Applied Materials Announces Results for Third Quarter of Fiscal 2008
-- Net Sales: $1.85 billion (28% decrease year over year; 14%
decrease quarter over quarter)
-- Net Income: $165 million (65% decrease year over year; 46%
decrease quarter over quarter)
-- EPS: $0.12 ($0.22 decrease year over year; $0.10 decrease
quarter over quarter)
-- New Orders: $2.03 billion (11% decrease year over year; 16%
decrease quarter over quarter)
SANTA CLARA, Calif.--(BUSINESS WIRE)--Aug. 12, 2008--Applied Materials, Inc. reported results for its third fiscal quarter ended July 27, 2008. Net sales were $1.85 billion, down 28 percent from $2.56 billion for the third quarter of fiscal 2007, and down 14 percent from $2.15 billion for the second quarter of fiscal 2008. Gross margin for the third quarter of fiscal 2008 was 40.2 percent, down from 47.5 percent for the third quarter of fiscal 2007, and down from 45.0 percent for the second quarter of fiscal 2008. Net income for the third quarter of fiscal 2008 was $165 million, or $0.12 per share, down from net income of $474 million, or $0.34 per share, for the third quarter of fiscal 2007, and down from net income of $303 million, or $0.22 per share, for the second quarter of fiscal 2008.
New orders of $2.03 billion for the third quarter of fiscal 2008 decreased 11 percent from $2.28 billion for the third quarter of fiscal 2007, and decreased 16 percent from $2.41 billion for the second quarter of fiscal 2008. Regional distribution of new orders for the third quarter of fiscal 2008 was: Japan 21 percent, North America 19 percent, Korea 17 percent, Southeast Asia and China 17 percent, Europe 16 percent, and Taiwan 10 percent. Backlog at the end of the third quarter of fiscal 2008 was $4.74 billion, compared to $4.59 billion at the end of the second quarter of fiscal 2008.
"Applied Materials delivered financial and operational performance that was in line with our quarter forecast during a difficult semiconductor industry environment," said Mike Splinter, president and CEO. "While our silicon business was down, revenues increased in our display, service and solar businesses. We made significant progress in our solar division during the quarter, substantially increasing the number of crystalline silicon systems shipped and enabling start-up production on the first four SunFab(TM) Thin Film lines at customer sites. We are focused on operational execution, and we are taking advantage of opportunities to expand our leadership with next-generation innovations in silicon, display and solar."
Non-GAAP net income for the third quarter of fiscal 2008 was $228 million, or $0.17 per share, compared to non-GAAP net income of $518 million, or $0.37 per share, for the third quarter of fiscal 2007, and $362 million or $0.26 per share for the second quarter of fiscal 2008. Non-GAAP adjustments are explained below and detailed in the accompanying Reconciliation of GAAP to Non-GAAP Results.
Results by reportable segment for the third quarter of fiscal 2008, the second quarter of fiscal 2008, and the third quarter of fiscal 2007 were:
Three Months Ended Three Months Ended
July 27, 2008 April 27, 2008
Operating Operating
New Net Income New Net Income
Orders Sales (Loss) Orders Sales (Loss)
------ ----- --------- ------ ------ ---------
(In millions)
Silicon $793 $756 $172 $1,061 $1,268 $448
Applied Global
Services 541 607 145 602 599 159
Display 374 311 103 493 198 59
Energy and
Environmental
Solutions 322 174 (85) 257 85 (71)
Three Months Ended
July 29, 2007
Operating
New Net Income
Orders Sales (Loss)
------ ------ ---------
(In millions)
Silicon $1,614 $1,772 $702
Applied Global
Services 559 599 155
Display 58 161 34
Energy and
Environmental
Solutions 53 29 (29)
Effective in the first quarter of fiscal 2008, Applied changed its management reporting system for services, with all service results reported in the Applied Global Services segment. Fiscal 2007 segment information has been reclassified to conform to the fiscal 2008 presentation.
