<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(MARK ONE)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JULY 28, 1996 or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission file number 0-6920
APPLIED MATERIALS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-1655526
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3050 BOWERS AVENUE, SANTA CLARA, CALIFORNIA 95054-3299
Address of principal executive offices (Zip Code)
Registrant's telephone number, including area code (408) 727-5555
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No .
Number of shares outstanding of the issuer's common stock as of July 28,
1996: 179,800,000
<PAGE> 2
PART I. FINANCIAL INFORMATION
APPLIED MATERIALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
- ---------------------------------------------------------------------------------------------------------------
July 28, July 30, July 28, July 30,
(In thousands, except per share data) 1996 1995 1996 1995
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $1,115,424 $ 897,684 $3,283,859 $2,079,231
Cost of products sold 583,448 489,256 1,713,792 1,127,781
---------- ---------- ---------- ----------
Gross margin 531,976 408,428 1,570,067 951,450
Operating expenses:
Research, development
and engineering 128,262 85,789 363,532 219,178
Marketing and selling 82,882 62,520 240,751 158,566
General and administrative 64,758 46,742 169,133 113,382
---------- ---------- ---------- ----------
Income from operations 256,074 213,377 796,651 460,324
Interest expense 4,812 5,527 14,897 17,161
Interest income 8,839 6,323 28,265 16,306
---------- ---------- ---------- ----------
Income from consolidated companies before
taxes 260,101 214,173 810,019 459,469
Provision for income taxes 91,035 74,961 283,506 160,814
---------- ---------- ---------- ----------
Income from consolidated companies 169,066 139,212 526,513 298,655
Equity in net income/loss of joint venture -- -- -- --
---------- ---------- ---------- ----------
Net income $ 169,066 $ 139,212 $ 526,513 $ 298,655
---------- ---------- ---------- ----------
Earnings per share $ 0.92 $ 0.78 $ 2.86 $ 1.71
---------- ---------- ---------- ----------
Average common shares and
equivalents 183,359 177,754 183,780 174,798
- --------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated condensed financial statements.
2
<PAGE> 3
APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS*
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
July 28, Oct. 29,
(In thousands) 1996 1995
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS Current assets:
Cash and cash equivalents $ 238,848 $ 285,845
Short-term investments 548,736 483,487
Accounts receivable, net 973,984 817,730
Inventories 533,331 427,413
Deferred income taxes 198,780 198,888
Other current assets 84,654 98,250
---------- ----------
Total current assets 2,578,333 2,311,613
Property, plant and equipment, net 881,318 630,746
Other assets 25,602 23,020
---------- ----------
Total assets $3,485,253 $2,965,379
---------- ----------
LIABILITIES Current liabilities:
AND Notes payable $ 24,611 $ 61,748
STOCKHOLDERS' Current portion of long-term debt 22,710 21,064
EQUITY Accounts payable and
accrued expenses 779,406 659,572
Income taxes payable 32,687 119,347
---------- ----------
Total current liabilities 859,414 861,731
Long-term debt 280,499 279,807
Deferred income taxes and
other non-current obligations 52,636 40,338
---------- ----------
Total liabilities 1,192,549 1,181,876
---------- ----------
Stockholders' equity:
Common stock 1,798 1,792
Additional paid-in capital 752,959 760,057
Retained earnings 1,526,492 999,979
Cumulative translation adjustments 11,455 21,675
---------- ----------
Total stockholders' equity 2,292,704 1,783,503
---------- ----------
Total liabilities and
stockholders' equity $3,485,253 $2,965,379
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
* Amounts as of July 28, 1996 are unaudited. Amounts as of
October 29, 1995 were obtained from the October 29, 1995
audited financial statements.
See accompanying notes to consolidated condensed financial statements.
