Applied Materials Announces Results for Second Fiscal Quarter 2003; New Orders of $971 Million; Net Sales of $1.11 Billion
SANTA CLARA, Calif.--(BUSINESS WIRE)--May 13, 2003--Applied Materials, Inc., the world's largest supplier of wafer fabrication solutions to the semiconductor industry, reported results for its second fiscal quarter ended April 27, 2003. Net sales were $1.11 billion, up five percent from $1.05 billion from the first fiscal quarter of 2003, and down four percent from $1.16 billion for the second fiscal quarter of 2002. The net loss for the second fiscal quarter of 2003 was $62 million, or $0.04 per share, compared to a loss of $66 million, or $0.04 per share, for the first fiscal quarter of 2003, and down from net income of $52 million, or $0.03 per share reported for the second fiscal quarter of 2002. The initiation of the 2003 Realignment Plan (the "Plan") resulted in the reported net loss for the second fiscal quarter of 2003.
Gross margin for the second fiscal quarter of 2003 was 33.7 percent, down from 37.0 percent for the first fiscal quarter of 2003 and 40.0 percent for the second fiscal quarter of 2002.
On March 17, 2003, Applied Materials announced the Plan to realign the company's infrastructure with current business conditions. The Plan consists of two major elements: first, restructuring actions (including consolidation of facilities and a reduction in work force); and second, refocused product development and cost reduction programs. Both parts of the Plan will result in charges to income across multiple categories, as incurred. During the second fiscal quarter of 2003, the company began implementing the Plan, resulting in charges of $151.7 million. If the charges under the Plan had been excluded from the results reported above, the company would have reported gross margin of 38.1 percent and $44.8 million of net income or $0.03 per share on an ongoing basis.
New orders of $971 million for the second fiscal quarter of 2003 decreased four percent from $1.02 billion from the first fiscal quarter of 2003, and decreased 42 percent from $1.69 billion for the second fiscal quarter of 2002. Regional distribution of new orders for the second fiscal quarter of 2003 was: Japan 28 percent, Europe 25 percent, North America 23 percent, Korea 12 percent, Taiwan seven percent, and Southeast Asia and China five percent. Backlog at the end of the second fiscal quarter of 2003 decreased to $2.76 billion from $3.05 billion at the end of the first fiscal quarter of 2003.
"We achieved our financial objectives for the second fiscal quarter despite challenging market conditions," said James C. Morgan, chairman of Applied Materials. "We believe that the Plan, which began during the quarter, will improve the company's cost structure and enable greater strategic focus on partnering with our customers to address their technology challenges as they move to 300mm wafers, smaller chip design geometries, and new materials.
"Semiconductor manufacturers remain cautious but continue to invest in advanced technologies, as they balance their need to develop the most advanced process capabilities with the uncertainties in the global economy and the impact of near-term weakness in chip demand. We believe that Applied Materials' strategic investment in product and service solutions, as well as our process integration expertise, strongly position the company for growth as the economy and capital spending levels improve.
"With the addition of Mike Splinter, as president and CEO, I am confident that our seasoned management team, together with our technological capabilities, global infrastructure and financial strength, uniquely position Applied Materials to rapidly respond to the opportunities ahead."
Reconciliations of reported results of operations under U.S. Generally Accepted Accounting Principles (GAAP) to the pro forma amounts have been included as a supplement to this press release. Due to the amount of costs incurred with realignment activities, Applied Materials believes that reconciliation to ongoing operations facilitates meaningful comparison with prior periods. To supplement the consolidated financial statements prepared under GAAP, the company uses a pro forma measure of net income that is GAAP net income, adjusted to exclude costs of the Plan. The company believes that pro forma net income reports baseline performance before costs of the Plan. In addition, pro forma net income is the primary indicator management uses to plan and forecast future periods. These measures are not in accordance with, or are an alternative for GAAP, and may be materially different from pro forma methods of accounting and reporting used by other companies. Pro forma net income is computed by adjusting GAAP net income with the impact of restructuring and realignment activities. The presentation of this additional information should not be considered as a substitute for net income prepared in accordance with GAAP.
