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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
Date of Report (Date of earliest event reported): November 12, 2008
 
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   (Zip Code)
offices)    
Registrant’s telephone number, including area code: (408) 727-5555
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))
 
 

 


TABLE OF CONTENTS

Item 2.02 Results of Operations and Financial Condition
Item 2.05 Costs Associated with Exit or Disposal Activities
Item 9.01 Financial Statements and Exhibits
SIGNATURES
EXHIBIT INDEX
Exhibit 99.1


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Item 2.02 Results of Operations and Financial Condition.
On November 12, 2008, Applied Materials, Inc. (“Applied” or “the Company”) announced its financial results for its fiscal year and fourth quarter ended October 26, 2008. A copy of Applied’s press release is furnished herewith as Exhibit 99.1.
The information contained herein and in the accompanying exhibit shall not be incorporated by reference into any filing of Applied, 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 2.05 Costs Associated with Exit or Disposal Activities.
On November 12, 2008, Applied announced that in light of deteriorating economic conditions and market uncertainties, it intends to implement a restructuring program designed to streamline the organization and reduce operating costs. Applied plans to begin implementing the program in the first quarter of fiscal 2009 and to complete the program by the end of fiscal 2009. When completed, the program is expected to result in annualized cost savings of approximately $400 million. As part of the program, Applied expects to eliminate 1,800 positions, or approximately 12% of its global workforce, through a combination of attrition, voluntary separation and other workforce reduction actions. Changes to the Company’s workforce will vary by country, based on local legal requirements and consultations with employee works councils and other employee representatives, as applicable. The Company expects that all employee-related charges under the program will result in cash expenditures and that these charges will be recorded in fiscal 2009.
Due to the variability of costs associated with voluntary separation programs, Applied is unable at this time to make a good faith determination of cost estimates, or ranges of cost estimates, associated with the program as set forth in paragraphs (b), (c) and (d) of Item 2.05 of Form 8-K. In accordance with paragraph (d) of Item 2.05, Applied will timely file an amendment to this report after its determination of such estimates or ranges of estimates.
Safe Harbor Statement
This report contains forward-looking statements, including those regarding the expected nature, timing, reductions, objectives, annualized cost savings, and charges of the restructuring program. All forward-looking statements are based on management’s estimates, projections and assumptions as of the date hereof 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: uncertain global and economic market conditions; Applied’s ability to implement the program as planned; retention of key employees; changes in Applied’s business requirements; the possibility that benefits of the program may not materialize as expected; and other risks described in Applied’s SEC filings and the press release furnished herewith. Applied undertakes no obligation to revise or update any forward-looking statements.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
     
Exhibit No.   Description
99.1
  Press Release issued by Applied Materials, Inc. dated November 12, 2008.

 


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SIGNATURES
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)
 
 
Date: November 12, 2008  By:   /s/ Joseph J. Sweeney    
    Joseph J. Sweeney    
    Senior Vice President, General Counsel
and Corporate Secretary
 
 

 


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EXHIBIT INDEX
     
Exhibit No.   Description
99.1
  Press Release issued by Applied Materials, Inc. dated November 12, 2008.

 

exv99w1
EXHIBIT 99.1
Release: Immediate
         
Contact:
  Robert Friess (investment community)   David Miller (editorial/media)
 
