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8-K - FORM 8-K - APPLIED MATERIALS INC /DEq412-8xk.htm

Exhibit 99.1

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.




Applied Materials, Inc.
Page 2 of 12
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.




Applied Materials, Inc.
Page 3 of 12

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.
Page 4 of 12


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.
Page 5 of 12


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.
Page 6 of 12


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.
Page 7 of 12

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.
Page 8 of 12
 
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.
Page 9 of 12
 
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

 
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.
 
 
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.
 
 
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.
Page 10 of 12
 

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.
Page 11 of 12
 
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
%
 
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.
 
 
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.
 
 
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.
Page 12 of 12
 
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
%