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): August 15, 2013
____________________________________________________________________
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)) | |
Item 2.02 Results of Operations and Financial Condition.
On August 15, 2013, Applied Materials, Inc. (“Applied Materials”) announced its financial results for its third quarter of fiscal 2013 ended July 28, 2013. 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, 2013. | |
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: August 15, 2013 | By: | /s/ Thomas F. Larkins | |
Thomas F. Larkins | |||
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, 2013. | |
Exhibit 99.1
APPLIED MATERIALS ANNOUNCES THIRD QUARTER RESULTS
• | Non-GAAP adjusted EPS of 18 cents at mid-point of guidance; GAAP EPS of 14 cents |
• | Strong demand for mobile devices and large-screen TVs drives semiconductor and display equipment sales |
• | Spending shift to RD&E to fund profitable growth opportunities in precision materials engineering |
SANTA CLARA, Calif., August 15, 2013 — Applied Materials, Inc. (NASDAQ:AMAT), the global leader in manufacturing solutions for the semiconductor, display and solar industries, today reported results for its third quarter of fiscal 2013 ended July 28, 2013.
Applied generated orders of $2.00 billion, down 12 percent from the prior quarter as a seasonal decline in foundry bookings was partially offset by growth in memory and logic orders along with higher bookings in the Display Group and Applied Global Services. Net sales were $1.98 billion, essentially flat sequentially. The company reported non-GAAP adjusted operating income of $312 million and non-GAAP adjusted net income of $223 million or 18 cents per diluted share. The company recorded GAAP operating income of $250 million and GAAP net income of $168 million or 14 cents per diluted share.
“Consumers’ appetite for mobile devices and larger TVs is driving healthy demand for our semiconductor and display equipment,” said Mike Splinter, chairman and chief executive officer. “We are seeing stronger investment by our memory customers, and our display business booked its highest orders in over two years.”
Quarterly Results Summary
GAAP Results | Q3 FY2013 | Q2 FY2013 | Q3 FY2012 | |||
Net sales | $1.98 billion | $1.97 billion | $2.34 billion | |||
Operating income (loss) | $250 million | $(68) million | $322 million | |||
Net income (loss) | $168 million | $(129) million | $218 million | |||
Diluted earnings (loss) per share (EPS) | $0.14 | $(0.11) | $0.17 | |||
Non-GAAP Adjusted Results | ||||||
Non-GAAP adjusted operating income | $312 million | $285 million | $431 million | |||
Non-GAAP adjusted net income | $223 million | $199 million | $300 million | |||
Non-GAAP adjusted diluted EPS | $0.18 | $0.16 | $0.24 | |||
Applied's non-GAAP adjusted results exclude the impact of the following, where applicable: certain acquisition-related costs; restructuring charges and any associated adjustments; impairments of assets, goodwill, or investments; gain or loss on sale of facilities; and certain tax items. A reconciliation of the GAAP and non-GAAP adjusted results is provided in the financial tables included in this release. See also “Use of Non-GAAP Adjusted Financial Measures” below.
Applied Materials, Inc.
Page 2 of 12
Third Quarter Reportable Segment Results and Comparisons to the Prior Quarter
Silicon Systems Group (SSG) orders were $1.20 billion, down 22 percent, due to a decrease in foundry orders, partially offset by increases in memory and logic orders. Net sales of $1.27 billion declined 1 percent. Non-GAAP adjusted operating income decreased to $283 million or 22.2 percent of net sales. GAAP operating income decreased to $246 million or 19.3 percent of net sales. New order composition was: foundry 45 percent; flash 24 percent; logic/other 17 percent; and DRAM 14 percent.
Applied Global Services (AGS) orders were $517 million, up 7 percent, reflecting higher orders for spares and 200mm equipment. Net sales were $497 million down 4 percent. Non-GAAP adjusted operating income was approximately flat at $116 million or 23.3 percent of net sales. GAAP operating income was approximately flat at $114 million or 22.9 percent of net sales.
