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		(Zip Code)
offices)

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 May 19, 2010, Applied Materials, Inc. (“Applied Materials”) announced its financial results for its second fiscal quarter ended May 2, 2010. 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 May 19, 2010.

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.

EXHIBIT INDEX

Exhibit No.		Description
99.1		Press Release issued by Applied Materials, Inc. dated May 19, 2010.

Exhibit 99.1

				CONTACT:
				Howard Clabo (editorial/media) 408.748.5775
		NEWS RELEASE		Michael Sullivan (financial community) 408.986.7977

APPLIED MATERIALS ANNOUNCES SOLID SECOND QUARTER RESULTS

	•		Orders of $2.53 billion up 29% quarter over quarter with increases in all segments
	•		Net sales of $2.30 billion up 24% quarter over quarter led by Silicon and Display segments
	•		Earnings per share of $0.20 and non-GAAP earnings per share of $0.22

SANTA CLARA, Calif., May 19, 2010 — Applied Materials, Inc. (NASDAQ: AMAT), the global leader in Nanomanufacturing Technology™ solutions for the semiconductor, flat panel display and solar industries, today reported results for its second quarter of fiscal 2010 ended May 2, 2010. Applied generated net sales of $2.30 billion, operating profit of $386 million, and net income of $264 million or $0.20 per share. Non-GAAP net income was $292 million or $0.22 per share.

“Applied’s stronger second quarter results were led by revenue and profitability gains in our silicon and flat panel display businesses,” said Mike Splinter, chairman and chief executive officer. “Global demand for computing and consumer electronics is giving our customers the confidence to make significant capacity additions, fueling what we believe will be a multiyear growth cycle. During the quarter, we announced a 17 percent increase in our quarterly dividend and resumed our stock repurchase program.”

“Our results were at the high end of our expectations despite an inventory charge for thin film solar equipment that lowered the gross profit margin by 3.6 percentage points or approximately $0.04 per share,” said George Davis, chief financial officer.

Financial Results Summary

Q2 FY 2010

Q1 FY 2010

Q2 FY 2009

GAAP Results

Net sales

$2.30 billion

$1.85 billion

$1.02 billion

Net income (loss)

$264 million

$83 million

($255 million)

Earnings (loss) per share

$

0.20

$

0.06

($0.19

)

Non-GAAP Results

Non-GAAP net income (loss)

$292 million

$179 million

($164 million)

Non-GAAP earnings (loss) per share

$

0.22

$

0.13

($0.12

)

Fiscal year 2010 is a 53-week year with 14 weeks in the first quarter.

Applied Materials, Inc.
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The non-GAAP results exclude the impact of the following, where applicable: restructuring and asset impairments, certain acquisition-related costs, investment impairments, and amounts associated with the resolution of income tax audits. Effective the first quarter of fiscal 2010, the non-GAAP results no longer exclude the impact of equity-based compensation. A reconciliation of the GAAP and non-GAAP results is provided in the financial statements included in this release.

Reportable Segment Results

Silicon had new orders of $1.42 billion, net sales of $1.40 billion and operating income of $498 million. The net sales increase of 45 percent over the first quarter reflected higher shipments to foundry and DRAM customers along with the addition of Semitool. New order composition was: DRAM 41 percent, foundry 37 percent, logic and other 12 percent, and flash 10 percent.

Applied Global Services (AGS) had new orders of $483 million. Net sales were $456 million, up 7 percent sequentially, and operating income was $90 million.

The Display group had new orders of $256 million, net sales of $270 million and operating income of $90 million. Net sales more than doubled over the first quarter primarily driven by Generation 8.5 system shipments.

The Energy and Environmental Solutions (EES) group had new orders of $378 million. Net sales were $166 million, down 48 percent from the first quarter, primarily due to lower thin film revenue. EES had an operating loss of $145 million, which included an $83 million inventory charge related to thin film solar manufacturing equipment.

Additional Quarterly Financial Information

•		Gross margin was 40.4 percent.
•		Operating cash flow was $527 million for the quarter or 23 percent of sales.
•		Cash dividend payments totaled $81 million.
•		The company used $100 million to repurchase 7.6 million shares of its common stock.
•		Cash, cash equivalents and investments ended the quarter at $3.57 billion.
•		The effective tax rate was 31.8 percent.
•		Backlog increased by $59 million to $2.99 billion and included negative backlog adjustments of $184 million.

