APPLIED MATERIALS DELIVERS STRONG THIRD QUARTER RESULTS
(Thomson Reuters ONE) -
* Net sales of $2.79 billion, up 11 percent year over year and down 3 percent
sequentially
* Q3 EPS of $0.36; Q3 non-GAAP EPS of $0.35
SANTA CLARA, Calif., August 24, 2011 -- Applied Materials, Inc. (NASDAQ: AMAT),
the world's leading supplier of manufacturing solutions for the semiconductor,
display and solar industries, today reported results for its third quarter of
fiscal 2011 ended July 31, 2011. Applied generated orders of $2.39 billion, net
sales of $2.79 billion, operating income of $687 million, and net income of $476
million or $0.36 per share. Non-GAAP operating income was $683 million, and non-
GAAP net income was $467 million or $0.35 per share.
"Applied delivered solid third quarter results, with earnings and revenue at the
upper end of our expectations," said Mike Splinter, chairman and chief executive
officer. "While the fundamental drivers of our markets remain strong, we are
seeing softness in our business resulting from the uncertain economic
environment and overcapacity in solar."
"Our cumulative net sales and non-GAAP earnings per share over the past four
quarters have been the strongest in the company's history," said George Davis,
chief financial officer. "In our most recent quarter, Applied generated nearly
$600 million in operating cash flow and issued $1.75 billion in long-term debt
to support the Varian acquisition."
Financial Results Summary
+-----------------------------+---------------+---------------+----------------+
|GAAP Results |Q3 FY2011 |Q2 FY2011 |Q3 FY2010 |
+-----------------------------+---------------+---------------+----------------+
|Net sales |$2.79 billion |$2.86 billion |$2.52 billion |
+-----------------------------+---------------+---------------+----------------+
|Operating income |$687 million |$677 million |$183 million |
+-----------------------------+---------------+---------------+----------------+
|Net income |$476 million |$489 million |$123 million |
+-----------------------------+---------------+---------------+----------------+
|Earnings per share (EPS) |$0.36 |$0.37 |$0.09 |
+-----------------------------+---------------+---------------+----------------+
|Non-GAAP Results | | | |
+-----------------------------+---------------+---------------+----------------+
|Non-GAAP operating income |$683 million |$685 million |$339 million |
+-----------------------------+---------------+---------------+----------------+
|Non-GAAP net income |$467 million |$501 million |$234 million |
+-----------------------------+---------------+---------------+----------------+
|Non-GAAP EPS |$0.35 |$0.38 |$0.17 |
+-----------------------------+---------------+---------------+----------------+
Applied's Q3 FY2010 results included $405 million in charges associated with the
EES restructuring plan announced in July 2010, consisting in part of $250
million in inventory-related charges that reduced GAAP and non-GAAP EPS by
$0.12. Non-GAAP results for the above periods exclude the impact of the
following, where applicable: restructuring and asset impairment charges and any
associated adjustment related to restructuring actions, certain discrete tax
items, certain acquisition-related costs, investment impairments, and gain or
loss on sale of facilities. A reconciliation of the GAAP and non-GAAP results is
provided in the financial statements included in this release. See also "Use of
Non-GAAP Financial Measures" below.
Fiscal Third Quarter Reportable Segment Results and Comparisons to the Prior
Quarter
Silicon Systems Group (SSG) orders were $1.24 billion, down 28 percent primarily
due to weaker demand in foundry. Net sales were $1.40 billion, down 4 percent.
Operating income decreased to $452 million or 32 percent of net sales,
reflecting the lower revenue. New order composition was: foundry 37 percent,
logic and other 25 percent, flash 23 percent, and DRAM 15 percent.
Applied Global Services (AGS) orders were $613 million, up 2 percent. Net sales
were $603 million, down 2 percent. Operating income increased by 61 percent to
$146 million or 24 percent of net sales driven primarily by higher margins in
200 millimeter equipment as well as services.
Display orders were $220 million, down 14 percent due primarily to reduced
demand from LCD TV customers. Net sales were $223 million, up 41 percent, and
operating income increased to $58 million or 26 percent of net sales.
Energy and Environmental Solutions (EES) orders were $318 million, down 48
percent as customers digested record capital additions in recent quarters. Net
sales were $563 million, down 12 percent. Operating income decreased to $123
million or 22 percent of net sales and included $3 million in asset impairment
charges.
