Applied Materials Announces Results for Second Quarter of Fiscal 2008

5月 13, 2008

-- Net Sales: $2.15 billion (15% decrease year over year; 3% increase quarter over quarter)
-- Net Income: $303 million (26% decrease year over year; 15% increase quarter over quarter)
-- EPS: $0.22 ($0.07 decrease year over year; $0.03 increase quarter over quarter)
-- New Orders: $2.41 billion (9% decrease year over year; 3% decrease quarter over quarter)

SANTA CLARA, Calif., May 13, 2008 (BUSINESS WIRE) -- Applied Materials, Inc. reported results for its second fiscal quarter ended April 27, 2008. Net sales were $2.15 billion, down 15 percent from $2.53 billion for the second quarter of fiscal 2007, and up 3 percent from $2.09 billion for the first quarter of fiscal 2008. Gross margin for the second quarter of fiscal 2008 was 45.0 percent, up from 44.9 percent for the second quarter of fiscal 2007, and up from 44.8 percent for the first quarter of fiscal 2008. Net income for the second quarter of fiscal 2008 was $303 million, or $0.22 per share, down from net income of $411 million, or $0.29 per share, for the second quarter of fiscal 2007, and up from net income of $262 million, or $0.19 per share, for the first quarter of fiscal 2008.

New orders of $2.41 billion for the second quarter of fiscal 2008 decreased 9 percent from $2.65 billion for the second quarter of fiscal 2007, and decreased 3 percent from $2.50 billion for the first quarter of fiscal 2008. Regional distribution of new orders for the second quarter of fiscal 2008 was: Korea 22 percent, Taiwan 22 percent, Southeast Asia and China 18 percent, Japan 13 percent, Europe 13 percent, and North America 12 percent. Backlog at the end of the second quarter of fiscal 2008 was $4.59 billion, compared to $4.10 billion at the end of the first quarter of fiscal 2008.

"This quarter's performance demonstrates our focus on operational execution and prudent cost controls across all of our businesses," said Mike Splinter, president and CEO. "We are ramping our display and solar businesses while addressing the challenges of a weaker global chip equipment market.

"During the quarter, we established our leadership in the crystalline silicon solar equipment market, built on our momentum in thin film solar products and disclosed the industry's first gigawatt-scale, thin film solar project. In addition, we launched a new mask inspection system, the Aera2(TM). Applied has significant opportunities ahead as we deliver on our promise to utilize our nanomanufacturing technology to improve the way people live," concluded Splinter.

Non-GAAP net income for the second quarter of fiscal 2008 was $362 million, or $0.26 per share, compared to non-GAAP net income of $509 million, or $0.36 per share, for the second quarter of fiscal 2007, and $345 million or $0.25 per share for the first quarter of fiscal 2008. Non-GAAP adjustments are explained below and detailed in the accompanying Reconciliation of GAAP to Non-GAAP Results.

Results by reportable segment for the second quarter of fiscal 2008, the first quarter of fiscal 2008, and the second quarter of fiscal 2007 were:

   

Three Months Ended

 

Three Months Ended

 

Three Months Ended

    April 27, 2008  

January 27, 2008

 

April 29, 2007

 
    New Orders   Net Sales   Operating
Income
(Loss)		   New Orders   Net Sales   Operating
Income
(Loss)		   New Orders   Net Sales   Operating
Income
(Loss)
(In millions)                                    
Silicon   $ 1,061   $ 1,268   $ 448     $ 1,075   $ 1,237   $ 445     $ 1,939   $ 1,738   $ 606  
Applied Global Services     602     599     159       610     595     149       586     589     157  
Display     493     198     59       555     133     34       60     160     28  
Energy and Environmental Solutions     257     85     (71 )     260     122     (48 )     63     43     (15 )

Effective in the first quarter of fiscal 2008, Applied changed its management reporting system for services, with all service results reported in the Applied Global Services segment. Fiscal 2007 segment information has been reclassified to conform to the fiscal 2008 presentation.

