Stock			Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Shares	Par Value		Shares	Par Value

	(In millions)
Balance as of October 31, 2021	4	$	—	413	$	—	$	24,330	$	748	$	(116)	$	24,962
Net income	—	—		—	—		—		2,472		—		2,472
Other comprehensive income	—	—		—	—		—		—		1		1


Dividends to common stockholders	—	—		—	—		—		(1,689)		—		(1,689)
Dividends to preferred stockholders	—	—		—	—		—		(74)		—		(74)
Common stock issued	—	—		2	—		1		—		—		1
Stock-based compensation	—	—		—	—		387		—		—		387
Repurchases of common stock	—	—		(4)	—		(1,267)		(1,457)		—		(2,724)
Shares repurchased for tax withholdings on vesting of equity awards	—	—		(1)	—		(368)		—		—		(368)
Balance as of January 30, 2022	4	$	—	410	$	—	$	23,083	$	—	$	(115)	$	22,968

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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BROADCOM INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY — UNAUDITED

Fiscal Quarter Ended January 31, 2021


	8.00% Mandatory Convertible Preferred Stock			Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Shares	Par Value		Shares	Par Value

	(In millions)
Balance as of November 1, 2020	4	$	—	407	$	—	$	23,982	$	—	$	(108)	$	23,874
Net income	—	—		—	—		—		1,378		—		1,378
Other comprehensive income	—	—		—	—		—		—		1		1


Dividends to common stockholders	—	—		—	—		(164)		(1,304)		—		(1,468)
Dividends to preferred stockholders	—	—		—	—		—		(74)		—		(74)
Common stock issued	—	—		2	—		35		—		—		35
Stock-based compensation	—	—		—	—		444		—		—		444

Shares repurchased for tax withholdings on vesting of equity awards	—	—		(1)	—		(217)		—		—		(217)
Balance as of January 31, 2021	4	$	—	408	$	—	$	24,080	$	—	$	(107)	$	23,973

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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BROADCOM INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Overview, Basis of Presentation and Significant Accounting Policies

Overview

Broadcom Inc. (“Broadcom”), a Delaware corporation, is a global technology leader that designs, develops and supplies a broad range of semiconductor and infrastructure software solutions. We develop semiconductor devices with a focus on complex digital and mixed signal complementary metal oxide semiconductor based devices and analog III-V based products. We have a history of innovation in the semiconductor industry and offer thousands of products that are used in end products such as enterprise and data center networking, home connectivity, set-top boxes, broadband access, telecommunication equipment, smartphones and base stations, data center servers and storage systems, factory automation, power generation and alternative energy systems, and electronic displays. Our infrastructure software solutions enable customers to plan, develop, automate, manage and secure applications across mainframe, distributed, mobile and cloud platforms. Our portfolio of infrastructure and security software is designed to modernize, optimize, and secure the most complex hybrid environments, enabling scalability, agility, automation, insights, resiliency and security. We also offer mission critical fibre channel storage area networking (“FC SAN”) products and related software in the form of modules, switches and subsystems incorporating multiple semiconductor products. Unless stated otherwise or the context otherwise requires, references to “Broadcom,” “we,” “our” and “us” mean Broadcom and its consolidated subsidiaries. We have two reportable segments: semiconductor solutions and infrastructure software.

Basis of Presentation

We operate on a 52- or 53-week fiscal year ending on the Sunday closest to October 31 in a 52-week year and the first Sunday in November in a 53-week year. Our fiscal year ending October 30, 2022 (“fiscal year 2022”) is a 52-week fiscal year. The first quarter of our fiscal year 2022 ended on January 30, 2022, the second quarter ends on May 1, 2022 and the third quarter ends on July 31, 2022. Our fiscal year ended October 31, 2021 (“fiscal year 2021”) was also a 52-week fiscal year.

The accompanying condensed consolidated financial statements include the accounts of Broadcom and its subsidiaries, and have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information. The financial information included herein is unaudited, and reflects all adjustments which are, in the opinion of our management, of a normal recurring nature and necessary for a fair statement of the results for the periods presented. The October 31, 2021 condensed consolidated balance sheet data were derived from Broadcom’s audited consolidated financial statements included in its Annual Report on Form 10-K for fiscal year 2021 as filed with the Securities and Exchange Commission. All intercompany transactions and balances have been eliminated in consolidation. The operating results for the fiscal quarter ended January 30, 2022 are not necessarily indicative of the results that may be expected for fiscal year 2022, or for any other future period.

Significant Accounting Policies

Use of estimates. The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The inputs into certain of these estimates and assumptions include the consideration of the economic impact of the COVID-19 pandemic. Actual results could differ materially from these estimates, and such differences could affect the results of operations reported in future periods. As the impact of the COVID-19 pandemic continues to develop, many of these estimates could require increased judgment and carry a higher degree of variability and volatility, and may change materially in future periods.

