- Applied reports EPS of $0.29; non-GAAP EPS of $0.34 at high end of guidance range
- Generates $3.5 billion in new orders, highest in 15 years
- Returns $1 billion to shareholders through dividends and share repurchases
- Expects record earnings per share in the third quarter of 2016
SANTA CLARA, Calif., May 19, 2016 (GLOBE NEWSWIRE) -- Applied Materials, Inc. AMAT today reported results for its second quarter ended May 1, 2016.
Second quarter orders were $3.45 billion, up 52 percent sequentially and up 37 percent year over year. Backlog increased to $4.17 billion. Net sales of $2.45 billion were up 9 percent sequentially, flat year over year, and near the high end of guidance.
The company recorded gross margin of 41.0 percent, operating margin of 17.3 percent, and net income of $320 million or $0.29 per diluted share. On a non-GAAP adjusted basis, the company reported second quarter gross margin of 42.7 percent, operating margin of 19.2 percent, and net income of $376 million or $0.34 per diluted share.
The company generated $481 million in cash from operations during the second quarter, paid dividends of $113 million and used $900 million to repurchase 45 million shares of common stock.
"In our second quarter we booked our highest orders in 15 years and we expect to deliver record earnings in fiscal 2016," said Gary Dickerson, president and CEO. "We are making significant progress with our strategy in semiconductor, display and service, and have a great pipeline of differentiated products that will fuel future growth."
Quarterly Results Summary
| Change | ||||||||||||||||||||||
| Q2 FY2016 | Q1 FY2016 | Q2 FY2015 | Q2 FY2016 vs. Q1 FY2016 | Q2 FY2016 vs. Q2 FY2015 | ||||||||||||||||||
| (In millions, except per share amounts and percentages) | ||||||||||||||||||||||
| New orders | $ | 3,451 | $ | 2,275 | $ | 2,515 | 52 | % | 37 | % | ||||||||||||
| Net sales | $ | 2,450 | $ | 2,257 | $ | 2,442 | 9 | % | — | % | ||||||||||||
| Gross margin | 41.0 | % | 40.6 | % | 41.6 | % | 0.4 | points | (0.6 | ) points | ||||||||||||
| Operating margin | 17.3 | % | 15.7 | % | 17.0 | % | 1.6 | points | 0.3 | points | ||||||||||||
| Net income | $ | 320 | $ | 286 | $ | 364 | 12 | % | (12 | )% | ||||||||||||
| Diluted earnings per share (EPS) | $ | 0.29 | $ | 0.25 | $ | 0.29 | 16 | % | — | % | ||||||||||||
| Change | |||||||||||||||||||||
| Non-GAAP Adjusted Results | Q2 FY2016 | Q1 FY2016 | Q2 FY2015 | Q2 FY2016 vs. Q1 FY2016 | Q2 FY2016 vs. Q2 FY2015 | ||||||||||||||||
| (In millions, except per share amounts and percentages) | |||||||||||||||||||||
| Non-GAAP adjusted gross margin | 42.7 | % | 42.4 | % | 43.2 | % | 0.3 | points | (0.5 | ) points | |||||||||||
| Non-GAAP adjusted operating margin | 19.2 | % | 17.8 | % | 19.5 | % | 1.4 | points | (0.3 | ) points | |||||||||||
| Non-GAAP adjusted net income | $ | 376 | $ | 302 | $ | 362 | 25 | % | 4 | % | |||||||||||
| Non-GAAP adjusted diluted EPS | $ | 0.34 | $ | 0.26 | $ | 0.29 | 31 | % | 17 | % | |||||||||||
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, or investments; gain or loss on sale of strategic investments; and certain discrete adjustments and 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.
Business Outlook
In the third quarter of fiscal 2016, Applied expects net sales to be up 14 percent to 18 percent sequentially. Non-GAAP adjusted diluted EPS is expected to be in the range of $0.46 to $0.50.
This outlook excludes known charges related to completed acquisitions of $0.04 per share and does not exclude other non-GAAP adjustments that may arise subsequent to this release.
