AMAT PR & CC Note 11/13
SANTA CLARA, Calif.--(BUSINESS WIRE)--Nov. 13, 2002--Applied Materials, Inc., the world's largest supplier of wafer fabrication solutions to the semiconductor industry, reported results for its fourth fiscal quarter ended October 27, 2002. Net sales were $1.45 billion, down 1 percent from $1.46 billion for the third fiscal quarter of 2002, and up 14 percent from $1.26 billion for the fourth fiscal quarter of 2001. Net income for the fourth fiscal quarter of 2002 was $147 million, or $0.09 per diluted share, up 28 percent from $115 million, or $0.07 per diluted share, for the third fiscal quarter of 2002, and up from a net loss of $82 million, or $0.05 per diluted share, reported for the fourth fiscal quarter of 2001.
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New orders of $1.56 billion for the fourth fiscal quarter of 2002 decreased 12 percent from $1.78 billion for the third fiscal quarter of 2002, and increased 41 percent from $1.10 billion for the fourth fiscal quarter of 2001. Regional distribution of new orders for the fourth fiscal quarter of 2002 was: Taiwan 21 percent, North America 20 percent, Japan 19 percent, Europe 14 percent, Southeast Asia and China 14 percent, and Korea 12 percent. Backlog at the end of the fourth fiscal quarter of 2002 decreased to $3.19 billion, from $3.30 billion at the end of the third fiscal quarter of 2002.
Gross margin for the fourth fiscal quarter of 2002 was 41.7 percent, compared to 41.5 percent for the third fiscal quarter of 2002 and 37.1 percent for the fourth fiscal quarter of 2001. Net income as a percentage of net sales was 10.2 percent for the fourth fiscal quarter of 2002, up from 7.9 percent for the third fiscal quarter of 2002 and up from a loss of 6.5 percent for the fourth fiscal quarter of 2001.
"We are pleased with the Company's results for our fourth quarter despite a difficult business environment," said James C. Morgan, chairman and chief executive officer. "The semiconductor industry continues to face uncertain economic conditions worldwide and reduced demand for electronic products. In recent weeks, a number of semiconductor manufacturers have announced reductions in their capital spending budgets, affecting the market outlook for equipment suppliers. We have implemented additional cost reduction measures to realign our operations with current business conditions, including a reduction in force announced November 4, 2002."
The Company also announced results for its fiscal year ended October 27, 2002. Fiscal 2002 new orders were $6.14 billion, a one percent increase from fiscal 2001 new orders of $6.10 billion. Net sales for fiscal 2002 were $5.06 billion, a 31 percent decrease from fiscal 2001 net sales of $7.34 billion. Net income for fiscal 2002 was $269 million, or $0.16 per diluted share, down 47 percent from $508 million, or $0.30 per diluted share, for fiscal 2001. During the fourth fiscal quarter of 2002, the Company reduced its fiscal 2002 effective tax rate to 21%, from 29.5% for fiscal 2001. This one-time rate reduction was due primarily to additional Foreign Sales Corporation income tax benefits, and resulted in an increase of $0.02 per diluted share for the fourth fiscal quarter of 2002 and for fiscal year 2002.
"This past year, while controlling costs, we continued to invest strategically in new technology development and in strengthening our global infrastructure. As a result, we achieved significant market share gains for our products, especially copper/low k interconnect, advanced transistor and 300mm applications. We have also increased our customer support capabilities especially in Asia, a region of expected high-growth potential, to maximize the utilization and efficiency of our systems in customer manufacturing facilities.
"Because we have engaged with our customers early in their technology development process, we believe that Applied Materials is well-positioned to capitalize on changes now taking place in the semiconductor industry and opportunities that lie ahead," concluded Morgan.
CC Notes:
Carolyn Swartz
Jim Morgan
Bill Bronson
Joe Sweeney
Jim Morgan Chairman, CEO
- want to congrat ees for working hard and achieving goals
- 1.56B in rev were inline in a very, very difficult enviroment
- not going to get better to geopolitical and economic slowdown
- despite increasing DRAM prices and decline in inventories, it continues to wait for an inflection point
- we will focus on profitability and future growrth. We want to gain market share during downturn
- B2B shows AMAT gaining sev pt in market share. We have full tech pipeline and will rollout a new product every month
- we will continue to keep Moore's law intact by increasing wafer size. Now as 300mm. Each transition we gain market share. We have the industry's largest installed base.
- 56% business is in Asia. First mover advantage in China.
- Only company that has a parts depot in China. This helps keep uptime and is a total solution for a customer. Customers tell us they need more aftermarket support to keep up with new technolgy.
- The industry's greatest invention lie ahead. When the economy improves, we are ready with new products. Our balance sheet is one of the stronger in the business.
Joe Bronson CFO, Exec. VP, Office of the Pres
- Nets sales decrease 1% y2y
- GM up slight q2q due to lower factory costs.
- Customer reduce wafers starts in the quarter.
- Pretax net income up slighty q2q
- 21% taxrate for the quarter
- CFO covers the numbers from PR
- 1.56B in new orders
- 1.08 B2B
- Orders increase for 300mm pilot lines
- Japanese customer pilot orders were strong.
- Cash increase by 77M to 4.93B
- Acct rec decrease 39M in the quarter
- DSO 66 days
- Inventory increase 23M due to having more customer spares on hand.
- Cap Ex was 485M which was completion of 2 centers and retirement of a synthethic lease
- 55M in stock repurchase at 15.32 avg price.
