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 15, 2018
____________________________________________________________________
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)) | |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging Growth Company | o |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act). o
Item 2.02 Results of Operations and Financial Condition.
On November 15, 2018, Applied Materials, Inc. (“Applied Materials”) announced its financial results for its fourth quarter and fiscal year ended October 28, 2018. 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 | |
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 15, 2018 | By: | /s/ Christina Y. Lai | |
Christina Y. Lai | ||||
Corporate Secretary | ||||
Exhibit 99.1
APPLIED MATERIALS ANNOUNCES FOURTH QUARTER AND FISCAL YEAR 2018 RESULTS
• | Quarterly revenue of $4.01 billion with GAAP EPS of $0.89 and non-GAAP EPS of $0.97 |
• | Record annual revenue and EPS |
• | Returns $5.89 billion to shareholders in fiscal 2018 |
SANTA CLARA, Calif., Nov. 15, 2018 — Applied Materials, Inc. (NASDAQ:AMAT) today reported strong revenue, operating income and earnings per share in its fourth quarter and fiscal year ended Oct. 28, 2018.
Fourth Quarter Results
Compared to the fourth quarter of fiscal 2017, Applied net sales increased slightly to $4.01 billion. On a GAAP basis, the company recorded gross margin of 44.3 percent, operating income of $1.02 billion or 25.3 percent of net sales, and earnings per share (EPS) of $0.89.
On a non-GAAP adjusted basis, over the same period, the company reported gross margin of 45.5 percent, operating income of $1.07 billion or 26.6 percent of net sales, and EPS of $0.97.
The company returned $946 million to shareholders through $751 million in share repurchases and dividends of $195 million.
Full Year Results
In fiscal 2018, Applied grew net sales by 19 percent to $17.25 billion. On a GAAP basis, the company recorded gross margin of 45.3 percent, operating income of $4.80 billion, and EPS of $3.23. On a non-GAAP adjusted basis, the company reported gross margin of 46.3 percent, operating income of $5.0 billion or 29.0 percent of net sales, and EPS of $4.45.
The company generated $3.79 billion in cash from operations, paid dividends of $605 million and used $5.28 billion to repurchase 102 million shares of common stock.
“In fiscal 2018, each of Applied’s major businesses delivered double-digit growth despite challenging conditions in the second half of the year,” said Gary Dickerson, president and CEO. “While near-term market headwinds remain, overall industry spending remains robust, and we are focused on positioning Applied Materials for the long term, expanding our role in the A.I.-Big Data era and winning the major technology inflections ahead.”
Applied Materials, Inc.
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Results Summary
Change | ||||||||||||||||||
Q4 FY2018 | Q4 FY2017 | FY2018 | FY2017 | Q4 FY2018 vs. Q4 FY2017 | FY2018 vs. FY2017 | |||||||||||||
(In millions, except per share amounts and percentages) | ||||||||||||||||||
Net sales | $ | 4,014 | $ | 3,969 | $ | 17,253 | $ | 14,537 | 1% | 19% | ||||||||
Gross margin | 44.3 | % | 45.0 | % | 45.3 | % | 44.9 | % | (0.7) points | 0.4 points | ||||||||
Operating margin | 25.3 | % | 27.7 | % | 27.8 | % | 26.6 | % | (2.4) points | 1.2 points | ||||||||
Net income | $ | 876 | $ | 982 | $ | 3,313 | $ | 3,434 | (11)% | (4)% | ||||||||
Diluted earnings per share | $ | 0.89 | $ | 0.91 | $ | 3.23 | $ | 3.17 | (2)% | 2% | ||||||||
Non-GAAP Adjusted Results | ||||||||||||||||||
Non-GAAP adjusted gross margin | 45.5 | % | 46.2 | % | 46.3 | % | 46.1 | % | (0.7) points | 0.2 points | ||||||||
Non-GAAP adjusted operating margin | 26.6 | % | 28.7 | % | 29.0 | % | 27.9 | % | (2.1) points | 1.1 points | ||||||||
Non-GAAP adjusted net income | $ | 956 | $ | 1,005 | $ | 4,569 | $ | 3,525 | (5)% | 30% | ||||||||
Non-GAAP adjusted diluted EPS | $ | 0.97 | $ | 0.93 | $ | 4.45 | $ | 3.25 | 4% | 37% | ||||||||
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” section.