Second Quarter Reportable Segment Information
| Silicon Systems | Q2 FY2016 | Q1 FY2016 | Q2 FY2015 | ||||||||
| (In millions, except percentages) | |||||||||||
| New orders | $ | 1,966 | $ | 1,275 | $ | 1,704 | |||||
| Foundry | 23 | % | 38 | % | 36 | % | |||||
| DRAM | 17 | % | 29 | % | 31 | % | |||||
| Flash | 49 | % | 22 | % | 21 | % | |||||
| Logic and other | 11 | % | 11 | % | 12 | % | |||||
| Net sales | 1,587 | 1,373 | 1,560 | ||||||||
| Operating income | 364 | 265 | 374 | ||||||||
| Operating margin | 22.9 | % | 19.3 | % | 24.0 | % | |||||
| Non-GAAP Adjusted Results | |||||||||||
| Non-GAAP adjusted operating income | $ | 410 | $ | 312 | $ | 418 | |||||
| Non-GAAP adjusted operating margin | 25.8 | % | 22.7 | % | 26.8 | % | |||||
| Applied Global Services | Q2 FY2016 | Q1 FY2016 | Q2 FY2015 | ||||||||
| (In millions, except percentages) | |||||||||||
| New orders | $ | 677 | $ | 773 | $ | 641 | |||||
| Net sales | 648 | 626 | 646 | ||||||||
| Operating income | 171 | 156 | 170 | ||||||||
| Operating margin | 26.4 | % | 24.9 | % | 26.3 | % | |||||
| Display | Q2 FY2016 | Q1 FY2016 | Q2 FY2015 | ||||||||
| (In millions, except percentages) | |||||||||||
| New orders | $ | 700 | $ | 183 | $ | 120 | |||||
| Net sales | 167 | 213 | 163 | ||||||||
| Operating income | 29 | 38 | 40 | ||||||||
| Operating margin | 17.4 | % | 17.8 | % | 24.5 | % | |||||
| Energy and Environmental Solutions | Q2 FY2016 | Q1 FY2016 | Q2 FY2015 | ||||||||
| (In millions, except percentages) | |||||||||||
| New orders | $ | 108 | $ | 44 | $ | 50 | |||||
| Net sales | 48 | 45 | 73 | ||||||||
| Operating income (loss) | — | 6 | (5 | ) | |||||||
| Operating margin | — | % | 13.3 | % | (6.8 | )% | |||||
| Non-GAAP Adjusted Results | |||||||||||
| Non-GAAP adjusted operating income (loss) | $ | (1 | ) | $ | 4 | $ | (4 | ) | |||
| Non-GAAP adjusted operating margin | (2.1 | )% | 8.9 | % | (5.5 | )% | |||||
Backlog Information
Applied's backlog increased 34 percent to $4.17 billion and included positive adjustments of $58 million, primarily consisting of favorable foreign currency impact. Backlog composition by reportable segment was as follows:
| Silicon Systems | 49 | % |
| Applied Global Services | 23 | % |
| Display | 25 | % |
| Energy and Environmental Solutions | 3 | % |
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 earnings expectations, our business outlook for the third 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. 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. | ||||||||||||||||||||
| UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS | ||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||
| (In millions, except per share amounts) | May 1, 2016 | January 31, 2016 | April 26, 2015 | May 1, 2016 | April 26, 2015 | |||||||||||||||
| Net sales | $ | 2,450 | $ | 2,257 | $ | 2,442 | $ | 4,707 | $ | 4,801 | ||||||||||
| Cost of products sold | 1,446 | 1,341 | 1,426 | 2,787 | 2,826 | |||||||||||||||
| Gross profit | 1,004 | 916 | 1,016 | 1,920 | 1,975 | |||||||||||||||
| Operating expenses: | ||||||||||||||||||||
| Research, development and engineering | 386 | 374 | 365 | 760 | 716 | |||||||||||||||
| Marketing and selling | 102 | 106 | 109 | 208 | 220 | |||||||||||||||
