Business Context and Reporting Period
Company: Applied Materials, Inc.
Filing Type: Form 10-K (Annual Report)
Period Ended: October 30, 1994
Industry: Semiconductor wafer fabrication equipment and related spare parts.
Operations: The Company develops, manufactures, and services equipment for deposition, etch, and ion implantation processes. It operates globally with 54 service/sales offices and manufacturing facilities in the U.S., England, and Japan. Applied Materials holds a 50% interest in Applied Komatsu Technology, Inc. (AKT), a joint venture producing systems for active-matrix liquid crystal displays.
Key Financial Metrics
Note: Specific revenue, profit, and cash flow figures for the fiscal year are incorporated by reference from the 1994 Annual Report and are not explicitly detailed in the provided text. The following metrics are available from the filing schedules and text:
- Backlog: $715.2 million as of October 30, 1994 (up from $365.8 million in 1993).
- Marketable Securities: $262.0 million (carried at cost approximating fair market value).
- Short-Term Borrowings: $43.1 million outstanding at year-end; weighted average interest rate of 3.0%.
- Property, Plant, and Equipment: Total gross value of $622.6 million; accumulated depreciation of $170.1 million.
- Employees: 6,497 as of October 30, 1994.
- Market Capitalization: Aggregate market value of voting stock held by non-affiliates was approximately $4.14 billion as of November 1, 1994.
- Dividends: No cash dividends paid or planned in the near future.
Material Changes vs. Prior Period
- Backlog Growth: Backlog increased significantly by approximately 95.5% year-over-year, rising from $365.8 million to $715.2 million.
- Geographic Sales Mix: Sales to the United States decreased slightly from 38% to 37%, while sales to Japan increased from 25% to 27%. Europe and Asia-Pacific remained relatively stable at 18% each.
- Capital Expenditures: Significant additions to Property, Plant, and Equipment totaling $186.0 million, including $35.7 million in land and $52.8 million in building improvements.
- Debt Structure: The Company secured a $125 million credit agreement in September 1994 and issued $100 million in 8% senior notes in August 1994.
Outlook, Risks, and Contingencies
Outlook and Guidance: Management expects to fill the current backlog of $715.2 million during fiscal 1995. The Company plans to complete a second manufacturing facility in Austin, Texas, in the first quarter of fiscal 1995. AKT anticipates accelerating investment in PVD and Etch technologies in fiscal 1995 and 1996.
Legal Proceedings:
- Advanced Semiconductor Materials (ASM): Applied Materials won a trial finding ASM infringed three patents. An injunction was issued but stayed pending appeal. ASM must pay a fee for each unit sold during the stay. A second lawsuit against ASM is set for trial in February 1995.
- General Signal Corporation: Filed a lawsuit in September 1994 alleging infringement of five patents regarding multichamber equipment. The suit is in early discovery; Applied Materials believes it has meritorious defenses.
- Counterclaims: ASM has counterclaimed alleging monopolization of the epitaxial reactor market.
Risks: The business is subject to capital expenditure patterns of major semiconductor manufacturers, global economic conditions, and rapid technological change. Competition is intense based on technology, productivity, and cost-effectiveness. Unavailability of sole-source suppliers could disrupt deliveries.
Investor Verification Checklist
- Verify the specific Net Sales and Net Income figures for fiscal 1994, 1993, and 1992, as these are incorporated by reference from the Annual Report and not listed in the text.
- Confirm the status of the appeal regarding the ASM patent infringement injunction and the potential financial impact of the stay fee.
- Review the details of the $100 million senior notes and $125 million credit agreement to understand debt covenants and maturity schedules.
- Assess the progress of the Austin, Texas manufacturing expansion and its impact on future capacity.
- Monitor the outcome of the General Signal Corporation lawsuit filed in September 1994.