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 August 18, 2010, Applied Materials, Inc. (“Applied Materials”) announced its financial results for its third fiscal quarter ended August 1, 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 August 18, 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 August 18, 2010.

Exhibit 99.1

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

APPLIED MATERIALS ANNOUNCES THIRD QUARTER RESULTS

	•		Net sales up 10 percent over prior quarter
	•		Results exceeded the high end of the company’s EPS projections by $0.03
	•		GAAP EPS of $0.09 included EES charges that reduced EPS by $0.20
	•		Non-GAAP EPS of $0.17 included EES inventory-related charges that lowered EPS by $0.12

SANTA CLARA, Calif., August 18, 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 third quarter of fiscal 2010 ended August 1, 2010. Applied generated net sales of $2.52 billion, operating profit of $183 million, and net income of $123 million or $0.09 per share. Non-GAAP net income was $234 million or $0.17 per share.

“Applied had strong results across our semiconductor, display and crystalline silicon solar businesses, and we now expect Silicon Systems Group net sales to be up by more than 160 percent over fiscal 2009,” said Mike Splinter, chairman and chief executive officer. “During the quarter, we took actions that focus our Energy and Environmental Solutions segment on our most promising opportunities in solar and advanced energy, and strengthen our company’s financial outlook.”

The EES restructuring plan announced on July 21, 2010 resulted in charges totaling $405 million. These charges consisted of inventory-related charges of approximately $250 million and severance and asset impairment charges of $155 million. The inventory-related charges lowered gross margin by approximately 10 percentage points and reduced GAAP and non-GAAP EPS by $0.12. Excluding the EES restructuring plan charges, non-GAAP EPS would have been $0.29.

Applied’s May business outlook was for non-GAAP EPS of between $0.22 and $0.26. At the announcement of the EES restructuring plan on July 21, 2010, the non-GAAP EPS outlook was revised to between $0.10 and $0.14.

Financial Results Summary

		Q3 FY2010		Q2 FY2010		Q3 FY2009
GAAP Results
Net sales		$2.52 billion		$2.30 billion		$1.13 billion
Net income (loss)		$123 million		$264 million		($55 million)
Earnings (loss) per share		$0.09		$0.20		($0.04)
Non-GAAP Results
Non-GAAP net income (loss)		$234 million		$292 million		($33 million)
Non-GAAP earnings (loss) per share		$0.17		$0.22		($0.02)

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

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exclude the impact of share-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 Systems Group (SSG) orders increased to $1.54 billion, net sales increased to $1.45 billion, and operating income rose to $525 million or 36 percent of sales. New order composition was: foundry 37 percent, DRAM 32 percent, logic and other 18 percent, and flash 13 percent.

Applied Global Services (AGS) orders were $595 million, up 23 percent from the second quarter led by higher demand for 200mm refurbished equipment. AGS net sales increased to $468 million, and operating income decreased to $84 million.

Display orders decreased to $242 million. Net sales decreased to $216 million, and operating income was lower, at $64 million or 30 percent of sales. The decrease in net sales and operating income from the second quarter was in line with the company’s expectations.

Energy and Environmental Solutions (EES) orders decreased to $353 million. Net sales more than doubled from the second quarter to $387 million led by record demand for crystalline silicon solar equipment. EES had an operating loss of $371 million, which included $405 million in charges associated with the restructuring plan.

Additional Quarterly Financial Information

•

Gross margin was 34.2 percent including the thin film solar equipment inventory charge which lowered gross margin by approximately 10 percentage points.

•

Operating cash flow was $299 million for the quarter or 12 percent of sales, and operating cash flow for the nine months was $1.20 billion or 18 percent of sales.

•

Cash dividend payments totaled $94 million.

•

The company used $100 million to repurchase 7.9 million shares of its common stock.

•

Cash, cash equivalents and investments increased to $3.63 billion at quarter end.

•

The effective tax rate was 30.8 percent.

•

Backlog increased by $136 million to $3.13 billion.

Business Outlook

For the fourth quarter of fiscal 2010, Applied expects net sales to be in the range of flat to up 5 percent quarter over quarter. The company expects non-GAAP EPS to be in the range of $0.28 to $0.32 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.

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

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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, opportunities, and the business outlooks for the Silicon segment and total company. 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, 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) maintain effective internal controls and procedures, (vi) obtain and protect intellectual property rights in key technologies, (vii) attract, motivate and retain key employees, and (viii) accurately forecast future operating and financial results, which depends on multiple assumptions related to, without limitation, market conditions and business needs; risks related to legal proceedings and claims; 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.

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.