3
<PAGE> 4
APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Nine Months Ended
July 28, July 30,
(In thousands) 1996 1995
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 526,513 $ 298,655
Adjustments required to reconcile
net income to cash provided by operations:
Deferred taxes (1,064) (3,111)
Depreciation and amortization 103,921 54,047
Equity in net income/loss of joint venture - -
Changes in assets and liabilities:
Accounts receivable (181,203) (354,523)
Inventories (112,282) (136,241)
Other current assets 12,671 (26,282)
Other assets (2,602) (1,380)
Accounts payable and accrued expenses 142,773 195,272
Income taxes payable (85,028) 7,015
Other long-term liabilities 13,383 7,185
------------- -------------
Cash provided by operations 417,082 40,637
------------- -------------
Cash flows from investing activities:
Capital expenditures, net (364,835) (144,569)
Proceeds from sales of short-term investments 494,599 165,244
Purchases of short-term investments (559,848) (340,620)
-------------- --------------
Cash used for investing (430,084) (319,945)
-------------- --------------
Cash flows from financing activities:
Short-term debt activity, net (33,422) 25,401
Long-term debt activity, net 7,062 27,910
Common stock transactions, net (7,092) 330,041
-------------- -------------
Cash provided by (used for) financing (33,452) 383,352
-------------- -------------
Effect of exchange rate changes on cash (543) (2,001)
-------------- --------------
Increase (decrease) in cash and cash equivalents (46,997) 102,043
Cash and cash equivalents
at beginning of period 285,845 160,320
------------- -------------
Cash and cash equivalents
at end of period $ 238,848 $ 262,363
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
For the nine months ended July 28, 1996, cash payments for interest and
income taxes were $12,053 and $345,779, respectively. For the nine
months ended July 30, 1995, cash payments for interest and income taxes
were $13,696 and $145,573, respectively.
See accompanying notes to consolidated condensed financial statements.
4
<PAGE> 5
APPLIED MATERIALS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
NINE MONTHS ENDED JULY 28, 1996
(IN THOUSANDS)
1) Basis of Presentation
In the opinion of management, the unaudited consolidated condensed
financial statements included herein have been prepared on a consistent
basis with the October 29, 1995 audited consolidated financial statements
and include all material adjustments, consisting of normal recurring
adjustments, necessary to fairly present the information set forth therein.
Certain amounts in the consolidated condensed financial statements for the
periods ended July 30, 1995 have been reclassified to conform to the
current presentation.
2) Earnings Per Share
Earnings per share has been computed using the weighted average number of
common shares outstanding and common equivalent shares from dilutive stock
options.
3) Inventories
Inventories are stated at the lower of cost or market, with cost determined
on a first-in, first-out (FIFO) basis. The components of inventories are
as follows:
<TABLE>
<CAPTION>
July 28, 1996 October 29, 1995
------------- ----------------
<S> <C> <C>
Customer service spares $194,936 $131,411
Systems raw materials 94,481 118,627
Work-in-process 175,241 139,537
Finished goods 68,673 37,838
-------- --------
$533,331 $427,413
======== ========
</TABLE>
4) Accounts Payable and Accrued Expenses
The components of accounts payable and accrued expenses are as follows:
<TABLE>
<CAPTION>
July 28, 1996 October 29, 1995
------------- ----------------
<S> <C> <C>
Accounts payable $197,966 $244,014
Compensation and benefits 140,592 109,388
Installation and warranty 194,837 133,035
Other 246,011 173,135
-------- --------
$779,406 $659,572
======== ========
</TABLE>
5
<PAGE> 6
5) Stockholders' Equity
During the nine month period ended July 28, 1996, the Company repurchased
730,000 shares of its common stock at an average price of $35.40 per share
and reissued 434,000 shares to stock-based employee benefit plans.
6) Subsequent Event
On August 13, 1996, the Company announced a reduction in its global
workforce that will result in an estimated $28-$32 million pre-tax
restructuring charge during its fourth fiscal quarter ending October 27,
1996. The restructuring charge will cover employee severance costs and
benefits, as well as certain costs incurred to consolidate facilities. The
restructuring charge consists primarily of cash expenditures to be made
prior to the end of the Company's first fiscal quarter of 1997, which ends
January 26, 1997.