Business Outlook

For the third quarter of fiscal 2010, Applied expects net sales to be in the range of down two percent to up five percent quarter over quarter. The company expects non-GAAP EPS to be in the range of $0.22 to $0.26 which excludes known charges related to completed acquisitions of approximately $0.01 per share. This outlook does not take into account other non-GAAP adjustments that may arise subsequent to this release.

Applied Materials, Inc.
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On March 30, 2010, Applied raised its fiscal year net sales outlook to growth of more than 60 percent over fiscal 2009.

Use of Non-GAAP Financial Measures

Management uses non-GAAP results 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 Materials believes 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 results prepared in accordance with GAAP.

Webcast Information

Applied Materials will discuss these results during an earnings call that begins at 1:30 p.m. Pacific Time today. A live webcast will be available at www.appliedmaterials.com.

Forward-Looking Statements

This press release contains forward-looking statements, including statements regarding Applied’s performance, growth opportunities, third quarter and fiscal year 2010 business outlooks, industry outlooks, and customers’ investments. Forward-looking statements may contain words such as “expect,” “believe,” “may,” “can,” “should,” “will,” “forecast,” “anticipate” 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 Applied’s products, which is subject to many factors, including uncertain global economic and industry conditions, customers’ ability to acquire affordable capital, business and consumer spending, demand for electronic products and semiconductors, government renewable energy policies and incentives, and customers’ utilization rates and new technology and capacity requirements; variability of operating expenses and results among the company’s segments caused by differing conditions in the served markets; Applied’s ability to (i) develop, deliver and support a broad range of products, expand its markets and develop new markets, (ii) timely implement effective cost reduction programs, realize expected benefits, and 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) realize synergies from, and successfully commercialize technologies acquired in, business acquisitions, (vi) maintain effective internal controls and procedures, (vii) obtain and protect intellectual property rights in key technologies, (viii) attract, motivate and retain key employees, and (ix) accurately forecast future operating and financial results, which depends on multiple assumptions related to, without limitation, market conditions and business needs; and other risks described in Applied Materials’ SEC filings. 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.

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About Applied Materials

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.
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APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

		Three Months Ended								Six Months Ended
		May 2,				April 26,				May 2,				April 26,
(In thousands, except per share amounts)		2010				2009				2010				2009
Net sales		$	2,295,540			$	1,020,077			$	4,144,442			$	2,353,473
Cost of products sold			1,368,648				864,558				2,506,366				1,806,378
Gross profit			926,892				155,519				1,638,076				547,095
Operating expenses:
Research, development and engineering			305,928				236,335				574,931				465,875
General and administrative			125,779				101,080				250,578				242,321
Marketing and selling			100,420				84,678				197,615				168,793
Restructuring and asset impairments			8,968				26,709				112,812				159,481
Income (loss) from operations			385,797				(293,283	)			502,140				(489,375	)
Pre-tax loss of equity method investment			—				19,175				—				34,983
Impairment of equity method investment and strategic investments			3,671				77,081				4,861				77,081
Interest expense			5,206				5,058				10,266				11,052
Interest income			10,132				11,789				18,773				27,024
Income (loss) before income taxes			387,052				(382,808	)			505,786				(585,467	)
Provision (benefit) for income taxes			123,048				(127,418	)			159,031				(197,143	)
Net income (loss)		$	264,004			$	(255,390	)		$	346,755			$	(388,324	)
Earnings (loss) per share:
Basic		$	0.20			$	(0.19	)		$	0.26			$	(0.29	)
Diluted		$	0.20			$	(0.19	)		$	0.26			$	(0.29	)
Weighted average number of shares:
Basic			1,344,617				1,331,729				1,343,229				1,330,476
Diluted			1,352,436				1,331,729				1,350,802				1,330,476

Applied Materials, Inc.
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APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS