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APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

		Three Months Ended								Nine Months Ended
		August 1,				July 26,				August 1,				July 26,
(In thousands, except per share amounts)		2010				2009				2010				2009
Net sales		$	2,517,790			$	1,133,740			$	6,662,232			$	3,487,213
Cost of products sold			1,657,662				808,866				4,164,028				2,615,244
Gross profit			860,128				324,874				2,498,204				871,969
Operating expenses:
Research, development and engineering			290,398				234,052				865,329				699,927
General and administrative			145,994				88,487				396,572				330,808
Marketing and selling			105,754				79,518				303,369				248,311
Restructuring and asset impairments			135,331				—				248,143				159,481
Total operating expenses			677,477				402,057				1,813,413				1,438,527
Income (loss) from operations			182,651				(77,183	)			684,791				(566,558	)
Pre-tax loss of equity method investment			—				—				—				34,983
Impairment of equity method investment and strategic investments			7,804				2,341				12,665				79,422
Interest expense			5,496				4,893				15,762				15,945
Interest income			8,480				10,233				27,253				37,257
Income (loss) before income taxes			177,831				(74,184	)			683,617				(659,651	)
Provision (benefit) for income taxes			54,735				(19,319	)			213,766				(216,462	)
Net income (loss)		$	123,096			$	(54,865	)		$	469,851			$	(443,189	)
Earnings (loss) per share:
Basic		$	0.09			$	(0.04	)		$	0.35			$	(0.33	)
Diluted		$	0.09			$	(0.04	)		$	0.35			$	(0.33	)
Weighted average number of shares:
Basic			1,339,660				1,333,278				1,342,068				1,331,410
Diluted			1,348,808				1,333,278				1,350,587				1,331,410

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APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS

		August 1,				October 25,
(In thousands)		2010				2009
		(unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	1,564,337			$	1,576,381
Short-term investments			783,799				638,349
Accounts receivable, less allowance for doubtful accounts of $74,014 and $67,313 at 2010 and 2009, respectively			1,721,496				1,041,495
Inventories			1,590,052				1,627,457
Deferred income taxes, net			577,442				356,336
Income taxes receivable			—				184,760
Other current assets			314,622				264,169
Total current assets			6,551,748				5,688,947
Long-term investments			1,279,515				1,052,165
Property, plant and equipment, net			983,790				1,090,433
Goodwill			1,336,426				1,170,932
Purchased technology and other intangible assets, net			300,401				306,416
Deferred income taxes and other assets			274,268				265,350
Total assets		$	10,726,148			$	9,574,243
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt		$	1,848			$	1,240
Accounts payable and accrued expenses			1,643,606				1,061,502
Customer deposits and deferred revenue			1,036,938				864,280
Income taxes payable			207,080				12,435
Total current liabilities			2,889,472				1,939,457
Long-term debt			204,438				200,654
Employee benefits and other liabilities			354,099				339,524
Total liabilities			3,448,009				2,479,635
Stockholders’ equity:
Common stock			13,361				13,409
Additional paid-in capital			5,368,862				5,195,437
Retained earnings			11,135,753				10,934,004
Treasury stock			(9,246,407	)			(9,046,562	)
Accumulated other comprehensive income (loss)			6,570				(1,680	)
Total stockholders’ equity			7,278,139				7,094,608
Total liabilities and stockholders’ equity		$	10,726,148			$	9,574,243

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

		Nine Months Ended
		August 1,				July 26,
(In thousands)		2010				2009
Cash flows from operating activities:
Net income (loss)		$	469,851			$	(443,189	)
Adjustments required to reconcile net income (loss) to cash provided by operating activities:
Depreciation and amortization			235,742				219,609
Loss on fixed asset retirements			14,505				16,165
Provision for bad debts			6,718				62,539
Restructuring and asset impairments			248,143				159,481
Deferred income taxes			(214,984	)			96,117
Net recognized loss on investments			15,532				13,083
Pretax loss of equity-method investment			—				34,983
Impairment of investments			12,665				79,422
Share-based compensation			94,772				116,114
Changes in operating assets and liabilities, net of amounts acquired:
Accounts receivable			(648,477	)			786,319
Inventories			100,305				238,510
Income taxes receivable			184,760				(296,330	)
Other current assets			(37,936	)			49,990
Other assets			(6,643	)			(7,134	)
Accounts payable and accrued expenses			374,037				(632,193	)
Customer deposits and deferred revenue			166,799				(314,250	)
Income taxes payable			192,054				(122,967	)
Employee benefits and other liabilities			(10,109	)			36,527
Cash provided by operating activities			1,197,734				92,796
Cash flows from investing activities:
Capital expenditures			(134,044	)			(187,804	)
Cash paid for acquisition, net of cash acquired			(322,599	)			—
Proceeds from sales and maturities of investments			967,067				1,121,026
Purchases of investments			(1,357,261	)			(649,417	)
Cash provided by (used in) investing activities			(846,837	)			283,805
Cash flows from financing activities:
Debt repayments, net			(5,684	)			(241	)
Proceeds from common stock issuances			98,920				29,406
Common stock repurchases			(200,000	)			(22,906	)
Payment of dividends to stockholders			(255,032	)			(239,756	)
Cash used in financing activities			(361,796	)			(233,497	)
Effect of exchange rate changes on cash and cash equivalents			(1,145	)			742
Increase (decrease) in cash and cash equivalents			(12,044	)			143,846
Cash and cash equivalents — beginning of period			1,576,381				1,411,624
Cash and cash equivalents — end of period		$	1,564,337			$	1,555,470
Supplemental cash flow information:
Cash payments for income taxes		$	55,960			$	139,625
Cash payments for interest		$	7,196			$	7,212