Display orders were $256 million, up 31 percent led by a recovery in TV equipment demand. Net sales were $161 million up 27 percent. Non-GAAP adjusted operating income increased to $34 million or 21.1 percent of net sales. GAAP operating income increased to $33 million or 20.5 percent of net sales.
Energy and Environmental Solutions (EES) orders were $19 million, down 51 percent. Net sales were $45 million, up 18 percent. EES had a non-GAAP adjusted operating loss of $15 million; EES recorded a GAAP operating loss of $27 million, which included restructuring and impairment charges of $10 million.
Additional Quarterly Financial Information
• | Backlog was approximately flat sequentially at $2.29 billion including negative adjustments of $28 million. |
• | Gross margin was 42.9 percent on a non-GAAP adjusted basis, down slightly from 43.2 percent in the prior quarter. GAAP gross margin was 40.8 percent. |
• | On a year-over-year basis, G&A declined by $40 million, or 29 percent, while RD&E increased by $25 million, or 8 percent. These changes primarily reflect the impact of ongoing initiatives to reduce company overhead spending and increase funding of profitable growth opportunities, particularly in the Silicon Systems Group. |
• | The effective tax rate was 23.9 percent on a non-GAAP adjusted basis. The GAAP effective tax rate was 26.3 percent. |
• | The company paid $120 million in cash dividends, up 11 percent from the prior quarter, reflecting the quarterly dividend increase announced in March 2013. Applied also used $50 million to repurchase 3 million shares of its common stock. |
• | Cash, cash equivalents and investments ended the quarter at $3.03 billion, up 6 percent from the prior quarter. |
Business Outlook
For the fourth quarter of fiscal 2013, Applied expects net sales to be approximately flat as compared to the previous quarter. The company expects non-GAAP adjusted operating expenses to be in the range of $525 million, plus or minus $10 million. Non-GAAP adjusted EPS is expected to be in the range of $0.16 to $0.20. The non-GAAP adjusted operating expenses and EPS outlooks exclude known charges related to completed acquisitions of approximately $19 million and $0.04 per share, respectively, but do not exclude other non-GAAP adjustments that may arise subsequent to this release.
Use of Non-GAAP Adjusted Financial Measures
Management uses non-GAAP adjusted 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 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. A replay will be available on the website beginning at 5:00 p.m. Pacific Time today.
Applied Materials, Inc.
Page 3 of 12
Forward-Looking Statements
This press release contains forward-looking statements, including those regarding Applied’s performance, end-user and customer demand, spending for growth, and business outlooks for the fourth quarter of fiscal 2013. These statements and their underlying assumptions 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, end-demand for electronic products and semiconductors, and customers’ new technology and capacity requirements; variability of operating expenses and results among the company’s segments caused by differing conditions in the served markets; the concentrated nature of Applied’s customer base; Applied’s ability to (i) develop, deliver and support a broad range of products, expand its markets and develop new markets, (ii) achieve the objectives of operational initiatives, (iii) plan and manage its resources and production capability, (iv) obtain and protect intellectual property rights in key technologies, (v) attract, motivate and retain key employees, and (vi) accurately forecast future results, which depends on multiple assumptions related to, without limitation, market conditions, customer requirements and business needs; and other risks described in Applied's SEC filings, including its most recent Form 10-Q. 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 providing innovative equipment, services and software to enable the manufacture of advanced semiconductor, flat panel display and solar photovoltaic products. Our technologies help make innovations like smartphones, flat screen TVs and solar panels more affordable and accessible to consumers and businesses around the world. Learn more at www.appliedmaterials.com.
Contact:
Kevin Winston (editorial/media) 408.235.4498
Michael Sullivan (financial community) 408.986.7977
Applied Materials, Inc.
