10-QPeriod: Q1 FY2014

APPLIED MATERIALS INC /DE Quarterly Report for Q1 Ended Jan 26, 2014

Filed February 20, 2014For Securities:AMAT

Summary

Applied Materials Inc. reported strong financial performance for the quarter ending January 26, 2014, with net sales of $2.19 billion, a significant increase from $1.57 billion in the prior year's comparable quarter. This growth was driven by robust demand in the semiconductor industry, particularly from foundry customers utilizing advanced mobile chip technology. The company's Silicon Systems Group remains its largest contributor, showcasing substantial growth in new orders and net sales. Profitability also saw a marked improvement, with income from operations rising to $330 million compared to $39 million in the prior year, and net income reaching $253 million ($0.21 per diluted share) from $34 million ($0.03 per diluted share) in the prior year. This quarter also highlighted the company's healthy cash flow generation, with cash provided by operating activities at $372 million. Investors should note the ongoing strategic combination with Tokyo Electron Limited (TEL), which is progressing, and the company's commitment to research and development to maintain its competitive edge in the highly dynamic technology sector.

Financial Highlights

51 data points
Beta

Revenue

$2.19B

40.7% Gross Margin

Net Income

$253.00M

11.6% Net Margin

EPS (Diluted)

$0.21

Total Assets

$12.20B

Cash & Equivalents

$2.14B

Free Cash Flow

$324.00M

Financial Statements
Beta
Revenue$2.19B
Cost of Revenue$1.30B
Gross Profit$891.00M
R&D Expenses$356.00M
Operating Expenses$561.00M
Operating Income$330.00M
Interest Expense$25.00M
Net Income$253.00M
EPS (Basic)$0.21
EPS (Diluted)$0.21
Shares Outstanding (Basic)1.21B
Shares Outstanding (Diluted)1.23B

Key Highlights

  • 1Net sales increased by 39% year-over-year to $2.19 billion, driven by strong demand in the semiconductor sector.
  • 2Income from operations significantly improved to $330 million, up from $39 million in the prior year's quarter.
  • 3Net income surged to $253 million, or $0.21 per diluted share, compared to $34 million, or $0.03 per diluted share, in the prior year.
  • 4The Silicon Systems Group (SSG) saw substantial growth, with net sales up 53% year-over-year to $1.48 billion, representing the largest segment contribution.
  • 5Applied Global Services (AGS) also demonstrated growth, with net sales increasing 8% year-over-year to $507 million.
  • 6The company reported strong cash flow from operations of $372 million, indicating healthy liquidity.
  • 7Progress continues on the proposed business combination with Tokyo Electron Limited (TEL), with an amended agreement filed in February 2014.

Frequently Asked Questions

The primary drivers for the significant increase in revenue and profit were strong customer investments in semiconductor capital equipment, particularly from foundry customers supporting advanced mobile chip demand. This led to a substantial uplift in net sales and operating income, especially within the Silicon Systems Group segment.

The proposed business combination with TEL is progressing. The company announced an agreement on September 24, 2013, which was amended on February 14, 2014. The transaction remains subject to customary closing conditions, including shareholder and regulatory approvals.

The Display segment saw an 83% year-over-year increase in net sales, driven by investments in TV manufacturing equipment and high-end mobile devices. The Energy & Environmental Solutions segment, however, continues to face challenges due to excess manufacturing capacity in the solar industry, resulting in low investment levels and operating losses for the segment.

Applied Materials maintained a strong financial position, with cash, cash equivalents, and investments totaling $3.12 billion. The company generated $372 million in cash from operating activities during the quarter and utilized cash primarily for dividends. Management believes current cash generated from operations, along with existing balances and borrowing capacity, is sufficient to meet liquidity requirements for the next 12 months.