EX-99.1 2 exhibit991earningsreleaseq.htm EXHIBIT 99.1 EARNINGS RELEASE SEC Exhibit
Exhibit 99.1
APPLIED MATERIALS ANNOUNCES SECOND QUARTER 2016 RESULTS

•
Applied reports EPS of $0.29; non-GAAP EPS of $0.34 at high end of guidance range
•
Generates $3.5 billion in new orders, highest in 15 years
•
Returns $1 billion to shareholders through dividends and share repurchases
•
Expects record earnings per share in the third quarter of 2016

SANTA CLARA, Calif., May 19, 2016 - Applied Materials, Inc. (NASDAQ:AMAT) today reported results for its second quarter ended May 1, 2016.
Second quarter orders were $3.45 billion, up 52 percent sequentially and up 37 percent year over year. Backlog increased to $4.17 billion. Net sales of $2.45 billion were up 9 percent sequentially, flat year over year, and near the high end of guidance.
The company recorded gross margin of 41.0 percent, operating margin of 17.3 percent, and net income of $320 million or $0.29 per diluted share. On a non-GAAP adjusted basis, the company reported second quarter gross margin of 42.7 percent, operating margin of 19.2 percent, and net income of $376 million or $0.34 per diluted share.
The company generated $481 million in cash from operations during the second quarter, paid dividends of $113 million and used $900 million to repurchase 45 million shares of common stock.
“In our second quarter we booked our highest orders in 15 years and we expect to deliver record earnings in fiscal 2016,” said Gary Dickerson, president and CEO. “We are making significant progress with our strategy in semiconductor, display and service, and have a great pipeline of differentiated products that will fuel future growth.”
Quarterly Results Summary
 
 
 
 
 
 
 
 
Change
 
 
Q2 FY2016
 
Q1 FY2016
 
Q2 FY2015
 
Q2 FY2016
vs.
Q1 FY2016
 
Q2 FY2016
vs.
Q2 FY2015
 
 
(In millions, except per share amounts and percentages)
New orders
 
$
3,451

 
$
2,275

 
$
2,515

 
52
%
 
37
%
Net sales
 
$
2,450

 
$
2,257

 
$
2,442

 
9
%
 
—
%
Gross margin
 
41.0
%
 
40.6
%
 
41.6
%
 
0.4 points

 
(0.6) points

Operating margin
 
17.3
%
 
15.7
%
 
17.0
%
 
1.6 points

 
0.3 points

Net income
 
$
320

 
$
286

 
$
364

 
12
%
 
(12
%)
Diluted earnings per share (EPS)
 
$
0.29

 
$
0.25

 
$
0.29

 
16
%
 
—
%



Applied Materials, Inc.
Page 2 of 12

 
 
 
 
 
 
 
 
Change
Non-GAAP Adjusted Results
 
Q2 FY2016
 
Q1 FY2016
 
Q2 FY2015
 
Q2 FY2016
vs.
Q1 FY2016
 
Q2 FY2016
vs.
Q2 FY2015
 
 
(In millions, except per share amounts and percentages)
Non-GAAP adjusted gross margin
 
42.7
%
 
42.4
%
 
43.2
%
 
0.3 points

 
(0.5) points

Non-GAAP adjusted operating margin
 
19.2
%
 
17.8
%
 
19.5
%
 
1.4 points

 
(0.3) points

Non-GAAP adjusted net income
 
$
376

 
$
302

 
$
362

 
25
%
 
4
%
Non-GAAP adjusted diluted EPS
 
$
0.34

 
$
0.26

 
$
0.29

 
31
%
 
17
%
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
In the third quarter of fiscal 2016, Applied expects net sales to be up 14 percent to 18 percent sequentially. Non-GAAP adjusted diluted EPS is expected to be in the range of $0.46 to $0.50.
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.
Second Quarter Reportable Segment Information
Silicon Systems
Q2 FY2016
 
Q1 FY2016
 
Q2 FY2015
 
 
 
 
 
 
 
