Applied Materials (AMAT) 8-K Financial statements and exhibits

EXHIBIT 99.1

Release:	Immediate
Contact:	Paul Bowman (investment community)	Jeff Lettes (editorial/media)
	(408) 563-1698	(408) 563-5161

APPLIED MATERIALS ANNOUNCES RESULTS
FOR SECOND FISCAL QUARTER 2004
New Orders Increase to $2.21 Billion; Net Sales Increase to $2.02 Billion

     SANTA CLARA, Calif., May 18, 2004 — Applied Materials, Inc., the world’s largest supplier of wafer fabrication solutions to the semiconductor industry, reported results for its second fiscal quarter ended May 2, 2004. Net sales were $2.02 billion, up 30 percent from $1.56 billion for the first fiscal quarter of 2004, and up 82 percent from $1.11 billion for the second fiscal quarter of 2003. Gross margin for the second fiscal quarter of 2004 was 46.5 percent, up from 43.5 percent for the first fiscal quarter of 2004 and up from 33.7 percent for the second fiscal quarter of 2003. Net income for the second fiscal quarter of 2004 was $373 million, or $0.22 per share, up from net income of $82 million, or $0.05 per share, for the first fiscal quarter of 2004, and up from a net loss of $62 million, or $0.04 per share, for the second fiscal quarter of 2003.

     The company’s ongoing net income was $373 million, or $0.22 per share, for the second fiscal quarter of 2004, up from $200 million, or $0.12 per share, for the first fiscal quarter of 2004, and up from $45 million, or $0.03 per share, for the second fiscal quarter of 2003. Ongoing results for the second fiscal quarter of 2004 were the same as reported net income since there were no special items.

     New orders of $2.21 billion for the second fiscal quarter of 2004 increased 32 percent from $1.68 billion for the first fiscal quarter of 2004, and increased 128 percent from $971 million for the second fiscal quarter of 2003. Regional distribution of new orders for the second fiscal quarter of 2004 was: Southeast Asia and China 22 percent, Taiwan 21 percent, North America 19 percent, Japan 17 percent, Korea 13 percent, and Europe 8 percent. Backlog at the end of the second fiscal quarter of 2004 was $2.80 billion, compared to $2.63 billion at the end of the first fiscal quarter of 2004.

     “Investment in 300mm semiconductor equipment for leading-edge technology, combined with capacity purchases of our 200mm systems, drove Applied Materials’ strong revenue and order growth this quarter. As semiconductor demand rose and our customers’ confidence grew, orders for 300mm equipment, copper interconnect and sub-100 nanometer geometries increased,” said Mike Splinter, president and chief executive officer. “Applied Materials continues to experience strong market acceptance across its broad array of products and is converting its leadership into outstanding operating performance.

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Applied Materials, Inc.
May 18, 2004
Page 2 of 8

     “Through close collaboration with customers, Applied Materials continues to develop highly differentiated and integrated products that address advanced design requirements. New products, such as the Applied Endura2 system, the Applied VeritySEM metrology tool, the AKT-40K PECVD system, and the recently announced strategic service agreement with Brooks Automation, Inc., exemplify the company’s dedication to delivering innovative solutions. Our focus is to achieve world class performance in everything we do, from product design through manufacturing to customer support,” concluded Splinter.

     Reconciliations of reported results of operations under U.S. Generally Accepted Accounting Principles (GAAP) to ongoing results have been included as a supplement to this press release. Due to the amount of charges incurred in prior periods as a result of realignment activities, Applied Materials believes that ongoing results are useful to investors because they reflect baseline performance exclusive of charges associated with realignment activities. Ongoing results are the primary indicator used by Applied Materials’ management to plan and forecast future periods. These non-GAAP measures are neither in accordance with, nor an alternative for, GAAP, and may be materially different from non-GAAP methods of accounting and reporting used by other companies. The presentation of this additional information should not be considered as a substitute for net income prepared in accordance with GAAP.

