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Financial News Release

Applied Materials Announces First Fiscal Quarter 2009 Results

SANTA CLARA, Calif.--(BUSINESS WIRE)--Feb. 10, 2009-- Applied Materials, Inc. today reported that for its first fiscal quarter ended January 25, 2009, net sales were $1.33 billion, gross margin was 29.4 percent, GAAP net loss was $133 million, GAAP net loss per share was $0.10, and new orders were $903 million. These results included a restructuring charge of $133 million associated with a global cost reduction program announced on November 12, 2008.

“We acted early and decisively to reduce costs in line with economic conditions that have resulted in an unprecedented decline in demand," said Mike Splinter, president and CEO. "With our leading technology and strong balance sheet, Applied is positioned to weather this recession and invest in new products and services.”

The following table shows comparisons to the first and fourth quarters of fiscal 2008.

   

Q1 FY ‘09

 

Q1 FY ‘08

 

Q4 FY ‘08

Net sales   $1.33 billion   $2.09 billion   $2.04 billion
Gross margin percent   29.4%   44.8%   39.1%
Net income (loss)   ($133 million)   $262 million   $231 million
Earnings (loss) per share   ($0.10)   $0.19   $0.17
New orders   $903 million   $2.50 billion   $2.21 billion

Regional distribution of new orders was: Europe 39 percent, North America 26 percent, Japan 17 percent, Southeast Asia and China 9 percent, Korea 7 percent, and Taiwan 2 percent. Backlog at the end of the first quarter of fiscal 2009 was $4.05 billion, down from $4.85 billion at the end of the fourth quarter of fiscal 2008.

Non-GAAP net loss for the first quarter of fiscal 2009 was $3 million, or $0.00 per share. The following table shows comparisons of non-GAAP results to the first and fourth quarters of fiscal 2008. Non-GAAP adjustments are explained below and detailed in the accompanying Reconciliation of GAAP to Non-GAAP Results.

   

Q1 FY ‘09

 

Q1 FY ‘08

 

Q4 FY ‘08

Non-GAAP net income (loss)   ($3 million)   $345 million   $264 million
Non-GAAP earnings (loss) per share   $0.00   $0.25   $0.20

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

Results by reportable segment for the first quarter of fiscal 2009 and the first and fourth quarters of fiscal 2008 were:

  Q1 FY ‘09 Q1 FY ‘08 Q4 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)
Silicon $246 $546 $34 $1,075 $1,237 $445 $1,162 $744 $177
Applied Global Services 310 345 26 610 595 149 496 528 123
Display 26 149 26 555 133 34 65 334 113
Energy and Environmental Solutions 321 293 (65) 260 122 (48) 490 438 21

Applied Materials will discuss its fiscal 2009 first quarter results on the earnings call today beginning at 1:30 p.m. Pacific Standard 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, cost reductions, strategic position, financial strength and product investment. Forward-looking statements may contain words such as “expect,” “believe,” “may,” “can,” “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 uncertain global economic and industry conditions, business and consumer spending, demand for electronic products and semiconductors, governmental renewable energy policies and incentives, and customers’ utilization rates and capacity requirements, including capacity utilizing the latest technology; the duration and severity of the recession; customers’ ability to acquire sufficient capital and/or obtain regulatory approvals; variability of operating 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 implement and maintain effective cost reduction programs, realize expected benefits, and 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) obtain and protect intellectual property rights in key technologies, and (vi) 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

January 25,

 

January 27,

(In thousands, except per share amounts)     2009       2008
 
Net sales $ 1,333,396 $ 2,087,397
Cost of products sold   941,820     1,152,416
Gross margin 391,576 934,981
 
Operating expenses:
Research, development and engineering 229,540 273,219
General and administrative 141,241 115,976
Marketing and selling 84,115 123,917
Restructuring and asset impairments   132,772     48,986
Income (loss) from operations (196,092 ) 372,883
 
Pre-tax loss of equity method investment 15,808 9,586
Interest expense 5,994 4,545
Interest income   15,235     30,570
Income (loss) before income taxes (202,659 ) 389,322
 
Provision (benefit) for income taxes   (69,725 )   126,946
Net income (loss) $ (132,934 ) $ 262,376
 
Earnings (loss) per share:
Basic $ (0.10 ) $ 0.19
Diluted $ (0.10 ) $ 0.19
 
Weighted average number of shares:
Basic 1,329,223 1,371,245
Diluted     1,329,223       1,383,886
APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
     
  January 25,   October 26,
(In thousands)   2009     2008  
ASSETS
 
Current assets:
Cash and cash equivalents $ 1,366,196 $ 1,411,624
Short-term investments 551,196 689,044
Accounts receivable, net 1,274,853 1,691,027
Inventories 2,131,092 1,987,017
Deferred income taxes, net 402,720 388,807
Income taxes receivable

187,183

125,605

Other current assets   366,428     371,033  
Total current assets 6,279,668 6,664,157
Long-term investments 1,210,997 1,367,056
Property, plant and equipment 2,888,267 2,831,952
Less: accumulated depreciation and amortization   (1,780,081 )   (1,737,752 )
Net property, plant and equipment 1,108,186 1,094,200
 
