EX-99.1 2 exhibit991earningsreleaseq.htm EXHIBIT 99.1 EARNINGS RELEASE Exhibit 99.1 Earnings Release (Q1 2014)
Exhibit 99.1
APPLIED MATERIALS ANNOUNCES FIRST QUARTER RESULTS

Net sales and non-GAAP EPS up sequentially and in high end of guidance
Silicon systems net sales up 19% sequentially reflecting strong customer demand for the company’s latest technologies for advanced transistors and NAND memory
Prepares for planned merger with Tokyo Electron

SANTA CLARA, Calif., February 12, 2014 — Applied Materials, Inc. (NASDAQ:AMAT), the global leader in manufacturing solutions for the semiconductor, display and solar industries, today reported results for its first quarter of fiscal 2014 ended January 26, 2014.
Applied generated orders of $2.29 billion, up 9 percent from the prior quarter led by demand for Silicon Systems Group products. Net sales were $2.19 billion, up 10 percent sequentially. Non-GAAP adjusted gross margin increased to 42.5 percent while non-GAAP adjusted operating income grew 18 percent sequentially to $380 million or 17.4 percent of net sales. Non-GAAP adjusted net income grew 22 percent sequentially to $279 million or 23 cents per diluted share. The company recorded GAAP gross margin of 40.7 percent, operating income of $330 million or 15.1 percent of net sales, and net income of $253 million or 21 cents per diluted share.

“In our first fiscal quarter, Applied Materials delivered earnings near the high end of our guidance range, while demonstrating momentum in revenue, orders and market share,” said Gary Dickerson, Chief Executive Officer.  “This performance reflects healthy investment by our semiconductor and display customers and major technology trends that are playing to our strengths in precision materials engineering.”
Quarterly Results Summary
GAAP Results
 
Q1 FY2014
 
Q4 FY2013
 
Q1 FY2013
Net sales
 
$2.19 billion
 
$1.99 billion
 
$1.57 billion
Operating income
 
$330 million
 
$211 million
 
$39 million
Net income
 
$253 million
 
$183 million
 
$34 million
Diluted earnings per share (EPS)
 
$0.21
 
$0.15
 
$0.03
Non-GAAP Adjusted Results
 
 
 
 
 
 
Non-GAAP adjusted operating income
 
$380 million
 
$323 million
 
$112 million
Non-GAAP adjusted net income
 
$279 million
 
$228 million
 
$69 million
Non-GAAP adjusted diluted EPS
 
$0.23
 
$0.19
 
$0.06
Applied's non-GAAP adjusted results exclude the impact of the following, where applicable: certain acquisition-related costs; restructuring charges and any associated adjustments; impairments of assets, goodwill, or investments; gain or loss on sale of facilities and strategic investments; and certain tax items. A reconciliation of the GAAP and non-GAAP adjusted results is provided in the financial tables included in this release. See also “Use of Non-GAAP Adjusted Financial Measures” section.




Applied Materials, Inc.
Page 2 of 12

First Quarter Reportable Segment Results and Comparisons to the Prior Quarter
Silicon Systems Group (SSG) orders were $1.57 billion, up 13 percent, with growth in foundry and flash partially offset by decreases in logic/other and DRAM. Net sales increased 19 percent to $1.48 billion. Non-GAAP adjusted operating income increased to $357 million or 24.1 percent of net sales. GAAP operating income increased to $314 million or 21.2 percent of net sales. New order composition was: foundry 60 percent; flash 27 percent; logic/other 8 percent; and DRAM 5 percent.
Applied Global Services (AGS) orders were $597 million, up 9 percent, primarily due to growth in 200mm equipment and services. Net sales of $507 million were down 6 percent. Non-GAAP adjusted operating income increased to $126 million or 24.9 percent of net sales. GAAP operating income increased to $125 million or 24.7 percent of net sales.
Display orders of $79 million were down 31 percent, while net sales declined slightly to $159 million. Non-GAAP adjusted operating income increased to $27 million or 17.0 percent of net sales. GAAP operating income increased to $26 million or 16.4 percent of net sales.
Energy and Environmental Solutions (EES) orders of $40 million were flat. Net sales declined 9 percent to $40 million. EES had a non-GAAP adjusted operating loss of $10 million and a GAAP operating loss of $11 million.