Applied Materials, Inc.
Page 3 of 13
Business Outlook
In the first quarter of fiscal 2019, Applied expects net sales to be in the range of $3.56 billion to $3.86 billion; the midpoint of the range would be down approximately 12 percent, year over year. Non-GAAP adjusted diluted EPS is expected to be in the range of $0.75 to $0.83; the midpoint of the range would be a decrease of approximately 25 percent, year over year.
This outlook for non-GAAP adjusted diluted EPS excludes known charges related to completed acquisitions of $0.01 per share, the normalized tax benefit of share-based compensation of $0.04 per share, and net income tax benefit related to intra-entity intangible asset transfers of $0.02 per share, but does not reflect any items that are unknown at this time, such as any additional charges related to acquisitions or other non-operational or unusual items, as well as other tax related items, which we are not able to predict without unreasonable efforts due to their inherent uncertainty.
Fourth Quarter and Fiscal Year Reportable Segment Information
Semiconductor Systems | Q4 FY2018 | Q4 FY2017 | FY2018 | FY2017 | |||||||||||
(In millions, except percentages) | |||||||||||||||
Net sales | $ | 2,309 | $ | 2,431 | $ | 10,903 | $ | 9,517 | |||||||
Foundry | 23 | % | 36 | % | 24 | % | 41 | % | |||||||
DRAM | 26 | % | 12 | % | 27 | % | 16 | % | |||||||
Flash | 34 | % | 38 | % | 36 | % | 34 | % | |||||||
Logic and other | 17 | % | 14 | % | 13 | % | 9 | % | |||||||
Operating income | 638 | 801 | 3,634 | 3,173 | |||||||||||
Operating margin | 27.6 | % | 32.9 | % | 33.3 | % | 33.3 | % | |||||||
Non-GAAP Adjusted Results | |||||||||||||||
Non-GAAP adjusted operating income | $ | 684 | $ | 847 | $ | 3,817 | $ | 3,357 | |||||||
Non-GAAP adjusted operating margin | 29.6 | % | 34.8 | % | 35.0 | % | 35.3 | % | |||||||
Applied Global Services | Q4 FY2018 | Q4 FY2017 | FY2018 | FY2017 | |||||||||||
(In millions, except percentages) | |||||||||||||||
Net sales | $ | 977 | $ | 831 | $ | 3,754 | $ | 3,017 | |||||||
Operating income | 289 | 232 | 1,102 | 817 | |||||||||||
Operating margin | 29.6 | % | 27.9 | % | 29.4 | % | 27.1 | % | |||||||
Non-GAAP Adjusted Results | |||||||||||||||
Non-GAAP adjusted operating income | $ | 290 | $ | 232 | $ | 1,104 | $ | 821 | |||||||
Non-GAAP adjusted operating margin | 29.7 | % | 27.9 | % | 29.4 | % | 27.2 | % | |||||||
Applied Materials, Inc.
Page 4 of 13
Display and Adjacent Markets | Q4 FY2018 | Q4 FY2017 | FY2018 | FY2017 | |||||||||||
(In millions, except percentages) | |||||||||||||||
Net sales | $ | 702 | $ | 677 | $ | 2,498 | $ | 1,900 | |||||||
Operating income | 202 | 212 | 679 | 502 | |||||||||||
Operating margin | 28.8 | % | 31.3 | % | 27.2 | % | 26.4 | % | |||||||
Non-GAAP Adjusted Results | |||||||||||||||
Non-GAAP adjusted operating income | $ | 206 | $ | 215 | $ | 694 | $ | 507 | |||||||
Non-GAAP adjusted operating margin | 29.3 | % | 31.8 | % | 27.8 | % | 26.7 | % | |||||||
Use of Non-GAAP Adjusted Financial Measures
Applied provides investors with certain non-GAAP adjusted financial measures, which are adjusted for the impact of certain costs, expenses, gains and losses, including certain items related to mergers and acquisitions; restructuring charges and any associated adjustments; impairments of assets, or investments; gain or loss on sale of strategic investments; tax effect of share-based compensation; certain income tax items and other discrete adjustments. Additionally, the fourth quarter and fiscal 2018 non-GAAP results exclude estimated discrete income tax expense items associated with changes to recent U.S. tax legislation. Reconciliations of these non-GAAP measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are provided in the financial tables included in this release.