(In millions, except percentages)
New orders
$
1,966

 
$
1,275

 
$
1,704

Foundry
23
%
 
38
%
 
36
%
DRAM
17
%
 
29
%
 
31
%
Flash
49
%
 
22
%
 
21
%
Logic and other
11
%
 
11
%
 
12
%
Net sales
1,587

 
1,373

 
1,560

Operating income
364

 
265

 
374

Operating margin
22.9
%
 
19.3
%
 
24.0
%
Non-GAAP Adjusted Results
 
 
 
 
Non-GAAP adjusted operating income
$
410

 
$
312

 
$
418

Non-GAAP adjusted operating margin
25.8
%
 
22.7
%
 
26.8
%





Applied Materials, Inc.
Page 3 of 12

Applied Global Services
Q2 FY2016
 
Q1 FY2016
 
Q2 FY2015
 
 
 
 
 
 
 
(In millions, except percentages)
New orders
$
677

 
$
773

 
$
641

Net sales
648

 
626

 
646

Operating income
171

 
156

 
170

Operating margin
26.4
%
 
24.9
%
 
26.3
%

Display
Q2 FY2016
 
Q1 FY2016
 
Q2 FY2015
 
 
 
 
 
 
 
(In millions, except percentages)
New orders
$
700

 
$
183

 
$
120

Net sales
167

 
213

 
163

Operating income
29

 
38

 
40

Operating margin
17.4
%
 
17.8
%
 
24.5
%

Energy and Environmental Solutions
Q2 FY2016
 
Q1 FY2016
 
Q2 FY2015
 
 
 
 
 
 
 
(In millions, except percentages)
New orders
$
108

 
$
44

 
$
50

Net sales
48

 
45

 
73

Operating income (loss)
—

 
6

 
(5
)
Operating margin
—
 %
 
13.3
%
 
(6.8
)%
Non-GAAP Adjusted Results
 
 
 
 
Non-GAAP adjusted operating income (loss)
$
(1
)
 
$
4

 
$
(4
)
Non-GAAP adjusted operating margin
(2.1
)%
 
8.9
%
 
(5.5
)%
Backlog Information
Applied's backlog increased 34 percent to $4.17 billion and included positive adjustments of $58 million, primarily consisting of favorable foreign currency impact. Backlog composition by reportable segment was as follows:
Silicon Systems
49
%
Applied Global Services
23
%
Display
25
%
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 earnings expectations, our business outlook for the third 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-Q 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 leader in materials engineering solutions used to produce virtually every new chip and advanced display in the world. Our expertise in modifying materials at atomic levels and on an industrial scale enables customers to transform possibilities into reality. At Applied Materials, our innovations make possible the technology shaping the future. 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
 
Six Months Ended
(In millions, except per share amounts)
 
May 1,
2016
 
January 31,
2016
 
April 26,
2015
 
May 1,
2016
 
April 26,
2015
Net sales
 
$
2,450

 
$
2,257

 
$
2,442

 
$
4,707

 
$
4,801

Cost of products sold
 
1,446

 
1,341

 
1,426

 
2,787

 
2,826

Gross profit
 
1,004

 
916

 
1,016

 
1,920

 
1,975

Operating expenses:
 
 
 
 
 
 
 
 
 
 
Research, development and engineering
 
386

 
374

 
365

 
760

 
716

Marketing and selling
 
102

 
106

 
109

 
208

 
220

General and administrative
 
91

 
82

 
140

 
173

 
257

Gain on derivatives associated with terminated business combination
 
—

 
—

 
(14
)
 
—

 
(92
)
Total operating expenses
 
579

 
562

 
600

 
1,141

 
1,101

Income from operations
 
425

 
354

 
416

 
779

 
874

Interest expense
 
37

 
42

 
24

 
79

 
47

Interest income and other income (loss), net
 
7

 
2

 
(3
)
 
9

 
(1
)
Income before income taxes
 
395

 
314

 
389

 
709

 
826

Provision for income taxes
 
75

 
28

 
25

 
103

 
114

Net income
 
$
320

 
$
286

 
$
364

 
$
606

 
$
712

Earnings per share:
 
 
 
 
 
 
 
 
 
 
Basic
 
$
0.29

 
$
0.25

 
$
0.30

 
$
0.54

 
$
0.58

Diluted
 
$
0.29

 
$
0.25

 
$
0.29

 
$
0.53

 
$
0.57

Weighted average number of shares:
 
 
 
 
 
 
 
 
 