		May 2,				October 25,
(In thousands)		2010				2009
		(unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	1,596,429			$	1,576,381
Short-term investments			738,433				638,349
Accounts receivable, less allowance for doubtful accounts of $73,297 and $67,313 at 2010 and 2009, respectively			1,437,746				1,041,495
Inventories			1,690,445				1,627,457
Deferred income taxes, net			432,735				356,336
Income taxes receivable			—				184,760
Other current assets			277,506				264,169
Total current assets			6,173,294				5,688,947
Long-term investments			1,230,214				1,052,165
Property, plant and equipment, net			1,083,525				1,090,433
Goodwill			1,336,426				1,170,932
Purchased technology and other intangible assets, net			346,228				306,416
Deferred income taxes and other assets			280,062				265,350
Total assets		$	10,449,749			$	9,574,243
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt		$	1,803			$	1,240
Accounts payable and accrued expenses			1,440,225				1,061,502
Customer deposits and deferred revenue			980,658				864,280
Income taxes payable			153,134				12,435
Total current liabilities			2,575,820				1,939,457
Long-term debt			204,847				200,654
Employee benefits and other liabilities			348,001				339,524
Total liabilities			3,128,668				2,479,635
Stockholders’ equity:
Common stock			13,430				13,409
Additional paid-in capital			5,348,780				5,195,437
Retained earnings			11,106,136				10,934,004
Treasury stock			(9,146,562	)			(9,046,562	)
Accumulated other comprehensive loss			(703	)			(1,680	)
Total stockholders’ equity			7,321,081				7,094,608
Total liabilities and stockholders’ equity		$	10,449,749			$	9,574,243

Applied Materials, Inc.
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APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

		Six Months Ended
		May 2,				April 26,
(In thousands)		2010				2009
Cash flows from operating activities:
Net income (loss)		$	346,755			$	(388,324	)
Adjustments required to reconcile net income (loss) to cash provided by (used in) operating activities:
Depreciation and amortization			163,178				146,108
Loss on fixed asset retirements			11,658				7,002
Provision for bad debts			6,000				62,539
Restructuring and asset impairments			112,812				159,481
Deferred income taxes			(74,546	)			35,927
Net recognized loss on investments			9,247				10,915
Pretax loss of equity-method investment			—				34,983
Impairment of investments			4,861				77,081
Equity-based compensation			62,330				72,780
Changes in operating assets and liabilities, net of amounts acquired:
Accounts receivable			(364,290	)			714,096
Inventories			(1,150	)			85,993
Other current assets			(1,514	)			13,411
Other assets			(9,521	)			(1,144	)
Accounts payable and accrued expenses			211,683				(649,976	)
Customer deposits and deferred revenue			110,519				(262,760	)
Income taxes			322,939				(246,739	)
Employee benefits and other liabilities			(12,125	)			27,710
Cash provided by (used in) operating activities			898,836				(100,917	)
Cash flows from investing activities:
Capital expenditures			(97,874	)			(128,099	)
Cash paid for acquisition, net of cash acquired			(322,599	)			—
Proceeds from sales and maturities of investments			539,515				925,485
Purchases of investments			(828,582	)			(486,527	)
Cash provided by (used in) investing activities			(709,540	)			310,859
Cash flows from financing activities:
Debt repayments, net			(5,320	)			(323	)
Proceeds from common stock issuances			97,141				27,633
Common stock repurchases			(100,000	)			(22,906	)
Payment of dividends to stockholders			(161,069	)			(159,736	)
Cash used in financing activities			(169,248	)			(155,332	)
Effect of exchange rate changes on cash and cash equivalents			—				742
Increase in cash and cash equivalents			20,048				55,352
Cash and cash equivalents — beginning of period			1,576,381				1,411,624
Cash and cash equivalents — end of period		$	1,596,429			$	1,466,976
Supplemental cash flow information:
Cash payments (refunds) for income taxes		$	(97,764	)		$	83,128
Cash payments for interest		$	7,195			$	7,211

Applied Materials, Inc.
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Reportable Segment Results

		Q2 FY 2010												Q1 FY 2010												Q2 FY 2009
										Operating												Operating												Operating
		New				Net				Income				New				Net				Income				New				Net				Income
(In millions)		Orders				Sales				(Loss)				Orders				Sales				(Loss)				Orders				Sales				(Loss)
Silicon		$	1,416			$	1,404			$	498			$	1,135			$	970			$	306			$	259			$	260				($82	)
AGS		$	483			$	456			$	90			$	474			$	426			$	63			$	236			$	319				($1	)
Display		$	256			$	270			$	90			$	126			$	132			$	25			$	13			$	84				($3	)
EES		$	378			$	166				($145	)		$	230			$	321				($36	)		$	141			$	357				($91	)
Corporate-unallocated expenses		$	—			$	—				($147	)		$	—			$	—				($242	)		$	—			$	—				($116	)
Consolidated		$	2,533			$	2,296			$	386			$	1,965			$	1,849			$	116			$	649			$	1,020				($293	)

Effective in the first quarter of fiscal 2010, Applied changed its methodology for allocating certain expenses to its reportable segments. Applied has reclassified segment operating results for the three months ended April 26, 2009 to conform to the fiscal 2010 presentation.

