UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

 

Applied Materials, Inc.

(Exact name of registrant as specified in its charter)

Delaware		000-06920		94-1655526
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)
3050 Bowers Avenue
P.O. Box 58039
Santa Clara, CA				95052-8039
(Address of principal executive offices)				(Zip Code)

N/A

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

Item 2.02 Results of Operations and Financial Condition.

On August 15, 2006, Applied Materials, Inc. (“Applied Materials”) announced its financial results for its third fiscal quarter ended July 30, 2006. A copy of Applied Materials’ press release is attached hereto as Exhibit 99.1.

The information contained herein and in the accompanying exhibit shall not be incorporated by reference into any filing of Applied Materials, whether made before or after the date hereof, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference in such filing. The information in this report, including the exhibit hereto, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.		Description
99.1		Press Release issued by Applied Materials, Inc. dated August 15, 2006.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		Applied Materials, Inc.
		(Registrant)
Dated: August 15, 2006		By:		/s/ Joseph J. Sweeney
				Joseph J. Sweeney
				Senior Vice President, General Counsel
				and Corporate Secretary

EXHIBIT INDEX

Exhibit No.		Description
99.1		Press Release issued by Applied Materials, Inc. dated August 15, 2006.

Exhibit 99.1

Release:      Immediate

Contact:		Randy Bane (investment community)		David Miller (editorial/media)
		(408) 986-7916		(408)563-9582

APPLIED MATERIALS ANNOUNCES RESULTS
FOR THIRD FISCAL QUARTER 2006

•		Net Sales: $2.54 billion (13% increase quarter over quarter; 56% increase year over year)
•		Net Income: $512 million (24% increase quarter over quarter; 39% increase year over year), including charges for equity-based compensation
•		EPS: $0.33 ($0.07 increase quarter over quarter; $0.10 increase year over year), including charges for equity-based compensation
•		New Orders: $2.67 billion (7% increase quarter over quarter; 82% increase year over year)

          SANTA CLARA, Calif., August 15, 2006 — Applied Materials, Inc. reported results for its third fiscal quarter ended July 30, 2006. Net sales were $2.54 billion, up 13 percent from $2.25 billion for the second fiscal quarter of 2006, and up 56 percent from $1.63 billion for the third fiscal quarter of 2005. Gross margin for the third fiscal quarter of 2006 was 48.1 percent, up from 46.5 percent for the second fiscal quarter of 2006, and up from 43.9 percent for the third fiscal quarter of 2005. Net income for the third fiscal quarter of 2006 was $512 million, or $0.33 per share, up from net income of $413 million, or $0.26 per share, for the second fiscal quarter of 2006, and up from net income of $370 million, or $0.23 per share, for the third fiscal quarter of 2005.

          Non-GAAP net income was $539 million, or $0.35 per share, for the third fiscal quarter of 2006. Non-GAAP adjustments consisted principally of $54 million of equity-based compensation charges before tax, or $0.03 per diluted share after tax, and an in-process research and development charge of $14 million, or $0.01 per diluted share, associated with the acquisition of Applied Films Corporation. These items were offset by a $34 million tax benefit, or $0.02 per diluted share, primarily from the resolution of audits of prior years’ income tax filings.

          New orders of $2.67 billion for the third fiscal quarter of 2006 increased 7 percent from $2.49 billion for the second fiscal quarter of 2006, and increased 82 percent from $1.47 billion for the third fiscal quarter of 2005. Regional distribution of new orders for the third fiscal quarter of 2006 was: Taiwan 21 percent, Japan 20 percent, North America 18 percent, Korea 16 percent, Southeast Asia and China 16 percent, and Europe 9 percent. Backlog at the end of the third fiscal quarter of 2006 was $3.32 billion, compared to $2.93 billion at the end of the second fiscal quarter of 2006.

