10-QPeriod: Q3 FY2004

APPLIED MATERIALS INC /DE Quarterly Report for Q3 Ended May 2, 2004

Filed June 10, 2004For Securities:AMAT

Summary

Applied Materials, Inc. (AMAT) reported a strong turnaround in its fiscal second quarter ending May 2, 2004. The company experienced a significant surge in net sales, reaching $2.02 billion, an 82% increase year-over-year, driven by a robust recovery in the semiconductor industry and increased customer investments in new technologies. This growth is further supported by a substantial rise in new orders to $2.21 billion, indicating sustained demand and a healthy backlog. Profitability has also improved dramatically, with net income reaching $373.3 million for the quarter, a stark contrast to the net loss reported in the prior year. Gross margin improved significantly to 46.5% from 33.7% in the comparable quarter last year, attributed to higher sales volumes, cost efficiencies from prior restructuring, and improved product costs. The company's financial position remains strong, with cash, cash equivalents, and short-term investments totaling $5.9 billion, and management expects sufficient liquidity for the next 12 months.

Key Highlights

  • 1Net sales surged to $2.02 billion in Q2 FY2004, an 82% year-over-year increase.
  • 2New orders grew significantly to $2.21 billion, reflecting strong industry demand.
  • 3Net income turned positive at $373.3 million, a substantial improvement from a net loss in the prior year's quarter.
  • 4Gross margin improved to 46.5% from 33.7% in Q2 FY2003.
  • 5The company's cash, cash equivalents, and short-term investments totaled $5.9 billion as of May 2, 2004.
  • 6Restructuring activities from the prior year are complete, contributing to a leaner cost structure.
  • 7The company successfully managed its backlog, which stood at $2.8 billion as of May 2, 2004.

Frequently Asked Questions

The substantial increase in net sales was primarily driven by a recovery in the semiconductor industry, leading to increased capital investments by customers for both 300mm and 200mm technologies. Higher order fulfillment from previous quarters also contributed significantly to the revenue growth.

Profitability has dramatically improved. The company reported a net income of $373.3 million for the quarter ended May 2, 2004, a significant turnaround from a net loss of $62.1 million in the same quarter of the previous year. This improvement is reflected in the substantial increase in gross margin and a more favorable income from operations.

The company's financial position is strong. As of May 2, 2004, Applied Materials held $5.9 billion in cash, cash equivalents, and short-term investments. Management anticipates that its cash generated from operations, combined with existing cash balances and borrowing capacity, will be sufficient to meet its liquidity needs for the next 12 months.

The company completed its realignment activities in the first fiscal quarter of 2004, which were implemented in response to difficult business conditions in fiscal year 2003. These actions aimed to better align the cost structure with economic conditions. The results for the current quarter show improved operating expenses relative to revenue, partly due to these cost structure adjustments, contributing to the enhanced profitability.