UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(MARK ONE)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 30, 1994 or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to __________
Commission file number 0-6920
APPLIED MATERIALS, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-1655526
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3050 Bowers Avenue, Santa Clara, California 95054-3299
Address of principal executive offices(Zip Code)
Registrant's telephone number, including area code(408) 727-5555
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
Number of shares outstanding of the issuer's common stock as of
January 30, 1994: 80,674,000
PART I. FINANCIAL INFORMATION
APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
Jan. 30, Jan. 31,
(In thousands, except per share data) 1994 1993
Net sales $340,449 $215,574
Costs and expenses:
Cost of products sold 184,470 123,967
Research, development
and engineering 39,238 30,185
Marketing and selling 34,033 23,384
General and administrative 19,732 13,456
Other, net 655 903
Income from operations 62,321 23,679
Interest expense 3,648 3,598
Interest income 2,007 1,838
Income from consolidated companies before taxes
and cumulative effect of accounting change 60,680 21,919
Provision for income taxes 21,238 7,233
Income from consolidated companies before
cumulative effect of accounting change 39,442 14,686
Equity in net loss of joint venture 2,051 -
Income before cumulative effect of
accounting change 37,391 14,686
Cumulative effect of a change in accounting for
income taxes 7,000 -
Net income $44,391 $14,686
Earnings per share*
Before cumulative effect of
accounting change $ 0.45 $ 0.18
Net income $ 0.53 $ 0.18
Average common shares and
equivalents 83,245 81,592
<FN>
* Retroactively restated for a two-for-one stock split in the form
of a 100% stock dividend effective October 5, 1993.
See accompanying notes to consolidated condensed
financial statements.
APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
Jan. 30, Oct. 31,
(In thousands) 1994 1993
ASSETS Current assets:
Cash and cash equivalents $94,778 $119,597
Short-term investments 127,746 146,583
Accounts receivable, net 291,980 256,020
Inventories 177,592 154,597
Deferred income taxes 66,169 62,413
Other current assets 36,075 36,706
Total current assets 794,340 775,916
Property, plant and
equipment, net 334,296 327,704
Other assets 13,561 16,532
Total assets $1,142,197 $1,120,152
LIABILITIES Current liabilities:
AND Notes payable $34,497 $41,645
STOCKHOLDERS' Current portion of
EQUITY long-term debt 6,996 7,017
Accounts payable and
accrued expenses 268,790 282,699
Income taxes payable 48,721 49,167
Total current liabilities 359,004 380,528
Long-term debt 119,043 121,076
Deferred income taxes and
other non-current obligations 23,395 19,786
Total liabilities 501,442 521,390
Stockholders' equity:
Common stock 807 804
Additional paid-in capital 256,679 256,429
Retained earnings 369,621 325,230
Cumulative translation
adjustments 13,648 16,299
Total stockholders' equity 640,755 598,762
Total liabilities and
stockholders' equity $1,142,197 $1,120,152
<FN>
Amounts as of January 30, 1994 are unaudited. Amounts as of
October 31, 1993 were obtained from the October 31, 1993
audited financial statements.
See accompanying notes to consolidated condensed
financial statements.
APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
Jan. 30, Jan. 31,
(In thousands) 1994 1993
Cash from operating activities:
Net income $44,391 $14,686
Adjustments required to reconcile
net income to net cash flow
used for operations:
Cumulative effect of a change in
accounting for income taxes (7,000) -
Depreciation and amortization 11,477 8,592
Equity in net loss of joint venture 2,051 -
Changes in assets and liabilities:
Accounts receivable (39,225) 9,745
Inventories (24,991) (13,968)
Other current assets (68) (2,906)
Other assets 2,683 291
Accounts payable and accrued
expenses (12,060) (19,600)
Income taxes payable 2,887 (2,302)
Other long-term liabilities 3,871 425
Other, net (119) (343)
(60,494) (20,066)
Cash used for operations (16,103) (5,380)
Cash flows from investing activities:
Capital expenditures (24,065) (14,523)
Disposition of capital equipment 3,118 159
Proceeds from short-term
investments 45,574 8,200
Purchases of short-term
investments (26,737) (30,020)
Cash used for investing (2,110) (36,184)
Cash flows from financing activities:
Short-term borrowing, net (6,100) (2,012)
Long-term debt repayments (593) (892)
Sales (repurchases) of common
stock, net 253 (77)
Cash used for financing (6,440) (2,981)
Effect of exchange rate changes
on cash (166) (318)
Decrease in cash and cash
equivalents (24,819) (44,863)
Cash and cash equivalents
at beginning of period 119,597 159,453
Cash and cash equivalents
at end of period $94,778 $114,590
<FN>
Cash payments for interest were $1,286 and $1,364 for the
three months ended January 30, 1994 and January 31, 1993,
respectively. Cash payments for income taxes were $19,631
and $9,399 for the three months ended January 30, 1994 and
January 31, 1993, respectively.
