Close

Form 8-K APPLIED MATERIALS INC For: Aug 18

August 18, 2016 4:06 PM EDT


 
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________________________________
FORM 8-K
 ____________________________________________________________________
CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 18, 2016
____________________________________________________________________
 Applied Materials, Inc.
(Exact name of registrant as specified in its charter)
____________________________________________________________________
 
 
 
 
 
Delaware
 
000-06920
 
94-1655526
(State or other jurisdiction of incorporation)
 
(Commission File Number)
 
(IRS Employer Identification No.)

3050 Bowers Avenue
 
 
P.O. Box 58039 Santa Clara, CA
 
95052-8039
(Address of principal executive
 
(Zip Code)
offices)
 
 
Registrant’s telephone number, including area code: (408) 727-5555
N/A
(Former name or former address, if changed since last report.)
____________________________________________________________________
 Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
 
o
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
 
o
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
 
o
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 








Item 2.02 Results of Operations and Financial Condition.
On August 18, 2016, Applied Materials, Inc. (“Applied Materials”) announced its financial results for its third quarter ended July 31, 2016. A copy of Applied Materials’ press release is attached hereto as Exhibit 99.1.
The information contained herein and in the accompanying exhibit shall not be incorporated by reference into any filing of Applied Materials, whether made before or after the date hereof, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference in such filing. The information in this report, including the exhibit hereto, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
 
 
 
Exhibit No.
 
Description
99.1
 
Press Release issued by Applied Materials, Inc. dated August 18, 2016
 










SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
 

Applied Materials, Inc.
 (Registrant)
  
Date:
August 18, 2016
By:
/s/ Thomas F. Larkins
 
 
 
Thomas F. Larkins
 
 
 
Senior Vice President, General Counsel
and Corporate Secretary  
 










EXHIBIT INDEX
 
 
 
Exhibit No.
 
Description
99.1
 
Press Release issued by Applied Materials, Inc. dated August 18, 2016
 

 




Exhibit 99.1
APPLIED MATERIALS ANNOUNCES RECORD RESULTS

Applied delivers record EPS of $0.46 and record non-GAAP EPS of $0.50 in its third quarter
Generates $3.66 billion in new orders and reports $4.95 billion in backlog, both all-time highs
Expects record non-GAAP EPS in its fourth quarter

SANTA CLARA, Calif., August 18, 2016 - Applied Materials, Inc. (NASDAQ: AMAT) today reported results for its third quarter ended July 31, 2016.
New orders were $3.66 billion, up 6 percent sequentially and up 26 percent year over year. Backlog of $4.95 billion was up 19 percent sequentially and up 60 percent year over year. Net sales of $2.82 billion were up 15 percent sequentially and up 13 percent year over year.
The company recorded gross margin of 42.3 percent, operating margin of 21.1 percent, and net income of $505 million or $0.46 per diluted share. On a non-GAAP adjusted basis, the company reported third quarter gross margin of 43.7 percent, operating margin of 22.8 percent, and net income of $550 million or $0.50 per diluted share.
The company generated $981 million in cash from operations, paid dividends of $108 million and used $196 million to repurchase 9 million shares of common stock at an average price of $21.88.
“With earnings and orders at an all-time high, Applied is performing better than ever and in a great position to sustainably outperform our markets,” said Gary Dickerson, president and CEO. “We are in the early stages of large, multi-year industry inflections that are driving our business today and creating new opportunities for future growth.”

Quarterly Results Summary
 
 
 
 
 
 
 
Change
 
Q3 FY2016
 
Q2 FY2016
 
Q3 FY2015
 
Q3 FY2016
vs.
Q2 FY2016
 
Q3 FY2016
vs.
Q3 FY2015
 
(In millions, except per share amounts and percentages)
New orders
$
3,658

 
$
3,451

 
$
2,892

 
6
%
 
26
%
Net sales
$
2,821

 
$
2,450

 
$
2,490

 
15
%
 
13
%
Gross margin
42.3
%
 
41.0
%
 
40.9
%
 
1.3 points

 
1.4 points

Operating margin
21.1
%
 
17.3
%
 
15.9
%
 
3.8 points

 
5.2 points

Net income
$
505

 
$
320

 
$
329

 
58
%
 
53
%
Diluted earnings per share (EPS)
$
0.46

 
$
0.29

 
$
0.27

 
59
%
 
70
%




Applied Materials, Inc.
Page 2 of 14

 
 
 
 
 
 
