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Form 8-K APPLIED MATERIALS INC For: May 14

May 14, 2015 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): May 14, 2015
____________________________________________________________________
 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 May 14, 2015, Applied Materials, Inc. (“Applied Materials”) announced its financial results for its second quarter ended April 26, 2015. 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 May 14, 2015.
 











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:
May 14, 2015
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 May 14, 2015.
 

 





Exhibit 99.1
APPLIED MATERIALS ANNOUNCES SECOND QUARTER RESULTS
 
Q2 net sales of $2.44 billion up 4% year over year led by growth in Applied Global Services and Display
Q2 non-GAAP adjusted EPS of $0.29 up 4% year over year; GAAP EPS of $0.29 up 38% year over year

SANTA CLARA, Calif., May 14, 2015 — Applied Materials, Inc. (NASDAQ: AMAT), the global leader in precision materials engineering solutions for the semiconductor, display and solar industries, today reported results for its second quarter ended April 26, 2015.
Second quarter orders were $2.52 billion, up 11 percent sequentially and down 4 percent year over year. Net sales were $2.44 billion, up 4 percent sequentially and up 4 percent year over year.
On a non-GAAP adjusted basis, the company reported gross margin of 43.2 percent, operating income of $476 million, and net income of $362 million or $0.29 per diluted share. The company recorded GAAP gross margin of 41.6 percent, operating income of $416 million, and net income of $364 million or $0.29 per diluted share.

“Applied posted our highest quarterly revenue in the past three years and earnings near the top of our guidance range,” said Gary Dickerson, president and CEO. “These results demonstrate that Applied is delivering the enabling products and services our customers need as they transition complex new devices into volume production.”

Quarterly Results Summary
 
 
 
 
 
 
 
 
Change
GAAP Results
 
Q2 FY2015
 
Q1 FY2015
 
Q2 FY2014
 
Q2 FY2015
vs.
Q1 FY2015
 
Q2 FY2015
vs.
Q2 FY2014
Net sales
 
$2.44 billion
 
$2.36 billion
 
$2.35 billion
 
4%
 
4%
Gross profit
 
$1.02 billion
 
$959 million
 
$1.00 billion
 
6%
 
1%
Operating income
 
$416 million
 
$458 million
 
$387 million
 
(9)%
 
7%
Net income
 
$364 million
 
$348 million
 
$262 million
 
5%
 
39%
Diluted earnings per share (EPS)
 
$0.29
 
$0.28
 
$0.21
 
4%
 
38%
Non-GAAP Adjusted Results
 
 
 
 
 
 
 
 
 
 
Non-GAAP adjusted gross profit
 
$1.06 billion
 
$1.00 billion
 
$1.04 billion
 
6%
 
1%
Non-GAAP adjusted operating income
 
$476 million
 
$447 million
 
$482 million
 
6%
 
(1)%
Non-GAAP adjusted net income
 
$362 million
 
$338 million
 
$348 million
 
7%
 
4%
Non-GAAP adjusted diluted EPS
 
$0.29
 
$0.27
 
$0.28
 
7%
 
4%




Applied Materials, Inc.
Page 2 of 12
Applied's non-GAAP adjusted results exclude the impact of the following, where applicable: certain items related to mergers and acquisitions; restructuring charges and any associated adjustments; impairments of assets, goodwill, or investments; gain or loss on sale of strategic investments or facilities; 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.
Second Quarter Reportable Segment Results and Comparisons to the Prior Quarter
Silicon Systems Group (SSG) orders were $1.70 billion, up 19 percent, with increases in foundry, flash and DRAM more than offsetting a decline in logic/other. Net sales increased by 8 percent to $1.56 billion. Non-GAAP adjusted operating income increased by 19 percent to $418 million or 26.8 percent of net sales. GAAP operating income increased by 22 percent to $374 million or 24.0 percent of net sales.
SSG new order composition was: foundry 36 percent; DRAM 31 percent; flash 21 percent; and logic/other 12 percent.
Applied Global Services orders of $641 million declined 7 percent primarily due to a seasonal decline in service contract renewals. Net sales of $646 million increased by 11 percent. Operating income increased to $170 million or 26.3 percent of net sales on both a GAAP and non-GAAP basis.
Display orders of $120 million were up 12 percent reflecting an increase in TV equipment orders. Net sales declined 41 percent to $163 million, which was in line with expectations. Operating income decreased to $40 million or 24.5 percent of net sales on both a GAAP and non-GAAP basis.
Energy and Environmental Solutions orders remained flat at $50 million, and net sales increased by 33 percent to $73 million. EES reported a non-GAAP adjusted operating loss of $4 million and a GAAP operating loss of $5 million.

