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Applied Materials Announces Fourth Quarter and Fiscal Year 2012 Results

Expects Orders to Increase in the First Quarter of FY2013

  • Fourth quarter net sales of $1.65 billion down 30 percent sequentially; Q4 non-GAAP EPS of 6 cents at high end of expectations; Q4 GAAP loss of 42 cents included a goodwill impairment and restructuring charges
  • FY2012 net sales of $8.72 billion down 17 percent; FY2012 non-GAAP EPS of 75 cents down 42 percent; FY2012 GAAP EPS of 9 cents included a goodwill impairment along with acquisition-related and restructuring charges
  • Returned $1.85 billion to stockholders in FY2012 including $1.42 billion in stock repurchases

View conference call details/replay

SANTA CLARA, Calif., November 15, 2012 - Applied Materials, Inc. (NASDAQ:AMAT), the global leader in  manufacturing solutions for the semiconductor, display and solar industries, today reported results for its fourth quarter and fiscal year ended October 28, 2012.

In the fourth quarter, Applied generated orders of $1.47 billion and net sales of $1.65 billion. The company recorded a goodwill impairment and restructuring charges totaling $545 million and reported an operating loss of $499 million, with a net loss of $515 million or 42 cents per diluted share. Non-GAAP operating income was $114 million, and non-GAAP net income was $70 million or 6 cents per share, at the high end of the company's expectations.

In FY2012, the company reported orders of $8.04 billion, net sales of $8.72 billion, operating income of $411 million, and net income of $109 million or 9 cents per diluted share. Non-GAAP operating income for the year was $1.38 billion, and non-GAAP net income was $960 million or 75 cents per share.

"In our fourth quarter, Applied delivered profit at the high end of our outlook despite challenging industry conditions in semiconductor, solar and display," said Mike Splinter, Chairman and CEO. "Our strong cash flow performance allowed us to increase our quarterly dividend and share buybacks, returning $1.85 billion to stockholders in the year."

"We see improving business conditions entering 2013, with orders projected to increase after bottoming in the fourth quarter," Splinter added. "Accelerated changes in device technology and the adoption of new materials in all of the industries we serve provide opportunities for Applied to build on our leadership and grow our market share."

Quarterly Results Summary

GAAP Results
 
Q4 FY2012
 
Q3 FY2012
 
Q4 FY2011

Net sales
 
$1.65 billion
 
$2.34 billion
 
$2.18 billion

Operating income (loss)
 
$(499) million
 
$322 million
 
$361 million

Net income (loss)
 
$(515) million
 
$218 million
 
$456 million

Diluted earnings (loss) per share (EPS)
 
$(0.42)
 
$0.17
 
$0.34

Non-GAAP Results
 
 
 
 
 
 

Non-GAAP operating income
 
$114 million
 
$431 million
 
$384 million

Non-GAAP net income
 
$70 million
 
$300 million
 
$271 million

Non-GAAP diluted EPS
 
$0.06
 
$0.24
 
$0.21

Fourth quarter results included a $421 million goodwill impairment charge associated with the Energy and Environmental Solutions (EES) segment. The goodwill impairment reflects the deterioration in solar equipment market conditions, our customers' financial condition and reduced market valuations, causing Applied to reassess the recoverability of the segment's goodwill. Applied also reported $124 million in charges related to previously announced restructuring plans and the integration of Varian.

Fourth quarter orders for Varian products of $152 million and net sales of $195 million were reported within the Silicon Systems Group (SSG) and Applied Global Services (AGS) segments. The Varian business contributed approximately one cent to the company's non-GAAP EPS in the quarter, which excluded acquisition-related charges equivalent to approximately three cents per share. In FY2012, orders for Varian products totaled $1.03 billion, and net sales were $1.02 billion. The Varian business contributed approximately 11 cents to Applied's non-GAAP EPS, which excluded acquisition-related charges equivalent to approximately 20 cents per share.

Applied's non-GAAP results exclude the impact of the following, where applicable: certain discrete tax items; restructuring charges and any associated adjustments; certain acquisition-related costs; impairments of assets, goodwill, or investments; and/or gain or loss on sale of facilities. A reconciliation of the GAAP and non-GAAP results is provided in the financial tables included in this release. See also "Use of Non-GAAP Financial Measures" below.

