Applied Materials Announces Results for Fourth Fiscal Quarter 1998; New Orders of $684 Million, Net Sales of $673 Million.SANTA CLARA Santa Clara, city, Cuba Santa Clara (sän`tä klä`rä), city (1994 est. pop. 217,000), capital of Villa Clara prov., central Cuba. , Calif.--(BUSINESS WIRE)--Nov. 17, 1998--Applied Materials, Inc., the world's largest supplier of wafer fabrication Wafer Fabrication is a procedure composed of many repeated sequential processes to produce complete electrical or photonic circuits. Examples include production of radio frequency (RF) amplifiers, LEDs, optical computer components, and CPUs for computers. systems and services to the global semiconductor industry, reported results for its fourth fiscal quarter ended October 25, 1998, with net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight of $673 million, down 47 percent from $1.28 billion for the fourth fiscal quarter of 1997 and down 24 percent from $884 million for the third fiscal quarter of 1998. The net loss for the fourth fiscal quarter of 1998 was $186.7 million, or $0.51 per share. Ongoing net income (net income, excluding one-time items, as applicable and discussed below) for the fourth fiscal quarter of 1998 was $26.4 million, or $0.07 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, down from $187.3 million, or $0.49 per diluted share, for the fourth fiscal quarter of 1997, and down from $70.6 million, or $0.19 per diluted share, for the third fiscal quarter of 1998. Strong asset management performance resulted in $1.76 billion of cash and short-term investments as of the end of the fourth fiscal quarter. New orders of $684 million for the fourth fiscal quarter of 1998 decreased from $1.37 billion for the fourth fiscal quarter of 1997 and increased from $608 million for the third fiscal quarter of 1998. Geographically, North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. new orders for the fourth fiscal quarter of 1998 were 52 percent of the Company's total new orders, Europe 12 percent, Japan 17 percent, Korea 5 percent, Taiwan 7 percent and Southeast Asia Southeast Asia, region of Asia (1990 est. pop. 442,500,000), c.1,740,000 sq mi (4,506,600 sq km), bounded roughly by the Indian subcontinent on the west, China on the north, and the Pacific Ocean on the east. and China 7 percent. Backlog at the end of the fourth fiscal quarter of 1998 decreased to $917 million, from $1 billion at the end of the third fiscal quarter of 1998. "We are pleased with the financial results we achieved in this challenging industry environment," said James C. Morgan, chairman and chief executive officer. "The actions taken during the third and fourth fiscal quarters to align our cost structure with prevailing market conditions enabled us to meet our financial performance objectives. Although the semiconductor industry continues to be impacted by global economic uncertainty and overcapacity o·ver·ca·pac·i·ty n. Too great a capacity for production of commodities or delivery of services in relation to actual need: the problem of overcapacity in many large industries. in memory chips, customers are investing in equipment for 0.25 micron micron: see micrometer. One micrometer, which is one millionth of a meter or approximately 1/25,000 of an inch. The tiny elements that make up a transistor on a chip are measured in micrometers and nanometers. See process technology. and 0.18 micron capable technologies that enable advanced designs, linewidth shrinks, and improved device performance." Gross margin for the fourth fiscal quarter of 1998 was 42.3 percent, down from 48.1 percent for the fourth fiscal quarter of 1997 and down from 44.6 percent for the third fiscal quarter of 1998. Ongoing net income as a percentage of net sales was 3.9 percent for the fourth fiscal quarter of 1998, compared to 14.6 percent for the fourth fiscal quarter of 1997 and 8 percent for the third fiscal quarter of 1998. The Company also announced results for its fiscal year ended October 25, 1998, with net sales of $4.04 billion, a slight decrease from fiscal 1997 net sales of $4.07 billion. Net income for fiscal 1998 was $231 million, or $0.61 per diluted share, down from $498 million, or $1.32 per diluted share, for fiscal 1997. Ongoing net income for fiscal 1998 was $436 million, or $1.15 per diluted share, compared to $524 million, or $1.39 per diluted share, for fiscal 1997. New orders of $3.61 billion were received for fiscal 1998, down from $4.53 billion for fiscal 1997. Applied Materials' focus on innovative product development has produced best-in-class technology in nearly every market in which the Company competes. A key driver of the semiconductor industry is the requirement to increase device performance and speed. To support the industry as it prepares to deal with unprecedented design and fabrication fabrication (fab´rikā´sh  n),n the construction or making of a restoration. challenges, Applied Materials Applied Materials, Inc. NASDAQ: AMAT (HKSE: 4336 ) is the global leader in nanomanufacturing technology solutions with a broad portfolio of innovative equipment, service and software products for the fabrication of semiconductor chips, flat panel solar displays, solar opened its Equipment and Process Integration Center (EPIC) on November 3, 1998. EPIC is the only facility in the