Applied's backlog remained essentially flat at $2.78 billion and included negative adjustments of $69 million, primarily consisting of order cancellations and other adjustments. Backlog composition by segment was: SSG 53 percent; AGS 29 percent; Display 13 percent; and EES 5 percent.


Business Outlook
For the third quarter of fiscal 2015, Applied expects net sales to be in the range of up 2 percent to up 6 percent from the previous quarter, the midpoint of which would be up 12 percent year over year. Non-GAAP adjusted diluted EPS is expected to be in the range of $0.31 to $0.35, the midpoint of which would be up 18 percent year over year.
This outlook excludes known charges related to completed acquisitions of $0.03 per share and does not exclude other non-GAAP adjustments that may arise subsequent to this release.







Applied Materials, Inc.
Page 3 of 12

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.
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 financial performance and market share positions, our business outlook for the third quarter of fiscal 2015, 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.

About Applied Materials
Applied Materials, Inc. (Nasdaq: AMAT) is the global leader in precision materials engineering solutions for the semiconductor, flat panel display and solar photovoltaic industries. 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
 
Six Months Ended
(In millions, except per share amounts)
 
April 26,
2015
 
January 25,
2015
 
April 27,
2014
 
April 26,
2015
 
April 27,
2014
Net sales
 
$
2,442

 
$
2,359

 
$
2,353

 
$
4,801

 
$
4,543

Cost of products sold
 
1,426

 
1,400

 
1,352

 
2,826

 
2,651

Gross profit
 
1,016

 
959

 
1,001

 
1,975

 
1,892

Operating expenses:
 
 
 
 
 
 
 
 
 
 
Research, development and engineering
 
365

 
351

 
355

 
716

 
711

Marketing and selling
 
109

 
111

 
107

 
220

 
216

General and administrative
 
140

 
117

 
129

 
257

 
249

Loss (gain) on derivatives associated with announced business combination
 
(14
)
 
(78
)
 
23

 
(92
)
 
(1
)
Total operating expenses
 
600

 
501

 
614

 
1,101

 
1,175

Income from operations
 
416

 
458

 
387

 
874

 
717

Interest expense
 
24

 
23

 
23

 
47

 
48

Interest income and other income (loss), net
 
(3
)
 
2

 
1

 
(1
)
 
11

Income before income taxes
 
389

 
437

 
365

 
826

 
680

Provision for income taxes
 
25

 
89

 
103

 
114

 
165

Net income
 
$
364

 
$
348

 
$
262

 
$
712

 
$
515

Earnings per share:
 
 
 
 
 
 
 
 
 
 
Basic
 
$
0.30

 
$
0.28

 
$
0.22

 
$
0.58

 
$
0.43

Diluted
 
$
0.29

 
$
0.28

 
$
0.21

 
$
0.57

 
$
0.42

Weighted average number of shares:
 
 
 
 
 
 
 
 
 
 
Basic
 
1,230

 
1,224

 
1,216

 
1,227

 
1,211

Diluted
 
1,241

 
1,240

 
1,229

 
1,241

 
1,227








Applied Materials, Inc.
Page 5 of 12


APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
 
(In millions)
 
