Applied Materials Announces First Quarter Results

13 februari 2013 * First quarter non-GAAP EPS of 6 cents at high end of outlook; GAAP EPS of 3 cents * Orders grew 44 percent sequentially led by demand for semiconductor and display equipment * Company expects strong sequential net sales and EPS growth in the second quarter of 2013 SANTA CLARA, Calif., February 13, 2013 - Applied Materials, Inc. (NASDAQ:AMAT), the global leader in  manufacturing solutions for the semiconductor, display and solar industries, today reported results for its first quarter of fiscal 2013 ended January 27, 2013. Applied generated orders of $2.11 billion and net sales of $1.57 billion. The company reported operating income of $39 million and net income of $34 million or 3 cents per diluted share. Non-GAAP operating income was $112 million, and non-GAAP net income was $69 million or 6 cents per share, at the high end of the business outlook. "We executed well through the bottom of this industry investment cycle and, with our semiconductor orders up over 80 percent from the previous quarter, we are optimistic about the potential of our markets this year," said Mike Splinter, chairman and chief executive officer. "2013 looks to be another strong year for mobile products like smartphones and tablets, and customers are increasingly turning to Applied to help solve the technology challenges they face in this growing market." Quarterly Results Summary GAAP Results   Q1 FY2013   Q4 FY2012   Q1 FY2012 ------------------------------- --------------- ---------------- -------------- Net sales   $1.57 billion   $1.65 billion   $2.19 billion Operating income (loss)   $39 million   $(499) million   $179 million Net income (loss)   $34 million   $(515) million   $117 million Diluted earnings (loss) per share (EPS)   $0.03   $(0.42)   $0.09 Non-GAAP Results ------------------------------- Non-GAAP operating income   $112 million   $114 million   $344 million Non-GAAP net income   $69 million   $70 million   $240 million Non-GAAP diluted EPS   $0.06   $0.06   $0.18 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; and impairments of assets, goodwill, or investments. 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. First Quarter Reportable Segment Results and Comparisons to the Prior Quarter Silicon Systems Group (SSG) orders were $1.36 billion, up 84 percent primarily due to increased demand in foundry and memory, partially offset by lower orders in logic. Net sales were $969 million, up 11 percent. Non-GAAP operating income increased to $180 million or 18.6 percent of net sales. GAAP operating income increased to $134 million or 13.8 percent of net sales. New order composition was: foundry 73 percent, logic and other 12 percent, flash 8 percent, and DRAM 7 percent. Applied Global Services (AGS) orders were $544 million, down 6 percent primarily due to lower orders of 200mm equipment. Net sales were $471 million, down 24 percent from the prior quarter which benefited from the sale of a thin film production line. Non-GAAP operating income decreased to $91 million or 19.3 percent of net sales. GAAP operating income decreased to $89 million or 18.9 percent of net sales. Display orders were $138 million, up 66 percent from low levels. Net sales were $87 million, down 6 percent. Non-GAAP operating income increased to $5 million or 5.7 percent of net sales. GAAP operating income remained at $3 million or 3.4 percent of net sales. Energy and Environmental Solutions (EES) orders were $68 million, up 5 percent from low levels, with the majority of orders for web coating equipment. Net sales were $46 million, down 26 percent. EES had a non-GAAP operating loss of $44 million and a GAAP operating loss of $54 million. Additional Quarterly Financial Information * Backlog increased by 31 percent sequentially  to $2.11 billion including negative adjustments of $40 million. * Gross margin was 39.8 percent on a non-GAAP basis, up from 38.4 percent  in the prior quarter due to a more favorable product mix. GAAP gross margin was 37.0 percent. * Operating expenses were $514 million on a non-GAAP basis, below the company's expectation due to approximately $20 million in favorable expense items. GAAP operating expenses were $543 million. * The effective tax rate was 24.2 percent on a non-GAAP basis. The GAAP effective tax rate was a benefit of 88.9 percent, reflecting the favorable resolution of a tax audit and the reinstatement of the U.S. R&D tax credit. * The company paid $108 million in cash dividends and used $48 million to repurchase 4 million shares of its common stock. * Cash, cash equivalents and investments ended the quarter at $2.82 billion. Business Outlook For the second quarter of fiscal 2013, Applied expects net sales to be up 15 to 25 percent sequentially. The company expects non-GAAP EPS to be in the range of $0.09 to $0.15. The non-GAAP EPS outlook excludes known charges related to completed acquisitions of approximately $0.04 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.  