| General and administrative | 91 | 82 | 140 | 173 | 257 | |||||||||||||||
| Gain on derivatives associated with terminated business combination | — | — | (14 | ) | — | (92 | ) | |||||||||||||
| Total operating expenses | 579 | 562 | 600 | 1,141 | 1,101 | |||||||||||||||
| Income from operations | 425 | 354 | 416 | 779 | 874 | |||||||||||||||
| Interest expense | 37 | 42 | 24 | 79 | 47 | |||||||||||||||
| Interest income and other income (loss), net | 7 | 2 | (3 | ) | 9 | (1 | ) | |||||||||||||
| Income before income taxes | 395 | 314 | 389 | 709 | 826 | |||||||||||||||
| Provision for income taxes | 75 | 28 | 25 | 103 | 114 | |||||||||||||||
| Net income | $ | 320 | $ | 286 | $ | 364 | $ | 606 | $ | 712 | ||||||||||
| Earnings per share: | ||||||||||||||||||||
| Basic | $ | 0.29 | $ | 0.25 | $ | 0.30 | $ | 0.54 | $ | 0.58 | ||||||||||
| Diluted | $ | 0.29 | $ | 0.25 | $ | 0.29 | $ | 0.53 | $ | 0.57 | ||||||||||
| Weighted average number of shares: | ||||||||||||||||||||
| Basic | 1,113 | 1,146 | 1,230 | 1,130 | 1,227 | |||||||||||||||
| Diluted | 1,119 | 1,154 | 1,241 | 1,137 | 1,241 | |||||||||||||||
| APPLIED MATERIALS, INC. | ||||||||||||
| UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS | ||||||||||||
| (In millions) | May 1, 2016 | January 31, 2016 | October 25, 2015 | |||||||||
| ASSETS | ||||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents | $ | 2,470 | $ | 2,962 | $ | 4,797 | ||||||
| Short-term investments | 170 | 154 | 168 | |||||||||
| Accounts receivable, net | 1,913 | 1,625 | 1,739 | |||||||||
| Inventories | 1,924 | 1,835 | 1,833 | |||||||||
| Other current assets | 251 | 334 | 724 | |||||||||
| Total current assets | 6,728 | 6,910 | 9,261 | |||||||||
| Long-term investments | 934 | 996 | 946 | |||||||||
| Property, plant and equipment, net | 904 | 908 | 892 | |||||||||
| Goodwill | 3,304 | 3,302 | 3,302 | |||||||||
| Purchased technology and other intangible assets, net | 668 | 714 | 762 | |||||||||
| Deferred income taxes and other assets | 537 | 496 | 145 | |||||||||
| Total assets | $ | 13,075 | $ | 13,326 | $ | 15,308 | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||
| Current liabilities: | ||||||||||||
| Short-term debt | $ | — | $ | — | $ | 1,200 | ||||||
| Accounts payable and accrued expenses | 1,630 | 1,457 | 1,833 | |||||||||
| Customer deposits and deferred revenue | 981 | 850 | 765 | |||||||||
| Total current liabilities | 2,611 | 2,307 | 3,798 | |||||||||
| Long-term debt | 3,343 | 3,343 | 3,342 | |||||||||
| Other liabilities | 556 | 508 | 555 | |||||||||
| Total liabilities | 6,510 | 6,158 | 7,695 | |||||||||
| Total stockholders' equity | 6,565 | 7,168 | 7,613 | |||||||||
| Total liabilities and stockholders' equity | $ | 13,075 | $ | 13,326 | $ | 15,308 | ||||||
| APPLIED MATERIALS, INC. | |||||||||||||||||||
| UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS | |||||||||||||||||||
| (In millions) | Three Months Ended | Six Months Ended | |||||||||||||||||
| May 1, 2016 | January 31, 2016 | April 26, 2015 | May 1, 2016 | April 26, 2015 | |||||||||||||||
| Cash flows from operating activities: | |||||||||||||||||||
| Net income | $ | 320 | $ | 286 | $ | 364 | $ | 606 | $ | 712 | |||||||||