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APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
Three Months Ended | Nine Months Ended | |||||||||||||||||||
(In millions, except per share amounts) | July 28, 2013 | April 28, 2013 | July 29, 2012 | July 28, 2013 | July 29, 2012 | |||||||||||||||
Net sales | $ | 1,975 | $ | 1,973 | $ | 2,343 | $ | 5,521 | $ | 7,073 | ||||||||||
Cost of products sold | 1,169 | 1,165 | 1,413 | 3,325 | 4,347 | |||||||||||||||
Gross margin | 806 | 808 | 930 | 2,196 | 2,726 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
Research, development and engineering | 334 | 344 | 309 | 982 | 933 | |||||||||||||||
Marketing and selling | 111 | 118 | 118 | 334 | 374 | |||||||||||||||
General and administrative | 97 | 126 | 137 | 348 | 465 | |||||||||||||||
Impairment of goodwill and intangible assets | — | 278 | — | 278 | — | |||||||||||||||
Restructuring charges and asset impairments | 14 | 10 | 44 | 33 | 44 | |||||||||||||||
Total operating expenses | 556 | 876 | 608 | 1,975 | 1,816 | |||||||||||||||
Income (loss) from operations | 250 | (68 | ) | 322 | 221 | 910 | ||||||||||||||
Impairments of strategic investments | 3 | 2 | — | 5 | 3 | |||||||||||||||
Interest and other expenses | 23 | 24 | 24 | 71 | 72 | |||||||||||||||
Interest and other income, net | 4 | 4 | 4 | 11 | 13 | |||||||||||||||
Income (loss) before income taxes | 228 | (90 | ) | 302 | 156 | 848 | ||||||||||||||
Provision for income taxes | 60 | 39 | 84 | 83 | 224 | |||||||||||||||
Net income (loss) | $ | 168 | $ | (129 | ) | $ | 218 | $ | 73 | $ | 624 | |||||||||
Earnings (loss) per share: | ||||||||||||||||||||
Basic | $ | 0.14 | $ | (0.11 | ) | $ | 0.17 | $ | 0.06 | $ | 0.49 | |||||||||
Diluted | $ | 0.14 | $ | (0.11 | ) | $ | 0.17 | $ | 0.06 | $ | 0.48 | |||||||||
Weighted average number of shares: | ||||||||||||||||||||
Basic | 1,203 | 1,203 | 1,257 | 1,201 | 1,282 | |||||||||||||||
Diluted | 1,220 | 1,203 | 1,268 | 1,218 | 1,292 | |||||||||||||||
Applied Materials, Inc.
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APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions) | July 28, 2013 | April 28, 2013 | October 28, 2012 | |||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 1,745 | $ | 1,545 | $ | 1,392 | ||||||
Short-term investments | 230 | 225 | 545 | |||||||||
Accounts receivable, net | 1,170 | 1,275 | 1,220 | |||||||||
Inventories | 1,358 | 1,318 | 1,272 | |||||||||
Other current assets | 734 | 750 | 673 | |||||||||
Total current assets | 5,237 | 5,113 | 5,102 | |||||||||
Long-term investments | 1,055 | 1,080 | 1,055 | |||||||||
Property, plant and equipment, net | 872 | 886 | 910 | |||||||||
Goodwill | 3,294 | 3,294 | 3,518 | |||||||||
Purchased technology and other intangible assets, net | 1,148 | 1,194 | 1,355 | |||||||||
Deferred income taxes and other assets | 145 | 128 | 162 | |||||||||
Total assets | $ | 11,751 | $ | 11,695 | $ | 12,102 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable and accrued expenses | $ | 1,446 | $ | 1,462 | $ | 1,510 | ||||||
Customer deposits and deferred revenue | 756 | 739 | 755 | |||||||||
Total current liabilities | 2,202 | 2,201 | 2,265 | |||||||||
Long-term debt | 1,946 | 1,946 | 1,946 | |||||||||
Other liabilities | 649 | 650 | 656 | |||||||||
Total liabilities | 4,797 | 4,797 | 4,867 | |||||||||
Total stockholders’ equity | 6,954 | 6,898 | 7,235 | |||||||||
Total liabilities and stockholders’ equity | $ | 11,751 | $ | 11,695 | $ | 12,102 | ||||||
Applied Materials, Inc.
