UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________________________________
FORM 8-K
 ____________________________________________________________________
CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 18, 2016
____________________________________________________________________
 Applied Materials, Inc.
(Exact name of registrant as specified in its charter)
____________________________________________________________________
 
 
 
 
 
Delaware
 
000-06920
 
94-1655526
(State or other jurisdiction of incorporation)
 
(Commission File Number)
 
(IRS Employer Identification No.)

3050 Bowers Avenue
 
 
P.O. Box 58039 Santa Clara, CA
 
95052-8039
(Address of principal executive
 
(Zip Code)
offices)
 
 
Registrant’s telephone number, including area code: (408) 727-5555
N/A
(Former name or former address, if changed since last report.)
____________________________________________________________________
 Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
 
o
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
 
o
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
 
o
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 










Item 2.02 Results of Operations and Financial Condition.
On February 18, 2016, Applied Materials, Inc. (“Applied Materials”) announced its financial results for its first quarter ended January 31, 2016. A copy of Applied Materials’ press release is attached hereto as Exhibit 99.1.
The information contained herein and in the accompanying exhibit shall not be incorporated by reference into any filing of Applied Materials, whether made before or after the date hereof, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference in such filing. The information in this report, including the exhibit hereto, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
 
 
 
Exhibit No.
 
Description
99.1
 
Press Release issued by Applied Materials, Inc. dated February 18, 2016.
 











SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
 

Applied Materials, Inc.
 (Registrant)
  
Date:
February 18, 2016
By:
/s/ Thomas F. Larkins
 
 
 
Thomas F. Larkins
 
 
 
Senior Vice President, General Counsel
and Corporate Secretary  
 










EXHIBIT INDEX
 
 
 
Exhibit No.
 
Description
99.1
 
Press Release issued by Applied Materials, Inc. dated February 18, 2016.
 

 






Exhibit 99.1
APPLIED MATERIALS ANNOUNCES FIRST QUARTER 2016 RESULTS

Applied delivers in line results and expects sequential growth in net sales and non-GAAP EPS
Company returns $740 million to shareholders through dividends and share repurchases

SANTA CLARA, Calif., Feb. 18, 2016 - Applied Materials, Inc. (NASDAQ:AMAT), the global leader in materials engineering solutions for the semiconductor, display and solar industries, today reported results for its first quarter ended January 31, 2016.
First quarter orders were $2.28 billion, down 6 percent sequentially and flat year over year. Net sales were $2.26 billion, down 5 percent sequentially and down 4 percent year over year.
On a non-GAAP adjusted basis, the company reported first quarter gross margin of 42.4 percent, operating margin of 17.8 percent, and net income of $302 million or $0.26 per diluted share. The company recorded GAAP gross margin of 40.6 percent, operating margin of 15.7 percent, and net income of $286 million or $0.25 per diluted share.
The company generated $207 million in cash from operations during the first quarter, paid dividends of $115 million and used $625 million to repurchase 35 million shares of common stock.
“As the market moves into the sweet spot for Applied’s materials engineering technology, we see strong demand for our semiconductor, display and service businesses,” said Gary Dickerson, president and CEO. “We are maintaining a positive outlook for 2016 as our customers make strategic, inflection-driven investments that play to our strengths.”
Quarterly Results Summary
 
 
 
 
 
 
 
 
Change
 
 
Q1 FY2016
 
Q4 FY2015
 
Q1 FY2015
 
Q1 FY2016
vs.
Q4 FY2015
 
Q1 FY2016
vs.
Q1 FY2015
 
 
(In millions, except per share amounts and percentages)
New orders
 
$2,275
 
$2,424
 
$2,273
 
(6)%
 
—%
Net sales
 
$2,257
 
$2,368
 
$2,359
 
(5)%
 
(4)%
Gross margin
 
40.6%
 
40.5%
 
40.7%
 
0.1 points
 
(0.1) points
Operating margin
 
15.7%
 
17.9%
 
19.4%
 
(2.2) points
 
(3.7) points
Net income
 
$286
 
$336
 
$348
 
(15)%
 
(18)%
Diluted earnings per share (EPS)
 
$0.25
 
$0.28
 
$0.28
 
(11)%
 
(11)%




Applied Materials, Inc.
Page 2 of 12

 
 
 
 
 
 
 
 
Change
Non-GAAP Adjusted Results
 
Q1 FY2016
 
Q4 FY2015
 
Q1 FY2015
 
Q1 FY2016
vs.
Q4 FY2015
 
Q1 FY2016
vs.
Q1 FY2015
 
 
(In millions, except per share amounts and percentages)
Non-GAAP adjusted gross margin
 