| Adjustments required to reconcile net income to cash provided by operating activities: | |||||||||||||||||||
| Depreciation and amortization | 96 | 96 | 90 | 192 | 182 | ||||||||||||||
| Share-based compensation | 48 | 54 | 47 | 102 | 95 | ||||||||||||||
| Excess tax benefits from share-based compensation | (3 | ) | (10 | ) | (12 | ) | (13 | ) | (51 | ) | |||||||||
| Deferred income taxes | (22 | ) | 15 | (21 | ) | (7 | ) | 7 | |||||||||||
| Other | 5 | 10 | 13 | 15 | 21 | ||||||||||||||
| Net change in operating assets and liabilities | 37 | (244 | ) | (183 | ) | (207 | ) | (608 | ) | ||||||||||
| Cash provided by operating activities | 481 | 207 | 298 | 688 | 358 | ||||||||||||||
| Cash flows from investing activities: | |||||||||||||||||||
| Capital expenditures | (47 | ) | (68 | ) | (64 | ) | (115 | ) | (113 | ) | |||||||||
| Cash paid for acquisitions, net of cash acquired | (8 | ) | — | — | (8 | ) | — | ||||||||||||
| Proceeds from sales and maturities of investments | 232 | 241 | 177 | 473 | 317 | ||||||||||||||
| Purchases of investments | (182 | ) | (282 | ) | (203 | ) | (464 | ) | (344 | ) | |||||||||
| Cash used in investing activities | (5 | ) | (109 | ) | (90 | ) | (114 | ) | (140 | ) | |||||||||
| Cash flows from financing activities: | |||||||||||||||||||
| Debt repayments | — | (1,205 | ) | — | (1,205 | ) | — | ||||||||||||
| Proceeds from common stock issuances and others | 42 | 2 | 42 | 44 | 42 | ||||||||||||||
| Common stock repurchases | (900 | ) | (625 | ) | — | (1,525 | ) | — | |||||||||||
| Excess tax benefits from share-based compensation | 3 | 10 | 12 | 13 | 51 | ||||||||||||||
| Payments of dividends to stockholders | (113 | ) | (115 | ) | (123 | ) | (228 | ) | (245 | ) | |||||||||
| Cash used in financing activities | (968 | ) | (1,933 | ) | (69 | ) | (2,901 | ) | (152 | ) | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | — | — | (1 | ) | — | (1 | ) | ||||||||||||
| Increase (decrease) in cash and cash equivalents | (492 | ) | (1,835 | ) | 138 | (2,327 | ) | 65 | |||||||||||
| Cash and cash equivalents — beginning of period | 2,962 | 4,797 | 2,929 | 4,797 | 3,002 | ||||||||||||||
| Cash and cash equivalents — end of period | $ | 2,470 | $ | 2,962 | $ | 3,067 | $ | 2,470 | $ | 3,067 | |||||||||
| Supplemental cash flow information: | |||||||||||||||||||
| Cash payments for income taxes | $ | 51 | $ | 44 | $ | 118 | $ | 95 | $ | 207 | |||||||||
| Cash refunds from income taxes | $ | 98 | $ | 5 | $ | 2 | $ | 103 | $ | 5 | |||||||||
| Cash payments for interest | $ | 42 | $ | 34 | $ | 7 | $ | 76 | $ | 46 | |||||||||
| APPLIED MATERIALS, INC. | ||||||||||||
| UNAUDITED SUPPLEMENTAL INFORMATION | ||||||||||||
| Corporate Unallocated Expenses | ||||||||||||
| (In millions) | Q2 FY2016 | Q1 FY2016 | Q2 FY2015 | |||||||||
| Share-based compensation | $ | 48 | $ | 54 | $ | 47 | ||||||
| Certain items associated with terminated business combination | — | — | 29 | |||||||||
| Gain on derivatives associated with terminated business combination, net | — | — | (14 | ) | ||||||||
| Other unallocated expenses | 91 | 57 | 101 | |||||||||
| Total corporate | $ | 139 | $ | 111 | $ | 163 | ||||||
| Additional Information | ||||||||||||||||||
| Q2 FY2016 | Q1 FY2016 | Q2 FY2015 | ||||||||||||||||