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APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In millions) | Three Months Ended | Nine Months Ended | |||||||||||||||||
July 28, 2013 | April 28, 2013 | July 29, 2012 | July 28, 2013 | July 29, 2012 | |||||||||||||||
Cash flows from operating activities: | |||||||||||||||||||
Net income (loss) | $ | 168 | $ | (129 | ) | $ | 218 | $ | 73 | $ | 624 | ||||||||
Adjustments required to reconcile net income (loss) to cash provided by operating activities: | |||||||||||||||||||
Depreciation and amortization | 100 | 106 | 105 | 312 | 325 | ||||||||||||||
Impairment of goodwill and intangible assets | — | 278 | — | 278 | — | ||||||||||||||
Restructuring charges and asset impairments | 14 | 10 | 44 | 33 | 44 | ||||||||||||||
Deferred income taxes and other | (56 | ) | 32 | 91 | (102 | ) | 144 | ||||||||||||
Share-based compensation | 40 | 39 | 42 | 121 | 138 | ||||||||||||||
Net change in operating assets and liabilities, net of amounts acquired | 98 | (112 | ) | 156 | (111 | ) | 165 | ||||||||||||
Cash provided by operating activities | 364 | 224 | 656 | 604 | 1,440 | ||||||||||||||
Cash flows from investing activities: | |||||||||||||||||||
Capital expenditures, net | (40 | ) | (51 | ) | (45 | ) | (140 | ) | (121 | ) | |||||||||
Cash paid for acquisition, net of cash acquired | — | (1 | ) | (3 | ) | (1 | ) | (4,189 | ) | ||||||||||
Proceeds from sales and maturities of investments | 134 | 158 | 205 | 737 | 765 | ||||||||||||||
Purchases of investments | (128 | ) | (167 | ) | (438 | ) | (438 | ) | (1,152 | ) | |||||||||
Cash provided by (used in) investing activities | (34 | ) | (61 | ) | (281 | ) | 158 | (4,697 | ) | ||||||||||
Cash flows from financing activities: | |||||||||||||||||||
Proceeds from common stock issuances and others, net | 40 | 67 | 6 | 125 | 51 | ||||||||||||||
Common stock repurchases | (50 | ) | (100 | ) | (500 | ) | (198 | ) | (900 | ) | |||||||||
Payments of dividends to stockholders | (120 | ) | (108 | ) | (115 | ) | (336 | ) | (323 | ) | |||||||||
Cash used in financing activities | (130 | ) | (141 | ) | (609 | ) | (409 | ) | (1,172 | ) | |||||||||
Effect of exchange rate changes on cash and cash equivalents | — | — | 2 | — | (2 | ) | |||||||||||||
Increase (decrease) in cash and cash equivalents | 200 | 22 | (232 | ) | 353 | (4,431 | ) | ||||||||||||
Cash and cash equivalents — beginning of period | 1,545 | 1,523 | 1,761 | 1,392 | 5,960 | ||||||||||||||
Cash and cash equivalents — end of period | $ | 1,745 | $ | 1,545 | $ | 1,529 | $ | 1,745 | $ | 1,529 | |||||||||
Supplemental cash flow information: | |||||||||||||||||||
Cash payments for income taxes | $ | 30 | $ | 122 | $ | 54 | $ | 184 | $ | 233 | |||||||||
Cash refunds from income taxes | $ | — | $ | 2 | $ | 1 | $ | 67 | $ | 5 | |||||||||
Cash payments for interest | $ | 39 | $ | 7 | $ | 39 | $ | 85 | $ | 87 | |||||||||
Applied Materials, Inc.
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APPLIED MATERIALS, INC.