Backlog grew 3 percent to $2.44 billion including negative adjustments of $32 million, primarily related to currency adjustments. Backlog composition by segment was: SSG 56 percent; AGS 27 percent; Display 12 percent; and EES 5 percent.


Business Outlook
For the second quarter of fiscal 2014, Applied expects net sales to be up 3 percent to 10 percent from the previous quarter. Non-GAAP adjusted diluted EPS is expected to be in the range of 25 cents to 29 cents.
Applied's second quarter non-GAAP adjusted diluted EPS outlook excludes known charges related to completed acquisitions and integration costs of 3 cents. The company's second quarter business outlook does not exclude other non-GAAP adjustments that may arise subsequent to this release.

Use of Non-GAAP Adjusted Financial Measures
Management uses non-GAAP adjusted results to evaluate the company’s operating and financial performance in light of business objectives and for planning purposes. These measures are not in accordance with GAAP and may differ from non-GAAP methods of accounting and reporting used by other companies. Applied believes these measures enhance investors’ ability to review the company’s business from the same perspective as the company’s management and facilitate comparisons of this period’s results with prior periods. The presentation of this additional information should not be considered a substitute for results prepared in accordance with GAAP.
Webcast Information
Applied Materials will discuss these results during an earnings call that begins at 1:30 p.m. Pacific Time today. A live webcast will be available at www.appliedmaterials.com. A replay will be available on the website beginning at 5:00 p.m. Pacific Time today.





Applied Materials, Inc.
Page 3 of 12
Forward-Looking Statements
This press release contains forward-looking statements, including those regarding Applied’s performance, momentum and opportunities; industry trends; and its business outlook for the second quarter of fiscal 2014. These statements and their underlying assumptions are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements, including but not limited to: the level of demand for Applied’s products, which is subject to many factors, including uncertain global economic and industry conditions, end-demand for electronic products and semiconductors, and customers’ new technology and capacity requirements; the timing and nature of technology transitions; the concentrated nature of Applied’s customer base; Applied’s ability to (i) develop, deliver and support a broad range of products and expand its markets, (ii) achieve the objectives of operational and strategic initiatives, (iii) obtain and protect intellectual property rights in key technologies, (iv) attract, motivate and retain key employees, (v) successfully complete the announced business combination and realize expected benefits and synergies, and (vi) accurately forecast future results, which depends on multiple assumptions related to, without limitation, market conditions, customer requirements and business needs; and other risks described in Applied's SEC filings, including its most recent Forms 10-K 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.

About Applied Materials
Applied Materials, Inc. (Nasdaq:AMAT) is the global leader in providing innovative equipment, services and software to enable the manufacture of advanced semiconductor, flat panel display and solar photovoltaic products. Our technologies help make innovations like smartphones, flat screen TVs and solar panels more affordable and accessible to consumers and businesses around the world. Learn more at www.appliedmaterials.com.

Contact:
Kevin Winston (editorial/media) 408.235.4498
Michael Sullivan (financial community) 408.986.7977






Applied Materials, Inc.
Page 4 of 12


APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
 
 
 
Three Months Ended
(In millions, except per share amounts)
 
January 26,
2014
 
October 27,
2013
 
January 27,
2013
Net sales
 
$
2,190

 
$
1,988

 
$
1,573

Cost of products sold
 
1,299

 
1,193

 
991

Gross margin
 
891

 
795

 
582

Operating expenses:
 
 
 
 
 
 
Research, development and engineering
 
356

 
338

 
304

Marketing and selling
 
109

 
99

 
105

General and administrative
 
89

 
117

 
125

Restructuring charges and asset impairments
 
7

 
30

 
9

Total operating expenses
 
561

 
584

 
543

Income from operations
 
330

 
211

 
39

Impairment of strategic investments
 
3

 
1

 