Management uses these non-GAAP adjusted financial measures to evaluate the company’s operating and financial performance and for planning purposes, and as performance measures in its executive compensation program. Applied believes these measures enhance an overall understanding of our performance and 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 on a consistent basis by excluding items that we do not believe are indicative of our ongoing operating performance. There are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles, may be different from non-GAAP financial measures used by other companies, and may exclude certain items that may have a material impact upon our reported financial results. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures 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.
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Forward-Looking Statements
This press release contains forward-looking statements, including those regarding anticipated growth and trends in our businesses and markets, industry outlooks and demand drivers, technology transitions, our business and financial performance and market share positions, our capital allocation, our investment and growth strategies, our development of new products and technologies, our business outlook for the first quarter of fiscal 2019, and other statements that are not historical facts. These statements and their underlying assumptions are subject to risks and uncertainties and are not guarantees of future performance. Factors that could cause actual results to differ materially from those expressed or implied by such statements include, without limitation: the level of demand for our products; global economic and industry conditions; global trade issues and changes in trade policies; consumer demand for electronic products; the demand for semiconductors; customers’ technology and capacity requirements; the introduction of new and innovative technologies, and the timing of technology transitions; our ability to develop, deliver and support new products and technologies; the concentrated nature of our customer base; our ability to expand our current markets, increase market share and develop new markets; market acceptance of existing and newly developed products; our ability to obtain and protect intellectual property rights in key technologies; our ability to achieve the objectives of operational and strategic initiatives, align our resources and cost structure with business conditions, and attract, motivate and retain key employees; the variability of operating expenses and results among products and segments, and our ability to accurately forecast future results, market conditions, customer requirements and business needs; changes in U.S. tax laws and regulation, and our interpretations of them; and other risks and uncertainties described in our SEC filings, including our most recent Forms 10-Q and 8-K. All forward-looking statements are based on management’s current estimates, projections and assumptions, and we assume no obligation to update them.
About Applied Materials
Applied Materials, Inc. (Nasdaq: AMAT) is the leader in materials engineering solutions used to produce virtually every new chip and advanced display in the world. Our expertise in modifying materials at atomic levels and on an industrial scale enables customers to transform possibilities into reality. At Applied Materials, our innovations make possible the technology shaping the future. Learn more at www.appliedmaterials.com.
Contact:
Ricky Gradwohl (editorial/media) 408.235.4676
Michael Sullivan (financial community) 408.986.7977
Applied Materials, Inc.
