Applied Materials Announces Fourth Quarter and Fiscal Year 2012 Results
Expects Orders to Increase in the First Quarter of FY2013
- Fourth quarter net sales of $1.65 billion down 30 percent sequentially; Q4 non-GAAP EPS of 6 cents at high end of expectations; Q4 GAAP loss of 42 cents included a goodwill impairment and restructuring charges
- FY2012 net sales of $8.72 billion down 17 percent; FY2012 non-GAAP EPS of 75 cents down 42 percent; FY2012 GAAP EPS of 9 cents included a goodwill impairment along with acquisition-related and restructuring charges
- Returned $1.85 billion to stockholders in FY2012 including $1.42 billion in stock repurchases
SANTA CLARA, Calif., November 15, 2012 - Applied Materials, Inc. (NASDAQ:AMAT), the global leader in manufacturing solutions for the semiconductor, display and solar industries, today reported results for its fourth quarter and fiscal year ended October 28, 2012.
In the fourth quarter, Applied generated orders of $1.47 billion and net sales of $1.65 billion. The company recorded a goodwill impairment and restructuring charges totaling $545 million and reported an operating loss of $499 million, with a net loss of $515 million or 42 cents per diluted share. Non-GAAP operating income was $114 million, and non-GAAP net income was $70 million or 6 cents per share, at the high end of the company's expectations.
In FY2012, the company reported orders of $8.04 billion, net sales of $8.72 billion, operating income of $411 million, and net income of $109 million or 9 cents per diluted share. Non-GAAP operating income for the year was $1.38 billion, and non-GAAP net income was $960 million or 75 cents per share.
"In our fourth quarter, Applied delivered profit at the high end of our outlook despite challenging industry conditions in semiconductor, solar and display," said Mike Splinter, Chairman and CEO. "Our strong cash flow performance allowed us to increase our quarterly dividend and share buybacks, returning $1.85 billion to stockholders in the year."
"We see improving business conditions entering 2013, with orders projected to increase after bottoming in the fourth quarter," Splinter added. "Accelerated changes in device technology and the adoption of new materials in all of the industries we serve provide opportunities for Applied to build on our leadership and grow our market share."
Quarterly Results Summary
| GAAP Results | Q4 FY2012 | Q3 FY2012 | Q4 FY2011 | |||
| Net sales | $1.65 billion | $2.34 billion | $2.18 billion | |||
| Operating income (loss) | $(499) million | $322 million | $361 million | |||
| Net income (loss) | $(515) million | $218 million | $456 million | |||
| Diluted earnings (loss) per share (EPS) | $(0.42) | $0.17 | $0.34 | |||
| Non-GAAP Results | ||||||
| Non-GAAP operating income | $114 million | $431 million | $384 million | |||
| Non-GAAP net income | $70 million | $300 million | $271 million | |||
| Non-GAAP diluted EPS | $0.06 | $0.24 | $0.21 |
Fourth quarter results included a $421 million goodwill impairment charge associated with the Energy and Environmental Solutions (EES) segment. The goodwill impairment reflects the deterioration in solar equipment market conditions, our customers' financial condition and reduced market valuations, causing Applied to reassess the recoverability of the segment's goodwill. Applied also reported $124 million in charges related to previously announced restructuring plans and the integration of Varian.
Fourth quarter orders for Varian products of $152 million and net sales of $195 million were reported within the Silicon Systems Group (SSG) and Applied Global Services (AGS) segments. The Varian business contributed approximately one cent to the company's non-GAAP EPS in the quarter, which excluded acquisition-related charges equivalent to approximately three cents per share. In FY2012, orders for Varian products totaled $1.03 billion, and net sales were $1.02 billion. The Varian business contributed approximately 11 cents to Applied's non-GAAP EPS, which excluded acquisition-related charges equivalent to approximately 20 cents per share.
Applied's non-GAAP results exclude the impact of the following, where applicable: certain discrete tax items; restructuring charges and any associated adjustments; certain acquisition-related costs; impairments of assets, goodwill, or investments; and/or gain or loss on sale of facilities. A reconciliation of the GAAP and non-GAAP results is provided in the financial tables included in this release. See also "Use of Non-GAAP Financial Measures" below.