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Reportable Segment Results

		Q3 FY2010												Q2 FY2010												Q3 FY2009
										Operating												Operating												Operating
										Income												Income												Income
(In millions)		New Orders				Net Sales				(Loss)				New Orders				Net Sales				(Loss)				New Orders				Net Sales				(Loss)
SSG		$	1,535			$	1,447			$	525			$	1,416			$	1,404			$	498			$	542			$	498			$	67
AGS		$	595			$	468			$	84			$	483			$	456			$	90			$	298			$	343			$	24
Display		$	242			$	216			$	64			$	256			$	270			$	90			$	96			$	69				($8	)
EES		$	353			$	387				($371	)		$	378			$	166				($145	)		$	136			$	224				($52	)
Corporate-unallocated expenses		$	—			$	—				($119	)		$	—			$	—				($147	)		$	—			$	—				($108	)
Consolidated		$	2,725			$	2,518			$	183			$	2,533			$	2,296			$	386			$	1,072			$	1,134				($77	)

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 July 26, 2009 to conform to the fiscal 2010 presentation.

Additional Information

New Orders and Net Sales by Geography

		Q3 FY2010								Q2 FY2010								Q3 FY2009
(In $ millions)		New Orders				Net Sales				New Orders				Net Sales				New Orders				Net Sales
North America			342				294				300				230				147				139
% of Total			13				12				12				10				14				12
Europe			238				285				156				165				130				174
% of Total			9				11				6				7				12				15
Japan			233				203				158				233				151				130
% of Total			8				8				6				10				14				12
Korea			519				398				561				632				114				129
% of Total			19				16				22				28				11				11
Taiwan			733				707				655				699				261				393
% of Total			27				28				26				30				24				35
Southeast Asia			245				162				152				105				88				53
% of Total			9				6				6				5				8				5
China			415				469				551				232				181				116
% of Total			15				19				22				10				17				10
Employees
Regular Full Time			13,000								13,000									13,000

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

		Three Months Ended												Nine Months Ended
		August 1,				May 2,				July 26,				August 1,				July 26,
(In thousands, except per share amounts)		2010				2010				2009				2010				2009
Non-GAAP Net Income (Loss)
Reported net income (loss) (GAAP basis)		$	123,096			$	264,004			$	(54,865	)		$	469,851			$	(443,189	)
Certain items associated with acquisitions 1			20,985				30,242				22,425				77,189				73,274
Semitool deal cost			—				—				—				9,860				—
Restructuring and asset impairments 2,3,4			135,331				8,968				—				248,143				159,481
Impairment of equity method investment and strategic investments			7,804				3,671				2,341				12,665				79,422
Income tax effect of non-GAAP adjustments and resolution of audits of prior years’ income tax filings			(53,652	)			(14,701	)			(2,657	)			(112,960	)			(93,258	)
Non-GAAP net income (loss)		$	233,564			$	292,184			$	(32,756	)		$	704,748			$	(224,270	)
Non-GAAP Net Income (Loss) Per Diluted Share
Reported net income (loss) per diluted share (GAAP basis)		$	0.09			$	0.20			$	(0.04	)		$	0.35			$	(0.33	)
Certain items associated with acquisitions			0.01				0.02				0.01				0.04				0.04
Semitool deal cost			—				—				—				0.01				—
Restructuring and asset impairments			0.07				—				—				0.12				0.08
Impairment of equity method investment and strategic investments			—				—				—				—				0.05
Resolution of audits of prior years’ income tax filings			—				—				—				—				—
Non-GAAP net income (loss) — per diluted share		$	0.17			$	0.22			$	(0.02	)		$	0.52			$	(0.17	)
Shares used in diluted shares calculation			1,348,808				1,352,436				1,333,278				1,350,587				1,331,410

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