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TMCNet:  Applied Materials Announces Fourth Quarter and Fiscal Year 2012 Results

[November 15, 2012]

Applied Materials Announces Fourth Quarter and Fiscal Year 2012 Results

(Thomson Reuters ONE Via Acquire Media NewsEdge) Expects Orders to Increase in the First Quarter of FY2013 * Fourth quarter net sales of $1.65 billion down 30 percent sequentially; Q4 non-GAAP EPS of 6 cents at high end of expectations; Q4 GAAP loss of 42 cents included a goodwill impairment and restructuring charges * FY2012 net sales of $8.72 billion down 17 percent; FY2012 non-GAAP EPS of 75 cents down 42 percent; FY2012 GAAP EPS of 9 cents included a goodwill impairment along with acquisition-related and restructuring charges * Returned $1.85 billion to stockholders in FY2012 including $1.42 billion in stock repurchases SANTA CLARA, Calif., November 15, 2012 - Applied Materials, Inc. (NASDAQ:AMAT), the global leader in  manufacturing solutions for the semiconductor, display and solar industries, today reported results for its fourth quarter and fiscal year ended October 28, 2012.


In the fourth quarter, Applied generated orders of $1.47 billion and net sales of $1.65 billion. The company recorded a goodwill impairment and restructuring charges totaling $545 million and reported an operating loss of $499 million, with a net loss of $515 million or 42 cents per diluted share. Non-GAAP operating income was $114 million, and non-GAAP net income was $70 million or 6 cents per share, at the high end of the company's expectations.

In FY2012, the company reported orders of $8.04 billion, net sales of $8.72 billion, operating income of $411 million, and net income of $109 million or 9 cents per diluted share. Non-GAAP operating income for the year was $1.38 billion, and non-GAAP net income was $960 million or 75 cents per share.

"In our fourth quarter, Applied delivered profit at the high end of our outlook despite challenging industry conditions in semiconductor, solar and display," said Mike Splinter, Chairman and CEO. "Our strong cash flow performance allowed us to increase our quarterly dividend and share buybacks, returning $1.85 billion to shtockholders in the year." "We see improving business conditions entering 2013, with orders projected to increase after bottoming in the fourth quarter," Splinter added.

"Accelerated changes in device technology and the adoption of new materials in all of the industries we serve provide opportunities for Applied to build on our leadership and grow our market share." Quarterly Results Summary GAAP Results   Q4 FY2012   Q3 FY2012   Q4 FY2011 ------------------------------- ---------------- --------------- -------------- Net sales   $1.65 billion   $2.34 billion   $2.18 billion Operating income (loss)   $(499) million   $322 million   $361 million Net income (loss)   $(515) million   $218 million   $456 million Diluted earnings (loss) per share (EPS) $(0.42)   $0.17   $0.34 Non-GAAP Results ------------------------------- Non-GAAP operating income   $114 million   $431 million   $384 million Non-GAAP net income   $70 million   $300 million   $271 million Non-GAAP diluted EPS   $0.06   $0.24   $0.21 Fourth quarter results included a $421 million goodwill impairment charge associated with the Energy and Environmental Solutions (EES) segment. The goodwill impairment reflects the deterioration in solar equipment market conditions, our customers' financial condition and reduced market valuations, causing Applied to reassess the recoverability of the segment's goodwill.

Applied also reported $124 million in charges related to previously announced restructuring plans and the integration of Varian.

Fourth quarter orders for Varian products of $152 million and net sales of $195 million were reported within the Silicon Systems Group (SSG) and Applied Global Services (AGS) segments. The Varian business contributed approximately one cent to the company's non-GAAP EPS in the quarter, which excluded acquisition-related charges equivalent to approximately three cents per share. In FY2012, orders for Varian products totaled $1.03 billion, and net sales were $1.02 billion. The Varian business contributed approximately 11 cents to Applied's non-GAAP EPS, which excluded acquisition-related charges equivalent to approximately 20 cents per share.