This press release contains certain forward-looking statements, including, but not limited to, those relating to the impact of the Plan, the company's strategic position and the semiconductor equipment and semiconductor industries' outlook. These forward-looking statements are based on management's estimates, projections and assumptions as of the date hereof. Forward-looking statements may contain words such as "expects," "anticipates," "believes," "may," "should," "will," "estimates," "forecasts," or similar expressions, and include the assumptions that underlie such statements. These forward-looking 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. Such risks and uncertainties include, but are not limited to: the company's ability to implement the Plan according to the timetable and to the extent anticipated; the impact of the Plan on the company's net sales and profitability; the company's ability to maintain effective cost controls and to timely align its cost structure with market conditions; the length and severity of the economic and industry downturn; changes in management; geopolitical uncertainties; changes in opportunities for growth; changes in demand for electronic products and semiconductors; customer capacity requirements, including capacity utilizing the latest technology; changes in the timing and amount of customers' capital spending for new technology; the company's ability to develop, deliver and support a broad range of products and services on a timely basis; the company's successful and timely development of new markets, products, processes and services and other risks described in Applied Materials' Forms 10-K, 10-Q, 8-K and other filings with the Securities and Exchange Commission. The company assumes no obligation to update the information in this press release.
Applied Materials will be discussing its second fiscal quarter results, along with its outlook for the third fiscal quarter of 2003, on a conference call today beginning at 1:30 p.m. Pacific Time. A webcast of the conference call will be available on Applied Materials' web site under the "Investors" section.
Applied Materials (Nasdaq: AMAT), the largest supplier of products and services to the global semiconductor industry, is one of the world's leading information infrastructure providers. Applied Materials enables Information for Everyone(TM) by helping semiconductor manufacturers produce more powerful, portable and affordable chips.
Applied Materials' web site is http://www.appliedmaterials.com.
APPLIED MATERIALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Six Months Ended
----------------------------------------------------------------------
(In thousands, except April 28, April 27, April 28, April 27,
per share amounts) 2002 2003 2002 2003
----------------------------------------------------------------------
Net sales $1,156,472 $1,107,177 $2,156,932 $2,161,386
Cost of products sold 693,732 734,403 1,308,740 1,398,230
---------- ---------- ---------- ----------
Gross margin 462,740 372,774 848,192 763,156
Operating expenses:
Research, development
and engineering 256,879 232,438 503,678 475,643
Marketing and selling 90,084 83,568 173,888 175,785
General and
administrative 76,415 78,198 146,458 150,999
Restructuring, asset
impairments and other
charges(a) - 92,731 85,479 192,069
---------- ---------- ---------- ----------
Income/(loss) from
operations 39,362 (114,161) (61,311) (231,340)
Interest expense 11,097 12,217 23,088 23,559
Interest income 45,537 38,256 93,669 73,628
---------- ---------- ---------- ----------
Income/(loss) before
income taxes 73,802 (88,122) 9,270 (181,271)
Provision/(benefit)
for income taxes 21,772 (25,996) 2,735 (53,475)
---------- ---------- ---------- ----------
Net income/(loss) $ 52,030 $ (62,126) $ 6,535 $ (127,796)
---------- ---------- ---------- ----------
Earnings/(loss) per
share:
Basic $ 0.03 $ (0.04) $ - $ (0.08)
Diluted $ 0.03 $ (0.04) $ - $ (0.08)
Weighted average
number of shares:
Basic 1,643,317 1,655,927 1,639,871 1,652,981
Diluted 1,719,777 1,655,927 1,708,669 1,652,981
----------------------------------------------------------------------
(a) The Company's reported results of operations for the second fiscal
quarter of 2003 included a pre-tax restructuring charge for
employee-related costs, impairment of certain assets and
facilities consolidation costs associated with the 2003
Realignment Plan previously announced on March 17, 2003.
APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS(b)
----------------------------------------------------------------------
October 27, April 27,
(In thousands) 2002 2003
----------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,284,791 $1,427,621
Short-term investments 3,644,735 3,792,123
Accounts receivable, net 1,046,016 742,063
Inventories 1,273,816 1,114,726
Deferred income taxes 565,936 578,153
Other current assets 257,499 204,402
----------- ----------
Total current assets 8,072,793 7,859,088
Property, plant and equipment, net 1,764,937 1,661,988
Other assets 387,035 402,819
----------- ----------
Total assets $10,224,765 $9,923,895
----------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 40,323 $ -
Current portion of long-term debt 9,453 9,821
Accounts payable and accrued expenses 1,348,156 1,256,126
Income taxes payable 103,524 10,967
----------- ----------
Total current liabilities 1,501,456 1,276,914
Long-term debt 573,853 570,153
Deferred income taxes and other liabilities 129,807 138,906
----------- ----------
Total liabilities 2,205,116 1,985,973
----------- ----------
Stockholders' equity:
Common stock 16,480 16,574
Additional paid-in capital 2,022,546 2,041,467
Retained earnings 5,962,014 5,834,218
Accumulated other comprehensive income 18,609 45,663
----------- ----------
Total stockholders' equity 8,019,649 7,937,922
----------- ----------
Total liabilities and stockholders' equity $10,224,765 $9,923,895
----------------------------------------------------------------------
(b) Amounts as of April 27, 2003 are unaudited. Amounts as of
October 27, 2002 are from the October 27, 2002 audited
financial statements.