          “This quarter’s strong results demonstrated Applied’s market leadership with continued growth in orders, revenue and profitability,” said Mike Splinter, president and CEO of Applied Materials. “Broad-based demand for Applied Materials’ nanomanufacturing technology solutions and improved market position in key product areas increased revenues. Improved profitability was driven by higher utilization of our factory, lower cycle times and other margin improvement programs.

          “We continued to execute our long-term growth strategy by entering new high growth areas through the acquisition of Applied Films and the formation of Sokudo, a joint venture with Dainippon Screen. These investments, together with our innovative technology solutions for transistors, interconnects, lithography-enabling films and fab operations, uniquely position the company for new levels of performance,” Splinter concluded.

          During the third fiscal quarter of 2006, the company returned value to stockholders by repurchasing approximately 31 million shares of common stock at an average price of $16.30 per share for an aggregate purchase price of $500 million, and paying $78 million in dividends.

          Applied Materials will discuss its third fiscal quarter 2006 results, along with its outlook for the fourth fiscal quarter of 2006, on a conference call today beginning at 1:30 p.m. Pacific Daylight Time. A webcast of the conference call will be available on Applied Materials’ web site.

          This press release includes financial measures that are not in accordance with Generally Accepted Accounting Principles (GAAP), consisting of non-GAAP net income and non-GAAP earnings per share (EPS). 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. Applied believes that these measures are useful to investors because they 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. These non-GAAP measures exclude charges related to (i) equity-based compensation, (ii) in-process research and development charges associated with the Applied Films acquisition, (iii) resolution of income tax audits, and (iv) asset impairment and restructuring activities. These financial measures are not in accordance with GAAP and may be different from non-GAAP methods of accounting and reporting used by other companies. The presentation of this additional information should not be considered a substitute for net income or EPS prepared in accordance with GAAP. Reconciliations of reported net income and reported EPS to non-GAAP net income and non-GAAP EPS, respectively, are included at the end of this press release.

          This press release contains forward-looking statements, including statements regarding the company’s performance, strategic position, market share gains, operational efficiencies, growth strategy and opportunities, strategic investments, technology leadership, delivery of stockholder value and cash deployment strategies. Forward-looking statements may contain words such as “expect,” “anticipate,” “believe,” “may,” “should,” “will,” “estimate,” “forecast,” “continue” 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. Risks and uncertainties include, but are not limited to: the sustainability of demand in the nanomanufacturing technology industry and broadening of demand for emerging applications such as solar, which are subject to many factors, including global economic conditions, business spending, consumer confidence, demand for electronic products and integrated circuits, and geopolitical uncertainties; customers’ capacity requirements, including capacity utilizing the latest technology; the timing, rate, amount and sustainability of capital spending for new nanomanufacturing technology; the company’s ability to successfully develop, deliver and support a broad range of products and to expand its markets and develop new markets; the successful integration and performance of acquired businesses; the effectiveness of joint ventures; retention of key employees; the company’s ability to maintain effective cost controls and to timely align its cost structure with business

conditions; the company’s ability to effectively manage its resources and production capability, including its supply chain; and other risks described in Applied Materials’ Securities and Exchange Commission 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 for the electronics industry with a broad portfolio of innovative equipment, service and software products. At Applied Materials, we apply nanomanufacturing technology to improve the way people live. Learn more at www.appliedmaterials.com.

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APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