 
Basic
 
1,113

 
1,146

 
1,230

 
1,130

 
1,227

Diluted
 
1,119

 
1,154

 
1,241

 
1,137

 
1,241







Applied Materials, Inc.
Page 6 of 12


APPLIED MATERIALS, INC.
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
 
(In millions)
 
May 1,
2016
 
January 31,
2016
 
October 25,
2015
ASSETS
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
 
$
2,470

 
$
2,962

 
$
4,797

Short-term investments
 
170

 
154

 
168

Accounts receivable, net
 
1,913

 
1,625

 
1,739

Inventories
 
1,924

 
1,835

 
1,833

Other current assets
 
251

 
334

 
724

Total current assets
 
6,728

 
6,910

 
9,261

Long-term investments
 
934

 
996

 
946

Property, plant and equipment, net
 
904

 
908

 
892

Goodwill
 
3,304

 
3,302

 
3,302

Purchased technology and other intangible assets, net
 
668

 
714

 
762

Deferred income taxes and other assets
 
537

 
496

 
145

Total assets
 
$
13,075

 
$
13,326

 
$
15,308

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

 
$
—

 
$
1,200

Accounts payable and accrued expenses
 
1,630

 
1,457

 
1,833

Customer deposits and deferred revenue
 
981

 
850

 
765

Total current liabilities
 
2,611

 
2,307

 
3,798

Long-term debt
 
3,343

 
3,343

 
3,342

Other liabilities
 
556

 
508

 
555

Total liabilities
 
6,510

 
6,158

 
7,695

Total stockholders’ equity
 
6,565

 
7,168

 
7,613

Total liabilities and stockholders’ equity
 
$
13,075

 
$
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
 
Six Months Ended
May 1,
2016
 
January 31,
2016
 
April 26,
2015
May 1,
2016
 
April 26,
2015
Cash flows from operating activities:
 
 
 
 
 
 
 
 
 
Net income
$
320

 
$
286

 
$
364

 
$
606

 
$
712

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

 
96

 
90

 
192

 
182

Share-based compensation
48

 
54

 
47

 
102

 
95

Excess tax benefits from share-based compensation
(3
)
 
(10
)
 
(12
)
 
(13
)
 
(51
)
Deferred income taxes
(22
)
 
15

 
(21
)
 
(7
)
 
7

Other
5

 
10

 
13

 
15

 
21

Net change in operating assets and liabilities
37

 
(244
)
 
(183
)
 
(207
)
 
(608
)
Cash provided by operating activities
481

 
207

 
298

 
688

 
358

Cash flows from investing activities:
 
 
 
 
 
 
 
 
 
Capital expenditures
(47
)
 
(68
)
 
(64
)
 
(115
)
 
(113
)
Cash paid for acquisitions, net of cash acquired
(8
)
 
—

 
—

 
(8
)
 
—

Proceeds from sales and maturities of investments
232

 
241

 
177

 
473

 
317

Purchases of investments
(182
)
 
(282
)
 
(203
)
 
(464
)
 
(344
)
Cash used in investing activities
(5
)
 
(109
)
 
(90
)
 
(114
)
 
(140
)
Cash flows from financing activities:
 
 
 
 
 
 
 
 
 
Debt repayments
—

 
(1,205
)
 
—

 
(1,205
)
 
—

Proceeds from common stock issuances and others
42

 
2

 
42

 
44

 
42

Common stock repurchases
(900
)
 
(625
)
 
—

 
(1,525
)
 
—

Excess tax benefits from share-based compensation
3

 
10

 
12

 
13

 
51

Payments of dividends to stockholders
(113
)
 
(115
)
 
(123
)
 
(228
)
 
(245
)
Cash used in financing activities
(968
)
 
(1,933
)
 
(69
)
 
(2,901
)
 
(152
)
Effect of exchange rate changes on cash and cash equivalents
—

 
—

 
(1
)
 
—

 
(1
)
Increase (decrease) in cash and cash equivalents
(492
)
 
(1,835
)
 
138

 
(2,327
)
 
65

Cash and cash equivalents — beginning of period
2,962

 
4,797

 
2,929

 
4,797

 
3,002

Cash and cash equivalents — end of period
$
2,470

 
$
2,962

 
$
3,067

 
$
2,470

 
$
3,067

Supplemental cash flow information:
 