Applied's non-GAAP results exclude the impact of the following, where applicable: certain discrete tax items; restructuring charges and any associated adjustments; certain acquisition-related costs; impairments of assets, goodwill, or investments; and/or gain or loss on sale of facilities. A reconciliation of the GAAP and non-GAAP results is provided in the financial tables included in this release. See also "Use of Non-GAAP Financial Measures" below.

Fourth Quarter Reportable Segment Results and Comparisons to the Third Quarter Silicon Systems Group (SSG) orders were $741 million, down 36 percent, primarily due to lower orders in foundry and memory, partially offset by increased orders in logic. Net sales were $870 million, down 44 percent. Non-GAAP operating income decreased to $95 million or 10.9 percent of net sales. GAAP operating income decreased to $41 million or 4.7 percent of net sales. New order composition was: foundry 47 percent, flash 8 percent, logic and other 40 percent, and DRAM 5 percent.

Applied Global Services (AGS) orders were $576 million, up 8 percent driven by service contract renewals. Net sales were $621 million, up 7 percent, which included $85 million in sales of a thin film production line. Non-GAAP operating income increased to $171 million or 27.5 percent of net sales. GAAP operating income increased to $164 million or 26.4 percent of net sales.

Display orders were $83 million, up 24 percent from low levels. Net sales were $93 million, down 35 percent. Non-GAAP operating income decreased to $4 million or 4.3 percent of net sales. GAAP operating income decreased to $3 million or 3.2 percent of net sales.

Energy and Environmental Solutions (EES) orders were $65 million, up 86 percent from low levels driven by demand for roll-to-roll deposition equipment. Net sales were $62 million, down 19 percent. EES had a non-GAAP operating loss of $46 million and a GAAP operating loss of $480 million.

Additional Quarterly Financial Information and Comparisons to the Third Quarter * Backlog decreased by $215 million to $1.6 billion and included negative adjustments of $42 million.

* Gross margin was 38.4 percent on a non-GAAP basis, down from 41.6 percent, reflecting the decrease in net sales. GAAP gross margin was 35.6 percent.

* Operating expenses were $518 million on a non-GAAP basis, down from $543 million, with the decrease primarily reflecting an adjustment in compensation accruals. GAAP operating expenses were $1.09 billion.

* The effective tax rate was 26.3 percent on a non-GAAP basis. The GAAP effective tax rate was 3.2 percent.

* Cash, cash equivalents and investments ended the quarter at $3.0 billion.

Full-Year Reportable Segment Results and Comparisons to the Prior Year SSG orders decreased by 4 percent to $5.29 billion, net sales increased by 2 percent to $5.54 billion, non-GAAP operating income decreased to $1.54 billion or 27.8 percent of net sales, and operating income decreased to $1.24 billion or 22.5 percent of net sales.

AGS orders decreased by 3 percent to $2.27 billion, net sales decreased by 5 percent to $2.29 billion, non-GAAP operating income increased to $530 million or 23.2 percent of net sales, and operating income increased to $502 million or 22.0 percent of net sales.

Display orders decreased by 57 percent to $274 million, net sales decreased by 32 percent to $473 million, non-GAAP operating income decreased to $32 million or 6.8 percent of net sales, and operating income decreased to $25 million or 5.3 percent of net sales.

EES orders decreased by 88 percent to $195 million and net sales decreased by 79 percent to $425 million. The business generated a non-GAAP operating loss of $184 million and a GAAP operating loss of $668 million.

Business Outlook For the first quarter of fiscal 2013, Applied expects net sales to be flat to down 15 percent  sequentially. The company expects non-GAAP EPS to be in the range of $0.00 to $0.06. The non-GAAP EPS outlook excludes known charges related to completed acquisitions of approximately $0.05 per share but does not exclude other non-GAAP adjustments that may arise subsequent to this release.

Use of Non-GAAP Financial Measures Management uses non-GAAP 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.