Fourth Quarter Reportable Segment Results and Comparisons to the Third Quarter

Silicon Systems Group (SSG) orders were $741 million, down 36 percent, primarily due to lower orders in foundry and memory, partially offset by increased orders in logic. Net sales were $870 million, down 44 percent. Non-GAAP operating income decreased to $95 million or 10.9 percent of net sales. GAAP operating income decreased to $41 million or 4.7 percent of net sales. New order composition was: foundry 47 percent, flash 8 percent, logic and other 40 percent, and DRAM 5 percent.

Applied Global Services (AGS) orders were $576 million, up 8 percent driven by service contract renewals. Net sales were $621 million, up 7 percent, which included $85 million in sales of a thin film production line. Non-GAAP operating income increased to $171 million or 27.5 percent of net sales. GAAP operating income increased to $164 million or 26.4 percent of net sales.

Display orders were $83 million, up 24 percent from low levels. Net sales were $93 million, down 35 percent. Non-GAAP operating income decreased to $4 million or 4.3 percent of net sales. GAAP operating income decreased to $3 million or 3.2 percent of net sales.

Energy and Environmental Solutions (EES) orders were $65 million, up 86 percent from low levels driven by demand for roll-to-roll deposition equipment. Net sales were $62 million, down 19 percent. EES had a non-GAAP operating loss of $46 million and a GAAP operating loss of $480 million.

Additional Quarterly Financial Information and Comparisons to the Third Quarter

  • Backlog decreased by $215 million to $1.6 billion and included negative adjustments of $42 million.
  • Gross margin was 38.4 percent on a non-GAAP basis, down from 41.6 percent, reflecting the decrease in net sales. GAAP gross margin was 35.6 percent.
  • Operating expenses were $518 million on a non-GAAP basis, down from $543 million, with the decrease primarily reflecting an adjustment in compensation accruals. GAAP operating expenses were $1.09 billion.
  • The effective tax rate was 26.3 percent on a non-GAAP basis. The GAAP effective tax rate was 3.2 percent.
  • Cash, cash equivalents and investments ended the quarter at $3.0 billion.

Full-Year Reportable Segment Results and Comparisons to the Prior Year

SSG orders decreased by 4 percent to $5.29 billion, net sales increased by 2 percent to $5.54 billion, non-GAAP operating income decreased to $1.54 billion or 27.8 percent of net sales, and operating income decreased to $1.24 billion or 22.5 percent of net sales.

AGS orders decreased by 3 percent to $2.27 billion, net sales decreased by 5 percent to $2.29 billion, non-GAAP operating income increased to $530 million or 23.2 percent of net sales, and operating income increased to $502 million or 22.0 percent of net sales.

Display orders decreased by 57 percent to $274 million, net sales decreased by 32 percent to $473 million, non-GAAP operating income decreased to $32 million or 6.8 percent of net sales, and operating income decreased to $25 million or 5.3 percent of net sales.

EES orders decreased by 88 percent to $195 million and net sales decreased by 79 percent to $425 million. The business generated a non-GAAP operating loss of $184 million and a GAAP operating loss of $668 million.

Business Outlook

For the first quarter of fiscal 2013, Applied expects net sales to be flat to down 15 percent  sequentially. The company expects non-GAAP EPS to be in the range of $0.00 to $0.06. The non-GAAP EPS outlook excludes known charges related to completed acquisitions of approximately $0.05 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, industry conditions, technology changes, opportunities, strategic position, and business outlooks for the first quarter of fiscal 2013. 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, end-demand for electronic products and semiconductors, government renewable energy policies and incentives, and customers' new technology and capacity requirements; variability of operating expenses and results among the company's segments caused by differing conditions in the served markets; the concentrated nature of Applied's customer base; 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 and achieve the intended objectives of cost-reduction activities, (iii) plan and manage its resources and production capability, (iv) integrate Varian and realize synergies, (v) obtain and protect intellectual property rights in key technologies, (vi) attract, motivate and retain key employees, and (vii) accurately forecast future results, which depends on multiple assumptions related to, without limitation, market conditions, customer requirements and business needs; and other risks described in Applied's most recent current and periodic SEC reports. 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.

Contact:

Matt Ceniceros (editorial/media) 408.768.8169

Michael Sullivan (financial community) 408.986.7977

APPLIED MATERIALS, INC.

UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

 
 
Three Months Ended
 
Twelve Months Ended

(In millions, except per share amounts) 
 
October 28,

2012
 
July 29,

2012
 
October 30,

2011
 
October 28,

2012
 
October 30,

2011

Net sales
 
$
1,646
 
 
$
2,343
 
 
$
2,182
 
 
$
8,719
 
 
$
10,517
 

Cost of products sold
 
1,060
 
 
1,413
 
 
1,330
 
 
5,406
 
 
6,157
 

Gross margin
 
586
 
 
930
 
 
852
 
 
3,313
 
 
4,360
 

Operating expenses:
 
 
 
 
 
 
 
 
 
 

  
Research, development and engineering
 
303
 
 
309
 
 
269
 
 
1,237
 
 
1,118
 

 
Selling, general and administrative
 
237
 
 
255
 
 
222
 
 
1,076
 
 
901
 

 
Impairment of goodwill
 
421
 
 
-
 
 
-
 
 
421
 
 
-
 

 
Restructuring charges and

asset impairments
 
124
 
 
44
 
 
-
 
 
168
 
 
(30
)

 
Gain on sale of facilities, net
 
-
 
 
-
 
 
-
 
 
-
 
 
(27
)

Total operating expenses
 
1,085
 
 
608
 
 
491
 
 
2,902
 
 
1,962
 

Income (loss) from operations
 
(499
)
 
322
 
 
361
 
 
411
 
 
2,398
 

Impairment of strategic investments
 
14
 
 
-
 
 
3
 
 
17
 
 
3
 

Interest and other expenses
 
24
 
 
24
 
 
24
 
 
95
 
 
59
 

Interest and other income, net
 
5
 
 
4
 
 
10
 
 
17
 
 
42
 

Income (loss) before income taxes
 
(532
)
 
302
 
 
344
 
 
316
 
 
2,378
 

Provision (benefit) for income taxes
 
(17
)
 
84
 
 
(112
)
 
207
 
 
452
 

Net income (loss)
 
$
(515
)
 
$
218
 
 
$
456
 
 
$
109
 
 
$
1,926
 

Earnings (loss) per share:
 
 
 
 
 
 
 
 
 
 

  
Basic
 
$
(0.42
)
 
$
0.17
 
 
$
0.35
 
 
$
0.09
 
 
$
1.46
 

 
Diluted
 
$
(0.42
)
 
$
0.17
 
 
$
0.34
 
 
$
0.09
 
 
$
1.45
 

Weighted average number of shares:
 
 
 
 
 
 
 
 
 
 

  
Basic
 
1,220
 
 
1,257
 
 
1,312
 
 
1,266
 
 
1,319
 

 
Diluted
 
1,220
 
 
1,268
 
 
1,321
 
 
1,277
 
 
1,330
 

APPLIED MATERIALS, INC.

UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS

(In millions) 
 
October 28,

2012
 
October 30,

2011

ASSETS
 
 
 
 

Current assets:
 
 
 
 

  
Cash and cash equivalents
 
$
1,392
 
 
$
5,960
 

 
Short-term investments
 
545
 
 
283
 

 
Accounts receivable, net
 
1,220
 
 
1,532
 

 
Inventories
 
1,272
 
 
1,701
 

 
Deferred income taxes, net
 
369
 
 
580
 

 
Other current assets
 
304
 
 
299
 

Total current assets
 
5,102
 
 
10,355
 

Long-term investments
 
1,055
 
 
931
 

Property, plant and equipment, net
 
910
 
 
866
 

Goodwill
 
3,518
 
 
1,335
 

Purchased technology and other intangible assets, net
 
1,355
 
 
211
 

Deferred income taxes and other assets
 
162
 
 
163
 

Total assets
 
$
12,102
 
 
$
13,861
 

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 

Current liabilities:
 
 
 
 

  
Accounts payable and accrued expenses
 
$
1,436
 
 
$
1,520
 

 
Customer deposits and deferred revenue
 
755
 
 
1,116
 

 
Income taxes payable
 
74
 
 
158
 

Total current liabilities
 
2,265
 
 
2,794
 

Long-term debt
 
1,946
 
 
1,947
 

Deferred income taxes and income taxes payable
 
341
 
 
104
 

Employee benefits and other liabilities
 
315
 
 
216
 

Total liabilities
 
4,867
 
 
5,061
 

Total stockholders' equity
 
7,235
 
 
8,800
 

Total liabilities and stockholders' equity
 
$
12,102
 
 
$
13,861
 

APPLIED MATERIALS, INC.

UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(In millions) 
Three Months Ended
 
Twelve Months Ended

October 28,

2012
 
October 30,

2011
October 28,

2012
 
October 30,

2011

Cash flows from operating activities:
 
 
 
 
 
 
 

  
Net income (loss)
$
(515
)
 
$
456
 
 
$
109
 
 
$
1,926
 

 
Adjustments required to reconcile net income (loss) to cash provided by operating activities:
 
 
 
 
 
 
 

  
  
Depreciation and amortization
97
 
 
59
 
 
422
 
 
246
 

 
 
Net loss (gain) on dispositions and

fixed asset retirements
(4
)
 
10
 
 
7
 
 
(13
)

 
 
Provision for bad debts
5
 
 
5
 
 
14
 
 
5
 

 
 
Impairment of goodwill
421
 
 
-
 
 
421
 
 
-
 

 
 
Restructuring charges and asset impairments
124
 
 
-
 
 
168
 
 
(30
)

 
 
Deferred income taxes
56
 
 
222
 
 
161
 
 
122
 

 
 
Net loss on investments and

amortization on debt securities
7
 
 
6
 
 
23
 
 
19
 

 
 
Impairment of strategic investments
14
 
 
-
 
 
17
 
 
-
 

 
 
Share-based compensation
44
 
 
37
 
 
182
 
 
146
 

 
 
Net change in operating assets and liabilities,

net of amounts acquired
162
 
 
(96
)
 
327
 
 
5
 

Cash provided by operating activities
411
 
 
699
 
 
1,851
 
 
2,426
 

Cash flows from investing activities:
 
 
 
 
 
 
 

  
Capital expenditures
(41
)
 
(73
)
 
(162
)
 
(209
)

 
Cash paid for acquisition, net of cash acquired
(1
)
 
-
 
 
(4,190
)
 
-
 

 
Proceeds from sale of facilities and dispositions
-
 
 
4
 
 
-
 
 
130
 

 
Proceeds from sales and maturities of investments
254
 
 
754
 
 
1,019
 
 
1,926
 

 
Purchases of investments
(175
)
 
(192
)
 
(1,327
)
 
(1,137
)

Cash provided by (used in) investing activities
37
 
 
493
 
 
(4,660
)
 
710
 

Cash flows from financing activities:
 
 
 
 
 
 
 

  
Debt borrowings (repayments), net
-
 
 
-
 
 
(1
)
 
1,744
 

 
Payments of debt issuance costs
-
 
 
-
 
 
-
 
 
(14
)

 
Proceeds from common stock issuances
45
 
 
31
 
 
97
 
 
95
 

 
Common stock repurchases
(516
)
 
(175
)
 
(1,416
)
 
(468
)

 
Payments of dividends to stockholders
(111
)
 
(106
)
 
(434
)
 
(397
)

Cash provided by (used in) financing activities
(582
)
 
(250
)
 
(1,754
)
 
960
 

Effect of exchange rate changes

on cash and cash equivalents
(3
)
 
 

 
(5
)
 
6
 

Increase (decrease) in cash and cash equivalents
(137
)
 
942
 
 
(4,568
)
 
4,102
 

Cash and cash equivalents - beginning of period
1,529
 
 
5,018
 
 
5,960
 
 
1,858
 

Cash and cash equivalents - end of period
$
1,392
 
 
$
5,960
 
 
$
1,392
 
 
$
5,960
 

Supplemental cash flow information:
 
 
 
 
 
 
 

  
Cash payments for income taxes
$
10
 
 
$
100
 
 
$
243
 
 
$
761
 

 
Cash refunds from income taxes
$
74
 
 
$
285
 
 
$
79
 
 
$
289
 

 
Cash payments for interest
$
7
 
 
$
7
 
 
$
94
 
 
$
14
 

APPLIED MATERIALS, INC.

UNAUDITED SUPPLEMENTAL INFORMATION

Reportable Segment Results

 
Q4 FY2012
 
Q3 FY2012
 
Q4 FY2011

(In millions) 
New

Orders
 
Net

Sales
 
Operating

Income

(Loss)
 
New

Orders
 
Net

Sales
 
Operating

Income

(Loss)
 
New

Orders
 
Net

Sales
 
Operating

Income

(Loss)

SSG
$
741
 
 
$
870
 
 
$
41
 
 
$
1,166
 
 
$
1,545
 
 
$
427
 
 
$
925
 
 
$
1,067
 
 
$
278
 

AGS
576
 
 
621
 
 
164
 
 
531
 
 
579
 
 
122
 
 
564
 
 
629
 
 
160
 

Display
83
 
 
93
 
 
3
 
 
67
 
 
142
 
 
10
 
 
20
 
 
171
 
 
31
 

EES
65
 
 
62
 
 
(480
)
 
