• Net Sales: $2.52 billion (1% decrease quarter over quarter; 47% increase year over year)
• Net Income: $449 million (12% decrease quarter over quarter; 82% increase year over year), including charges for equity-based compensation
• EPS: $0.30 ($0.03 decrease quarter over quarter; $0.15 increase year over year), including charges for equity-based compensation
• New Orders: $2.69 billion (1% increase quarter over quarter; 59% increase year over year)
SANTA CLARA, Calif. – Applied Materials, Inc. (Nasdaq:AMAT) reported results for its fourth fiscal quarter ended October 29, 2006. Net sales were $2.52 billion, down 1 percent from $2.54 billion for the third quarter of fiscal 2006, and up 47 percent from $1.72 billion for the fourth quarter of fiscal 2005. Gross margin for the fourth quarter of fiscal 2006 was 47.1 percent, down from 48.1 percent for the third quarter of fiscal 2006, and up from 44.2 percent for the fourth quarter of fiscal 2005. Net income for the fourth quarter of fiscal 2006 was $449 million, or $0.30 per share, down from net income of $512 million, or $0.33 per share, for the third quarter of fiscal 2006, and up from net income of $247 million, or $0.15 per share, for the fourth quarter of fiscal 2005.
Non-GAAP net income was $482 million, or $0.33 per share, for the fourth quarter of fiscal 2006. Non-GAAP adjustments consisted principally of: $56 million, or $0.03 per diluted share, of equity-based compensation charges, and $18 million, or $0.01 per diluted share, of certain costs associated with acquisitions, which were partially offset by a $20 million tax benefit, or $0.01 per diluted share, primarily from the resolution of audits of prior years’ income tax filings.
New orders of $2.69 billion for the fourth quarter of fiscal 2006 increased 1 percent from $2.67 billion for the third quarter of fiscal 2006, and increased 59 percent from $1.69 billion for the fourth quarter of fiscal 2005. Regional distribution of new orders for the fourth quarter of fiscal 2006 was: Japan 22 percent, Taiwan 21 percent, North America 19 percent, Korea 15 percent, Southeast Asia and China 13 percent, and Europe 10 percent. Backlog at the end of the fourth quarter of fiscal 2006 was $3.40 billion, compared to $3.32 billion at the end of the third quarter of fiscal 2006.
“Applied Materials delivered a strong quarter with healthy cash flow,” said Mike Splinter, president and CEO. “We expanded our product offerings, extending our flat panel display systems for Generation 8.5 manufacturing and launching our strategy for solar technology. We also returned value to stockholders by reducing outstanding shares by 10 percent, primarily through our accelerated stock buyback.”
After the acquisition of Applied Films, Applied made certain changes to its internal financial reporting structure during the fourth quarter and, as a result, is reporting four segments: Silicon, Fab Solutions, Display, and Adjacent Technologies. The Silicon segment manufactures and sells equipment to fabricate semiconductor chips. The Fab Solutions segment offers a broad range of products to maintain, service and optimize customers’ semiconductor fabs, including total parts management, spare parts, remanufactured equipment, maintenance agreements, total support programs, and environmental and software solutions. The Display segment manufactures, sells and services equipment used to make flat panel displays. The Adjacent Technologies segment manufactures, sells and services equipment used to fabricate solar photovoltaic cells, flexible electronics and energy-efficient glass. Net sales by reportable segment for the fourth quarter of fiscal 2006 were: Silicon, $1.61 billion; Fab Solutions, $590 million; Display, $296 million; and Adjacent Technologies, $20 million.
During the fourth quarter of fiscal 2006, the company repurchased 154 million shares of common stock at an average price of $17.15 per share for an aggregate purchase price of $2.64 billion, and paid $77 million in dividends.
The company also announced its results for the fiscal year ended October 29, 2006. Fiscal 2006 new orders were $9.89 billion, a 55 percent increase from $6.39 billion for fiscal 2005. Net sales for fiscal 2006 were $9.17 billion, a 31 percent increase from $6.99 billion for fiscal 2005. Net income for fiscal 2006 was $1.52 billion, or $0.97 per diluted share, up from $1.21 billion, or $0.73 per diluted share, for fiscal 2005.
Applied Materials will discuss its fiscal 2006 fourth quarter and annual results, along with its outlook for the first quarter of fiscal 2007, on a conference call today beginning at 1:30 p.m. Pacific Standard Time. A webcast of the conference call will be available on Applied Materials’ web site.
This press release includes financial measures that are not in accordance with Generally Accepted Accounting Principles (GAAP), consisting of non-GAAP net income and non-GAAP earnings per share (EPS). Management uses non-GAAP net income and non-GAAP EPS to evaluate the company’s operating and financial performance in light of business objectives and for planning purposes. Applied believes that these measures are useful to investors because they 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. These non-GAAP measures exclude charges related to (i) equity-based compensation, (ii) inventory fair value adjustments on products sold and amortization of purchased intangible assets associated with acquisitions, (iii) in-process research and development charges associated with the Applied Films acquisition, (iv) asset impairment and restructuring activities, and (v) resolution of income tax audits. These financial measures are not in accordance with GAAP and may be different from non-GAAP methods of accounting and reporting used by other companies. The presentation of this additional information should not be considered a substitute for net income or EPS prepared in accordance with GAAP. Reconciliations of reported net income and reported EPS to non-GAAP net income and non-GAAP EPS, respectively, are included at the end of this press release.
This press release contains forward-looking statements, including statements regarding the company’s performance, technology leadership, opportunities, and return of stockholder value. Forward-looking statements may contain words such as “expect,” “anticipate,” “believe,” “may,” “should,” “will,” “estimate,” “forecast,” “continue” or similar expressions, and include the assumptions that underlie such statements. These statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Risks and uncertainties include, but are not limited to: the sustainability of demand in the nanomanufacturing technology industry and broadening of demand for emerging applications such as solar, which are subject to many factors, including global economic conditions, business spending, consumer confidence, demand for electronic products and integrated circuits, and geopolitical uncertainties; customers’ capacity requirements, including capacity utilizing the latest technology; the timing, rate, amount and sustainability of capital spending for new nanomanufacturing technology; the company’s ability to successfully develop, deliver and support a broad range of products and to expand its markets and develop new markets; the successful integration and performance of acquired businesses; the effectiveness of joint ventures; retention of key employees; the company’s ability to maintain effective cost controls and to timely align its cost structure with business conditions; the company’s ability to effectively manage its resources and production capability, including its supply chain; and other risks described in Applied Materials’ Securities and Exchange Commission filings, including its reports on Forms 10-K, 10-Q and 8-K. All forward-looking statements are based on management’s estimates, projections and assumptions as of the date hereof. The company undertakes no obligation to update any forward-looking statements.
Applied Materials, Inc. (Nasdaq:AMAT) is the global leader in Nanomanufacturing Technology™ solutions with a broad portfolio of innovative equipment, services and software products for the fabrication of semiconductor chips, flat panels, solar photovoltaic cells, flexible electronics and energy-efficient glass. At Applied Materials, we apply Nanomanufacturing Technology to improve the way people live. Learn more at www.appliedmaterials.com.
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