Applied Materials Announces 4Q, FY 2012 Results

Applied Materials, Inc. reported results for its fourth quarter and fiscal year ended Oct. 28, 2012. In the fourth quarter, Applied generated orders of $1.47 billion and net sales of $1.65 billion. The company recorded a goodwill impairment and restructuring charges totaling $545 million and reported an operating loss of $499 million, with a net loss of $515 million or 42 cents per diluted share. Non-GAAP operating income was $114 million, and non-GAAP net income was $70 million or 6 cents per share, at the high end of the company’s expectations.

In FY2012, the company reported orders of $8.04 billion, net sales of $8.72 billion, operating income of $411 million, and net income of $109 million or 9 cents per diluted share. Non-GAAP operating income for the year was $1.38 billion, and non-GAAP net income was $960 million or 75 cents per share.

“In our fourth quarter, Applied delivered profit at the high end of our outlook despite challenging industry conditions in semiconductor, solar and display,” said Mike Splinter, chairman and CEO. “Our strong cash flow performance allowed us to increase our quarterly dividend and share buybacks, returning $1.85 billion to shtockholders in the year.

“We see improving business conditions entering 2013, with orders projected to increase after bottoming in the fourth quarter,” Splinter added. “Accelerated changes in device technology and the adoption of new materials in all of the industries we serve provide opportunities for Applied to build on our leadership and grow our market share.”

Fourth quarter results included a $421 million goodwill impairment charge associated with the Energy and Environmental Solutions (EES) segment. The goodwill impairment reflects the deterioration in solar equipment market conditions, our customers’ financial condition and reduced market valuations, causing Applied to reassess the recoverability of the segment’s goodwill. Applied also reported $124 million in charges related to previously announced restructuring plans and the integration of Varian.

Fourth quarter orders for Varian products of $152 million and net sales of $195 million were reported within the Silicon Systems Group (SSG) and Applied Global Services (AGS) segments. The Varian business contributed approximately one cent to the company’s non-GAAP EPS in the quarter, which excluded acquisition-related charges equivalent to approximately three cents per share. In FY2012, orders for Varian products totaled $1.03 billion, and net sales were $1.02 billion. The Varian business contributed approximately 11 cents to Applied’s non-GAAP EPS, which excluded acquisition-related charges equivalent to approximately 20 cents per share.

Silicon Systems Group (SSG) orders were $741 million, down 36%, primarily due to lower orders in foundry and memory, partially offset by increased orders in logic. Net sales were $870 million, down 44%. Non-GAAP operating income decreased to $95 million or 10.9% of net sales. GAAP operating income decreased to $41 million or 4.7 % of net sales. New order composition was: foundry 47%, flash 8%, logic and other 40%, and DRAM 5%.

Applied Global Services (AGS) orders were $576 million, up 8% driven by service contract renewals. Net sales were $621 million, up 7%, which included $85 million in sales of a thin film production line. Non-GAAP operating income increased to $171 million or 27.5% of net sales. GAAP operating income increased to $164 million or 26.4% of net sales.

Display orders were $83 million, up 24% from low levels. Net sales were $93 million, down 35%. Non-GAAP operating income decreased to $4 million or 4.3% of net sales. GAAP operating income decreased to $3 million or 3.2% of net sales.

Energy and Environmental Solutions (EES) orders were $65 million, up 86% from low levels driven by demand for roll-to-roll deposition equipment. Net sales were $62 million, down 19%. EES had a non-GAAP operating loss of $46 million and a GAAP operating loss of $480 million.

SSG orders decreased by 4% to $5.29 billion, net sales increased by 2% to $5.54 billion, non-GAAP operating income decreased to $1.54 billion or 27.8% of net sales, and operating income decreased to $1.24 billion or 22.5% of net sales.

AGS orders decreased by 3% to $2.27 billion, net sales decreased by 5% to $2.29 billion, non-GAAP operating income increased to $530 million or 23.2% of net sales, and operating income increased to $502 million or 22.0% of net sales.

Display orders decreased by 57 percent to $274 million, net sales decreased by 32 percent to $473 million, non-GAAP operating income decreased to $32 million or 6.8 percent of net sales, and operating income decreased to $25 million or 5.3 percent of net sales.

EES orders decreased by 88% to $195 million and net sales decreased by 79% to $425 million. The business generated a non-GAAP operating loss of $184 million and a GAAP operating loss of $668 million.

For the first quarter of fiscal 2013, Applied expects net sales to be flat to down 15% sequentially. The company expects non-GAAP EPS to be in the range of $0.00 to $0.06. The non-GAAP EPS outlook excludes known charges related to completed acquisitions of approximately $0.05 per share but does not exclude other non-GAAP adjustments that may arise subsequent to this release