Applied Materials Announces Results for Third Fiscal Quarter 2003; New Orders Increase to $1.05 Billion; Net Sales of $1.09 Billion
SANTA CLARA, Calif.--(BUSINESS WIRE)--Aug. 12, 2003--Applied Materials, Inc. (Nasdaq:AMAT), the world's largest supplier of wafer fabrication solutions to the semiconductor industry, reported results for its third fiscal quarter ended July 27, 2003. Net sales were $1.09 billion, down one percent from $1.11 billion for the second fiscal quarter of 2003, and down 25 percent from $1.46 billion for the third fiscal quarter of 2002. Gross margin for the third fiscal quarter of 2003 was 31.7 percent, down from 33.7 percent for the second fiscal quarter of 2003 and 41.5 percent for the third fiscal quarter of 2002. The net loss for the third fiscal quarter of 2003 was $37 million, or $0.02 per share, compared to a loss of $62 million, or $0.04 per share, for the second fiscal quarter of 2003, and down from net income of $115 million, or $0.07 per share, for the third fiscal quarter of 2002.
A pre-tax realignment charge of $164 million, or $0.07 per share, resulted in the net loss for the third fiscal quarter of 2003. Realignment activities consisted of inventory write-offs as a result of the implementation of the global spares distribution system, refocused product efforts (which included the Etec mask pattern products), a reduction in the workforce and the consolidation of facilities. Excluding the charges associated with realignment activities, the company would have reported ongoing gross margin of 40.2 percent for the third fiscal quarter, an increase from 38.1 percent for the second fiscal quarter, and ongoing net income of $78 million, or $0.05 per share, for the third fiscal quarter, an increase from $45 million, or $0.03 per share, for the second fiscal quarter.
New orders of $1.05 billion for the third fiscal quarter of 2003 increased nine percent from $971 million for the second fiscal quarter of 2003, and decreased 41 percent from $1.78 billion for the third fiscal quarter of 2002. Regional distribution of new orders for the third fiscal quarter of 2003 was: Taiwan 36 percent, North America 20 percent, Japan 18 percent, Korea 10 percent, Europe 10 percent, and Southeast Asia and China six percent. Backlog at the end of the third fiscal quarter of 2003 decreased to $2.53 billion from $2.76 billion at the end of the second fiscal quarter of 2003.
"We are pleased with our financial performance this quarter, particularly the increase in new orders as we focus the company on renewed growth," said Mike Splinter, president and CEO of Applied Materials. "These results reflect Applied Materials' technology and market leadership, customer focus and improved cost structure.
"Although semiconductor manufacturers continue to be cautious in their capital spending, we see positive indicators emerging. An improved global economy and higher fab utilization are giving customers the confidence to gradually invest in new technology for the transition to advanced chip designs and 300mm wafer production."
In the quarter, Applied Materials extended its leadership in 300mm technologies for 90nm and below devices with eight new products for copper interconnect and transistor applications, including advanced systems for etch, decoupled plasma nitridation, electrochemical plating, wafer inspection, epitaxy, and chemical mechanical polishing. In addition, Applied Materials' Black Diamond CVD film became the first low-k solution to reach volume production in multiple manufacturing sites.
"My first 90 days at Applied Materials have reinforced my belief in its great people, outstanding product portfolio, strong financial management and commitment to our customers. Our entire organization is focused on delivering the next generation technologies that our customers need. Applied Materials is well positioned to take advantage of the opportunities ahead," concluded Splinter.