A replay will be available on the website beginning at 5:00 p.m. Pacific Time today. Forward-Looking Statements This press release contains forward-looking statements, including statements regarding Applied's performance, industry conditions, market outlook, opportunities  and business outlooks for the second quarter of fiscal 2013, 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, 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) obtain and protect intellectual property rights in key technologies, (v) attract, motivate and retain key employees, and (vi) 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 SEC filings, including its Form 10-K for the fiscal year ended October 28, 2012. 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. Learn more at www.appliedmaterials.com. Contact: Kevin Winston (editorial/media) 408.235.4498 Michael Sullivan (financial community) 408.986.7977 APPLIED MATERIALS, INC. UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS     Three Months Ended ---------------------------------------- (In millions, except per share January 27, October 28, January 29, amounts)   2013   2012   2012 ------------- ------------- ------------ Net sales   $ 1,573     $ 1,646     $ 2,189 Cost of products sold   991     1,060     1,403 ------------- ------------- ------------ Gross margin   582     586     786 Operating expenses:     Research, development and engineering 304     303     304   Selling, general and administrative 230     237     303   Impairment of goodwill   -     421     -   Restructuring charges and asset impairments 9     124     - ------------- ------------- ------------ Total operating expenses   543     1,085     607 Income (loss) from operations   39     (499 )   179 Impairment of strategic investments   -     14     - Interest and other expenses   24     24     24 Interest and other income, net   3     5     4 ------------- ------------- ------------ Income (loss) before income taxes   18     (532 )   159 Provision (benefit) for income taxes   (16 )   (17 )   42 ------------- ------------- ------------ Net income (loss)   $ 34     $ (515 )   $ 117 ------------- ------------- ------------ Earnings (loss) per share:     Basic and diluted   $ 0.03     $ (0.42 )   $ 0.09 Weighted average number of shares:     Basic   1,198     1,220     1,299   Diluted   1,212     1,220     1,310 APPLIED MATERIALS, INC. UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS January 27, October 28, (In millions)   2013   2012 ------------- ------------ ASSETS Current assets:     Cash and cash equivalents   $ 1,523     $ 1,392   Short-term investments   230     545   Accounts receivable, net   1,109     1,220   Inventories   1,278     1,272   Other current assets   625     673 ------------- ------------ Total current assets   4,765     5,102 Long-term investments   1,062     1,055 Property, plant and equipment, net   900     910 Goodwill   3,518     3,518 Purchased technology and other intangible assets, net 1,302     1,355 Deferred income taxes and other assets   167     162 ------------- ------------ Total assets   $ 11,714     $ 12,102 ------------- ------------ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:     Accounts payable and accrued expenses   $ 1,287     $ 1,510   Customer deposits and deferred revenue   678     755 ------------- ------------ Total current liabilities   1,965     2,265 Long-term debt   1,946     1,946 Other liabilities   662     656 ------------- ------------ Total liabilities   4,573     4,867 ------------- ------------ Total stockholders' equity   7,141     7,235 ------------- ------------ Total liabilities and stockholders' equity   $ 11,714     $ 12,102 ------------- ------------ APPLIED MATERIALS, INC. UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS Three Months Ended ---------------------------------------- January 27, October 28, January 29, (In millions) 2013   2012   2012 ------------- ------------- ------------ Cash flows from operating activities:     Net income (loss) $ 34     $ (515 )   $ 117   Adjustments required to reconcile net income (loss) to cash provided by operating activities:         Depreciation and amortization 106     97     112     Impairment of goodwill -     421     -     Restructuring charges and asset impairments 9     124     -     Deferred income taxes and other (78 )   64     39     Impairment of strategic investments -     14     -     Share-based compensation 42     44     53     Net change in operating assets and liabilities, net of amounts acquired (97 )   162     (140 ) ------------- ------------- ------------ Cash provided by operating activities 16     411     181 ------------- ------------- ------------ Cash flows from investing activities:     Capital expenditures (49 )   (41 )   (37 )   Cash paid for acquisition, net of cash acquired -     (1 )   (4,179 )   Proceeds from sales and maturities of investments 445     254     313   Purchases of investments (143 )   (175 )   (254 ) ------------- ------------- ------------ Cash provided by (used in) investing 253     37     (4,157 ) activities ------------- ------------- ------------ Cash flows from financing activities:     Proceeds from common stock issuances 18     45     2   Common stock repurchases (48 )   (516 )   (200 )   Payments of dividends to stockholders (108 )   (111 )   (104 ) ------------- ------------- ------------ Cash used in financing activities (138 )   (582 )   (302 ) ------------- ------------- ------------ Effect of exchange rate changes on cash and cash equivalents -     (3 )   (1 ) ------------- ------------- ------------ Increase (decrease) in cash and cash 131     (137 )   (4,279 ) equivalents Cash and cash equivalents - beginning of period 1,392     1,529     5,960 ------------- ------------- ------------ Cash and cash equivalents - end of $ 1,523     $ 1,392     $ 1,681 period ------------- ------------- ------------ Supplemental cash flow information:     Cash payments for income taxes $ 32     $ 10     $ 33   Cash refunds from income taxes $ 65     $ 74     $ 3   Cash payments for interest $ 39     $ 7     $ 41 APPLIED MATERIALS, INC. UNAUDITED SUPPLEMENTAL INFORMATION Reportable Segment Results     Q1 FY2013   Q4 FY2012   Q1 FY2012 ----------------------------------- ----------------------------------- ---------------------------------- Operating Operating Operating (In New Net Income New Net Income New Net Income millions)   Orders   Sales   (Loss)   Orders   Sales   (Loss)   Orders   Sales   (Loss) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------- SSG   $ 1,363     $ 969     $ 134     $ 741     $ 870     $ 41     $ 1,418     $ 1,344     $ 271 AGS   544     471     89     576     621     164     517     534     107 Display   138     87     3     83     93     3     40     104     5 EES   68     46     (54 )   65     62     (480 )   33     207     (23 ) Corporate   -     -     (133 )   -     -     (227 )   -     -     (181 ) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------- Consol- idated $ 2,113     $ 1,573     $ 39     $ 1,465     $ 1,646     $ (499 )   $ 2,008     $ 2,189     $ 179 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------- Corporate Unallocated Expenses Q1 Q4 Q1 (In millions)   FY2013   FY2012   FY2012 --------- --------- -------- Restructuring charges and asset impairments, net   $ 4     $ 111     $ - Share-based compensation   42     44     53 Other unallocated expenses   87     72     128 --------- --------- -------- Corporate   $ 133     $ 227     $ 181 --------- --------- -------- APPLIED MATERIALS, INC. UNAUDITED SUPPLEMENTAL INFORMATION Additional Information     Q1 FY2013     Q4 FY2012     Q1 FY2012 ---------------- ---------------- --------------- New Orders and Net Sales by Geography New Net New Net New Net (In $ millions)   Orders   Sales   Orders   Sales   Orders   Sales -------- ------- -------- ------- -------- ------ United States   391     401     435     373      467     417     % of Total   19 %   25 %   30 %   23 %   23 %   19 % Europe   134     119     165     271     209     179     % of Total   6 %   8 %   11 %   16 %   11 %   8 % Japan   181     98     184     129     167     217     % of Total   9 %   6 %   12 %   8 %   8 %   10 % Korea   198     205     115     127     666     628     % of Total   9 %   13 %   8 %   8 %   33 %   29 % Taiwan   906     565     390     457     367     489     % of Total   43 %   36 %   27 %   28 %   18 %   22 % Southeast Asia   65     58     74     97     50     79     % of Total   3 %   4 %   5 %   6 %   3 %   4 % China   238     127     102     192     82     180     % of Total   11 %   8 %   7 %   11 %   4 %   8 % Employees (In thousands) Regular Full Time   13.7     14.5     14.6 APPLIED MATERIALS, INC. UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP RESULTS     Three Months Ended ---------------------------------------- January 27, October 28, January 29, (In millions, except percentages)   2013   2012   2012 ------------- ------------- ------------ Non-GAAP Gross Margin Reported gross margin (GAAP basis)   $ 582     $ 586     $ 786 Certain items associated with acquisitions(1)   43     46     104 Acquisition integration and deal costs   1     -     - ------------- ------------- ------------ Non-GAAP gross margin   $ 626     $ 632     $ 890 ------------- ------------- ------------ Non-GAAP gross margin percent (% of net sales)   39.8 %   38.4 %   40.7 % Non-GAAP Operating Income Reported operating income (loss) (GAAP basis)   $ 39     $ (499 )   $ 179 Certain items associated with acquisitions(1)   54     55     115 Acquisition integration and deal costs   10     13     50 Impairment of goodwill   -     421     - Restructuring charges and asset impairments(2, 3)   9     124     - ------------- ------------- ------------ Non-GAAP operating income   $ 112     $ 114     $ 344 ------------- ------------- ------------ Non-GAAP operating margin percent (% of net sales)   7.1 %   6.9 %   15.7 % Non-GAAP Net Income Reported net income (loss) (GAAP basis)   $ 34     $ (515 )   $ 117 Certain items associated with acquisitions(1)   54     55     115 Acquisition integration and deal costs   10     13     50 Impairment of goodwill   -     421     - Restructuring charges and asset impairments(2, 3)   9     124     - Impairment of strategic investments   -     14     - Reinstatement of federal R&D tax credit   (10 )   -     - Resolution of audits of prior years' income tax filings   (11 )   (5 )   - Income tax effect of non-GAAP adjustments   (17 )   (37 )   (42 ) ------------- ------------- ------------ Non-GAAP net income   $ 69     $ 70     $ 240 ------------- ------------- ------------ 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 January 27, 2013 included $4 million of employee-related costs, net, related to the restructuring program announced on October 3, 2012, asset impairment charges of $3 million related to the restructuring program announced on May 10, 2012 and severance charges of $2 million related to the integration of Varian. 