Applied Materials
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APPLIED MATERIALS DELIVERS STRONG SECOND QUARTER RESULTS
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* Net sales of $2.86 billion up 25 percent year over year and up 7 percent
sequentially
* Q2 EPS of $0.37; Q2 non-GAAP EPS of $0.38
SANTA CLARA, Calif., May 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 second quarter of
fiscal 2011 ended May 1, 2011. Applied generated orders of $3.19 billion, net
sales of $2.86 billion, operating income of $677 million, and net income of $489
million or $0.37 per share. Non-GAAP operating income was $685 million, and non-
GAAP net income was $501 million or $0.38 per share.
"Applied delivered one of the best quarters in the company's history, including
record net sales in our solar business," said Mike Splinter, chairman and chief
executive officer. "While near-term economic conditions have tempered our growth
expectations, our outlook for the year remains strong driven by our customers'
plans to invest in the advanced technologies needed to meet growing demand for
mobile devices and consumer electronics."
Splinter added, "Earlier this month, we announced the planned acquisition of
Varian Semiconductor to strengthen our leadership in the semiconductor industry
and deliver value to our customers, shareholders and employees worldwide."
"We exceeded our guidance for net sales in the second quarter and delivered
earnings per share at the high end of the range," said George Davis, chief
financial officer. "During the quarter, we also raised our dividend by 14
percent to 8 cents per share and generated operating cash flow of more than $700
million."
Financial Results Summary
+-----------------------------+---------------+---------------+---------------+
| GAAP Results | Q2 FY2011 | Q1 FY2011 | Q2 FY2010 |
+-----------------------------+---------------+---------------+---------------+
| Net sales | $2.86 billion | $2.69 billion | $2.30 billion |
+-----------------------------+---------------+---------------+---------------+
| Operating income | $677 million | $674 million | $386 million |
+-----------------------------+---------------+---------------+---------------+
| Net income | $489 million | $506 million | $264 million |
+-----------------------------+---------------+---------------+---------------+
| Earnings per share | $0.37 | $0.38 | $0.20 |
+-----------------------------+---------------+---------------+---------------+
| Non-GAAP Results | | | |
+-----------------------------+---------------+---------------+---------------+
| Non-GAAP operating income | $685 million | $659 million | $425 million |
+-----------------------------+---------------+---------------+---------------+
| Non-GAAP net income | $501 million | $484 million | $292 million |
+-----------------------------+---------------+---------------+---------------+
| Non-GAAP earnings per share | $0.38 | $0.36 | $0.22 |
+-----------------------------+---------------+---------------+---------------+
The non-GAAP results 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 Second Quarter Reportable Segment Results
Silicon Systems Group (SSG) orders were $1.71 billion, up 7 percent
sequentially. Net sales were $1.45 billion, down 3 percent sequentially.
Operating income decreased 10 percent sequentially to $491 million or 34 percent
of net sales on a weaker mix. New order composition was: foundry 47 percent,
logic and other 25 percent, flash 16 percent, and DRAM 12 percent.
Applied Global Services (AGS) orders were $603 million, up 9 percent
sequentially. Net sales were a record $614 million, up 8 percent sequentially,
led by higher shipments of 200mm equipment. Operating income increased to $91
million or 15 percent of net sales and included $24 million in intangible asset
impairment charges.
Display orders were $255 million, up 80 percent sequentially driven primarily by
growth in equipment for producing touch panels and advanced mobile device
displays. Net sales were $158 million, up 7 percent sequentially. Operating
income increased to $31 million or 19 percent of net sales.
Energy and Environmental Solutions (EES) orders were $612 million, down 8
percent sequentially. Net sales set a record at $637 million, up 34 percent
sequentially. Operating income increased to $170 million or 27 percent of net
sales.
Additional Quarterly Financial Information
* Backlog increased by $344 million to $3.88 billion.
* Gross margin was 41.5 percent, down from 42.3 percent in the first quarter.
* The effective tax rate was 28.8 percent.
* Operating cash flow was $704 million or 25 percent of net sales.
* Cash dividend payments totaled $93 million.
* The company used $118 million to repurchase 7.6 million shares of its common
stock.
* Cash, cash equivalents and investments increased to $4.58 billion at quarter
end.