Forward-Looking Statements This press release contains forward-looking statements, including statements regarding Applied's performance, industry conditions, technology changes, opportunities, strategic position, and business outlooks for the first quarter of fiscal 2013. Forward-looking statements may contain words such as "expect," "believe," "may," "can," "should," "will," "anticipate" or similar expressions, and include the assumptions that underlie such statements. These statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements, including but not limited to: the level of demand for Applied's products, which is subject to many factors, including uncertain global economic and industry conditions, end-demand for electronic products and semiconductors, government renewable energy policies and incentives, and customers' new technology and capacity requirements; variability of operating expenses and results among the company's segments caused by differing conditions in the served markets; the concentrated nature of Applied's customer base; Applied's ability to (i) develop, deliver and support a broad range of products, expand its markets and develop new markets, (ii) timely align its cost structure with business conditions and achieve the intended objectives of cost-reduction activities, (iii) plan and manage its resources and production capability, (iv) integrate Varian and realize synergies, (v) obtain and protect intellectual property rights in key technologies, (vi) attract, motivate and retain key employees, and (vii) accurately forecast future results, which depends on multiple assumptions related to, without limitation, market conditions, customer requirements and business needs; and other risks described in Applied's most recent current and periodic SEC reports. All forward-looking statements are based on management's estimates, projections and assumptions as of the date hereof. The company undertakes no obligation to update any forward-looking statements.

About Applied Materials Applied Materials, Inc. (Nasdaq:AMAT) is the global leader in providing innovative equipment, services and software to enable the manufacture of advanced semiconductor, flat panel display and solar photovoltaic products. Our technologies help make innovations like smartphones, flat screen TVs and solar panels more affordable and accessible to consumers and businesses around the world. At Applied Materials, we turn today's innovations into the industries of tomorrow. Learn more at www.appliedmaterials.com.

Contact: Matt Ceniceros (editorial/media) 408.768.8169 Michael Sullivan (financial community) 408.986.7977 APPLIED MATERIALS, INC.

UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS     Three Months Ended   Twelve Months Ended --------------------------------------- -------------------------- (In millions, except per share October 28, July 29, October 30, October 28, October 30, amounts)   2012   2012   2011   2012   2011 ------------- ----------- ------------- ------------- ------------ Net sales   $ 1,646     $ 2,343     $ 2,182     $ 8,719     $ 10,517 Cost of products sold 1,060     1,413     1,330     5,406     6,157 ------------- ----------- ------------- ------------- ------------ Gross margin   586     930     852     3,313     4,360 Operating expenses:    Research, development and engineering 303     309     269     1,237     1,118   Selling, general and administrative 237     255     222     1,076     901   Impairment of goodwill 421     -     -     421     -   Restructuring charges and 124     44     -     168     (30 ) asset impairments   Gain on sale of facilities, net -     -     -     -     (27 ) ------------- ----------- ------------- ------------- ------------ Total operating expenses 1,085     608     491     2,902     1,962 Income (loss) from operations (499 )   322     361     411     2,398 Impairment of strategic investments 14     -     3     17     3 Interest and other expenses 24     24     24     95     59 Interest and other income, net 5     4     10     17     42 ------------- ----------- ------------- ------------- ------------ Income (loss) before income taxes (532 )   302     344     316     2,378 Provision (benefit) for income taxes (17 )   84     (112 )   207     452 ------------- ----------- ------------- ------------- ------------ Net income (loss)   $ (515 )   $ 218     $ 456     $ 109     $ 1,926 ------------- ----------- ------------- ------------- ------------ Earnings (loss) per share:    Basic   $ (0.42 )   $ 0.17     $ 0.35     $ 0.09     $ 1.46   Diluted   $ (0.42 )   $ 0.17     $ 0.34     $ 0.09     $ 1.45 Weighted average number of shares:    Basic   1,220     1,257     1,312     1,266     1,319   Diluted   1,220   1,268   1,321   1,277   1,330 APPLIED MATERIALS, INC.

UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS October 28, October 30, (In millions)   2012   2011 ------------- ------------ ASSETS Current assets:    Cash and cash equivalents   $ 1,392     $ 5,960   Short-term investments   545     283   Accounts receivable, net   1,220     1,532   Inventories   1,272     1,701   Deferred income taxes, net   369     580   Other current assets   304     299 ------------- ------------ Total current assets   5,102     10,355 Long-term investments   1,055     931 Property, plant and equipment, net   910     866 Goodwill   3,518     1,335 Purchased technology and other intangible assets, net 1,355     211 Deferred income taxes and other assets   162     163 ------------- ------------ Total assets   $ 12,102     $ 13,861 ------------- ------------ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:    Accounts payable and accrued expenses   $ 1,436     $ 1,520   Customer deposits and deferred revenue   755     1,116   Income taxes payable   74     158 ------------- ------------ Total current liabilities   2,265     2,794 Long-term debt   1,946     1,947 Deferred income taxes and income taxes payable   341     104 Employee benefits and other liabilities   315     216 ------------- ------------ Total liabilities   4,867     5,061 ------------- ------------ Total stockholders' equity   7,235     8,800 ------------- ------------ Total liabilities and stockholders' equity   $ 12,102     $ 13,861 ------------- ------------ APPLIED MATERIALS, INC.

UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS Three Months Ended Twelve Months Ended --------------------------- -------------------------- October 28, October 30, October 28, October 30, (In millions) 2012   2011   2012   2011 ------------- ------------- ------------- ------------ Cash flows from operating activities:    Net income (loss) $ (515 )   $ 456     $ 109     $ 1,926   Adjustments required to reconcile net income (loss) to cash provided by operating activities:       Depreciation and amortization 97     59   422     246     Net loss (gain) on dispositions and (4 )   10     7     (13 ) fixed asset retirements     Provision for bad debts 5     5   14     5     Impairment of goodwill 421     -   421     -     Restructuring charges and asset impairments 124     -   168     (30 )     Deferred income taxes 56     222   161     122     Net loss on investments and 7     6     23     19 amortization on debt securities     Impairment of strategic investments 14     -   17     -     Share-based compensation 44     37   182     146     Net change in operating assets and liabilities, 162     (96 )   327     5 net of amounts acquired ------------- ------------- ------------- ------------ Cash provided by operating activities 411     699     1,851     2,426 ------------- ------------- ------------- ------------ Cash flows from investing activities:    Capital expenditures (41 )   (73 )   (162 )   (209 )   Cash paid for acquisition, net of cash acquired (1 )   -   (4,190 )   -   Proceeds from sale of facilities and dispositions -     4   -     130   Proceeds from sales and maturities of investments 254     754   1,019     1,926   Purchases of investments (175 )   (192 ) (1,327 )   (1,137 ) ------------- ------------- ------------- ------------ Cash provided by (used 37     493 in) investing activities (4,660 )   710 ------------- ------------- ------------- ------------ Cash flows from financing activities:    Debt borrowings (repayments), net -     -   (1 )   1,744   Payments of debt issuance costs -     -   -     (14 )   Proceeds from common stock issuances 45     31   97     95   Common stock repurchases (516 )   (175 ) (1,416 )   (468 )   Payments of dividends to stockholders (111 )   (106 ) (434 )   (397 ) ------------- ------------- ------------- ------------ Cash provided by (used (582 )   (250 ) in) financing activities (1,754 )   960 ------------- ------------- ------------- ------------ Effect of exchange rate changes (3 )     -    (5 )   6 on cash and cash equivalents ------------- ------------- ------------- ------------ Increase (decrease) in (137 )   942 cash and cash equivalents (4,568 )   4,102 Cash and cash equivalents - beginning of period 1,529     5,018   5,960     1,858 ------------- ------------- ------------- ------------ Cash and cash $ 1,392     $ 5,960 equivalents - end of period $ 1,392     $ 5,960 ------------- ------------- ------------- ------------ Supplemental cash flow information:    Cash payments for income taxes $ 10     $ 100   $ 243     $ 761   Cash refunds from income taxes $ 74     $ 285   $ 79     $ 289   Cash payments for interest $ 7   $ 7 $ 94   $ 14 APPLIED MATERIALS, INC.

