10-QPeriod: Q2 FY2007

APPLIED MATERIALS INC /DE Quarterly Report for Q2 Ended Apr 29, 2007

Filed May 30, 2007For Securities:AMAT

Summary

Applied Materials, Inc. (AMAT) reported strong financial results for the six months ended April 29, 2007, with net sales increasing by 17% to $4.81 billion and net income rising by 47% to $814.9 million, compared to the same period in the prior year. This growth was driven by a significant increase in new orders, up 15%, particularly in the Silicon and Fab Solutions segments. The company's financial position remains robust, with total assets growing to $9.9 billion. While the company generated substantial operating cash flow, it also utilized cash for strategic investments, including the acquisition of Brooks Software, and for significant share repurchases and dividend payments. Despite industry cyclicality and specific challenges in the Display segment due to delayed capacity expansion plans by LCD manufacturers, AMAT demonstrated resilience and strategic execution.

Key Highlights

  • 1Net sales for the six months ended April 29, 2007, increased 17% to $4.81 billion from $4.11 billion in the prior year.
  • 2Net income for the six months increased 47% to $814.9 million, from $555.6 million.
  • 3Diluted earnings per share rose to $0.58 for the six months, a 66% increase from $0.35.
  • 4New orders for the six months increased 15% to $5.19 billion, indicating strong future demand.
  • 5The company's cash, cash equivalents, and investments increased to $3.37 billion as of April 29, 2007.
  • 6Significant share repurchases were made, totaling $1 billion for the six-month period, alongside dividend payments.
  • 7The company announced a plan to cease development of beamline implant products and close its Implant group operations in Horsham, England, incurring restructuring and asset impairment charges.

Frequently Asked Questions

Revenue growth was primarily driven by increased demand for semiconductor equipment in the Silicon segment, coupled with robust orders in the Fab Solutions segment. This was partially offset by a decline in the Display segment due to delayed capacity expansion plans by LCD manufacturers.

Applied Materials generated strong operating cash flow and maintained a healthy cash balance of $3.37 billion. The company used its cash for strategic acquisitions, such as Brooks Software, significant share repurchases totaling $1 billion, and dividend payments. Capital expenditures also increased, partly for a new global development capability center and business transformation initiatives.

Yes, the company recorded charges related to a plan to cease future development of beamline implant products and close operations in Horsham, England. Costs included inventory-related charges and restructuring and asset impairment charges totaling approximately $75 million in the second quarter of fiscal 2007. Additionally, a real estate and facilities disinvestment plan initiated in fiscal 2006 also resulted in charges.

Management acknowledges that the semiconductor and related industries are volatile and cyclical, with demand influenced by end-user demand for electronic products and capacity expansion plans of manufacturers. While the company saw strong growth in Silicon and Fab Solutions, the Display segment experienced a slowdown. The company plans to manage its resources and capacity to adapt to these changing conditions.