Applied Materials Announces Results for Second Quarter of Fiscal 2008
-- Net Income: $303 million (26% decrease year over year; 15% increase quarter over quarter)
-- EPS: $0.22 ($0.07 decrease year over year; $0.03 increase quarter over quarter)
-- New Orders: $2.41 billion (9% decrease year over year; 3% decrease quarter over quarter)
SANTA CLARA, Calif., May 13, 2008 (BUSINESS WIRE) -- Applied Materials, Inc. reported results for its second fiscal quarter ended April 27, 2008. Net sales were $2.15 billion, down 15 percent from $2.53 billion for the second quarter of fiscal 2007, and up 3 percent from $2.09 billion for the first quarter of fiscal 2008. Gross margin for the second quarter of fiscal 2008 was 45.0 percent, up from 44.9 percent for the second quarter of fiscal 2007, and up from 44.8 percent for the first quarter of fiscal 2008. Net income for the second quarter of fiscal 2008 was $303 million, or $0.22 per share, down from net income of $411 million, or $0.29 per share, for the second quarter of fiscal 2007, and up from net income of $262 million, or $0.19 per share, for the first quarter of fiscal 2008.
New orders of $2.41 billion for the second quarter of fiscal 2008 decreased 9 percent from $2.65 billion for the second quarter of fiscal 2007, and decreased 3 percent from $2.50 billion for the first quarter of fiscal 2008. Regional distribution of new orders for the second quarter of fiscal 2008 was: Korea 22 percent, Taiwan 22 percent, Southeast Asia and China 18 percent, Japan 13 percent, Europe 13 percent, and North America 12 percent. Backlog at the end of the second quarter of fiscal 2008 was $4.59 billion, compared to $4.10 billion at the end of the first quarter of fiscal 2008.
"This quarter's performance demonstrates our focus on operational execution and prudent cost controls across all of our businesses," said Mike Splinter, president and CEO. "We are ramping our display and solar businesses while addressing the challenges of a weaker global chip equipment market.
"During the quarter, we established our leadership in the crystalline silicon solar equipment market, built on our momentum in thin film solar products and disclosed the industry's first gigawatt-scale, thin film solar project. In addition, we launched a new mask inspection system, the Aera2(TM). Applied has significant opportunities ahead as we deliver on our promise to utilize our nanomanufacturing technology to improve the way people live," concluded Splinter.
Non-GAAP net income for the second quarter of fiscal 2008 was $362 million, or $0.26 per share, compared to non-GAAP net income of $509 million, or $0.36 per share, for the second quarter of fiscal 2007, and $345 million or $0.25 per share for the first quarter of fiscal 2008. Non-GAAP adjustments are explained below and detailed in the accompanying Reconciliation of GAAP to Non-GAAP Results.
Results by reportable segment for the second quarter of fiscal 2008, the first quarter of fiscal 2008, and the second quarter of fiscal 2007 were:
Three Months Ended Three Months Ended
April 27, 2008 January 27, 2008
Operating Operating
New Net Income New Net Income
Orders Sales (Loss) Orders Sales (Loss)
------ ------ --------- ------ ------ ---------
(In millions)
Silicon $1,061 $1,268 $448 $1,075 $1,237 $445
Applied Global
Services 602 599 159 610 595 149
Display 493 198 59 555 133 34
Energy and
Environmental
Solutions 257 85 (71) 260 122 (48)
Three Months Ended
April 29, 2007
Operating
New Net Income
Orders Sales (Loss)
------ ------ ---------
(In millions)
Silicon $1,939 $1,738 $606
Applied Global
Services 586 589 157
Display 60 160 28
Energy and
Environmental
Solutions 63 43 (15)
Effective in the first quarter of fiscal 2008, Applied changed its management reporting system for services, with all service results reported in the Applied Global Services segment. Fiscal 2007 segment information has been reclassified to conform to the fiscal 2008 presentation.
Non-GAAP net income and non-GAAP EPS, detailed in the accompanying Reconciliation of GAAP to Non-GAAP Results, exclude charges related to (i) equity-based compensation, (ii) certain items associated with acquisitions, including amortization of intangibles and inventory fair value adjustments on products sold, (iii) restructuring and asset impairments, (iv) certain costs associated with ceasing development of beamline implant products, and/or (v) the resolution of income tax audits and changes in tax credits. Management uses non-GAAP net income and non-GAAP EPS 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 that 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 net income or EPS prepared in accordance with GAAP.