Additional Information

		Q2 FY 2010								Q1 FY 2010								Q2 FY 2009
New Orders and Net Sales by Geography
		New				Net				New				Net				New				Net
(In $ millions)		Orders				Sales				Orders				Sales				Orders				Sales
North America			300				230				256				241				128				212
% of Total			12				10				13				13				20				21
Europe			156				165				146				310				124				231
% of Total			6				7				7				17				19				23
Japan			158				233				178				174				101				155
% of Total			6				10				9				9				16				15
Korea			561				632				387				331				83				96
% of Total			22				28				20				18				13				9
Taiwan			655				699				658				514				127				162
% of Total			26				30				34				28				19				16
Southeast Asia			152				105				125				136				60				41
% of Total			6				5				6				7				9				4
China			551				232				215				143				26				123
% of Total			22				10				11				8				4				12
Employees
Regular Full Time					13,000						13,000*							13,000

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

		Three Months Ended												Six Months Ended
		May 2,				January 31,				April 26,				May 2,				April 26,
(In thousands, except per share amounts)		2010				2010				2009				2010				2009
Non-GAAP Net Income (Loss)
Reported net income (loss) (GAAP basis)		$	264,004			$	82,751			$	(255,390	)		$	346,755			$	(388,324	)
Certain items associated with acquisitions 1			30,242				25,962				24,824				56,204				50,849
Semitool deal cost			—				9,860				—				9,860				—
Restructuring and asset impairments 2,3,4			8,968				103,844				26,709				112,812				159,481
Impairment of equity method investment and strategic investments			3,671				1,190				77,081				4,861				77,081
Income tax effect of non-GAAP adjustments and resolution of audits of prior years’ income tax filings			(14,701	)			(44,607	)			(37,072	)			(59,308	)			(90,601	)
Non-GAAP net income (loss)		$	292,184			$	179,000			$	(163,848	)		$	471,184			$	(191,514	)
Non-GAAP Net Income (Loss) Per Diluted Share
Reported net income (loss) per diluted share (GAAP basis)		$	0.20			$	0.06			$	(0.19	)		$	0.26			$	(0.29	)
Certain items associated with acquisitions			0.02				0.01				0.01				0.03				0.03
Semitool deal cost			—				0.01				—				0.01				—
Restructuring and asset impairments			—				0.05				0.01				0.05				0.08
Impairment of equity method investment and strategic investments			—				—				0.05				—				0.05
Resolution of audits of prior years’ income tax filings			—				—				(0.01	)			—				(0.01	)
Non-GAAP net income (loss) — per diluted share		$	0.22			$	0.13			$	(0.12	)		$	0.35			$	(0.14	)
Shares used in diluted shares calculation			1,352,436				1,349,567				1,331,729				1,350,802				1,330,476

¹ These items are incremental charges attributable to acquisitions consisting of inventory fair value adjustments on products sold and amortization of purchased intangible assets.

² Results for the three and six months ended May 2, 2010 included asset impairment charges of $9 million related to a facility held for sale.

³ Results for the three months ended January 31, 2010 and the six months ended May 2, 2010 included restructuring charges of $104 million associated with a restructuring program announced on November 11, 2009.

⁴ Results for the three months ended April 26, 2009 included asset impairment charges of $15 million related to wafer cleaning equipment and restructuring charges of $12 million primarily associated with a restructuring program announced on November 12, 2008. Results for the six months ended April 26, 2009 included asset impairment charges of $15 million related to wafer cleaning equipment and restructuring charges of $145 million associated with a restructuring program announced on November 12, 2008.

Effective the first quarter of fiscal 2010, the non-GAAP results no longer exclude the impact of equity-based compensation. Previously reported non-GAAP results have been restated to conform to the fiscal 2010 presentation.