Non-GAAP net income and non-GAAP EPS, detailed in the accompanying Reconciliation of GAAP to Non-GAAP Results, exclude charges related to (i) equity-based compensation, (ii) certain items associated with acquisitions, including amortization of intangibles and inventory fair value adjustments on products sold, (iii) restructuring and asset impairments, (iv) certain costs associated with ceasing development of beamline implant products, and/or (v) the resolution of income tax audits and changes in tax credits. Management uses non-GAAP net income and non-GAAP EPS 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 that 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 net income or EPS prepared in accordance with GAAP.

Applied Materials will discuss its fiscal 2008 second quarter results, along with its outlook for the third quarter of fiscal 2008, on the earnings call today beginning at 1:30 p.m. Pacific Daylight Time. A webcast of the earnings call will be available at www.appliedmaterials.com.

This press release contains forward-looking statements, including statements regarding Applied’s performance, operational efficiencies, products, strategic position and opportunities, and the industry outlook. Forward-looking statements may contain words such as “expect,” “believe,” “may,” “should,” “will,” “forecast” 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 nanomanufacturing technology products, which is subject to many factors, including global economic and market conditions, business and consumer spending, demand for electronic products and semiconductors, governmental renewable energy policies and incentives, and geopolitical uncertainties; customers’ utilization rates and capacity requirements, including capacity utilizing the latest technology; customers’ ability to acquire sufficient capital, obtain regulatory approvals and/or fulfill infrastructure requirements; variability of operating results among the company’s reportable segments caused by differing conditions in the served markets; the successful implementation and effectiveness of initiatives to enhance global operations and efficiencies; the successful performance of acquired businesses and joint ventures; Applied’s ability to (i) successfully develop, deliver and support a broad range of products and expand its markets and develop new markets, (ii) maintain effective cost controls and timely align its cost structure with business conditions, (iii) effectively plan and manage its resources and production capability, including its supply chain, (iv) obtain and protect intellectual property rights in key technologies, and (v) attract, motivate and retain key employees; and other risks described in Applied Materials’ SEC filings, including its reports on Forms 10-K, 10-Q and 8-K. 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.

Applied Materials, Inc. (Nasdaq:AMAT) is the global leader in Nanomanufacturing Technology™ solutions with a broad portfolio of innovative equipment, services and software products for the fabrication of semiconductor chips, flat panel displays, solar photovoltaic cells, flexible electronics and energy-efficient glass. At Applied Materials, we apply Nanomanufacturing Technology to improve the way people live. Learn more at www.appliedmaterials.com.

APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
     
   

Three Months Ended

 

Six Months Ended

   

April 27,

 

April 29,

 

April 27,

 

April 29,

(In thousands, except per share amounts)

    2008     2007     2008    

2007

     
Net sales  

$

2,149,998

  $ 2,529,561   $ 4,237,395   $ 4,806,828
Cost of products sold     1,183,170     1,392,951     2,335,586     2,607,680
Gross margin     966,828     1,136,610     1,901,809     2,199,148
     
Operating expenses:                
Research, development and engineering     287,122     291,044     560,341     578,611
Marketing and selling     119,410     112,107     243,327     219,019
General and administrative     122,035     119,391     238,011     241,202
Restructuring and asset impairments     510     25,044     49,496     21,766
Income from operations     437,751     589,024     810,634     1,138,550
     
Pre-tax loss of equity method investment     9,766     5,924     19,352     9,861
Interest expense     6,256     8,845     10,801     19,313
Interest income     32,414     34,022     62,984     64,125
Income before income taxes     454,143     608,277     843,465     1,173,501
     
Provision for income taxes     151,636     196,833     278,582     358,581
Net income  

$

302,507

  $ 411,444   $ 564,883   $ 814,920
     
Earnings per share:                
Basic  

$

0.22

  $ 0.30   $ 0.41   $ 0.59
Diluted  

$

0.22

  $ 0.29   $ 0.41   $ 0.58
     
Weighted average number of shares:                
Basic     1,356,705     1,391,076     1,363,975     1,392,477
Diluted     1,373,314     1,407,255     1,379,071     1,408,224

APPLIED MATERIALS, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS

    April 27,   October 28,

(In thousands)

