News Column

Applied Materials Announces Third Quarter Results

August 14, 2014

* Orders of $2.48 billion, up 24% year over year led by SSG year-over-year order growth of $362 million. * Net sales of $2.27 billion, up 15% year over year led by growth in SSG. * Non-GAAP adjusted gross margin of 45.5%, up 260 basis points year over year. GAAP gross margin of 43.8%, up 300 basis points year over year. * Non-GAAP adjusted diluted EPS of $0.28, up 56% year over year. GAAP diluted EPS of $0.24, up 71% year over year. SANTA CLARA, Calif., Aug. 14, 2014 - Applied Materials, Inc. (NASDAQ:AMAT), the global leader in precision materials engineering solutions for the semiconductor, display and solar industries, today reported results for its third quarter of fiscal 2014 ended July 27, 2014. Applied generated orders of $2.48 billion, down 6 percent sequentially and up 24 percent year over year. Net sales were $2.27 billion, down 4 percent sequentially and up 15 percent year over year. Non-GAAP adjusted gross margin of 45.5 percent increased 130 basis points sequentially and grew 260 basis points year over year. Non-GAAP adjusted operating income of $477 million declined slightly from the prior quarter and grew 53 percent year over year to 21.1 percent of net sales. Non-GAAP adjusted net income was $349 million, approximately flat sequentially and up 57 percent year over year. Non-GAAP adjusted diluted EPS was $0.28. The company recorded GAAP gross margin of 43.8 percent, operating income of $391 million or 17.3 percent of net sales, and net income of $301 million or $0.24 per diluted share. "We have focused our strategy and investments in areas that have the largest impact for customers while driving improvements in execution and speed across the company," said Gary Dickerson, President and CEO. "With these actions, we have improved our operating margins for seven quarters in a row and are making substantial progress towards our long-term financial model." Quarterly Results Summary GAAP Results   Q3 FY2014   Q2 FY2014   Q3 FY2013 -------------------------------- --------------- --------------- -------------- Net sales   $2.27 billion   $2.35 billion   $1.98 billion Operating income   $391 million   $387 million   $250 million Net income   $301 million   $262 million   $168 million Diluted earnings per share (EPS)   $0.24   $0.21   $0.14 Non-GAAP Adjusted Results -------------------------------- Non-GAAP adjusted operating income   $477 million   $482 million   $312 million Non-GAAP adjusted net income   $349 million   $348 million   $222 million Non-GAAP adjusted diluted EPS   $0.28   $0.28   $0.18 Applied's non-GAAP adjusted results exclude the impact of the following, where applicable: certain acquisition-related costs; restructuring charges and any associated adjustments; impairments of assets, goodwill, or investments; gain or loss on sale of strategic investments; and certain tax items. A reconciliation of the GAAP and non-GAAP adjusted results is provided in the financial tables included in this release. See also "Use of Non-GAAP Adjusted Financial Measures" section. Third Quarter Reportable Segment Results and Comparisons to the Prior Quarter Silicon Systems Group (SSG) orders were $1.57 billion, down 6 percent, with decreases in DRAM and foundry. Net sales decreased 7 percent to $1.48 billion. Non-GAAP adjusted operating income decreased to $423 million while non-GAAP adjusted operating margin increased to 28.7 percent driven by a favorable product mix. GAAP operating income decreased to $381 million while GAAP operating margin increased to 25.8 percent. New order composition was: foundry 50 percent; flash 22 percent; DRAM 14 percent; and logic/other 14 percent. Applied Global Services (AGS) orders were $552 million, up 3 percent, while net sales of $567 million were up 6 percent. Operating income increased slightly to $154 million on both a GAAP and non-GAAP adjusted basis while operating margin decreased to 27.2 percent. Display orders of $296 million were down 13 percent but remained at high levels reflecting continued strong demand for TV production capacity. Net sales declined 19 percent to $119 million. Non-GAAP adjusted operating income was flat at $26 million while non-GAAP adjusted operating margin increased to 21.8 percent. GAAP operating income declined slightly to $25 million while GAAP operating margin grew to 21 percent. The GAAP and non-GAAP results included a benefit from the sale of previously reserved inventory. Energy and Environmental Solutions (EES) orders decreased to $66 million while net sales rose to $103 million. Non-GAAP adjusted operating income increased to $25 million and  non-GAAP adjusted operating margin rose to 24.3 percent. GAAP operating income increased to $24 million and GAAP operating margin grew to 23.3 percent. The GAAP and non-GAAP results included the benefit of a favorable litigation