3  Results for the three months ended October 28, 2012 included severance and other employee-related costs 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. APPLIED MATERIALS, INC. UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP RESULTS     Three Months Ended ------------------------------------------- (In millions except per share January 27, October 28, January 29, amounts)   2013   2012   2012 -------------- -------------- ------------- Non-GAAP Earnings Per Diluted Share Reported earnings (loss) per diluted share (GAAP basis)   $ 0.03     $ (0.42 )   $ 0.09 Certain items associated with acquisitions   0.03     0.04     0.07 Acquisition integration and deal costs   0.01     0.01     0.02 Impairment of goodwill   -     0.34     - Restructuring charges and asset impairments   0.01     0.08     - Impairment of strategic investments   -     0.01     - Reinstatement of federal R&D tax credit and resolution of audits of prior years' income tax filings   (0.02 )   -     - -------------- -------------- ------------- Non-GAAP earnings per diluted share   $ 0.06     $ 0.06     $ 0.18 -------------- -------------- ------------- Weighted average number of diluted shares   1,212     1,234     1,310 APPLIED MATERIALS, INC. UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP RESULTS     Three Months Ended ---------------------------------------- January 27, October 28, January 29, (In millions, except percentages)   2013   2012   2012 ------------- ------------- ------------ Non-GAAP SSG Operating Income Reported operating income (GAAP basis)   $ 134     $ 41     $ 271 Certain items associated with acquisitions(1)   44     45     101 Acquisition integration and deal costs   1     6     14 Restructuring charges and asset impairments(2, 3)   1     3     - ------------- ------------- ------------ Non-GAAP operating income   $ 180     $ 95     $ 386 ------------- ------------- ------------ Non-GAAP operating margin percent (% of net sales)   18.6 %   10.9 %   28.7 % Non-GAAP AGS Operating Income Reported operating income (GAAP basis)   $ 89     $ 164     $ 107 Certain items associated with acquisitions(1)   1     3     6 Restructuring charges and asset impairments(2, 3)   1     4     - ------------- ------------- ------------ Non-GAAP operating income   $ 91     $ 171     $ 113 ------------- ------------- ------------ Non-GAAP operating margin percent (% of net sales)   19.3 %   27.5 %   21.2 % Non-GAAP Display Operating Income Reported operating income (GAAP basis)   $ 3     $ 3     $ 5 Certain items associated with acquisitions(1)   2     1     2 ------------- ------------- ------------ Non-GAAP operating income   $ 5     $ 4     $ 7 ------------- ------------- ------------ Non-GAAP operating margin percent (% of net sales)   5.7 %   4.3 %   6.7 % Non-GAAP EES Operating Income Reported operating loss (GAAP basis)   $ (54 )   $ (480 )   $ (23 ) Certain items associated with acquisitions(1)   7     7     6 Impairment of goodwill   -     421     - Restructuring charges and asset impairments(2, 3)   3     6     - ------------- ------------- ------------ Non-GAAP operating loss   $ (44 )   $ (46 )   $ (17 ) ------------- ------------- ------------ Non-GAAP operating margin percent (% of net sales)   (95.7 )%   (74.2 )%   (8.2 )% 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 January 27, 2013 included asset impairment charges of $3 million related to the restructuring program announced on May 10, 2012 and severance charges of $2 million related to the integration of Varian. 3  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. APPLIED MATERIALS, INC. UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP OPERATING EXPENSES   Three Months Ended ---------------------------- January 27, October 28, (In millions) 2013   2012 -------------- ------------- Operating expenses (GAAP basis) $ 543     $ 1,085 Certain items associated with acquisitions (11 )   (9 ) Acquisition integration and deal costs (9 )   (13 ) Impairment of goodwill -     (421 ) Restructuring charges and asset impairments (9 )   (124 ) -------------- ------------- Non-GAAP operating expenses $ 514     $ 518 -------------- ------------- UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP EFFECTIVE INCOME TAX RATE Three Months   Ended January 27, (In millions, except percentages) 2013 --------------- Provision (benefit) for income taxes (GAAP basis) (a) $ (16 ) Reinstatement of federal R&D tax credit 10 Resolutions from audits of prior years' income tax filings 11 Income tax effect of non-GAAP adjustments 17 --------------- Non-GAAP provision for income taxes (b) $ 22 --------------- Income before income taxes (GAAP basis) (c) $ 18 Certain items associated with acquisitions 54 Acquisition integration costs 10 Restructuring charges and asset impairments 9 --------------- Non-GAAP income before income taxes (d) $ 91 --------------- Effective income tax rate (GAAP basis) (a/c) (88.9 )% --------------- Non-GAAP effective income tax rate (b/d) 24.2 % --------------- 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 [HUG#1677297]