10-QPeriod: Q1 FY2011

APPLIED MATERIALS INC /DE Quarterly Report for Q1 Ended Jan 30, 2011

Filed February 28, 2011For Securities:AMAT

Summary

Applied Materials, Inc. (AMAT) reported a significant increase in financial performance for the first quarter of fiscal year 2011, ending January 30, 2011, compared to the same period in the prior year. Net sales surged by 45% to $2.69 billion, driven by strong demand across all segments, particularly in semiconductor equipment and crystalline silicon (c-Si) solar PV products. This robust top-line growth translated into a substantial improvement in profitability, with net income soaring to $506 million, or $0.38 per diluted share, a significant increase from $83 million, or $0.06 per diluted share, in the prior year. The company's strong performance was underpinned by a broad-based recovery in its end markets, with new orders up 51% year-over-year. The Silicon Systems Group and Energy and Environmental Solutions segments showed particular strength. The company also maintained a healthy financial position, with cash, cash equivalents, and investments increasing to $4.1 billion. Management expressed optimism about the ongoing demand, despite acknowledging the cyclical nature of the industries served.

Financial Highlights

55 data points
Beta

Revenue

$2.69B

42.3% Gross Margin

Net Income

$506.00M

18.8% Net Margin

EPS (Diluted)

$0.38

Total Assets

$11.27B

Cash & Equivalents

$1.97B

Free Cash Flow

$425.00M

Financial Statements
Beta
Revenue$2.69B
Cost of Revenue$1.55B
Gross Profit$1.14B
R&D Expenses$270.00M
SG&A Expenses$221.00M
Operating Expenses$462.00M
Operating Income$674.00M
Interest Expense$5.00M
Net Income$506.00M
EPS (Basic)$0.38
EPS (Diluted)$0.38
Shares Outstanding (Basic)1.32B
Shares Outstanding (Diluted)1.33B

Key Highlights

  • 1Net sales increased significantly by 45% to $2.69 billion in Q1 FY2011 from $1.85 billion in Q1 FY2010.
  • 2Net income rose dramatically to $506 million ($0.38/share) from $83 million ($0.06/share) year-over-year.
  • 3New orders increased by 51% to $3.0 billion, indicating strong demand across segments.
  • 4Gross margin improved to 42% from 38%, driven by higher sales, favorable product mix, and improved factory utilization.
  • 5The company's cash, cash equivalents, and investments grew to $4.1 billion, reflecting strong cash generation from operations.
  • 6The Silicon Systems Group and Energy and Environmental Solutions segments showed particularly strong growth in orders and sales.
  • 7Applied Materials repurchased $150 million of its common stock and declared a quarterly dividend of $0.07 per share.

Frequently Asked Questions

The significant increase in net sales and net income was primarily driven by a broad-based recovery in demand across all of Applied Materials' segments, particularly in semiconductor equipment and crystalline silicon (c-Si) solar PV products. This increased demand led to a 51% year-over-year rise in new orders and a 45% increase in net sales. Improved gross margins, stemming from higher sales volumes, a favorable product mix, and better factory utilization, also contributed to the substantial profit growth.

Applied Materials ended the quarter with a strong liquidity position, with cash, cash equivalents, and investments totaling $4.1 billion, an increase from $3.9 billion at the end of the previous fiscal year. This was primarily due to a robust increase in cash generated from operating activities. The company also has access to a $1.1 billion credit facility, with no amounts outstanding. During the quarter, the company returned capital to shareholders through $150 million in stock repurchases and $93 million in dividends.

Management noted that the industries served are historically cyclical. However, for the first quarter of fiscal 2011, the company experienced increased demand across all segments due to more favorable global economic and industry conditions. While acknowledging the cyclicality, the significant increase in new orders and backlog suggests a positive short-to-medium term outlook. The company's diversified business segments and strong financial position provide some resilience against market fluctuations.

The filing details ongoing legal matters, including patent disputes with Jusung and shareholder litigation related to the Semitool acquisition, which appears to be nearing settlement. Additionally, the company disclosed that employees of Applied Materials Korea were indicted in relation to improper receipt and use of confidential information from Samsung Electronics; however, Applied Materials itself was not named as a party to the criminal action. The company also detailed various risk factors associated with the volatility of its end markets, competition, technological changes, and global economic conditions.