42.4%
 
42.2%
 
42.3%
 
0.2 points
 
0.1 points
Non-GAAP adjusted operating margin
 
17.8%
 
19.3%
 
18.9%
 
(1.5) points
 
(1.1) points
Non-GAAP adjusted net income
 
$302
 
$347
 
$338
 
(13)%
 
(11)%
Non-GAAP adjusted diluted EPS
 
$0.26
 
$0.29
 
$0.27
 
(10)%
 
(4)%
Applied's non-GAAP adjusted results exclude the impact of the following, where applicable: certain items related to mergers and acquisitions; restructuring charges and any associated adjustments; impairments of assets, or investments; gain or loss on sale of strategic investments; and certain discrete adjustments and tax items. A reconciliation of the GAAP and non-GAAP adjusted results is provided in the financial tables included in this release. See also “Use of Non-GAAP Adjusted Financial Measures” section.
Business Outlook
For the second quarter of fiscal 2016, Applied expects net sales to be up 5 percent to 10 percent sequentially. Non-GAAP adjusted diluted EPS is expected to be in the range of $0.30 to $0.34.
This outlook excludes known charges related to completed acquisitions of $0.04 per share and does not exclude other non-GAAP adjustments that may arise subsequent to this release.
First Quarter Reportable Segment Information
Silicon Systems
Q1 FY2016
 
Q4 FY2015
 
Q1 FY2015
 
 
 
 
 
 
 
(In millions, except percentages)
New orders
$
1,275

 
$
1,444

 
$
1,426

Foundry
38
%
 
35
%
 
34
%
DRAM
29
%
 
21
%
 
34
%
Flash
22
%
 
31
%
 
18
%
Logic and other
11
%
 
13
%
 
14
%
Net sales
1,373

 
1,494

 
1,446

Operating income
265

 
318

 
307

Operating margin
19.3
%
 
21.3
%
 
21.2
%
Non-GAAP Adjusted Results
 
 
 
 
Non-GAAP adjusted operating income
$
312

 
$
365

 
$
350

Non-GAAP adjusted operating margin
22.7
%
 
24.4
%
 
24.2
%






Applied Materials, Inc.
Page 3 of 12

Applied Global Services
Q1 FY2016
 
Q4 FY2015
 
Q1 FY2015
 
 
 
 
 
 
 
(In millions, except percentages)
New orders
$
773

 
$
761

 
$
690

Net sales
626

 
637

 
583

Operating income
156

 
171

 
153

Operating margin
24.9
%
 
26.8
%
 
26.2
%
Non-GAAP Adjusted Results
 
 
 
 
Non-GAAP adjusted operating income
$
156

 
$
170

 
$
154

Non-GAAP adjusted operating margin
24.9
%
 
26.7
%
 
26.4
%

Display
Q1 FY2016
 
Q4 FY2015
 
Q1 FY2015
 
 
 
 
 
 
 
(In millions, except percentages)
New orders
$
183

 
$
195

 
$
107

Net sales
213

 
191

 
275

Operating income
38

 
19

 
72

Operating margin
17.8
%
 
9.9
%
 
26.2
%
Non-GAAP Adjusted Results
 
 
 
 
Non-GAAP adjusted operating income
$
38

 
$
19

 
$
73

Non-GAAP adjusted operating margin
17.8
%
 
9.9
%
 
26.5
%

Energy and Environmental Solutions
Q1 FY2016
 
Q4 FY2015
 
Q1 FY2015
 
 
 
 
 
 
 
(In millions, except percentages)
New orders
$
44

 
$
24

 
$
50

Net sales
45

 
46

 
55

Operating income (loss)
6

 

 
(4
)
Operating margin
13.3
%
 
 %
 
(7.3
)%
Non-GAAP Adjusted Results
 
 
 
 
Non-GAAP adjusted operating income (loss)
$
4

 
$
(1
)
 
$
(3
)
Non-GAAP adjusted operating margin
8.9
%
 
(2.2
)%
 
(5.5
)%
Backlog Information
Applied's backlog decreased 1% to $3.11 billion and included negative adjustments of $51 million. Backlog composition by reportable segment was as follows:
Silicon Systems
51
%
Applied Global Services
30
%
Display
16
%
Energy and Environmental Solutions
3
%