semiconductor equipment industry in which chipmakers can evaluate full equipment sets for advanced chip designs. EPIC's first product module, the Copper Interconnect (1) To attach one device to another. (2) A physical port (plug, socket) or wireless port (transmitter, receiver) used to attach one device to another. Equipment Set Solution (ESS (1) (Electronic Switching System) A large-scale computer from Lucent used to route telephone calls in a telephone company office. The 5ESS is a Class 5 central office switch, and the 4ESS is a Class 4 tandem office switch. ), allows customers to quickly test copper interconnect designs before installing equipment in their fabs, thus dramatically reducing start-up time and accelerating time to market for their product introductions. Customer endorsement of the Silicon Etch To create a design in a material by digging out the material. The circuit designs on printed circuit boards and chips are etched by acid. See chip and printed circuit board. DPS Minicomputer series from Bull HN. 1. (language, text) DPS - Display PostScript. 2. (language) DPS - A real-time language with direct expression of timing requests. ["Language Constructs for Distributed Real-Time PRogramming", I. (tm) (decoupled plasma source Plasma sources generate plasmas. Excitation of a plasma requires partial ionisation of neutral atoms and/or molecules of a medium. There are several ways to cause ionisation: collisions of energetic particles, strong electric fields acting on bond electrons, or ionising ) Centura(R) system and the Endura(R) Integrated PVD/CVD (physical vapor deposition/chemical vapor deposition Vapor deposition Production of a film of material often on a heated surface and in a vacuum. Vapor deposition technology is used in a large variety of applications. ) Liner/Barrier system, resulted in the selection of these products as "Editor's Choice Best Product" for 1998 by Semiconductor International magazine. The Silicon Etch DPS Centura system helped the Company achieve etch market leadership in 1997, as recognized by Dataquest and VLSI VLSI: see integrated circuit. (1) (Very Large Scale Integration) Between 100,000 and one million transistors on a chip. See SSI, MSI, LSI and ULSI. (2) (VLSI Technology, Inc., Tempe, AZ, www.semiconductors. Research, and ranks as one of the industry's most successful products. The Endura Integrated PVD/CVD Liner/Barrier system was the industry's first product to integrate both PVD PVD abbr. peripheral vascular disease PVD Peripheral vascular disease, see there and CVD CVD Cardiovascular disease, see there technologies on a single system for depositing the critical Ti/TiN liner/barrier films in advanced metal interconnect structures. As previously announced on October 23, 1998, the Company's results of operations for the fourth fiscal quarter of 1998 include $170 million of pre-tax non-recurring operating expense Operating Expense The essential things that a company must purchase in order to maintain business. Notes: For example, the payment of employees wages are an operating expense. Also known as OPEX. items, consisting of: $50 million for employee severance and benefits associated with a recently completed reduction in force; $50 million for consolidation of facilities and related fixed assets fixed assets npl → activo sg fijo fixed assets npl → immobilisations fpl fixed assets fix npl → ; and $70 million for the write-down of intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. that are deemed to be impaired. Results of operations for the fourth fiscal quarter of 1998 also include $65 million of pre-tax non-operating expense associated with a reserve for a doubtful receivable obtained in connection with the ASM (1) (Association for Systems Management) An international membership organization based in Cleveland, Ohio. Founded in 1947 and disbanded in 1996, it sponsored conferences in all phases of administrative systems and management. International, N.V. patent litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. settlement. In addition, the Company recorded after-tax costs of $58 million related to the discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. of its 50-50 joint venture, Applied Komatsu Technology, Inc. (AKT AKT Auto- ja Kuljetusalan Työntekijäliitto (Finnish Transport Workers Union) AKT Automatischer Kassentresor (German: automatic cash desk vault; used in german banks to secure money at counters) AKT Apprentice Knowledge Test ), a supplier of fabrication systems used to produce flat panel displays A thin display screen for computer and TV usage. The first flat panels appeared on laptop computers in the mid-1980s, and the LCD technology became the standard. Stand-alone LCD screens became available for desktop computers in the mid-1990s and exceeded sales of CRTs for the first time . "Despite some recent favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. developments in the world economy and semiconductor industry, the outlook for our business is uncertain. Our completed restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). program and strong balance sheet, coupled with customer-focused leading-edge technology solutions, position the Company to manage successfully in this difficult environment," concluded Morgan. This press release contains