Fourth Quarter Reportable Segment Results and Comparisons to the Third Quarter
Silicon Systems Group (SSG) orders were $741 million, down 36 percent, primarily due to lower orders in foundry and memory, partially offset by increased orders in logic. Net sales were $870 million, down 44 percent. Non-GAAP operating income decreased to $95 million or 10.9 percent of net sales. GAAP operating income decreased to $41 million or 4.7 percent of net sales. New order composition was: foundry 47 percent, flash 8 percent, logic and other 40 percent, and DRAM 5 percent.
Applied Global Services (AGS) orders were $576 million, up 8 percent driven by service contract renewals. Net sales were $621 million, up 7 percent, which included $85 million in sales of a thin film production line. Non-GAAP operating income increased to $171 million or 27.5 percent of net sales. GAAP operating income increased to $164 million or 26.4 percent of net sales.
Display orders were $83 million, up 24 percent from low levels. Net sales were $93 million, down 35 percent. Non-GAAP operating income decreased to $4 million or 4.3 percent of net sales. GAAP operating income decreased to $3 million or 3.2 percent of net sales.
Energy and Environmental Solutions (EES) orders were $65 million, up 86 percent from low levels driven by demand for roll-to-roll deposition equipment. Net sales were $62 million, down 19 percent. EES had a non-GAAP operating loss of $46 million and a GAAP operating loss of $480 million.
Additional Quarterly Financial Information and Comparisons to the Third Quarter
- Backlog decreased by $215 million to $1.6 billion and included negative adjustments of $42 million.
- Gross margin was 38.4 percent on a non-GAAP basis, down from 41.6 percent, reflecting the decrease in net sales. GAAP gross margin was 35.6 percent.
- Operating expenses were $518 million on a non-GAAP basis, down from $543 million, with the decrease primarily reflecting an adjustment in compensation accruals. GAAP operating expenses were $1.09 billion.
- The effective tax rate was 26.3 percent on a non-GAAP basis. The GAAP effective tax rate was 3.2 percent.
- Cash, cash equivalents and investments ended the quarter at $3.0 billion.
Full-Year Reportable Segment Results and Comparisons to the Prior Year
SSG orders decreased by 4 percent to $5.29 billion, net sales increased by 2 percent to $5.54 billion, non-GAAP operating income decreased to $1.54 billion or 27.8 percent of net sales, and operating income decreased to $1.24 billion or 22.5 percent of net sales.
AGS orders decreased by 3 percent to $2.27 billion, net sales decreased by 5 percent to $2.29 billion, non-GAAP operating income increased to $530 million or 23.2 percent of net sales, and operating income increased to $502 million or 22.0 percent of net sales.
Display orders decreased by 57 percent to $274 million, net sales decreased by 32 percent to $473 million, non-GAAP operating income decreased to $32 million or 6.8 percent of net sales, and operating income decreased to $25 million or 5.3 percent of net sales.
EES orders decreased by 88 percent to $195 million and net sales decreased by 79 percent to $425 million. The business generated a non-GAAP operating loss of $184 million and a GAAP operating loss of $668 million.
Business Outlook
For the first quarter of fiscal 2013, Applied expects net sales to be flat to down 15 percent sequentially. The company expects non-GAAP EPS to be in the range of $0.00 to $0.06. The non-GAAP EPS outlook excludes known charges related to completed acquisitions of approximately $0.05 per share but does not exclude 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 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, industry conditions, technology changes, opportunities, strategic position, and business outlooks for the first quarter of fiscal 2013. Forward-looking statements may contain words such as "expect," "believe," "may," "can," "should," "will," "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, end-demand for electronic products and semiconductors, government renewable energy policies and incentives, 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) timely align its cost structure with business conditions and achieve the intended objectives of cost-reduction activities, (iii) plan and manage its resources and production capability, (iv) integrate Varian and realize synergies, (v) obtain and protect intellectual property rights in key technologies, (vi) attract, motivate and retain key employees, and (vii) 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 most recent current and periodic SEC reports. 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. At Applied Materials, we turn today's innovations into the industries of tomorrow. Learn more at www.appliedmaterials.com.