  (408) 986-7977   (408) 563-9582
APPLIED MATERIALS ANNOUNCES
FISCAL 2008 FULL YEAR AND FOURTH QUARTER RESULTS
     SANTA CLARA, Calif., November 12, 2008 — Applied Materials, Inc. reported results for its fiscal year and fourth quarter ended October 26, 2008.
     Fourth quarter net sales were $2.04 billion, down from $2.37 billion for the fourth quarter of fiscal 2007, and up from $1.85 billion for the third quarter of fiscal 2008. Gross margin was 39.1 percent, down from 45.5 percent for the fourth quarter of fiscal 2007, and down from 40.2 percent for the third quarter of fiscal 2008. GAAP net income was $231 million, or $0.17 per diluted share, down from net income of $422 million, or $0.30 per diluted share, for the fourth quarter of fiscal 2007, and up from $165 million, or $0.12 per diluted share, for the third quarter of fiscal 2008.
     New orders of $2.21 billion for the fourth quarter of fiscal 2008 were comparable to the fourth quarter of fiscal 2007, and increased from $2.03 billion for the third quarter of fiscal 2008. Regional distribution of new orders for the fourth quarter of fiscal 2008 was: Taiwan 26 percent, North America 22 percent, Southeast Asia and China 22 percent, Europe 11 percent, Korea 10 percent, and Japan 9 percent. Backlog at the end of the fourth quarter of fiscal 2008 was $4.85 billion, up from $4.74 billion at the end of the third quarter of fiscal 2008 and up from $3.65 billion at the end of fiscal 2007.
     Fiscal 2008 net sales were $8.13 billion, down from $9.73 billion for fiscal 2007. Gross margin for fiscal 2008 was 42.4 percent, down from 46.1 percent for fiscal 2007. GAAP net income for fiscal 2008 was $961 million, or $0.70 per diluted share, down from net income of $1.71 billion, or $1.20 per diluted share, for fiscal 2007. New orders of $9.16 billion for fiscal 2008 decreased from $9.68 billion for fiscal 2007.
     “Fiscal 2008 was a pivotal year for Applied as we made significant progress in advancing our Silicon and Display businesses and expanding in the solar market. Our fourth quarter results demonstrate effective performance in a very challenging environment,” said Mike Splinter, president and CEO. “We passed a major milestone as the first SunFabtm Thin Film Solar Line began volume production demonstrating Applied’s commitment to deliver exciting new technology to the solar industry.
     “As Applied moves into fiscal 2009, we will implement further cost-reduction actions due to declining market conditions, and we will invest in strategic priorities,” concluded Splinter.
     Applied will implement a restructuring program beginning in the first quarter of fiscal 2009, designed to streamline the organization and reduce operating costs. When completed the program is expected to drive annualized cost savings of approximately $400 million. As part of this program, the company plans to reduce its global workforce by approximately 12% or 1,800 positions by the end of fiscal 2009 through a combination of attrition, voluntary separation and other workforce reduction programs consistent with local legal requirements and in consultation with employee representatives, where applicable.

 


 

     Non-GAAP net income for fiscal 2008 was $1.20 billion, or $0.87 per diluted share, compared to non-GAAP net income of $1.90 billion, or $1.33 per diluted share, for fiscal 2007. Non-GAAP net income for the fourth quarter of fiscal 2008 was $264 million, or $0.20 per diluted share, compared to non-GAAP net income of $472 million, or $0.34 per diluted share, for the fourth quarter of fiscal 2007, and $228 million or $0.17 per diluted share for the third quarter of fiscal 2008. Non-GAAP adjustments are explained below and detailed in the accompanying Reconciliation of GAAP to Non-GAAP Results.
     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. Results by reportable segment for fiscal 2008 and fiscal 2007 were:
                                                 
    Twelve Months Ended   Twelve Months Ended
    October 26, 2008   October 28, 2007
                    Operating                   Operating
    New   Net   Income   New   Net   Income
(In millions)   Orders   Sales   (Loss)   Orders   Sales   (Loss)
Silicon
  $ 4,092     $ 4,005     $ 1,242     $ 6,651     $ 6,512     $ 2,379  
 
Applied Global Services
    2,249       2,329       575       2,508       2,353       630  
 
Display
    1,486       976       310       273       705       159  
 
Energy and Environmental Solutions
    1,329       819       (183 )     245       165       (89 )
     Results by reportable segment for the fourth quarter of fiscal 2008, the third quarter of fiscal 2008, and the fourth quarter of fiscal 2007 were:
                                                                         
    Three Months Ended   Three Months Ended   Three Months Ended
    October 26, 2008   July 27, 2008   October 28, 2007
                                            Operating                   Operating
    New   Net   Operating   New   Net   Income   New   Net   Income
(In millions)   Orders   Sales   Income   Orders   Sales   (Loss)   Orders   Sales   (Loss)
Silicon
  $ 1,162     $ 744     $ 177     $ 793     $ 756     $ 172     $ 1,343     $ 1,511     $ 550  
 
Applied Global Services
    496       528       123       541       607       145       645       605       159  
 
Display
    65       334       113       374       311       103       120       189       47  
 
Energy and Environmental Solutions
    490       438       21       322       174       (85 )     98       62       (30 )

 


 

     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 inventory fair value adjustments on products sold and amortization of purchased intangible assets, (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 full year and fourth quarter results, along with its outlook for the first quarter of fiscal 2009, on the earnings call today beginning at 1:30 p.m. Pacific 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, technologies, growth, cost-reductions actions and anticipated savings, as well as industry and global economic outlooks. 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 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; adverse conditions in the global banking system and financial markets; 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 performance of acquired businesses and joint ventures; changes in Applied’s business requirements; 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) implement initiatives that enhance global operations and efficiencies, (v) obtain and protect intellectual property rights in key technologies, (vi) implement its restructuring program as planned and realize expected benefits, and (vii) 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     Twelve Months Ended  
    October 26,     October 28,     October 26,     October 28,  
(In thousands, except per share amounts)   2008     2007     2008     2007  
Net sales
  $ 2,043,677     $ 2,367,044     $ 8,129,240     $ 9,734,856  
Cost of products sold
    1,244,972       1,290,139       4,686,412       5,242,413  
 