     This press release contains forward-looking statements, including, but not limited to, those relating to the semiconductor and semiconductor equipment industries’ growth and positive trends, and the company’s industry position and business outlook. Forward-looking statements may contain words such as “expect,” “anticipate,” “believe,” “may,” “should,” “will,” “estimate,” “forecast,” “see,” 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 increased demand in the semiconductor and semiconductor equipment industries, which is subject to many factors, including global economic conditions, business spending, consumer confidence, demand for electronic products and semiconductors, and geopolitical uncertainties; customers’ capacity requirements, including capacity utilizing the latest technology; the timing, rate, amount and sustainability of increases in capital spending for new technology, such as 300mm and nanometer applications; the company’s ability to develop, deliver and support a broad range of products and services on a timely basis; the company’s successful and timely development of new markets, products, processes and services; the company’s ability to timely satisfy manufacturing requirements; the company’s ability to maintain effective cost controls and to timely align its cost structure with business conditions; changes in management; and other risks described in Applied Materials’ Securities and Exchange Commission filings. All forward-looking statements are based on management’s estimates, projections and assumptions as of the date hereof. The company assumes no obligation to update the information in this press release.

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Applied Materials, Inc.
May 18, 2004
Page 3 of 8

     Applied Materials will be discussing its second fiscal quarter results, along with its outlook for the third fiscal quarter of 2004, on a conference call today beginning at 1:30 p.m. Pacific Time. A webcast of the conference call will be available on Applied Materials’ web site under the “Investors” section.

     Applied Materials, Inc. (Nasdaq: AMAT) is the largest supplier of equipment and services to the global semiconductor industry. Applied Materials’ web site is http://www.appliedmaterials.com.

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Applied Materials, Inc.
May 18, 2004
Page 4 of 8

APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)

	Three Months Ended					Six Months Ended
	April 27,			May 2,		April 27,			May 2,
(In thousands, except per share amounts)	2003			2004		2003			2004
Net sales	$	1,107,177		$	2,018,105	$	2,161,386		$	3,573,553
Cost of products sold		734,403			1,079,464		1,398,230			1,958,743
Gross margin		372,774			938,641		763,156			1,614,810
Operating expenses:
Research, development and engineering		232,438			244,175		475,643			486,820
Marketing and selling		83,568			95,975		175,785			184,373
General and administrative		78,198			83,457		150,999			163,751
Restructuring, asset impairments and other charges		92,731			—		192,069			167,459
Income/(loss) from operations		(114,161	)		515,034		(231,340	)		612,407
Interest expense		12,217			11,682		23,559			23,482
Interest income		38,256			26,220		73,628			57,493
Income/(loss) before income taxes		(88,122	)		529,572		(181,271	)		646,418
Provision for/(benefit from) income taxes		(25,996	)		156,224		(53,475	)		190,694
Net income/(loss)	$	(62,126	)	$	373,348	$	(127,796	)	$	455,724
Earnings/(loss) per share:
Basic	$	(0.04	)	$	0.22	$	(0.08	)	$	0.27
Diluted	$	(0.04	)	$	0.22	$	(0.08	)	$	0.26
Weighted average number of shares:
Basic		1,655,927			1,690,617		1,652,981			1,686,193
Diluted		1,655,927			1,729,506		1,652,981			1,732,542

Applied Materials, Inc.
May 18, 2004
Page 5 of 8

APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS

	October 26,			May 2,
(In thousands)	2003			2004
	(AUDITED)			(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents	$	1,364,857		$	1,448,078
Short-term investments		4,128,349			4,458,611
Accounts receivable, net		912,875			1,405,067
Inventories		950,692			1,110,731
Deferred income taxes		782,823			704,365
Other current assets		231,177			266,505
Total current assets		8,370,773			9,393,357
Property, plant and equipment		3,094,427			2,901,878
Less: accumulated depreciation and amortization		(1,534,597	)		(1,475,531	)
Net property, plant and equipment		1,559,830			1,426,347
Goodwill, net		223,521			230,676
Purchased technology and other intangible assets, net		92,512			75,155
Other assets		64,986			81,914
Total assets	$	10,311,622		$	11,207,449
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	105,292		$	104,431
Accounts payable and accrued expenses		1,319,471			1,564,120
Income taxes payable		216,114			301,243
Total current liabilities		1,640,877			1,969,794
Long-term debt		456,422			454,491
Deferred income taxes and other liabilities		146,289			146,788
Total liabilities		2,243,588			2,571,073
Stockholders’ equity:
Common stock		16,774			16,944
Additional paid-in capital		2,223,553			2,329,952
Deferred stock compensation, net		(1,543	)		(761	)
Retained earnings		5,812,867			6,268,591
Accumulated other comprehensive income		16,383			21,650
Total stockholders’ equity		8,068,034			8,636,376
Total liabilities and stockholders’ equity	$	10,311,622		$	11,207,449