 
Change
Non-GAAP Adjusted Results
Q3 FY2016
 
Q2 FY2016
 
Q3 FY2015
 
Q3 FY2016
vs.
Q2 FY2016
 
Q3 FY2016
vs.
Q3 FY2015
 
(In millions, except per share amounts and percentages)
Non-GAAP adjusted gross margin
43.7
%
 
42.7
%
 
43.9
%
 
1.0 points

 
(0.2) points

Non-GAAP adjusted operating margin
22.8
%
 
19.2
%
 
20.8
%
 
3.6 points

 
2.0 points

Non-GAAP adjusted net income
$
550

 
$
376

 
$
410

 
46
%
 
34
%
Non-GAAP adjusted diluted EPS
$
0.50

 
$
0.34

 
$
0.33

 
47
%
 
52
%
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.
Business Outlook
In the fourth quarter of fiscal 2016, Applied expects net sales to be up 15 percent to 19 percent sequentially. Non-GAAP adjusted diluted EPS is expected to be in the range of $0.61 to $0.69.
This outlook for non-GAAP adjusted diluted EPS excludes known charges related to completed acquisitions of $0.04 per share and any additional charges related to completed or future acquisitions or other non-operational or unusual items that are unknown at this time, as well as other tax related items, which we are not able to predict without unreasonable efforts due to their inherent uncertainty.
Third Quarter Reportable Segment Information
Effective in the third quarter of fiscal 2016, Applied has expanded its Display segment to now include roll-to-roll web coating systems (previously in Energy and Environmental Solutions) and display upgrade equipment (previously in Applied Global Services). The Display segment is now named Display and Adjacent Markets. Applied no longer reports Energy and Environmental Solutions as a segment and its solar business is now included in Corporate and Other. The Silicon Systems segment is now named Semiconductor Systems and is otherwise unchanged. Applied Global Services continues to include 200-millimeter semiconductor equipment sales. Segment operating results for previous periods have been recast to conform to the current presentation in the table below and in the supplemental historical information accompanying this release.

Semiconductor Systems
Q3 FY2016
 
Q2 FY2016
 
Q3 FY2015
 
(In millions, except percentages)
New orders
$
2,215

 
$
1,966

 
$
2,007

Foundry
57
%
 
23
%
 
32
%
DRAM
14
%
 
17
%
 
18
%
Flash
15
%
 
49
%
 
39
%
Logic and other
14
%
 
11
%
 
11
%
Net sales
1,786

 
1,587

 
1,635

Operating income
511

 
364

 
411

Operating margin
28.6
%
 
22.9
%
 
25.1
%
Non-GAAP Adjusted Results
 
 
 
 
Non-GAAP adjusted operating income
$
556

 
$
410

 
$
455

Non-GAAP adjusted operating margin
31.1
%
 
25.8
%
 
27.8
%






Applied Materials, Inc.
Page 3 of 14

Applied Global Services
Q3 FY2016
 
Q2 FY2016
 
Q3 FY2015
 
(In millions, except percentages)
New orders
$
590

 
$
636

 
$
543

Net sales
657

 
633

 
646

Operating income
175

 
165

 
162

Operating margin
26.6
%
 
26.1
%
 
25.1
%
Non-GAAP Adjusted Results
 
 
 
 
Non-GAAP adjusted operating income
$
176

 
$
165

 
$
165

Non-GAAP adjusted operating margin
26.8
%
 
26.1
%
 
25.5
%

Display and Adjacent Markets
Q3 FY2016
 
Q2 FY2016
 
Q3 FY2015
 
(In millions, except percentages)
New orders
$
803

 
$
762

 
$
318

Net sales
313

 
187

 
185

Operating income
63

 
31

 
35

Operating margin
20.1
%
 
16.6
%
 
18.9
%
Non-GAAP Adjusted Results
 
 
 
 
Non-GAAP adjusted operating income
$
63

 
$
31

 
$
36

Non-GAAP adjusted operating margin
20.1
%
 
16.6
%
 
19.5
%

Backlog Information
Applied's backlog increased 19 percent to $4.95 billion and included negative adjustments of $56 million, primarily consisting of order cancellations, partially offset by favorable foreign currency impacts. Backlog composition by reportable segment was as follows:
Semiconductor Systems
50
%
Applied Global Services
15
%
Display and Adjacent Markets
33
%
Corporate and Other
2
%