35
 
 
77
 
 
(102
)
 
86
 
 
315
 
 
17
 

Corporate
-
 
 
-
 
 
(227
)
 
-
 
 
-
 
 
(135
)
 
-
 
 
-
 
 
(125
)

Consolidated
$
1,465
 
 
$
1,646
 
 
$
(499
)
 
$
1,799
 
 
$
2,343
 
 
$
322
 
 
$
1,595
 
 
$
2,182
 
 
$
361
 

 

 
 
FY 2012
 
FY 2011

(In millions) 
 
New

Orders
 
Net

Sales
 
Operating

Income

(Loss)
 
New

Orders
 
Net

Sales
 
Operating

Income

(Loss)

SSG
 
$
5,294
 
 
$
5,536
 
 
$
1,243
 
 
$
5,489
 
 
$
5,415
 
 
$
1,764
 

AGS
 
2,274
 
 
2,285
 
 
502
 
 
2,333
 
 
2,413
 
 
482
 

Display
 
274
 
 
473
 
 
25
 
 
636
 
 
699
 
 
147
 

EES
 
195
 
 
425
 
 
(668
)
 
1,684
 
 
1,990
 
 
453
 

Corporate
 
-
 
 
-
 
 
(691
)
 
-
 
 
-
 
 
(448
)

Consolidated
 
$
8,037
 
 
$
8,719
 
 
$
411
 
 
$
10,142
 
 
$
10,517
 
 
$
2,398
 

Corporate Unallocated Expenses

(In millions) 
 
Q4 FY2012
 
Q3 FY2012
 
Q4 FY2011
 
FY 2012
 
FY 2011

Restructuring charges and asset impairments, net
 
$
111
 
 
$
-
 
 
$
-
 
 
$
111
 
 
$
(21
)

Share-based compensation
 
44
 
 
42
 
 
36
 
 
182
 
 
146
 

Gain on sale of facilities
 
-
 
 
-
 
 
-
 
 
-
 
 
(27
)

Other unallocated expenses
 
72
 
 
93
 
 
89
 
 
398
 
 
350
 

Corporate
 
$
227
 
 
$
135
 
 
$
125
 
 
$
691
 
 
$
448
 

APPLIED MATERIALS, INC.

UNAUDITED SUPPLEMENTAL INFORMATION

Additional Information

 
 
Q4 FY2012
 
 
Q3 FY2012
 
 
Q4 FY2011
 

New Orders and Net Sales by Geography
 
 
 
 
 
 
 
 
 
 
 
 

(In $ millions) 
 
New

Orders
 
Net

Sales
 
New

Orders
 
Net

Sales
 
New

Orders
 
Net

Sales

North America
 
435
 
 
373
 
 
420
 
 
441
 
 
324
 
 
434
 

  
% of Total
 
30
%
 
23
%
 
23
%
 
19
%
 
20
%
 
20
%

Europe
 
165
 
 
271
 
 
172
 
 
184
 
 
176
 
 
271
 

  
% of Total
 
11
%
 
16
%
 
9
%
 
8
%
 
11
%
 
12
%

Japan
 
184
 
 
129
 
 
128
 
 
189
 
 
173
 
 
255
 

  
% of Total
 
12
%
 
8
%
 
7
%
 
8
%
 
11
%
 
12
%

Korea
 
115
 
 
127
 
 
299
 
 
392
 
 
330
 
 
363
 

  
% of Total
 
8
%
 
8
%
 
17
%
 
17
%
 
21
%
 
17
%

Taiwan
 
390
 
 
457
 
 
588
 
 
811
 
 
283
 
 
353
 

  
% of Total
 
27
%
 
28
%
 
33
%
 
34
%
 
18
%
 
16
%

Southeast Asia
 
74
 
 
97
 
 
91
 
 
72
 
 
98
 
 
98
 

  
% of Total
 
5
%
 
6
%
 
5
%
 
3
%
 
6
%
 
4
%

China
 
102
 
 
192
 
 
101
 
 
254
 
 
211
 
 
408
 

  
% of Total
 
7
%
 
11
%
 
6
%
 
11
%
 
13
%
 
19
%

 
 
 
 
 
 
 
 
 
 
 
 
 