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 charges incurred with realignment activities, Applied Materials believes that reconciliation to ongoing operations facilitates meaningful comparison with prior periods. To supplement the consolidated condensed financial statements prepared under GAAP, the company uses a pro forma measure of net income that is GAAP net income, adjusted to exclude costs associated with realignment activities. The company believes that pro forma net income reports baseline performance before charges associated with realignment activities. 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. 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 forward-looking statements, including, but not limited to, those relating to the impact of realignment activities, the company's strategic position, customers' investments in new technology, the global economy, the rate of fab utilization 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 conduct the realignment activities according to the timetable and to the extent anticipated; the impact of the realignment activities 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; continuing uncertainties in global economic conditions; 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; the timing, rate, amount and sustainability of increases in capital spending for new technology, such as 300mm and 90nm and below applications; 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 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 third fiscal quarter results, along with its outlook for the fourth 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 CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Nine Months Ended
----------------------------------------------------------------------
(In thousands, except July 28, July 27, July 28, July 27,
per share amounts) 2002 2003 2002 2003
----------------------------------------------------------------------
Net sales $ 1,459,682 $1,094,907 $ 3,616,614 $3,256,293
Cost of products sold 853,539 747,979 2,162,279 2,146,209
------------ ---------- ----------- ----------
Gross margin 606,143 346,928 1,454,335 1,110,084
Operating expenses:
Research, development
and engineering 275,952 217,025 779,630 692,668
Marketing and selling 104,225 78,121 278,113 253,906
General and
administrative 89,553 72,307 236,011 223,306
Restructuring, asset
impairments and
other charges* - 66,181 85,479 258,250
------------- ---------- ----------- ----------
Income/(loss) from
operations 136,413 (86,706) 75,102 (318,046)
Interest expense 13,080 11,626 36,168 35,185
Interest income 40,110 46,131 133,779 119,759
------------ ---------- ----------- ----------
Income/(loss) before
income taxes 163,443 (52,201) 172,713 (233,472)
Provision/(benefit)
for income taxes 48,216 (15,399) 50,951 (68,874)
------------ ---------- ----------- ----------
Net income/(loss) $ 115,227 $ (36,802)$ 121,762 $ (164,598)
------------ ---------- ----------- ----------
Earnings/(loss) per
share:
Basic $ 0.07 $ (0.02)$ 0.07 $ (0.10)
Diluted $ 0.07 $ (0.02)$ 0.07 $ (0.10)
Weighted average
number of shares:
Basic 1,647,181 1,659,365 1,642,337 1,655,430
Diluted 1,703,196 1,659,365 1,706,894 1,655,430
----------------------------------------------------------------------
* The company's reported results of operations for the third fiscal
quarter of 2003 included a pre-tax restructuring charge for a
reduction in the workforce, the consolidation of facilities, and
impairment of certain assets associated with realignment activities.
APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS*
----------------------------------------------------------------------
October 27, July 27,
(In thousands) 2002 2003
----------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,284,791 $ 1,285,045
Short-term investments 3,644,735 3,947,657
Accounts receivable, net 1,046,016 741,618
Inventories 1,273,816 997,277
Refundable income taxes - 5,661
Deferred income taxes 565,936 629,594
Other current assets 257,499 200,890
----------- -----------
Total current assets 8,072,793 7,807,742
Property, plant and equipment 3,223,133 3,087,968
Less: accumulated depreciation and
amortization (1,458,196) (1,479,519)
----------- -----------
Net property, plant and equipment 1,764,937 1,608,449
----------- -----------
Goodwill, net 202,290 223,521
Purchased technology, net 112,920 88,021
Other assets 71,825 95,646
----------- -----------
Total assets $10,224,765 $ 9,823,379
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 40,323 $ -
Current portion of long-term debt 9,453 4,847
Accounts payable and accrued expenses 1,348,156 1,254,757
Income taxes payable 103,524 -
----------- ------------
Total current liabilities 1,501,456 1,259,604
Long-term debt 573,853 557,161
Deferred income taxes and other liabilities 129,807 141,521
----------- -----------
Total liabilities 2,205,116 1,958,286
----------- -----------
Stockholders' equity:
Common stock 16,480 16,631
Additional paid-in capital 2,022,546 2,036,341
Less: deferred stock compensation - (2,749)
Retained earnings 5,962,014 5,797,416
Accumulated other comprehensive income 18,609 17,454
----------- -----------
Total stockholders' equity 8,019,649 7,865,093
----------- -----------
Total liabilities and stockholders' equity $10,224,765 $ 9,823,379
----------------------------------------------------------------------
* Amounts as of July 27, 2003 are unaudited. Amounts as of October 27,
2002 are from the October 27, 2002 audited financial statements with
certain reclassifications to conform to the July 27, 2003
presentation.