Contact:
Matt Ceniceros (editorial/media) 408.768.8169
Michael Sullivan (financial community) 408.986.7977
APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
| Three Months Ended | Twelve Months Ended | ||||||||||||||||||||
| (In millions, except per share amounts) | October 28, 2012 |
July 29, 2012 |
October 30, 2011 |
October 28, 2012 |
October 30, 2011 | ||||||||||||||||
| Net sales | $ | 1,646 | $ | 2,343 | $ | 2,182 | $ | 8,719 | $ | 10,517 | |||||||||||
| Cost of products sold | 1,060 | 1,413 | 1,330 | 5,406 | 6,157 | ||||||||||||||||
| Gross margin | 586 | 930 | 852 | 3,313 | 4,360 | ||||||||||||||||
| Operating expenses: | |||||||||||||||||||||
| Research, development and engineering | 303 | 309 | 269 | 1,237 | 1,118 | ||||||||||||||||
| Selling, general and administrative | 237 | 255 | 222 | 1,076 | 901 | ||||||||||||||||
| Impairment of goodwill | 421 | - | - | 421 | - | ||||||||||||||||
| Restructuring charges and asset impairments |
124 | 44 | - | 168 | (30 | ) | |||||||||||||||
| Gain on sale of facilities, net | - | - | - | - | (27 | ) | |||||||||||||||
| Total operating expenses | 1,085 | 608 | 491 | 2,902 | 1,962 | ||||||||||||||||
| Income (loss) from operations | (499 | ) | 322 | 361 | 411 | 2,398 | |||||||||||||||
| Impairment of strategic investments | 14 | - | 3 | 17 | 3 | ||||||||||||||||
| Interest and other expenses | 24 | 24 | 24 | 95 | 59 | ||||||||||||||||
| Interest and other income, net | 5 | 4 | 10 | 17 | 42 | ||||||||||||||||
| Income (loss) before income taxes | (532 | ) | 302 | 344 | 316 | 2,378 | |||||||||||||||
| Provision (benefit) for income taxes | (17 | ) | 84 | (112 | ) | 207 | 452 | ||||||||||||||
| Net income (loss) | $ | (515 | ) | $ | 218 | $ | 456 | $ | 109 | $ | 1,926 | ||||||||||
| Earnings (loss) per share: | |||||||||||||||||||||
| Basic | $ | (0.42 | ) | $ | 0.17 | $ | 0.35 | $ | 0.09 | $ | 1.46 | ||||||||||
| Diluted | $ | (0.42 | ) | $ | 0.17 | $ | 0.34 | $ | 0.09 | $ | 1.45 | ||||||||||
| Weighted average number of shares: | |||||||||||||||||||||
| Basic | 1,220 | 1,257 | 1,312 | 1,266 | 1,319 | ||||||||||||||||
| Diluted | 1,220 | 1,268 | 1,321 | 1,277 | 1,330 | ||||||||||||||||
APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
| (In millions) | October 28, 2012 |
October 30, 2011 | |||||||
| ASSETS | |||||||||
| Current assets: | |||||||||
| Cash and cash equivalents | $ | 1,392 | $ | 5,960 | |||||
| Short-term investments | 545 | 283 | |||||||
| Accounts receivable, net | 1,220 | 1,532 | |||||||
| Inventories | 1,272 | 1,701 | |||||||
| Deferred income taxes, net | 369 | 580 | |||||||
| Other current assets | 304 | 299 | |||||||
| Total current assets | 5,102 | 10,355 | |||||||
| Long-term investments | 1,055 | 931 | |||||||
| Property, plant and equipment, net | 910 | 866 | |||||||
| Goodwill | 3,518 | 1,335 | |||||||
| Purchased technology and other intangible assets, net | 1,355 | 211 | |||||||
| Deferred income taxes and other assets | 162 | 163 | |||||||
| Total assets | $ | 12,102 | $ | 13,861 | |||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||
| Current liabilities: | |||||||||
| Accounts payable and accrued expenses | $ | 1,436 | $ | 1,520 | |||||
| Customer deposits and deferred revenue | 755 | 1,116 | |||||||
| Income taxes payable | 74 | 158 | |||||||
| Total current liabilities | 2,265 | 2,794 | |||||||
| Long-term debt | 1,946 | 1,947 | |||||||
| Deferred income taxes and income taxes payable | 341 | 104 | |||||||