Applied Materials will discuss its fiscal 2008 second quarter results, along with its outlook for the third quarter of fiscal 2008, on the earnings call today beginning at 1:30 p.m. Pacific Daylight Time. A webcast of the earnings call will be available at www.appliedmaterials.com.
This press release contains forward-looking statements, including statements regarding Applied's performance, operational efficiencies, products, strategic position and opportunities, and the industry outlook. Forward-looking statements may contain words such as "expect," "believe," "may," "should," "will," "forecast" 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 nanomanufacturing technology products, which is subject to many factors, including global economic and market conditions, business and consumer spending, demand for electronic products and semiconductors, governmental renewable energy policies and incentives, and geopolitical uncertainties; customers' utilization rates and capacity requirements, including capacity utilizing the latest technology; customers' ability to acquire sufficient capital, obtain regulatory approvals and/or fulfill infrastructure requirements; variability of operating results among the company's reportable segments caused by differing conditions in the served markets; the successful implementation and effectiveness of initiatives to enhance global operations and efficiencies; the successful performance of acquired businesses and joint ventures; Applied's ability to (i) successfully develop, deliver and support a broad range of products and expand its markets and develop new markets, (ii) maintain effective cost controls and timely align its cost structure with business conditions, (iii) effectively plan and manage its resources and production capability, including its supply chain, (iv) obtain and protect intellectual property rights in key technologies, and (v) attract, motivate and retain key employees; and other risks described in Applied Materials' SEC filings, including its reports on Forms 10-K, 10-Q and 8-K. 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.
Applied Materials, Inc. (Nasdaq:AMAT) is the global leader in Nanomanufacturing Technology(TM) solutions with a broad portfolio of innovative equipment, services and software products for the fabrication of semiconductor chips, flat panel displays, solar photovoltaic cells, flexible electronics and energy-efficient glass. At Applied Materials, we apply Nanomanufacturing Technology to improve the way people live. Learn more at www.appliedmaterials.com.
APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended
----------------------------------------------------------------------
April 27, April 29, April 27, April 29,
(In thousands, except per
share amounts) 2008 2007 2008 2007
----------------------------------------------------------------------
Net sales $2,149,998 $2,529,561 $4,237,395 $4,806,828
Cost of products sold 1,183,170 1,392,951 2,335,586 2,607,680
---------- ---------- ---------- ----------
Gross margin 966,828 1,136,610 1,901,809 2,199,148
Operating expenses:
Research, development
and engineering 287,122 291,044 560,341 578,611
Marketing and selling 119,410 112,107 243,327 219,019
General and
administrative 122,035 119,391 238,011 241,202
Restructuring and asset
impairments 510 25,044 49,496 21,766
---------- ---------- ---------- ----------
Income from operations 437,751 589,024 810,634 1,138,550
Pre-tax loss of equity
method investment 9,766 5,924 19,352 9,861
Interest expense 6,256 8,845 10,801 19,313
Interest income 32,414 34,022 62,984 64,125
---------- ---------- ---------- ----------
Income before income taxes 454,143 608,277 843,465 1,173,501
Provision for income taxes 151,636 196,833 278,582 358,581
---------- ---------- ---------- ----------
Net income $ 302,507 $ 411,444 $ 564,883 $ 814,920
---------- ---------- ---------- ----------
Earnings per share:
Basic $ 0.22 $ 0.30 $ 0.41 $ 0.59
Diluted $ 0.22 $ 0.29 $ 0.41 $ 0.58
Weighted average number of
shares:
Basic 1,356,705 1,391,076 1,363,975 1,392,477
Diluted 1,373,314 1,407,255 1,379,071 1,408,224
----------------------------------------------------------------------
APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
----------------------------------------------------------------------
April 27, October 28,
(In thousands) 2008 2007