                       
Gross margin
    798,705       1,076,905       3,442,828       4,492,443  
 
                               
Operating expenses:
                               
Research, development and engineering
    275,222       270,878       1,104,122       1,142,073  
Marketing and selling
    100,131       116,270       459,402       451,258  
General and administrative
    138,410       125,624       505,762       501,185  
Restructuring and asset impairments
    (9,686 )     3,039       39,948       26,421  
 
                       
Income from operations
    294,628       561,094       1,333,594       2,371,506  
 
                               
Pre-tax loss of equity method investment
    9,867       12,162       35,527       29,371  
Gain on sale of facility
    21,837             21,837        
Interest expense
    4,846       9,243       20,506       38,631  
Interest income
    20,937       39,556       109,320       136,149  
 
                       
Income before income taxes
    322,689       579,245       1,408,718       2,439,653  
 
                               
Provision for income taxes
    91,594       157,484       447,972       729,457  
 
                       
Net income
  $ 231,095     $ 421,761     $ 960,746     $ 1,710,196  
 
                       
 
                               
Earnings per share:
                               
Basic
  $ 0.17     $ 0.31     $ 0.71     $ 1.22  
Diluted
  $ 0.17     $ 0.30     $ 0.70     $ 1.20  
 
                               
Weighted average number of shares:
                               
Basic
    1,338,227       1,381,871       1,354,176       1,406,685  
Diluted
    1,350,092       1,403,687       1,374,507       1,427,002  

 


 

APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
                 
        October 26,     October 28,  
(In thousands)     2008     2007  
                 
ASSETS
               
 
               
Current assets:
               
Cash and cash equivalents
  $ 1,411,624     $ 1,202,722  
Short-term investments
    689,044       1,166,857  
Accounts receivable, net
    1,691,027       2,049,427  
Inventories
    1,987,017       1,313,237  
Deferred income taxes
    388,807       426,471  
Income taxes receivable
    125,605        
Other current assets
    371,033       448,879  
 
           
Total current assets
    6,664,157       6,607,593  
 
Long-term investments
    1,367,056       1,362,425  
Property, plant and equipment
    2,831,952       2,782,204  
Less: accumulated depreciation and amortization
    (1,737,752 )     (1,730,962 )
 
           
Net property, plant and equipment
    1,094,200       1,051,242  
 
               
Goodwill, net
    1,174,673       1,006,410  
Purchased technology and other intangible assets, net
    388,429       373,178  
Equity method investment
    79,533       115,060  
Deferred income taxes and other assets
    138,270       146,370  
 
           
Total assets
  $ 10,906,318     $ 10,662,278  
 
           
 
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
 
               
Current liabilities:
               
Current portion of long-term debt
  $ 1,068     $ 2,561  
Accounts payable and accrued expenses
    2,771,090       2,221,516  
Income taxes payable
    173,394       157,549  
 
           
Total current liabilities
    2,945,552       2,381,626  
 
               
Long-term debt
    201,576       202,281  
Other liabilities
    310,232       256,962  
 
           
Total liabilities
    3,457,360       2,840,869  
 
           
 
               
Stockholders’ equity:
               
Common stock
    13,308       13,857  
Additional paid-in capital
    5,095,894       4,658,832  
Retained earnings
    11,501,288       10,863,291  
Treasury stock
    (9,134,962 )     (7,725,924 )
Accumulated other comprehensive income/(loss)
    (26,570 )     11,353  
 
           
Total stockholders’ equity
    7,448,958       7,821,409  
 
           
Total liabilities and stockholders’ equity
  $ 10,906,318     $ 10,662,278  
 
           

 


 

APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                 
    Twelve Months Ended  
    October 26,     October 28,  
(In thousands)   2008     2007  
Cash flows from operating activities:
               
Net income
  $ 960,746     $ 1,710,196  
Adjustments required to reconcile net income to cash provided by operating activities:
               
Depreciation and amortization
    320,051       268,334  
Loss on fixed asset retirements
    6,826       21,401  
Restructuring and asset impairments
    49,634       26,421  
Deferred income taxes
    (58,259 )     31,642  
Excess tax benefits from equity-based compensation plans
    (7,491 )     (49,794 )
Acquired in-process research and development expense
          4,900  
Net recognized loss on investments
    4,392       5,460  
Pretax loss of equity-method investment
    35,527       29,371  
Equity-based compensation
    178,943       161,197  
Changes in operating assets and liabilities, net of amounts acquired:
               
Accounts receivable, net
    424,290       34,259  
Inventories
    (638,256 )     140,933  
Other current assets
    94,247       (164,289 )
Other assets
    (394 )     3,359  
Accounts payable and accrued expenses
    352,918       (12,473 )
Income taxes
    8,126       (23,968 )
Other liabilities
    (20,832 )     22,347  
 