Applied Materials, Inc.
Page 4 of 14

Use of Non-GAAP Adjusted Financial Measures

Applied provides investors with certain non-GAAP adjusted financial measures, which are adjusted to exclude the impact of certain costs, expenses, gains and losses, including certain items related to mergers and acquisitions; restructuring charges and any associated adjustments; impairments of assets, or investments; gain or loss on sale of strategic investments; income tax items and certain other discrete adjustments. Reconciliations of these non-GAAP measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are provided in the financial tables included in this release.
Management uses these non-GAAP adjusted financial measures to evaluate the company’s operating and financial performance and for planning purposes, and as performance measures in its executive compensation program. Applied believes these measures enhance an overall understanding of our performance and investors’ ability to review the company’s business from the same perspective as the company’s management, and facilitate comparisons of this period’s results with prior periods on a consistent basis by excluding items that we do not believe are indicative of our ongoing operating performance. There are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles, may be different from non-GAAP financial measures used by other companies, and may exclude certain items that may have a material impact upon our reported financial results. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP.
Webcast Information
Applied Materials will discuss these results during an earnings call that begins at 1:30 p.m. Pacific Time today. A live webcast will be available at www.appliedmaterials.com. A replay will be available on the website beginning at 5:00 p.m. Pacific Time today.
Forward-Looking Statements

This press release contains forward-looking statements, including those regarding anticipated growth and trends in our businesses and markets, industry outlooks, technology transitions, our business and financial performance and market share positions, our earnings expectations, our business outlook for the fourth quarter of fiscal 2016, and other statements that are not historical facts. These statements and their underlying assumptions are subject to risks and uncertainties and are not guarantees of future performance. Factors that could cause actual results to differ materially from those expressed or implied by such statements include, without limitation: the level of demand for our products; global economic and industry conditions; consumer demand for electronic products; the demand for semiconductors; customers’ technology and capacity requirements; the introduction of new and innovative technologies, and the timing of technology transitions; our ability to develop, deliver and support new products and technologies; the concentrated nature of our customer base;  our ability to expand our current markets, increase market share and develop new markets; market acceptance of existing and newly developed products; our ability to obtain and protect intellectual property rights in key technologies; our ability to achieve the objectives of operational and strategic initiatives, align our resources and cost structure with business conditions, and attract, motivate and retain key employees; the variability of operating expenses and results among products and segments, and our ability to accurately forecast future results, market conditions, customer requirements and business needs; and other risks and uncertainties described in our SEC filings, including our most recent Forms 10-Q and 8-K. All forward-looking statements are based on management’s current estimates, projections and assumptions, and we assume no obligation to update them.








Applied Materials, Inc.
Page 5 of 14
About Applied Materials

Applied Materials, Inc. (Nasdaq: AMAT) is the leader in materials engineering solutions used to produce virtually every new chip and advanced display in the world. Our expertise in modifying materials at atomic levels and on an industrial scale enables customers to transform possibilities into reality. At Applied Materials, our innovations make possible the technology shaping the future. Learn more at www.appliedmaterials.com.

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






Applied Materials, Inc.
Page 6 of 14


APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
 
 
Three Months Ended
 
Nine Months Ended
(In millions, except per share amounts)
July 31,
2016
 
May 1,
2016
 
July 26,
2015
 
July 31,
2016
 
July 26,
2015
Net sales
$
2,821

 
$
2,450

 
$
2,490

 
$
7,528

 
$
7,291

Cost of products sold
1,629

 
1,446

 
1,472

 
4,416

 
4,298

Gross profit
1,192

 
1,004

 
1,018

 
3,112

 
2,993

Operating expenses:
 
 
 
 
 
 
 
 
 
Research, development and engineering
386

 
386

 
372

 
1,146

 
1,088

Marketing and selling
107

 
102

 
112

 
315

 
332

General and administrative
103

 
91

 
135

 
276

 
392

Loss (gain) on derivatives associated with terminated business combination

 

 
3

 

 
(89
)
Total operating expenses
596

 
579

 
622

 
1,737

 
1,723

Income from operations
596

 
425

 
396

 
1,375

 
1,270

Interest expense
38

 
37

 
24

 
117

 
71

Interest income and other income, net
6

 
7

 
3

 
15

 
2

Income before income taxes
564

 
395

 
375

 
1,273

 
1,201

Provision for income taxes
59

 
75

 
46

 
162

 
160

Net income
$
505

 
$
320

 
$
329

 
$
1,111

 
$
1,041

Earnings per share:
 
 
 
 
 
 
 
 
 