UNAUDITED SUPPLEMENTAL INFORMATION
Reportable Segment Results
Q3 FY2013 | Q2 FY2013 | Q3 FY2012 | ||||||||||||||||||||||||||||||||||
(In millions) | New Orders | Net Sales | Operating Income (Loss) | New Orders | Net Sales | Operating Income (Loss) | New Orders | Net Sales | Operating Income (Loss) | |||||||||||||||||||||||||||
SSG | $ | 1,203 | $ | 1,272 | $ | 246 | $ | 1,551 | $ | 1,291 | $ | 283 | $ | 1,166 | $ | 1,545 | $ | 427 | ||||||||||||||||||
AGS | 517 | 497 | 114 | 481 | 517 | 118 | 531 | 579 | 122 | |||||||||||||||||||||||||||
Display | 256 | 161 | 33 | 195 | 127 | 19 | 67 | 142 | 10 | |||||||||||||||||||||||||||
EES* | 19 | 45 | (27 | ) | 39 | 38 | (322 | ) | 35 | 77 | (102 | ) | ||||||||||||||||||||||||
Corporate | — | — | (116 | ) | — | — | (166 | ) | — | — | (135 | ) | ||||||||||||||||||||||||
Consolidated | $ | 1,995 | $ | 1,975 | $ | 250 | $ | 2,266 | $ | 1,973 | $ | (68 | ) | $ | 1,799 | $ | 2,343 | $ | 322 | |||||||||||||||||
* Operating loss for the second quarter of fiscal 2013 included $278 million in goodwill and intangible asset impairment charges
Corporate Unallocated Expenses
(In millions) | Q3 FY2013 | Q2 FY2013 | Q3 FY2012 | |||||||||
Restructuring charges and asset impairments | $ | 4 | $ | 4 | $ | — | ||||||
Share-based compensation | 40 | 39 | 42 | |||||||||
Gain on sale of facility | (4 | ) | — | — | ||||||||
Other unallocated expenses | 76 | 123 | 93 | |||||||||
Corporate | $ | 116 | $ | 166 | $ | 135 | ||||||
Applied Materials, Inc.
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APPLIED MATERIALS, INC.
UNAUDITED SUPPLEMENTAL INFORMATION
Additional Information
Q3 FY2013 | Q2 FY2013 | Q3 FY2012 | ||||||||||||||||
New Orders and Net Sales by Geography | ||||||||||||||||||
(In $ millions) | New Orders | Net Sales | New Orders | Net Sales | New Orders | Net Sales | ||||||||||||
United States | 369 | 353 | 398 | 362 | 420 | 441 | ||||||||||||
% of Total | 19 | % | 18 | % | 18 | % | 18 | % | 23 | % | 19 | % | ||||||
Europe | 225 | 175 | 173 | 144 | 172 | 184 | ||||||||||||
% of Total | 11 | % | 9 | % | 8 | % | 7 | % | 9 | % | 8 | % | ||||||
Japan | 333 | 154 | 191 | 157 | 128 | 189 | ||||||||||||
% of Total | 17 | % | 8 | % | 8 | % | 8 | % | 7 | % | 8 | % | ||||||
Korea | 249 | 262 | 259 | 226 | 299 | 392 | ||||||||||||
% of Total | 12 | % | 13 | % | 11 | % | 12 | % | 17 | % | 17 | % | ||||||
Taiwan | 356 | 658 | 902 | 828 | 588 | 811 | ||||||||||||
% of Total | 18 | % | 33 | % | 40 | % | 42 | % | 33 | % | 34 | % | ||||||
Southeast Asia | 124 | 100 | 67 | 73 | 91 | 72 | ||||||||||||
% of Total | 6 | % | 5 | % | 3 | % | 4 | % | 5 | % | 3 | % | ||||||
China | 339 | 273 | 276 | 183 | 101 | 254 | ||||||||||||
% of Total | 17 | % | 14 | % | 12 | % | 9 | % | 6 | % | 11 | % | ||||||
Employees (In thousands) | ||||||||||||||||||
Regular Full Time | 13.7 | 13.6 | 14.6 | |||||||||||||||
Applied Materials, Inc.