UNAUDITED SUPPLEMENTAL INFORMATION Reportable Segment Results   Q4 FY2012   Q3 FY2012   Q4 FY2011 ----------------------------------- ----------------------------------- ---------------------------------- Operating Operating Operating (In New Net Income New Net Income New Net Income millions) Orders   Sales   (Loss)   Orders   Sales   (Loss)   Orders   Sales   (Loss) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------- SSG $ 741     $ 870     $ 41     $ 1,166     $ 1,545     $ 427     $ 925     $ 1,067     $ 278 AGS 576     621     164     531     579     122     564     629     160 Display 83     93     3     67     142     10     20     171     31 EES 65     62     (480 )   35     77     (102 )   86     315     17 Corporate -     -     (227 )   -     -     (135 )   -     -     (125 ) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------- Consolidated $ 1,465     $ 1,646     $ (499 )   $ 1,799     $ 2,343     $ 322     $ 1,595     $ 2,182     $ 361 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------     FY 2012   FY 2011 ----------------------------------- ------------------------------------ Operating Operating (In New Net Income New Net Income millions)   Orders   Sales   (Loss)   Orders   Sales   (Loss) ----------- ----------- ----------- ------------ ------------ ---------- SSG   $ 5,294     $ 5,536     $ 1,243     $ 5,489     $ 5,415     $ 1,764 AGS   2,274     2,285     502     2,333     2,413     482 Display   274     473     25     636     699     147 EES   195     425     (668 )   1,684     1,990     453 Corporate   -     -     (691 )   -     -     (448 ) ----------- ----------- ----------- ------------ ------------ ---------- Consolidated   $ 8,037     $ 8,719     $ 411     $ 10,142     $ 10,517     $ 2,398 ----------- ----------- ----------- ------------ ------------ ---------- Corporate Unallocated Expenses Q4 Q3 Q4 (In millions)   FY2012   FY2012   FY2011   FY 2012   FY 2011 --------- --------- --------- --------- -------- Restructuring charges and asset impairments, net $ 111     $ -     $ -     $ 111     $ (21 ) Share-based compensation   44     42     36     182     146 Gain on sale of facilities   -     -     -     -     (27 ) Other unallocated expenses   72     93     89     398     350 --------- --------- --------- --------- -------- Corporate   $ 227     $ 135     $ 125     $ 691     $ 448 --------- --------- --------- --------- -------- APPLIED MATERIALS, INC.

UNAUDITED SUPPLEMENTAL INFORMATION Additional Information     Q4 FY2012     Q3 FY2012     Q4 FY2011 ---------------- ---------------- --------------- New Orders and Net Sales by Geography New Net New Net New Net (In $ millions)   Orders   Sales   Orders   Sales   Orders   Sales -------- ------- -------- ------- -------- ------ North America   435     373     420     441     324     434    % of Total   30 %   23 %   23 %   19 %   20 %   20 % Europe   165     271     172     184     176     271    % of Total   11 %   16 %   9 %   8 %   11 %   12 % Japan   184     129     128     189     173     255    % of Total   12 %   8 %   7 %   8 %   11 %   12 % Korea   115     127     299     392     330     363    % of Total   8 %   8 %   17 %   17 %   21 %   17 % Taiwan   390     457     588     811     283     353    % of Total   27 %   28 %   33 %   34 %   18 %   16 % Southeast Asia   74     97     91     72     98     98    % of Total   5 %   6 %   5 %   3 %   6 %   4 % China   102     192     101     254     211     408    % of Total   7 %   11 %   6 %   11 %   13 %   19 % Employees (In thousands) Regular Full Time   14.5   14.6   12.9     FY 2012     FY 2011 ------------------- ------------------ New Orders and Net Sales by Geography New Net New Net (In $ millions)   Orders   Sales   Orders   Sales --------- --------- --------- -------- North America   1,995     1,749     2,069     1,963    % of Total   25 %   20 %   20 %   19 % Europe   817     863     1,022     1,120    % of Total   10 %   10 %   10 %   11 % Japan   600     704     1,001     912    % of Total   7 %   8 %   10 %   9 % Korea   1,784     1,897     1,286     1,263    % of Total   22 %   22 %   13 %   12 % Taiwan   2,155     2,411     2,235     2,093    % of Total   27 %   28 %   22 %   20 % Southeast Asia   283     312     463     592    % of Total   4 %   3 %   5 %   5 % China   403     783     2,066     2,574    % of Total     9 %     24 % 5 % 20 % APPLIED MATERIALS, INC.