6
<PAGE> 7
APPLIED MATERIALS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
================================================================================
RESULTS OF OPERATIONS
The Company's net sales for the three and nine month periods ended July 28, 1996
increased 24 and 58 percent, respectively, over the corresponding periods of
fiscal 1995 as a result of increased demand for the Company's advanced wafer
process technology, multi-chamber equipment and installed base support services.
The increased demand for the Company's advanced equipment reflects the
semiconductor industry's need for the technical capability to fabricate advanced
device structures and the continued investment in systems capable of performing
processes required for smaller device geometries. The increase in installed base
support services revenue is attributable to a larger installed systems base and
our global customers' requirements for high reliability and uptime.
Sales increased in the third quarter and first nine months of fiscal 1996 in all
regions when compared to sales in the corresponding periods of fiscal 1995, with
the exception of third quarter sales in Europe. Sales by region as a percentage
of total sales were as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
July 28, July 30, July 28, July 30,
1996 1995 1996 1995
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
North America 29% 30% 33% 34%
Europe 9% 16% 15% 14%
Japan 26% 28% 23% 24%
Korea 21% 19% 15% 18%
Asia-Pacific 15% 7% 14% 10%
</TABLE>
7
<PAGE> 8
New orders of $931 million were received during the third quarter of fiscal
1996, versus $1,323 million in the second quarter of fiscal 1996. Orders
decreased as our customers' investment decisions were negatively impacted by
their declining profitability and excess capacity. The Company anticipates that
this market downturn is likely to continue for some time. In response to this
changing environment, the Company announced a reduction in workforce and related
consolidation of facilities for which it will incur an estimated $28-$32 million
pre-tax restructuring charge, or approximately $0.10-$0.11 per share after-tax,
during its fourth quarter of fiscal 1996. Each region in the global
semiconductor equipment market exhibits unique investment patterns which cause
regional order growth rates to vary from quarter to quarter. North American
orders increased to $338 million from $250 million; Europe increased to $214
million from $203 million; Japan decreased to $141 million from $319 million;
Korea decreased to $67 million from $337 million; and Asia-Pacific decreased to
$171 million from $214 million. Backlog at July 28, 1996 was $1,663 million,
versus $1,901 million at April 28, 1996 and $1,509 million at October 29, 1995.
For the three and nine months ended July 28, 1996, the Company's gross margin as
a percentage of sales was 47.7 and 47.8 percent, respectively, up from 45.5 and
45.8 percent for the corresponding periods of fiscal 1995. These improvements
resulted primarily from reduced cycle times, improved manufacturing efficiencies
and increased unit volume.
Operating expenses as a percentage of sales for the three and nine months ended
July 28, 1996 were 24.7 and 23.6 percent, respectively, versus 21.7 and 23.6
percent for the three and nine months ended July 30, 1995. The increase for the
three month period is primarily attributable to certain research and development
programs, costs associated with the protection of intellectual property rights
and the implementation of a worldwide communications software.
8
<PAGE> 9
Significant operations of the Company are conducted in Japanese yen, British
pounds and other foreign currencies. Forward exchange contracts and options are
purchased to hedge certain existing firm commitments and foreign currency
denominated transactions expected to occur during the next year. Gains and
losses on hedge contracts are reported as a component of the related
transaction. Because the impact of movements in currency exchange rates on
foreign exchange contracts generally offsets the related impact on the
underlying items being hedged, these financial instruments do not subject the
Company to speculative risk that would otherwise result from changes in currency
exchange rates. To date, exchange gains and losses have not had a significant
effect on the Company's results of operations.