Applied Materials, Inc.
Page 4 of 12


Use of Non-GAAP Adjusted Financial Measures
Management uses non-GAAP adjusted results to evaluate the company’s operating and financial performance in light of business objectives and for planning purposes. These measures are not in accordance with GAAP and may differ from non-GAAP methods of accounting and reporting used by other companies. Applied believes these measures enhance investors’ ability to review the company’s business from the same perspective as the company’s management and facilitate comparisons of this period’s results with prior periods. The presentation of this additional information should not be considered a substitute for results prepared in accordance with GAAP.
Webcast Information
Applied Materials will discuss these results during an earnings call that begins at 1:30 p.m. Pacific Time today. A live webcast will be available at www.appliedmaterials.com. A replay will be available on the website beginning at 5:00 p.m. Pacific Time today.
Forward-Looking Statements

This press release contains forward-looking statements, including those regarding anticipated growth and trends in our businesses and markets, industry outlooks, technology transitions, our financial performance and market share positions, our business outlook for the second quarter of fiscal 2016, and other statements that are not historical facts. These statements and their underlying assumptions are subject to risks and uncertainties and are not guarantees of future performance. Factors that could cause actual results to differ materially from those expressed or implied by such statements include, without limitation: the level of demand for our products; global economic and industry conditions; consumer demand for electronic products; the demand for semiconductors; customers’ technology and capacity requirements; the introduction of new and innovative technologies, and the timing of technology transitions; our ability to develop, deliver and support new products and technologies; the concentrated nature of our customer base;  our ability to expand our current markets, increase market share and develop new markets; market acceptance of existing and newly developed products; our ability to obtain and protect intellectual property rights in key technologies; our ability to achieve the objectives of operational and strategic initiatives, align our resources and cost structure with business conditions, and attract, motivate and retain key employees; the variability of operating expenses and results among products and segments, and our ability to accurately forecast future results, market conditions, customer requirements and business needs; and other risks and uncertainties described in our SEC filings, including our most recent Forms 10-K and 8-K. All forward-looking statements are based on management’s current estimates, projections and assumptions, and we assume no obligation to update them.

About Applied Materials
Applied Materials, Inc. (Nasdaq:AMAT) is the global leader in materials engineering solutions for the semiconductor, flat panel display and solar photovoltaic industries. Our technologies help make innovations like smartphones, flat screen TVs and solar panels more affordable and accessible to consumers and businesses around the world. Learn more at www.appliedmaterials.com.

Contact:
Kevin Winston (editorial/media) 408.235.4498
Michael Sullivan (financial community) 408.986.7977






Applied Materials, Inc.
Page 5 of 12


APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
 
 
 
Three Months Ended
(In millions, except per share amounts)
 
January 31,
2016
 
October 25,
2015
 
January 25,
2015
Net sales
 
$
2,257

 
$
2,368

 
$
2,359

Cost of products sold
 
1,341

 
1,409

 
1,400

Gross profit
 
916

 
959

 
959

Operating expenses:
 
 
 
 
 
 
Research, development and engineering
 
374

 
363

 
351

Marketing and selling
 
106

 
96

 
111

General and administrative
 
82

 
77

 
117

Gain on derivatives associated with terminated business combination
 

 

 
(78
)
Total operating expenses
 
562

 
536

 
501

Income from operations
 
354

 
423

 
458

Interest expense
 
42

 
32

 
23

Interest income and other income, net
 
2

 
6

 
2

Income before income taxes
 
314

 
397

 
437

Provision for income taxes
 
28

 
61

 
89

Net income
 
$
286

 
$
336

 
$
348

Earnings per share:
 
 
 
 
 
 
Basic and diluted
 
$
0.25

 
$
0.28

 
$
0.28

Weighted average number of shares:
 
 
 
 
 
 
Basic
 
1,146

 
1,182

 
1,224

Diluted
 
1,154

 
1,190

 
1,240








Applied Materials, Inc.
Page 6 of 12


APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
 
(In millions)
 
January 31,
2016
 
October 25,
2015
ASSETS
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
2,962

 
$
4,797

Short-term investments
 
154

 
168

Accounts receivable, net
 
1,625

 
1,739

Inventories
 
1,835

 
1,833

Other current assets
 
334

 
724

Total current assets
 
6,910

 
9,261

Long-term investments
 
996

 
946

Property, plant and equipment, net
 
908

 
892

Goodwill
 
3,302

 
3,302

Purchased technology and other intangible assets, net
 
714

 
762

Deferred income taxes and other assets
 
496

 
145

Total assets
 
$
13,326

 
$
15,308

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
Current liabilities:
 