See accompanying notes to consolidated condensed
financial statements.
APPLIED MATERIALS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)
THREE MONTHS ENDED JANUARY 30, 1994
(In thousands)
1) Basis of Presentation
In the opinion of management, the unaudited consolidated condensed
interim financial statements included herein have been prepared on
the same basis as the October 31, 1993 audited consolidated
financial statements and include all adjustments, consisting of only
normal recurring adjustments, necessary to fairly state the
information set forth therein. Certain amounts in the consolidated
condensed statement of cash flows for the quarter ended January 31,
1993 have been reclassified to conform with the current quarter's
presentation.
2) Earnings Per Share
Earnings per share is computed on the basis of the weighted average
number of common shares and common equivalent shares from dilutive
stock options.
3) Inventories
Inventories are stated at the lower of cost or market, with cost
determined on the basis of first-in, first-out (FIFO).
The components of inventories are as follows:
January 30, 1994 October 31, 1993
Customer service spares $47,506 $45,584
Systems raw materials 35,746 32,294
Work-in-process 70,011 57,526
Finished goods 24,329 19,193
$177,592 $154,597
4) Income Taxes
Effective November 1, 1993, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 109 (SFAS 109),
"Accounting for Income Taxes." The Company has adopted SFAS 109
prospectively.
The adoption of SFAS 109 changes the Company's method of accounting
for income taxes from the deferred method, pursuant to APB 11, to an
asset and liability approach. Under APB 11, deferred taxes are
recognized for income and expense items that are reported in
different years for financial reporting purposes and income tax
purposes. Under the asset and liability approach of SFAS 109,
deferred tax assets and liabilities are recognized for the future
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their existing tax bases.
The cumulative effect of adopting SFAS 109 resulted in a benefit of
$7,000, or $0.08 per share, and is reported separately in the
Consolidated Condensed Statement of Operations for the quarter ended
January 30, 1994.
Deferred tax assets (liabilities) at November 1, 1993 relate to the
following:
Deferred tax assets:
Financial accruals not currently tax deductible:
Inventory $ 13,454
Warranty and installation 21,022
Other 19,458
States income taxes 8,135
Other 4,344
Total deferred tax assets 66,413
Deferred tax liabilities:
Depreciation and other (7,193)
Net deferred tax assets $ 59,220
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
During the first quarter of fiscal 1994 Applied Materials, Inc.
reported record net sales of $340.4 million, up 57.9 percent from
first quarter fiscal 1993 sales of $215.6 million. Worldwide new
order levels of $438.2 million, including a large order from Hyundai
Electronics Ind. Co., Ltd., were received during the quarter, an
increase of 89.7 percent from first quarter fiscal 1993 new orders of
$231.0 million. The record net sales and orders were the result of
customers investing in semiconductor manufacturing equipment in order
to increase manufacturing capacity to meet increasing worldwide
demand for advanced logic, microprocessor and memory devices.
Backlog at January 30, 1994 was $458.2 million, up from $365.8
million at the end of fiscal year 1993.
Results of Operations
The Company's worldwide net sales growth for the quarter ended
January 30, 1994 can be attributed primarily to increased unit sales
of the Company's single-wafer, multi-chamber systems. Compared with
the first quarter of fiscal 1993, Physical Vapor Deposition (PVD),
Metal Chemical Vapor Deposition (MCVD), Etch and Ion Implantation
sales were all up significantly. Regionally, 57 percent of the
Company's net sales for the first quarter of fiscal 1994 were to
customers located outside North America compared to 63 percent in the
fourth quarter of fiscal 1993 and 55 percent in the comparable 1993
period. While net sales and orders by product and region for the
first quarter of fiscal 1994 continue at high levels compared to the
prior quarter or prior year comparable quarter, the Company remains
cautious about the strength and timing of the Japanese and European
economic recoveries, and anticipates that the current high order
growth rates from that quarter's prior year comparable quarter will
moderate sometime during fiscal 1994. The Company believes the first
quarter of fiscal 1994 ratio of bookings to net sales was unusually high,
driven by the $80 million order from Hyundai Electronics Ind. Co.,
Ltd. The Company also believes this unusually high bookings to net
sales ratio will decline during fiscal 1994.