    2008       2007  
ASSETS        
 
Current assets:        
Cash and cash equivalents   $ 1,098,259     $ 1,202,722  
Short-term investments     1,357,097       1,166,857  
Accounts receivable, net     1,729,487       2,049,427  
Inventories     1,626,239       1,313,237  
Deferred income taxes     450,187       426,471  
Other current assets     345,669       448,879  
Total current assets     6,606,938       6,607,593  
 
Long-term investments     1,392,504       1,362,425  
Property, plant and equipment     2,766,315       2,782,204  
Less: accumulated depreciation and amortization     (1,692,513 )     (1,730,962 )
Net property, plant and equipment     1,073,802       1,051,242  
 
Goodwill, net     1,176,122       1,006,410  
Purchased technology and other intangible assets, net     456,920       373,178  
Equity method investment     95,708       115,060  
Deferred income taxes and other assets    

168,956

      146,370  
Total assets   $

10,970,950

    $ 10,662,278  
 
LIABILITIES AND STOCKHOLDERS' EQUITY        
 
Current liabilities:        
Current portion of long-term debt   $ 2,749     $ 2,561  
Accounts payable and accrued expenses     2,598,891       2,221,516  
Income taxes payable     105,785       157,549  
Total current liabilities     2,707,425       2,381,626  
 
Long-term debt     202,000       202,281  
Other liabilities    

350,721

      256,962  
Total liabilities    

3,260,146

      2,840,869  
 
Stockholders' equity:        
Common stock     13,554       13,857  
Additional paid-in capital     5,004,030       4,658,832  

Retained earnings

   

11,265,710

      10,863,291  
Treasury stock     (8,575,054 )     (7,725,924 )
Accumulated other comprehensive income     2,564       11,353  
Total stockholders' equity     7,710,804       7,821,409  
Total liabilities and stockholders' equity   $

10,970,950

    $ 10,662,278  

APPLIED MATERIALS, INC.

 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

   

Six Months Ended

   

 April 27,

 

April 29,

(In thousands)

   

    2008

     

 2007

 
Cash flows from operating activities:        
Net income   $ 564,883     $ 814,920  
Adjustments required to reconcile net income to cash provided by operating activities:        
Depreciation and amortization     154,321       123,978  
Loss on fixed asset retirements     21,527       12,476  
Restructuring and asset impairments     49,496       21,766  
Deferred income taxes     (38,538 )     (7,553 )
Excess tax benefits from equity-based compensation plans     (5,406 )     (3,243 )
Acquired in-process research and development expense    

—

      4,900  
Net recognized loss (gain) on investments     (3,560 )     3,129  
Pretax loss of equity-method investment     19,352       9,861  
Equity-based compensation     89,044       82,823  
Changes in operating assets and liabilities, net of amounts acquired:        
Accounts receivable, net     385,830       (71,064 )
Inventories     (277,478 )     (62,442 )
Other current assets     116,352       2,969  
Other assets     (4,875 )     (3,483 )
Accounts payable and accrued expenses     195,040       (36,546 )
Income taxes payable     (11,803 )     (3,725 )
Other liabilities     9,548       5,565  
Cash provided by operating activities     1,263,733       894,331  
Cash flows from investing activities:        
Capital expenditures     (137,699 )     (131,266 )
Cash paid for acquisitions, net of cash acquired     (235,324 )     (127,677 )
Proceeds from disposition of assets held for sale     —       17,727  
Proceeds from sales and maturities of investments     1,285,365       1,400,576  
Purchases of investments     (1,530,288 )     (1,484,869 )
Cash provided (used) for investing activities     (617,946 )     (325,509 )
Cash flows from financing activities:        
Short-term debt repayments     (12 )     (302 )
Proceeds from common stock issuances     308,463       169,884  
Common stock repurchases     (899,984 )     (532,015 )
Excess tax benefits from equity-based compensation plans     5,406       3,243  
Payment of dividends to stockholders     (164,274 )     (139,489 )
Cash used for financing activities     (750,401 )     (498,679 )
Effect of exchange rate changes on cash and cash equivalents     151       438  
Increase in cash and cash equivalents     (104,463 )     70,581  
Cash and cash equivalents — beginning of period     1,202,722       861,463  
Cash and cash equivalents — end of period   $ 1,098,259     $ 932,044  
Supplemental cash flow information:        
Cash payments for income taxes   $ 167,185     $ 365,012  
Cash payments for interest   $ 7,229     $ 14,049  
APPLIED MATERIALS, INC.
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
 