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP RESULTS     Three Months Ended   Twelve Months Ended -------------------------------------- -------------------------- (In millions, except October 28, July 29, October 30, October 28, October 30, percentages)   2012   2012   2011   2012   2011 ------------- ---------- ------------- ------------- ------------ Non-GAAP Gross Margin Reported gross margin (GAAP basis)   $ 586     $ 930     $ 852     $ 3,313     $ 4,360 Certain items associated with acquisitions(1)   46     44     10     253     37 ------------- ---------- ------------- ------------- ------------ Non-GAAP gross margin   $ 632     $ 974     $ 862     $ 3,566     $ 4,397 ------------- ---------- ------------- ------------- ------------ Non-GAAP gross margin percent (% of net sales)   38.4 %   41.6 %   39.5 %   40.9 %   41.8 % Non-GAAP Operating Income Reported operating income (loss) (GAAP basis)   $ (499 )   $ 322     $ 361     $ 411     $ 2,398 Certain items associated with acquisitions(1)   55     57     13     298     51 Acquisition integration and deal costs   13     8     10     81     19 Impairment of goodwill   421     -     -     421     - Restructuring charges and asset impairments(2, 3, 4, 5)   124     44     -     168     (30 ) Gain on sale of facilities, net   -     -     -     -     (27 ) ------------- ---------- ------------- ------------- ------------ Non-GAAP operating income   $ 114     $ 431     $ 384     $ 1,379     $ 2,411 ------------- ---------- ------------- ------------- ------------ Non-GAAP operating margin percent (% of net sales)   6.9 %   18.4 %   17.6 %   15.8 %   22.9 % Non-GAAP Net Income Reported net income (loss) (GAAP basis)   $ (515 )   $ 218     $ 456     $ 109     $ 1,926 Certain items associated with acquisitions(1)   55     57     13     298     51 Acquisition integration and deal costs   13     8     10     81     19 Impairment of goodwill   421     -     -     421     - Restructuring charges and asset impairments(2, 3, 4, 5)   124     44     -     168     (30 ) Impairment of strategic investments   14     -     3     17     3 Gain on sale of facilities, net   -     -     -     -     (27 ) Reinstatement of federal R&D tax credit   -     -     -     -     (13 ) Resolution of audits of prior years' income tax filings   (5 )   (10 )   (203 )   (22 )   (203 ) Income tax effect of non- GAAP adjustments   (37 )   (17 )   (8 )   (112 )   (3 ) ------------- ---------- ------------- ------------- ------------ Non-GAAP net income   $ 70     $ 300     $ 271     $ 960     $ 1,723 ------------- ---------- ------------- ------------- ------------ 1  These items are incremental charges attributable to acquisitions, consisting of inventory fair value adjustments on products sold, and amortization of purchased intangible assets.