APPLIED MATERIALS, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF OPERATIONS - ONGOING BASIS
(UNAUDITED)
Three Months Ended
----------------------------------------------------------------------
April 28, 2002
-----------------------------------
(In thousands, except Special Ongoing
per share amounts) Reported(1) Items(2) Results
----------------------------------------------------------------------
Net sales $1,156,472 $ - $1,156,472
Cost of products sold 693,732 - 693,732
---------- ---------- ----------
Gross margin 462,740 - 462,740
Operating expenses:
Research, development and
engineering 256,879 - 256,879
Marketing and selling 90,084 - 90,084
General and administrative 76,415 - 76,415
Restructuring, asset
impairments and other charges - - -
---------- ---------- ----------
Income/(loss) from operations 39,362 - 39,362
Interest expense 11,097 - 11,097
Interest income 45,537 - 45,537
---------- ---------- ----------
Income/(loss) before income taxes 73,802 - 73,802
Provision/(benefit) for
income taxes 21,772 - 21,772
---------- ---------- ----------
Net income/(loss) $ 52,030 $ - $ 52,030
---------- ---------- ----------
Earnings/(loss) per share:
Basic $ 0.03 $ - $ 0.03
Diluted $ 0.03 $ - $ 0.03
Weighted average number of
shares:
Basic 1,643,317 1,643,317 1,643,317
Diluted 1,719,777 1,719,777 1,719,777
----------------------------------------------------------------------
(1) Reported results of operations are presented in accordance with
U.S. Generally Accepted Accounting Principles (GAAP).
(2) There were no special item adjustments to reported results of
operations for the second fiscal quarter of 2002. Therefore,
ongoing results are equal to reported results of operations.
APPLIED MATERIALS, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF OPERATIONS - ONGOING BASIS
(UNAUDITED)
Three Months Ended
----------------------------------------------------------------------
April 27, 2003
----------------------------------------
(In thousands, except Special Ongoing
per share amounts) Reported(1) Items(3) Results
----------------------------------------------------------------------
Net sales $1,107,177 $ - $1,107,177
Cost of products sold 734,403 (49,000) (a) 685,403
---------- ---------- ----------
Gross margin 372,774 49,000 421,774
Operating expenses:
Research, development
and engineering 232,438 (10,000) (b) 222,438
Marketing and selling 83,568 - 83,568
General and administrative 78,198 - 78,198
Restructuring, asset
impairments and other charges 92,731 (92,731) (c) -
---------- ---------- ----------
Income/(loss) from operations (114,161) 151,731 37,570
Interest expense 12,217 - 12,217
Interest income 38,256 - 38,256
---------- ---------- ----------
Income/(loss) before
income taxes (88,122) 151,731 63,609
Provision/(benefit) for
income taxes (25,996) 44,761 (d) 18,765
---------- ---------- ----------
Net income/(loss) $ (62,126) $ 106,970 $ 44,844
---------- ---------- ----------
Earnings/(loss) per share:
Basic $ (0.04) $ 0.06 $ 0.03
Diluted $ (0.04) $ 0.06 $ 0.03
Weighted average number of
shares:
Basic 1,655,927 1,655,927 1,655,927
Diluted 1,655,927 1,681,571 1,681,571
----------------------------------------------------------------------
(1) Reported results of operations are presented in accordance with
U.S. Generally Accepted Accounting Principles (GAAP).
(3) Special items for the second fiscal quarter of 2003 consisted
of the following:
(a) Charges to cost of products sold for inventory deemed to be
excess as a result of refocused product efforts initiated
under the 2003 Realignment Plan.
(b) Charges to research, development and engineering expense for
laboratory tool write-offs associated with refocused product
efforts initiated under the 2003 Realignment Plan.
(c) Restructuring, asset impairments and other charges consist of
employee-related costs, impairment of certain assets and
facilities consolidation costs associated with the 2003
Realignment Plan.
(d) Pro forma tax provision for the tax effect of special items.