certain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Such risks and uncertainties include, but are not limited to: the length and severity of the current industry downturn; the level of technology upgrades by the Company's customers; the ability of the Company to timely deliver economical solutions to its customers; the ability of the Company to maintain its technology leadership and improve its market share; the ability of the Company to timely align its cost structure with prevailing market conditions; and the successful and timely development of new markets, products, processes and services, including 0.25 micron and 0.18 micron level applications. The Company assumes no obligation to update the information in this press release. Applied Materials, Inc. is a Fortune 500 company and the world's largest supplier of wafer fabrication systems and services to the global semiconductor industry. Applied Materials is traded on the Nasdaq National Market under the symbol, "AMAT AMAT Applied Materials (stock symbol) AMAT Average Memory Access Time AMAT Automatic Message Accounting Transmitter AMAT Anti-Materiel (bomb or mine) AMAT Ageing Management Assessment Team ". Applied Materials' website is http://www.appliedmaterials.com. -0-
APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)(a)
Three Months Ended Fiscal Year Ended
----------------------------------------------------------------------
October 25, October 26, October 25, October 26,
(In thousands, except
per share amounts) 1998 1997 1998 1997
----------------------------------------------------------------------
Net sales $ 673,195 $ 1,280,396 $ 4,041,687 $ 4,074,275
Cost of products sold 388,158 664,040 2,178,531 2,173,350
----------- ----------- ----------- -----------
Gross margin 285,037 616,356 1,863,156 1,900,925
Operating expenses:
Research, development
and engineering 125,542 175,267 643,852 567,612
Marketing and selling 70,632 91,954 321,606 314,381
General and
administrative 59,929 72,420 272,109 252,214
Non-recurring items 170,000 -- 237,227 75,818
----------- ----------- ----------- -----------
Income/(loss) from
operations (141,066) 276,715 388,362 690,900
Income/(expense) from
litigation settlements (65,000) (11,000) 15,000 69,000
Interest expense 10,278 5,119 45,309 20,705
Interest income 21,403 16,533 79,780 59,726
----------- ----------- ----------- -----------
Income/(loss) from
consolidated companies
before taxes (194,941) 277,129 437,833 798,921
Provision/(benefit)
for income taxes (66,280) 96,994 148,863 300,447
----------- ----------- ----------- -----------
Income/(loss) from
consolidated companies(128,661) 180,135 288,970 498,474
Provision for
discontinuance of
joint venture and
related equity in
net loss (58,068) -- (58,068) --
----------- ----------- ----------- -----------
Net income/(loss) $ (186,729) $ 180,135 $ 230,902 $ 498,474
----------- ----------- ----------- -----------
Earnings/(loss)
per share:
Basic - consolidated
companies $ (0.35) $ 0.49 $ 0.79 $ 1.37
Basic - discontinued
operations (0.16) -- (0.16) --
----------- ----------- ----------- -----------
Total basic $ (0.51) $ 0.49 $ 0.63 $ 1.37
----------- ----------- ----------- -----------
Diluted -
consolidated
companies $ (0.35) $ 0.47 $ 0.76 $ 1.32
Diluted -
discontinued
operations (0.16) -- (0.15) --
----------- ----------- ----------- -----------
Total diluted $ (0.51) $ 0.47 $ 0.61 $ 1.32
----------- ----------- ----------- -----------
Weighted average
number of shares:
Basic 367,708 366,406 366,849 363,542
Diluted 367,708 382,775 378,508 377,838
----------------------------------------------------------------------
(a) Results of operations for the three months ended October 25, 1998
and October 26, 1997 are unaudited. Results of operations for the
fiscal years presented have been audited.
APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
----------------------------------------------------------------------
October 25, October 26,
(In thousands) 1998 1997
----------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 575,205 $ 448,043
Short-term investments 1,188,351 1,094,912
Accounts receivable, net 764,472 1,110,885
Inventories 555,881 686,451
Deferred income taxes 337,906 324,568
Other current assets 97,140 105,498
----------- -----------
Total current assets 3,518,955 3,770,357
Property, plant and equipment, net 1,261,520 1,066,053
Other assets 149,217 234,356
----------- -----------
Total assets $ 4,929,692 $ 5,070,766
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 644 $ 55,943
Current portion of long-term debt 7,367 10,563
Accounts payable and accrued expenses 1,041,341 1,157,808
Income taxes payable 68,974 177,774
----------- -----------
Total current liabilities 1,118,326 1,402,088
Long-term debt 616,572 623,090
Deferred income taxes and other liabilities 74,173 103,417
----------- -----------
Total liabilities 1,809,071 2,128,595
----------- -----------
Stockholders' equity:
Common stock 3,679 3,672
Additional paid-in capital 792,145 850,902
Retained earnings 2,328,940 2,098,038
Cumulative translation adjustments (4,143) (10,441)
----------- -----------
Total stockholders' equity 3,120,621 2,942,171
----------- -----------
Total liabilities and stockholders' equity $ 4,929,692 $ 5,070,766
----------- -----------
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