Applied Materials, Inc.
May 18, 2004
Page 6 of 8

APPLIED MATERIALS, INC.
SUPPLEMENTAL CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS – ONGOING BASIS
(UNAUDITED)

	Three Months Ended
	April 27, 2003								May 2, 2004
				Special			Ongoing				Special		Ongoing
(In thousands, except per share amounts)	Reported (1)			Items(2)			Results		Reported(1)		Items(3)		Results
Net sales	$	1,107,177		$	–		$	1,107,177	$	2,018,105	$	–	$	2,018,105
Cost of products sold		734,403			(49,000	)(a)		685,403		1,079,464		–		1,079,464
Gross margin		372,774			49,000			421,774		938,641		–		938,641
Operating expenses:
Research, development and engineering		232,438			(10,000	)(b)		222,438		244,175		–		244,175
Marketing and selling		83,568			–			83,568		95,975		–		95,975
General and administrative		78,198			–			78,198		83,457		–		83,457
Restructuring, asset impairments and other charges		92,731			(92,731	)(c)		–		–		–		–
Income/(loss) from operations		(114,161	)		151,731			37,570		515,034		–		515,034
Interest expense		12,217			–			12,217		11,682		–		11,682
Interest income		38,256			–			38,256		26,220		–		26,220
Income/(loss) before income taxes		(88,122	)		151,731			63,609		529,572		–		529,572
Provision for/(benefit from) income taxes		(25,996	)		44,761	(d)		18,765		156,224		–		156,224
Net income/(loss)	$	(62,126	)	$	106,970		$	44,844	$	373,348	$	–	$	373,348
Earnings/(loss) per share:
Basic	$	(0.04	)	$	0.06		$	0.03	$	0.22	$	–	$	0.22
Diluted	$	(0.04	)	$	0.06		$	0.03	$	0.22	$	–	$	0.22
Weighted average number of shares:
Basic		1,655,927			1,655,927			1,655,927		1,690,617		1,690,617		1,690,617
Diluted		1,655,927			1,681,571			1,681,571		1,729,506		1,729,506		1,729,506

(1)	Reported results of operations are presented in accordance with U.S. Generally Accepted Accounting Principles (GAAP).
(2)	Special items for the second fiscal quarter of 2003 consisted of the following:

(a)	Charges to cost of products sold for inventory deemed to be excess as a result of refocused product efforts associated with realignment activities.
(b)	Charges to research, development and engineering expense for laboratory tool write-offs as a result of refocused product efforts associated with realignment activities.
(c)	Restructuring, asset impairments and other charges consisted of employee-related costs, impairment of certain assets and facilities consolidation costs associated with realignment activities.
(d)	Pro forma tax provision for the tax effect of special items.

⁽³⁾ There were no special items for the second fiscal quarter of 2004. Therefore, ongoing results are the same as reported results of operations.

Applied Materials, Inc.
May 18, 2004
Page 7 of 8

APPLIED MATERIALS, INC.
SUPPLEMENTAL CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS – ONGOING BASIS
(UNAUDITED)

	Three Months Ended
	February 1, 2004							May 2, 2004
			Special			Ongoing				Special		Ongoing
(In thousands, except per share amounts)	Reported(1)		Items(2)			Results		Reported(1)		Items(3)		Results
Net sales	$	1,555,448	$	–		$	1,555,448	$	2,018,105	$	–	$	2,018,105
Cost of products sold		879,279		–			879,279		1,079,464		–		1,079,464
Gross margin		676,169		–			676,169		938,641		–		938,641
Operating expenses:
Research, development and engineering		242,645		–			242,645		244,175		–		244,175
Marketing and selling		88,398		–			88,398		95,975		–		95,975
General and administrative		80,294		–			80,294		83,457		–		83,457
Restructuring, asset impairments and other charges		167,459		(167,459	)(a)		–		–		–		–
Income from operations		97,373		167,459			264,832		515,034		–		515,034
Interest expense		11,800		–			11,800		11,682		–		11,682
Interest income		31,273		–			31,273		26,220		–		26,220
Income before income taxes		116,846		167,459			284,305		529,572		–		529,572
Provision for income taxes		34,470		49,400	(b)		83,870		156,224		–		156,224
Net income	$	82,376	$	118,059		$	200,435	$	373,348	$	–	$	373,348
Earnings per share:
Basic	$	0.05	$	0.07		$	0.12	$	0.22	$	–	$	0.22
Diluted	$	0.05	$	0.07		$	0.12	$	0.22	$	–	$	0.22
Weighted average number of shares:
Basic		1,682,025		1,682,025			1,682,025		1,690,617		1,690,617		1,690,617
Diluted		1,735,268		1,735,268			1,735,268		1,729,506		1,729,506		1,729,506