APPLIED MATERIALS, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF OPERATIONS - ONGOING BASIS
(UNAUDITED)
Six Months Ended
----------------------------------------------------------------------
April 28, 2002
--------------------------------------
(In thousands, except Special Ongoing
per share amounts) Reported(1) Items(2) Results
----------------------------------------------------------------------
Net sales $2,156,932 $ - $2,156,932
Cost of products sold 1,308,740 - 1,308,740
---------- ---------- ----------
Gross margin 848,192 - 848,192
Operating expenses:
Research, development
and engineering 503,678 - 503,678
Marketing and selling 173,888 - 173,888
General and administrative 146,458 - 146,458
Restructuring, asset
impairments and other
charges 85,479 (85,479) (a) -
---------- ---------- ----------
Income/(loss) from operations (61,311) 85,479 24,168
Interest expense 23,088 - 23,088
Interest income 93,669 - 93,669
---------- ---------- ----------
Income/(loss) before
income taxes 9,270 85,479 94,749
Provision/(benefit) for
income taxes 2,735 25,216 (b) 27,951
---------- ---------- ----------
Net income/(loss) $ 6,535 $ 60,263 $ 66,798
---------- ---------- ----------
Earnings/(loss) per share:
Basic $ - $ 0.04 $ 0.04
Diluted $ - $ 0.04 $ 0.04
Weighted average number of
shares:
Basic 1,639,871 1,639,871 1,639,871
Diluted 1,708,669 1,708,669 1,708,669
----------------------------------------------------------------------
(1) Reported results of operations are presented in accordance with
U.S. Generally Accepted Accounting Principles (GAAP).
(2) Special items for the six months ended April 28, 2002 consisted of
the following:
(a) Restructuring consisting of employee-related costs,
consolidation of facilities and other costs totaling
approximately $77 million, and in-process research and
development expense in connection with its acquisitions of
Schlumberger's electron-beam wafer inspection business and
Global Knowledge Services, Inc. totaling approximately
$8 million.
(b) Pro forma tax provision for the tax effect of special items.
APPLIED MATERIALS, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF OPERATIONS - ONGOING BASIS
(UNAUDITED)
Six Months Ended
----------------------------------------------------------------------
April 27, 2003
------------------------------------------
(In thousands, except Special Ongoing
per share amounts) Reported(1) Items(3) Results
----------------------------------------------------------------------
Net sales $ 2,161,386 $ - $2,161,386
Cost of products sold 1,398,230 (49,000) (c) 1,349,230
----------- ---------- ----------
Gross margin 763,156 49,000 812,156
Operating expenses:
Research, development
and engineering 475,643 (10,000) (d) 465,643
Marketing and selling 175,785 - 175,785
General and administrative 150,999 - 150,999
Restructuring, asset
impairments and other
charges 192,069 (192,069) (e) -
----------- ---------- ----------
Income/(loss) from
operations (231,340) 251,069 19,729
Interest expense 23,559 - 23,559
Interest income 73,628 - 73,628
----------- ---------- ----------
Income/(loss) before
income taxes (181,271) 251,069 69,798
Provision/(benefit) for
income taxes (53,475) 74,065 (f) 20,590
----------- ---------- ----------
Net income/(loss) $ (127,796) $ 177,004 $ 49,208
----------- ---------- ----------
Earnings/(loss) per share:
Basic $ (0.08) $ 0.11 $ 0.03
Diluted $ (0.08) $ 0.11 $ 0.03
Weighted average number of
shares:
Basic 1,652,981 1,652,981 1,652,981
Diluted 1,652,981 1,681,846 1,681,846
(1) Reported results of operations are presented in accordance with
U.S. Generally Accepted Accounting Principles (GAAP).
(3) Special items for the six months ended April 27, 2003 consisted
of the following:
(c) Charges to cost of products sold for inventory deemed to be
excess as a result of refocused product efforts initiated
under the 2003 Realignment Plan.
(d) Charges to research, development and engineering expense for
laboratory tool write-offs associated with refocused product
efforts initiated under the 2003 Realignment Plan.
(e) Restructuring, asset impairments and other charges consist of
employee-related costs, impairment of certain assets and
facilities consolidation costs associated with the 2003
Realignment Plan and restructuring activities for the first
fiscal quarter of 2003.
(f) Pro forma tax provision for the tax effect of special items.
CONTACT:
Applied Materials, Inc. Carolyn Schwartz, 408/748-5227 (investment community)
Jeffrey Lettes, 408/563-5161 (editorial/media)
SOURCE: Applied Materials, Inc.