Non-GAAP net income and non-GAAP EPS, detailed in the accompanying Reconciliation of GAAP to Non-GAAP Results, exclude charges related to (i) equity-based compensation, (ii) certain items associated with acquisitions, including amortization of intangibles and inventory fair value adjustments on products sold, (iii) restructuring and asset impairments, (iv) certain costs associated with ceasing development of beamline implant products, and/or (v) the resolution of income tax audits and changes in tax credits. Management uses non-GAAP net income and non-GAAP EPS 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 or EPS prepared in accordance with GAAP.
Applied Materials will discuss its fiscal 2008 third quarter results, along with its outlook for the fourth quarter of fiscal 2008, on the earnings call today beginning at 1:30 p.m. Pacific Daylight 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, operational execution, products, strategic position and opportunities, and the industry outlook. Forward-looking statements may contain words such as "expect," "believe," "may," "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 global economic and market conditions, business and consumer spending, demand for electronic products and semiconductors, governmental renewable energy policies and incentives, and geopolitical uncertainties; customers' utilization rates and capacity requirements, including capacity utilizing the latest technology; customers' ability to acquire sufficient capital, obtain regulatory approvals and/or fulfill infrastructure requirements; variability of operating results among the company's segments caused by differing conditions in the served markets; the successful implementation and effectiveness of initiatives to enhance global operations and efficiencies; the successful performance of acquired businesses and joint ventures; Applied's ability to (i) develop, deliver and support a broad range of products, expand its markets and develop new markets, (ii) maintain effective cost controls and timely align its cost structure with business conditions, (iii) plan and manage its resources and production capability, including its supply chain, (iv) obtain and protect intellectual property rights in key technologies, and (v) 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(TM) 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 Nine Months Ended
----------------------------------------------------------------------
July 27, July 29, July 27, July 29,
(In thousands, except per 2008 2007 2008 2007
share amounts)
----------------------------------------------------------------------
Net sales $1,848,168 $2,560,984 $6,085,563 $7,367,812
Cost of products sold 1,105,854 1,344,594 3,441,440 3,952,274
---------- ---------- ---------- ----------
Gross margin 742,314 1,216,390 2,644,123 3,415,538
Operating expenses:
Research, development
and engineering 268,559 292,584 828,900 871,195
Marketing and selling 115,944 115,969 359,271 334,988
General and
administrative 129,341 134,359 367,352 375,561
Restructuring and
asset impairments 138 1,616 49,634 23,382
---------- ---------- ---------- ----------
Income from operations 228,332 671,862 1,038,966 1,810,412
Pre-tax loss of equity
method investment 6,308 7,348 25,660 17,209
Interest expense 4,859 10,075 15,660 29,388
Interest income 25,399 32,468 88,383 96,593
---------- ---------- ---------- ----------
Income before income
taxes 242,564 686,907 1,086,029 1,860,408
Provision for income
taxes 77,796 213,392 356,378 571,973
---------- ---------- ---------- ----------
Net income $ 164,768 $ 473,515 $ 729,651 $1,288,435
========== ========== ========== ==========
Earnings per share:
Basic $ 0.12 $ 0.34 $ 0.54 $ 0.92
Diluted $ 0.12 $ 0.34 $ 0.53 $ 0.91
Weighted average number
of shares:
Basic 1,350,526 1,385,519 1,359,492 1,397,890
Diluted 1,367,557 1,407,264 1,375,656 1,415,720
APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
----------------------------------------------------------------------
July 27, October 28,
(In thousands) 2008 2007
----------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,140,532 $ 1,202,722
Short-term investments 1,157,143 1,166,857
Accounts receivable, net 1,581,213 2,049,427