---------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,098,259 $ 1,202,722
Short-term investments 1,357,097 1,166,857
Accounts receivable, net 1,729,487 2,049,427
Inventories 1,626,239 1,313,237
Deferred income taxes 450,187 426,471
Other current assets 345,669 448,879
------------ ------------
Total current assets 6,606,938 6,607,593
Long-term investments 1,392,504 1,362,425
Property, plant and equipment 2,766,315 2,782,204
Less: accumulated depreciation and
amortization (1,692,513) (1,730,962)
------------ ------------
Net property, plant and equipment 1,073,802 1,051,242
Goodwill, net 1,176,122 1,006,410
Purchased technology and other intangible
assets, net 456,920 373,178
Equity method investment 95,708 115,060
Deferred income taxes and other assets 168,956 146,370
------------ ------------
Total assets $10,970,950 $10,662,278
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 2,749 $ 2,561
Accounts payable and accrued expenses 2,598,891 2,221,516
Income taxes payable 105,785 157,549
------------ ------------
Total current liabilities 2,707,425 2,381,626
Long-term debt 202,000 202,281
Other liabilities 350,721 256,962
------------ ------------
Total liabilities 3,260,146 2,840,869
------------ ------------
Stockholders' equity:
Common stock 13,554 13,857
Additional paid-in capital 5,004,030 4,658,832
Retained earnings 11,265,710 10,863,291
Treasury stock (8,575,054) (7,725,924)
Accumulated other comprehensive income 2,564 11,353
------------ ------------
Total stockholders' equity 7,710,804 7,821,409
------------ ------------
Total liabilities and stockholders' equity $10,970,950 $10,662,278
----------------------------------------------------------------------
APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
----------------------------------------------------------------------
Six Months Ended
April 27, April 29,
(In thousands) 2008 2007
----------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 564,883 $ 814,920
Adjustments required to reconcile net income
to cash provided by operating activities:
Depreciation and amortization 154,321 123,978
Loss on fixed asset retirements 21,527 12,476
Restructuring and asset impairments 49,496 21,766
Deferred income taxes (38,538) (7,553)
Excess tax benefits from equity-based
compensation plans (5,406) (3,243)
Acquired in-process research and development
expense -- 4,900
Net recognized loss (gain) on investments (3,560) 3,129
Pretax loss of equity-method investment 19,352 9,861
Equity-based compensation 89,044 82,823
Changes in operating assets and liabilities,
net of amounts acquired:
Accounts receivable, net 385,830 (71,064)
Inventories (277,478) (62,442)
Other current assets 116,352 2,969
Other assets (4,875) (3,483)
Accounts payable and accrued expenses 195,040 (36,546)
Income taxes payable (11,803) (3,725)
Other liabilities 9,548 5,565
------------ ------------
Cash provided by operating activities 1,263,733 894,331
------------ ------------
Cash flows from investing activities:
Capital expenditures (137,699) (131,266)
Cash paid for acquisitions, net of cash
acquired (235,324) (127,677)
Proceeds from disposition of assets held for
sale -- 17,727
Proceeds from sales and maturities of
investments 1,285,365 1,400,576
Purchases of investments (1,530,288) (1,484,869)
------------ ------------
Cash provided (used) for investing
activities (617,946) (325,509)
------------ ------------
Cash flows from financing activities:
Short-term debt repayments (12) (302)
Proceeds from common stock issuances 308,463 169,884
Common stock repurchases (899,984) (532,015)
Excess tax benefits from equity-based
compensation plans 5,406 3,243
Payment of dividends to stockholders (164,274) (139,489)
------------ ------------
Cash used for financing activities (750,401) (498,679)
------------ ------------
Effect of exchange rate changes on cash and
cash equivalents 151 438
------------ ------------
Increase in cash and cash equivalents (104,463) 70,581
------------ ------------
Cash and cash equivalents -- beginning of
period 1,202,722 861,463
------------ ------------
Cash and cash equivalents -- end of period $ 1,098,259 $ 932,044
------------ ------------
Supplemental cash flow information:
Cash payments for income taxes $ 167,185 $ 365,012
Cash payments for interest $ 7,229 $ 14,049
----------------------------------------------------------------------
APPLIED MATERIALS, INC.