April 26,
2015
 
January 25,
2015
 
October 26,
2014
ASSETS
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
 
$
3,067

 
$
2,929

 
$
3,002

Short-term investments
 
163

 
158

 
160

Accounts receivable, net
 
1,798

 
1,580

 
1,670

Inventories
 
1,713

 
1,641

 
1,567

Other current assets
 
706

 
625

 
568

Total current assets
 
7,447

 
6,933

 
6,967

Long-term investments
 
936

 
930

 
935

Property, plant and equipment, net
 
887

 
864

 
861

Goodwill
 
3,304

 
3,304

 
3,304

Purchased technology and other intangible assets, net
 
860

 
905

 
951

Deferred income taxes and other assets
 
153

 
137

 
156

Total assets
 
$
13,587

 
$
13,073

 
$
13,174

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
Accounts payable and accrued expenses
 
$
1,822

 
$
1,737

 
$
1,883

Customer deposits and deferred revenue
 
874

 
784

 
940

Total current liabilities
 
2,696

 
2,521

 
2,823

Long-term debt
 
1,947

 
1,947

 
1,947

Other liabilities
 
593

 
533

 
536

Total liabilities
 
5,236

 
5,001

 
5,306

Total stockholders’ equity
 
8,351

 
8,072

 
7,868

Total liabilities and stockholders’ equity
 
$
13,587

 
$
13,073

 
$
13,174








Applied Materials, Inc.
Page 6 of 12


APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
 
(In millions)
Three Months Ended
 
Six Months Ended
April 26,
2015
 
January 25,
2015
 
April 27,
2014
April 26,
2015
 
April 27,
2014
Cash flows from operating activities:
 
 
 
 
 
 
 
 
 
Net income
$
364

 
$
348

 
$
262

 
$
712

 
$
515

Adjustments required to reconcile net income to cash provided by operating activities:
 
 
 
 
 
 
 
 
 
Depreciation and amortization
90

 
92

 
94

 
182

 
188

Share-based compensation
47

 
48

 
42

 
95

 
88

Excess tax benefits from share-based compensation
(12
)
 
(39
)
 
(7
)
 
(51
)
 
(25
)
Other
(8
)
 
36

 
12

 
28

 
21

Net change in operating assets and liabilities
(183
)
 
(425
)
 
34

 
(608
)
 
22

Cash provided by operating activities
298

 
60

 
437

 
358

 
809

Cash flows from investing activities:
 
 
 
 
 
 
 
 
 
Capital expenditures
(64
)
 
(49
)
 
(65
)
 
(113
)
 
(113
)
Proceeds from sales and maturities of investments
177

 
140

 
157

 
317

 
521

Purchases of investments
(203
)
 
(141
)
 
(161
)
 
(344
)
 
(324
)
Cash provided by (used in) investing activities
(90
)
 
(50
)
 
(69
)
 
(140
)
 
84

Cash flows from financing activities:
 
 
 
 
 
 
 
 
 
Proceeds from common stock issuances and others, net
42

 

 
56

 
42

 
66

Excess tax benefits from share-based compensation
12

 
39

 
7

 
51

 
25

Payments of dividends to stockholders
(123
)
 
(122
)
 
(122
)
 
(245
)
 
(242
)
Cash used in financing activities
(69
)
 
(83
)
 
(59
)
 
(152
)
 
(151
)
Effect of exchange rate changes on cash and cash equivalents
(1
)
 

 

 
(1
)
 

Increase (decrease) in cash and cash equivalents
138

 
(73
)
 
309

 
65

 
742

Cash and cash equivalents — beginning of period
2,929

 
3,002

 
2,144

 
3,002

 
1,711

Cash and cash equivalents — end of period
$
3,067

 
$
2,929

 
$
2,453

 
$
3,067

 
$
2,453

Supplemental cash flow information:
 
 
 
 
 
 
 
 
 
Cash payments for income taxes
$
118

 
$
89

 
$
33

 
$
207

 
$
59

Cash refunds from income taxes
$
2

 
$
3

 
$
3

 
$
5

 
$
12

Cash payments for interest
$
7

 
$
39

 
$
7

 
$
46

 
$
46







Applied Materials, Inc.
Page 7 of 12

APPLIED MATERIALS, INC.
UNAUDITED SUPPLEMENTAL INFORMATION

Reportable Segment Results
 
 
 
Q2 FY2015
 
Q1 FY2015
 
Q2 FY2014
(In millions)
 