Interest expense
 
25

 
24

 
24

Interest and other income, net
 
13

 
8

 
3

Income before income taxes
 
315

 
194

 
18

Provision (benefit) for income taxes
 
62

 
11

 
(16
)
Net income
 
$
253

 
$
183

 
$
34

Earnings per share:
 
 
 
 
 
 
Basic and diluted
 
$
0.21

 
$
0.15

 
$
0.03

Weighted average number of shares:
 
 
 
 
 
 
Basic
 
1,206

 
1,204

 
1,198

Diluted
 
1,225

 
1,222

 
1,212








Applied Materials, Inc.
Page 5 of 12


APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
 
(In millions)
 
January 26,
2014
 
October 27,
2013
ASSETS
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
2,144

 
$
1,711

Short-term investments
 
145

 
180

Accounts receivable, net
 
1,510

 
1,633

Inventories
 
1,533

 
1,413

Other current assets
 
682

 
705

Total current assets
 
6,014

 
5,642

Long-term investments
 
833

 
1,005

Property, plant and equipment, net
 
846

 
850

Goodwill
 
3,294

 
3,294

Purchased technology and other intangible assets, net
 
1,057

 
1,103

Deferred income taxes and other assets
 
155

 
149

Total assets
 
$
12,199

 
$
12,043

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable and accrued expenses
 
$
1,576

 
$
1,649

Customer deposits and deferred revenue
 
901

 
794

Total current liabilities
 
2,477

 
2,443

Long-term debt
 
1,946

 
1,946

Other liabilities
 
535

 
566

Total liabilities
 
4,958

 
4,955

Total stockholders’ equity
 
7,241

 
7,088

Total liabilities and stockholders’ equity
 
$
12,199

 
$
12,043








Applied Materials, Inc.
Page 6 of 12


APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
 
(In millions)
Three Months Ended
January 26,
2014
 
October 27,
2013
 
January 27,
2013
Cash flows from operating activities:
 
 
 
 
 
Net income
$
253

 
$
183

 
$
34

Adjustments required to reconcile net income to cash provided by operating activities:
 
 
 
 
 
Depreciation and amortization
94

 
98

 
106

Restructuring charges and asset impairments
7

 
30

 
9

Unrealized loss (gain) on derivative associated with announced business combination
(24
)
 
7

 

Share-based compensation
46

 
41

 
42

Other
(16
)
 
11

 
(78
)
Net change in operating assets and liabilities
12

 
(351
)
 
(97
)
Cash provided by operating activities
372

 
19

 
16

Cash flows from investing activities:
 
 
 
 
 
Capital expenditures
(48
)
 
(50
)
 
(49
)
Proceeds from sales and maturities of investments
364

 
276

 
445

Purchases of investments
(163
)
 
(169
)
 
(143
)
Cash provided by investing activities
153

 
57

 
253

Cash flows from financing activities:
 
 
 
 
 
Proceeds from common stock issuances and others
28

 
57

 
18

Common stock repurchases

 
(47
)
 
(48
)
Payments of dividends to stockholders
(120
)
 
(120
)
 
(108
)
Cash used in financing activities
(92
)
 
(110
)
 
(138
)
Increase (decrease) in cash and cash equivalents
433

 
(34
)
 
131

Cash and cash equivalents — beginning of period
1,711

 
1,745

 
1,392

Cash and cash equivalents — end of period
$
2,144

 
$
1,711

 
$
1,523

Supplemental cash flow information:
 
 
 
 
 
Cash payments for income taxes
$
26

 
$
12

 
$
32

Cash refunds from income taxes
$
9

 
$
35

 
$
65

Cash payments for interest
$
39

 
$
7

 
$
39







Applied Materials, Inc.
Page 7 of 12

APPLIED MATERIALS, INC.
UNAUDITED SUPPLEMENTAL INFORMATION

Reportable Segment Results
 
 
 
Q1 FY2014
 
Q4 FY2013
 
Q1 FY2013
(In millions)
 
New
Orders
 
Net
Sales
 
Operating
Income
(Loss)
 
