01—Abstract
Summary
Summary of the 10-K filed December 21, 1994. Cited figures are marked; the original filing is the authoritative source.
Applied Materials (AMAT) closed fiscal 1994 (ended October 30, 1994) with record results: net sales rose 54% to $1.66 billiona from $1.08 billion, and net income more than doubled to $220.7 million, or $2.60 per share, from $99.7 million ($1.21).
Gross margin improved to 46.3% from 44.0%, reflecting economies of scale, and the company ended the year with a backlog of $715.2 millionb, up from $365.8 million, plus record new orders of $2.0 billion. Growth was driven by demand for its single-wafer, multichamber systems (Precision 5000, Endura, Centura), which accounted for about 86% of systems revenue, and by a 39% increase in service and support revenue. Roughly 63% of sales came from outside North America, with Japan, Asia-Pacific and Europe all growing strongly.
Balance sheet and liquidity strengthened materially. Cash and short-term investments reached $422.3 million, total assets grew to $1.70 billionc, and stockholders' equity rose to $966.3 million. The company raised $110.7 million through a March 1994 common stock offering and $98.6 million through 8% noncallable senior notes due 2004.
Working capital expanded to $734 milliond. However, operating cash flow fell to $111.0 million from $117.0 million as receivables (up $149.8 million) and inventories (up $91.1 million) grew faster than earnings, and capital expenditures rose to $180.4 million, with about $195 million planned for 1995. Management signaled that growth rates would moderate as semiconductor equipment demand normalizes, and that operating expenses as a percentage of sales would rise modestly in fiscal 1995 as the company invests in facilities, systems and personnel.
The company paid no cash dividends and its stock trades on NASDAQ. Notable legal exposure includes ongoing patent litigation with ASM International and a General Signal suit filed in September 1994, which management believes is unlikely to have a material adverse effect.
02—Key points
Key Highlights
- Record net sales of $1,659.8 million, up 54% from $1,080.0 million in fiscal 1993.
- Net income of $220.7 million ($2.60 per share), up from $99.7 million ($1.21 per share), including a $7.0 million SFAS 109 accounting change credit.
- Gross margin improved to 46.3% of net sales from 44.0%, while R&D fell to 11.4% of sales from 13.0%.
- Record backlog of $715.2 million at year-end, nearly double the $365.8 million a year earlier, with $2.0 billion in new orders.
- Balance sheet strengthened: cash and short-term investments of $422.3 million, equity of $966.3 million, and long-term debt of $209.1 million after a $100 million 8% senior note issuance.
- Operating cash flow dipped to $111.0 million as receivables and inventory build outpaced earnings; capex of $180.4 million with about $195 million planned for 1995.
- Management expects growth to moderate and operating expenses to rise modestly as a percentage of sales in fiscal 1995; no cash dividends are paid.
03—Questions
Frequently Asked Questions
What drove Applied Materials' revenue growth in fiscal 1994?
Demand for the company's single-wafer, multichamber systems, including the Precision 5000, Endura and Centura platforms, which accounted for about 86% of systems revenue. Service and support revenue also grew 39%, and sales rose across Japan, Asia-Pacific and Europe as chipmakers added DRAM, logic and foundry capacity.
Is the company's customer demand expected to continue at this pace?
Management expects growth rates to moderate as demand for semiconductor production equipment reaches more sustainable levels. The record $715.2 million backlog is expected to be filled during fiscal 1995, which supports near-term revenue visibility.
What are the main risks to the business?
The company is exposed to the cyclical capital spending of semiconductor manufacturers, fluctuations in the yen and other currencies (much of its business is in Japan and Europe), trade and political issues, and competitive pricing pressure. It also faces patent litigation with ASM International and a General Signal suit, which management believes are unlikely to have a material adverse effect.
How is the company financing its growth and what is its balance sheet position?
In fiscal 1994 it raised $110.7 million from a 2.3 million share stock offering and $98.6 million from 8% noncallable senior notes due 2004. At year-end it held $422.3 million in cash and short-term investments and $205 million in available credit facilities, and management believes these resources will cover fiscal 1995 needs.
Does Applied Materials pay dividends, and where does its stock trade?
No. The company has paid no cash dividends and has no plans to do so in the near future. Its common stock trades over-the-counter on the NASDAQ National Market System under the symbol AMAT, with about 1,175 record holders as of November 1, 1994.
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