2 Results for the three months ended July 29, 2012 included severance charges of $24 million and asset impairment charges of $11 million related to the restructuring program announced on May 10, 2012 and severance charges of $9 million related to the integration of Varian.

3  Results for the three months ended October 28, 2012 included severance and other charges of $106 million related to the restructuring program announced on October 3, 2012, restructuring and asset impairment charges of $12 million related to the restructuring program announced on May 10, 2012, and severance charges of $6 million related to the integration of Varian.

4  Results for the twelve months ended October 28, 2012 included severance and other charges of $106 million related to the restructuring program announced on October 3, 2012, restructuring and asset impairment charges of $48 million related to the restructuring program announced on May 10, 2012, and severance charges of $14 million related to the integration of Varian.

5 Results for the twelve months ended October 30, 2011 included favorable adjustments of $36 million related to a restructuring program announced on July 21, 2010, $19 million related to a restructuring program announced on November 11, 2009, and $5 million related to a restructuring program announced on November 12, 2008, partially offset by asset impairment charges of $30 million primarily related to certain fixed and intangible assets.

APPLIED MATERIALS, INC.

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP RESULTS     Three Months Ended   Twelve Months Ended -------------------------------------- -------------------------- (In millions except per share October 28, July 29, October 30, October 28, October 30, amounts)   2012   2012   2011   2012   2011 ------------- ---------- ------------- ------------- ------------ Non-GAAP Earnings Per Diluted Share Reported earnings (loss) per diluted share (GAAP basis)   $ (0.42 )   $ 0.17     $ 0.34     $ 0.09     $ 1.45 Certain items associated with acquisitions   0.04     0.04     0.01     0.19     0.03 Acquisition integration and deal costs   0.01     0.01     0.01     0.05     0.01 Impairment of goodwill   0.34     -     -     0.33     - Restructuring charges and asset impairments   0.08     0.03     -     0.10     (0.01 ) Impairment of strategic investments   0.01     -     -     0.01     - Gain on sale of facilities, net   -     -     -     -     (0.02 ) Reinstatement of federal R&D tax credit and resolution of audits of prior years' income tax filings   -     (0.01 )   (0.15 )   (0.02 )   (0.16 ) ------------- ---------- ------------- ------------- ------------ Non-GAAP earnings per diluted share   $ 0.06     $ 0.24     $ 0.21     $ 0.75     $ 1.30 ------------- ---------- ------------- ------------- ------------ Weighted average number of diluted shares   1,234   1,268   1,321   1,277   1,330 APPLIED MATERIALS, INC.