New
Orders
 
Net
Sales
 
Operating
Income
(Loss)
 
New
Orders
 
Net
Sales
 
Operating
Income
(Loss)
SSG
 
$
1,569

 
$
1,484

 
$
314

 
$
1,390

 
$
1,243

 
$
213

 
$
1,363

 
$
969

 
$
134

AGS
 
597

 
507

 
125

 
548

 
538

 
115

 
544

 
471

 
89

Display
 
79

 
159

 
26

 
114

 
163

 
19

 
138

 
87

 
3

EES
 
40

 
40

 
(11
)
 
40

 
44

 
(30
)
 
68

 
46

 
(54
)
Corporate
 

 

 
(124
)
 

 

 
(106
)
 

 

 
(133
)
Consolidated
 
$
2,285

 
$
2,190

 
$
330

 
$
2,092

 
$
1,988

 
$
211

 
$
2,113

 
$
1,573

 
$
39



Corporate Unallocated Expenses
 
(In millions)
 
Q1 FY2014
 
Q4 FY2013
 
Q1 FY2013
Restructuring charges and asset impairments
 
$
7

 
$
23

 
$
4

Share-based compensation
 
46

 
41

 
42

Other unallocated expenses
 
71

 
42

 
87

Corporate
 
$
124

 
$
106

 
$
133








Applied Materials, Inc.
Page 8 of 12
 
APPLIED MATERIALS, INC.
UNAUDITED SUPPLEMENTAL INFORMATION

Additional Information
 
 
 
Q1 FY2014
 
Q4 FY2013
 
Q1 FY2013
New Orders and Net Sales by Geography
 
 
 
 
 
 
 
 
 
 
 
 
(In $ millions)
 
New
Orders
 
Net
Sales
 
New
Orders
 
Net
Sales
 
New
Orders
 
Net
Sales
United States
 
403

 
280

 
261

 
357

 
391

 
401

% of Total
 
18
%
 
13
%
 
12
%
 
18
%
 
19
%
 
25
%
Europe
 
119

 
164

 
203

 
242

 
134

 
119

% of Total
 
5
%
 
7
%
 
10
%
 
12
%
 
6
%
 
8
%
Japan
 
163

 
164

 
117

 
276

 
181

 
98

% of Total
 
7
%
 
8
%
 
6
%
 
14
%
 
9
%
 
6
%
Korea
 
240

 
201

 
209

 
231

 
198

 
205

% of Total
 
11
%
 
9
%
 
10
%
 
12
%
 
9
%
 
13
%
Taiwan
 
984

 
705

 
721

 
589

 
906

 
565

% of Total
 
43
%
 
32
%
 
34
%
 
30
%
 
43
%
 
36
%
Southeast Asia
 
50

 
87

 
95

 
89

 
65

 
58

% of Total
 
2
%
 
4
%
 
5
%
 
4
%
 
3
%
 
4
%
China
 
326

 
589

 
486

 
204

 
238

 
127

% of Total
 
14
%
 
27
%
 
23
%
 
10
%
 
11
%
 
8
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Employees (In thousands)
 
 
 
 
 
 
 
 
 
 
 
 
Regular Full Time
 
13.6
 
 
13.7
 
 
13.7
 








Applied Materials, Inc.
Page 9 of 12
 APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS

 
 
Three Months Ended
(In millions, except percentages and per share amounts)
 
January 26,
2014
 
October 27,
2013
 
January 27,
2013
Non-GAAP Adjusted Gross Margin
 
 
 
 
 
 
Reported gross margin - GAAP basis
 
$
891

 
$
795

 
$
582

Certain items associated with acquisitions1
 
39

 
40

 
43

Acquisition integration and deal costs
 

 

 
1

Non-GAAP adjusted gross margin
 
$
930

 
$
835

 
$
626

Non-GAAP adjusted gross margin percent (% of net sales)
 
42.5
%
 
42.0
%
 
39.8
%
Non-GAAP Adjusted Operating Income
 
 
 
 
 