- Despite the general negativity in the tech sector, we believe our prospect is great for the future
- 300mm product development is complete and gaining market share
- Product competitiveness is gaining market share.
- VTEK and Laser beam has caught up and passed comptetion
- Module got first order for copper interconnect
- The economic environment was weker than expected. Our customers reacted by cutting orders.
- Cap utiliation dropped to 69% to 74% from last quarter. With new capacity utilization coming onboard and prospects for weaker orders, utlization could drop to 55%.
- The wireless handset was stable and tracking with modest growth.
- Low visible for electronic sector for 6-9 months. We expect orders to be weak. Orders for next quarter will be 20% less than this quarter. We will be profitable, but expect a loss due to restructing charge.
Q&A
Credit Suisse - Geo area weak? GM for first quarter?
a - Certainly Korea will be weaker since had large order recently. Maybe a little more 300M in Japan. DRAM orders are little lumpy. GM is pleasing. No guidance for q1. we had some one time cost this quarter. With drop in service revs, will be hard press to keep same GM
Bear Stearns - Cancellations?
a - the guidance reflects cancellation. Some were project cancellation and some change their program for processing. About 6 accounts total. Still are some DRAM proojects on the horizon but may not book next q.
Merryl - Flat panel continue growth?
A- business is at steady state and alot of capacity in sector. rate of order is going to slow a bit. This buusiness is profitable for us and continues to be.
JDana - Wafer fab equipment growth? China?
a - China will be up 150% in 2003. Moderate growth in 2003 vs. 2003 with a very low foirst two quarters. Difficult when not alot of visibility down the road. We know where the 300mm are with the customers, they will go when the customer is ready. Wafer Fab equipment will be up in 2003. We kinda had a plateau year this year.
Solomon SB down 20% is the bottom
a - If I could answer that I could make money on Wall Street. We have visibilty to 300mm projects. Customers need a better climate before they will complete projects. I think Japan will be an up year as they are investing in 300mm as an opportunity to catch up.
Bond Stock & Co. magnitude of restructuring charge? 750M of DRAM bookings in the Q?
a - not done all the work and calcuations. Can figure it out from guidance. DRAM was responsible of 2/3 orders over 100M. Close to half of the 750M was from 2 customers.
GoldmanSachs - Chinese capex in foundries up in 2003?
a - there is only one Chinese foundry up and hard to imagine that they will spend more than TSC and UMC.
Q - Europe?
a - We are entering new markets. R&D will be at high levels. We have a signifance pipeline to new markets. Europe is typical of the rest of the world. Only a few major customers and they are making reasonable investments.
Deutche Bank - Foundry capacity may be up 50% due to China?
a - Not sure was you are talking about. Foundries were 28% of rev.
BankOA - headcount?
a - 300mm shift is positive for GM and once we gert some movement it will be higher. 16K and action we be 14-14.2K next q.
USBPJ - market share?
a - High share in many regions. New entry in China is a good example. In Taiwan, it competiotion by product since establish. Our 300mm share is better than 200mm share
Needham - service rev?
a - Service is 20% of total revs for quite some time. Booking in service are very lumpy and seasonal. usually see first quarter bulge. We have goal to make 25% rev from service. Service will have lower GM but has no R&D costs with it. We had some highs cost for implementing the new distribution business.
Lehman - share in pilot line?
a - we have been able to maintain share in 300mm early days. We made progress in the metrology and inspection space and it 15-20% lead there.
Tom Weisel Partners - DRAM surprise strength?
a - None of the DRAM business is DRAm since they are not making any. The customer doesn't call you up and order 100M of product. This is long sales cycle so not a surprise.
Synch partners - Black diamond process?
a - very little production using these type of films. Still early days. Still alot of work to go. This investment is critical to the industry.
q- Which segment or technoilogy is getting pricing pressure?
a - not seeing it. You have to get the product qualified. So dependent on yield and quality so not dependent on pricing pressure.
q - Cost saving for annual shutdown in christmas.
a - some of the shutdown are variable due delivery of products.
q - Is charge for layoff a 5cent/share.
a - nickel would be on the high side.
soundview - down 20% in new orders due visibility?
a - We are comfortable that number. We hone in it.
Web Brush Morgan - Taiwan foundries volatility?
a - It depends in technolgy. Very little in place for certain technology. If the ramp up in Nvida chips was a surge, there is not enough capacity to handle the demand vs. older pc chips.
Adam Harkness, hill - declining finish goods inventory?
a - We managed the system inventory hard. We tried to move equipment and sign offs getting done particularly in Japan.
q - flat sequential orders outside of DRAM when others cutting capex?
a - I don't see alot of change in logic order.
Benchmark - KLA lowered, rupdolph raised, why the difference?
a - Seeing shift in the PDC business and we are doing well in 300mm. PDC was a unit that had high book to bbill and high margins.
q - costs of mass sets in Etech?
a - Etech profitable for 2 quarters. We caught up in the ebeam space and are the leader in the laser space. We must reduce the mass cost for the industry to help it.
USBWarburg - drop in tax rate in last quarter guidance?
a - no, i forgot to include it. We record the saving in the last quarter.
Prudential Securities - target GM for AMAT?
a - No guidance for 2003. Overall is targeted GM when we had peak revenues 55%. Service 35%. Not getting that due to industry not at peak. We like 55% GM with 2B in revs.
We appreciate support from investors in the difficult times in the sector.
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More an endurance contest for shareholders in the sector. AMAT is my choice in the semis and INTC another.
Jack |