Basic
$
0.47

 
$
0.29

 
$
0.27

 
$
1.00

 
$
0.85

Diluted
$
0.46

 
$
0.29

 
$
0.27

 
$
0.99

 
$
0.84

Weighted average number of shares:
 
 
 
 
 
 
 
 
 
Basic
1,083

 
1,113

 
1,221

 
1,115

 
1,225

Diluted
1,093

 
1,119

 
1,231

 
1,123

 
1,238








Applied Materials, Inc.
Page 7 of 14


APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
 
(In millions)
July 31,
2016
 
May 1,
2016
 
October 25,
2015
ASSETS
 
 
 
 
 
Current assets:
 
 
 
 
 
Cash and cash equivalents
$
2,828

 
$
2,470

 
$
4,797

Short-term investments
438

 
170

 
168

Accounts receivable, net
1,852

 
1,913

 
1,739

Inventories
2,026

 
1,924

 
1,833

Other current assets
255

 
251

 
724

Total current assets
7,399

 
6,728

 
9,261

Long-term investments
960

 
934

 
946

Property, plant and equipment, net
905

 
904

 
892

Goodwill
3,305

 
3,304

 
3,302

Purchased technology and other intangible assets, net
621

 
668

 
762

Deferred income taxes and other assets
509

 
537

 
145

Total assets
$
13,699

 
$
13,075

 
$
15,308

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
Current liabilities:
 
 
 
 
 
Short-term debt
$

 
$

 
$
1,200

Accounts payable and accrued expenses
1,800

 
1,630

 
1,833

Customer deposits and deferred revenue
1,164

 
981

 
765

Total current liabilities
2,964

 
2,611

 
3,798

Long-term debt
3,343

 
3,343

 
3,342

Other liabilities
573

 
556

 
555

Total liabilities
6,880

 
6,510

 
7,695

Total stockholders’ equity
6,819

 
6,565

 
7,613

Total liabilities and stockholders’ equity
$
13,699

 
$
13,075

 
$
15,308








Applied Materials, Inc.
Page 8 of 14


APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
 
(In millions)
Three Months Ended
 
Nine Months Ended
July 31,
2016
 
May 1,
2016
 
July 26,
2015
July 31,
2016
 
July 26,
2015
Cash flows from operating activities:
 
 
 
 
 
 
 
 
 
Net income
$
505

 
$
320

 
$
329

 
$
1,111

 
$
1,041

Adjustments required to reconcile net income to cash provided by operating activities:
 
 
 
 
 
 
 
 
 
Depreciation and amortization
97

 
96

 
93

 
289

 
275

Share-based compensation
48

 
48

 
46

 
150

 
141

Excess tax benefits from share-based compensation
(5
)
 
(3
)
 
(3
)
 
(18
)
 
(54
)
Deferred income taxes
21

 
(22
)
 
18

 
14

 
25

Other
5

 
5

 
43

 
20

 
64

Net change in operating assets and liabilities
310

 
37

 
(192
)
 
103

 
(800
)
Cash provided by operating activities
981

 
481

 
334

 
1,669

 
692

Cash flows from investing activities:
 
 
 
 
 
 
 
 
 
Capital expenditures
(50
)
 
(47
)
 
(49
)
 
(165
)
 
(162
)
Cash paid for acquisitions, net of cash acquired
3

 
(8
)
 
(2
)
 
(5
)
 
(2
)
Proceeds from sales and maturities of investments
208

 
232

 
583

 
681

 
900

Purchases of investments
(483
)
 
(182
)
 
(616
)
 
(947
)
 
(960
)
Cash used in investing activities
(322
)
 
(5
)
 
(84
)
 
(436
)
 
(224
)
Cash flows from financing activities:
 
 
 
 
 
 
 
 
 
Debt repayments
(2
)
 

 

 
(1,207
)
 

Proceeds from common stock issuances and others

 
42

 
1

 
44

 
43

Common stock repurchases
(196
)
 
(900
)
 
(625
)
 
(1,721
)
 
(625
)
Excess tax benefits from share-based compensation
5

 
3

 
3

 
18

 
54

Payments of dividends to stockholders
(108
)
 
(113
)
 
(123
)
 
(336
)
 
(368
)
Cash used in financing activities
(301
)
 
(968
)
 
(744
)
 
(3,202
)
 
(896
)
Effect of exchange rate changes on cash and cash equivalents

 

 
1

 

 

Increase (decrease) in cash and cash equivalents
358

 
(492
)
 
(493
)
 
(1,969
)
 