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APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS
Three Months Ended | Nine Months Ended | |||||||||||||||||||
(In millions, except percentages) | July 28, 2013 | April 28, 2013 | July 29, 2012 | July 28, 2013 | July 29, 2012 | |||||||||||||||
Non-GAAP Adjusted Gross Margin | ||||||||||||||||||||
Reported gross margin (GAAP basis) | $ | 806 | $ | 808 | $ | 930 | $ | 2,196 | $ | 2,726 | ||||||||||
Certain items associated with acquisitions1 | 40 | 43 | 44 | 126 | 209 | |||||||||||||||
Acquisition integration and deal costs | 1 | 1 | — | 3 | — | |||||||||||||||
Non-GAAP adjusted gross margin | $ | 847 | $ | 852 | $ | 974 | $ | 2,325 | $ | 2,935 | ||||||||||
Non-GAAP adjusted gross margin percent (% of net sales) | 42.9 | % | 43.2 | % | 41.6 | % | 42.1 | % | 41.5 | % | ||||||||||
Non-GAAP Adjusted Operating Income | ||||||||||||||||||||
Reported operating income (loss) (GAAP basis) | $ | 250 | $ | (68 | ) | $ | 322 | $ | 221 | $ | 910 | |||||||||
Impairment of goodwill and intangible assets | — | 278 | — | 278 | — | |||||||||||||||
Certain items associated with acquisitions1 | 47 | 53 | 57 | 154 | 242 | |||||||||||||||
Acquisition integration and deal costs | 5 | 12 | 8 | 27 | 70 | |||||||||||||||
Restructuring charges and asset impairments2, 3, 4, 5 | 14 | 10 | 44 | 33 | 44 | |||||||||||||||
Gain on sale of facility | (4 | ) | — | — | (4 | ) | — | |||||||||||||
Non-GAAP adjusted operating income | $ | 312 | $ | 285 | $ | 431 | $ | 709 | $ | 1,266 | ||||||||||
Non-GAAP adjusted operating margin percent (% of net sales) | 15.8 | % | 14.4 | % | 18.4 | % | 12.8 | % | 17.9 | % | ||||||||||
Non-GAAP Adjusted Net Income | ||||||||||||||||||||
Reported net income (loss) (GAAP basis) | $ | 168 | $ | (129 | ) | $ | 218 | $ | 73 | $ | 624 | |||||||||
Impairment of goodwill and intangible assets | — | 278 | — | 278 | — | |||||||||||||||
Certain items associated with acquisitions1 | 47 | 53 | 57 | 154 | 242 | |||||||||||||||
Acquisition integration and deal costs | 5 | 12 | 8 | 27 | 70 | |||||||||||||||
Restructuring charges and asset impairments2, 3, 4, 5 | 14 | 10 | 44 | 33 | 44 | |||||||||||||||
Gain on sale of facility | (4 | ) | — | — | (4 | ) | — | |||||||||||||
Impairment of strategic investments | 3 | 2 | — | 5 | 3 | |||||||||||||||
Reinstatement of federal R&D tax credit | — | (3 | ) | — | (13 | ) | — | |||||||||||||
Resolution of prior years’ income tax filings | (3 | ) | — | (10 | ) | (14 | ) | (17 | ) | |||||||||||
Income tax effect of non-GAAP adjustments | (7 | ) | (24 | ) | (17 | ) | (48 | ) | (77 | ) | ||||||||||
Non-GAAP adjusted net income | $ | 223 | $ | 199 | $ | 300 | $ | 491 | $ | 889 | ||||||||||
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 months ended July 28, 2013 included $4 million of employee-related costs related to the restructuring program announced on October 3, 2012 and restructuring and asset impairment charges of $10 million related to the restructuring program announced on May 10, 2012. |
3 | Results for the three months ended April 28, 2013 included $4 million of employee-related costs related to the restructuring program announced on October 3, 2012 and restructuring and asset impairment charges of $6 million related to the restructuring program announced on May 10, 2012. |
4 | Results for the three and nine months ended July 29, 2012 included $35 million of restructuring and asset impairment charges related to the restructuring program announced on May 10, 2012 and severance charges of $9 million related to the integration of Varian. |
5 | Results for the nine months ended July 28, 2013 included $12 million of employee-related costs, net, related to the restructuring program announced on October 3, 2012, restructuring and asset impairment charges of $19 million related to the restructuring program announced on May 10, 2012 and severance charges of $2 million related to the integration of Varian. |
Applied Materials, Inc.