| Employee benefits and other liabilities | 315 | 216 | |||||||
| Total liabilities | 4,867 | 5,061 | |||||||
| Total stockholders' equity | 7,235 | 8,800 | |||||||
| Total liabilities and stockholders' equity | $ | 12,102 | $ | 13,861 | |||||
APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
| (In millions) | Three Months Ended | Twelve Months Ended | |||||||||||||||
| October 28, 2012 |
October 30, 2011 |
October 28, 2012 |
October 30, 2011 | ||||||||||||||
| Cash flows from operating activities: | |||||||||||||||||
| Net income (loss) | $ | (515 | ) | $ | 456 | $ | 109 | $ | 1,926 | ||||||||
| Adjustments required to reconcile net income (loss) to cash provided by operating activities: | |||||||||||||||||
| Depreciation and amortization | 97 | 59 | 422 | 246 | |||||||||||||
| Net loss (gain) on dispositions and fixed asset retirements |
(4 | ) | 10 | 7 | (13 | ) | |||||||||||
| Provision for bad debts | 5 | 5 | 14 | 5 | |||||||||||||
| Impairment of goodwill | 421 | - | 421 | - | |||||||||||||
| Restructuring charges and asset impairments | 124 | - | 168 | (30 | ) | ||||||||||||
| Deferred income taxes | 56 | 222 | 161 | 122 | |||||||||||||
| Net loss on investments and amortization on debt securities |
7 | 6 | 23 | 19 | |||||||||||||
| Impairment of strategic investments | 14 | - | 17 | - | |||||||||||||
| Share-based compensation | 44 | 37 | 182 | 146 | |||||||||||||
| Net change in operating assets and liabilities, net of amounts acquired |
162 | (96 | ) | 327 | 5 | ||||||||||||
| Cash provided by operating activities | 411 | 699 | 1,851 | 2,426 | |||||||||||||
| Cash flows from investing activities: | |||||||||||||||||
| Capital expenditures | (41 | ) | (73 | ) | (162 | ) | (209 | ) | |||||||||
| Cash paid for acquisition, net of cash acquired | (1 | ) | - | (4,190 | ) | - | |||||||||||
| Proceeds from sale of facilities and dispositions | - | 4 | - | 130 | |||||||||||||
| Proceeds from sales and maturities of investments | 254 | 754 | 1,019 | 1,926 | |||||||||||||
| Purchases of investments | (175 | ) | (192 | ) | (1,327 | ) | (1,137 | ) | |||||||||
| Cash provided by (used in) investing activities | 37 | 493 | (4,660 | ) | 710 | ||||||||||||
| Cash flows from financing activities: | |||||||||||||||||
| Debt borrowings (repayments), net | - | - | (1 | ) | 1,744 | ||||||||||||
| Payments of debt issuance costs | - | - | - | (14 | ) | ||||||||||||
| Proceeds from common stock issuances | 45 | 31 | 97 | 95 | |||||||||||||
| Common stock repurchases | (516 | ) | (175 | ) | (1,416 | ) | (468 | ) | |||||||||
| Payments of dividends to stockholders | (111 | ) | (106 | ) | (434 | ) | (397 | ) | |||||||||
| Cash provided by (used in) financing activities | (582 | ) | (250 | ) | (1,754 | ) | 960 | ||||||||||
| Effect of exchange rate changes on cash and cash equivalents |
(3 | ) | - | (5 | ) | 6 | |||||||||||
| Increase (decrease) in cash and cash equivalents | (137 | ) | 942 | (4,568 | ) | 4,102 | |||||||||||
| Cash and cash equivalents - beginning of period | 1,529 | 5,018 | 5,960 | 1,858 | |||||||||||||
| Cash and cash equivalents - end of period | $ | 1,392 | $ | 5,960 | $ | 1,392 | $ | 5,960 | |||||||||
| Supplemental cash flow information: | |||||||||||||||||
| Cash payments for income taxes | $ | 10 | $ | 100 | $ | 243 | $ | 761 | |||||||||
| Cash refunds from income taxes | $ | 74 | $ | 285 | $ | 79 | $ | 289 | |||||||||
| Cash payments for interest | $ | 7 | $ | 7 | $ | 94 | $ | 14 | |||||||||
APPLIED MATERIALS, INC.
