Applied Materials Announces Results for Third Fiscal Quarter 2002; New Orders Increase to $1.78 Billion; Net Sales Reach $1.46 Billion.

Business Editors

SANTA CLARA, Calif.--(BUSINESS WIRE)--Aug. 13, 2002

Applied Materials, Inc. (Nasdaq:AMAT), the world's largest supplier of wafer fabrication solutions to the semiconductor industry, reported results for its third fiscal quarter ended July 28, 2002. Net sales were $1.46 billion, up 26 percent from $1.16 billion for the second fiscal quarter of 2002, and down 7 percent from $1.58 billion for the third fiscal quarter of 2001. Net income for the third fiscal quarter of 2002 was $115 million, or $0.07 per diluted share, up 121 percent from $52 million, or $0.03 per diluted share, for the second fiscal quarter of 2002, and flat with $115 million, or $0.07 per diluted share, reported for the third fiscal quarter of 2001.

New orders of $1.78 billion for the third fiscal quarter of 2002 increased 5 percent from $1.69 billion for the second fiscal quarter of 2002, and increased 47 percent from $1.21 billion for the third fiscal quarter of 2001. Regional distribution of new orders for the third fiscal quarter of 2002 was: North America 23 percent, Taiwan 18 percent, Southeast Asia and China 17 percent, Japan 15 percent, Korea 14 percent and Europe 13 percent. Backlog at the end of the third fiscal quarter of 2002 increased to $3.30 billion, from $3.11 billion at the end of the second fiscal quarter of 2002.

Gross margin for the third fiscal quarter of 2002 was 41.5 percent, compared to 40.0 percent for the second fiscal quarter of 2002 and 41.6 percent for the third fiscal quarter of 2001. Net income as a percentage of net sales was 7.9 percent for the third fiscal quarter of 2002, up from 4.5 percent for the second fiscal quarter of 2002 and up from 7.3 percent for the third fiscal quarter of 2001.

"I am pleased that orders and net sales were up for Applied Materials' third quarter," said James C. Morgan, chairman and chief executive officer. "Despite the continuing uncertainty of the global macro-economic environment, the semiconductor industry has begun a major shift requiring a substantial investment in advanced manufacturing technologies. As a result of Applied Materials' research and development efforts over the past several years, we are able to provide our customers with the innovative product and service solutions required to successfully make this transition.

"We recently introduced a number of new technologies to help our customers produce more powerful chips with geometries half the size of today's most advanced chips. With the strong long-term outlook for our industry, we believe Applied Materials is well-positioned to capitalize on the opportunities ahead," concluded Morgan.

This press release contains certain forward-looking statements, including, but not limited to, those relating to customers' investments in new technology, the Company's strategic position, the semiconductor industry's outlook and the economy. These forward-looking statements 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: uncertainties as to the sustainability of economic recovery, worldwide and in the semiconductor industry; the Company's ability to maintain effective cost controls; the Company's ability to develop, deliver and support a broader range of products and services on a timely basis; global uncertainties; changes in demand for semiconductors and customer capacity requirements, including capacity utilizing the latest technology; changes in the timing and amount of customers' investments in new technology; the successful and timely development of new markets, products, processes and services and other risks described in Applied Materials' Form 10-K, Forms 10-Q and other filings with the Securities and Exchange Commission. The Company assumes no obligation to update the information in this press release.

Applied Materials will be discussing its third fiscal quarter results, along with its outlook for the fourth fiscal quarter of 2002, on a conference call today beginning at 1:30 p.m. Pacific Time. A webcast of the conference call will be available on Applied Materials' Web site under the "Investors" section. Applied Materials will file its Report on Form 10-Q for the third fiscal quarter of 2002 with the Securities and Exchange Commission (SEC) by September 11, 2002 (within 45 days after the close of its third fiscal quarter on July 28, 2002). At the time of this 10-Q filing, James C. Morgan, Applied Materials' Chief Executive Officer, and Joseph R. Bronson, Chief Financial Officer, will file sworn statements certifying the accuracy and completeness of the Company's filings, as required by the SEC's June 27, 2002 order covering the 947 largest public companies incorporated in the United States.

Applied Materials (Nasdaq: AMAT), the largest supplier of products and services to the global semiconductor industry, is one of the world's leading information infrastructure providers. Applied Materials enables Information for Everyone(TM) by helping semiconductor manufacturers produce more powerful, portable and affordable chips.

Applied Materials' Web site is http://www.appliedmaterials.com.