| New Orders and Net Sales by Geography | ||||||||||||||||||
| (In $ millions) | New Orders | Net Sales | New Orders | Net Sales | New Orders | Net Sales | ||||||||||||
| United States | 386 | 272 | 369 | 293 | 368 | 472 | ||||||||||||
| % of Total | 11 | % | 11 | % | 16 | % | 13 | % | 15 | % | 19 | % | ||||||
| Europe | 194 | 97 | 156 | 138 | 131 | 169 | ||||||||||||
| % of Total | 6 | % | 4 | % | 7 | % | 6 | % | 5 | % | 7 | % | ||||||
| Japan | 339 | 260 | 109 | 334 | 365 | 274 | ||||||||||||
| % of Total | 10 | % | 10 | % | 5 | % | 15 | % | 15 | % | 11 | % | ||||||
| Korea | 792 | 506 | 373 | 273 | 607 | 536 | ||||||||||||
| % of Total | 23 | % | 21 | % | 17 | % | 12 | % | 24 | % | 22 | % | ||||||
| Taiwan | 445 | 311 | 534 | 637 | 589 | 461 | ||||||||||||
| % of Total | 13 | % | 13 | % | 23 | % | 28 | % | 23 | % | 19 | % | ||||||
| Southeast Asia | 392 | 252 | 232 | 87 | 103 | 96 | ||||||||||||
| % of Total | 11 | % | 10 | % | 10 | % | 4 | % | 4 | % | 4 | % | ||||||
| China | 903 | 752 | 502 | 495 | 352 | 434 | ||||||||||||
| % of Total | 26 | % | 31 | % | 22 | % | 22 | % | 14 | % | 18 | % | ||||||
| Employees (In thousands) | ||||||||||||||||||
| Regular Full Time | 14.8 | 14.6 | 14.3 | |||||||||||||||
| APPLIED MATERIALS, INC. | ||||||||||||||||||||
| UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS | ||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||
| (In millions, except percentages) | May 1, 2016 | January 31, 2016 | April 26, 2015 | May 1, 2016 | April 26, 2015 | |||||||||||||||
| Non-GAAP Adjusted Gross Profit | ||||||||||||||||||||
| Reported gross profit - GAAP basis | $ | 1,004 | $ | 916 | $ | 1,016 | $ | 1,920 | $ | 1,975 | ||||||||||
| Certain items associated with acquisitions1 | 41 | 42 | 39 | 83 | 79 | |||||||||||||||
| Reversals related to restructuring, net4 | — | (1 | ) | — | (1 | ) | — | |||||||||||||
| Non-GAAP adjusted gross profit | $ | 1,045 | $ | 957 | $ | 1,055 | $ | 2,002 | $ | 2,054 | ||||||||||
| Non-GAAP adjusted gross margin | 42.7 | % | 42.4 | % | 43.2 | % | 42.5 | % | 42.8 | % | ||||||||||
| Non-GAAP Adjusted Operating Income | ||||||||||||||||||||
| Reported operating income - GAAP basis | $ | 425 | $ | 354 | $ | 416 | $ | 779 | $ | 874 | ||||||||||
| Certain items associated with acquisitions1 | 46 | 48 | 45 | 94 | 91 | |||||||||||||||
| Acquisition integration costs | — | — | — | — | 1 | |||||||||||||||
| Gain on derivatives associated with terminated business combination, net | — | — | (14 | ) | — | (92 | ) | |||||||||||||
| Certain items associated with terminated business combination2 | — | — | 29 | — | 49 | |||||||||||||||
| Reversals related to restructuring, net3,4 | (1 | ) | (1 | ) | — | (2 | ) | — | ||||||||||||
| Non-GAAP adjusted operating income | $ | 470 | $ | 401 | $ | 476 | $ | 871 | $ | 923 | ||||||||||
| Non-GAAP adjusted operating margin | 19.2 | % | 17.8 | % | 19.5 | % | 18.5 | % | 19.2 | % | ||||||||||
| Non-GAAP Adjusted Net Income | ||||||||||||||||||||
| Reported net income - GAAP basis5 | $ | 320 | $ | 286 | $ | 364 | $ | 606 | $ | 712 | ||||||||||
| Certain items associated with acquisitions1 | 46 | 48 | 45 | 94 | 91 | |||||||||||||||
| Acquisition integration costs | — | — | — | — | 1 | |||||||||||||||