UNAUDITED SUPPLEMENTAL INFORMATION
Reportable Segment Results
| Q4 FY2012 | Q3 FY2012 | Q4 FY2011 | |||||||||||||||||||||||||||||||||
| (In millions) | New Orders |
Net Sales |
Operating Income (Loss) |
New Orders |
Net Sales |
Operating Income (Loss) |
New Orders |
Net Sales |
Operating Income (Loss) | ||||||||||||||||||||||||||
| SSG | $ | 741 | $ | 870 | $ | 41 | $ | 1,166 | $ | 1,545 | $ | 427 | $ | 925 | $ | 1,067 | $ | 278 | |||||||||||||||||
| AGS | 576 | 621 | 164 | 531 | 579 | 122 | 564 | 629 | 160 | ||||||||||||||||||||||||||
| Display | 83 | 93 | 3 | 67 | 142 | 10 | 20 | 171 | 31 | ||||||||||||||||||||||||||
| EES | 65 | 62 | (480 | ) | 35 | 77 | (102 | ) | 86 | 315 | 17 | ||||||||||||||||||||||||
| Corporate | - | - | (227 | ) | - | - | (135 | ) | - | - | (125 | ) | |||||||||||||||||||||||
| Consolidated | $ | 1,465 | $ | 1,646 | $ | (499 | ) | $ | 1,799 | $ | 2,343 | $ | 322 | $ | 1,595 | $ | 2,182 | $ | 361 | ||||||||||||||||
| FY 2012 | FY 2011 | |||||||||||||||||||||||
| (In millions) | New Orders |
Net Sales |
Operating Income (Loss) |
New Orders |
Net Sales |
Operating Income (Loss) | ||||||||||||||||||
| SSG | $ | 5,294 | $ | 5,536 | $ | 1,243 | $ | 5,489 | $ | 5,415 | $ | 1,764 | ||||||||||||
| AGS | 2,274 | 2,285 | 502 | 2,333 | 2,413 | 482 | ||||||||||||||||||
| Display | 274 | 473 | 25 | 636 | 699 | 147 | ||||||||||||||||||
| EES | 195 | 425 | (668 | ) | 1,684 | 1,990 | 453 | |||||||||||||||||
| Corporate | - | - | (691 | ) | - | - | (448 | ) | ||||||||||||||||
| Consolidated | $ | 8,037 | $ | 8,719 | $ | 411 | $ | 10,142 | $ | 10,517 | $ | 2,398 | ||||||||||||
Corporate Unallocated Expenses
| (In millions) | Q4 FY2012 | Q3 FY2012 | Q4 FY2011 | FY 2012 | FY 2011 | |||||||||||||||
| Restructuring charges and asset impairments, net | $ | 111 | $ | - | $ | - | $ | 111 | $ | (21 | ) | |||||||||
| Share-based compensation | 44 | 42 | 36 | 182 | 146 | |||||||||||||||
| Gain on sale of facilities | - | - | - | - | (27 | ) | ||||||||||||||
| Other unallocated expenses | 72 | 93 | 89 | 398 | 350 | |||||||||||||||
| Corporate | $ | 227 | $ | 135 | $ | 125 | $ | 691 | $ | 448 | ||||||||||
APPLIED MATERIALS, INC.
UNAUDITED SUPPLEMENTAL INFORMATION
Additional Information
| Q4 FY2012 | Q3 FY2012 | Q4 FY2011 | |||||||||||||||||
| New Orders and Net Sales by Geography | |||||||||||||||||||
| (In $ millions) | New Orders |
Net Sales |
New Orders |
Net Sales |
New Orders |
Net Sales | |||||||||||||
| North America | 435 | 373 | 420 | 441 | 324 | 434 | |||||||||||||
| % of Total | 30 | % | 23 | % | 23 | % | 19 | % | 20 | % | 20 | % | |||||||
| Europe | 165 | 271 | 172 | 184 | 176 | 271 | |||||||||||||
| % of Total | 11 | % | 16 | % | 9 | % | 8 | % | 11 | % | 12 | % | |||||||
| Japan | 184 | 129 | 128 | 189 | 173 | 255 | |||||||||||||
| % of Total | 12 | % | 8 | % | 7 | % | 8 | % | 11 | % | 12 | % | |||||||
| Korea | 115 | 127 | 299 | 392 | 330 | 363 | |||||||||||||
| % of Total | 8 | % | 8 | % | 17 | % | 17 | % | 21 | % | 17 | % | |||||||
| Taiwan | 390 | 457 | 588 | 811 | 283 | 353 | |||||||||||||
| % of Total | 27 | % | 28 | % | 33 | % | 34 | % | 18 | % | 16 | % | |||||||
| Southeast Asia | 74 | 97 | 91 | 72 | 98 | 98 | |||||||||||||
| % of Total | 5 | % | 6 | % | 5 | % | 3 | % | 6 | % | 4 | % | |||||||
| China | 102 | 192 | 101 | 254 | 211 | 408 | |||||||||||||
| % of Total | 7 | % | 11 | % | 6 | % | 11 | % | 13 | % | 19 | % | |||||||
| Employees (In thousands) | |||||||||||||||||||
| Regular Full Time | 14.5 | 14.6 | 12.9 | ||||||||||||||||
| FY 2012 | FY 2011 | ||||||||||||
| New Orders and Net Sales by Geography | |||||||||||||
| (In $ millions) | New Orders |
Net Sales |
New Orders |
Net Sales | |||||||||
| North America | 1,995 | 1,749 | 2,069 | 1,963 | |||||||||
