Applied Materials Announces 3Q 2013 Results

Applied Materials, Inc. reported results for its third quarter of fiscal 2013 ended July 28, 2013.

Applied generated orders of $2.00 billion, down 12% from the prior quarter as a seasonal decline in foundry bookings was partially offset by growth in memory and logic orders along with higher bookings in the Display Group and Applied Global Services. Net sales were $1.98 billion, essentially flat sequentially. The company reported non-GAAP adjusted operating income of $312 million and non-GAAP adjusted net income of $223 million or 18 cents per diluted share. The company recorded GAAP operating income of $250 million and GAAP net income of $168 million or 14 cents per diluted share.

“Consumers’ appetite for mobile devices and larger TVs is driving healthy demand for our semiconductor and display equipment,” said Mike Splinter, chairman and CEO. “We are seeing stronger investment by our memory customers, and our display business booked its highest orders in over two years.”

Silicon Systems Group (SSG) orders were $1.20 billion, down 22%, due to a decrease in foundry orders, partially offset by increases in memory and logic orders. Net sales of $1.27 billion declined 1%. Non-GAAP adjusted operating income decreased to $283 million or 22.2% of net sales. GAAP operating income decreased to $246 million or 19.3% of net sales. New order composition was: foundry 45% ; flash 24% ; logic/other 17% ; and DRAM 14%.

Applied Global Services (AGS) orders were $517 million, up 7%, reflecting higher orders for spares and 200mm equipment. Net sales were $497 million down 4%. Non-GAAP adjusted operating income was approximately flat at $116 million or 23.3% of net sales. GAAP operating income was approximately flat at $114 million or 22.9% of net sales.

Display orders were $256 million, up 31% led by a recovery in TV equipment demand. Net sales were $161 million up 27%. Non-GAAP adjusted operating income increased to $34 million or 21.1% of net sales. GAAP operating income increased to $33 million or 20.5% of net sales.

Energy and Environmental Solutions (EES) orders were $19 million, down 51%. Net sales were $45 million, up 18%. EES had a non-GAAP adjusted operating loss of $15 million; EES recorded a GAAP operating loss of $27 million, which included restructuring and impairment charges of $10 million.

Additional Quarterly Financial Information:
• Backlog was approximately flat sequentially at $2.29 billion including negative adjustments of $28 million.
• Gross margin was 42.9% on a non-GAAP adjusted basis, down slightly from 43.2% in the prior quarter. GAAP gross margin was 40.8% .
• On a year-over-year basis, G&A declined by $40 million, or 29%, while RD&E increased by $25 million, or 8%. These changes primarily reflect the impact of ongoing initiatives to reduce company overhead spending and increase funding of profitable growth opportunities, particularly in the Silicon Systems Group.

For the fourth quarter of fiscal 2013, Applied expects net sales to be approximately flat as compared to the previous quarter. The company expects non-GAAP adjusted operating expenses to be in the range of $525 million, plus or minus $10 million.