Applied Materials announces solid Q2 results

SANTA CLARA, USA: Applied Materials Inc. has reported results for its second quarter of fiscal 2010 ended May 2, 2010. Applied generated net sales of $2.30 billion, operating profit of $386 million, and net income of $264 million or $0.20 per share. Non-GAAP net income was $292 million or $0.22 per share.

“Applied’s stronger second quarter results were led by revenue and profitability gains in our silicon and flat panel display businesses,” said Mike Splinter, chairman and chief executive officer. “Global demand for computing and consumer electronics is giving our customers the confidence to make significant capacity additions, fueling what we believe will be a multiyear growth cycle. During the quarter, we announced a 17 percent increase in our quarterly dividend and resumed our stock repurchase program.”

“Our results were at the high end of our expectations despite an inventory charge for thin film solar equipment that lowered the gross profit margin by 3.6 percentage points or approximately $0.04 per share,” said George Davis, chief financial officer.

Silicon had new orders of $1.42 billion, net sales of $1.40 billion and operating income of $498 million. The net sales increase of 45 percent over the first quarter reflected higher shipments to foundry and DRAM customers along with the addition of Semitool. New order composition was: DRAM 41 percent, foundry 37 percent, logic and other 12 percent, and flash 10 percent.

Applied Global Services (AGS) had new orders of $483 million. Net sales were $456 million, up 7 percent sequentially, and operating income was $90 million.

The Display group had new orders of $256 million, net sales of $270 million and operating income of $90 million. Net sales more than doubled over the first quarter primarily driven by Generation 8.5 system shipments.

The Energy and Environmental Solutions (EES) group had new orders of $378 million. Net sales were $166 million, down 48 percent from the first quarter, primarily due to lower thin film revenue. EES had an operating loss of $145 million, which included an $83 million inventory charge related to thin film solar manufacturing equipment.

Additional quarterly financial information
* Gross margin was 40.4 percent.
* Operating cash flow was $527 million for the quarter or 23 percent of sales.
* Cash dividend payments totaled $81 million.
* The company used $100 million to repurchase 7.6 million shares of its common stock.
* Cash, cash equivalents and investments ended the quarter at $3.57 billion.
The effective tax rate was 31.8 percent.
* Backlog increased by $59 million to $2.99 billion and included negative backlog adjustments of $184 million.

Business outlook
For the third quarter of fiscal 2010, Applied expects net sales to be in the range of down two percent to up five percent quarter over quarter. The company expects non-GAAP EPS to be in the range of $0.22 to $0.26 which excludes known charges related to completed acquisitions of approximately $0.01 per share. This outlook does not take into account other non-GAAP adjustments that may arise subsequent to this release.

On March 30, 2010, Applied raised its fiscal year net sales outlook to growth of more than 60 percent over fiscal 2009.