Recently Adopted Accounting Guidance

In October 2021, the Financial Accounting Standards Boards issued Accounting Standards Update (“ASU”) 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The new guidance requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with Accounting Standards Codification 606, Revenue from Contracts with Customers, as if it had originated the contracts. We early adopted ASU 2021-08 at the beginning of fiscal year 2022 and it did not impact our condensed consolidated financial statements.

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2. Revenue from Contracts with Customers

We account for a contract with a customer when both parties have approved the contract and are committed to perform their respective obligations, each party’s rights can be identified, payment terms can be identified, the contract has commercial substance, and it is probable we will collect substantially all of the consideration we are entitled to. Revenue is recognized when, or as, performance obligations are satisfied by transferring control of a promised product or service to a customer.

Disaggregation

We have considered (1) information that is regularly reviewed by our Chief Executive Officer, who has been identified as the chief operating decision maker (the “CODM”) as defined by the authoritative guidance on segment reporting, in evaluating financial performance and (2) disclosures presented outside of our financial statements in our earnings releases and used in investor presentations to disaggregate revenues. The principal category we use to disaggregate revenues is the nature of our products and subscriptions and services, as presented in our condensed consolidated statements of operations. In addition, revenues by reportable segment are presented in Note 9. “Segment Information”.

The following tables present revenue disaggregated by type of revenue and by region for the periods presented:


	Fiscal Quarter Ended January 30, 2022
	Americas		Asia Pacific		Europe, the Middle East and Africa		Total

	(In millions)
Products	$	548	$	4,984	$	521	$	6,053
Subscriptions and services (a)	1,109		128		416		1,653
Total	$	1,657	$	5,112	$	937	$	7,706


	Fiscal Quarter Ended January 31, 2021
	Americas		Asia Pacific		Europe, the Middle East and Africa		Total

	(In millions)
Products	$	390	$	4,320	$	371	$	5,081
Subscriptions and services (a)	1,004		191		379		1,574
Total	$	1,394	$	4,511	$	750	$	6,655

_______________

(a) Subscriptions and services predominantly include software licenses with termination for convenience clauses.

Although we recognize revenue for the majority of our products when title and control transfer in Penang, Malaysia, we disclose net revenue by region based primarily on the geographic shipment location or delivery location specified by our distributors, original equipment manufacturer customers, contract manufacturers, channel partners, or software customers.

Contract Balances

Contract assets and contract liabilities balances were as follows:


		January 30, 2022		October 31, 2021

	(In millions)
Contract Assets		$	105	$	126

Contract Liabilities		$	3,545	$	3,185

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Changes in our contract assets and contract liabilities primarily result from the timing difference between our performance and the customer’s payment. We fulfill our obligations under a contract with a customer by transferring products and services in exchange for consideration from the customer. We recognize a contract asset when we transfer products or services to a customer and the right to consideration is conditional on something other than the passage of time. Accounts receivable are recorded when the customer has been billed or the right to consideration is unconditional. We recognize contract liabilities when we have received consideration or an amount of consideration is due from the customer and we have a future obligation to transfer products or services. Contract liabilities include amounts billed or collected and advanced payments on contracts or arrangements, which may include termination for convenience provisions. The amount of revenue recognized during the fiscal quarter ended January 30, 2022 that was included in the contract liabilities balance as of October 31, 2021 was $1,216 million. The amount of revenue recognized during the fiscal quarter ended January 31, 2021 that was included in the contract liabilities balance as of November 1, 2020 was $1,132 million.

Remaining Performance Obligations

Revenue allocated to remaining performance obligations represents the transaction price allocated to unsatisfied or partially unsatisfied performance obligations. Remaining performance obligations include unearned revenue and amounts that will be invoiced and recognized as revenue in future periods, but do not include contracts for software, subscriptions or services where the customer is not committed. The customer is not considered committed when termination for convenience without payment of a substantive penalty exists, either contractually or through customary business practice. The majority of our customer software contracts include termination for convenience clauses without a substantive penalty and are not considered committed. Additionally, as a practical expedient, we have not included contracts that have an original duration of one year or less, nor have we included contracts with sales-based or usage-based royalties promised in exchange for a license of intellectual property (“IP”).

Certain multi-year customer contracts in our semiconductor solutions segment contain firmly committed amounts and the remaining performance obligations under these contracts as of January 30, 2022 were approximately $15.3 billion. We expect approximately 28% of this amount to be recognized as revenue over the next 12 months. Although the majority of our software contracts are not deemed to be committed, our customers generally do not exercise their termination for convenience rights. In addition, the majority of our contracts for products, subscriptions and services have a duration of one year or less. Accordingly, our remaining performance obligations disclosed above are not indicative of revenue for future periods.