Inventories 1,853,316 1,313,237
Deferred income taxes 438,167 426,471
Income taxes receivable 72,717 -
Other current assets 380,787 448,879
------------ ------------
Total current assets 6,623,875 6,607,593
Long-term investments 1,426,631 1,362,425
Property, plant and equipment 2,804,742 2,782,204
Less: accumulated depreciation and
amortization (1,714,280) (1,730,962)
------------ ------------
Net property, plant and equipment 1,090,462 1,051,242
Goodwill, net 1,175,777 1,006,410
Purchased technology and other intangible
assets, net 419,756 373,178
Equity method investment 89,400 115,060
Deferred income taxes and other assets 172,540 146,370
------------ ------------
Total assets $ 10,998,441 $10,662,278
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 981 $ 2,561
Accounts payable and accrued expenses 2,790,984 2,221,516
Income taxes payable 119,411 157,549
------------ ------------
Total current liabilities 2,911,376 2,381,626
Long-term debt 201,926 202,281
Other liabilities 344,344 256,962
------------ ------------
Total liabilities 3,457,646 2,840,869
------------ ------------
Stockholders' equity:
Common stock 13,417 13,857
Additional paid-in capital 5,060,833 4,658,832
Retained earnings 11,350,019 10,863,291
Treasury stock (8,875,052) (7,725,924)
Accumulated other comprehensive
income/(loss) (8,422) 11,353
------------ ------------
Total stockholders' equity 7,540,795 7,821,409
------------ ------------
Total liabilities and stockholders' equity $ 10,998,441 $10,662,278
============ ============
----------------------------------------------------------------------
APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
----------------------------------------------------------------------
Nine Months Ended
July 27, July 29,
(In thousands) 2008 2007
----------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 729,651 $ 1,288,435
Adjustments required to reconcile net income
to cash provided by operating activities:
Depreciation and amortization 240,039 187,310
Loss on fixed asset retirements 27,880 15,961
Restructuring and asset impairments 49,634 23,382
Deferred income taxes (60,886) (6,234)
Excess tax benefits from equity-based
compensation plans (5,406) (16,990)
Acquired in-process research and development
expense - 4,900
Net recognized (gain) loss on investments (1,244) 5,097
Pretax loss of equity-method investment 25,660 17,209
Equity-based compensation 135,165 130,308
Changes in operating assets and liabilities,
net of amounts acquired:
Accounts receivable, net 534,104 (189,308)
Inventories (504,555) 46,331
Other current assets 77,593 (36,810)
Other assets (4,383) 3,019
Accounts payable and accrued expenses 402,924 129,120
Income taxes (66,603) (78,212)
Other liabilities 4,578 8,380
------------ ------------
Cash provided by operating activities 1,584,151 1,531,898
------------ ------------
Cash flows from investing activities:
Capital expenditures (209,512) (204,236)
Cash paid for acquisitions, net of cash
acquired (235,324) (136,828)
Proceeds from disposition of assets held for
sale - 23,358
Proceeds from sales and maturities of
investments 2,162,900 2,114,602
Purchases of investments (2,257,097) (2,376,791)
------------ ------------
Cash used in investing activities (539,033) (579,895)
------------ ------------
Cash flows from financing activities:
Short-term debt repayments (1,854) (250)
Proceeds from common stock issuances 334,575 436,443
Common stock repurchases (1,199,984) (931,996)
Excess tax benefits from equity-based
compensation plans 5,406 16,990
Payment of dividends to stockholders (245,559) (222,537)
------------ ------------
Cash used in financing activities (1,107,416) (701,350)
------------ ------------
Effect of exchange rate changes on cash and
cash equivalents 108 559
------------ ------------
Increase/(decrease) in cash and cash
equivalents (62,190) 251,212
Cash and cash equivalents -- beginning of
period 1,202,722 861,463
------------ ------------
Cash and cash equivalents -- end of period $ 1,140,532 $ 1,112,675
============ ============
Supplemental cash flow information:
Cash payments for income taxes $ 349,914 $ 653,351
Cash payments for interest $ 7,243 $ 14,081
----------------------------------------------------------------------
APPLIED MATERIALS, INC.