                        APPLIED MATERIALS, INC.
                 CONSOLIDATED STATEMENTS OF OPERATIONS
                              (UNAUDITED)

                      Three Months Ended         Nine Months Ended
----------------------------------------------------------------------
(In thousands,
 except per share   July 29,     July 28,     July 29,      July 28,
 amounts)             2001         2002         2001          2002
----------------------------------------------------------------------

Net sales          $1,575,904   $1,459,682   $6,078,575    $3,616,614
Cost of products
 sold                 920,291      853,539    3,295,248     2,162,279
                   ----------   ----------   ----------    ----------
Gross margin          655,613      606,143    2,783,327     1,454,335

Operating expenses:
  Research,
   development and
   engineering        277,333      275,952      926,251       779,630
  Marketing and
   selling            125,979      104,225      389,188       278,113
  General and
   administrative     114,369       89,553      306,481       236,011
  Non-recurring
   items               14,150            -       72,564        85,479
                   ----------   ----------   ----------    ----------
Income from
 operations           123,782      136,413    1,088,843        75,102

Interest expense       10,709       13,080       34,981        36,168
Interest income        54,153       40,110      166,699       133,779
                   ----------   ----------   ----------    ----------
Income before
 income taxes and
 cumulative effect
 of change in
 accounting
 principle            167,226      163,443    1,220,561       172,713

Provision for
 income taxes          52,281       48,216      363,015        50,951
                   ----------   ----------   ----------    ----------
Income before
 cumulative effect
 of change in
 accounting
 principle            114,945      115,227      857,546       121,762

Cumulative effect
 of change in
 accounting
 principle, net
 of tax                     -            -     (267,399)            -
                   ----------   ----------   ----------    ----------
Net income         $  114,945   $  115,227   $  590,147    $  121,762
                   ----------   ----------   ----------    ----------

Earnings per share:
  Basic-continuing
   operations      $     0.07   $     0.07   $     0.53    $     0.07
  Basic-cumulative
   effect of change
   in accounting
   principle                -            -        (0.17)            -
                   ----------   ----------   ----------    ----------
    Total basic    $     0.07   $     0.07   $     0.36    $     0.07
                   ----------   ----------   ----------    ----------

  Diluted-
   continuing
   operations      $     0.07   $     0.07   $     0.51    $     0.07
  Diluted-
   cumulative
   effect of change
   in accounting
   principle                -            -        (0.16)            -
                   ----------   ----------   ----------    ----------
    Total
     diluted       $     0.07   $     0.07   $     0.35    $     0.07
                   ----------   ----------   ----------    ----------

Weighted average
 number of shares:
  Basic             1,629,840    1,647,181    1,624,438     1,642,337
  Diluted           1,707,810    1,703,196    1,697,586     1,706,894
----------------------------------------------------------------------


                        APPLIED MATERIALS, INC.
                CONSOLIDATED CONDENSED BALANCE SHEETS*

----------------------------------------------------------------------
                                    October 28,        July 28,
(In thousands)                          2001             2002
----------------------------------------------------------------------

ASSETS

Current assets:
  Cash and cash equivalents         $ 1,356,304      $ 1,164,613
  Short-term investments              3,485,088        3,687,434
  Accounts receivable, net              776,451        1,085,214
  Inventories                         1,412,997        1,251,260
  Deferred income taxes                 551,785          557,601
  Other current assets                  199,549          257,578
                                    -----------      -----------
Total current assets                  7,782,174        8,003,700

Property, plant and equipment, net    1,706,488        1,799,271
Other assets                            339,848          406,849
                                    -----------      -----------
Total assets                        $ 9,828,510      $10,209,820
                                    -----------      -----------


LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Notes payable                     $         -      $    40,086
  Current portion of
   long-term debt                         4,807            9,798
  Accounts payable and
   accrued expenses                   1,477,531        1,439,752
  Income taxes payable                   50,478          151,720
                                    -----------      -----------
Total current liabilities             1,532,816        1,641,356

Long-term debt                          564,805          579,388
Deferred income taxes and
 other liabilities                      124,152          131,891
                                    -----------      -----------
Total liabilities                     2,221,773        2,352,635
                                    -----------      -----------

Stockholders' equity:
  Common stock                           16,315           16,480
  Additional paid-in capital          1,872,967        1,982,423
  Retained earnings                   5,693,010        5,814,772
  Accumulated other
   comprehensive income/(loss)           24,445           43,510
                                    -----------      -----------
Total stockholders' equity            7,606,737        7,857,185
                                    -----------      -----------

Total liabilities and
 stockholders' equity               $ 9,828,510      $10,209,820
----------------------------------------------------------------------

        * Amounts as of July 28, 2002 are unaudited. Amounts as of
        October 28, 2001 are from the fiscal 2001 audited financial
        statements.