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APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS
Three Months Ended | Nine Months Ended | |||||||||||||||||||
(In millions except per share amounts) | July 28, 2013 | April 28, 2013 | July 29, 2012 | July 28, 2013 | July 29, 2012 | |||||||||||||||
Non-GAAP Adjusted Earnings Per Diluted Share | ||||||||||||||||||||
Reported earnings (loss) per diluted share (GAAP basis) | $ | 0.14 | $ | (0.11 | ) | $ | 0.17 | $ | 0.06 | $ | 0.48 | |||||||||
Impairment of goodwill and intangible assets | — | 0.22 | — | 0.22 | — | |||||||||||||||
Certain items associated with acquisitions | 0.03 | 0.04 | 0.04 | 0.10 | 0.15 | |||||||||||||||
Acquisition integration and deal costs | — | 0.01 | 0.01 | 0.02 | 0.04 | |||||||||||||||
Restructuring charges and asset impairments | 0.01 | — | 0.03 | 0.02 | 0.03 | |||||||||||||||
Reinstatement of federal R&D tax credit and resolution of prior years’ income tax filings | — | — | (0.01 | ) | (0.02 | ) | (0.01 | ) | ||||||||||||
Non-GAAP adjusted earnings per diluted share | $ | 0.18 | $ | 0.16 | $ | 0.24 | $ | 0.40 | $ | 0.69 | ||||||||||
Weighted average number of diluted shares | 1,220 | 1,217 | 1,268 | 1,218 | 1,292 | |||||||||||||||
Applied Materials, Inc.
Page 11 of 12
APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS
Three Months Ended | Nine Months Ended | |||||||||||||||||||
(In millions, except percentages) | July 28, 2013 | April 28, 2013 | July 29, 2012 | July 28, 2013 | July 29, 2012 | |||||||||||||||
SSG Non-GAAP Adjusted Operating Income | ||||||||||||||||||||
Reported operating income (GAAP basis) | $ | 246 | $ | 283 | $ | 427 | $ | 663 | $ | 1,202 | ||||||||||
Certain items associated with acquisitions1 | 42 | 45 | 47 | 131 | 208 | |||||||||||||||
Acquisition integration and deal costs, net | (5 | ) | 1 | 7 | (3 | ) | 31 | |||||||||||||
Restructuring charges and asset impairments4, 5 | — | — | 1 | 1 | 1 | |||||||||||||||
Non-GAAP adjusted operating income | $ | 283 | $ | 329 | $ | 482 | $ | 792 | $ | 1,442 | ||||||||||
Non-GAAP adjusted operating margin percent (% of net sales) | 22.2 | % | 25.5 | % | 31.2 | % | 22.4 | % | 30.9 | % | ||||||||||
AGS Non-GAAP Adjusted Operating Income | ||||||||||||||||||||
Reported operating income (GAAP basis) | $ | 114 | $ | 118 | $ | 122 | $ | 321 | $ | 338 | ||||||||||
Certain items associated with acquisitions1 | 2 | 1 | 2 | 4 | 10 | |||||||||||||||
Restructuring charges and asset impairments3, 4, 5 | — | 1 | 11 | 2 | 11 | |||||||||||||||
Non-GAAP adjusted operating income | $ | 116 | $ | 120 | $ | 135 | $ | 327 | $ | 359 | ||||||||||
Non-GAAP adjusted operating margin percent (% of net sales) | 23.3 | % | 23.2 | % | 23.3 | % | 22.0 | % | 21.6 | % | ||||||||||
Display Non-GAAP Adjusted Operating Income | ||||||||||||||||||||
Reported operating income (GAAP basis) | $ | 33 | $ | 19 | $ | 10 | $ | 55 | $ | 23 | ||||||||||
Certain items associated with acquisitions1 | 1 | 2 | 2 | 5 | 6 | |||||||||||||||
Non-GAAP adjusted operating income | $ | 34 | $ | 21 | $ | 12 | $ | 60 | $ | 29 | ||||||||||
Non-GAAP adjusted operating margin percent (% of net sales) | 21.1 | % | 16.5 | % | 8.5 | % | 16.0 | % | 7.6 | % | ||||||||||