 
Reported operating income - GAAP basis
 
$
330

 
$
211

 
$
39

Certain items associated with acquisitions1
 
45

 
47

 
54

Acquisition integration and deal costs
 
11

 
11

 
10

Unrealized loss (gain) on derivative associated with announced business combination
 
(24
)
 
7

 

Certain items associated with announced business combination2
 
11

 
17

 

Restructuring charges and asset impairments3, 4, 5
 
7

 
30

 
9

Non-GAAP adjusted operating income
 
$
380

 
$
323

 
$
112

Non-GAAP adjusted operating margin percent (% of net sales)
 
17.4
%
 
16.2
%
 
7.1
%
Non-GAAP Adjusted Net Income
 
 
 
 
 
 
Reported net income - GAAP basis
 
$
253

 
$
183

 
$
34

Certain items associated with acquisitions1
 
45

 
47

 
54

Acquisition integration and deal costs
 
11

 
11

 
10

Unrealized loss (gain) on derivative associated with announced business combination
 
(24
)
 
7

 

Certain items associated with announced business combination2
 
11

 
17

 

Restructuring charges and asset impairments3, 4, 5
 
7

 
30

 
9

Impairment (gain on sale) of strategic investments, net
 
(5
)
 
(3
)
 

Reinstatement of federal R&D tax credit
 

 

 
(10
)
Resolution of prior years’ income tax filings and other tax items
 
(15
)
 
(10
)
 
(11
)
Income tax effect of non-GAAP adjustments
 
(4
)
 
(54
)
 
(17
)
Non-GAAP adjusted net income
 
$
279

 
$
228

 
$
69



These items are incremental charges attributable to completed acquisitions, consisting of inventory fair value adjustments on products sold, and amortization of purchased intangible assets.
 
 
2
These items are incremental charges related to the announced business combination agreement with Tokyo Electron Limited, consisting of acquisition-related and integration costs.
 
 
Results for the three months ended January 26, 2014 included employee-related costs of $7 million related to the restructuring program announced on October 3, 2012.
 
 
4
Results for the three months ended October 27, 2013 included $27 million of employee-related costs related to the restructuring program announced on October 3, 2012, and restructuring and asset impairment charges of $7 million related to the restructuring program announced on May 10, 2012, partially offset by a favorable adjustment of $4 million in restructuring charges related to other restructuring plans.
 
 
5
Results for the three months ended January 27, 2013 included $4 million of employee-related costs related to the restructuring program announced on October 3, 2012, asset impairment charges of $3 million related to the restructuring program announced on May 10, 2012 and severance charges of $2 million related to the integration of Varian.
 
 





Applied Materials, Inc.
Page 10 of 12

APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS

 
 
Three Months Ended
(In millions except per share amounts)
 
January 26,
2014
 
October 27,
2013
 
January 27,
2013
Non-GAAP Adjusted Earnings Per Diluted Share
 
 
 
 
 
 
Reported earnings per diluted share - GAAP basis
 
$
0.21

 
$
0.15

 
$
0.03

Certain items associated with acquisitions
 
0.03

 
0.03

 
0.03

Acquisition integration and deal costs
 
0.01

 

 
0.01

Unrealized gain on derivative associated with announced business combination
 
(0.01
)
 

 

Certain items associated with announced business combination
 

 
0.01

 

Restructuring charges and asset impairments
 

 
0.01

 
0.01

Reinstatement of federal R&D tax credit and resolution of prior years’ income tax filings and other tax items
 
(0.01
)
 
(0.01
)
 
(0.02
)
Non-GAAP adjusted earnings per diluted share
 
$
0.23

 
$
0.19

 
$
0.06

Weighted average number of diluted shares
 
1,225

 
1,222

 
1,212







Applied Materials, Inc.
Page 11 of 12
 
APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS
 
 
 
Three Months Ended
(In millions, except percentages)
 
January 26,
2014
 
October 27,
2013
 
January 27,
2013
SSG Non-GAAP Adjusted Operating Income
 
 
 
 
 