The Company's effective tax rate for the third quarter and first nine months of
fiscal 1996 was 35 percent, consistent with the corresponding periods of fiscal
1995. Management anticipates that a 35 percent effective tax rate will continue
throughout fiscal 1996.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company's financial condition remained strong, with a ratio of current
assets to current liabilities of 3.0:1 at July 28, 1996, compared to 2.7:1 at
October 29, 1995. During the first nine months of fiscal 1996, cash, cash
equivalents and short-term investments increased $18 million. Cash provided by
operations of $417 million resulted primarily from net income (plus non-cash
depreciation and amortization charges) of $630 million and an increase in
accounts payable and accrued expenses of $143 million, offset by an increase of
$293 million in accounts receivable and inventories and a decrease in income
taxes payable of $85 million. The principal uses of cash were for net property,
plant and equipment acquisitions of $365 million, the majority of which relate
to facilities expansion, and net debt repayments of $26 million.
At July 28, 1996, the Company's principal sources of liquidity consisted of $788
million of cash, cash equivalents and short-term investments, $194 million of
unissued notes registered under the Company's medium-term note program and $333
million of available credit facilities. The Company's liquidity is affected by
many factors, some of which are based on the normal on-going operations of the
business and others of which relate to the uncertainties of the industry and
global economies. Although the Company's cash requirements will fluctuate based
on the timing and extent of these factors, management believes that cash
generated from operations, together with its existing sources of liquidity, will
be sufficient to satisfy its liquidity requirements for the remainder of the
fiscal year.
9
<PAGE> 10
Capital expenditures are expected to approximate $500 million for fiscal 1996.
This amount includes funds for the continuation and completion of facilities
expansion and investments in demonstration and test equipment, information
systems and other capital equipment.
As of July 28, 1996, the Company is authorized to repurchase 4,470,000 shares of
its common stock in the open market. This authorization expires in March 1999.
DISCLOSURE PURSUANT TO THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
When used in this Management's Discussion and Analysis, the words "anticipate,"
"estimate," "expect" and similar expressions are intended to identify
forward-looking statements. These statements are subject to certain risks and
uncertainties, including, but not limited to, slowing growth in the demand for
semiconductors and the Company's systems and services, challenges from the
Company's competition, insufficient cost reduction programs, product pricing
pressures, continuing semiconductor device price declines and semiconductor
manufacturers' reduced capital spending, that could cause actual results to
differ materially from those projected. For more details, refer to the Company's
Form 8-K filed with the SEC on February 13, 1996. The Company undertakes no
obligation to update the information, including the forward-looking statements,
in this Form 10-Q.
10
<PAGE> 11
PART II OTHER INFORMATION
Item 1. Legal Proceedings
In the first of two lawsuits filed by the Company, captioned Applied
Materials, Inc. v. Advanced Semiconductor Materials America, Inc., Epsilon
Technology, Inc. (doing business as ASM Epitaxy) and Advanced Semiconductor
Materials International N.V. (collectively "ASM") (case no. C-91-20061-RMW),
Judge William Ingram of the United States District Court for the Northern
District of California ruled on April 26, 1994 that ASM's Epsilon I epitaxial
reactor infringed three of the Company's United States patents and issued an
injunction against ASM's use and sale of the ASM Epsilon I in the United
States. ASM has appealed the decision and the injunction has been stayed
pending the appeal only as to ASM products offered for sale as of April 1994.
The Court recently ruled that ASM's announced redesign of its reduced
pressure epitaxial reactors is not subject to this stay order. The stay order
further requires that ASM pay a fee, as security for the Company's interest,
for each Epsilon I system sold by ASM in the United States after the date of
the injunction. Judge Ronald M. Whyte of the same Court ruled that
proceedings to resolve the issues of damages, willful infringement and ASM's
counterclaims, which had been bifurcated for separate trial, will also be
stayed, pending the appeal of Judge Ingram's decision. Oral arguments
regarding this appeal were completed on June 5, 1995 before the Court of
Appeals for the Federal Circuit. The Company is awaiting the decision of the
Court of Appeals. The trial of the Company's second patent infringement
lawsuit against ASM, captioned Applied Materials, Inc. v. ASM (case no.