(428
)
Cash and cash equivalents — beginning of period
2,470

 
2,962

 
3,067

 
4,797

 
3,002

Cash and cash equivalents — end of period
$
2,828

 
$
2,470

 
$
2,574

 
$
2,828

 
$
2,574

Supplemental cash flow information:
 
 
 
 
 
 
 
 
 
Cash payments for income taxes
$
49

 
$
51

 
$
51

 
$
144

 
$
258

Cash refunds from income taxes
$
1

 
$
98

 
$
5

 
$
104

 
$
10

Cash payments for interest
$
34

 
$
42

 
$
39

 
$
110

 
$
85







Applied Materials, Inc.
Page 9 of 14

APPLIED MATERIALS, INC.
UNAUDITED SUPPLEMENTAL INFORMATION

Corporate and Other
(In millions)
Q3 FY2016
 
Q2 FY2016
 
Q3 FY2015
New orders
$
50

 
$
87

 
$
24

 
 
 
 
 
 
Unallocated net sales
$
65

 
$
43

 
$
24

Unallocated cost of products sold and expenses
(170
)
 
(130
)
 
(186
)
Share-based compensation
(48
)
 
(48
)
 
(46
)
Certain items associated with terminated business combination

 

 
(1
)
Loss on derivatives associated with terminated business combination, net

 

 
(3
)
Total
$
(153
)
 
$
(135
)
 
$
(212
)
Additional Information
 
Q3 FY2016
 
Q2 FY2016
 
Q3 FY2015
New Orders and Net Sales by Geography
 
 
 
 
 
 
 
 
 
 
 
(In $ millions)
New
Orders
 
Net
Sales
 
New
Orders
 
Net
Sales
 
New
Orders
 
Net
Sales
United States
259

 
289

 
386

 
272

 
262

 
488

% of Total
7
%
 
10
%
 
11
%
 
11
%
 
9
%
 
20
%
Europe
212

 
124

 
194

 
97

 
142

 
148

% of Total
6
%
 
5
%
 
6
%
 
4
%
 
5
%
 
6
%
Japan
270

 
321

 
339

 
260

 
727

 
283

% of Total
7
%
 
11
%
 
10
%
 
10
%
 
25
%
 
11
%
Korea
689

 
472

 
792

 
506

 
349

 
343

% of Total
19
%
 
17
%
 
23
%
 
21
%
 
12
%
 
14
%
Taiwan
1,240

 
741

 
445

 
311

 
828

 
825

% of Total
34
%
 
26
%
 
13
%
 
13
%
 
29
%
 
33
%
Southeast Asia
139

 
303

 
392

 
252

 
142

 
101

% of Total
4
%
 
11
%
 
11
%
 
10
%
 
5
%
 
4
%
China
849

 
571

 
903

 
752

 
442

 
302

% of Total
23
%
 
20
%
 
26
%
 
31
%
 
15
%
 
12
%
 
 
 
 
 
 
 
 
 
 
 
 
Employees (In thousands)
 
 
 
 
 
 
 
 
 
 
 
Regular Full Time
15.2
 
 
14.8
 
 
14.5
 









Applied Materials, Inc.
Page 10 of 14
 APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS

 
Three Months Ended
 
Nine Months Ended
(In millions, except percentages)
July 31,
2016
 
May 1,
2016
 
July 26,
2015
 
July 31,
2016
 
July 26,
2015
Non-GAAP Adjusted Gross Profit
 
 
 
 
 
 
 
 
 
Reported gross profit - GAAP basis
$
1,192

 
$
1,004

 
$
1,018

 
$
3,112

 
$
2,993

Certain items associated with acquisitions1
42

 
41

 
41

 
125

 
120

Inventory charges (reversals) related to restructuring3, 5
(1
)
 

 
34

 
(2
)
 
34

Non-GAAP adjusted gross profit
$
1,233

 
$
1,045

 
$
1,093

 
$
3,235

 
$
3,147

Non-GAAP adjusted gross margin
43.7
%
 
42.7
%
 
43.9
%
 
43.0
%
 
43.2
%
Non-GAAP Adjusted Operating Income
 
 
 
 
 
 
 
 
 
Reported operating income - GAAP basis
$
596

 
$
425

 
$
396

 
$
1,375

 
$
1,270

Certain items associated with acquisitions1
47

 
46

 
47

 
141

 
138

Acquisition integration and deal costs
2

 

 
1

 
2

 
2

Loss (gain) on derivatives associated with terminated business combination, net

 