Goodwill, net 1,171,740 1,174,673
Purchased technology and other intangible assets, net 366,980 388,429
Equity method investment 63,725 79,533
Deferred income taxes and other assets   226,307     238,270  
Total assets $ 10,427,603   $ 11,006,318  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
Current liabilities:
Current portion of long-term debt $ 1,259 $ 1,068
Accounts payable and accrued expenses 2,387,837 2,771,090
Income taxes payable   140,635     173,394  
Total current liabilities 2,529,731 2,945,552
 
Long-term debt 201,895 201,576
Other liabilities   339,306     310,232  
Total liabilities   3,070,932     3,457,360  
 
Stockholders’ equity:
Common stock 13,293 13,308
Additional paid-in capital 5,125,991 5,095,894
Retained earnings 11,386,759 11,601,288
Treasury stock (9,157,868 ) (9,134,962 )
Accumulated other comprehensive loss   (11,504 )   (26,570 )
Total stockholders’ equity   7,356,671     7,548,958
Total liabilities and stockholders’ equity   $ 10,427,603     $ 11,006,318  

APPLIED MATERIALS, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

 
 

Three Months Ended

January 25,

 

January 27,

(In thousands)

 

2009

 

2008

 
Cash flows from operating activities:
Net income (loss) $ (132,934 ) $ 262,376

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

Depreciation and amortization 71,228 78,474
Loss on fixed asset retirements 3,447 11,211
Provision for bad debts 47,526
Restructuring and asset impairments 132,772 48,986
Deferred income taxes (13,054 ) 3,417
Net recognized loss on investments 5,398 639
Pretax loss of equity-method investment 15,808 9,586
Equity-based compensation 33,608 38,722
Changes in operating assets and liabilities, net of amounts acquired:
Accounts receivable 368,648 34,926
Inventories (144,075 ) (73,937 )
Other current assets 10,890 (22,579 )
Other assets 1,311 (4,984 )
Accounts payable and accrued expenses (518,373 ) (95,459 )
Income taxes (94,337 ) 94,248
Other liabilities   26,920     4,105  
Cash provided by (used in) operating activities   (185,217 )   389,731  
Cash flows from investing activities:
Capital expenditures (73,318 ) (74,144 )
Cash paid for acquisition, net of cash acquired (19,084 )
Proceeds from sales and maturities of investments 541,689 2,038,001
Purchases of investments   (227,348 )   (1,654,754 )
Cash provided by investing activities   241,023     290,019  
Cash flows from financing activities:
Debt borrowings 510 343
Proceeds from common stock issuances 182 15,681
Common stock repurchases (22,906 ) (600,000 )
Payment of dividends to stockholders   (79,762 )   (83,068 )
Cash used in financing activities   (101,976 )   (667,044 )
Effect of exchange rate changes on cash and cash equivalents   742     221  
Increase (decrease) in cash and cash equivalents   (45,428 )   12,927  
Cash and cash equivalents — beginning of period   1,411,624     1,202,722  
Cash and cash equivalents — end of period $ 1,366,196   $ 1,215,649  
Supplemental cash flow information:
Cash payments for income taxes $ 12,064 $ 41,878
Cash payments for interest   $ 42     $ 45  
APPLIED MATERIALS, INC.
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
 
  Three Months Ended
January 25,   January 27,   October 26,
(In thousands, except per share amounts)   2009   2008   2008
 
Non-GAAP Net Income (Loss)
 
Reported net income (loss) (GAAP basis) $ (132,934 ) $ 262,376 $ 231,095
Equity-based compensation expense 33,608 38,722 43,778
Certain items associated with acquisitions 1 26,025 31,038 35,320
Gain on sale of facility (21,837 )
Restructuring and asset impairments 2, 3, 4 132,772 48,986 (9,686 )

Costs associated with ceasing development of beamline implant products 5

1,021
Income tax effect of non-GAAP adjustments   (62,939 )   (37,326 )   (14,765 )
Non-GAAP net income (loss) $ (3,468 ) $ 344,817   $ 263,905  
 
Non-GAAP Net Income (Loss) Per Diluted Share
 

Reported net income (loss) per diluted share (GAAP basis)

$ (0.10 ) $ 0.19 $ 0.17
Equity-based compensation expense 0.02 0.02 0.02
Certain items associated with acquisitions 0.01 0.02 0.02
Gain on sale of facility (0.01 )
Restructuring and asset impairments 0.06 0.02

Costs associated with ceasing development of beamline implant products

Non-GAAP net income (loss) – per diluted share $ 0.00 $ 0.25 $ 0.20
Shares used in diluted shares calculation     1,329,223       1,383,886       1,350,092  
 

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

2 Results for the first fiscal quarter ended January 25, 2009 included restructuring charges of $133 million associated with a restructuring program announced on November 12, 2008.
3 Results for the first fiscal quarter ended January 27, 2008 included restructuring and asset impairment charges of $38 million associated with a global cost reduction plan and $11 million associated with ceasing development of beamline implant products.
4 Results for the fourth fiscal quarter ended October 26, 2008 included a restructuring and asset impairment benefit of $9 million associated with a global cost reduction plan.
5 Results for the fiscal quarter ended January 27, 2008 included other operating charges of $1 million associated with ceasing development of beamline implant products.

Source: Applied Materials, Inc.

Applied Materials, Inc.
David Miller, 408-563-9582 (editorial/media)
Michael Sullivan, 408-986-7977 (financial community)

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