Page 6 of 13
APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
Three Months Ended | Twelve Months Ended | ||||||||||||||
(In millions, except per share amounts) | October 28, 2018 | October 29, 2017 | October 28, 2018 | October 29, 2017 | |||||||||||
Net sales | $ | 4,014 | $ | 3,969 | $ | 17,253 | $ | 14,537 | |||||||
Cost of products sold | 2,234 | 2,182 | 9,436 | 8,005 | |||||||||||
Gross profit | 1,780 | 1,787 | 7,817 | 6,532 | |||||||||||
Operating expenses: | |||||||||||||||
Research, development and engineering | 518 | 466 | 2,019 | 1,774 | |||||||||||
Marketing and selling | 127 | 105 | 521 | 456 | |||||||||||
General and administrative | 119 | 118 | 481 | 434 | |||||||||||
Total operating expenses | 764 | 689 | 3,021 | 2,664 | |||||||||||
Income from operations | 1,016 | 1,098 | 4,796 | 3,868 | |||||||||||
Interest expense | 60 | 57 | 234 | 198 | |||||||||||
Interest and other income, net | 42 | 33 | 132 | 61 | |||||||||||
Income before income taxes | 998 | 1,074 | 4,694 | 3,731 | |||||||||||
Provision for income taxes | 122 | 92 | 1,381 | 297 | |||||||||||
Net income | $ | 876 | $ | 982 | $ | 3,313 | $ | 3,434 | |||||||
Earnings per share: | |||||||||||||||
Basic | $ | 0.90 | $ | 0.92 | $ | 3.27 | $ | 3.20 | |||||||
Diluted | $ | 0.89 | $ | 0.91 | $ | 3.23 | $ | 3.17 | |||||||
Weighted average number of shares: | |||||||||||||||
Basic | 974 | 1,064 | 1,013 | 1,073 | |||||||||||
Diluted | 984 | 1,076 | 1,026 | 1,084 | |||||||||||
Applied Materials, Inc.
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APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions) | October 28, 2018 | October 29, 2017 | |||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 3,440 | $ | 5,010 | |||
Short-term investments | 590 | 2,266 | |||||
Accounts receivable, net | 2,565 | 2,338 | |||||
Inventories | 3,722 | 2,930 | |||||
Other current assets | 430 | 374 | |||||
Total current assets | 10,747 | 12,918 | |||||
Long-term investments | 1,568 | 1,143 | |||||
Property, plant and equipment, net | 1,407 | 1,066 | |||||
Goodwill | 3,368 | 3,368 | |||||
Purchased technology and other intangible assets, net | 213 | 412 | |||||
Deferred income taxes and other assets | 470 | 512 | |||||
Total assets | $ | 17,773 | $ | 19,419 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable and accrued expenses | $ | 2,721 | $ | 2,450 | |||
Customer deposits and deferred revenue | 1,347 | 1,665 | |||||
Total current liabilities | 4,068 | 4,115 | |||||
Long-term debt | 5,309 | 5,304 | |||||
Income taxes payable | 1,254 | 392 | |||||
Other liabilities | 303 | 259 | |||||
Total liabilities | 10,934 | 10,070 | |||||
Total stockholders’ equity | 6,839 | 9,349 | |||||
Total liabilities and stockholders’ equity | $ | 17,773 | $ | 19,419 | |||
Applied Materials, Inc.
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APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In millions) | Three Months Ended | Twelve Months Ended | |||||||||||||
October 28, 2018 | October 29, 2017 | October 28, 2018 | October 29, 2017 | ||||||||||||
Cash flows from operating activities: | |||||||||||||||
Net income | $ | 876 | $ | 982 | $ | 3,313 | $ | 3,434 | |||||||
Adjustments required to reconcile net income to cash provided by operating activities: | |||||||||||||||
Depreciation and amortization | 120 | 105 | 457 | 407 | |||||||||||
Share-based compensation | 65 | 58 | 258 | 220 | |||||||||||