Business Outlook
For the third quarter of fiscal 2011, Applied expects net sales to be down in
the range of 3 percent to 10 percent sequentially. The company expects non-GAAP
EPS to be in the range of $0.31 to $0.37. 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. The non-GAAP EPS outlook includes the potential cost of long-
term financing related to the planned Varian acquisition of approximately $0.01
per share.
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 Materials
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
atwww.appliedmaterials.com.
Forward-Looking Statements
This press release contains forward-looking statements, including statements
regarding Applied's performance and full-year outlook, customers' investments,
the planned acquisition of Varian Semiconductor Equipment Associates, Inc.
(Varian) and associated benefits, and the business outlook for the third quarter
of fiscal 2011. Forward-looking statements may contain words such as "expect,"
"believe," "may," "can," "should," "will," "forecast," "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 and approval by
Varian's stockholders, (vi) complete anticipated financing arrangements, (vii)
integrate Varian's operations, product lines, technology and employees and
realize synergies from the proposed merger, (viii) obtain and protect
intellectual property rights in key technologies, (ix) attract, motivate and
retain key employees, and (x) 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 Ended Six Months Ended
--------------------------------------------------------------------------------
May 1, May 2, May 1, May 2,
(In millions, except per share
amounts) 2011 2010 2011 2010
--------------------------------------------------------------------------------
Net sales $ 2,862 $ 2,296 5,549 4,144
Cost of products sold 1,673 1,369 3,224 2,506
Gross margin 1,189 927 2,325 1,638
Operating expenses:
Research, development and 297 306 567 575
engineering
General and administrative 112 126 224 250
Marketing and selling 107 100 216 198
Restructuring charges and asset (4) 9 (33) 113
impairments
Total operating expenses 512 541 974 1,136
Income from operations 677 386 1,351 502
Impairment of strategic - 4 - 5
investments
Interest expense 5 5 10 10
Interest and other income, net 14 10 25 19
Income before income taxes 686 387 1,366 506
Provision for income taxes 197 123 371 159
Net income $ 489 $ 264 $ 995 $ 347
Earnings per share:
Basic and Diluted $ 0.37 $ 0.20 $ 0.75 $ 0.26
Weighted average number of shares:
Basic 1,320 1,345 1,322 1,343
Diluted 1,333 1,352 1,333 1,351
--------------------------------------------------------------------------------
APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
--------------------------------------------------------------------------------
May 1, October 31,
(In millions) 2011 2010
--------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 2,558 $ 1,858
Short-term investments 750 727
Accounts receivable, net 1,916 1,831
Inventories 1,794 1,547
Deferred income taxes, net 545 513
Income taxes receivable 110 -
Other current assets 271 289
Total current assets 7,944 6,765
Long-term investments 1,269 1,307
Property, plant and equipment, net 898 963
Goodwill, net 1,336 1,336
Purchased technology and other intangible assets, 236 287
net
Deferred income taxes and other assets 274 285
Total assets $ 11,957 $ 10,943
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1 $ 1
Accounts payable and accrued expenses 1,760 1,766
Customer deposits and deferred revenue 1,279 847
Income taxes payable 211 274
Total current liabilities 3,251 2,888
Long-term debt 204 204
Employee benefits and other liabilities 320 315
Total liabilities 3,775 3,407
Total stockholders' equity 8,182 7,536
Total liabilities and stockholders' equity $ 11,957 $ 10,943
--------------------------------------------------------------------------------
APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
Six Months Ended
May 1, May 2,
(In millions) 2011 2010
--------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 995 $ 347
Adjustments required to reconcile net income to
cash provided by
operating activities:
Depreciation and amortization 128 163
Loss on fixed asset retirements 1 12
Provision for bad debts - 6
Restructuring charges and asset impairments (33) 113
Deferred income taxes (17) (75)
Net recognized loss on investments 5 14
Share-based compensation 72 62
Net change in operating assets and liabilities, (22) 257
net of amounts acquired
Cash provided by operating activities 1,129 899
Cash flows from investing activities:
Capital expenditures (81) (98)
Proceeds from sale of facility 39 -
Cash paid for acquisition, net of cash acquired - (323)
Proceeds from sales and maturities of 904 540
investments
Purchases of investments (896) (829)
Cash used in investing activities (34) (710)
Cash flows from financing activities:
Debt repayments, net (1) (5)
Proceeds from common stock issuances 59 97
Common stock repurchases (268) (100)
