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August 11, 2009

Applied Materials Announces Third Quarter of Fiscal 2009 Results

Filed under: AMAT — Tags: , , , , — Jason @ 4:03 pm

Tuesday August 11, 2009, 4:03 pm EDT

SANTA CLARA, Calif.–(BUSINESS WIRE)–Applied Materials, Inc. (AMAT) today reported results for its third fiscal quarter ended July 26, 2009. Net sales were $1.13 billion, and the GAAP net loss was $55 million, or $0.04 per share. The company also reported a non-GAAP net loss for the period of $2 million, or breakeven per share.

“In a difficult environment, Applied improved its operating performance and generated significant cash flow while making substantial investments in new technologies for next-generation semiconductor chips, flat panel displays and solar panels,” said Mike Splinter, chairman and CEO.

GAAP Results

Q3 FY ‘09 Q2 FY ‘09 Q3 FY ‘08
Net sales $1.13 billion $1.02 billion $1.85 billion
Net income (loss) ($55 million) ($255 million) $165 million
Earnings (loss) per share ($0.04) ($0.19) $0.12

Non-GAAP Results

Q3 FY ‘09 Q2 FY ‘09 Q3 FY ‘08
Non-GAAP net income (loss) ($2 million) ($136 million) $228 million
Non-GAAP earnings (loss) per share ($0.00) ($0.10) $0.17

The non-GAAP results exclude the impact of any of the following for a particular quarter: investment impairments, equity-based compensation, restructuring and asset impairments, acquisition-related costs, ceasing implant development, and amounts associated with the resolution of income tax audits. A reconciliation of the GAAP and non-GAAP results is provided in the financial statements included in this release.

Order and Backlog Summary

New orders for the quarter totaled $1.07 billion. Regional distribution was: Southeast Asia and China 25 percent, Taiwan 24 percent, Japan 14 percent, North America 14 percent, Europe 12 percent, and Korea 11 percent. Within the Silicon Systems Group (SSG), new order composition was: foundry 42 percent, DRAM 25 percent, logic and other 18 percent, and flash 15 percent. Backlog for the company as of the end of the quarter was $2.95 billion, down from $3.16 billion in the previous quarter.

Reportable Segment Results

Q3 FY ‘09 Q2 FY ‘09 Q3 FY ‘08
(In millions) New
Orders
Net
Sales
Operating
Income
(Loss)
New
Orders
Net
Sales
Operating
Income
(Loss)
New
Orders
Net
Sales
Operating
Income
(Loss)
SSG $542 $498 $56 $259 $260 ($96) $793 $756 $172
Applied Global Services $298 $343 $24 $236 $319 ($1) $541 $607 $145
Display $96 $69 ($5) $13 $84 $1 $374 $311 $103
Energy and Environmental Solutions $136 $224 ($53) $141 $357 ($93) $322 $174 ($85)

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 http://www.appliedmaterials.com.

APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended
(In thousands, except per share amounts) July 26,
2009
July 27,
2008
July 26,
2009
July 27,
2008
Net sales $ 1,133,740 $ 1,848,168 $ 3,487,213 $ 6,085,563
Cost of products sold 808,866 1,105,854 2,615,244 3,441,440
Gross margin 324,874 742,314 871,969 2,644,123
Operating expenses:
Research, development and engineering 234,052 268,559 699,927 828,900
General and administrative 88,487 129,341 330,808 367,352
Marketing and selling 79,518 115,944 248,311 359,271
Restructuring and asset impairments 138 159,481 49,634
Income (loss) from operations (77,183 ) 228,332 (566,558 ) 1,038,966
Pre-tax loss of equity method investment 6,308 34,983 25,660
Impairment of equity method investment and strategic investments 2,341 79,422
Interest expense 4,893 4,859 15,945 15,660
Interest income 10,233 25,399 37,257 88,383
Income (loss) before income taxes (74,184 ) 242,564 (659,651 ) 1,086,029
Provision (benefit) for income taxes (19,319 ) 77,796 (216,462 ) 356,378
Net income (loss) $ (54,865 ) $ 164,768 $ (443,189 ) $ 729,651
Earnings (loss) per share:
Basic $ (0.04 ) $ 0.12 $ (0.33 ) $ 0.54
Diluted $ (0.04 ) $ 0.12 $ (0.33 ) $ 0.53
Weighted average number of shares:
Basic 1,333,278 1,350,526 1,331,410 1,359,492
Diluted 1,333,278 1,367,557 1,331,410 1,375,656
APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands) July 26,
2009
October 26,
2008
ASSETS
Current assets:
Cash and cash equivalents $ 1,555,470 $ 1,411,624
Short-term investments 583,188 689,044
Accounts receivable, net 842,169 1,691,027
Inventories 1,748,507 1,987,017
Deferred income taxes, net 304,706 388,807
Income taxes receivable 421,935 125,605
Other current assets 308,817 371,033
Total current assets 5,764,792 6,664,157
Long-term investments 990,167 1,367,056
Property, plant and equipment 2,876,731 2,831,952
Less: accumulated depreciation and amortization (1,788,673 ) (1,737,752 )
Net property, plant and equipment 1,088,058 1,094,200
Goodwill, net 1,171,740 1,174,673
Purchased technology and other intangible assets, net 327,351 388,429
Equity method investment 79,533
Deferred income taxes and other assets 238,173 238,270
Total assets $ 9,580,281 $ 11,006,318
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt $ 1,203 $ 1,068
Accounts payable and accrued expenses 1,056,532 1,545,355
Customer deposits and deferred revenue 911,485 1,225,735
Income taxes payable 69,763 173,394
Total current liabilities 2,038,983 2,945,552
Long-term debt 201,200 201,576
Other liabilities 326,489 310,232
Total liabilities 2,566,672 3,457,360
Stockholders’ equity:
Common stock 13,337 13,308
Additional paid-in capital 5,198,613 5,095,894
Retained earnings 10,896,826 11,601,288
Treasury stock (9,100,915 ) (9,134,962 )
Accumulated other comprehensive income (loss) 5,748 (26,570 )
Total stockholders’ equity 7,013,609 7,548,958
Total liabilities and stockholders’ equity $ 9,580,281 $ 11,006,318
APPLIED MATERIALS, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