| Gain on derivatives associated with terminated business combination, net | — | — | (14 | ) | — | (92 | ) | |||||||||||||
| Certain items associated with terminated business combination2 | — | — | 29 | — | 49 | |||||||||||||||
| Reversals related to restructuring, net3,4 | (1 | ) | (1 | ) | — | (2 | ) | — | ||||||||||||
| Impairment (gain on sale) of strategic investments, net | (1 | ) | (2 | ) | 6 | (3 | ) | 7 | ||||||||||||
| Loss on early extinguishment of debt | — | 5 | — | 5 | — | |||||||||||||||
| Reinstatement of federal R&D tax credit, resolution of prior years' income tax filings and other tax items5 | 16 | (29 | ) | (54 | ) | (13 | ) | (71 | ) | |||||||||||
| Income tax effect of non-GAAP adjustments | (4 | ) | (5 | ) | (14 | ) | (9 | ) | 3 | |||||||||||
| Non-GAAP adjusted net income | $ | 376 | $ | 302 | $ | 362 | $ | 678 | $ | 700 | ||||||||||
| 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 months ended May 1, 2016 included a $1 million favorable adjustment of employee-related costs associated with the cost reductions in the solar business. |
| 4 | Results for the three months ended January 31, 2016 included a $1 million benefit from sales of solar equipment tools for which inventory had been previously reserved related to the cost reductions in the solar business. |
| 5 | Amounts for 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, 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 | Six Months Ended | |||||||||||||||||||
| (In millions, except per share amounts) | May 1, 2016 | January 31, 2016 | April 26, 2015 | May 1, 2016 | April 26, 2015 | |||||||||||||||
| Non-GAAP Adjusted Earnings Per Diluted Share | ||||||||||||||||||||
| Reported earnings per diluted share - GAAP basis1 | $ | 0.29 | $ | 0.25 | $ | 0.29 | $ | 0.53 | $ | 0.57 | ||||||||||
| Certain items associated with acquisitions | 0.04 | 0.04 | 0.03 | 0.08 | 0.07 | |||||||||||||||
| Certain items associated with terminated business combination | — | — | 0.02 | — | 0.03 | |||||||||||||||
| Gain on derivatives associated with terminated business combination, net | — | — | (0.01 | ) | — | (0.05 | ) | |||||||||||||
| Reinstatement of federal R&D tax credit, resolution of prior years' income tax filings and other tax items1 | 0.01 | (0.03 | ) | (0.04 | ) | (0.01 | ) | (0.06 | ) | |||||||||||
| Non-GAAP adjusted earnings per diluted share | $ | 0.34 | $ | 0.26 | $ | 0.29 | $ | 0.60 | $ | 0.56 | ||||||||||
| Weighted average number of diluted shares | 1,119 | 1,154 | 1,241 | 1,137 | 1,241 | |||||||||||||||
| 1 | Amounts for 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, 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 | Six Months Ended | |||||||||||||||||||
| (In millions, except percentages) | May 1, 2016 | January 31, 2016 | April 26, 2015 | May 1, 2016 | April 26, 2015 | |||||||||||||||
| Silicon Systems Non-GAAP Adjusted Operating Income | ||||||||||||||||||||
| Reported operating income - GAAP basis | $ | 364 | $ | 265 | $ | 374 | $ | 629 | $ | 681 | ||||||||||
| Certain items associated with acquisitions1 | 46 | 47 | 44 | 93 | 87 | |||||||||||||||
| Non-GAAP adjusted operating income | $ | 410 | $ | 312 | $ | 418 | $ | 722 | $ | 768 | ||||||||||
| Non-GAAP adjusted operating margin | 25.8 | % | 22.7 | % | 26.8 | % | 24.4 | % | 25.5 | % | ||||||||||