| % of Total | 25 | % | 20 | % | 20 | % | 19 | % | |||||
| Europe | 817 | 863 | 1,022 | 1,120 | |||||||||
| % of Total | 10 | % | 10 | % | 10 | % | 11 | % | |||||
| Japan | 600 | 704 | 1,001 | 912 | |||||||||
| % of Total | 7 | % | 8 | % | 10 | % | 9 | % | |||||
| Korea | 1,784 | 1,897 | 1,286 | 1,263 | |||||||||
| % of Total | 22 | % | 22 | % | 13 | % | 12 | % | |||||
| Taiwan | 2,155 | 2,411 | 2,235 | 2,093 | |||||||||
| % of Total | 27 | % | 28 | % | 22 | % | 20 | % | |||||
| Southeast Asia | 283 | 312 | 463 | 592 | |||||||||
| % of Total | 4 | % | 3 | % | 5 | % | 5 | % | |||||
| China | 403 | 783 | 2,066 | 2,574 | |||||||||
| % of Total | 5 | % | 9 | % | 20 | % | 24 | % | |||||
APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP RESULTS
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||
| (In millions, except percentages) | October 28, 2012 |
July 29, 2012 |
October 30, 2011 |
October 28, 2012 |
October 30, 2011 | |||||||||||||||
| Non-GAAP Gross Margin | ||||||||||||||||||||
| Reported gross margin (GAAP basis) | $ | 586 | $ | 930 | $ | 852 | $ | 3,313 | $ | 4,360 | ||||||||||
| Certain items associated with acquisitions1 | 46 | 44 | 10 | 253 | 37 | |||||||||||||||
| Non-GAAP gross margin | $ | 632 | $ | 974 | $ | 862 | $ | 3,566 | $ | 4,397 | ||||||||||
| Non-GAAP gross margin percent (% of net sales) | 38.4 | % | 41.6 | % | 39.5 | % | 40.9 | % | 41.8 | % | ||||||||||
| Non-GAAP Operating Income | ||||||||||||||||||||
| Reported operating income (loss) (GAAP basis) | $ | (499 | ) | $ | 322 | $ | 361 | $ | 411 | $ | 2,398 | |||||||||
| Certain items associated with acquisitions1 | 55 | 57 | 13 | 298 | 51 | |||||||||||||||
| Acquisition integration and deal costs | 13 | 8 | 10 | 81 | 19 | |||||||||||||||
| Impairment of goodwill | 421 | - | - | 421 | - | |||||||||||||||
| Restructuring charges and asset impairments2, 3, 4, 5 | 124 | 44 | - | 168 | (30 | ) | ||||||||||||||
| Gain on sale of facilities, net | - | - | - | - | (27 | ) | ||||||||||||||
| Non-GAAP operating income | $ | 114 | $ | 431 | $ | 384 | $ | 1,379 | $ | 2,411 | ||||||||||
| Non-GAAP operating margin percent (% of net sales) | 6.9 | % | 18.4 | % | 17.6 | % | 15.8 | % | 22.9 | % | ||||||||||
| Non-GAAP Net Income | ||||||||||||||||||||
| Reported net income (loss) (GAAP basis) | $ | (515 | ) | $ | 218 | $ | 456 | $ | 109 | $ | 1,926 | |||||||||
| Certain items associated with acquisitions1 | 55 | 57 | 13 | 298 | 51 | |||||||||||||||
| Acquisition integration and deal costs | 13 | 8 | 10 | 81 | 19 | |||||||||||||||
| Impairment of goodwill | 421 | - | - | 421 | - | |||||||||||||||
| Restructuring charges and asset impairments2, 3, 4, 5 | 124 | 44 | - | 168 | (30 | ) | ||||||||||||||
| Impairment of strategic investments | 14 | - | 3 | 17 | 3 | |||||||||||||||
| Gain on sale of facilities, net | - | - | - | - | (27 | ) | ||||||||||||||
| Reinstatement of federal R&D tax credit | - | - | - | - | (13 | ) | ||||||||||||||
| Resolution of audits of prior years' income tax filings | (5 | ) | (10 | ) | (203 | ) | (22 | ) | (203 | ) | ||||||||||
| Income tax effect of non-GAAP adjustments | (37 | ) | (17 | ) | (8 | ) | (112 | ) | (3 | ) | ||||||||||
| Non-GAAP net income | $ | 70 | $ | 300 | $ | 271 | $ | 960 | $ | 1,723 | ||||||||||
| 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 29, 2012 included severance charges of $24 million and asset impairment charges of $11 million related to the restructuring program announced on May 10, 2012 and severance charges of $9 million related to the integration of Varian. |