Nine Months Ended
(In thousands) July 26,
2009
July 27,
2008
Cash flows from operating activities:
Net income (loss) $ (443,189 ) $ 729,651
Adjustments required to reconcile net income (loss) to cash provided by (used in) operating activities:
Depreciation and amortization 219,609 240,039
Loss on fixed asset retirements 16,165 27,880
Provision for bad debts 62,539
Restructuring and asset impairments 159,481 49,634
Deferred income taxes 96,117 (60,886 )
Excess tax benefits from equity-based compensation plans (5,406 )
Net recognized loss (gain) on investments 13,083 (1,244 )
Pretax loss of equity-method investment 34,983 25,660
Impairment of equity-method investment and strategic investments 79,422
Equity-based compensation 116,114 135,165
Changes in operating assets and liabilities, net of amounts acquired:
Accounts receivable 786,319 534,104
Inventories 238,510 (504,555 )
Other current assets 49,990 77,593
Other assets (7,134 ) (4,383 )
Accounts payable and accrued expenses (632,193 ) 530,347
Customer deposits and deferred revenue (314,250 ) (127,423 )
Income taxes (419,297 ) (66,603 )
Other liabilities 36,527 4,578
Cash provided by operating activities 92,796 1,584,151
Cash flows from investing activities:
Capital expenditures (187,804 ) (209,512 )
Cash paid for acquisition, net of cash acquired (235,324 )
Proceeds from sales and maturities of investments 1,121,026 4,514,648
Purchases of investments (649,417 ) (4,608,845 )
Cash provided by (used in) investing activities 283,805 (539,033 )
Cash flows from financing activities:
Debt repayments (241 ) (1,854 )
Proceeds from common stock issuances 29,406 334,575
Common stock repurchases (22,906 ) (1,199,984 )
Excess tax benefits from equity-based compensation plans 5,406
Payment of dividends to stockholders (239,756 ) (245,559 )
Cash used in financing activities (233,497 ) (1,107,416 )
Effect of exchange rate changes on cash and cash equivalents 742 108
Increase (decrease) in cash and cash equivalents 143,846 (62,190 )
Cash and cash equivalents — beginning of period 1,411,624 1,202,722
Cash and cash equivalents — end of period $ 1,555,470 $ 1,140,532
Supplemental cash flow information:
Cash payments for income taxes $ 139,625 $ 349,914
Cash payments for interest $ 7,212 $ 7,243
APPLIED MATERIALS, INC.
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
Three Months Ended Nine Months Ended
(In thousands, except per share amounts) July 26,
2009
April 26,
2009
July 27,
2008
July 26,
2009
July 27,
2008
Non-GAAP Net Income (Loss)
Reported net income (loss) (GAAP basis) $ (54,865 ) $ (255,390 ) $ 164,768 $ (443,189 ) $ 729,651
Equity-based compensation expense 43,334 39,172 46,121 116,114 135,165
Certain items associated with acquisitions 1 22,425 24,824 41,109 73,274 103,291
Restructuring and asset impairments 2,3,4 26,709 138 159,481 49,634
Costs associated with ceasing development of beamline implant products 5 156 1,436
Impairment of equity method investment and strategic investments 2,341 77,081 79,422
Income tax effect of non-GAAP adjustments and resolution of audits of prior years’ income tax filings (14,791 ) (48,040 ) (24,601 ) (125,770 ) (85,069 )
Non-GAAP net income (loss) $ (1,556 ) $ (135,644 ) $ 227,691 $ (140,668 ) $ 934,108
Non-GAAP Net Income (Loss) Per Diluted Share
Reported net income (loss) per diluted share (GAAP basis) $ (0.04 ) $ (0.19 ) $ 0.12 $ (0.33 ) $ 0.53
Equity-based compensation expense 0.02 0.02 0.02 0.06 0.07
Certain items associated with acquisitions 0.01 0.01 0.02 0.04 0.05
Restructuring and asset impairments 0.01 0.08 0.02
Costs associated with ceasing development of beamline implant products
Impairment of equity method investment and strategic investments 0.05 0.05
Resolution of audits of prior years’ income tax filings (0.01 )
Non-GAAP net income (loss) – per diluted share $ (0.00 ) $ (0.10 ) $ 0.17 $ (0.11 ) $ 0.68
Shares used in diluted shares calculation 1,333,278 1,331,729 1,367,557 1,331,410 1,375,656

1These items are incremental charges attributable to acquisitions consisting of inventory fair value adjustments on products sold and amortization of purchased intangible assets.

2Results for the three months ended April 26, 2009 included asset impairment charges of $15 million related to wafer cleaning equipment and restructuring charges of $12 million primarily associated with a restructuring program announced on November 12, 2008. Results for the nine months ended July 26, 2009 included asset impairment charges of $15 million related to wafer cleaning equipment and restructuring charges of $145 million associated with a restructuring program announced on November 12, 2008.

3Results for the nine months ended July 27, 2008 included restructuring charges of $38 million associated with a global cost reduction plan.

4Results for the three and nine months ended July 27, 2008 included restructuring and asset impairment charges of $138,000 and $12 million, respectively, associated with ceasing development of beamline implant products.

5Results for the three and nine months ended July 27, 2008 included other operating charges of $156,000 and $1 million, respectively, associated with ceasing development of beamline implant products.

Contact:

Applied Materials, Inc.
Howard Clabo, 408-748-5775 (editorial/media)
Michael Sullivan, 408-986-7977 (financial community)
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