New
Orders
 
Net
Sales
 
Operating
Income
(Loss)
 
New
Orders
 
Net
Sales
 
Operating
Income
(Loss)
 
New
Orders
 
Net
Sales
 
Operating
Income
(Loss)
SSG
 
$
1,704

 
$
1,560

 
$
374

 
$
1,426

 
$
1,446

 
$
307

 
$
1,664

 
$
1,584

 
$
391

AGS
 
641

 
646

 
170

 
690

 
583

 
153

 
537

 
534

 
148

Display
 
120

 
163

 
40

 
107

 
275

 
72

 
340

 
147

 
26

EES
 
50

 
73

 
(5
)
 
50

 
55

 
(4
)
 
88

 
88

 
5

Corporate
 

 

 
(163
)
 

 

 
(70
)
 

 

 
(183
)
Consolidated
 
$
2,515

 
$
2,442

 
$
416

 
$
2,273

 
$
2,359

 
$
458

 
$
2,629

 
$
2,353

 
$
387



Corporate Unallocated Expenses
 
(In millions)
 
Q2 FY2015
 
Q1 FY2015
 
Q2 FY2014
Share-based compensation
 
47

 
48

 
42

Certain items associated with announced business combination
 
29

 
20

 
16

Loss (gain) on derivative associated with announced business combination, net
 
(14
)
 
(78
)
 
23

Other unallocated expenses
 
101

 
80

 
102

Total corporate
 
$
163

 
$
70

 
$
183








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

Additional Information
 
 
 
Q2 FY2015
 
Q1 FY2015
 
Q2 FY2014
New Orders and Net Sales by Geography
 
 
 
 
 
 
 
 
 
 
 
 
(In $ millions)
 
New
Orders
 
Net
Sales
 
New
Orders
 
Net
Sales
 
New
Orders
 
Net
Sales
United States
 
368

 
632

 
411

 
529

 
521

 
370

% of Total
 
15
%
 
26
%
 
18
%
 
22
%
 
20
%
 
16
%
Europe
 
131

 
150

 
148

 
143

 
199

 
156

% of Total
 
5
%
 
6
%
 
6
%
 
6
%
 
7
%
 
7
%
Japan
 
365

 
257

 
242

 
231

 
203

 
215

% of Total
 
15
%
 
10
%
 
11
%
 
10
%
 
8
%
 
9
%
Korea
 
607

 
449

 
546

 
464

 
378

 
351

% of Total
 
24
%
 
18
%
 
24
%
 
20
%
 
14
%
 
15
%
Taiwan
 
589

 
455

 
545

 
519

 
660

 
781

% of Total
 
23
%
 
19
%
 
24
%
 
22
%
 
25
%
 
33
%
Southeast Asia
 
103

 
87

 
85

 
85

 
72

 
52

% of Total
 
4
%
 
4
%
 
4
%
 
4
%
 
3
%
 
2
%
China
 
352

 
412

 
296

 
388

 
596

 
428

% of Total
 
14
%
 
17
%
 
13
%
 
16
%
 
23
%
 
18
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Employees (In thousands)
 
 
 
 
 
 
 
 
 
 
 
 
Regular Full Time
 
14.3
 
 
14.1
 
 
13.7
 











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

 
 
Three Months Ended
 
Six Months Ended
(In millions, except percentages)
 
April 26,
2015
 
January 25,
2015
 
April 27,
2014
 
April 26,
2015
 
April 27,
2014
Non-GAAP Adjusted Gross Profit
 
 
 
 
 
 
 
 
 
 
Reported gross profit - GAAP basis
 
$
1,016

 
$
959

 
$
1,001

 
$
1,975

 
$
1,892

Certain items associated with acquisitions1
 
39

 
40

 
39

 
79

 
78

Acquisition integration costs
 

 

 
1

 

 
1

Non-GAAP adjusted gross profit
 
$
1,055

 
$
999

 
$
1,041

 
$
2,054

 
$
1,971

Non-GAAP adjusted gross margin
 
43.2
%
 
42.3
%
 
44.2
%
 
42.8
%
 
43.4
%
Non-GAAP Adjusted Operating Income
 
 
 