Additional Quarterly Financial Information
* Backlog decreased by $637 million to $3.24 billion and included $248 million
in negative adjustments.
* Gross margin was 42.5 percent, up from 41.5 percent in the second quarter.
* The effective tax rate was 28.8 percent.
* Operating cash flow was $599 million or 21 percent of net sales.
* Cash dividend payments totaled $105 million.
* The company used $25 million to repurchase 2 million shares of its common
stock.
* Cash, cash equivalents and investments increased to $6.81 billion at quarter
end. The amount included proceeds from the $1.75 billion of notes issued
during the quarter.
Business Outlook
For the fourth quarter of fiscal 2011, Applied expects net sales to be down in
the range of 15 percent to 30 percent sequentially. The company expects non-GAAP
EPS to be in the range of $0.16 to $0.24. The non-GAAP EPS outlook excludes
known charges related to completed acquisitions of approximately $0.01 per
share, but does not exclude other non-GAAP adjustments that may arise subsequent
to this release.
Use of Non-GAAP Financial Measures
Management uses non-GAAP results to evaluate the company's operating and
financial performance in light of business objectives and for planning purposes.
These measures are not in accordance with GAAP and may differ from non-GAAP
methods of accounting and reporting used by other companies. Applied believes
these measures enhance 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. The presentation of this additional
information should not be considered a substitute for results 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.
Forward-Looking Statements
This press release contains forward-looking statements, including statements
regarding Applied's performance, market drivers, and the business outlook for
the fourth quarter of fiscal 2011. Forward-looking statements may contain words
such as "expect," "believe," "may," "can," "should," "will," "anticipate" or
similar expressions, and include the assumptions that underlie such statements.
These statements are subject to known and unknown risks and uncertainties that
could cause actual results to differ materially from those expressed or implied
by such statements, including but not limited to: the level of demand for
Applied's products, which is subject to many factors, including uncertain global
economic and industry conditions, business and consumer spending, demand for
electronic products and semiconductors, government renewable energy policies and
incentives, and customers' utilization rates and new technology and capacity
requirements; variability of operating expenses and results among the company's
segments caused by differing conditions in the served markets; Applied's ability
to (i) develop, deliver and support a broad range of products, expand its
markets and develop new markets, (ii) timely align its cost structure with
business conditions, (iii) plan and manage its resources and production
capability, including its supply chain, (iv) implement initiatives that enhance
global operations and efficiencies, (v) consummate the proposed merger with
Varian in a timely manner or at all, which depends on satisfaction of conditions
precedent, including receipt of certain regulatory approvals, (vi) integrate
Varian's operations, product lines, technology and employees and realize
synergies, (vii) obtain and protect intellectual property rights in key
technologies, (viii) attract, motivate and retain key employees, and (ix)
accurately forecast future operating and financial results, which depends on
multiple assumptions related to, without limitation, market conditions, customer
requirements and business needs; and other risks described in Applied Materials'
SEC filings. All forward-looking statements are based on management's estimates,
projections and assumptions as of the date hereof. The company undertakes no
obligation to update any forward-looking statements.
About Applied Materials
Applied Materials, Inc. (Nasdaq:AMAT) is the global leader in providing
innovative equipment, services and software to enable the manufacture of
advanced semiconductor, flat panel display and solar photovoltaic products. Our
technologies help make innovations like smartphones, flat screen TVs and solar
panels more affordable and accessible to consumers and businesses around the
world. At Applied Materials, we turn today's innovations into the industries of
tomorrow. Learn more at www.appliedmaterials.com.
APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
Three Months Nine Months
Ended Ended
--------------------------------------------------------------------------------
Jul 31, Augus 1, July 31, A gust
(In millions, except per share 2011 2010 2011 1,
amounts) 2010
--------------------------------------------------------------------------------
Net sales $ 2,787 $ 2,518 $ 8,336 $ 6,662
Cost of products sold 1,603 1,658 4,827 4,164
------- ------- ------- ------
Gross margin 1,184 860 3,509 2,498
Operating expenses:
Research, deve lopment and 282 290 850 865
engineering
Selling, general and 240 252 679 700
administrative
Restructuring charges and asset 3 135 (30) 248
impairments
Gain on sale of facilities, net (28) - (27) -
------- ------- ------- ------
Total operating expenses 497 677 1,472 1,813
Income from operations 687 183 2,037 685
Impairment of strategic investments - 8 - 13
Interest and other expense 25 5 35 15
Interest and other income, net 7 8 33 27
------- ------- ------- ------
Income before income taxes 669 178 2,035 684
Provision for income taxes 193 55 564 214
------- ------- ------- ------
Net income $ 476 $ 123 $ 1,471 $ 470
------- ------- ------- ------
Earnings per share:
Basic $ 0.36 $ 0.09 $ 1.11 $ 0.35
Diluted $ 0.36 $ 0.09 $ 1.10 $ 0.35
Weighted average number of shares:
Basic 1,318 1,340 1,321 1,342
Diluted 1,330 1,349 1,333 1,351
--------------------------------------------------------------------------------
APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
-------------------------------------------------------------------------
July 31, October
011 31,
(In millions) 2010
-------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 5,018 $ 1,858
Short-term investments 739 727
Accounts receivable, net 1,812 1,831
Inventories 1,849 1,547
Deferred income taxes, net 541 513
Other current assets 314 289
-------- -------
Total current assets 10,273 6,765
Long-term investments 1,052 1,307
Property, plant and equipment, net 854 963
Goodwill 1,335 1,336
Purchased technology and other intangible assets, net 223 287
Deferred income taxes and other assets 366 285
-------- -------
Total assets $ 14,103 $ 10,943
-------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ - $ 1
Accounts payable and accrued expenses 1,653 1,766
Customer deposits and deferred revenue 1,347 847
Income taxes payable 278 274
-------- -------
Total current liabilities 3,278 2,888
Long-term debt 1,947 204
Employee benefits and other liabilities 327 315
-------- -------
Total liabilities 5,552 3,407
-------- -------
Total stockholders' equity 8,551 7,536
-------- -------
Total liabilities and stockholders' equity $ 14,103 $ 10,943
-------------------------------------------------------------------------
APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
Nine Months Ended
July 31, August 1,
2011 2010
(In millions)
--------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 1,471 $ 470
Adjustments required to reconcile net income to cash
provided by
operating activities:
Depreciation and amortization 187 236
Net loss (gain) on dispositions and fixed asset (24) 14
retirements
Provision for bad debts - 7
Restructuring charges and asset impairments (30) 248
Deferred income taxes (100) (215)
Net recognized loss on investments 13 28
Share-based compensation 110 95
Net change in operating assets and liabilities, net 101 315
of amounts acquired
---------- ----------
Cash provided by operating activities 1,728 1,198
---------- ----------
Cash flows from investing activities:
Capital expenditures (136) (134)
Proceeds from sale of facilit ies and dispositions, 126 -
net of cash sold
Cash paid for acquisition, net of cash acquired - (323)
Proceeds from sales and maturities of investments 1,173 967
Purchases of investments (945) (1,357)
---------- ----------
Cash provided by (used in) investing activities 218 (847)
---------- ----------
Cash flows from financing activities:
Debt borrowings (repayments), net 1,744 (6)
Payments of debt issuance costs (14) -
Proceeds from common stock issuances 64 99
Common stock repurchases (293) (200)
Payment of dividends to stockholders (291) (255)
---------- ----------
Cash provided by (used in) financing activities 1,210 (362)
---------- ----------
Effect of exchange rate changes on cash and cash 4 (1)
equivalents
---------- ----------
Increase (decrease) in cash and cash equivalents 3,160 (12)
Cash and cash equivalents - beginning of period 1,858 1,576
---------- ----------
Cash and cash equivalents - end of period $ 5,018 $ 1,564
---------- ----------
Supplemental cash flow information:
Cash payments for income taxes $ 657 $ 56
Cash payments for interest $ 7 $ 7
--------------------------------------------------------------------------------
Reportable Segment Results
+------------+---------------------------+---------------------------+---------------------------+
| | Q3 FY2011 | Q2 FY2011 | Q3 FY2010 |