Payment of dividends to stockholders (186) (161)
Cash used in financing activities (396) (169)
Effect of exchange rate changes on cash and cash 1 -
equivalents
Increase in cash and cash equivalents 700 20
Cash and cash equivalents - beginning of period 1,858 1,576
Cash and cash equivalents - end of period $ 2,558 $ 1,596
Supplemental cash flow information:
Cash payments (refunds) for income taxes $ 554 $ (98)
Cash payments for interest $ 7 $ 7
--------------------------------------------------------------------------------
Reportable Segment Results
+------------+-----------------------+-----------------------+-----------------------+
| | Q2 FY2011 | Q1 FY2011 | Q2 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 |$1,715|$1,453| $491 |$1,610|$1,496| $543 |$1,416|$1,404| $498 |
+------------+------+------+---------+------+------+---------+------+------+---------+
|AGS | $603 | $614 | $91 | $552 | $567 | $85 | $483 | $456 | $90 |
+------------+------+------+---------+------+------+---------+------+------+---------+
|Display | $255 | $158 | $31 | $142 | $147 | $28 | $256 | $270 | $90 |
+------------+------+------+---------+------+------+---------+------+------+---------+
|EES | $612 | $637 | $170 | $668 | $476 | $144 | $378 | $166 | ($145) |
+------------+------+------+---------+------+------+---------+------+------+---------+
|Corporate | - | - | ($106) | - | - | ($126) | - | - | ($147) |
+------------+------+------+---------+------+------+---------+------+------+---------+
|Consolidated|$3,185|$2,862| $677 |$2,971|$2,686| $674 |$2,533|$2,296| $386 |
+------------+------+------+---------+------+------+---------+------+------+---------+
Corporate Unallocated Expenses
+------------------------------------------------+---------+---------+---------+
| (In millions) |Q2 FY2011|Q1 FY2011|Q2 FY2010|
+------------------------------------------------+---------+---------+---------+
|Restructuring charges and asset impairments, net| ($20) | ($1) | $9 |
+------------------------------------------------+---------+---------+---------+
|Share-based compensation | $39 | $33 | $28 |
+------------------------------------------------+---------+---------+---------+
|Other unallocated expenses | $87 | $94 | $110 |
+------------------------------------------------+---------+---------+---------+
|Corporate | $106 | $126 | $147 |
+------------------------------------------------+---------+---------+---------+
Additional Information
+---------------+--------------------+--------------------+--------------------+
| | Q2 FY2011 | Q1 FY2011 | Q2 FY2010 |
+---------------+--------------------+--------------------+--------------------+
|New Orders and Net Sales by Geography |
+---------------+----------+---------+----------+---------+----------+---------+
|(In $ millions)|New Orders|Net Sales|New Orders|Net Sales|New Orders|Net Sales|
+---------------+----------+---------+----------+---------+----------+---------+
|North America | 710 | 467 | 679 | 610 | 300 | 230 |
+---------------+----------+---------+----------+---------+----------+---------+
| % of Total| 22 | 16 | 23 | 23 | 12 | 10 |
+---------------+----------+---------+----------+---------+----------+---------+
|Europe | 246 | 312 | 346 | 278 | 156 | 165 |
+---------------+----------+---------+----------+---------+----------+---------+
| % of Total| 8 | 11 | 12 | 10 | 6 | 7 |
+---------------+----------+---------+----------+---------+----------+---------+
|Japan | 269 | 208 | 187 | 166 | 158 | 233 |
+---------------+----------+---------+----------+---------+----------+---------+
| % of Total| 8 | 7 | 6 | 6 | 6 | 10 |
+---------------+----------+---------+----------+---------+----------+---------+
|Korea | 367 | 299 | 225 | 169 | 561 | 632 |
+---------------+----------+---------+----------+---------+----------+---------+
| % of Total| 12 | 10 | 8 | 6 | 22 | 28 |
+---------------+----------+---------+----------+---------+----------+---------+
|Taiwan | 782 | 650 | 745 | 635 | 655 | 699 |
+---------------+----------+---------+----------+---------+----------+---------+
| % of Total| 25 | 23 | 25 | 24 | 26 | 30 |
+---------------+----------+---------+----------+---------+----------+---------+
|Southeast Asia | 143 | 185 | 135 | 154 | 152 | 105 |
+---------------+----------+---------+----------+---------+----------+---------+
| % of Total| 4 | 7 | 4 | 6 | 6 | 5 |
+---------------+----------+---------+----------+---------+----------+---------+
|China | 668 | 741 | 654 | 674 | 551 | 232 |
+---------------+----------+---------+----------+---------+----------+---------+
| % of Total| 21 | 26 | 22 | 25 | 22 | 10 |
+---------------+----------+---------+----------+---------+----------+---------+
| |
+------------------------------------------------------------------------------+
|Employees (In thousands) |
+---------------+--------------------+--------------------+--------------------+
|Regular Full | 13.1 | 13.0 | 13.0 |
|Time | | | |
+---------------+--------------------+--------------------+--------------------+
APPLIED MATERIALS, INC.