 
 
 
 
 
 
 
 
Cash payments for income taxes
$
51

 
$
44

 
$
118

 
$
95

 
$
207

Cash refunds from income taxes
$
98

 
$
5

 
$
2

 
$
103

 
$
5

Cash payments for interest
$
42

 
$
34

 
$
7

 
$
76

 
$
46






Applied Materials, Inc.
Page 8 of 12

APPLIED MATERIALS, INC.
UNAUDITED SUPPLEMENTAL INFORMATION

Corporate Unallocated Expenses
(In millions)
 
Q2 FY2016
 
Q1 FY2016
 
Q2 FY2015
Share-based compensation
 
$
48

 
$
54

 
$
47

Certain items associated with terminated business combination
 
—

 
—

 
29

Gain on derivatives associated with terminated business combination, net
 
—

 
—

 
(14
)
Other unallocated expenses
 
91

 
57

 
101

Total corporate
 
$
139

 
$
111

 
$
163

Additional Information
 
 
Q2 FY2016
 
Q1 FY2016
 
Q2 FY2015
New Orders and Net Sales by Geography
 
 
 
 
 
 
 
 
 
 
 
 
(In $ millions)
 
New
Orders
 
Net
Sales
 
New
Orders
 
Net
Sales
 
New
Orders
 
Net
Sales
United States
 
386

 
272

 
369

 
293

 
368

 
472

% of Total
 
11
%
 
11
%
 
16
%
 
13
%
 
15
%
 
19
%
Europe
 
194

 
97

 
156

 
138

 
131

 
169

% of Total
 
6
%
 
4
%
 
7
%
 
6
%
 
5
%
 
7
%
Japan
 
339

 
260

 
109

 
334

 
365

 
274

% of Total
 
10
%
 
10
%
 
5
%
 
15
%
 
15
%
 
11
%
Korea
 
792

 
506

 
373

 
273

 
607

 
536

% of Total
 
23
%
 
21
%
 
17
%
 
12
%
 
24
%
 
22
%
Taiwan
 
445

 
311

 
534

 
637

 
589

 
461

% of Total
 
13
%
 
13
%
 
23
%
 
28
%
 
23
%
 
19
%
Southeast Asia
 
392

 
252

 
232

 
87

 
103

 
96

% of Total
 
11
%
 
10
%
 
10
%
 
4
%
 
4
%
 
4
%
China
 
903

 
752

 
502

 
495

 
352

 
434

% of Total
 
26
%
 
31
%
 
22
%
 
22
%
 
14
%
 
18
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Employees (In thousands)
 
 
 
 
 
 
 
 
 
 
 
 
Regular Full Time
 
14.8
 
 
14.6
 
 
14.3
 








Applied Materials, Inc.
Page 9 of 12
 APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS

 
 
Three Months Ended
 
Six Months Ended
(In millions, except percentages)
 
May 1,
2016
 
January 31,
2016
 
April 26,
2015
 
May 1,
2016
 
April 26,
2015
Non-GAAP Adjusted Gross Profit
 
 
 
 
 
 
 
 
 
 
Reported gross profit - GAAP basis
 
$
1,004

 
$
916

 
$
1,016

 
$
1,920

 
$
1,975

Certain items associated with acquisitions1
 
41

 
42

 
39

 
83

 
79

Reversals related to restructuring, net4
 
—

 
(1
)
 
—

 
(1
)
 
—

Non-GAAP adjusted gross profit
 
$
1,045

 
$
957

 
$
1,055

 
$
2,002

 
$
2,054

Non-GAAP adjusted gross margin
 
42.7
%
 
42.4
%
 
43.2
%
 
42.5
%
 
42.8
%
Non-GAAP Adjusted Operating Income
 
 
 
 
 
 
 
 
 
 
Reported operating income - GAAP basis
 
$
425

 
$
354

 
$
416

 
$
779

 
$
874

Certain items associated with acquisitions1
 
46

 
48

 
45

 
94

 
91

Acquisition integration costs
 
—

 
—

 
—

 
—

 
1

Gain on derivatives associated with terminated business combination, net
 
—

 
—

 
(14
)
 