outcome. Applied's backlog grew 9 percent sequentially to $2.97 billion including positive adjustments of $19 million, primarily related to EES re-bookings. Backlog composition by segment was:  SSG 51 percent; AGS 22 percent; Display 22 percent; and EES 5 percent. The company's GAAP and non-GAAP adjusted gross margin  included benefits from the sale of display tools for which inventory had been fully reserved previously along with the recovery of all of the remaining customs assessment charges taken in the fourth quarter of fiscal 2013. These benefits were equivalent to approximately 80 basis points of third-quarter gross margin. Business Outlook For the fourth quarter of fiscal 2014, Applied expects net sales to be approximately flat, plus or minus three percent as compared to the previous quarter, and up by approximately 10 percent to 17 percent from the year-ago period. Non-GAAP adjusted diluted EPS is expected to be in the range of $0.25 to $0.29, which would be up by approximately 32 percent to 53 percent year over year. This outlook excludes known charges related to completed acquisitions and integration costs of $0.03 per share. The outlook does not exclude other non- GAAP adjustments that may arise subsequent to this release. Use of Non-GAAP Adjusted Financial Measures Management uses non-GAAP adjusted results to evaluate the company's operating and financial performance in light of business objectives and for planning purposes. These measures are not in accordance with GAAP and may differ from non-GAAP methods of accounting and reporting used by other companies. Applied believes these measures enhance investors' ability to review the company's business from the same perspective as the company's management and facilitate comparisons of this period's results with prior periods. The presentation of this additional information should not be considered a substitute for results prepared in accordance with GAAP. Webcast Information Applied Materials will discuss these results during an earnings call that begins at 1:30 p.m. Pacific Time today. A live webcast will be available at www.appliedmaterials.com. A replay will be available on the website beginning at 5:00 p.m. Pacific Time today. Forward-Looking Statements This press release contains forward-looking statements, including those regarding Applied's performance, strategies, improvements and business outlook for the fourth quarter of fiscal 2014. These statements and their underlying assumptions 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, including but not limited to: the level of demand for Applied's products, which is subject to many factors, including uncertain global economic and industry conditions, end-demand for electronic products and semiconductors, and customers' new technology and capacity requirements; the timing and nature of technology transitions; the concentrated nature of Applied's customer base; Applied's ability to (i) develop, deliver and support a broad range of products and expand its markets, (ii) achieve the objectives of operational and strategic initiatives, (iii) obtain and protect intellectual property rights in key technologies, (iv) attract, motivate and retain key employees, (v) successfully complete the announced business combination and realize expected benefits and synergies, and (vi) accurately forecast future results, which depends on multiple assumptions related to, without limitation, market conditions, customer requirements and business needs; and other risks described in Applied's SEC filings, including its most recent Forms 10-Q and 8-K. All forward-looking statements are based on management's estimates, projections and assumptions as of the date hereof. The company undertakes no obligation to update any forward- looking statements. About Applied MaterialsApplied Materials, Inc. (Nasdaq:AMAT) is the global leader in providing innovative equipment, services and software to enable the manufacture of advanced semiconductor, flat panel display and solar photovoltaic products. Our technologies help make innovations like smartphones, flat screen TVs and solar panels more affordable and accessible to consumers and businesses around the world. Learn more at www.appliedmaterials.com. Contact: Kevin Winston (editorial/media) 408.235.4498 Michael Sullivan (financial community) 408.986.7977 APPLIED MATERIALS, INC. UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS     Three Months Ended   Nine Months Ended ----------------------------------- ---------------------- (In millions, except per share July 27, April 27, July 28, July 27, July 28, amounts)    2014    2014    2013    2014    2013 ----------- ----------- ----------- ----------- ---------- Net sales   $ 2,265     $ 2,353     $ 1,975     $ 6,808     $ 5,521 Cost of products sold   1,273     1,352     1,169     3,924     3,325 ----------- ----------- ----------- ----------- ---------- Gross