| AGS Non-GAAP Adjusted Operating Income | ||||||||||||||||||||
| Reported operating income - GAAP basis | $ | 171 | $ | 156 | $ | 170 | $ | 327 | $ | 323 | ||||||||||
| Certain items associated with acquisitions1 | — | — | — | — | 1 | |||||||||||||||
| Non-GAAP adjusted operating income | $ | 171 | $ | 156 | $ | 170 | $ | 327 | $ | 324 | ||||||||||
| Non-GAAP adjusted operating margin | 26.4 | % | 24.9 | % | 26.3 | % | 25.7 | % | 26.4 | % | ||||||||||
| Display Non-GAAP Adjusted Operating Income | ||||||||||||||||||||
| Reported operating income - GAAP basis | $ | 29 | $ | 38 | $ | 40 | $ | 67 | $ | 112 | ||||||||||
| Certain items associated with acquisitions1 | — | — | — | — | 1 | |||||||||||||||
| Non-GAAP adjusted operating income | $ | 29 | $ | 38 | $ | 40 | $ | 67 | $ | 113 | ||||||||||
| Non-GAAP adjusted operating margin | 17.4 | % | 17.8 | % | 24.5 | % | 17.6 | % | 25.8 | % | ||||||||||
| EES Non-GAAP Adjusted Operating Income (Loss) | ||||||||||||||||||||
| Reported operating income (loss) - GAAP basis | $ | — | $ | 6 | $ | (5 | ) | $ | 6 | $ | (9 | ) | ||||||||
| Certain items associated with acquisitions1 | — | 1 | 1 | 1 | 2 | |||||||||||||||
| Reversals related to restructuring, net2 | (1 | ) | (3 | ) | — | (4 | ) | — | ||||||||||||
| Non-GAAP adjusted operating income (loss) | $ | (1 | ) | $ | 4 | $ | (4 | ) | $ | 3 | $ | (7 | ) | |||||||
| Non-GAAP adjusted operating margin | (2.1 | )% | 8.9 | % | (5.5 | )% | 3.2 | % | (5.5 | )% | ||||||||||
| 1 | These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets. |
| 2 | Results for the three months ended May 1, 2016 and January 31, 2016 and six months ended May 1, 2016 primarily included favorable adjustments of employee-related costs associated with the cost reductions in the solar business. |
| APPLIED MATERIALS, INC. | |||||||
| UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED OPERATING EXPENSES | |||||||
| Three Months Ended | |||||||
| (In millions) | May 1, 2016 | January 31, 2016 | |||||
| Operating expenses - GAAP basis | $ | 579 | $ | 562 | |||
| Reversals related to restructuring, net | 1 | — | |||||
| Certain items associated with acquisitions | (5 | ) | (6 | ) | |||
| Non-GAAP adjusted operating expenses | $ | 575 | $ | 556 | |||
| UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED EFFECTIVE INCOME TAX RATE | |||
| Three Months Ended | |||
| (In millions, except percentages) | May 1, 2016 | ||
| Provision for income taxes - GAAP basis (a) | $ | 75 | |
| Reinstatement of federal R&D tax credit, resolutions of prior years' income tax filings and other tax items | (16 | ) | |
| Income tax effect of non-GAAP adjustments | 4 | ||
| Non-GAAP adjusted provision for income taxes (b) | $ | 63 | |
| Income before income taxes - GAAP basis (c) | $ | 395 | |
| Certain items associated with acquisitions | 46 | ||
| Reversals related to restructuring, net | (1 | ) | |
| Gain on sale of strategic investments, net | (1 | ) | |
| Non-GAAP adjusted income before income taxes (d) | $ | 439 | |
| Effective income tax rate - GAAP basis (a/c) | 19.0 | % | |
| Non-GAAP adjusted effective income tax rate (b/d) | 14.4 | % | |
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