+------------+------+-------+------------+--------+--------+---------+--------+--------+---------+
| | | | Operating | | |Operating| | |Operating|
| (In | New | Net | Income | New | Net | Income | New | Net | Income |
| millions) |Orders| Sales |(Loss) | Orders | Sales | (Loss) | Orders | Sales | (Loss) |
+------------+------+-------+------------+--------+--------+---------+--------+--------+---------+
|SSG |$1,239|$1,398 | $452 | $1,715 | $1,453 | $491 | $1,535 | $1,447 | $525 |
+------------+------+-------+------------+--------+--------+---------+--------+--------+---------+
|AGS | $613 | $603 | $146 | $603 | $614 | $91 | $595 | $468 | $84 |
+------------+------+-------+------------+--------+--------+---------+--------+--------+---------+
|Display | $220 | $223 | $58 | $255 | $158 | $31 | $242 | $216 | $64 |
+------------+------+-------+------------+--------+--------+---------+--------+--------+---------+
|EES | $318 | $563 | $123 | $612 | $637 | $170 | $353 | $387 | $(371) |
+------------+------+-------+------------+--------+--------+---------+--------+--------+---------+
|Corporate | - | - | $(92) | - | - | $(106) | - | - | $(119) |
+------------+------+-------+------------+--------+--------+---------+--------+--------+---------+
|Consolidated|$2,390|$2,787 | $687 |$3,185 |$2,862 | $677 |$2,725 |$2,518 | $183 |
+------------+------+-------+------------+--------+--------+---------+--------+--------+---------+
Corporate Unallocated Expenses
+---------------------------------+--------------+--------------+--------------+
| (In millions) | Q3 FY2011 | Q2 FY2011 | Q3 FY2010 |
+---------------------------------+--------------+--------------+--------------+
|Restructuring charges and asset | $- | $(20) | $(20) |
|impairments, net | | | |
+---------------------------------+--------------+--------------+--------------+
|Share-based compensation | $38 | $39 | $32 |
+---------------------------------+--------------+--------------+--------------+
|Gain on sale of facilities | $(28) | $- | $- |
+---------------------------------+--------------+--------------+--------------+
|Other unallocated expenses | $82 | $87 | $107 |
+---------------------------------+--------------+--------------+--------------+
|Corporate | $92 | $106 | $119 |
+---------------------------------+--------------+--------------+--------------+
Additional Information
+-------------+----------------------+--------------------+--------------------+
| | Q3 FY2011 | Q2 FY2011 | Q3 FY2010 |
+-------------+----------------------+--------------------+--------------------+
|New Orders and Net Sales by Geography |
+-------------+-----------+----------+----------+---------+----------+---------+
| (In $ | New | Net | New | Net | New | Net |
| millions) | Orders | Sales | Orders | Sales | Orders | Sales |
+-------------+-----------+----------+----------+---------+----------+---------+
|North America| 356 | 451 | 710 | 467 | 342 | 294 |
+-------------+-----------+----------+----------+---------+----------+---------+
| % of Total| 15 | 16 | 22 | 16 | 13 | 12 |
+-------------+-----------+----------+----------+---------+----------+---------+
|Europe | 254 | 259 | 246 | 312 | 238 | 285 |
+-------------+-----------+----------+----------+---------+----------+---------+
| % of Total| 11 | 9 | 8 | 11 | 9 | 11 |
+-------------+-----------+----------+----------+---------+----------+---------+
|Japan | 372 | 284 | 269 | 208 | 233 | 203 |
+-------------+-----------+----------+----------+---------+----------+---------+
| % of Total| 15 | 10 | 8 | 7 | 8 | 8 |
+-------------+-----------+----------+----------+---------+----------+---------+
|Korea | 362 | 432 | 367 | 299 | 519 | 398 |
+-------------+-----------+----------+----------+---------+----------+---------+
| % of Total| 15 | 16 | 12 | 10 | 19 | 16 |
+-------------+-----------+----------+----------+---------+----------+---------+
|Taiwan | 425 | 454 | 782 | 650 | 733 | 707 |
+-------------+-----------+----------+----------+---------+----------+---------+
| % of Total| 18 | 16 | 25 | 23 | 27 | 28 |
+-------------+-----------+----------+----------+---------+----------+---------+
|Southeast | 87 | 156 | 143 | 185 | 245 | 162 |
|Asia | | | | | | |
+-------------+-----------+----------+----------+---------+----------+---------+
| % of Total| 4 | 6 | 4 | 7 | 9 | 6 |
+-------------+-----------+----------+----------+---------+----------+---------+
|China | 534 | 751 | 668 | 741 | 415 | 469 |
+-------------+-----------+----------+----------+---------+----------+---------+
| % of Total| 22 | 27 | 21 | 26 | 15 | 19 |
+-------------+-----------+----------+----------+---------+----------+---------+
| |
+------------------------------------------------------------------------------+
|Employees (In thousands) |
+-------------+----------------------+--------------------+--------------------+
|Regular Full | 12.7 | 13.0 | 12.9 |
|Time | | | |
+-------------+----------------------+--------------------+--------------------+
APPLIED MATERIALS, INC.