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
----------------------------------------------------------------------
Three Months Ended
April 27, January 27, April 29,
(In thousands, except per share
amounts) 2008 2008 2007
----------------------------------------------------------------------
Non-GAAP Net Income
----------------------------------
Reported net income (GAAP basis) $ 302,507 $ 262,376 $ 411,444
Equity-based compensation expense 50,322 38,722 47,922
Certain items associated with
acquisitions (1) 31,144 31,038 23,725
Restructuring and asset
impairments (2,3,4) 510 48,986 25,044
Costs associated with ceasing
development of beamline implant
products (5) 259 1,021 50,299
Resolution of audits of prior
years' income tax filings (6) -- -- --
Income tax effect of non-GAAP
adjustments (23,142) (37,326) (49,239)
----------- ----------- -----------
Non-GAAP net income $ 361,600 $ 344,817 $ 509,195
----------- ----------- -----------
Non-GAAP Net Income Per Diluted
Share
----------------------------------
Reported net income per diluted
share
(GAAP basis) $ 0.22 $ 0.19 $ 0.29
Equity-based compensation expense 0.03 0.02 0.02
Certain items associated with
acquisitions 0.02 0.02 0.01
Restructuring and asset
impairments -- 0.02 0.01
Costs associated with ceasing
development of beamline implant
products -- -- 0.02
Resolution of audits of prior
years' income tax filings -- -- --
Non-GAAP net income - per diluted
share $ 0.26 $ 0.25 $ 0.36
Shares used in diluted shares
calculation 1,373,314 1,383,886 1,407,255
----------------------------------------------------------------------
Six Months Ended
April 27, April 29,
(In thousands, except per share amounts) 2008 2007
----------------------------------------------------------------------
Non-GAAP Net Income
---------------------------------------------
Reported net income (GAAP basis) $ 564,883 $ 814,920
Equity-based compensation expense 89,044 82,822
Certain items associated with acquisitions
(1) 62,182 37,105
Restructuring and asset impairments (2,3,4) 49,496 21,766
Costs associated with ceasing development of
beamline implant products (5) 1,280 50,299
Resolution of audits of prior years' income
tax filings (6) -- (29,863)
Income tax effect of non-GAAP adjustments (60,468) (62,673)
----------- -----------
Non-GAAP net income $ 706,417 $ 914,376
----------- -----------
Non-GAAP Net Income Per Diluted Share
---------------------------------------------
Reported net income per diluted share
(GAAP basis) $ 0.41 $ 0.58
Equity-based compensation expense 0.05 0.04
Certain items associated with acquisitions 0.03 0.02
Restructuring and asset impairments 0.02 0.01
Costs associated with ceasing development of
beamline implant products -- 0.02
Resolution of audits of prior years' income
tax filings -- (0.02)
Non-GAAP net income - per diluted share $ 0.51 $ 0.65
Shares used in diluted shares calculation 1,379,071 1,408,224
----------------------------------------------------------------------
(1) Incremental charges attributable to acquisitions consisting of inventory fair value adjustments on products sold and amortization of purchased intangible assets. Results for the three and six months ended April 29, 2007 included an in-process research and development charge of $5 million associated with the acquisition of the software division of Brooks Automation, Inc. in the second fiscal quarter of 2007.
(2) Results for the six months ended April 27, 2008 included restructuring charges of $38 million associated with a global cost reduction plan.
(3) Results for the fiscal quarters ended April 27, 2008, January 27, 2008 and April 29, 2007 included restructuring and asset impairment charges of $510,000, $11 million and $25 million, respectively, associated with ceasing development of beamline implant products. Results for the three and six months ended April 29, 2007 included restructuring and asset impairment charges of $25 million associated with ceasing development of beamline implant products.
(4) Results for the three and six months ended April 29, 2007 included a net benefit of $3 million from the sale of the Hillsboro, Oregon facility.
(5) Results for the fiscal quarters ended April 27, 2008, January 27, 2008 and April 29, 2007 included other operating charges of $259,000, $1 million, and $50 million, respectively, associated with ceasing development of beamline implant products.
(6) Results for the six months ended April 29, 2007 consisted of a $24 million benefit from the resolution of audits of prior years' income tax filings and a $6 million benefit related to the retroactive reinstatement to January 1, 2006 of the research and development tax credit.
SOURCE: Applied Materials, Inc.
Applied Materials, Inc. Linda Heller, 408-986-7977 (investment community) David Miller, 408-563-9582 (editorial/media)