margin   992     1,001     806     2,884     2,196 Operating expenses: Research, development and engineering   357     355     334     1,068     982 Marketing and selling   108     107     111     324     334 General and administrative   136     152     97     377     348 Impairment of goodwill and intangible assets   -     -     -     -     278 Restructuring charges and asset impairments   -     -     14     7     33 ----------- ----------- ----------- ----------- ---------- Total operating expenses   601     614     556     1,776     1,975 Income from operations   391     387     250     1,108     221 Interest expense   24     23     23     72     71 Interest and other income, net   3     1     1     14     6 ----------- ----------- ----------- ----------- ---------- Income before income taxes   370     365     228     1,050     156 Provision for income taxes   69     103     60     234     83 ----------- ----------- ----------- ----------- ---------- Net income   $ 301     $ 262     $ 168     $ 816     $ 73 ----------- ----------- ----------- ----------- ---------- Earnings per share: Basic   $ 0.25     $ 0.22     $ 0.14     $ 0.67     $ 0.06 Diluted   $ 0.24     $ 0.21     $ 0.14     $ 0.66     $ 0.06 Weighted average number of shares: Basic   1,218     1,216     1,203     1,213     1,201 Diluted   1,233     1,229     1,220     1,230     1,218 APPLIED MATERIALS, INC. UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS October July 27, April 27, 27, (In millions)    2014    2014    2013 ------------ ------------ ----------- ASSETS Current assets: Cash and cash equivalents   $ 2,726     $ 2,453     $ 1,711 Short-term investments   145     146     180 Accounts receivable, net   1,622     1,615     1,633 Inventories   1,547     1,564     1,413 Other current assets   600     623     705 ------------ ------------ ----------- Total current assets   6,640     6,401     5,642 Long-term investments   957     836     1,005 Property, plant and equipment, net   849     855     850 Goodwill   3,294     3,294     3,294 Purchased technology and other intangible assets, net   979     1,018     1,103 Deferred income taxes and other assets   132     151     149 ------------ ------------ ----------- Total assets   $ 12,851     $ 12,555     $ 12,043 ------------ ------------ ----------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses   $ 1,689     $ 1,663     $ 1,649 Customer deposits and deferred revenue   1,066     999     794 ------------ ------------ ----------- Total current liabilities   2,755     2,662     2,443 Long-term debt   1,947     1,947     1,946 Other liabilities   465     471     566 ------------ ------------ ----------- Total liabilities   5,167     5,080     4,955 ------------ ------------ ----------- Total stockholders' equity   7,684     7,475     7,088 ------------ ------------ ----------- Total liabilities and stockholders' equity   $ 12,851     $ 12,555     $ 12,043 ------------ ------------ ----------- APPLIED MATERIALS, INC. UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS Three Months Ended Nine Months Ended ----------------------------------- ---------------------- July 27, April 27, July 28, July 27, July 28, (In millions)  2014    2014    2013    2014    2013 ----------- ----------- ----------- ----------- ---------- Cash flows from operating activities: Net income $ 301     $ 262     $ 168     $ 816     $ 73 Adjustments required to reconcile net income to cash provided by operating activities: Depreciation and amortization 93     94     100     281     312 Impairment of goodwill and intangible assets -     -     -     -     278 Restructuring charges and asset impairments -     -     14     7     33 Unrealized loss on derivative associated with announced business combination 10     23     -     9     - Share-based compensation 44     42     40     132     121 Other 48     5     (56 )   37     (102 ) Net change in operating assets and liabilities 88     11     98     111     (111 ) ----------- ----------- ----------- ----------- ---------- Cash provided by operating activities 584     437     364     1,393     604 ----------- ----------- ----------- ----------- ---------- Cash flows from investing activities: Capital expenditures (65 )   (65 )   (40 )   (178 )   (141 ) Proceeds from sales and maturities of investments 181     157     134     702     737 Purchases of investments (308 )   (161 )   (128 )   (632 )   (438 ) ----------- ----------- ----------- ----------- ---------- Cash provided by (used in) investing activities (192 )   (69 )   (34 )   (108 )   158 ----------- ----------- ----------- ----------- ---------- Cash flows from financing activities: Proceeds from common stock issuances and others, net 2     63     40     93     125 Common stock repurchases -     -     (50 )   -     (198 ) Payments of dividends to stockholders (121 )   (122 )   (120 )   (363 )   (336 ) ----------- ----------- ----------- ----------- ---------- Cash used in financing activities (119 )   (59 )   (130 )   (270 )   (409 ) ----------- ----------- ----------- ----------- ---------- Increase in cash and cash equivalents 273     309     200     1,015     353 Cash and cash equivalents - beginning of period 2,453     2,144     1,545     1,711     1,392 ----------- ----------- ----------- ----------- ---------- Cash and cash equivalents - end of period $ 2,726     $ 2,453     $ 1,745     $ 2,726     $ 1,745 ----------- ----------- ----------- ----------- ---------- Supplemental cash flow information: Cash payments for income taxes $ 49     $ 33     $ 30     $ 108     $ 184 Cash refunds from income taxes $ 21     $ 3     $ -     $ 33     $ 67 Cash payments for interest $ 39     $ 7     $ 39     $ 85     $ 85 APPLIED MATERIALS, INC. UNAUDITED SUPPLEMENTAL INFORMATION Reportable Segment Results     Q3 FY2014   Q2 FY2014   Q3 FY2013 --------------------------------- --------------------------------- -------------------------------- Opera Opera Opera ting ting ting (In New Net Income New Net Income New Net Income millions)   Orders   Sales   (Loss)   Orders   Sales   (Loss)   Orders   Sales   (Loss) ----------- ----------- --------- ----------- ----------- --------- ----------- ----------- -------- SSG   $ 1,565     $ 1,476     $ 381     $ 1,664     $ 1,584     $ 391     $ 1,203     $ 1,272     $ 246 AGS   552     567     154     537     534     148     517     497     114 Display   296     119     25     340     147     26     256     161     33 EES   66     103     24     88     88     5     19     45     (27 ) Corporate   -     -     (193 )   -     -     (183 )   -     -     (116 ) ----------- ----------- --------- ----------- ----------- --------- ----------- ----------- -------- Consolidated   $ 2,479     $ 2,265     $ 391     $ 2,629     $ 2,353     $ 387     $ 1,995     $ 1,975     $ 250 ----------- ----------- --------- ----------- ----------- --------- ----------- ----------- -------- Corporate Unallocated Expenses (In millions)   Q3 FY2014   Q2 FY2014   Q3 FY2013 ----------- ----------- ---------- Restructuring charges and asset impairments   $ -     $ -     $ 4 Share-based compensation   44     42     40 Gain on sale of facility   -     -     (4 ) Unrealized loss on derivative associated with announced business combination   10     23     - Other unallocated expenses   139     118     76 ----------- ----------- ---------- Total corporate   $ 193     $ 183     $ 116 ----------- ----------- ---------- APPLIED MATERIALS, INC. UNAUDITED SUPPLEMENTAL INFORMATION Additional Information     Q3 FY2014   Q2 FY2014   Q3 FY2013 ---------------- ---------------- --------------- New Orders and Net Sales by Geography New Net New Net New Net (In $ millions)   Orders   Sales   Orders   Sales   Orders   Sales -------- ------- -------- ------- -------- ------ United States   680     683     521     370     369     353 % of Total   27 %   30 %   20 %   16 %   19 %   18 % Europe   146     160     199     156     225     175 % of Total   6 %   7 %   7 %   7 %   11 %   9 % Japan   378     229     203     215     333     154 % of Total   15 %   10 %   8 %   9 %   17 %   8 % Korea   217     226     378     351     249     262 % of Total   9 %   10 %   14 %   15 %   12 %   13 % Taiwan   497     598     660     781     356     658 % of Total   20 %   26 %   25 %   33 %   18 %   33 % Southeast Asia   177     81     72     52     124     100 % of Total   7 %   4 %   3 %   2 %   6 %   5 % China   384     288     596     428     339     273 % of Total   16 %   13 %   23 %   18 %   17 %   14 % Employees (In thousands) Regular Full Time   13.8     13.7     13.7  APPLIED MATERIALS, INC. UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS     Three Months Ended   Nine Months Ended --------------------------------- ---------------------- July (In millions, except July 27, April 27, 28, July 27, July 28, percentages)    2014    2014    2013    2014    2013 ----------- ----------- --------- ----------- ---------- Non-GAAP Adjusted Gross Margin Reported gross margin - GAAP basis   $ 992     $ 1,001     $ 806     $ 2,884     $ 2,196 Certain items associated with acquisitions(1)   38     39     40     116     126 Acquisition integration costs   -     1     1     1     3 ----------- ----------- --------- ----------- ---------- Non-GAAP adjusted gross margin   $ 1,030     $ 1,041     $ 847     $ 3,001     $ 2,325 ----------- ----------- --------- ----------- ---------- Non-GAAP adjusted gross margin percent (% of net sales)   45.5 %   44.2 %   42.9 %   44.1 %   42.1 % Non-GAAP Adjusted Operating Income Reported operating income - GAAP basis   $ 391     $ 387     $ 250     $ 1,108     $ 221 Certain items associated with acquisitions(1)   44     46     47     135     154 Acquisition integration costs   9     10     5     30     27 