EES Non-GAAP Adjusted Operating Loss | ||||||||||||||||||||
Reported operating loss (GAAP basis) | $ | (27 | ) | $ | (322 | ) | $ | (102 | ) | $ | (403 | ) | $ | (188 | ) | |||||
Impairment of goodwill and intangible assets | — | 278 | — | 278 | — | |||||||||||||||
Certain items associated with acquisitions1 | 2 | 5 | 6 | 14 | 18 | |||||||||||||||
Restructuring charges and asset impairments2, 3, 4, 5 | 10 | 5 | 32 | 18 | 32 | |||||||||||||||
Non-GAAP adjusted operating loss | $ | (15 | ) | $ | (34 | ) | $ | (64 | ) | $ | (93 | ) | $ | (138 | ) | |||||
Non-GAAP adjusted operating margin percent (% of net sales) | (33.3 | )% | (89.5 | )% | (83.1 | )% | (72.1 | )% | (38.0 | )% | ||||||||||
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 months ended July 28, 2013 included restructuring and asset impairment charges of $10 million related to the restructuring program announced on May 10, 2012. |
3 | Results for the three months ended April 28, 2013 included restructuring and asset impairment charges of $6 million related to the restructuring program announced on May 10, 2012. |
4 | Results for the three and nine months ended July 29, 2012 included restructuring and asset impairment charges of $35 million related to the restructuring program announced on May 10, 2012 and severance charges of $9 million related to the integration of Varian. |
5 | Results for the nine months ended July 28, 2013 included restructuring and asset impairment charges of $19 million related to the restructuring program announced on May 10, 2012 and severance charges of $2 million related to the integration of Varian. |
Applied Materials, Inc.
Page 12 of 12
APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED OPERATING EXPENSES
Three Months Ended | |||||||
(In millions) | July 28, 2013 | April 28, 2013 | |||||
Operating expenses (GAAP basis) | $ | 556 | $ | 876 | |||
Restructuring charges and asset impairments | (14 | ) | (10 | ) | |||
Certain items associated with acquisitions | (7 | ) | (10 | ) | |||
Acquisition integration costs | (4 | ) | (11 | ) | |||
Gain on sale of facility | 4 | — | |||||
Impairment of goodwill and intangible assets | — | (278 | ) | ||||
Non-GAAP adjusted operating expenses | $ | 535 | $ | 567 | |||
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED EFFECTIVE INCOME TAX RATE
Three Months Ended | |||
(In millions, except percentages) | July 28, 2013 | ||
Provision for income taxes (GAAP basis) (a) | $ | 60 | |
Resolutions of prior years’ income tax filings | 3 | ||
Income tax effect of non-GAAP adjustments | 7 | ||
Non-GAAP adjusted provision for income taxes (b) | $ | 70 | |
Income before income taxes (GAAP basis) (c) | $ | 228 | |
Certain items associated with acquisitions | 47 | ||
Restructuring charges and asset impairments | 14 | ||
Acquisition integration costs | 5 | ||
Impairment of strategic investments | 3 | ||
Gain on sale of facility | (4 | ) | |
Non-GAAP adjusted income before income taxes (d) | $ | 293 | |
Effective income tax rate (GAAP basis) (a/c) | 26.3 | % | |
Non-GAAP adjusted effective income tax rate (b/d) | 23.9 | % | |