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP RESULTS     Three Months Ended   Twelve Months Ended --------------------------------------- -------------------------- (In millions, except October 28, July 29, October 30, October 28, October 30, percentages)   2012   2012   2011   2012   2011 ------------- ----------- ------------- ------------- ------------ Non-GAAP SSG Operating Income Reported operating income (GAAP basis)   $ 41     $ 427     $ 278     $ 1,243     $ 1,764 Certain items associated with acquisitions(1)   45     47     4     253     12 Acquisition integration and deal costs   6     7     3     37     3 Restructuring charges and asset impairments(2,3,4)   3     1     -     4     - ------------- ----------- ------------- ------------- ------------ Non-GAAP operating income   $ 95     $ 482     $ 285     $ 1,537     $ 1,779 ------------- ----------- ------------- ------------- ------------ Non-GAAP operating margin percent (% of net sales)   10.9 %   31.2 %   26.7 %   27.8 %   32.9 % Non-GAAP AGS Operating Income Reported operating income (GAAP basis)   $ 164     $ 122     $ 160     $ 502     $ 482 Certain items associated with acquisitions(1)   3     2     2     13     7 Restructuring charges and asset impairments(2, 3, 4, 5)   4     11     -     15     24 ------------- ----------- ------------- ------------- ------------ Non-GAAP operating income   $ 171     $ 135     $ 162     $ 530     $ 513 ------------- ----------- ------------- ------------- ------------ Non-GAAP operating margin percent (% of net sales)   27.5 %   23.3 %   25.8 %   23.2 %   21.3 % Non-GAAP Display Operating Income Reported operating income (GAAP basis)   $ 3     $ 10     $ 31     $ 25     $ 147 Certain items associated with acquisitions(1)   1     2     2     7     7 ------------- ----------- ------------- ------------- ------------ Non-GAAP operating income   $ 4     $ 12     $ 33     $ 32     $ 154 ------------- ----------- ------------- ------------- ------------ Non-GAAP operating margin percent (% of net sales)   4.3 %   8.5 %   19.3 %   6.8 %   22.0 % Non-GAAP EES Operating Income Reported operating income (loss) (GAAP basis)   $ (480 )   $ (102 )   $ 17     $ (668 )   $ 453 Certain items associated with acquisitions(1)   7     6     6     25     25 Impairment of goodwill   421     -     -     421     - Restructuring charges and asset impairments(2, 3, 4, 5)   6     32     -     38     (34 ) ------------- ----------- ------------- ------------- ------------ Non-GAAP operating income (loss)   $ (46 )   $ (64 )   $ 23     $ (184 )   $ 444 ------------- ----------- ------------- ------------- ------------ Non-GAAP operating margin percent (% of net sales)   (74.2 )%   (83.1 )%   7.3 % (43.3 )%   22.3 % 1  These items are incremental charges attributable to acquisitions, consisting of inventory fair value adjustments on products sold, and amortization of purchased intangible assets.

2 Results for the three months ended July 29, 2012 included severance charges of $24 million and asset impairment charges of $11 million related to the restructuring program announced on May 10, 2012 and severance charges of $9 million related to the integration of Varian.

3  Results for the three months ended October 28, 2012 included restructuring and asset impairment charges of $7 million related to the restructuring program announced on May 10, 2012, and severance charges of $6 million related to the integration of Varian.

4  Results for the twelve months ended October 28, 2012 included restructuring and asset impairment charges of $43 million related to the restructuring program announced on May 10, 2012 and severance charges of $14 million related to the integration of Varian.

5 Results for the twelve months ended October 30, 2011 included favorable adjustments of $36 million related to a restructuring program announced on July 21, 2010, partially offset by asset impairment charges of $26 million primarily related to certain fixed and intangible assets.

APPLIED MATERIALS, INC.

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP OPERATING EXPENSES   Three Months Ended (In millions) October 28, 2012 --------------------- Operating expenses (GAAP basis) $ 1,085 Certain items associated with acquisitions (9 ) Acquisition integration and deal costs (13 ) Impairment of goodwill (421 ) Restructuring charges and asset impairments (124 ) --------------------- Non-GAAP operating expenses $ 518 --------------------- UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP EFFECTIVE INCOME TAX RATE Three Months   Ended October 28, (In millions, except percentages) 2012 --------------- Provision (benefit) for income taxes (GAAP basis) (a) $ (17 ) Income tax effect of non-GAAP adjustments 37 Resolutions from audits of prior years' income tax filings 5 --------------- Non-GAAP provision for income taxes (b) $ 25 --------------- Income (loss) before income taxes (GAAP basis) (c) $ (532 ) Certain items associated with acquisitions 55 Acquisition integration and deal costs 13 Impairment of goodwill 421 Restructuring charges and asset impairments 124 Impairment of strategic investments 14 --------------- Non-GAAP income before income taxes (d) $ 95 --------------- Effective income tax rate (GAAP basis) (a/c) 3.2 % --------------- Non-GAAP effective income tax rate (b/d) 26.3 % --------------- This announcement is distributed by Thomson Reuters on behalf of Thomson Reuters clients. The owner of this announcement warrants that: (i) the releases contained herein are protected by copyright and other applicable laws; and (ii) they are solely responsible for the content, accuracy and originality of the information contained therein.

Source: Applied Materials via Thomson Reuters ONE [HUG#1657722]

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