Unrealized loss on derivative associated with announced business combination   10     23     -     9     - Certain items associated with announced business combination(2)   23     16     -     50     - Impairment of goodwill and intangible assets   -     -     -     -     278 Restructuring charges and asset impairments(3, 4, 5)   -     -     14     7     33 Gain on sale of facility   -     -     (4 )   -     (4 ) ----------- ----------- --------- ----------- ---------- Non-GAAP adjusted operating income   $ 477     $ 482     $ 312     $ 1,339     $ 709 ----------- ----------- --------- ----------- ---------- Non-GAAP adjusted operating margin percent (% of net sales)   21.1 %   20.5 %   15.8 %   19.7 %   12.8 % Non-GAAP Adjusted Net Income Reported net income - GAAP basis   $ 301     $ 262     $ 168     $ 816     $ 73 Certain items associated with acquisitions(1)   44     46     47     135     154 Acquisition integration costs   9     10     5     30     27 Unrealized loss on derivative associated with announced business combination   10     23     -     9     - Certain items associated with announced business combination(2)   23     16     -     50     - Impairment of goodwill and intangible assets   -     -     -     -     278 Restructuring charges and asset impairments(3, 4, 5)   -     -     14     7     33 Gain on sale of facility   -     -     (4 )   -     (4 ) Impairment (gain on sale) of strategic investments, net   (1 )   2     2     (4 )   4 Reinstatement of federal R&D tax credit   -     -     -     -     (13 ) Resolution of prior years' income tax filings and other tax items   (19 )   12     (3 )   (22 )   (14 ) Income tax effect of non-GAAP adjustments   (18 )   (23 )   (7 )   (45 )   (48 ) ----------- ----------- --------- ----------- ---------- Non-GAAP adjusted net income   $ 349     $ 348     $ 222     $ 976     $ 490 ----------- ----------- --------- ----------- ---------- 1 These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets. 2 These items are incremental charges related to the announced business combination agreement with Tokyo Electron Limited, consisting of acquisition-related and integration planning costs. 3 Results for the nine months ended July 27, 2014 included employee-related costs of $7 million related to the restructuring program announced on October 3, 2012. 4 Results for the three months ended July 28, 2013 included $4 million of employee-related costs related to the restructuring program announced on October 3, 2012, and restructuring and asset impairment charges of $10 million related to the restructuring program announced on May 10, 2012. 5 Results for the nine months ended July 28, 2013 included $12 million of employee-related costs, net, related to the restructuring program announced on October 3, 2012, restructuring and asset impairment charges of $19 million related to the restructuring program announced on May 10, 2012, and severance charges of $2 million related to the integration of Varian Semiconductor Equipment Associates, Inc (Varian). APPLIED MATERIALS, INC. UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS     Three Months Ended   Nine Months Ended --------------------------------- -------------------- (In millions except July 27, April 27, July 28, July 27, July 28, per share amounts)   2014   2014   2013   2014   2013 ---------- ----------- ---------- ---------- --------- Non-GAAP Adjusted Earnings Per Diluted Share Reported earnings per diluted share - GAAP basis   $ 0.24     $ 0.21     $ 0.14     $ 0.66     $ 0.06 Certain items associated with acquisitions   0.03     0.03     0.03     0.09     0.10 Acquisition integration costs   0.01     0.01     -     0.02     0.02 Certain items associated with announced business combination   0.02     0.01     -     0.04     - Unrealized loss on derivative associated with announced business combination   -     0.01     -     -     - Impairment of goodwill and intangible assets   -     -     -     -     0.22 Restructuring charges and asset impairments   -     -     0.01     -     0.02 Reinstatement of federal R&D tax credit and resolution of prior years' income tax filings and other tax items   (0.02 )   0.01     -     (0.02 )   (0.02 ) ---------- ----------- ---------- ---------- --------- Non-GAAP adjusted earnings per diluted share   $ 0.28     $ 0.28     $ 0.18     $ 0.79     $ 0.40 ---------- ----------- ---------- ---------- --------- Weighted average number of diluted shares   1,233     1,229     1,220     1,230     1,218 APPLIED MATERIALS, INC. UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS     Three Months Ended   Nine Months Ended --------------------------------- ---------------------- (In millions, except July 27, April 27, July 28, July 27, July 28, percentages)   2014   2014   2013   2014   2013 ---------- ----------- ---------- ----------- ---------- SSG Non-GAAP Adjusted Operating Income Reported