C-92-20643-RMW), was concluded before Judge Whyte in May 1995. On November 1,
1995, the Court issued its judgment holding that two of the Company's United
States patents were valid and infringed by ASM's reduced pressure epitaxial
reactors. ASM has appealed this decision. A permanent injunction was entered
on March 7, 1996 prohibiting ASM's use or sale of its ribbed quartz epitaxial
reactors within the United States effective June 15, 1996. ASM is allowed to
continue service and maintenance of the installed base, including the sale of
replacement chambers upon payment of a fee to the Company. On June 14, 1996,
the Court entered a stay of the permanent injunction, substantially
increasing the fees paid to the Company on ASM's sale of reduced pressure
reactors, and permitting ASM's continued sales of such reactors at an average
of one (1) reactor per month, until a decision is reached in the Court of
Appeals for the Federal Circuit.
11
<PAGE> 12
In a separate lawsuit filed by ASM against the Company involving one patent
relating to the Company's single wafer epitaxial product line, captioned ASM
America, Inc. v. Applied Materials, Inc. (case no. C-93-20853-RMW), the Court
granted three motions for summary judgment in favor of the Company which
eliminate the Company's liability on this patent. The Company's counterclaims
against ASM for inequitable conduct were tried by the Court in July 1996. No
decision has been made yet. ASM has not indicated whether it intends to
appeal this matter. A separate action severed from ASM's case, captioned ASM
America, Inc. v. Applied Materials, Inc. (case no. C-95-20169-RMW), involves
one United States patent which relates to the Company's Precision 5000
product line. Trial has been scheduled for December 9, 1996, and discovery is
proceeding. In these cases, ASM seeks injunctive relief, damages and such
other relief as the Court may find appropriate.
Further, the Company has filed a Declaratory Judgment action against ASM,
captioned Applied Materials, Inc. v. ASM (case no. C-95-20003-RMW),
requesting that an ASM United States patent be held invalid and not infringed
by the Company's single wafer epitaxial product line. Discovery is
proceeding, and no trial date has been set. On April 10, 1996, the Court
denied ASM's motion for summary judgment and granted the Company's motion for
summary judgment finding several independent grounds why the Company's
reactors do not literally infringe ASM's patent. With this ruling, the
Company's liability has been substantially eliminated on this patent. ASM has
not indicated whether it intends to appeal this decision. On July 7, 1996,
ASM filed a lawsuit, captioned ASM America, Inc. v. Applied Materials, Inc.
(case no. C95-20586-RMW), concerning alleged infringement of a United States
patent by susceptors in chemical vapor deposition chambers. Discovery has
commenced and no trial date has been set.
In September 1994, General Signal Corporation filed a lawsuit against the
Company (case no. 94-461-JJF) in the United States District Court, District
of Delaware. General Signal alleges that the Company infringes five of
General Signal's United States patents by making, using, selling or offering
for sale multi-chamber wafer fabrication equipment, including for example,
the Precision 5000 series machines. General Signal seeks an injunction,
multiple damages and costs, including reasonable attorneys' fees and
interest, and such other relief as the court may deem appropriate. This
lawsuit is currently in active discovery, and a trial date has been set for
January 20, 1997.