—

 
(92
)
Certain items associated with terminated business combination2
 
—

 
—

 
29

 
—

 
49

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

 
(2
)
 
—

Non-GAAP adjusted operating income
 
$
470

 
$
401

 
$
476

 
$
871

 
$
923

Non-GAAP adjusted operating margin
 
19.2
%
 
17.8
%
 
19.5
%
 
18.5
%
 
19.2
%
Non-GAAP Adjusted Net Income
 
 
 
 
 
 
 
 
 
 
Reported net income - GAAP basis5
 
$
320

 
$
286

 
$
364

 
$
606

 
$
712

Certain items associated with acquisitions1
 
46

 
48

 
45

 
94

 
91

Acquisition integration costs
 
—

 
—

 
—

 
—

 
1

Gain on derivatives associated with terminated business combination, net
 
—

 
—

 
(14
)
 
—

 
(92
)
Certain items associated with terminated business combination2
 
—

 
—

 
29

 
—

 
49

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

 
(2
)
 
—

Impairment (gain on sale) of strategic investments, net
 
(1
)
 
(2
)
 
6

 
(3
)
 
7

Loss on early extinguishment of debt
 
—

 
5

 
—

 
5

 
—

Reinstatement of federal R&D tax credit, resolution of prior years’ income tax filings and other tax items5
 
16

 
(29
)
 
(54
)
 
(13
)
 
(71
)
Income tax effect of non-GAAP adjustments
 
(4
)
 
(5
)
 
(14
)
 
(9
)
 
3

Non-GAAP adjusted net income
 
$
376

 
$
302

 
$
362

 
$
678

 
$
700

1 
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 the three months ended May 1, 2016 included a $1 million favorable adjustment of employee-related costs associated with the cost reductions in the solar business.
 
 
4
Results for the three months ended January 31, 2016 included a $1 million benefit from sales of solar equipment tools for which inventory had been previously reserved related to the cost reductions in the solar business.
 
 
5
Amounts for three and six months ended April 26, 2015 included an adjustment to decrease the provision for income taxes by $39 million and $35 million, respectively, with a corresponding increase in net income, resulting in an increase in diluted earnings per share of $0.03. The adjustment was excluded in Applied's non-GAAP adjusted results and was made primarily to correct an error in the recognition of cost of sales in the U.S. related to intercompany sales, which resulted in overstating profitability in the U.S. and the provision for income taxes in immaterial amounts in each year since fiscal 2010.





Applied Materials, Inc.
Page 10 of 12

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

 
 
Three Months Ended
 
Six Months Ended
(In millions, except per share amounts)
 
May 1,
2016
 
January 31,
2016
 
April 26,
2015
 
May 1,
2016
 
April 26,
2015
Non-GAAP Adjusted Earnings Per Diluted Share
 
 
 
 
 
 
 
 
 
 
Reported earnings per diluted share - GAAP basis1
 
$
0.29

 
$
0.25

 
$
0.29

 
$
0.53

 
$
0.57

Certain items associated with acquisitions
 
0.04

 
0.04

 
0.03

 
0.08

 
0.07

Certain items associated with terminated business combination
 
—

 
—

 
0.02

 
—

 
0.03

Gain on derivatives associated with terminated business combination, net
 
—

 
—

 
(0.01
)
 
—

 
(0.05
)
Reinstatement of federal R&D tax credit, resolution of prior years’ income tax filings and other tax items1
 
0.01

 
(0.03
)
 
(0.04
)
 
(0.01
)
 
(0.06
)
Non-GAAP adjusted earnings per diluted share
 
$
0.34

 
$
0.26

 
$
0.29

 
$
0.60

 
$
0.56

Weighted average number of diluted shares
 
1,119

 
1,154

 
1,241

 
1,137

 
1,241


1
Amounts for three and six months ended April 26, 2015 included an adjustment to decrease the provision for income taxes by $39 million and $35 million, respectively, with a corresponding increase in net income, resulting in an increase in diluted earnings per share of $0.03. The adjustment was excluded in Applied's non-GAAP adjusted results and was made primarily to correct an error in the recognition of cost of sales in the U.S. related to intercompany sales, which resulted in overstating profitability in the U.S. and the provision for income taxes in immaterial amounts in each year since fiscal 2010.