3. Supplemental Financial Information

Cash Equivalents

Cash equivalents included $3,315 million and $4,668 million of time deposits and $1,080 million and $1,607 million of money-market funds as of January 30, 2022 and October 31, 2021, respectively. For time deposits, carrying value approximates fair value due to the short-term nature of the instruments. The fair value of money-market funds, which was consistent with their carrying value, was determined using unadjusted prices in active, accessible markets for identical assets, and as such, they were classified as Level 1 assets in the fair value hierarchy.

Accounts Receivable Factoring

We sell certain of our trade accounts receivable on a non-recourse basis to third-party financial institutions pursuant to factoring arrangements. We account for these transactions as sales of receivables and present cash proceeds as cash provided by operating activities in the condensed consolidated statements of cash flows. Total trade accounts receivable sold under the factoring arrangements were $1,200 million and $927 million during the fiscal quarters ended January 30, 2022 and January 31, 2021, respectively. Factoring fees for the sales of receivables were recorded in other income (expense), net and were not material for any of the periods presented.

Inventory


	January 30, 2022		October 31, 2021

	(In millions)
Finished goods	$	526	$	423
Work-in-process	779		680
Raw materials	215		194
Total inventory	$	1,520	$	1,297

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Other Current Assets


	January 30, 2022		October 31, 2021

	(In millions)
Prepaid expenses	$	579	$	539
Other (miscellaneous)	484		516
Total other current assets	$	1,063	$	1,055

Other Current Liabilities


	January 30, 2022		October 31, 2021

	(In millions)
Contract liabilities	$	3,027	$	2,619
Tax liabilities	556		541
Interest payable	417		282
Other (miscellaneous)	378		397
Total other current liabilities	$	4,378	$	3,839

Other Long-Term Liabilities


	January 30, 2022		October 31, 2021

	(In millions)
Unrecognized tax benefits	$	3,366	$	3,407
Other (miscellaneous)	1,372		1,453
Total other long-term liabilities	$	4,738	$	4,860

Supplemental Cash Flow Information


	Fiscal Quarter Ended
	January 30, 2022		January 31, 2021

	(In millions)
Cash paid for interest	$	240	$	372
Cash paid for income taxes	$	186	$	147

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4. Intangible Assets


	Gross Carrying Amount		Accumulated Amortization		Net Book Value

	(In millions)
As of January 30, 2022:
Purchased technology	$	23,597	$	(17,542)	$	6,055
Customer contracts and related relationships	8,335		(4,857)		3,478
Order backlog	1,279		(1,085)		194
Trade names	698		(316)		382
Other	183		(75)		108
Intangible assets subject to amortization	34,092		(23,875)		10,217
In-process research and development	27		—		27
Total	$	34,119	$	(23,875)	$	10,244

As of October 31, 2021:
Purchased technology	$	23,932	$	(17,148)	$	6,784
Customer contracts and related relationships	8,356		(4,533)		3,823
Order backlog	2,579		(2,352)		227
Trade names	787		(386)		401
Other	239		(127)		112
Intangible assets subject to amortization	35,893		(24,546)		11,347
In-process research and development	27		—		27
Total	$	35,920	$	(24,546)	$	11,374

Based on the amount of intangible assets subject to amortization at January 30, 2022, the expected amortization expense for each of the next five years and thereafter was as follows:


Fiscal Year:	Expected Amortization Expense
	(In millions)
2022 (remainder)	$	3,235
2023	3,237
2024	2,367
2025	659
2026	323
Thereafter	396
Total	$	10,217

The weighted-average remaining amortization periods by intangible asset category were as follows:


Amortizable intangible assets:						January 30, 2022
						(In years)
Purchased technology						4
Customer contracts and related relationships						3
Order backlog						1
Trade names						8
Other						9

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5. Net Income Per Share

Basic net income per share is computed by dividing net income attributable to common stock by the weighted-average number of shares of common stock outstanding during the period. Diluted net income per share is computed by dividing net income attributable to common stock by the weighted-average number of shares of common stock and potentially dilutive shares of common stock outstanding during the period.

Diluted shares outstanding include the dilutive effect of unvested restricted stock units (“RSUs”), in-the-money stock options and employee stock purchase plan rights under the Broadcom Inc. Employee Stock Purchase Plan, as amended (“ESPP”), (collectively referred to as “equity awards”), as well as Mandatory Convertible Preferred Stock, as defined in Note 7. “Stockholders’ Equity.” Potentially dilutive shares whose effect would have been antidilutive are excluded from the computation of diluted net income per share.

