8-KMaterial AgreementsFinancial EventsRegulation FD+1

APPLIED MATERIALS INC /DE 8-K Report, Material Agreement (Sep 18, 2006)

Filed September 18, 2006For Securities:AMAT

Summary

Applied Materials, Inc. (AMAT) announced on September 18, 2006, a significant move to return capital to shareholders through an accelerated stock buyback program. The company repurchased 145 million shares of its common stock from Goldman, Sachs & Co. for approximately $2.5 billion, funded by existing cash reserves. This transaction immediately reduces the outstanding share count used for earnings per share calculations. In addition to the accelerated buyback, AMAT also authorized a new stock repurchase program allowing for up to an additional $5.0 billion in share repurchases over the next three years, to be executed through open market or privately negotiated transactions, subject to market conditions. These actions signal a strong commitment by management to enhance shareholder value and reflect confidence in the company's financial position.

Key Highlights

  • 1Applied Materials entered into an accelerated stock buyback program on September 18, 2006.
  • 2The company repurchased 145 million shares of common stock from Goldman, Sachs & Co. for approximately $2.5 billion.
  • 3The buyback was funded using the company's existing cash.
  • 4The number of outstanding shares for EPS calculation was immediately reduced.
  • 5A new stock repurchase program was authorized, allowing for up to $5.0 billion in repurchases over the next three years.
  • 6The new program allows for repurchases via open market or privately negotiated transactions.
  • 7The terms of the accelerated buyback include a two-way market purchase price adjustment mechanism.

Frequently Asked Questions

The accelerated stock buyback program significantly reduces the number of outstanding shares, which can lead to an increase in earnings per share (EPS) and potentially boost the stock price. It also demonstrates the company's commitment to returning capital to shareholders and its confidence in its financial health.

The accelerated stock buyback was funded by Applied Materials' existing cash reserves. In addition to the $2.5 billion spent on the accelerated buyback, the company announced a new program authorizing up to $5.0 billion in further share repurchases over the next three years, bringing the total capital allocated for these programs to potentially $7.5 billion.

The agreements for the accelerated buyback include a two-way market purchase price adjustment. This means the final cost of the repurchased shares will be based on the volume-weighted average market trading price of AMAT's common stock over an expected four-month period. If the average price is higher or lower than the initial agreed price, there may be an adjustment payment between AMAT and Goldman Sachs & Co., which can be settled in cash or stock.

The new $5.0 billion stock repurchase program, authorized over three years, provides Applied Materials with flexibility to continue reducing its outstanding share count and returning capital to investors in a manner that is subject to market conditions. This indicates a long-term strategy to manage its capital structure and enhance shareholder value.