(1)	Reported results of operations are presented in accordance with U.S. Generally Accepted Accounting Principles (GAAP).
(2)	Special items for the first fiscal quarter of 2004 consisted of the following:

(a)	Restructuring, asset impairments and other charges resulting primarily from the consolidation of facilities associated with realignment activities.
(b)	Pro forma tax provision for the tax effect of special items.

⁽³⁾ There were no special items for the second fiscal quarter of 2004. Therefore, ongoing results are the same as reported results of operations.

Applied Materials, Inc.
May 18, 2004
Page 8 of 8

APPLIED MATERIALS, INC.
SUPPLEMENTAL CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS – ONGOING BASIS
(UNAUDITED)

	Six Months Ended
	April 27, 2003								May 2, 2004
				Special			Ongoing				Special			Ongoing
(In thousands, except per share amounts)	Reported(1)			Items(2)			Results		Reported(1)		Items(3)			Results
Net sales	$	2,161,386		$	–		$	2,161,386	$	3,573,553	$	–		$	3,573,553
Cost of products sold		1,398,230			(49,000	)(a)		1,349,230		1,958,743		–			1,958,743
Gross margin		763,156			49,000			812,156		1,614,810		–			1,614,810
Operating expenses:
Research, development and engineering		475,643			(10,000	)(b)		465,643		486,820		–			486,820
Marketing and selling		175,785			–			175,785		184,373		–			184,373
General and administrative		150,999			–			150,999		163,751		–			163,751
Restructuring, asset impairments and other
charges		192,069			(192,069	)(c)		–		167,459		(167,459	)(e)		–
Income/(loss) from operations		(231,340	)		251,069			19,729		612,407		167,459			779,866
Interest expense		23,559			–			23,559		23,482		–			23,482
Interest income		73,628			–			73,628		57,493		–			57,493
Income/(loss) before income taxes		(181,271	)		251,069			69,798		646,418		167,459			813,877
Provision for/(benefit from) income taxes		(53,475	)		74,065	(d)		20,590		190,694		49,400	(f)		240,094
Net income/(loss)	$	(127,796	)	$	177,004		$	49,208	$	455,724	$	118,059		$	573,783
Earnings/(loss) per share:
Basic	$	(0.08	)	$	0.11		$	0.03	$	0.27	$	0.07		$	0.34
Diluted	$	(0.08	)	$	0.11		$	0.03	$	0.26	$	0.07		$	0.33
Weighted average number of shares:
Basic		1,652,981			1,652,981			1,652,981		1,686,193		1,686,193			1,686,193
Diluted		1,652,981			1,681,846			1,681,846		1,732,542		1,732,542			1,732,542

(1)	Reported results of operations are presented in accordance with U.S. Generally Accepted Accounting Principles (GAAP).
(2)	Special items for the six months ended April 27, 2003 consisted of the following:

(a)	Charges to cost of products sold for inventory deemed to be excess as a result of refocused product efforts associated with realignment activities.
(b)	Charges to research, development and engineering expense for laboratory tool write-offs as a result of refocused product efforts associated with realignment activities.
(c)	Restructuring, asset impairments and other charges consisted of employee-related costs, impairment of certain assets and facilities consolidation costs associated with realignment activities.
(d)	Pro forma tax provision for the tax effect of special items.

⁽³⁾ Special items for the six months ended May 2, 2004, all of which occurred in the first fiscal quarter of 2004, consisted of the following:

(e)	Restructuring, asset impairments and other charges resulting primarily from the consolidation of facilities associated with realignment activities.
(f)	Pro forma tax provision for the tax effect of special items.