operating income - GAAP basis   $ 381     $ 391     $ 246     $ 1,086     $ 663 Certain items associated with acquisitions(1)   42     42     42     126     131 Acquisition integration costs   -     -     (5 )   1     (3 ) Restructuring charges and asset impairments(3)   -     -     -     -     1 ---------- ----------- ---------- ----------- ---------- Non-GAAP adjusted operating income   $ 423     $ 433     $ 283     $ 1,213     $ 792 ---------- ----------- ---------- ----------- ---------- Non-GAAP adjusted operating margin percent (% of net sales)   28.7 %   27.3 %   22.2 %   26.7 %   22.4 % AGS Non-GAAP Adjusted Operating Income Reported operating income - GAAP basis   $ 154     $ 148     $ 114     $ 427     $ 321 Certain items associated with acquisitions(1)   -     2     2     3     4 Restructuring charges and asset impairments(3)   -     -     -     -     2 ---------- ----------- ---------- ----------- ---------- Non-GAAP adjusted operating income   $ 154     $ 150     $ 116     $ 430     $ 327 ---------- ----------- ---------- ----------- ---------- Non-GAAP adjusted operating margin percent (% of net sales)   27.2 %   28.1 %   23.3 %   26.7 %   22.0 % Display Non-GAAP Adjusted Operating Income Reported operating income - GAAP basis   $ 25     $ 26     $ 33     $ 77     $ 55 Certain items associated with acquisitions(1)   1     -     1     2     5 ---------- ----------- ---------- ----------- ---------- Non-GAAP adjusted operating income   $ 26     $ 26     $ 34     $ 79     $ 60 ---------- ----------- ---------- ----------- ---------- Non-GAAP adjusted operating margin percent (% of net sales)   21.8 %   17.7 %   21.1 %   18.6 %   16.0 % EES Non-GAAP Adjusted Operating Income (Loss) Reported operating income (loss) - GAAP basis   $ 24     $ 5     $ (27 )   $ 18     $ (403 ) Certain items associated with acquisitions(1)   1     2     2     4     14 Restructuring charges and asset impairments(2, 3)   -     -     10     -     18 Impairment of goodwill and intangible assets     -       -       -       -       278 ---------- ----------- ---------- ----------- ---------- Non-GAAP adjusted operating income (loss)   $ 25     $ 7     $ (15 )   $ 22     $ (93 ) ---------- ----------- ---------- ----------- ---------- Non-GAAP adjusted operating margin percent (% of net sales)   24.3 %   8.0 %   (33.3 )%   9.5 %   (72.1 )% 1 These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets. 2 Results for the three months ended July 28, 2013 included restructuring and asset impairment charges of $10 million related to the restructuring program announced on May 10, 2012. 3 Results for the nine months ended July 28, 2013 included restructuring and asset impairment charges of $19 million related to the restructuring program announced on May 10, 2012 and severance charges of $2 million related to the integration of Varian. APPLIED MATERIALS, INC. UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED OPERATING EXPENSES   Three Months Ended ----------------------- July April (In millions) 27, 2014   27, 2014 ----------- ----------- Operating expenses - GAAP basis $ 601     $ 614 Unrealized loss on derivative associated with announced business combination (10 )   (23 ) Certain items associated with acquisitions (6 )   (7 ) Acquisition integration costs (9 )   (9 ) Certain items associated with announced business combination (23 )   (16 ) ----------- ----------- Non-GAAP adjusted operating expenses $ 553     $ 559 ----------- ----------- UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED EFFECTIVE INCOME TAX RATE Three Months   Ended (In millions, except percentages) July 27, 2014 --------------- Provision for income taxes - GAAP basis (a) $ 69 Resolutions of prior years' income tax filings and other tax items 19 Income tax effect of non-GAAP adjustments 18 --------------- Non-GAAP adjusted provision for income taxes (b) $ 106 --------------- Income before income taxes - GAAP basis (c) $ 370 Certain items associated with acquisitions 44 Acquisition integration costs 9 Unrealized loss on derivative associated with announced business combination 10 Certain items associated with announced business combination 23 Gain on sale of strategic investments, net (1 ) --------------- Non-GAAP adjusted income before income taxes (d) $ 455 --------------- Effective income tax rate - GAAP basis (a/c) 18.6 % --------------- Non-GAAP adjusted effective income tax rate (b/d) 23.3 % --------------- This announcement is distributed by GlobeNewswire on behalf of GlobeNewswire clients. The owner of this announcement warrants that: (i) the releases contained herein are protected by copyright and other applicable laws; and (ii) they are solely responsible for the content, accuracy and originality of the information contained therein. Source: Applied Materials via GlobeNewswire [HUG#1848731]


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