 
3

 

 
(89
)
Certain items associated with terminated business combination2

 

 
1

 

 
50

Inventory charges (reversals) related to restructuring and asset impairments, net3, 4, 5
(1
)
 
(1
)
 
50

 
(3
)
 
50

Foreign exchange loss due to functional currency change6

 

 
19

 

 
19

Non-GAAP adjusted operating income
$
644

 
$
470

 
$
517

 
$
1,515

 
$
1,440

Non-GAAP adjusted operating margin
22.8
%
 
19.2
%
 
20.8
%
 
20.1
%
 
19.8
%
Non-GAAP Adjusted Net Income
 
 
 
 
 
 
 
 
 
Reported net income - GAAP basis7
$
505

 
$
320

 
$
329

 
$
1,111

 
$
1,041

Certain items associated with acquisitions1
47

 
46

 
47

 
141

 
138

Acquisition integration and deal costs
2

 

 
1

 
2

 
2

Loss (gain) on derivatives associated with terminated business combination, net

 

 
3

 

 
(89
)
Certain items associated with terminated business combination2

 

 
1

 

 
50

Inventory charges (reversals) related to restructuring and asset impairments, net3, 4, 5
(1
)
 
(1
)
 
50

 
(3
)
 
50

Impairment (gain on sale) of strategic investments, net

 
(1
)
 
(1
)
 
(3
)
 
6

Foreign exchange loss due to functional currency change6

 

 
19

 

 
19

Loss on early extinguishment of debt

 

 

 
5

 

Reinstatement of federal R&D tax credit, resolution of prior years’ income tax filings and other tax items7
1

 
16

 
(21
)
 
(12
)
 
(92
)
Income tax effect of non-GAAP adjustments8
(4
)
 
(4
)
 
(18
)
 
(13
)
 
(15
)
Non-GAAP adjusted net income
$
550

 
$
376

 
$
410

 
$
1,228

 
$
1,110

These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets.
 
 
2
These items are incremental charges related to the terminated business combination agreement with Tokyo Electron Limited, consisting of acquisition-related and integration planning costs.
 
 
3
Results for the three and nine months ended July 31, 2016 primarily included benefit from sales of solar equipment tools for which inventory had been previously reserved related to the cost reductions in the solar business.
 
 
4
Results for the three months ended May 1, 2016 included a $1 million favorable adjustment of employee-related costs associated with the cost reductions in the solar business.
 
 
5
Results for the three and nine months ended July 26, 2015 primarily included $34 million of inventory charges and $17 million of restructuring charges and asset impairments related to cost reductions in the solar business.
 
 
6
Results for the three and nine months ended July 26, 2015 included a $19 million foreign exchange loss due to an immaterial correction of an error related to functional currency change.
 
 
7
Amounts for nine months ended July 26, 2015 included an adjustment to decrease the provision for income taxes by $35 million with a corresponding increase in net income, resulting in an increase in diluted earnings per share of $0.03. The adjustment was excluded in Applied's non-GAAP adjusted results and was made primarily to correct an error in the recognition of cost of sales in the U.S. related to intercompany sales, which resulted in overstating profitability in the U.S. and the provision for income taxes in immaterial amounts in each year since fiscal 2010.
 
 
8
These amounts represent non-GAAP adjustments above multiplied by the effective tax rate within the jurisdictions the adjustments affect.






Applied Materials, Inc.
Page 11 of 14

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

 
Three Months Ended
 
Nine Months Ended
(In millions, except per share amounts)
July 31,
2016
 
May 1,
2016
 
July 26,
2015
 
July 31,
2016
 
July 26,
2015
Non-GAAP Adjusted Earnings Per Diluted Share
 
 
 
 
 
 
 
 
 
Reported earnings per diluted share - GAAP basis1
$
0.46

 
$
0.29

 
$
0.27

 
$
0.99

 
$
0.84

Certain items associated with acquisitions
0.04

 
0.04

 
0.03

 
0.11

 
0.10

Certain items associated with terminated business combination

 

 

 

 
0.03

Gain on derivatives associated with terminated business combination, net

 

 

 

 
(0.05
)
Restructuring, inventory charges and asset impairments

 

 
0.03

 

 
0.03

Reinstatement of federal R&D tax credit, resolution of prior years’ income tax filings and other tax items1

 
0.01

 
(0.02
)
 
(0.01
)
 
(0.07
)
Foreign exchange loss due to functional currency change

 

 
0.02

 

