10-QPeriod: Q2 FY2002

APPLIED MATERIALS INC /DE Quarterly Report for Q2 Ended Apr 28, 2002

Filed June 7, 2002For Securities:AMAT

Summary

Applied Materials Inc. (AMAT) reported significant year-over-year declines in revenue and net income for the six months ended April 28, 2002, reflecting the severe downturn in the semiconductor industry. Net sales decreased by 52% to $2.16 billion, and net income fell to $6.5 million from $475.2 million in the prior year's comparable period. This was primarily due to reduced capital spending by semiconductor manufacturers, leading to order cancellations and rescheduled deliveries. Despite the challenging environment, the company saw a sequential improvement in the second fiscal quarter of 2002, with new orders increasing and net sales rising by 16% from the previous quarter, indicating a potential recovery. The company maintained a strong financial position with robust liquidity, holding $4.8 billion in cash, cash equivalents, and short-term investments. Operating expenses were significantly reduced by 25% year-over-year due to ongoing cost-saving measures. AMAT also highlighted its strategic focus on new technologies like 300mm wafers and advanced materials, signaling its commitment to long-term growth despite current industry headwinds. The company is managing its business through this cyclical downturn by aligning costs with market conditions and is preparing for the industry's eventual recovery.

Key Highlights

  • 1Net sales for the six months ended April 28, 2002, decreased 52% to $2.16 billion compared to $4.50 billion in the prior year period.
  • 2Net income for the six months ended April 28, 2002, plummeted to $6.5 million, a sharp decline from $475.2 million in the same period last year.
  • 3The company experienced a sequential recovery in the second fiscal quarter of 2002, with new orders increasing to $1.7 billion from $1.1 billion in the first quarter.
  • 4Gross margin declined to 40.0% in Q2 FY2002 from 46.0% in Q2 FY2001, attributed to factory underabsorption due to lower business volume.
  • 5Operating expenses were reduced by 25% for the six-month period due to continued cost-saving initiatives.
  • 6Applied Materials ended the period with a strong liquidity position, holding $4.8 billion in cash, cash equivalents, and short-term investments.
  • 7The company has adopted new accounting standards, including SFAS 142 for goodwill and intangible assets, ceasing goodwill amortization.

Frequently Asked Questions

The primary reason is the severe downturn in the semiconductor industry, characterized by reduced capital spending by semiconductor manufacturers, order cancellations, and rescheduled deliveries. This led to a substantial decrease in demand for Applied Materials' manufacturing equipment.

Yes, the company reported a sequential improvement in the second fiscal quarter of 2002. New orders increased to $1.7 billion from $1.1 billion in the first quarter, and net sales rose by 16% from the previous quarter, indicating a potential moderate recovery driven by strengthening global economies and consumer demand.

The company is maintaining a strong financial condition with ample liquidity, holding $4.8 billion in cash, cash equivalents, and short-term investments. They have also implemented significant cost-saving measures, reducing operating expenses by 25% year-over-year, to align costs with the reduced business volume.

Applied Materials adopted SFAS 142, which means goodwill is no longer amortized but is periodically tested for impairment. This change, effective from the first fiscal quarter of 2002, affects the accounting for goodwill and other intangible assets. The company also adopted SAB 101 for revenue recognition, retroactively restating some prior period figures.