Gross margin as a percent of sales was 45.8 percent for the first
quarter of fiscal 1994, an improvement from the 45.1 percent and 42.5
percent gross margins reported in the fourth and first quarters of
fiscal 1993, respectively. The continued improvement in gross margin
percentage primarily reflects economies of scale in manufacturing and
service and support operations as net sales have reached record
levels. While the Company may see some continued benefit from
economies of scale, past margin trends are not necessarily indicative
of future margin performance.
Operating expenses as a percentage of sales were 27.5 percent for the
first quarter of fiscal 1994, relatively flat compared with the
fourth quarter of fiscal 1993 rate of 27.3 percent, but down from
31.5 percent for the comparable prior year period. The improvement
demonstrates the Company's intent to hold the operating expense
growth rate below current net sales growth rates. There can be no
assurance that the Company will be successful in maintaining or
improving future operating expenses as a percentage of net sales.
The Company's effective tax rate for the first quarter of fiscal 1994
was 35 percent, up from 33 percent in fiscal 1993. This increase is
due to recently enacted U.S. tax legislation as well as variations in
the Company's worldwide income mix and foreign taxes. Management
anticipates the 35 percent effective tax rate will continue through
fiscal 1994.
Income before the cumulative effect of an accounting change rose to
$37.4 million, or 11.0 percent of net sales, compared to net income
of $34.5 million, or 10.5 percent of net sales, in the fourth quarter
of fiscal 1993, and net income of $14.7 million, or 6.8 percent of
net sales, in the first quarter of fiscal 1993.
Net income for the first quarter of fiscal 1994 of $44.4 million
includes the favorable impact of an accounting change of $7.0
million, or $0.08 per share, from the cumulative effect of the
adoption of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (SFAS 109). The Company adopted SFAS
109 prospectively and the cumulative accounting change is reported
separately in the Consolidated Condensed Statement of Operations.
The Company's future operating results may be affected by inherent
uncertainties characteristic of the worldwide semiconductor equipment
industry. Such uncertainties include, but are not limited to, the
development of new technologies, the anticipated transition to a new
generation of microprocessors (i.e. from the Intel 486 to Pentium and
Power PC microprocessors), competitive pricing pressures, global
economic conditions, and the availability of needed components.
Accordingly, recent historical operating results should be only one
factor in evaluating the future financial performance of the Company.
Financial Condition, Liquidity and Capital Resources
At January 30, 1994, total current assets exceeded total current
liabilities by 2.2 times, compared to 2.0 at October 31, 1993. During
the first quarter of fiscal 1994 the Company's cash, cash equivalents
and short-term investments declined $43.7 million. Cash used for
operations since October 31, 1993 totaled $16.1 million, resulting
primarily from increased inventory and accounts receivable levels and
paydowns of accounts payable and accrued expenses. The increase in
accounts receivable was due mainly to increased net sales over the
prior quarter. Other uses of cash include investments in facilities
and capital equipment of $24.1 million and borrowing reductions of
$6.7 million. Capital expenditures are expected to be approximately
$130 million for fiscal year 1994. This amount includes funds for
the continuation and/or completion of facilities expansion,
investments in demonstration and test equipment, information systems
and other capital expenditures.
At January 30, 1994 the Company's principal sources of liquidity
consisted of $222.5 million of cash and short-term investments and
$127.7 million in available U.S. and foreign credit facilities. The
Company's liquidity is affected by many factors, some based on the
typical on-going operations of the business and others related to the
uncertainties of the industry and global economies. Although the
Company's cash requirements will fluctuate based on the timing and
extent of these factors, management believes that cash generated from
operations, together with the liquidity provided by existing cash
balances and current borrowing arrangements, will be sufficient to
support operations through fiscal year 1994.
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the
quarter ended January 30, 1994.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
APPLIED MATERIALS, INC.
February 28, 1994 By: __\s\ Gerald .F.Taylor_________
Gerald F. Taylor
Senior Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)