Applied Materials Delivers Solid 3Q 2012 Results

Applied Materials, Inc. reported results for its third quarter of fiscal 2012 ended July 29, 2012.

Applied generated orders of $1.80 billion and net sales of $2.34 billion. Non-GAAP operating income was $431 million, and non-GAAP net income was $300 million, or 24 cents per share. GAAP operating income was $322 million, and GAAP net income was $218 million, or 17 cents per share.

“We delivered solid financial performance in line with our outlook despite challenging industry conditions in semiconductor, display and solar,” said Mike Splinter, chairman and CEO. “Economic uncertainty is weighing on top of a seasonal pullback to produce weaker near-term demand.”

“Applied generated strong operating cash flow and ramped the return of cash to shareholders, buying back 3.6 percent of shares outstanding in the quarter,” said George Davis, executive vice president and CFO. “In a difficult environment, we are controlling spending while ensuring we prioritize investment in key areas to support future growth. “

During the quarter, Varian generated orders of $241 million and net sales of $294 million, which were reported within the Silicon Systems Group (SSG) and Applied Global Services (AGS) segments.
Silicon Systems Group (SSG) orders were $1.17 billion, down 41%, primarily due to lower demand from foundry and logic customers. Net sales were $1.55 billion, down 13%. Non-GAAP operating income decreased to $482 million or 31.2% of net sales. GAAP operating income decreased to $427 million or 27.6% of net sales. New order composition was: foundry 58%, flash 19%, logic and other 13%, and DRAM 10%.

Applied Global Services (AGS) orders were $531 million, down 18% from the prior quarter, which benefited from a thin film production line order. Net sales were $579 million, up 5%. Non-GAAP operating income increased to $135 million or 23.3% of net sales. GAAP operating income increased to $122 million or 21.1% of net sales.

Display orders were $67 million, down 20%. Net sales were $142 million, up 6%. Non-GAAP operating income increased to $12 million or 8.5% of net sales. GAAP operating income increased to $10 million or 7% of net sales.

Energy and Environmental Solutions (EES) orders were $35 million, down 44%. Net sales were $77 million, down 3%. EES had a non-GAAP operating loss of $64 million and a GAAP operating loss of $102 million.

Backlog decreased by $551 million to $1.82 billion. Gross margin was 41.6% on a non-GAAP basis, down from 42.1%, in line with the decrease in net sales. GAAP gross margin of 39.7% was down slightly from 39.8%. Cash, cash equivalents and investments were essentially flat at $3.2 billion.

For the fourth quarter of fiscal 2012, Applied expects net sales to be 25% to 40% lower 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.