Applied Materials Announces 4Q, Fiscal Year 2013 Results

Applied Materials, Inc. reported results for its fourth quarter and fiscal year ended Oct. 27, 2013.

In its fourth quarter, Applied generated orders of $2.09 billion, up 5% from the prior quarter led by strengthening demand in the Silicon Systems Group. Fourth quarter net sales were $1.99 billion, up 1% sequentially.

Fourth quarter non-GAAP adjusted gross margin declined approximately 1 point to 42% while non-GAAP adjusted operating income grew 4% to $323 million or 16.2%. Non-GAAP adjusted net income grew 3% in the quarter to $228 million or 19 cents per diluted share, which was in the upper end of the guidance range. For the quarter, the company recorded GAAP gross margin of 40%, operating income of $211 million or 10.6%, and net income of $183 million or 15 cents per diluted share.

In FY2013, orders grew 5% to $8.47 billion, net sales declined 14% to $7.51 billion, non-GAAP adjusted gross margin declined 11% to $3.16 billion or 42.1%, non-GAAP adjusted operating income declined 25% to $1.03 billion or 13.7%, and non-GAAP adjusted net income declined 25% to $718 million or 59 cents per diluted share. The company recorded GAAP gross margin of $2.99 billion or 39.8%, operating income of $432 million or 5.8%, and net income of $256 million or 21 cents per diluted share. Applied returned $701 million to stockholders, including $456 million in dividends paid and $245 million in stock repurchases.

“This has been a transformative year for Applied Materials as we shaped a more competitive company, reduced overhead expenses, stepped up investment in product development and built momentum for profitable growth,” said Gary Dickerson, president and CEO. “As we look ahead to 2014, we expect stronger investment by our semiconductor and display customers and major technology inflections in transistor and memory that play to our strengths.”

Silicon Systems Group (SSG) orders were $1.39 billion in the fourth quarter, up 16%, with higher orders in foundry, flash and logic, partially offset by decreases in DRAM. Net sales declined 2% to $1.24 billion. Non-GAAP adjusted operating income declined to $258 million or 20.8% of net sales. GAAP operating income declined to $213 million or 17.1% of net sales. New order composition was: foundry 47%; flash 25%; logic/other 17%; and DRAM 11%.

Applied Global Services (AGS) orders were $548 million, up 6%. Net sales were $538 million up 8%. Non-GAAP adjusted operating income was flat at $116 million or 21.6% of net sales. GAAP operating income increased slightly to $115 million or 21.4% of net sales.

Display orders of $114 million were down 55% from high levels in the previous quarter and reflected customer push-outs of orders that are expected to be recorded in future periods. Net sales were up slightly to $163 million. Non-GAAP adjusted operating income declined to $20 million or 12.3% of net sales. GAAP operating income declined to $19 million or 11.7% of net sales, including the impact of a $10 million inventory charge.

Energy and Environmental Solutions (EES) orders increased to $40 million. Net sales declined 2% to $44 million. EES had a non-GAAP adjusted operating loss of $22 million and a GAAP operating loss of $30 million.

SSG orders increased by 4% to $5.51 billion during the full year, net sales decreased by 14% to $4.78 billion, non-GAAP adjusted operating income decreased to $1.1 billion or 22.0% of net sales, and GAAP operating income decreased to $876 million or 18.3% of net sales.

AGS orders decreased by 8% to $2.1 billion, net sales decreased by 11% to $2.0 billion, non-GAAP adjusted operating income decreased to $443 million or 21.9% of net sales, and GAAP operating income decreased to $436 million or 21.6% of net sales. Non-GAAP operating income decreased in fiscal 2013 from fiscal 2012 reflecting lower sales. Fiscal 2012 results included $85 million in sales for a thin film solar production line.

Display orders increased by 157% to $703 million, reflecting a recovery in TV equipment demand and share gains in array PVD equipment. Net sales increased by 14% to $538 million, non-GAAP adjusted operating income increased to $80 million or 14.9% of net sales, and GAAP operating income increased to $74 million or 13.8% of net sales.

EES orders decreased by 15% to $166 million, and net sales decreased by 59% to $173 million, reflecting continued overcapacity conditions in the global PV solar industry. EES generated a non-GAAP adjusted operating loss of $115 million. EES reported a GAAP operating loss of $433 million, which included $278 million in impairment charges recorded in the second quarter of FY2013, along with $40 million of restructuring charges, asset impairments, and certain items related to acquisitions.

For the first quarter of fiscal 2014, Applied expects net sales to be up 3% to 10% from the previous quarter. The company expects non-GAAP adjusted operating expenses to be in the range of $540 million, plus or minus $10 million. Non-GAAP adjusted diluted EPS is expected to be in the range of 20 cents to 24 cents.