		Three Months Ended								Nine Months Ended
		July 31,				July 30,				July 31,				July 30,
(In thousands, except per share amounts)		2005				2006				2005				2006
Net sales		$	1,631,938			$	2,543,443			$	5,273,703			$	6,648,721
Cost of products sold			914,849				1,320,089				2,947,959				3,543,043
Gross margin			717,089				1,223,354				2,325,744				3,105,678
Operating expenses:
Research, development and engineering			236,448				304,326				703,799				853,086
Marketing and selling			98,366				123,810				268,644				322,289
General and administrative			79,578				117,083				256,876				333,889
Restructuring and asset impairments			—				(2,646	)			—				210,623
Income from operations			302,697				680,781				1,096,425				1,385,791
Interest expense			9,338				8,848				28,425				26,788
Interest income			45,948				50,578				123,055				147,899
Income before income taxes			339,307				722,511				1,191,055				1,506,902
Provision for/(benefit from) income taxes			(30,284	)			210,471				227,869				439,268
Net income		$	369,591			$	512,040			$	963,186			$	1,067,634
Earnings per share:
Basic		$	0.23			$	0.33			$	0.58			$	0.68
Diluted		$	0.23			$	0.33			$	0.58			$	0.67
Weighted average number of shares:
Basic			1,630,895				1,550,744				1,654,740				1,571,534
Diluted			1,641,818				1,562,615				1,666,720				1,586,878

APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS

		October 30,				July 30,
(In thousands)		2005*				2006
ASSETS
Current assets:
Cash and cash equivalents		$	990,342			$	1,308,457
Short-term investments			2,342,952				1,524,319
Accounts receivable, net			1,615,504				2,294,318
Inventories			1,034,093				1,341,918
Deferred income taxes			581,183				610,757
Assets held for sale			—				43,662
Other current assets			271,003				284,248
Total current assets			6,835,077				7,407,679
Long-term investments			2,651,927				2,324,505
Property, plant and equipment			3,011,110				2,741,702
Less: accumulated depreciation and amortization			(1,736,086	)			(1,711,035	)
Net property, plant and equipment			1,275,024				1,030,667
Goodwill, net			338,982				548,848
Purchased technology and other intangible assets, net			81,093				210,790
Investment in joint venture			—				147,280
Deferred income taxes and other assets			87,054				104,088
Total assets		$	11,269,157			$	11,773,857
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt		$	7,574			$	2,550
Accounts payable and accrued expenses			1,618,042				2,189,539
Income taxes payable			139,798				239,718
Total current liabilities			1,765,414				2,431,807
Long-term debt			407,380				406,970
Other liabilities			167,814				269,136
Total liabilities			2,340,608				3,107,913
Stockholders’ equity:
Common stock			16,067				15,339
Additional paid-in capital			721,937				—
Retained earnings			8,227,793				8,692,135
Accumulated other comprehensive loss			(37,248	)			(41,530	)
Total stockholders’ equity			8,928,549				8,665,944
Total liabilities and stockholders’ equity		$	11,269,157			$	11,773,857

APPLIED MATERIALS, INC.
RECONCILIATION OF GAAP TO NON-GAAP RESULTS

		Three Months Ended								Nine Months Ended
		July 31,				July 30,				July 31,				July 30,
(In thousands, except per share amounts)		2005				2006				2005				2006
Non-GAAP Net Income
Reported net income (GAAP basis)		$	369,591			$	512,040			$	963,186			$	1,067,634
Equity-based compensation expense 1			—				53,684				—				160,716
Restructuring and asset impairments 2			—				(2,646	)			—				210,623
In-process research and development 3			—				14,000				—				14,000
Resolution of audits of prior years’ income tax filings			(131,761	)			(33,915	)			(131,761	)			(33,915	)
Income tax effect of non-GAAP adjustments			—				(3,861	)			—				(114,348	)
Non-GAAP net income		$	237,830			$	539,302			$	831,425			$	1,304,710
Non-GAAP Net Income Per Diluted Share
Reported net income per diluted share (GAAP basis)		$	0.23			$	0.33			$	0.58			$	0.67
Equity-based compensation expense			—				0.03				—				0.08
Restructuring and asset impairments			—				—				—				0.08
In-process research and development			—				0.01				—				0.01
Resolution of audits of prior years’ income tax filings			(0.09	)			(0.02	)			(0.08	)			(0.02	)
Non-GAAP net income – per diluted share		$	0.14			$	0.35			$	0.50			$	0.82
Shares used in diluted shares calculation			1,641,818				1,562,615				1,666,720				1,586,878