 
Reported operating income - GAAP basis
 
$
314

 
$
213

 
$
134

Certain items associated with acquisitions1
 
42

 
44

 
44

Acquisition integration and deal costs, net
 
1

 
1

 
1

Restructuring charges and asset impairments3
 

 

 
1

Non-GAAP adjusted operating income
 
$
357

 
$
258

 
$
180

Non-GAAP adjusted operating margin percent (% of net sales)
 
24.1
 %
 
20.8
 %
 
18.6
 %
AGS Non-GAAP Adjusted Operating Income
 
 
 
 
 
 
Reported operating income - GAAP basis
 
$
125

 
$
115

 
$
89

Certain items associated with acquisitions1
 
1

 
1

 
1

Restructuring charges and asset impairments3
 

 

 
1

Non-GAAP adjusted operating income
 
$
126

 
$
116

 
$
91

Non-GAAP adjusted operating margin percent (% of net sales)
 
24.9
 %
 
21.6
 %
 
19.3
 %
Display Non-GAAP Adjusted Operating Income
 
 
 
 
 
 
Reported operating income - GAAP basis
 
$
26

 
$
19

 
$
3

Certain items associated with acquisitions1
 
1

 
1

 
2

Non-GAAP adjusted operating income
 
$
27

 
$
20

 
$
5

Non-GAAP adjusted operating margin percent (% of net sales)
 
17.0
 %
 
12.3
 %
 
5.7
 %
EES Non-GAAP Adjusted Operating Loss
 
 
 
 
 
 
Reported operating loss - GAAP basis
 
$
(11
)
 
$
(30
)
 
$
(54
)
Certain items associated with acquisitions1
 
1

 
1

 
7

Restructuring charges and asset impairments2, 3
 

 
7

 
3

Non-GAAP adjusted operating loss
 
$
(10
)
 
$
(22
)
 
$
(44
)
Non-GAAP adjusted operating margin percent (% of net sales)
 
(25.0
)%
 
(50.0
)%
 
(95.7
)%
 
These items are incremental charges attributable to completed acquisitions, consisting of inventory fair value adjustments on products sold, and amortization of purchased intangible assets.
 
 
2
Results for the three months ended October 27, 2013 included restructuring and asset impairment charges of $7 million related to the restructuring program announced on May 10, 2012.
 
 
3
Results for the three months ended January 27, 2013 included asset impairment charges of $3 million related to the restructuring program announced on May 10, 2012 and severance charges of $2 million related to the integration of Varian.






Applied Materials, Inc.
Page 12 of 12
 
APPLIED MATERIALS, INC.

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED OPERATING EXPENSES
 
 
Three Months Ended
(In millions)
January 26, 2014
 
October 27, 2013
 
 
 
 
Operating expenses - GAAP basis
$
561

 
$
584

Unrealized gain (loss) on derivative associated with announced business combination
24

 
(7
)
Restructuring charges and asset impairments
(7
)
 
(30
)
Certain items associated with acquisitions
(6
)
 
(7
)
Acquisition integration costs
(11
)
 
(11
)
Certain items associated with announced business combination
(11
)
 
(17
)
Non-GAAP adjusted operating expenses
$
550

 
$
512



UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED EFFECTIVE INCOME TAX RATE
 
 
Three Months Ended
(In millions, except percentages)
January 26, 2014
 
 
Provision for income taxes - GAAP basis (a)
$
62

Resolutions of prior years’ income tax filings and other tax items
15

Income tax effect of non-GAAP adjustments
4

Non-GAAP adjusted provision for income taxes (b)
$
81

 
 
Income before income taxes - GAAP basis (c)
$
315

Certain items associated with acquisitions
45

Restructuring charges and asset impairments
7

Acquisition integration costs
11

Unrealized gain on derivative associated with announced business combination
(24
)
Certain items associated with announced business combination
11

Gain on sale strategic investments, net
(5
)
Non-GAAP adjusted income before income taxes (d)
$
360

 
 
Effective income tax rate - GAAP basis (a/c)
19.7
%
 
 
Non-GAAP adjusted effective income tax rate (b/d)
22.5
%