 
 
 
 
 
 
 
Reported operating income - GAAP basis
 
$
416

 
$
458

 
$
387

 
$
874

 
$
717

Certain items associated with acquisitions1
 
45

 
46

 
46

 
91

 
91

Acquisition integration costs
 

 
1

 
10

 
1

 
21

Loss (gain) on derivatives associated with announced business combination, net
 
(14
)
 
(78
)
 
23

 
(92
)
 
(1
)
Certain items associated with announced business combination2
 
29

 
20

 
16

 
49

 
27

Restructuring charges and asset impairments3
 

 

 

 

 
7

Non-GAAP adjusted operating income
 
$
476

 
$
447

 
$
482

 
$
923

 
$
862

Non-GAAP adjusted operating margin
 
19.5
%
 
18.9
%
 
20.5
%
 
19.2
%
 
19.0
%
Non-GAAP Adjusted Net Income
 
 
 
 
 
 
 
 
 
 
Reported net income - GAAP basis4
 
$
364

 
$
348

 
$
262

 
$
712

 
$
515

Certain items associated with acquisitions1
 
45

 
46

 
46

 
91

 
91

Acquisition integration costs
 

 
1

 
10

 
1

 
21

Loss (gain) on derivatives associated with announced business combination, net
 
(14
)
 
(78
)
 
23

 
(92
)
 
(1
)
Certain items associated with announced business combination2
 
29

 
20

 
16

 
49

 
27

Restructuring charges and asset impairments3
 

 

 

 

 
7

Impairment (gain on sale) of strategic investments, net
 
6

 
1

 
2

 
7

 
(3
)
Reinstatement of federal R&D tax credit, resolution of prior years’ income tax filings and other tax items4
 
(54
)
 
(17
)
 
12

 
(71
)
 
(3
)
Income tax effect of non-GAAP adjustments
 
(14
)
 
17

 
(23
)
 
3

 
(27
)
Non-GAAP adjusted net income
 
$
362

 
$
338

 
$
348

 
$
700

 
$
627


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 announced business combination agreement with Tokyo Electron Limited, consisting of acquisition-related and integration planning costs.
 
 
3
Results for the six months ended April 27, 2014 included a $7 million of employee-related costs related to the restructuring program announced on October 3, 2012.
 
 
4
Amounts for the three and six months ended April 26, 2015 included an adjustment to decrease the provision for income taxes by $39 million and $35 million, respectively, with a corresponding increase in net income and 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 10 of 12

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

 
 
Three Months Ended
 
Six Months Ended
(In millions except per share amounts)
 
April 26,
2015
 
January 25,
2015
 
April 27,
2014
 
April 26,
2015
 
April 27,
2014
Non-GAAP Adjusted Earnings Per Diluted Share
 
 
 
 
 
 
 
 
 
 
Reported earnings per diluted share - GAAP basis1
 
$
0.29

 
$
0.28

 
$
0.21

 
$
0.57

 
$
0.42

Certain items associated with acquisitions
 
0.03

 
0.03

 
0.03

 
0.07

 
0.06

Acquisition integration costs
 

 

 
0.01

 

 
0.01

Certain items associated with announced business combination
 
0.02

 
0.01

 
0.01

 
0.03

 
0.02

Loss (gain) on derivative associated with announced business combination, net
 
(0.01
)
 
(0.04
)
 
0.01

 
(0.05
)
 

Reinstatement of federal R&D tax credit, resolution of prior years’ income tax filings and other tax items1
 
(0.04
)
 
(0.01
)
 
0.01

 
(0.06
)
 

Non-GAAP adjusted earnings per diluted share
 
$
0.29

 
$
0.27

 
$
0.28

 
$
0.56

 
$
0.51

Weighted average number of diluted shares
 
1,241

 
1,240

 
1,229

 
1,241

 
1,227


1
Amounts for the three and six months ended April 26, 2015 included an adjustment to decrease the provision for income taxes by $39 million and $35 million, respectively, with a corresponding increase in net income and 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 11 of 12
 
APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS
 
 
 