Deferred income taxes | (18 | ) | (17 | ) | 94 | (11 | ) | ||||||||
Other | — | (24 | ) | 4 | (9 | ) | |||||||||
Net change in operating assets and liabilities | 34 | (395 | ) | (339 | ) | (252 | ) | ||||||||
Cash provided by operating activities | 1,077 | 709 | 3,787 | 3,789 | |||||||||||
Cash flows from investing activities: | |||||||||||||||
Capital expenditures | (165 | ) | (124 | ) | (622 | ) | (345 | ) | |||||||
Cash paid for acquisitions, net of cash acquired | (1 | ) | (12 | ) | (6 | ) | (68 | ) | |||||||
Proceeds from sales and maturities of investments | 453 | 921 | 3,276 | 2,743 | |||||||||||
Purchases of investments | (416 | ) | (1,314 | ) | (2,077 | ) | (4,856 | ) | |||||||
Cash provided by (used in) investing activities | (129 | ) | (529 | ) | 571 | (2,526 | ) | ||||||||
Cash flows from financing activities: | |||||||||||||||
Debt borrowings, net of issuance costs | — | — | — | 2,176 | |||||||||||
Debt repayments | — | — | — | (205 | ) | ||||||||||
Proceeds from common stock issuances | 68 | 50 | 124 | 97 | |||||||||||
Common stock repurchases | (751 | ) | (385 | ) | (5,283 | ) | (1,172 | ) | |||||||
Tax withholding payments for vested equity awards | (4 | ) | (6 | ) | (164 | ) | (125 | ) | |||||||
Payments of dividends to stockholders | (195 | ) | (107 | ) | (605 | ) | (430 | ) | |||||||
Cash provided by (used in) financing activities | (882 | ) | (448 | ) | (5,928 | ) | 341 | ||||||||
Increase (decrease) in cash and cash equivalents | 66 | (268 | ) | (1,570 | ) | 1,604 | |||||||||
Cash and cash equivalents — beginning of period | 3,374 | 5,278 | 5,010 | 3,406 | |||||||||||
Cash and cash equivalents — end of period | $ | 3,440 | $ | 5,010 | $ | 3,440 | $ | 5,010 | |||||||
Supplemental cash flow information: | |||||||||||||||
Cash payments for income taxes | $ | 19 | $ | 26 | $ | 300 | $ | 194 | |||||||
Cash refunds from income taxes | $ | 12 | $ | 44 | $ | 63 | $ | 61 | |||||||
Cash payments for interest | $ | 76 | $ | 76 | $ | 219 | $ | 186 | |||||||
Applied Materials, Inc.
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APPLIED MATERIALS, INC.
UNAUDITED SUPPLEMENTAL INFORMATION
Corporate and Other
(In millions) | Q4 FY2018 | Q4 FY2017 | FY2018 | FY2017 | |||||||||||
Unallocated net sales | $ | 26 | $ | 30 | $ | 98 | $ | 103 | |||||||
Unallocated cost of products sold and expenses | (74 | ) | (119 | ) | (459 | ) | (507 | ) | |||||||
Share-based compensation | (65 | ) | (58 | ) | (258 | ) | (220 | ) | |||||||
Total | $ | (113 | ) | $ | (147 | ) | $ | (619 | ) | $ | (624 | ) | |||
Additional Information
Q4 FY2018 | Q4 FY2017 | FY2018 | FY2017 | ||||||||
Net Sales by Geography (In millions) | |||||||||||
United States | 366 | 415 | 1,532 | 1,474 | |||||||
% of Total | 9 | % | 10 | % | 9 | % | 10 | % | |||
Europe | 250 | 227 | 1,066 | 816 | |||||||
% of Total | 7 | % | 6 | % | 6 | % | 6 | % | |||
Japan | 721 | 507 | 2,405 | 1,518 | |||||||
% of Total | 18 | % | 13 | % | 14 | % | 10 | % | |||
Korea | 537 | 1,175 | 3,603 | 4,052 | |||||||
% of Total | 13 | % | 30 | % | 21 | % | 28 | % | |||
Taiwan | 608 | 718 | 2,732 | 3,291 | |||||||
% of Total | 15 | % | 18 | % | 16 | % | 23 | % | |||
Southeast Asia | 201 | 330 | 802 | 640 | |||||||
% of Total | 5 | % | 8 | % | 4 | % | 4 | % | |||
China | 1,331 | 597 | 5,113 | 2,746 | |||||||
% of Total | 33 | % | 15 | % | 30 | % | 19 | % | |||
Employees (In thousands) | |||||||||||
Regular Full Time | 21.0 | 18.4 | |||||||||
Applied Materials, Inc.