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
----------------------------------------------------------------------
Three Months Ended
---------------------------------------------------------------------
(In thousands, except per share July 27, April 27, July 29,
amounts) 2008 2008 2007
---------------------------------------------------------------------
Non-GAAP Net Income
Reported net income (GAAP basis) $ 164,768 $ 302,507 $ 473,515
Equity-based compensation
expensex 46,121 50,322 47,485
Certain items associated with
acquisitions (1) 41,109 31,144 18,911
Restructuring and asset
impairments (2,3,4) 138 510 1,616
Costs associated with ceasing
development of
beamline implant products
(5) 156 259 6,373
Resolution of audits of prior
years' income
tax filings(6) - - (6,379)
Income tax effect of non-GAAP
adjustments (24,601) (23,142) (23,137)
----------- ----------- -----------
Non-GAAP net income $ 227,691 $ 361,600 $ 518,384
----------- ----------- -----------
Non-GAAP Net Income Per Diluted
Share
Reported net income per diluted
share
(GAAP basis) $ 0.12 $ 0.22 $ 0.34
Equity-based compensation expense 0.02 0.03 0.02
Certain items associated with
acquisitions 0.02 0.02 0.01
Restructuring and asset
impairments - - -
Costs associated with ceasing
development
of beamline implant products - - -
Resolution of audits of prior
years' income
tax filings - - -
Non-GAAP net income - per diluted
share $ 0.17 $ 0.26 $ 0.37
Shares used in diluted shares
calculation 1,367,557 1,373,314 1,407,264
----------------------------------------------------------------------
Nine Months Ended
----------------------------------------------------------------------
July 27, July 29,
(In thousands, except per share amounts) 2008 2007
----------------------------------------------------------------------
Non-GAAP Net Income
Reported net income (GAAP basis) $ 729,651 $1,288,435
Equity-based compensation expensex 135,165 130,307
Certain items associated with acquisitions
(1) 103,291 56,016
Restructuring and asset impairments (2,3,4) 49,634 23,382
Costs associated with ceasing development of
beamline implant products (5) 1,436 56,672
Resolution of audits of prior years' income
tax filings(6) - (36,242)
Income tax effect of non-GAAP adjustments (85,069) (85,810)
----------- -----------
Non-GAAP net income $ 934,108 $1,432,760
----------- -----------
Non-GAAP Net Income Per Diluted Share
Reported net income per diluted share
(GAAP basis) $ 0.53 $ 0.91
Equity-based compensation expense 0.07 0.07
Certain items associated with acquisitions 0.05 0.03
Restructuring and asset impairments 0.02 0.01
Costs associated with ceasing development
of beamline implant products - 0.03
Resolution of audits of prior years' income
tax filings - (0.03)
Non-GAAP net income - per diluted share $ 0.68 $ 1.01
Shares used in diluted shares calculation 1,375,656 1,415,720
---------------------------------------------------------------------
(1) Incremental charges attributable to acquisitions consisting of
inventory fair value adjustments on products sold and amortization of
purchased intangible assets. Results for the nine months ended July
29, 2007 included an in-process research and development charge of $5
million associated with the acquisition of the software division of
Brooks Automation, Inc. in the second fiscal quarter of 2007.
(2) Results for the nine months ended July 27, 2008 included
restructuring charges of $38 million associated with a global cost
reduction plan.
(3) Results for the fiscal quarters ended July 27, 2008, April 27,
2008 and July 29, 2007 included restructuring and asset impairment
charges of $138,000, $510,000 and $2 million, respectively,
associated with ceasing development of beamline implant products.
Results for the nine months ended July 27, 2008 and July 29, 2007
included restructuring and asset impairment charges of $12 million
and $27 million, respectively, associated with ceasing development of
beamline implant products.
(4) Results for the nine months ended July 29, 2007 included a net
benefit of $3 million from the sale of the Hillsboro, Oregon
facility.
(5) Results for the fiscal quarters ended July 27, 2008, April 27,
2008 and July 29, 2007 included other operating charges of $156,000,
$259,000, and $6 million, respectively, associated with ceasing
development of beamline implant products. Results for the nine months
ended July 27, 2008 and July 29, 2007 included other operating
charges of $1 million and $57 million, respectively, associated with
ceasing development of beamline implant products.
(6) Results for the nine months ended July 29, 2007 consisted of a $30
million benefit from the resolution of audits of prior years' income
tax filings and a $6 million benefit related to the retroactive
reinstatement to January 1, 2006 of the research and development tax
credit.
CONTACT: Applied Materials, Inc. Robert Friess, 408-986-7977 (investment community)
David Miller, 408-563-9582 (editorial/media)
SOURCE: Applied Materials, Inc.