10-QPeriod: Q1 FY2002

APPLIED MATERIALS INC /DE Quarterly Report for Q1 Ended Jan 27, 2002

Filed March 7, 2002For Securities:AMAT

Summary

Applied Materials, Inc. (AMAT) reported a significant decline in its financial performance for the quarter ended January 27, 2002, compared to the prior year period. Net sales plummeted by 58% year-over-year to $1.000 billion, while the company posted a net loss of $45.5 million, or -$0.06 per diluted share, a stark contrast to the net income of $156.8 million, or $0.19 per diluted share, in the same quarter of the previous year. This downturn is attributed to the severe cyclical nature of the semiconductor industry, with customers significantly reducing capital spending due to weak global economic conditions and excess inventory. The company also incurred substantial non-recurring charges, including $85 million related to in-process R&D and restructuring costs due to the industry downturn. Despite the challenging environment, AMAT maintained a strong liquidity position with $4.9 billion in cash, cash equivalents, and short-term investments, and continues to manage its cost structure to navigate the industry cycle.

Key Highlights

  • 1Revenue decline: Net sales decreased by 58% year-over-year to $1.000 billion for the quarter ended January 27, 2002.
  • 2Shift to loss: The company reported a net loss of $45.5 million, a significant reversal from a net profit of $156.8 million in the prior year's comparable quarter.
  • 3Earnings per share erosion: Diluted EPS turned negative at -$0.06 from $0.19 in the prior year.
  • 4Industry downturn impact: Management cites a severe and historical downturn in the semiconductor industry as the primary driver of reduced customer capital spending and order cancellations.
  • 5Non-recurring charges: The company recorded $85 million in non-recurring items, including $8 million for acquired in-process R&D and $77 million for restructuring charges.
  • 6Strong liquidity maintained: Despite the operational challenges, AMAT reported $4.9 billion in cash, cash equivalents, and short-term investments, indicating a solid financial buffer.
  • 7Restructuring and cost controls: The company undertook significant cost reduction measures, including a workforce reduction of approximately 1,100 employees, to align with market conditions.

Frequently Asked Questions

The primary reason is the severe cyclical downturn in the semiconductor industry. Weak global economic conditions, inventory build-ups, and reduced consumer demand for electronic goods have led semiconductor companies to significantly cut back on their capital expenditures, resulting in fewer orders for manufacturing equipment.

Applied Materials has implemented significant cost reduction measures. This includes a substantial restructuring charge of $77 million, which involved reducing its global workforce by approximately 1,100 positions. Operating expenses were also reduced by 31% year-over-year in absolute dollars.

Despite the challenging operating environment, Applied Materials maintains a strong liquidity position. As of January 27, 2002, the company had $4.9 billion in cash, cash equivalents, and short-term investments. Management believes this liquidity, combined with cash generated from operations, is sufficient to meet requirements for the next 12 months.

Yes, the company adopted Staff Accounting Bulletin No. 101 (SAB 101) for revenue recognition, which led to a restatement of prior periods and a cumulative effect of change in accounting principle impacting prior fiscal year results. Additionally, the company adopted SFAS 142, which discontinued the amortization of goodwill, though this did not materially impact the current quarter's reported results as the transitional impairment test indicated no impairment.