Applied Materials, Inc.
Page 11 of 12
 
APPLIED MATERIALS, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED RESULTS
 
 
 
Three Months Ended
 
Six Months Ended
(In millions, except percentages)
 
May 1,
2016
 
January 31,
2016
 
April 26,
2015
 
May 1,
2016
 
April 26,
2015
Silicon Systems Non-GAAP Adjusted Operating Income
 
 
 
 
 
 
 
 
 
 
Reported operating income - GAAP basis
 
$
364

 
$
265

 
$
374

 
$
629

 
$
681

Certain items associated with acquisitions1
 
46

 
47

 
44

 
93

 
87

Non-GAAP adjusted operating income
 
$
410

 
$
312

 
$
418

 
$
722

 
$
768

Non-GAAP adjusted operating margin
 
25.8
 %
 
22.7
%
 
26.8
 %
 
24.4
%
 
25.5
 %
AGS Non-GAAP Adjusted Operating Income
 
 
 
 
 
 
 
 
 
 
Reported operating income - GAAP basis
 
$
171

 
$
156

 
$
170

 
$
327

 
$
323

Certain items associated with acquisitions1
 
—

 
—

 
—

 
—

 
1

Non-GAAP adjusted operating income
 
$
171

 
$
156

 
$
170

 
$
327

 
$
324

Non-GAAP adjusted operating margin
 
26.4
 %
 
24.9
%
 
26.3
 %
 
25.7
%
 
26.4
 %
Display Non-GAAP Adjusted Operating Income
 
 
 
 
 
 
 
 
 
 
Reported operating income - GAAP basis
 
$
29

 
$
38

 
$
40

 
$
67

 
$
112

Certain items associated with acquisitions1
 
—

 
—

 
—

 
—

 
1

Non-GAAP adjusted operating income
 
$
29

 
$
38

 
$
40

 
$
67

 
$
113

Non-GAAP adjusted operating margin
 
17.4
 %
 
17.8
%
 
24.5
 %
 
17.6
%
 
25.8
 %
EES Non-GAAP Adjusted Operating Income (Loss)
 
 
 
 
 
 
 
 
 
 
Reported operating income (loss) - GAAP basis
 
$
—

 
$
6

 
$
(5
)
 
$
6

 
$
(9
)
Certain items associated with acquisitions1
 
—

 
1

 
1

 
1

 
2

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

 
(4
)
 
—

Non-GAAP adjusted operating income (loss)
 
$
(1
)
 
$
4

 
$
(4
)
 
$
3

 
$
(7
)
Non-GAAP adjusted operating margin
 
(2.1
)%
 
8.9
%
 
(5.5
)%
 
3.2
%
 
(5.5
)%
 
1 
These items are incremental charges attributable to completed acquisitions, consisting of amortization of purchased intangible assets.
 
 
2
Results for the three months ended May 1, 2016 and January 31, 2016 and six months ended May 1, 2016 primarily included favorable adjustments of employee-related costs associated with the cost reductions in the solar business.
 
 
 
 





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)
May 1, 2016
 
January 31, 2016
 
 
 
 
Operating expenses - GAAP basis
$
579

 
$
562

Reversals related to restructuring, net
1

 
—

Certain items associated with acquisitions
(5
)
 
(6
)
Non-GAAP adjusted operating expenses
$
575

 
$
556



UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED EFFECTIVE INCOME TAX RATE
 
 
Three Months Ended
(In millions, except percentages)
May 1, 2016
 
 
Provision for income taxes - GAAP basis (a)
$
75

Reinstatement of federal R&D tax credit, resolutions of prior years’ income tax filings and other tax items
(16
)
Income tax effect of non-GAAP adjustments
4

Non-GAAP adjusted provision for income taxes (b)
$
63

 
 
Income before income taxes - GAAP basis (c)
$
395

Certain items associated with acquisitions
46

Reversals related to restructuring, net
(1
)
Gain on sale of strategic investments, net
(1
)
Non-GAAP adjusted income before income taxes (d)
$
439

 
 
Effective income tax rate - GAAP basis (a/c)
19.0
%
 
 
Non-GAAP adjusted effective income tax rate (b/d)
14.4
%