| 3 | Results for the three months ended October 28, 2012 included severance and other charges of $106 million related to the restructuring program announced on October 3, 2012, restructuring and asset impairment charges of $12 million related to the restructuring program announced on May 10, 2012, and severance charges of $6 million related to the integration of Varian. |
| 4 | Results for the twelve months ended October 28, 2012 included severance and other charges of $106 million related to the restructuring program announced on October 3, 2012, restructuring and asset impairment charges of $48 million related to the restructuring program announced on May 10, 2012, and severance charges of $14 million related to the integration of Varian. |
| 5 | Results for the twelve months ended October 30, 2011 included favorable adjustments of $36 million related to a restructuring program announced on July 21, 2010, $19 million related to a restructuring program announced on November 11, 2009, and $5 million related to a restructuring program announced on November 12, 2008, partially offset by asset impairment charges of $30 million primarily related to certain fixed and intangible assets. |
APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP RESULTS
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||
| (In millions except per share amounts) | October 28, 2012 |
July 29, 2012 |
October 30, 2011 |
October 28, 2012 |
October 30, 2011 | |||||||||||||||
| Non-GAAP Earnings Per Diluted Share | ||||||||||||||||||||
| Reported earnings (loss) per diluted share (GAAP basis) | $ | (0.42 | ) | $ | 0.17 | $ | 0.34 | $ | 0.09 | $ | 1.45 | |||||||||
| Certain items associated with acquisitions | 0.04 | 0.04 | 0.01 | 0.19 | 0.03 | |||||||||||||||
| Acquisition integration and deal costs | 0.01 | 0.01 | 0.01 | 0.05 | 0.01 | |||||||||||||||
| Impairment of goodwill | 0.34 | - | - | 0.33 | - | |||||||||||||||
| Restructuring charges and asset impairments | 0.08 | 0.03 | - | 0.10 | (0.01 | ) | ||||||||||||||
| Impairment of strategic investments | 0.01 | - | - | 0.01 | - | |||||||||||||||
| Gain on sale of facilities, net | - | - | - | - | (0.02 | ) | ||||||||||||||
| Reinstatement of federal R&D tax credit and resolution of audits of prior years' income tax filings | - | (0.01 | ) | (0.15 | ) | (0.02 | ) | (0.16 | ) | |||||||||||
| Non-GAAP earnings per diluted share | $ | 0.06 | $ | 0.24 | $ | 0.21 | $ | 0.75 | $ | 1.30 | ||||||||||
| Weighted average number of diluted shares | 1,234 | 1,268 | 1,321 | 1,277 | 1,330 | |||||||||||||||
APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP RESULTS
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||
| (In millions, except percentages) | October 28, 2012 |
July 29, 2012 |
October 30, 2011 |
October 28, 2012 |
October 30, 2011 | |||||||||||||||
| Non-GAAP SSG Operating Income | ||||||||||||||||||||
| Reported operating income (GAAP basis) | $ | 41 | $ | 427 | $ | 278 | $ | 1,243 | $ | 1,764 | ||||||||||
| Certain items associated with acquisitions1 | 45 | 47 | 4 | 253 | 12 | |||||||||||||||
| Acquisition integration and deal costs | 6 | 7 | 3 | 37 | 3 | |||||||||||||||
| Restructuring charges and asset impairments2,3,4 | 3 | 1 | - | 4 | - | |||||||||||||||
| Non-GAAP operating income | $ | 95 | $ | 482 | $ | 285 | $ | 1,537 | $ | 1,779 | ||||||||||
| Non-GAAP operating margin percent (% of net sales) | 10.9 | % | 31.2 | % | 26.7 | % | 27.8 | % | 32.9 | % | ||||||||||
| Non-GAAP AGS Operating Income | ||||||||||||||||||||
| Reported operating income (GAAP basis) | $ | 164 | $ | 122 | $ | 160 | $ | 502 | $ | 482 | ||||||||||
| Certain items associated with acquisitions1 | 3 | 2 | 2 | 13 | 7 | |||||||||||||||
| Restructuring charges and asset impairments2, 3, 4, 5 | 4 | 11 | - | 15 | 24 | |||||||||||||||
| Non-GAAP operating income | $ | 171 | $ | 135 | $ | 162 | $ | 530 | $ | 513 | ||||||||||