APPLIED MATERIALS, INC.
SUPPLEMENTAL CONSOLIDATED CONDENSED
STATEMENTS OF OPERATIONS - ONGOING BASIS
(UNAUDITED)
Three Months Ended
----------------------------------------------------------------------
April 27, 2003
-------------------------------------
(In thousands, except Special Ongoing
per share amounts) Reported(1) Items(2) 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).
(2) 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 associated with
realignment activities.
(b) Charges to research, development and engineering expense for
laboratory tool write-offs resulting from refocused product
efforts associated with realignment activities.
(c) Restructuring, asset impairments and other charges consist of
employee-related costs, impairment of certain assets and
facilities consolidation costs associated with realignment
activities.
(d) Pro forma tax provision for the tax effect of special items.
APPLIED MATERIALS, INC.
SUPPLEMENTAL CONSOLIDATED CONDENSED
STATEMENTS OF OPERATIONS - ONGOING BASIS
(UNAUDITED)
Three Months Ended
----------------------------------------------------------------------
July 27, 2003
------------------------------------
(In thousands, except Special Ongoing
per share amounts) Reported(1) Items(3) Results
----------------------------------------------------------------------
Net sales $1,094,907 $ - $1,094,907
Cost of products sold 747,979 (93,404)(e) 654,575
---------- ---------- ----------
Gross margin 346,928 93,404 440,332
Operating expenses:
Research, development and
engineering 217,025 (3,916)(f) 213,109
Marketing and selling 78,121 - 78,121
General and administrative 72,307 - 72,307
Restructuring, asset
impairments and other
charges 66,181 (66,181)(g) -
---------- ---------- -----------
Income/(loss) from operations (86,706) 163,501 76,795
Interest expense 11,626 - 11,626
Interest income 46,131 - 46,131
---------- ----------- ----------
Income/(loss) before income
taxes (52,201) 163,501 111,300
Provision/(benefit) for income
taxes (15,399) 48,233 (h) 32,834
---------- ---------- ----------
Net income/(loss) $ (36,802) $ 115,268 $ 78,466
---------- ---------- ----------
Earnings/(loss) per share:
Basic $ (0.02) $ 0.07 $ 0.05
Diluted $ (0.02) $ 0.07 $ 0.05
Weighted average number of
shares:
Basic 1,659,365 1,659,365 1,659,365
Diluted 1,659,365 1,692,207 1,692,207
----------------------------------------------------------------------
(1) Reported results of operations are presented in accordance with
U.S. Generally Accepted Accounting Principles (GAAP).
(3) Special items for the third fiscal quarter of 2003 consisted of
the following:
(e) Charges to cost of products sold for inventory write-offs as a
result of the implementation of the global spares distribution
system and refocused product efforts, which included the Etec mask
pattern products.
(f) Charges to research, development and engineering expense for
laboratory tool write-offs resulting from refocused product
efforts associated with realignment activities.
(g) Restructuring, asset impairments and other charges consist of
a reduction in the workforce, the consolidation of facilities and
impairment of certain assets associated with realignment
activities.
(h) Pro forma tax provision for the tax effect of special items.
APPLIED MATERIALS, INC.