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
-----------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
(In millions,
except per share July May August July August
amounts) 31, 2011 1, 2011 1, 2010 31, 2011 1, 2010
Non -GAAP
Operating Income
Reportedoperating $ 687 $ 677 $ 183 $ 2,037 $ 685
income (GAAP
basis)
Certain items 12 12 21 37 77
associated with
acquisitions (1)
Varian and 9 - - 9 10
Semitool deal
cost
Restructuring 3 (4) 135 (30) 248
charges and asset
impairments
(2,3,4,5,6)
Gain on sale of (28) - - (27) -
facilit ies, net
------------------------------------------------------------------
Non -GAAP $ 683 $ 685 $ 339 $ 2,026 $ 1,020
operating income
------------------------------------------------------------------
Non -GAAP Net
Income
Reported net $ 476 $ 489 $ 123 $ 1,471 $ 470
income (GAAP
basis)
Certain items 12 12 21 37 77
associated with
acquisitions (1)
Varian and 9 - - 9 10
Semitool deal
cost
Restructuring 3 (4) 135 (30) 248
charges and asset
impairments
(2,3,4,5,6)
Impairment of - - 8 - 13
strategic
investments
Gain on sale of (28) - - (27) -
facilit ies, net
Reinstatement of - - - (13) -
federal R&D tax
credit
Income tax effect (5) 4 (53) 5 (113)
of non-GAAP
adjustments
------------------------------------------------------------------
Non -GAAP net $ 467 $ 501 $ 234 $ 1,452 $ 705
income
------------------------------------------------------------------
Non -GAAP
Earnings Per
Diluted Share
Reported earnings
per diluted share
(GAAP basis) $ 0.36 $ 0.37 $ 0.09 $ 1.10 $ 0.35
Certain items 0.01 0.01 0.01 0.02 0.04
associated with
acquisitions
Varian and - - - 0.01 0.01
Semitool deal
cost
Restructuring - - 0.07 (0.01) 0.12
charges and asset
impairments
Impairment of - - - - -
strategic
investments
Gain on sale of (0.02) - - (0.02) -
facilit ies, net
Reinstatement of - - - (0.01) -
federal R&D tax
credit
Non -GAAP $ 0.35 $ 0.38 $ 0.17 $ 1.09 $ 0.52
earnings per
diluted share
Weighted average 1,330 1,333 1,349 1,333 1,351
number of diluted
shares
-----------------------------------------------------------------------------------
1 These items are incremental charges attributable to acquisitions consisting of
inventory fair value adjustments on products sold and amortization of purchased
intangible assets.
2 Results for the three months ended July 31, 2011 included asset impairment
charges of $3 million related to certain fixed assets.
3 Results for the three months ended May 1, 2011 included asset impairment
charges of $24 million related to certain intangible assets, offset by favorable
adjustments of $8 million related to a restructuring program announced on July
21, 2010, $19 million related to a restructuring program announced on November
11, 2009, and $1 million related to a restructuring program announced on
November 12, 2008.
4 Results for the three months ended August 1, 2010 included asset impairment
charges of $110 million and restructuring charges of $45 million related to a
restructuring program announced on July 21, 2010, offset by a $20 million
favorable adjustment to a restructuring program announced on November 11, 2009.
5 Results for the nine months ended July 31, 2011 included asset impairment
charges of $30 million primarily related to certain intangible assets, offset by
favorable adjustments of $36 million related to a restructuring program
announced on July 21, 2010, $19 million related to a restructuring program
announced on November 11, 2009, and $5 million related to a restructuring
program announced on November 12, 2008.
6 Results for the nine months ended August 1, 2010 included asset impairment
charges of $110 million and restructuring charges of $45 million related to a
restructuring program announced on July 21, 2010, restructuring charges of $84
million associated with a restructuring program announced on November 11, 2009,
and asset impairment charges of $9 million related to a facility held for sale.
Contact:
Howard Clabo (editorial/media) 408.748.5775
Michael Sullivan (financial community) 408.986.7977
This announcement is distributed by Thomson Reuters on behalf of
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(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Applied Materials via Thomson Reuters ONE
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