10-QPeriod: Q2 FY2003

APPLIED MATERIALS INC /DE Quarterly Report for Q2 Ended Apr 27, 2003

Filed June 9, 2003For Securities:AMAT

Summary

Applied Materials Inc. (AMAT) filed its quarterly report for the period ending April 26, 2003. The company provided updates on its market risk management, noting that foreign currency exchange rate and interest rate fluctuations are not expected to materially impact its financial condition, results of operations, or cash flows due to hedging strategies. Internal controls and procedures were evaluated and found to be effective, with no significant changes or material weaknesses identified. The report details ongoing legal proceedings, primarily patent infringement disputes with various industry players including Novellus, Axcelis Technologies, Linear Technology, Semitool, ASMI, Varian Semiconductor Equipment Associates, and Robert Bosch GmbH. While these litigations are actively being contested, the company believes it has meritorious claims and defenses and does not anticipate a material adverse effect on its financial condition or results of operations from these matters collectively. Additionally, the company announced a significant leadership change with the appointment of Michael R. Splinter as President and CEO, succeeding James C. Morgan, who remains Chairman of the Board.

Key Highlights

  • 1Applied Materials employs hedging strategies for foreign currency transactions, indicating proactive risk management. Net foreign currency gains and losses were not material for the reporting periods.
  • 2The company's principal executive and financial officers concluded that disclosure controls and procedures are effective, with no significant changes or material weaknesses identified in internal controls.
  • 3AMAT is involved in multiple ongoing legal proceedings, predominantly patent infringement disputes with competitors such as Novellus, Axcelis, and ASMI. The company is actively defending these claims.
  • 4The trial date for the Novellus patent infringement case has been rescheduled to January 20, 2004, indicating the continuation of a significant legal battle.
  • 5The trial date for the Axcelis Technologies patent infringement case has been rescheduled to June 16, 2003, with a ruling on claim interpretation already issued.
  • 6A significant leadership transition occurred with the appointment of Michael R. Splinter as President and CEO, effective April 30, 2003, succeeding James C. Morgan who remains Chairman.
  • 7The ratio of earnings to fixed charges for the six months ended April 27, 2003, was negative (-1.66x), indicating a loss relative to fixed charges, a notable change from previous periods.

Frequently Asked Questions

Applied Materials utilizes forward exchange and currency option contracts to hedge foreign currency transactions. The company's analysis indicates that reasonably possible near-term changes in interest and foreign currency exchange rates are not expected to be material to its financial condition, results of operations, or cash flows.

Applied Materials is engaged in several patent infringement lawsuits with competitors, including Novellus, Axcelis Technologies, Linear Technology, Semitool, ASMI, Varian Semiconductor Equipment Associates, and Robert Bosch GmbH. While these litigations are ongoing and some have trial dates set for late 2003 or early 2004, the company believes it has strong defenses and does not expect them to have a material adverse effect on its financial condition or results of operations.

Yes, on April 30, 2003, Michael R. Splinter was appointed as the new President and Chief Executive Officer (CEO), succeeding James C. Morgan, who will continue as Chairman of the Board. Dan Maydan will transition to President Emeritus but remain on the Board.

The ratio of earnings to fixed charges for the six months ended April 27, 2003, was (1.66)x. This indicates a net loss relative to the company's fixed charges for that period, a deterioration compared to the positive ratios reported in prior periods, including 1.23x for the six months ended April 28, 2002.