SUPPLEMENTAL CONSOLIDATED CONDENSED
STATEMENTS OF OPERATIONS - ONGOING BASIS
(UNAUDITED)
Three Months Ended
----------------------------------------------------------------------
July 28, 2002
-----------------------------------
(In thousands, except Special Ongoing
per share amounts) Reported(1) Items(2) Results
----------------------------------------------------------------------
Net sales $ 1,459,682 $ - $1,459,682
Cost of products sold 853,539 - 853,539
----------- ---------- ----------
Gross margin 606,143 - 606,143
Operating expenses:
Research, development and
engineering 275,952 - 275,952
Marketing and selling 104,225 - 104,225
General and administrative 89,553 - 89,553
Restructuring, asset
impairments and other
charges - - -
------------ ---------- -----------
Income/(loss) from operations 136,413 - 136,413
Interest expense 13,080 - 13,080
Interest income 40,110 - 40,110
----------- ---------- ----------
Income/(loss) before income taxes 163,443 - 163,443
Provision/(benefit) for income
taxes 48,216 - 48,216
----------- ---------- ----------
Net income/(loss) $ 115,227 $ - $ 115,227
----------- ---------- ----------
Earnings/(loss) per share:
Basic $ 0.07 $ - $ 0.07
Diluted $ 0.07 $ - $ 0.07
Weighted average number of
shares:
Basic 1,647,181 1,647,181 1,647,181
Diluted 1,703,196 1,703,196 1,703,196
----------------------------------------------------------------------
(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 third fiscal quarter of 2002. Therefore,
ongoing results are the same as reported results of operations.
APPLIED MATERIALS, INC.
SUPPLEMENTAL CONSOLIDATED CONDENSED
STATEMENTS OF OPERATIONS - ONGOING BASIS
(UNAUDITED)
Three Months Ended
----------------------------------------------------------------------
July 27, 2003
-------------------------------------
(In thousands, except Special Ongoing
per share amounts) Reported(1) Items(3) Results
----------------------------------------------------------------------
Net sales $1,094,907 $ - $1,094,907
Cost of products sold 747,979 (93,404)(a) 654,575
---------- ---------- ----------
Gross margin 346,928 93,404 440,332
Operating expenses:
Research, development and
engineering 217,025 (3,916)(b) 213,109
Marketing and selling 78,121 - 78,121
General and administrative 72,307 - 72,307
Restructuring, asset
impairments and other
charges 66,181 (66,181)(c) -
---------- ---------- -----------
Income/(loss) from operations (86,706) 163,501 76,795
Interest expense 11,626 - 11,626
Interest income 46,131 - 46,131
---------- ----------- ----------
Income/(loss) before income
taxes (52,201) 163,501 111,300
Provision/(benefit) for income
taxes (15,399) 48,233 (d) 32,834
---------- ---------- ----------
Net income/(loss) $ (36,802) $ 115,268 $ 78,466
---------- ---------- ----------
Earnings/(loss) per share:
Basic $ (0.02) $ 0.07 $ 0.05
Diluted $ (0.02) $ 0.07 $ 0.05
Weighted average number of
shares:
Basic 1,659,365 1,659,365 1,659,365
Diluted 1,659,365 1,692,207 1,692,207
----------------------------------------------------------------------
(1) Reported results of operations are presented in accordance with
U.S. Generally Accepted Accounting Principles (GAAP).
(3) Special items for the third fiscal quarter of 2003 consisted of
the following:
(a) Charges to cost of products sold for inventory write-offs as a
result of the implementation of the global spares distribution
system and refocused product efforts, which included the Etec mask
pattern products.
(b) Charges to research, development and engineering expense for
laboratory tool write-offs resulting from refocused product
efforts associated with realignment activities.
(c) Restructuring, asset impairments and other charges consist of
a reduction in the workforce, the consolidation of facilities and
impairment of certain assets associated with realignment
activities.
(d) Pro forma tax provision for the tax effect of special items.
APPLIED MATERIALS, INC.