| Non-GAAP operating margin percent (% of net sales) | 27.5 | % | 23.3 | % | 25.8 | % | 23.2 | % | 21.3 | % | ||||||||||
| Non-GAAP Display Operating Income | ||||||||||||||||||||
| Reported operating income (GAAP basis) | $ | 3 | $ | 10 | $ | 31 | $ | 25 | $ | 147 | ||||||||||
| Certain items associated with acquisitions1 | 1 | 2 | 2 | 7 | 7 | |||||||||||||||
| Non-GAAP operating income | $ | 4 | $ | 12 | $ | 33 | $ | 32 | $ | 154 | ||||||||||
| Non-GAAP operating margin percent (% of net sales) | 4.3 | % | 8.5 | % | 19.3 | % | 6.8 | % | 22.0 | % | ||||||||||
| Non-GAAP EES Operating Income | ||||||||||||||||||||
| Reported operating income (loss) (GAAP basis) | $ | (480 | ) | $ | (102 | ) | $ | 17 | $ | (668 | ) | $ | 453 | |||||||
| Certain items associated with acquisitions1 | 7 | 6 | 6 | 25 | 25 | |||||||||||||||
| Impairment of goodwill | 421 | - | - | 421 | - | |||||||||||||||
| Restructuring charges and asset impairments2, 3, 4, 5 | 6 | 32 | - | 38 | (34 | ) | ||||||||||||||
| Non-GAAP operating income (loss) | $ | (46 | ) | $ | (64 | ) | $ | 23 | $ | (184 | ) | $ | 444 | |||||||
| Non-GAAP operating margin percent (% of net sales) | (74.2 | )% | (83.1 | )% | 7.3 | % | (43.3 | )% | 22.3 | % | ||||||||||
| 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 29, 2012 included severance charges of $24 million and asset impairment charges of $11 million related to the restructuring program announced on May 10, 2012 and severance charges of $9 million related to the integration of Varian. |
| 3 | Results for the three months ended October 28, 2012 included restructuring and asset impairment charges of $7 million related to the restructuring program announced on May 10, 2012, and severance charges of $6 million related to the integration of Varian. |
| 4 | Results for the twelve months ended October 28, 2012 included restructuring and asset impairment charges of $43 million related to the restructuring program announced on May 10, 2012 and severance charges of $14 million related to the integration of Varian. |
| 5 | Results for the twelve months ended October 30, 2011 included favorable adjustments of $36 million related to a restructuring program announced on July 21, 2010, partially offset by asset impairment charges of $26 million primarily related to certain fixed and intangible assets. |
APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP OPERATING EXPENSES
| Three Months Ended | |||
| (In millions) | October 28, 2012 | ||
| Operating expenses (GAAP basis) | $ | 1,085 | |
| Certain items associated with acquisitions | (9 | ) | |
| Acquisition integration and deal costs | (13 | ) | |
| Impairment of goodwill | (421 | ) | |
| Restructuring charges and asset impairments | (124 | ) | |
| Non-GAAP operating expenses | $ | 518 | |
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP EFFECTIVE INCOME TAX RATE
| Three Months Ended | |||
| (In millions, except percentages) | October 28, 2012 | ||
| Provision (benefit) for income taxes (GAAP basis) (a) | $ | (17 | ) |
| Income tax effect of non-GAAP adjustments | 37 | ||
| Resolutions from audits of prior years' income tax filings | 5 | ||
| Non-GAAP provision for income taxes (b) | $ | 25 | |
| Income (loss) before income taxes (GAAP basis) (c) | $ | (532 | ) |
| Certain items associated with acquisitions | 55 | ||
| Acquisition integration and deal costs | 13 | ||
| Impairment of goodwill | 421 | ||
| Restructuring charges and asset impairments | 124 | ||
| Impairment of strategic investments | 14 | ||
| Non-GAAP income before income taxes (d) | $ | 95 | |
| Effective income tax rate (GAAP basis) (a/c) | 3.2 | % | |
| Non-GAAP effective income tax rate (b/d) | 26.3 | % | |