Employees (In thousands)
 
 
 
 
 
 
 
 
 
 
 
 

Regular Full Time
 
14.5
 
 
14.6
 
 
12.9
 

 

 
 
FY 2012
 
 
FY 2011
 

New Orders and Net Sales by Geography
 
 
 
 
 
 
 
 

(In $ millions) 
 
New

Orders
 
Net

Sales
 
New

Orders
 
Net

Sales

North America
 
1,995
 
 
1,749
 
 
2,069
 
 
1,963
 

  
% of Total
 
25
%
 
20
%
 
20
%
 
19
%

Europe
 
817
 
 
863
 
 
1,022
 
 
1,120
 

  
% of Total
 
10
%
 
10
%
 
10
%
 
11
%

Japan
 
600
 
 
704
 
 
1,001
 
 
912
 

  
% of Total
 
7
%
 
8
%
 
10
%
 
9
%

Korea
 
1,784
 
 
1,897
 
 
1,286
 
 
1,263
 

  
% of Total
 
22
%
 
22
%
 
13
%
 
12
%

Taiwan
 
2,155
 
 
2,411
 
 
2,235
 
 
2,093
 

  
% of Total
 
27
%
 
28
%
 
22
%
 
20
%

Southeast Asia
 
283
 
 
312
 
 
463
 
 
592
 

  
% of Total
 
4
%
 
3
%
 
5
%
 
5
%

China
 
403
 
 
783
 
 
2,066
 
 
2,574
 

  
% of Total
 
5
%
 
9
%
 
20
%
 
24
%

APPLIED MATERIALS, INC.

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP RESULTS

 
 
Three Months Ended
 
Twelve Months Ended

(In millions, except percentages) 
 
October 28,

2012
 
July 29,

2012
 
October 30,

2011
 
October 28,

2012
 
October 30,

2011

Non-GAAP Gross Margin
 
 
 
 
 
 
 
 
 
 

Reported gross margin (GAAP basis)
 
$
586
 
 
$
930
 
 
$
852
 
 
$
3,313
 
 
$
4,360
 

Certain items associated with acquisitions1
 
46
 
 
44
 
 
10
 
 
253
 
 
37
 

Non-GAAP gross margin
 
$
632
 
 
$
974
 
 
$
862
 
 
$
3,566
 
 
$
4,397
 

Non-GAAP gross margin percent (% of net sales)
 
38.4
%
 
41.6
%
 
39.5
%
 
40.9
%
 
41.8
%

Non-GAAP Operating Income
 
 
 
 
 
 
 
 
 
 

Reported operating income (loss) (GAAP basis)
 
$
(499
)
 
$
322
 
 
$
361
 
 
$
411
 
 
$
2,398
 

Certain items associated with acquisitions1
 
55
 
 
57
 
 
13
 
 
298
 
 
51
 

Acquisition integration and deal costs
 
13
 
 
8
 
 
10
 
 
81
 
 
19
 

Impairment of goodwill
 
421
 
 
-
 
 
-
 
 
421
 
 
-
 

Restructuring charges and asset impairments2, 3, 4, 5
 
124
 
 
44
 
 
-
 
 
168
 
 
(30
)

Gain on sale of facilities, net
 
-
 
 
-
 
 
-
 
 
-
 
 
(27
)

Non-GAAP operating income
 
$
114
 
 
$
431
 
 
$
384
 
 
$
1,379
 
 
$
2,411
 

Non-GAAP operating margin percent (% of net sales)
 
6.9
%
 
18.4
%
 
17.6
%
 
15.8
%
 
22.9
%

Non-GAAP Net Income
 
 
 
 
 
 
 
 
 
 

Reported net income (loss) (GAAP basis)
 
$
(515
)
 
$
218
 
 
$
456
 
 
$
109
 
 
$
1,926
 

Certain items associated with acquisitions1
 
55
 
 
57
 
 
13
 
 
298
 
 
51
 

Acquisition integration and deal costs
 
13
 
 
8
 
 
10
 
 
81
 
 
19
 

Impairment of goodwill
 
421
 
 
-
 
 
-
 
 
421
 
 
-
 

Restructuring charges and asset impairments2, 3, 4, 5
 
124
 
 
44
 
 
-
 
 
168
 
 
(30
)

Impairment of strategic investments
 
14
 
 
-
 
 
3
 
 
17
 
 
3
 

Gain on sale of facilities, net
 
-
 
 
-
 
 
-
 
 
-
 
 
(27
)