SUPPLEMENTAL CONSOLIDATED CONDENSED
STATEMENTS OF OPERATIONS - ONGOING BASIS
(UNAUDITED)
Nine Months Ended
----------------------------------------------------------------------
July 28, 2002
--------------------------------------
(In thousands, except Special Ongoing
per share amounts) Reported(1) Items(2) Results
----------------------------------------------------------------------
Net sales $ 3,616,614 $ - $3,616,614
Cost of products sold 2,162,279 - 2,162,279
----------- ---------- ----------
Gross margin 1,454,335 - 1,454,335
Operating expenses:
Research, development and
engineering 779,630 - 779,630
Marketing and selling 278,113 - 278,113
General and
administrative 236,011 - 236,011
Restructuring, asset
impairments and other
charges 85,479 (85,479)(a) -
----------- ---------- -----------
Income/(loss) from operations 75,102 85,479 160,581
Interest expense 36,168 - 36,168
Interest income 133,779 - 133,779
----------- ---------- ----------
Income/(loss) before income
taxes 172,713 85,479 258,192
Provision/(benefit) for income
taxes 50,951 25,216 (b) 76,167
----------- ---------- ----------
Net income/(loss) $ 121,762 $ 60,263 $ 182,025
----------- ---------- ----------
Earnings/(loss) per share:
Basic $ 0.07 $ 0.04 $ 0.11
Diluted $ 0.07 $ 0.04 $ 0.11
Weighted average number of
shares:
Basic 1,642,337 1,642,337 1,642,337
Diluted 1,706,894 1,706,894 1,706,894
----------------------------------------------------------------------
(1) Reported results of operations are presented in accordance with
U.S. Generally Accepted Accounting Principles (GAAP).
(2) Special items for the nine months ended July 28, 2002 consisted of
the following:
(a) Restructuring charges consisting of employee-related costs,
consolidation of facilities and other costs totaling approximately
$77 million, and in-process research and development expenses in
connection with the 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 CONDENSED
STATEMENTS OF OPERATIONS - ONGOING BASIS
(UNAUDITED)
Nine Months Ended
----------------------------------------------------------------------
July 27, 2003
------------------------------------
(In thousands, except Special Ongoing
per share amounts) Reported(1) Items(3) Results
----------------------------------------------------------------------
Net sales $3,256,293 $ - $3,256,293
Cost of products sold 2,146,209 (142,404)(c) 2,003,805
---------- ---------- ----------
Gross margin 1,110,084 142,404 1,252,488
Operating expenses:
Research, development and
engineering 692,668 (13,916)(d) 678,752
Marketing and selling 253,906 - 253,906
General and administrative 223,306 - 223,306
Restructuring, asset
impairments and other
charges 258,250 (258,250)(e) -
---------- ---------- -----------
Income/(loss) from operations (318,046) 414,570 96,524
Interest expense 35,185 - 35,185
Interest income 119,759 - 119,759
---------- ----------- ----------
Income/(loss) before income
taxes (233,472) 414,570 181,098
Provision/(benefit) for income
taxes (68,874) 122,298 (f) 53,424
---------- ---------- ----------
Net income/(loss) $ (164,598) $ 292,272 $ 127,674
---------- ---------- ----------
Earnings/(loss) per share:
Basic $ (0.10) $ 0.18 $ 0.08
Diluted $ (0.10) $ 0.17 $ 0.08
Weighted average number of
shares:
Basic 1,655,430 1,655,430 1,655,430
Diluted 1,655,430 1,685,001 1,685,001
----------------------------------------------------------------------
(1) Reported results of operations are presented in accordance with
U.S. Generally Accepted Accounting Principles (GAAP).
(3) Special items for the nine months ended July 27, 2003 consisted of
the following:
(c) Charges to cost of products sold for inventory write-offs as a
result of the implementation of the global spares distribution
system and refocused product efforts, which included the Etec mask
pattern products.
(d) Charges to research, development and engineering expense for
laboratory tool write-offs resulting from refocused product
efforts associated with realignment activities.
(e) Restructuring, asset impairments and other charges consist of
a reduction in the workforce, the consolidation of facilities and
impairment of certain assets associated with realignment
activities.
(f) Pro forma tax provision for the tax effect of special items.
CONTACT:
Applied Materials, Inc.
Paul Bowman, 408-563-1698 (investment community)
Jeffrey Lettes, 408-563-5161 (editorial/media)
SOURCE: Applied Materials, Inc.