Applied Materials Announces Record Results
August 18 2016 - 4:01PM
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 |
% |
|
|
|
|
|
|
|
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 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 |
% |
|
|
|
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.
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) 408.235.4498Michael Sullivan
(financial community) 408.986.7977
|
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.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.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.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) |
NewOrders |
|
NetSales |
|
NewOrders |
|
NetSales |
|
NewOrders |
|
NetSales |
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.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 |
|
1 |
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.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.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 |
% |
1 |
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.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.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 |
) |
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