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APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS
Three Months Ended | Twelve Months Ended | ||||||||||||||
(In millions, except percentages) | October 28, 2018 | October 29, 2017 | October 28, 2018 | October 29, 2017 | |||||||||||
Non-GAAP Adjusted Gross Profit | |||||||||||||||
Reported gross profit - GAAP basis | $ | 1,780 | $ | 1,787 | $ | 7,817 | $ | 6,532 | |||||||
Certain items associated with acquisitions1 | 45 | 45 | 179 | 172 | |||||||||||
Non-GAAP adjusted gross profit | $ | 1,825 | $ | 1,832 | $ | 7,996 | $ | 6,704 | |||||||
Non-GAAP adjusted gross margin | 45.5 | % | 46.2 | % | 46.3 | % | 46.1 | % | |||||||
Non-GAAP Adjusted Operating Income | |||||||||||||||
Reported operating income - GAAP basis | $ | 1,016 | $ | 1,098 | $ | 4,796 | $ | 3,868 | |||||||
Certain items associated with acquisitions1 | 50 | 49 | 197 | 191 | |||||||||||
Acquisition integration and deal costs | 3 | — | 5 | 3 | |||||||||||
Other gains, losses or charges, net | — | (9 | ) | — | (12 | ) | |||||||||
Non-GAAP adjusted operating income | $ | 1,069 | $ | 1,138 | $ | 4,998 | $ | 4,050 | |||||||
Non-GAAP adjusted operating margin | 26.6 | % | 28.7 | % | 29.0 | % | 27.9 | % | |||||||
Non-GAAP Adjusted Net Income | |||||||||||||||
Reported net income - GAAP basis | $ | 876 | $ | 982 | $ | 3,313 | $ | 3,434 | |||||||
Certain items associated with acquisitions1 | 50 | 49 | 197 | 191 | |||||||||||
Acquisition integration and deal costs | 3 | — | 5 | 3 | |||||||||||
Impairment (gain on sale) of strategic investments, net | (15 | ) | (7 | ) | (25 | ) | (3 | ) | |||||||
Loss on early extinguishment of debt | — | — | — | 5 | |||||||||||
Other gains, losses or charges, net | — | (9 | ) | — | (12 | ) | |||||||||
Income tax effect of share-based compensation2 | 13 | — | — | — | |||||||||||
Income tax effect of changes in applicable U.S. tax laws3 | 23 | — | 1,112 | — | |||||||||||
Resolution of prior years’ income tax filings and other tax items | 6 | (11 | ) | (26 | ) | (79 | ) | ||||||||
Income tax effect of non-GAAP adjustments4 | — | 1 | (7 | ) | (14 | ) | |||||||||
Non-GAAP adjusted net income | $ | 956 | $ | 1,005 | $ | 4,569 | $ | 3,525 | |||||||
1 | These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets. |
2 | Applied adopted the accounting standard related to share-based compensation (ASU 2016-09) in the first quarter of fiscal 2018, which resulted in $51 million tax benefit on a GAAP basis for fiscal 2018; this benefit was being recognized ratably over the fiscal year on a non-GAAP basis. |
3 | Charges to income tax provision related to a one-time transition tax and a decrease in U.S. deferred tax assets as a result of the recent U.S. tax legislation. |
4 | Adjustment to provision for income taxes related to non-GAAP adjustments reflected in income before income taxes. |
Applied Materials, Inc.
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APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS
Three Months Ended | Twelve Months Ended | ||||||||||||||
(In millions, except per share amounts) | October 28, 2018 | October 29, 2017 | October 28, 2018 | October 29, 2017 | |||||||||||
Non-GAAP Adjusted Earnings Per Diluted Share | |||||||||||||||
Reported earnings per diluted share - GAAP basis | $ | 0.89 | $ | 0.91 | $ | 3.23 | $ | 3.17 | |||||||
Certain items associated with acquisitions | 0.05 | 0.04 | 0.18 | 0.16 | |||||||||||
Impairment (gain on sale) of strategic investments, net | (0.01 | ) | — | (0.02 | ) | — | |||||||||
Income tax effect of share-based compensation | 0.01 | — | — | — | |||||||||||
Income tax effect of changes in applicable U.S. tax laws | 0.02 | — | 1.08 | — | |||||||||||
Resolution of prior years’ income tax filings and other tax items | 0.01 | (0.01 | ) | (0.02 | ) | (0.07 | ) | ||||||||
Other gains, losses or charges, net | — | (0.01 | ) | — | (0.01 | ) | |||||||||
Non-GAAP adjusted earnings per diluted share | $ | 0.97 | $ | 0.93 | $ | 4.45 | $ | 3.25 | |||||||
Weighted average number of diluted shares | 984 | 1,076 | 1,026 | 1,084 | |||||||||||
Applied Materials, Inc.
