8-KFinancial EventsExhibits & Filings

APPLIED MATERIALS INC /DE 8-K Report, Exit or Disposal Costs (Jan 27, 2006)

Filed January 27, 2006For Securities:AMAT

Summary

Applied Materials, Inc. (AMAT) filed an 8-K on January 27, 2006, reporting on a strategic decision by its Board of Directors to divest a portion of its real estate and facilities portfolio. This plan involves selling or disposing of non-strategic owned or leased facilities across several international and domestic locations, including Hayward, California; Hillsboro, Oregon; Danvers, Massachusetts; Chunan, South Korea; and Narita, Japan. Management cited a re-evaluation of its global infrastructure against anticipated business needs as the reason for this divestiture, emphasizing that the action is not expected to hinder its ability to serve customers or execute business strategies. The divestiture is expected to result in pre-tax charges of approximately $212 million in the first fiscal quarter ending January 29, 2006. This includes significant amounts for asset write-offs/impairments ($122 million) and lease obligation restructuring ($90 million). While future cash expenditures for lease restructuring are estimated at $109 million, these will be partially offset by proceeds from property sales. The company anticipates annual savings of roughly $29 million through 2014 as a result of this plan.

Key Highlights

  • 1Applied Materials approved a plan to divest non-strategic real estate and facilities, including locations in California, Oregon, Massachusetts, South Korea, and Japan.
  • 2The company expects to record approximately $212 million in pre-tax charges in its first fiscal quarter ending January 29, 2006, related to asset impairments and lease restructurings.
  • 3Approximately $122 million of the charges are for asset write-offs and impairments.
  • 4Approximately $90 million of the charges are for restructuring of lease obligations.
  • 5Future cash expenditures related to lease restructuring are estimated at $109 million.
  • 6The plan is projected to generate average annual savings of approximately $29 million through 2014.
  • 7Management stated that the divestiture will not adversely impact the company's ability to serve customers or execute business strategies.

Frequently Asked Questions

Applied Materials is divesting these facilities as part of a plan to optimize its real estate and facilities portfolio based on management's evaluation of its global infrastructure in light of anticipated business needs. Some facilities were acquired under changing business conditions or through mergers.

The company expects to record approximately $212 million in pre-tax charges in its first fiscal quarter ending January 29, 2006. This includes $122 million for asset write-offs and impairments, and $90 million for lease obligation restructuring. Future cash expenditures for lease restructuring are projected at $109 million, offset by property sale proceeds.

Management has stated that this action is not expected to adversely impact the Company’s ability to serve its customers or execute its business strategies.

Applied Materials intends to complete the plan as soon as feasible. The charges are expected to be recognized in the first fiscal quarter ending January 29, 2006.