Business Context and Reporting Period
Company: Applied Materials, Inc.
Filing Type: Form 10-K (Annual Report)
Reporting Period: Fiscal year ended October 29, 1995
Industry: Semiconductor wafer fabrication equipment and related spare parts.
Applied Materials develops, manufactures, and services sophisticated systems for semiconductor fabrication, focusing on deposition, etch, and ion implantation processes. The company operates globally with significant manufacturing in the U.S., England, and Japan, and maintains a 50% ownership stake in Applied Komatsu Technology, Inc. (AKT), a joint venture producing equipment for active-matrix liquid crystal displays.
Key Financial Metrics
Note: Specific revenue, profit, cash flow, and margin figures are incorporated by reference from the 1995 Annual Report (pages 26-30) and are not explicitly detailed in the provided text.
- Backlog: $1.5 billion as of October 29, 1995 (up from $715.2 million in the prior year).
- Market Capitalization: Aggregate market value of voting stock held by nonaffiliates was approximately $7.53 billion as of December 15, 1995.
- Shares Outstanding: 179,366,057 shares of Common Stock as of December 15, 1995.
- Employees: 10,537 regular full-time employees as of October 29, 1995.
- Debt/Liquidity: The company has a $125 million credit agreement and $60 million in loans secured by property and equipment. Specific liquidity ratios and total debt figures are not provided in the text.
- Allowance for Doubtful Accounts: Ended the year at $3.017 million.
Material Changes vs. Prior Period
- Backlog Growth: The order backlog more than doubled, increasing from $715.2 million in fiscal 1994 to $1.5 billion in fiscal 1995.
- Geographic Sales Mix: Sales to North America decreased from 37% to 32% of net sales. Sales to Korea increased significantly from 12% to 17%. Sales to Asia-Pacific grew from 6% to 10%.
- Product Portfolio: Single-wafer, multi-chamber systems represented approximately 92% of systems revenue in fiscal 1995. The company introduced new platforms including the Precision Implant xR80, RTP Centura, and MxP+ enhancements.
- Legal Outcomes: The company secured a favorable judgment in a patent infringement lawsuit against ASM regarding epitaxial reactors, with a permanent injunction expected.
Guidance, Outlook, and Risks
Outlook: Management expects to fill the current $1.5 billion backlog during fiscal 1996. The company is investing in technology centers in South Korea and Taiwan and is developing systems for the next-generation 300 mm wafer size.
Risks and Contingencies:
- Legal Proceedings: The company is involved in multiple patent infringement lawsuits, including ongoing disputes with ASM (Advanced Semiconductor Materials) and Novellus Systems, Inc. While management believes outcomes are unlikely to have a material adverse effect, these cases involve potential injunctions and damages.
- Competition: The industry is highly competitive with rapid technological changes. Competition comes from other equipment manufacturers and semiconductor manufacturers producing equipment for internal use.
- Supply Chain: While multiple sources exist for most components, the unavailability of components from sole-source suppliers could disrupt deliveries.
- Environmental: One location is designated as a Superfund site, though management does not expect this to materially affect operations or capital expenditures.
Investor Verification Checklist
- Verify the specific revenue, net income, and operating margin figures in the Consolidated Statements of Operations (incorporated by reference, page 31 of the Annual Report).
- Review the Consolidated Statements of Cash Flows (page 33) to assess liquidity and capital expenditure trends.
- Monitor the status of the patent litigation against ASM and Novellus Systems, specifically regarding potential damages and the scope of injunctions.
- Confirm the conversion rate of the $1.5 billion backlog into recognized revenue during fiscal 1996.
- Assess the impact of the shifting geographic sales mix, particularly the growth in Korea and Asia-Pacific, on future revenue stability.