 
 
 
Short-term debt
 
$

 
$
1,200

Accounts payable and accrued expenses
 
1,457

 
1,833

Customer deposits and deferred revenue
 
850

 
765

Total current liabilities
 
2,307

 
3,798

Long-term debt
 
3,343

 
3,342

Other liabilities
 
508

 
555

Total liabilities
 
6,158

 
7,695

Total stockholders’ equity
 
7,168

 
7,613

Total liabilities and stockholders’ equity
 
$
13,326

 
$
15,308








Applied Materials, Inc.
Page 7 of 12


APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
 
(In millions)
Three Months Ended
January 31,
2016
 
October 25,
2015
 
January 25,
2015
Cash flows from operating activities:
 
 
 
 
 
Net income
$
286

 
$
336

 
$
348

Adjustments required to reconcile net income to cash provided by operating activities:
 
 
 
 
 
Depreciation and amortization
96

 
96

 
92

Share-based compensation
54

 
46

 
48

Excess tax benefits from share-based compensation
(10
)
 
(2
)
 
(39
)
Deferred income taxes
15

 
(159
)
 
28

Other
10

 
(11
)
 
8

Net change in operating assets and liabilities
(244
)
 
165

 
(425
)
Cash provided by operating activities
207

 
471

 
60

Cash flows from investing activities:
 
 
 
 
 
Capital expenditures
(68
)
 
(55
)
 
(49
)
Proceeds from sales and maturities of investments
241

 
200

 
140

Purchases of investments
(282
)
 
(202
)
 
(141
)
Cash used in investing activities
(109
)
 
(57
)
 
(50
)
Cash flows from financing activities:
 
 
 
 
 
Debt borrowings (repayments), net of issuance costs
(1,205
)
 
2,581

 

Proceeds from common stock issuances and others, net
2

 
45

 

Common stock repurchases
(625
)
 
(700
)
 

Excess tax benefits from share-based compensation
10

 
2

 
39

Payments of dividends to stockholders
(115
)
 
(119
)
 
(122
)
Cash provided by (used in) financing activities
(1,933
)
 
1,809

 
(83
)
Increase (decrease) in cash and cash equivalents
(1,835
)
 
2,223

 
(73
)
Cash and cash equivalents — beginning of period
4,797

 
2,574

 
3,002

Cash and cash equivalents — end of period
$
2,962

 
$
4,797

 
$
2,929

Supplemental cash flow information:
 
 
 
 
 
Cash payments for income taxes
$
44

 
$
149

 
$
89

Cash refunds from income taxes
$
5

 
$
2

 
$
3

Cash payments for interest
$
34

 
$
7

 
$
39







Applied Materials, Inc.
Page 8 of 12

APPLIED MATERIALS, INC.
UNAUDITED SUPPLEMENTAL INFORMATION

Corporate Unallocated Expenses
(In millions)
 
Q1 FY2016
 
Q4 FY2015
 
Q1 FY2015
Share-based compensation
 
$
54

 
$
46

 
$
48

Certain items associated with terminated business combination
 

 

 
20

Gain on derivatives associated with terminated business combination, net
 

 

 
(78
)
Other unallocated expenses
 
57

 
39

 
80

Total corporate
 
$
111

 
$
85

 
$
70

Additional Information
 
 
Q1 FY2016
 
Q4 FY2015
 
Q1 FY2015
New Orders and Net Sales by Geography
 
 
 
 
 
 
 
 
 
 
 
 
(In $ millions)
 
New
Orders
 
Net
Sales
 
New
Orders
 
Net
Sales
 
New
Orders
 
Net
Sales
United States
 
369

 
293

 
282

 
301

 
411

 
369

% of Total
 
16
%
 
13
%
 
12
%
 
13
%
 
18
%
 
16
%
Europe
 
156

 
138

 
155

 
172

 
148

 
153

% of Total
 
7
%
 
6
%
 
6
%
 
7
%
 
6
%
 
6
%
Japan
 
109

 
334

 
452

 
278

 
242

 
243

% of Total
 
5
%
 
15
%
 
19
%
 
12
%
 
11
%
 
10
%
Korea
 
373

 
268

 
207

 
239

 
546

 
536

% of Total
 
17
%
 
12
%
 
8
%
 
10
%
 
24
%
 
23
%
Taiwan
 
574

 
637

 
846

 
758

 
545

 
556

% of Total
 
25
%
 
28
%
 
35
%
 
32
%
 
24
%
 
24
%
Southeast Asia
 
232

 
90

 
100

 
143

 
85

 
92

% of Total
 
10
%
 
4
%
 
4
%
 
6
%
 
4
%
 
4
%
China
 
462

 
497

 
382

 
477

 
296

 
410

% of Total
 
20
%
 
22
%
 
16
%
 
20
%
 
13
%
 
17
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Employees (In thousands)
 