           
Cash provided by operating activities
    1,710,468       2,209,296  
 
           
Cash flows from investing activities:
               
Capital expenditures
    (287,906 )     (264,784 )
Cash paid for acquisitions, net of cash acquired
    (235,324 )     (599,653 )
Proceeds from sale of facility
    42,210        
Proceeds from disposition of assets held for sale
          37,611  
Proceeds from sales and maturities of investments
    5,962,316       3,053,640  
Purchases of investments
    (5,534,475 )     (3,203,427 )
 
           
Cash used in investing activities
    (53,179 )     (976,613 )
 
           
Cash flows from financing activities:
               
Debt repayments
    (2,117 )     (202,139 )
Proceeds from common stock issuances
    393,978       898,025  
Common stock repurchases
    (1,499,984 )     (1,331,997 )
Excess tax benefits from equity-based compensation plans
    7,491       49,794  
Payment of dividends to stockholders
    (325,405 )     (305,672 )
 
           
Cash used in financing activities
    (1,426,037 )     (891,989 )
 
           
Effect of exchange rate changes on cash and cash equivalents
    (22,350 )     565  
 
           
Increase/(decrease) in cash and cash equivalents
    208,902       341,259  
Cash and cash equivalents — beginning of period
    1,202,722       861,463  
 
           
Cash and cash equivalents — end of period
  $ 1,411,624     $ 1,202,722  
 
           
Supplemental cash flow information:
               
Cash payments for income taxes
  $ 368,459     $ 845,756  
Cash payments for interest
  $ 14,580     $ 29,104  

 


 

APPLIED MATERIALS, INC.
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
                                         
    Three Months Ended       Twelve Months Ended  
 
    October 26,     July 27,     October 28,     October 26,   October 28,  
(In thousands, except per share amounts)   2008     2008     2007     2008   2007  
Non-GAAP Net Income
                                       
 
                                       
Reported net income (GAAP basis)
  $ 231,095     $ 164,768     $ 421,761     $ 960,746     $ 1,710,196  
Equity-based compensation expense
    43,778       46,121       30,889       178,943       161,196  
Certain items associated with acquisitions 1
    35,320       41,109       29,497       138,611       85,513  
Gain on sale of facility
    (21,837 )                 (21,837 )      
Restructuring and asset impairments 2,3
    (9,686 )     138       3,039       39,948       26,421  
Costs associated with ceasing development of beamline implant products 4
          156       9,391       1,436       66,063  
Resolution of audits of prior years’ income tax filings 5
                            (36,242 )
Income tax effect of non-GAAP adjustments
    (14,765 )     (24,601 )     (22,691 )     (99,834 )     (108,501 )
 
                             
 
                                       
Non-GAAP net income
  $ 263,905     $ 227,691     $ 471,886     $ 1,198,013     $ 1,904,646  
 
                             
 
                                       
Non-GAAP Net Income Per Diluted Share
                                       
 
                                       
Reported net income per diluted share (GAAP basis)
  $ 0.17     $ 0.12     $ 0.30     $ 0.70     $ 1.20  
Equity-based compensation expense
    0.02       0.02       0.02       0.09       0.08  
Certain items associated with acquisitions
    0.02       0.02       0.01       0.07       0.04  
Gain on sale of facility
    (0.01 )                 (0.01 )      
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
  $ 0.20     $ 0.17     $ 0.34     $ 0.87     $ 1.33  
 
                                       
Shares used in diluted shares calculation
    1,350,092       1,367,557       1,403,687       1,374,507       1,427,002  
 
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 twelve months ended October 26, 2008 included restructuring charges of $29 million associated with a global cost reduction plan.
 
3   Results for the fiscal quarters ended October 26, 2008, July 27, 2008 and October 28, 2007 included restructuring and asset impairment benefit of $351,000 and charges of $138,000 and $3 million, respectively, associated with ceasing development of beamline implant products. Results for the twelve months ended October 26, 2008 and October 28, 2007 included restructuring and asset impairment charges of $11 million and $30 million, respectively, associated with ceasing development of beamline implant products. Results for the twelve months ended October 28, 2007 included a net benefit of $3 million from the sale of the Hillsboro, Oregon facility.
 
4   Results for the fiscal quarters ended July 27, 2008 and October 28, 2007 included other operating charges of $156,000 and $9 million, respectively, associated with ceasing development of beamline implant products. Results for the twelve months ended October 26, 2008 and October 28, 2007 included other operating charges of $1 million and $66 million, respectively, associated with ceasing development of beamline implant products.
 
5   Results for the twelve months ended October 28, 2007 consisted of a $36 million benefit from the resolution of audits of prior years’ income tax filings and changes in tax credits.