The dilutive effect of equity awards is calculated based on the average stock price for each fiscal period, using the treasury stock method. Under the treasury stock method, the amount the employee must pay for exercising stock options and purchasing shares under the ESPP and the amount of compensation cost for future service that we have not yet recognized are collectively assumed to be used to repurchase shares. The dilutive effect of Mandatory Convertible Preferred Stock is calculated using the if-converted method. The if-converted method assumes that these securities were converted at the beginning of the reporting period to the extent that the effect is dilutive.

For each of the fiscal quarters ended January 30, 2022 and January 31, 2021, diluted net income per share excluded the potentially dilutive effect of 12 million shares of common stock issuable upon the conversion of Mandatory Convertible Preferred Stock as their effect was antidilutive.

The following is a reconciliation of the numerators and denominators of the basic and diluted net income per share computations for the periods presented:


	Fiscal Quarter Ended
	January 30, 2022		January 31, 2021

	(In millions, except per share data)
Numerator:
Net income	$	2,472	$	1,378
Dividends on preferred stock	(74)		(74)






Net income attributable to common stock	$	2,398	$	1,304

Denominator:
Weighted-average shares outstanding - basic	412		407
Dilutive effect of equity awards	17		21

Weighted-average shares outstanding - diluted	429		428




Net income per share attributable to common stock:


Basic	$	5.82	$	3.20




Diluted	$	5.59	$	3.05

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6. Borrowings


	Effective Interest Rate		January 30, 2022		October 31, 2021

	(In millions, except percentages)
September 2021 Senior Notes - fixed rate
3.137% notes due November 2035	4.23	%	$	3,250	$	3,250
3.187% notes due November 2036	4.79	%	2,750		2,750
			6,000		6,000
March 2021 Senior Notes - fixed rate
3.419% notes due April 2033	4.66	%	2,250		2,250
3.469% notes due April 2034	4.63	%	3,250		3,250
			5,500		5,500
January 2021 Senior Notes - fixed rate
1.950% notes due February 2028	2.10	%	750		750
2.450% notes due February 2031	2.56	%	2,750		2,750
2.600% notes due February 2033	2.70	%	1,750		1,750
3.500% notes due February 2041	3.60	%	3,000		3,000
3.750% notes due February 2051	3.84	%	1,750		1,750
			10,000		10,000
June 2020 Senior Notes - fixed rate
3.459% notes due September 2026	4.19	%	752		752
4.110% notes due September 2028	5.02	%	1,965		1,965
			2,717		2,717
May 2020 Senior Notes - fixed rate
2.250% notes due November 2023	2.40	%	105		105
3.150% notes due November 2025	3.29	%	900		900
4.150% notes due November 2030	4.27	%	2,679		2,679
4.300% notes due November 2032	4.39	%	2,000		2,000
			5,684		5,684
April 2020 Senior Notes - fixed rate
4.700% notes due April 2025	4.88	%	1,020		1,020
5.000% notes due April 2030	5.18	%	1,086		1,086
			2,106		2,106
April 2019 Senior Notes - fixed rate
3.625% notes due October 2024	3.98	%	622		622
4.250% notes due April 2026	4.54	%	944		944
4.750% notes due April 2029	4.95	%	1,958		1,958
			3,524		3,524
2017 Senior Notes - fixed rate
3.000% notes due January 2022	3.21	%	—		255
2.650% notes due January 2023	2.78	%	260		260
3.625% notes due January 2024	3.74	%	829		829
3.125% notes due January 2025	3.23	%	495		495
3.875% notes due January 2027	4.02	%	2,922		2,922
3.500% notes due January 2028	3.60	%	777		777
			5,283		5,538

Table of Contents


	Effective Interest Rate		January 30, 2022		October 31, 2021

	(In millions, except percentages)
Assumed CA Senior Notes - fixed rate
4.500% notes due August 2023	4.10	%	143		143
4.700% notes due March 2027	5.15	%	265		265
			408		408
Other borrowings
2.500% - 4.500% senior notes due August 2022 - August 2034	2.59% - 4.55%		22		22
Total principal amount outstanding			41,244		41,499
Less: Unamortized discount and issuance costs			(1,803)		(1,834)
Total debt			$	39,441	$	39,665

As of January 30, 2022 and October 31, 2021, short-term finance lease liabilities of $31 million and $26 million, respectively, were included in the current portion of long-term debt and long-term finance lease liabilities of $33 million and $39 million, respectively, were included in long-term debt.

January 2021 Credit Agreement

In January 2021, we entered into a credit agreement (the “January 2021 Credit Agreement”), which provides for a five-year $7.5 billion unsecured revolving credit facility (the “Revolving Facility”), of which $