12
<PAGE> 13
In January 1995, the Company filed a lawsuit against Novellus Systems, Inc.
in the United States District Court, Northern District of California (case
no. C-95-0243-MMC). This lawsuit alleges that Novellus' Concept One, Concept
Two, and Maxxus F TEOS systems infringe the Company's United States patent
relating to the TEOS-based, plasma enhanced CVD process for silicon oxide
deposition. The lawsuit seeks an injunction, damages and costs, including
reasonable attorneys' fees and interest, and such other relief as the court
may deem appropriate. Damages and counterclaims have been bifurcated for
separate trial. A jury trial has been scheduled for November 4, 1996, before
Judge Charles A. Legge. On September 15, 1995, the Company filed another
lawsuit against Novellus alleging that Novellus' newly announced blanket
tungsten interconnect process infringes the Company's United States patent
relating to a tungsten CVD process. The Company also sought a declaration
that a Novellus United States patent for a gas purge mechanism is not
infringed by the Company and/or is invalid. Novellus answered by denying the
allegations and counterclaimed by alleging that the Company's plasma enhanced
TEOS CVD systems infringe Novellus' United States patents concerning gas
purge and gas debubbler mechanisms. Novellus also filed a separate lawsuit as
a plaintiff before the same court which contains the same claims as those
stated in Novellus' defense of the Company's lawsuit. Both cases have been
assigned to Judge Legge. Discovery has commenced, and trial has been set for
August 1997.
In the normal course of business, the Company from time to time receives and
makes inquiries with regard to possible patent infringement. Management
believes that it is unlikely that the outcome of these lawsuits or of the
patent infringement inquiries will have a material adverse affect on the
Company's financial position or results of operations.
13
<PAGE> 14
Item 5. Other Information
The ratio of earnings to fixed charges for the nine months ended July 28,
1996 and July 30, 1995, and for each of the last five fiscal years, was as
follows:
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
July 28, July 30, Fiscal Year
--------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
23.68x 16.43x 21.25x 13.37x 7.61x 3.63x 3.02x
====== ======= ====== ====== ===== ===== =====
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits are numbered in accordance with the Exhibit Table of
Item 601 of Regulation S-K:
10.23 Amendment to Employment Agreement with James Bagley,
dated May 17, 1996.
27.0 Financial Data Schedule: filed electronically
b) Report on Form 8-K was filed on May 14, 1996. The report
contains the Company's financial statements for the period
ended April 28, 1996, as attached to its press release dated
May 14, 1996.
14
<PAGE> 15
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
APPLIED MATERIALS, INC.
September 10, 1996 By: \s\Gerald F. Taylor
----------------------------------
Gerald F. Taylor
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
By: \s\Michael K. O'Farrell
----------------------------------
Michael K. O'Farrell
Corporate Controller
(Principal Accounting Officer)
15
<PAGE> 1
CONFIDENTIAL
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment (the "Amendment"), made effective as
of May 17, 1996, to that certain Employment Agreement dated August 15, 1995 (the
"Employment Agreement") between Applied Materials, Inc., a Delaware corporation
(the "Company"), a corporation having its principal office at 3050 Bowers
Avenue, Santa Clara, California, and James W. Bagley ("Executive").
RECITALS
Executive resigned his positions as Vice Chairman
of the Board of Directors and as a member of the Board of Directors effective
May 17, 1996.
Executive is willing to continue employment by the
Company on a part-time basis upon the terms and conditions hereinafter set
forth.
The effectiveness of this Amendment is conditioned
upon its being duly authorized and approved by the Board of Directors of the
Company ("Board"), and the terms of compensation contained herein being approved
by the Stock Option and Compensation Committee ("Committee") of the Board.
<PAGE> 2
Capitalized terms used throughout this Amendment
will have the same meanings as such terms are defined in the Employment
Agreement except as may be modified herein.
This Amendment refers to and should be read in
conjunction with the Employment Agreement.
NOW, THEREFORE, in consideration of the foregoing
premises and the mutual covenants herein contained, the parties
hereto agree as follows:
1. Paragraph 1 of the Employment Agreement
(Employment) shall be unchanged.
2. Paragraph 2 of the Employment Agreement
(Position and Responsibilities) is amended to read in full as follows:
Position and Responsibilities. Effective
immediately, Executive shall serve the Company and
the Company shall employ Executive as an advisor to
the Company's Chairman of the Board on business,
management and performance issues related to the
Company, as requested by the Chief Executive
Officer.