 
 
 
 
 
 
 
 
 
 
 
Regular Full Time
 
14.6
 
 
14.6
 
 
14.1
 









Applied Materials, Inc.
Page 9 of 12
 APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS
 
 
Three Months Ended
(In millions, except percentages)
 
January 31,
2016
 
October 25,
2015
 
January 25,
2015
Non-GAAP Adjusted Gross Profit
 
 
 
 
 
 
Reported gross profit - GAAP basis
 
$
916

 
$
959

 
$
959

Certain items associated with acquisitions1
 
42

 
42

 
40

Inventory charges (reversals) related to restructuring3, 4
 
(1
)
 
1

 

Other significant gains, losses or charges, net5
 

 
(2
)
 

Non-GAAP adjusted gross profit
 
$
957

 
$
1,000

 
$
999

Non-GAAP adjusted gross margin
 
42.4
%
 
42.2
%
 
42.3
%
Non-GAAP Adjusted Operating Income
 
 
 
 
 
 
Reported operating income - GAAP basis
 
$
354

 
$
423

 
$
458

Certain items associated with acquisitions1
 
48

 
47

 
46

Acquisition integration costs
 

 

 
1

Gain on derivatives associated with terminated business combination, net
 

 

 
(78
)
Certain items associated with terminated business combination2
 

 

 
20

Reversals related to restructuring, net3, 4
 
(1
)
 
(1
)
 

Other significant gains, losses or charges, net5
 

 
(13
)
 

Non-GAAP adjusted operating income
 
$
401

 
$
456

 
$
447

Non-GAAP adjusted operating margin
 
17.8
%
 
19.3
%
 
18.9
%
Non-GAAP Adjusted Net Income
 
 
 
 
 
 
Reported net income - GAAP basis
 
$
286

 
$
336

 
$
348

Certain items associated with acquisitions1
 
48

 
47

 
46

Acquisition integration costs
 

 

 
1

Gain on derivatives associated with terminated business combination, net
 

 

 
(78
)
Certain items associated with terminated business combination2
 

 

 
20

Reversals related to restructuring, net3, 4
 
(1
)
 
(1
)
 

Impairment (gain on sale) of strategic investments, net
 
(2
)
 
(2
)
 
1

Loss on early extinguishment of debt
 
5

 

 

Other significant gains, losses or charges, net5
 

 
(13
)
 

Reinstatement of federal R&D tax credit, resolution of prior years’ income tax filings and other tax items
 
(29
)
 
(18
)
 
(17
)
Income tax effect of non-GAAP adjustments
 
(5
)
 
(2
)
 
17

Non-GAAP adjusted net income
 
$
302

 
$
347

 
$
338

These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets.
 
 
2
These items are incremental charges related to the terminated business combination agreement with Tokyo Electron Limited, consisting of acquisition-related and integration planning costs.
 
 
3
Results for three months ended January 31, 2016 included a $1 million reversal of inventory charges related to cost reductions in the solar business.
 
 
4
Results for the three months ended October 25, 2015 included a $2 million favorable adjustment of restructuring reserves related to prior restructuring plans and $1 million of inventory charges related to cost reductions in the solar business.
 
 
5
These items are significant gains, losses, or charges during a period that are the result of isolated events or transactions which have not occurred frequently in the past and are not expected to occur regularly or be repeated in the future.
 