Reinstatement of federal R&D tax credit
 
-
 
 
-
 
 
-
 
 
-
 
 
(13
)

Resolution of audits of prior years' income tax filings
 
(5
)
 
(10
)
 
(203
)
 
(22
)
 
(203
)

Income tax effect of non-GAAP adjustments
 
(37
)
 
(17
)
 
(8
)
 
(112
)
 
(3
)

Non-GAAP net income
 
$
70
 
 
$
300
 
 
$
271
 
 
$
960
 
 
$
1,723
 

 


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 29, 2012 included severance charges of $24 million and asset impairment charges of $11 million related to the restructuring program announced on May 10, 2012 and severance charges of $9 million related to the integration of Varian.

 
 


Results for the three months ended October 28, 2012 included severance and other charges of $106 million related to the restructuring program announced on October 3, 2012, restructuring and asset impairment charges of $12 million related to the restructuring program announced on May 10, 2012, and severance charges of $6 million related to the integration of Varian.

 
 


Results for the twelve months ended October 28, 2012 included severance and other charges of $106 million related to the restructuring program announced on October 3, 2012, restructuring and asset impairment charges of $48 million related to the restructuring program announced on May 10, 2012, and severance charges of $14 million related to the integration of Varian.

 
 

5
Results for the twelve months ended October 30, 2011 included 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, partially offset by asset impairment charges of $30 million primarily related to certain fixed and intangible assets.

APPLIED MATERIALS, INC.

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP RESULTS

 
 
Three Months Ended
 
Twelve Months Ended

(In millions except per share amounts) 
 
October 28,

2012
 
July 29,

2012
 
October 30,

2011
 
October 28,

2012
 
October 30,

2011

Non-GAAP Earnings Per Diluted Share
 
 
 
 
 
 
 
 
 
 

Reported earnings (loss) per diluted share (GAAP basis)
 
$
(0.42
)
 
$
0.17
 
 
$
0.34
 
 
$
0.09
 
 
$
1.45
 

Certain items associated with acquisitions
 
0.04
 
 
0.04
 
 
0.01
 
 
0.19
 
 
0.03
 

Acquisition integration and deal costs
 
0.01
 
 
0.01
 
 
0.01
 
 
0.05
 
 
0.01
 

Impairment of goodwill
 
0.34
 
 
-
 
 
-
 
 
0.33
 
 
-
 

Restructuring charges and asset impairments
 
0.08
 
 
0.03
 
 
-
 
 
0.10
 
 
(0.01
)

Impairment of strategic investments
 
0.01
 
 
-
 
 
-
 
 
0.01
 
 
-
 

Gain on sale of facilities, net
 
-
 
 
-
 
 
-
 
 
-
 
 
(0.02
)

Reinstatement of federal R&D tax credit and resolution of audits of prior years' income tax filings
 
-
 
 
(0.01
)
 
(0.15
)
 
(0.02
)
 
(0.16
)

Non-GAAP earnings per diluted share
 
$
0.06
 
 
$
0.24
 
 
$
0.21
 
 
$
0.75
 
 
$
1.30
 

Weighted average number of diluted shares
 
1,234
 
 
1,268
 
 
1,321
 
 
1,277
 
 
1,330
 

APPLIED MATERIALS, INC.

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP RESULTS

 
 
Three Months Ended
 
Twelve Months Ended

(In millions, except percentages)
 
October 28,

2012
 
July 29,

2012
 
October 30,

2011
 
October 28,

2012
 
October 30,

2011

Non-GAAP SSG Operating Income
 
 
 
 
 
 
 
 
 
 

Reported operating income (GAAP basis)
 
$
41
 
 
$
427
 
 
$
278
 
 
$
1,243
 
 
$
1,764
 

Certain items associated with acquisitions1
 
45
 
 
47
 
 
4
 
 
253
 
 
12
 

Acquisition integration and deal costs
 
6
 
 
7
 
 
3
 
 
37
 
 
3
 

Restructuring charges and asset impairments2,3,4
 
3
 
 
1
 
 
-
 
 
4
 
 
-
 

Non-GAAP operating income
 
$
95
 
 
$
482
 
 
$
285
 
 
$
1,537
 
 
$
1,779
 

Non-GAAP operating margin percent (% of net sales)
 
10.9
%
 
31.2
%
 
26.7
%
 
27.8
%
 
32.9
%

Non-GAAP AGS Operating Income
 
 
 
