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Applied Materials Inc. Reports Operating Results (10-Q)

May 24, 2012 | About:
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10qk

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Applied Materials Inc. (AMAT) filed Quarterly Report for the period ended 2012-04-29.

Appld Matls Inc has a market cap of $13.38 billion; its shares were traded at around $10.41 with a P/E ratio of 10.3 and P/S ratio of 1.3. The dividend yield of Appld Matls Inc stocks is 3.1%.

Highlight of Business Operations:

Applied s backlog for the most recent three fiscal quarters was as follows: $2.4 billion at April 29, 2012, $2.2 billion at January 29, 2012, and $2.4 billion at October 30, 2011. Backlog adjustments for the quarter ended April 29, 2012 were negative and totaled $24 million. Negative backlog adjustments of $97 million consisted of financial debookings, cancellations and foreign exchange effects primarily related to services and semiconductor equipment customers. Negative adjustments were offset in part by $73 million of rebookings primarily related to display customers. Backlog consists of: (1) orders for which written authorizations have been accepted and assigned shipment dates are within the next 12 months, or shipment has occurred but revenue has not been recognized; and (2) contractual service revenue and maintenance fees to be earned within the next 12 months. Applied s backlog at any particular time is not necessarily indicative of actual sales for any future periods, due to the potential for customer changes in delivery schedules or cancellation of orders. In the second quarter of fiscal 2012, approximately 71 percent of the net sales in the Silicon Systems Group, Applied s largest business segment, were from orders received and shipped in the same quarter.

The increase in the gross margin for the second quarter of fiscal 2012 compared to the first quarter of fiscal 2012 was principally attributable to higher net sales, changes in segment mix and a decrease in Varian acquisition-related costs. Gross margin for the three and six months ended April 29, 2012 decreased from the comparable periods in the prior year primarily due to changes in segment mix, inventory fair value adjustments and intangible asset amortization associated with purchase accounting and additional inventory charges. Inventory fair value adjustments and intangible asset amortization associated with purchase accounting were $50 million and $128 million for the three and six months ended April 29, 2012, respectively. Gross margin during the three month periods ended April 29, 2012, January 29, 2012 and May 1, 2011 included $14 million, $13 million and $13 million of share-based compensation expense, respectively. Gross margin during the first six months of fiscal 2012 and 2011 included $27 million and $24 million of share-based compensation expense, respectively. Reconciliations of non-GAAP measures are presented under “Non-GAAP Results.”

The increases in new orders and net sales for the second quarter of fiscal 2012 compared to the second quarter of fiscal 2011 were primarily due to increased demand from foundry customers, which was partially driven by demand for Varian products. Varian products contributed approximately $315 million and $277 million in new orders and net sales, respectively, in the second quarter of fiscal 2012. The segment s book to bill ratio of 1.1 for the second quarter of fiscal 2012 decreased compared to 1.2 for the second quarter of fiscal 2011, reflecting lower increases in new orders relative to net sales. Operating income for the second quarter of fiscal 2012 increased compared to the second quarter of fiscal 2011, reflecting higher net sales, partially offset by costs associated with Varian operations, Varian acquisition-related costs, and additional inventory charges of $20 million. However, operating margin, as a percentage of net sales, decreased for the second quarter of fiscal 2012 compared to the same period in the prior year due to increased costs associated with Varian operations and acquisition relative to the increase in net sales.

Applied generated $784 million of cash from operating activities for the six months ended April 29, 2012. The primary sources of cash from operating activities for the six months ended April 29, 2012 were net income, as adjusted to exclude the effect of non-cash charges including depreciation, amortization, share-based compensation, deferred income taxes and changes in components of working capital. Applied did not utilize programs to discount letters of credit issued by customers for the six months ended April 29, 2012. Applied utilized programs to discount letters of credit issued by customers of $173 million for the six months ended May 1, 2011. Discounting of letters of credit depends on many factors, including the willingness of financial institutions to discount the letters of credit and the cost of such arrangements. For the six months ended April 29, 2012 and May 1, 2011, Applied factored accounts receivable and discounted promissory notes totaling $70 million and $55 million, respectively. Days sales outstanding for the second quarter of fiscal 2012 of 64 days decreased compared to 66 days at the end of the first quarter of fiscal 2012 and increased compared to 61 days for the quarter ended May 1, 2011. Days sales outstanding varies due to the timing of shipments and the payment terms. Applied s working capital was $3.7 billion at April 29, 2012 and $7.6 billion at October 30, 2011.

Applied used $4.4 billion of cash for investing activities during the six months ended April 29, 2012. In the first half of fiscal 2012, Applied acquired Varian for $4.2 billion, net of cash acquired. Purchases of investments, net of proceeds from sales and maturities of investments, totaled $154 million, and capital expenditures totaled $76 million for the first half of fiscal 2012.

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