3. Paragraph 3 of the Employment Agreement (Terms
and Duties) is amended to read in full as follows:
Terms and Duties. Executive shall continue as an
employee of this Company on an "at will" status.
The
2
<PAGE> 3
term of this Employment Agreement shall expire
at the close of business on January 3, 1997. Either
party hereto may terminate the Employment
Agreement, as amended herein, at any time, by
giving written notice of its or his election to do
so not less than 30 days prior to the effective
date of termination. Termination may be
accomplished with or without Cause.
4. Paragraph 4 of the Employment Agreement
(Compensation and Reimbursement of Expenses; Other Benefits) is hereby amended
to read in full as follows:
Compensation and Reimbursement of Expenses: Other
Benefits. The Company shall compensate Executive
during the period of employment at an annualized
base salary of $100. A bonus (not payable under the
Senior Executive Bonus Plan) shall be awarded to
Executive in December 1996 using the same formula
and parameters as were used to compute the fiscal
year OCEO bonuses. The bonus payment to Executive
for fiscal year 1996 will be computed on the salary
earned (both paid and deferred) for fiscal 1996
and, if the Executive elects in accordance with the
Executive Deferred Compensation Plan, will be
deferred in accordance with Executive's
3
<PAGE> 4
election. Executive will be permitted to defer
compensation under the Company's Executive Deferred
Compensation Plan and will retain stock options
held by him, but Executive will not be eligible for
any other Company-sponsored employee benefit plans
or compensation arrangements.
5. Paragraph 5 of the Employment Agreement
(Obligations of Executive During and After Employment) shall be unchanged.
6. Paragraph 6 of the Employment Agreement
(Termination by Company) is superseded in its entirety by this Amendment.
7. Paragraph 7 of the Employment Agreement
(Termination by Executive) is superseded in its entirety by this Amendment.
8. Paragraph 8 of the Employment Agreement
(Arbitration) shall be unchanged.
9. Paragraph 9 of the Employment Agreement (Notice)
shall be unchanged.
10. Paragraph 10 of the Employment Agreement (Non-
Waiver. Complete Agreement, Governing Law.) shall be unchanged.
4
<PAGE> 5
11. Paragraph 11 of the Employment Agreement
(Severability) shall be unchanged.
12. Paragraph 12 (Counterparts) of the Employment
Agreement shall be unchanged.
13. Paragraph 13 (Publicity) of the Employment
Agreement is hereby terminated.
The Executive and the Company have executed this
Amendment, effective as of the date first above written.
APPLIED MATERIALS, INC.
a Delaware Corporation
By
--------------------------------------
James C. Morgan, Chairman of the
Board of Directors and
Chief Executive Officer
THE EXECUTIVE
--------------------------------------
James W. Bagley
5
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTER ENDED JULY 28, 1996.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-27-1996
<PERIOD-END> JUL-28-1996
<CASH> 238,848
<SECURITIES> 548,736
<RECEIVABLES> 973,984
<ALLOWANCES> 0
<INVENTORY> 533,331
<CURRENT-ASSETS> 2,578,333
<PP&E> 1,190,632
<DEPRECIATION> 309,314
<TOTAL-ASSETS> 3,485,253
<CURRENT-LIABILITIES> 859,414
<BONDS> 280,499
0
0
<COMMON> 1,798
<OTHER-SE> 2,290,906
<TOTAL-LIABILITY-AND-EQUITY> 3,485,253
<SALES> 1,115,424
<TOTAL-REVENUES> 1,115,424
<CGS> 583,448
<TOTAL-COSTS> 583,448
<OTHER-EXPENSES> 128,262
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,812
<INCOME-PRETAX> 260,101
<INCOME-TAX> 91,035
<INCOME-CONTINUING> 169,066
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 169,066
<EPS-PRIMARY> 0.92
<EPS-DILUTED> 0.92
</TABLE>