 
 
 
 
 
 
 

Reported operating income (GAAP basis)
 
$
164
 
 
$
122
 
 
$
160
 
 
$
502
 
 
$
482
 

Certain items associated with acquisitions1
 
3
 
 
2
 
 
2
 
 
13
 
 
7
 

Restructuring charges and asset impairments2, 3, 4, 5
 
4
 
 
11
 
 
-
 
 
15
 
 
24
 

Non-GAAP operating income
 
$
171
 
 
$
135
 
 
$
162
 
 
$
530
 
 
$
513
 

Non-GAAP operating margin percent (% of net sales)
 
27.5
%
 
23.3
%
 
25.8
%
 
23.2
%
 
21.3
%

Non-GAAP Display Operating Income
 
 
 
 
 
 
 
 
 
 

Reported operating income (GAAP basis)
 
$
3
 
 
$
10
 
 
$
31
 
 
$
25
 
 
$
147
 

Certain items associated with acquisitions1
 
1
 
 
2
 
 
2
 
 
7
 
 
7
 

Non-GAAP operating income
 
$
4
 
 
$
12
 
 
$
33
 
 
$
32
 
 
$
154
 

Non-GAAP operating margin percent (% of net sales)
 
4.3
%
 
8.5
%
 
19.3
%
 
6.8
%
 
22.0
%

Non-GAAP EES Operating Income
 
 
 
 
 
 
 
 
 
 

Reported operating income (loss) (GAAP basis)
 
$
(480
)
 
$
(102
)
 
$
17
 
 
$
(668
)
 
$
453
 

Certain items associated with acquisitions1
 
7
 
 
6
 
 
6
 
 
25
 
 
25
 

Impairment of goodwill
 
421
 
 
-
 
 
-
 
 
421
 
 
-
 

Restructuring charges and asset impairments2, 3, 4, 5
 
6
 
 
32
 
 
-
 
 
38
 
 
(34
)

Non-GAAP operating income (loss)
 
$
(46
)
 
$
(64
)
 
$
23
 
 
$
(184
)
 
$
444
 

Non-GAAP operating margin percent (% of net sales)
 
(74.2
)%
 
(83.1
)%
 
7.3
%
 
(43.3
)%
 
22.3
%

 


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 29, 2012 included severance charges of $24 million and asset impairment charges of $11 million related to the restructuring program announced on May 10, 2012 and severance charges of $9 million related to the integration of Varian.

 
 


Results for the three months ended October 28, 2012 included restructuring and asset impairment charges of $7 million related to the restructuring program announced on May 10, 2012, and severance charges of $6 million related to the integration of Varian.

 
 


Results for the twelve months ended October 28, 2012 included restructuring and asset impairment charges of $43 million related to the restructuring program announced on May 10, 2012 and severance charges of $14 million related to the integration of Varian.

 
 

5
Results for the twelve months ended October 30, 2011 included favorable adjustments of $36 million related to a restructuring program announced on July 21, 2010, partially offset by asset impairment charges of $26 million primarily related to certain fixed and intangible assets.

APPLIED MATERIALS, INC.

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP OPERATING EXPENSES

 
Three Months Ended

(In millions)
October 28, 2012

 
 

Operating expenses (GAAP basis)
$
1,085
 

Certain items associated with acquisitions
(9
)

Acquisition integration and deal costs
(13
)

Impairment of goodwill
(421
)

Restructuring charges and asset impairments
(124
)

Non-GAAP operating expenses
$
518
 

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP EFFECTIVE INCOME TAX RATE

 
Three Months Ended

(In millions, except percentages)
October 28, 2012

 
 

Provision (benefit) for income taxes (GAAP basis) (a)
$
(17
)

Income tax effect of non-GAAP adjustments
37
 

Resolutions from audits of prior years' income tax filings
5
 

Non-GAAP provision for income taxes (b)
$
25
 

 
 

Income (loss) before income taxes (GAAP basis) (c)
$
(532
)

Certain items associated with acquisitions
55
 

Acquisition integration and deal costs
13
 

Impairment of goodwill
421
 

Restructuring charges and asset impairments
124
 

Impairment of strategic investments
14
 

Non-GAAP income before income taxes (d)
$
95
 

 
 

Effective income tax rate (GAAP basis) (a/c)
3.2
%

 
 

Non-GAAP effective income tax rate (b/d)
26.3
%


HUG#1657722

November 15, 2012