Three Months Ended
 
Six Months Ended
(In millions, except percentages)
 
April 26,
2015
 
January 25,
2015
 
April 27,
2014
 
April 26,
2015
 
April 27,
2014
SSG Non-GAAP Adjusted Operating Income
 
 
 
 
 
 
 
 
 
 
Reported operating income - GAAP basis
 
$
374

 
$
307

 
$
391

 
$
681

 
$
705

Certain items associated with acquisitions1
 
44

 
43

 
42

 
87

 
84

Acquisition integration costs
 

 

 

 

 
1

Non-GAAP adjusted operating income
 
$
418

 
$
350

 
$
433

 
$
768

 
$
790

Non-GAAP adjusted operating margin
 
26.8
 %
 
24.2
 %
 
27.3
%
 
25.5
 %
 
25.7
 %
AGS Non-GAAP Adjusted Operating Income
 
 
 
 
 
 
 
 
 
 
Reported operating income - GAAP basis
 
$
170

 
$
153

 
$
148

 
$
323

 
$
273

Certain items associated with acquisitions1
 

 
1

 
2

 
1

 
3

Non-GAAP adjusted operating income
 
$
170

 
$
154

 
$
150

 
$
324

 
$
276

Non-GAAP adjusted operating margin
 
26.3
 %
 
26.4
 %
 
28.1
%
 
26.4
 %
 
26.5
 %
Display Non-GAAP Adjusted Operating Income
 
 
 
 
 
 
 
 
 
 
Reported operating income - GAAP basis
 
$
40

 
$
72

 
$
26

 
$
112

 
$
52

Certain items associated with acquisitions1
 

 
1

 

 
1

 
1

Non-GAAP adjusted operating income
 
$
40

 
$
73

 
$
26

 
$
113

 
$
53

Non-GAAP adjusted operating margin
 
24.5
 %
 
26.5
 %
 
17.7
%
 
25.8
 %
 
17.3
 %
EES Non-GAAP Adjusted Operating Income (Loss)
 
 
 
 
 
 
 
 
 
 
Reported operating income (loss) - GAAP basis
 
$
(5
)
 
$
(4
)
 
$
5

 
$
(9
)
 
$
(6
)
Certain items associated with acquisitions1
 
1

 
1

 
2

 
2

 
3

Non-GAAP adjusted operating income (loss)
 
$
(4
)
 
$
(3
)
 
$
7

 
$
(7
)
 
$
(3
)
Non-GAAP adjusted operating margin
 
(5.5
)%
 
(5.5
)%
 
8.0
%
 
(5.5
)%
 
(2.3
)%
 
These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets.






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)
April 26, 2015
 
January 25, 2015
 
 
 
 
Operating expenses - GAAP basis
$
600

 
$
501

Gain on derivative associated with announced business combination, net
14

 
78

Certain items associated with acquisitions
(6
)
 
(6
)
Acquisition integration costs

 
(1
)
Certain items associated with announced business combination
(29
)
 
(20
)
Non-GAAP adjusted operating expenses
$
579

 
$
552



UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED EFFECTIVE INCOME TAX RATE
 
 
Three Months Ended
(In millions, except percentages)
April 26, 2015
 
 
Provision for income taxes - GAAP basis1 (a)
$
25

Reinstatement of federal R&D tax credit, resolutions of prior years’ income tax filings and other tax items
54

Income tax effect of non-GAAP adjustments1
14

Non-GAAP adjusted provision for income taxes (b)
$
93

 
 
Income before income taxes - GAAP basis (c)
$
389

Certain items associated with acquisitions
45

Gain on derivative associated with announced business combination
(14
)
Certain items associated with announced business combination
29

Impairment of strategic investments, net
6

Non-GAAP adjusted income before income taxes (d)
$
455

 
 
Effective income tax rate - GAAP basis1 (a/c)
6.4
%
 
 
Non-GAAP adjusted effective income tax rate (b/d)
20.4
%

1
Amounts for the three months ended April 26, 2015 included an adjustment to decrease the provision for income taxes by $39 million, with a corresponding increase in net income and 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.





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