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APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS
Three Months Ended | Twelve Months Ended | ||||||||||||||
(In millions, except percentages) | October 28, 2018 | October 29, 2017 | October 28, 2018 | October 29, 2017 | |||||||||||
Semiconductor Systems Non-GAAP Adjusted Operating Income | |||||||||||||||
Reported operating income - GAAP basis | $ | 638 | $ | 801 | $ | 3,634 | $ | 3,173 | |||||||
Certain items associated with acquisitions1 | 46 | 46 | 183 | 184 | |||||||||||
Non-GAAP adjusted operating income | $ | 684 | $ | 847 | $ | 3,817 | $ | 3,357 | |||||||
Non-GAAP adjusted operating margin | 29.6 | % | 34.8 | % | 35.0 | % | 35.3 | % | |||||||
AGS Non-GAAP Adjusted Operating Income | |||||||||||||||
Reported operating income - GAAP basis | $ | 289 | $ | 232 | $ | 1,102 | $ | 817 | |||||||
Certain items associated with acquisitions1 | — | — | — | 1 | |||||||||||
Acquisition integration costs | 1 | — | 2 | 3 | |||||||||||
Non-GAAP adjusted operating income | $ | 290 | $ | 232 | $ | 1,104 | $ | 821 | |||||||
Non-GAAP adjusted operating margin | 29.7 | % | 27.9 | % | 29.4 | % | 27.2 | % | |||||||
Display and Adjacent Markets Non-GAAP Adjusted Operating Income | |||||||||||||||
Reported operating income - GAAP basis | $ | 202 | $ | 212 | $ | 679 | $ | 502 | |||||||
Certain items associated with acquisitions1 | 4 | 3 | 14 | 5 | |||||||||||
Acquisition integration costs | — | — | 1 | — | |||||||||||
Non-GAAP adjusted operating income | $ | 206 | $ | 215 | $ | 694 | $ | 507 | |||||||
Non-GAAP adjusted operating margin | 29.3 | % | 31.8 | % | 27.8 | % | 26.7 | % | |||||||
1 | These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets. |
Note: The reconciliation of GAAP and non-GAAP adjusted segment results above does not include certain revenues, costs of products sold and operating expenses that are reported within corporate and other and included in consolidated operating income.
Applied Materials, Inc.
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UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED EFFECTIVE INCOME TAX RATE
Three Months Ended | |||
(In millions, except percentages) | October 28, 2018 | ||
Provision for income taxes - GAAP basis (a) | $ | 122 | |
Income tax effect of share-based compensation | (13 | ) | |
Income tax effect of changes in applicable U.S. tax laws | (23 | ) | |
Resolutions of prior years’ income tax filings and other tax items | (6 | ) | |
Non-GAAP adjusted provision for income taxes (b) | $ | 80 | |
Income before income taxes - GAAP basis (c) | $ | 998 | |
Certain items associated with acquisitions | 50 | ||
Acquisition integration and deal costs | 3 | ||
Impairment (gain on sale) of strategic investments, net | (15 | ) | |
Non-GAAP adjusted income before income taxes (d) | $ | 1,036 | |
Effective income tax rate - GAAP basis (a/c) | 12.2 | % | |
Non-GAAP adjusted effective income tax rate (b/d) | 7.7 | % | |