 
0.02

Non-GAAP adjusted earnings per diluted share
$
0.50

 
$
0.34

 
$
0.33

 
$
1.09

 
$
0.90

Weighted average number of diluted shares
1,093

 
1,119

 
1,231

 
1,123

 
1,238


 
 
1
Amounts for nine months ended July 26, 2015 included an adjustment to decrease the provision for income taxes by $35 million with a corresponding increase in net income, resulting in an increase in diluted earnings per share of $0.03. The adjustment was excluded in Applied's non-GAAP adjusted results and was made primarily to correct an error in the recognition of cost of sales in the U.S. related to intercompany sales, which resulted in overstating profitability in the U.S. and the provision for income taxes in immaterial amounts in each year since fiscal 2010.







Applied Materials, Inc.
Page 12 of 14
 
APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS
 
 
Three Months Ended
 
Nine Months Ended
(In millions, except percentages)
July 31,
2016
 
May 1,
2016
 
July 26,
2015
 
July 31,
2016
 
July 26,
2015
Semiconductor Systems Non-GAAP Adjusted Operating Income
 
 
 
 
 
 
 
 
 
Reported operating income - GAAP basis
$
511

 
$
364

 
$
411

 
$
1,140

 
$
1,092

Certain items associated with acquisitions1
45

 
46

 
44

 
138

 
131

Non-GAAP adjusted operating income
$
556

 
$
410

 
$
455

 
$
1,278

 
$
1,223

Non-GAAP adjusted operating margin
31.1
%
 
25.8
%
 
27.8
%
 
26.9
%
 
26.4
%
AGS Non-GAAP Adjusted Operating Income
 
 
 
 
 
 
 
 
 
Reported operating income - GAAP basis
$
175

 
$
165

 
$
162

 
$
489

 
$
470

Certain items associated with acquisitions1
1

 

 

 
1

 
1

Inventory charges related to restructuring2

 

 
3

 

 
3

Non-GAAP adjusted operating income
$
176

 
$
165

 
$
165

 
$
490

 
$
474

Non-GAAP adjusted operating margin
26.8
%
 
26.1
%
 
25.5
%
 
25.8
%
 
25.8
%
Display and Adjacent Markets Non-GAAP Adjusted Operating Income
 
 
 
 
 
 
 
 
 
Reported operating income - GAAP basis
$
63

 
$
31

 
$
35

 
$
142

 
$
163

Certain items associated with acquisitions1

 

 
1

 

 
3

Non-GAAP adjusted operating income
$
63

 
$
31

 
$
36

 
$
142

 
$
166

Non-GAAP adjusted operating margin
20.1
%
 
16.6
%
 
19.5
%
 
18.8
%
 
23.4
%
 
These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets.
 
 
2
Results for the three and nine months ended July 26, 2015 included $3 million of inventory charges related to cost reduction in the solar business.

Note: The reconciliation of GAAP and non-GAAP adjusted segment results above does not include certain revenues, costs of products sold and operating expenses that are reported within corporate and other and included in consolidated operating income.







Applied Materials, Inc.
Page 13 of 14
 
APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED OPERATING EXPENSES
 
 
Three Months Ended
(In millions)
July 31, 2016
 
May 1, 2016
Operating expenses - GAAP basis
$
596

 
$
579

Reversals related to restructuring, net

 
1

Certain items associated with acquisitions
(5
)
 
(5
)
Acquisition integration and deal costs
(2
)
 

Non-GAAP adjusted operating expenses
$
589

 
$
575



UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED EFFECTIVE INCOME TAX RATE
 
 
Three Months Ended
(In millions, except percentages)
July 31, 2016
Provision for income taxes - GAAP basis (a)
$
59

Reinstatement of federal R&D tax credit, resolutions of prior years’ income tax filings and other tax items
(1
)
Income tax effect of non-GAAP adjustments
4

Non-GAAP adjusted provision for income taxes (b)
$
62

 
 
Income before income taxes - GAAP basis (c)
$
564

Certain items associated with acquisitions
47

Reversals related to restructuring, net
(1
)
Acquisition integration costs
2

Non-GAAP adjusted income before income taxes (d)
$
612

 
 
Effective income tax rate - GAAP basis (a/c)
10.5
%
 
 
Non-GAAP adjusted effective income tax rate (b/d)
10.1
%






Applied Materials, Inc.
Page 14 of 14
 
APPLIED MATERIALS, INC.
UNAUDITED SUPPLEMENTAL HISTORICAL INFORMATION
Semiconductor Systems
Q2 FY2016
 