Three Months Ended

 

Six Months Ended

 

April 27,

 

January 27,

 

April 29,

 

April 27,

 

April 29,

(In thousands, except per share amounts)

  2008       2008       2007       2008       2007  
 

Non-GAAP Net Income

                 
 
Reported net income (GAAP basis)

$

302,507

   

$

262,376

   

$

411,444

   

$

564,883

   

$

814,920

 
Equity-based compensation expense   50,322       38,722       47,922      

89,044

      82,822  

Certain items associated with acquisitions 1

  31,144       31,038       23,725       62,182       37,105  

Restructuring and asset impairments 2,3,4

  510       48,986       25,044       49,496       21,766  

Costs associated with ceasing development of beamline implant products 5

                 
  259       1,021       50,299       1,280       50,299  

Resolution of audits of prior years' income tax filings 6

                 
 

—

     

—

     

—

     

—

      (29,863 )
Income tax effect of non-GAAP adjustments   (23,142 )     (37,326 )     (49,239 )     (60,468 )     (62,673 )
 
Non-GAAP net income

$

361,600

   

$

344,817

   

$

509,195

   

$

706,417

   

$

914,376

 
 

Non-GAAP Net Income Per Diluted Share

                 
 
Reported net income per diluted share                  

(GAAP basis)

$

0.22

   

$

0.19

   

$

0.29

   

$

0.41

   

$

0.58

 
Equity-based compensation expense   0.03       0.02       0.02       0.05       0.04  
Certain items associated with acquisitions   0.02       0.02       0.01       0.03       0.02  

Restructuring and asset impairments

 

—

     

0.02

     

0.01

     

0.02

     

0.01

 
Costs associated with ceasing development of beamline implant products                  
 

—

     

—

      0.02      

—

      0.02  
Resolution of audits of prior years' income tax filings                  
 

—

     

—

     

—

     

—

      (0.02 )
 
Non-GAAP net income - per diluted share

$

0.26

   

$

0.25

   

$

0.36

   

$

0.51

   

$

0.65

 
 
Shares used in diluted shares calculation   1,373,314       1,383,886       1,407,255       1,379,071       1,408,224  

1 Incremental charges attributable to acquisitions consisting of inventory fair value adjustments on products sold and amortization of purchased intangible assets. Results for the three and six months ended April 29, 2007 included an in-process research and development charge of $5 million associated with the acquisition of the software division of Brooks Automation, Inc. in the second fiscal quarter of 2007.

2 Results for the six months ended April 27, 2008 included restructuring charges of $38 million associated with a global cost reduction plan.

3 Results for the fiscal quarters ended April 27, 2008, January 27, 2008 and April 29, 2007 included restructuring and asset impairment charges of $510,000, $11 million and $25 million, respectively, associated with ceasing development of beamline implant products. Results for the three and six months ended April 29, 2007 included restructuring and asset impairment charges of $25 million associated with ceasing development of beamline implant products.

4 Results for the three and six months ended April 29, 2007 included a net benefit of $3 million from the sale of the Hillsboro, Oregon facility.

5 Results for the fiscal quarters ended April 27, 2008, January 27, 2008 and April 29, 2007 included other operating charges of $259,000, $1 million, and $50 million, respectively, associated with ceasing development of beamline implant products.

6 Results for the six months ended April 29, 2007 consisted of a $24 million benefit from the resolution of audits of prior years’ income tax filings and a $6 million benefit related to the retroactive reinstatement to January 1, 2006 of the research and development tax credit.

Contacts

Applied Materials, Inc.
Linda Heller, 408-986-7977 (investment community)
David Miller, 408-563-9582 (editorial/media)

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