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
--------------------------------------------------------------------------------
Three Months Ended Six Months Ended
--------------------------------------------------------------------------------
May 1, January 30, May 2, May 1, May 2,
(In millions, 2011 2011 2010 2011 2010
except per
share amounts)
--------------------------------------------------------------------------------
Non-GAAP
Operating
Income
Reported $ 677 $ 674 $ 386 $ 1,351 $ 502
operating
income (GAAP
basis)
Certain items 12 13 30 25 56
associated
with
acquisitions
(1)
Semitool deal - - - - 10
cost
Restructuring (4) (29) 9 (33) 113
charges and
asset
impairments
(2,3,4,5,6)
Loss on sale - 1 - 1 -
of facility
Non-GAAP $ 685 $ 659 $ 425 $ 1,344 $ 681
operating
income
Non-GAAP Net
Income
Reported net $ 489 $ 506 $ 264 $ 995 $ 347
income (GAAP
basis)
Certain items 12 13 30 25 56
associated
with
acquisitions
(1)
Semitool deal - - - - 10
cost
Restructuring (4) (29) 9 (33) 113
charges and
asset
impairments
(2,3,4,5,6)
Impairment of - - 4 - 5
strategic
investments
Loss on sale - 1 - 1 -
of facility
Reinstatement - (13) - (13) -
of federal R&D
tax credit
Income tax 4 (15) 10 (59)
effect of non- 6
GAAP
adjustments
Non-GAAP net $ 501 $ 484 $ 292 $ 985 $ 471
income
Non-GAAP Net
Income Per
Diluted Share
Reported net
income per $ 0.37 $ 0.38 $ 0.20 $ 0.75 $ 0.26
diluted share
(GAAP basis)
Certain items 0.01 0.01 0.02 0.01 0.03
associated
with
acquisitions
Semitool deal - - - - 0.01
cost
Restructuring - (0.01) - (0.01) 0.05
charges and
asset
impairments
Impairment of - - - - -
strategic
investments
Loss on sale - - - - -
of facility
Reinstatement - (0.01) - (0.01) -
of federal R&D
tax credit
Non-GAAP net $ 0.38 $ 0.36 $ 0.22 $ 0.74 $ 0.35
income - per
diluted share
Shares used in 1,333 1,335 1,352 1,333 1,351
diluted shares
calculation
--------------------------------------------------------------------------------
( )
(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 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.
(3) Results for the three months ended January 30, 2011 included asset
impairment charges of $3 million related to a facility held-for-sale, offset by
favorable adjustments of $28 million related to a restructuring program
announced on July 21, 2010, and $4 million related to a restructuring program
announced on November 12, 2008.
(4 )Results for the three and six months ended May 2, 2010 included asset
impairment charges of $9 million related to a facility held for sale.
(5 )Results for the six months ended May 1, 2011 included asset impairment
charges of $27 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 six months ended May 2, 2010 included restructuring charges
of $104 million related to a restructuring program announced on November
11, 2009.
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
Thomson Reuters clients. The owner of this announcement warrants that:
(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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