Q1 FY2016
 
Q4 FY2015
 
Q3 FY2015
 
Q2 FY2015
 
Q1 FY2015
 
FY2014
 
(In millions, except percentages)
New orders
$
1,966

 
$
1,275

 
$
1,444

 
$
2,007

 
$
1,704

 
$
1,426

 
$
6,132

Net sales
1,587

 
1,373

 
1,494

 
1,635

 
1,560

 
1,446

 
5,978

Operating income
364

 
265

 
318

 
411

 
374

 
307

 
1,391

Operating margin
22.9
%
 
19.3
%
 
21.3
%
 
25.1
%
 
24.0
%
 
21.2
%
 
23.3
%
Non-GAAP Adjusted Results
 
 
 
 
Non-GAAP adjusted operating income
$
410

 
$
312

 
$
365

 
$
455

 
$
418

 
$
350

 
$
1,565

Non-GAAP adjusted operating margin
25.8
%
 
22.7
%
 
24.4
%
 
27.8
%
 
26.8
%
 
24.2
%
 
26.2
%

Applied Global Services
Q2 FY2016
 
Q1 FY2016
 
Q4 FY2015
 
Q3 FY2015
 
Q2 FY2015
 
Q1 FY2015
 
FY2014
 
(In millions, except percentages)
New orders
$
636

 
$
755

 
$
743

 
$
543

 
$
620

 
$
676

 
$
2,345

Net sales
633

 
606

 
611

 
646

 
627

 
563

 
2,114

Operating income
165

 
149

 
160

 
162

 
162

 
146

 
538

Operating margin
26.1
%
 
24.6
%
 
26.2
%
 
25.1
%
 
25.8
%
 
25.9
%
 
25.4
%
Non-GAAP Adjusted Results
 
 
 
 
Non-GAAP adjusted operating income
$
165

 
$
149

 
$
159

 
$
165

 
$
162

 
$
147

 
$
541

Non-GAAP adjusted operating margin
26.1
%
 
24.6
%
 
26.0
%
 
25.5
%
 
25.8
%
 
26.1
%
 
25.6
%

Display and Adjacent Markets
Q2 FY2016
 
Q1 FY2016
 
Q4 FY2015
 
Q3 FY2015
 
Q2 FY2015
 
Q1 FY2015
 
FY2014
 
(In millions, except percentages)
New orders
$
762

 
$
208

 
$
219

 
$
318

 
$
159

 
$
132

 
$
1,066

Net sales
187

 
254

 
235

 
185

 
208

 
316

 
848

Operating income
31

 
48

 
28

 
35

 
49

 
79

 
202

Operating margin
16.6
%
 
18.9
%
 
11.9
%
 
18.9
%
 
23.6
%
 
25.0
%
 
23.8
%
Non-GAAP Adjusted Results
 
 
 
 
Non-GAAP adjusted operating income
$
31

 
$
48

 
$
28

 
$
36

 
$
50

 
$
80

 
$
206

Non-GAAP adjusted operating margin
16.6
%
 
18.9
%
 
11.9
%
 
19.5
%
 
24.0
%
 
25.3
%
 
24.3
%

Corporate and Other
Q2 FY2016
 
Q1 FY2016
 
Q4 FY2015
 
Q3 FY2015
 
Q2 FY2015
 
Q1 FY2015
 
FY2014
 
(In millions)
New orders
$
87

 
$
37

 
$
18

 
$
24

 
$
32

 
$
39

 
$
105

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unallocated net sales
$
43

 
$
24

 
$
28

 
$
24

 
$
47

 
$
34

 
$
132

Unallocated cost of products sold and expenses
(130
)
 
(78
)
 
(65
)
 
(186
)
 
(154
)
 
(118
)
 
(523
)
Share-based compensation
(48
)
 
(54
)
 
(46
)
 
(46
)
 
(47
)
 
(48
)
 
(177
)
Certain items associated with terminated business combination

 

 

 
(1
)
 
(29
)
 
(20
)
 
(73
)
Gain (loss) on derivatives associated with terminated business combination, net

 

 

 
(3
)
 
14

 
78

 
30

Total
$
(135
)
 
$
(108
)
 
$
(83
)
 
$
(212
)
 
$
(169
)
 
$
(74
)
 
$
(611
)




Serious News for Serious Traders! Try StreetInsider.com Premium Free!

You May Also Be Interested In





Related Categories

SEC Filings