 






Applied Materials, Inc.
Page 10 of 12

APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS

 
 
Three Months Ended
(In millions except per share amounts)
 
January 31,
2016
 
October 25,
2015
 
January 25,
2015
Non-GAAP Adjusted Earnings Per Diluted Share
 
 
 
 
 
 
Reported earnings per diluted share - GAAP basis
 
$
0.25

 
$
0.28

 
$
0.28

Certain items associated with acquisitions
 
0.04

 
0.04

 
0.03

Certain items associated with terminated business combination
 

 

 
0.01

Gain on derivatives associated with terminated business combination, net
 

 

 
(0.04
)
Reinstatement of federal R&D tax credit, resolution of prior years’ income tax filings and other tax items
 
(0.03
)
 
(0.02
)
 
(0.01
)
Other significant gains, losses or charges, net
 

 
(0.01
)
 

Non-GAAP adjusted earnings per diluted share
 
$
0.26

 
$
0.29

 
$
0.27

Weighted average number of diluted shares
 
1,154

 
1,190

 
1,240


 
 







Applied Materials, Inc.
Page 11 of 12
 
APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS
 
 
 
Three Months Ended
(In millions, except percentages)
 
January 31,
2016
 
October 25,
2015
 
January 25,
2015
Silicon Systems Non-GAAP Adjusted Operating Income
 
 
 
 
 
 
Reported operating income - GAAP basis
 
$
265

 
$
318

 
$
307

Certain items associated with acquisitions1
 
47

 
47

 
43

Non-GAAP adjusted operating income
 
$
312

 
$
365

 
$
350

Non-GAAP adjusted operating margin
 
22.7
%
 
24.4
 %
 
24.2
 %
AGS Non-GAAP Adjusted Operating Income
 
 
 
 
 
 
Reported operating income - GAAP basis
 
$
156

 
$
171

 
$
153

Certain items associated with acquisitions1
 

 

 
1

Other significant gains, losses or charges, net4
 

 
(1
)
 

Non-GAAP adjusted operating income
 
$
156

 
$
170

 
$
154

Non-GAAP adjusted operating margin
 
24.9
%
 
26.7
 %
 
26.4
 %
Display Non-GAAP Adjusted Operating Income
 
 
 
 
 
 
Reported operating income - GAAP basis
 
$
38

 
$
19

 
$
72

Certain items associated with acquisitions1
 

 

 
1

Non-GAAP adjusted operating income
 
$
38

 
$
19

 
$
73

Non-GAAP adjusted operating margin
 
17.8
%
 
9.9
 %
 
26.5
 %
EES Non-GAAP Adjusted Operating Income (Loss)
 
 
 
 
 
 
Reported operating income (loss) - GAAP basis
 
$
6

 
$

 
$
(4
)
Certain items associated with acquisitions1
 
1

 

 
1

Reversals related to restructuring, net2,3
 
(3
)
 
(1
)
 

Non-GAAP adjusted operating income (loss)
 
$
4

 
$
(1
)
 
$
(3
)
Non-GAAP adjusted operating margin
 
8.9
%
 
(2.2
)%
 
(5.5
)%
 
These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets.
 
 
2
Results for the three months ended January 31, 2016 included $3 million of favorable adjustment of employee-related costs and $1 million reversal of inventory charges, partially offset by $1 million of fixed asset impairment charges related to cost reductions in the solar business.
 
 
3
Results for the three months ended October 25, 2015 included a $2 million favorable adjustment of restructuring reserves related to prior restructuring plans and $1 million of inventory charges related to cost reductions in the solar business.
 
 
4
These items are significant gains, losses, or charges during a period that are the result of isolated events or transactions which have not occurred frequently in the past and are not expected to occur regularly or be repeated in the future.






Applied Materials, Inc.
Page 12 of 12
 
APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED OPERATING EXPENSES
 
 
Three Months Ended
(In millions)
January 31, 2016
 
October 25, 2015
 
 
 
 
Operating expenses - GAAP basis
$
562

 
$
536

Reversals related to restructuring, net

 
2

Certain items associated with acquisitions
(6
)
 
(5
)
Other significant gains, losses or charges, net

 
11

Non-GAAP adjusted operating expenses
$
556

 
$
544



UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED EFFECTIVE INCOME TAX RATE
 
 
Three Months Ended
(In millions, except percentages)
January 31, 2016
 
 
Provision for income taxes - GAAP basis (a)
$
28

Reinstatement of federal R&D tax credit, resolutions of prior years’ income tax filings and other tax items
29

Income tax effect of non-GAAP adjustments
5

Non-GAAP adjusted provision for income taxes (b)
$
62

 
 
Income before income taxes - GAAP basis (c)
$
314

Certain items associated with acquisitions
48

Reversals related to restructuring, net
(1
)
Gain on sale of strategic investments, net
(2
)
Loss on early extinguishment of debt
5

Non-GAAP adjusted income before income taxes (d)
$
364

 
 
Effective income tax rate - GAAP basis (a/c)
8.9
%
 
 
Non-GAAP adjusted effective income tax rate (b/d)
17.0
%



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