<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11- K
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
(X) Annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934
For the fiscal year ended DECEMBER 31, 1996
or
( ) Transition report pursuant to Section 15(d) of the Securities Exchange
Act of 1934
For the transition period from ___________ to ___________
Commission file number 2-69114
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
Applied Materials, Inc. Employee Savings and Retirement Plan
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
APPLIED MATERIALS, INC.
3050 Bowers Avenue
Santa Clara, California 95054
Page 1 of 16
<PAGE> 2
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Administrative Committee has duly caused this annual report to be signed on its
behalf by the undersigned hereunto duly authorized.
APPLIED MATERIALS, INC.
EMPLOYEE SAVINGS AND RETIREMENT PLAN
Date: June 23, 1997 By /s/Sam Ishii
---------------------------------------
Sam Ishii
Vice President, Global Human Resources
2
<PAGE> 3
Table of Contents
<TABLE>
<CAPTION>
Page number
-----------
<S> <C>
Report of Independent Accountants 4
Financial Statements
Statements of Net Assets Available for Benefits -
December 31, 1996 and 1995 5
Statement of Changes in Net Assets Available for Benefits
with Fund Information - year ended December 31, 1996 6
Notes to Financial Statements 7-13
Schedule 27a - Schedule of Assets Held for Investment
Purposes - December 31, 1996 14
Schedule 27d - Schedule of Reportable Transactions - year ended
December 31, 1996 15
Consent of Independent Accountants (Exhibit) 16
</TABLE>
3
<PAGE> 4
Report of Independent Accountants
To the Administrative Committee of the Applied Materials, Inc. Employee
Savings and Retirement Plan:
In our opinion, the financial statements listed in the accompanying table of
contents present fairly, in all material respects, the net assets available for
benefits of the Applied Materials, Inc. Employee Savings and Retirement Plan at
December 31, 1996 and 1995, and the changes in net assets available for benefits
for the year ended December 31, 1996, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Administrative Committee; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The additional information included in
schedules 27a and 27d is presented for purposes of additional analysis and is
not a required part of the basic financial statements, but is additional
information required by ERISA. The Fund Information in the statement of changes
in net assets available for benefits is presented for purposes of additional
analysis rather than to present the changes in net assets available for benefits
of each fund. Schedules 27a and 27d and the Fund Information have been subjected
to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, are fairly stated in all material respects in
relation to the basic financial statements taken as a whole.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
San Jose, California
June 11, 1997
4
<PAGE> 5
APPLIED MATERIALS, INC.
EMPLOYEE SAVINGS AND RETIREMENT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
<TABLE>
<CAPTION>
December 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Investments, at fair value:
In shares of registered investment companies:
Fidelity Retirement Government Money Market Portfolio $ 10,956,875 $ 9,530,984
Fidelity Equity-Income Fund 24,580,294 16,591,463
Fidelity Intermediate Bond Fund 6,179,619 4,968,760
Fidelity Magellan Fund 38,643,670 33,072,888
Fidelity Contrafund 1,407,318 -
Fidelity U.S. Equity Index 1,118,592 -
PBHG Emerging Growth 3,301,389 -
Janus Worldwide 2,671,446 -
Invesco Total Return 181,190 -
Applied Materials, Inc. Common Stock 202,475,438 181,581,671
Fidelity Institutional Cash Portfolio Money Market 2,288,803 2,281,272
Participant notes receivable 7,767,076 6,116,408
------------ ------------
301,571,710 254,143,446
LIABILITIES
Forfeited matching contributions 249,072 1,220,049
------------ ------------
Net assets available for benefits $301,322,638 $252,923,397
============ ============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 6
APPLIED MATERIALS, INC.
EMPLOYEE SAVINGS AND RETIREMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
FUND A FUND B FUND C FUND D FUND E
------------ ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Additions to net assets
attributed to:
Investment income/(loss):
Interest and dividends $ 486,949 $ 1,525,627 $ - $ 379,523 $ 6,141,385
Loan interest - - - - -
Net realized and unrealized
appreciation/(depreciation)
in fair value of
investments - 2,615,596 (10,905,396) (142,714) (1,933,096)
------------ ------------ ------------- ----------- ------------
486,949 4,141,223 (10,905,396) 236,809 4,208,289
Participant contributions 2,303,030 6,100,992 18,787,147 1,781,087 11,826,893
Company and AKTA contributions:
Noncash contributions - - 5,858,151 - -
Cash contributions - - 10,044,980 - -
------------ ------------ ------------- ----------- ------------
Total additions 2,789,979 10,242,215 23,784,882 2,017,896 16,035,182
Deductions from net assets
attributed to:
Benefits paid to participants (616,103) (1,028,854) (3,835,029) (269,739) (1,600,165)
------------ ------------ ------------- ----------- ------------
Net increase prior to loans and
interfund transfers 2,173,876 9,213,361 19,949,853 1,748,157 14,435,017
Net loans issued (115,955) (214,553) (547,793) (63,612) (535,439)
Interfund transfers 338,947 (1,009,977) 1,499,238 (473,686) (8,328,796)
------------ ------------ ------------- ----------- ------------
Net increase 2,396,868 7,988,831 20,901,298 1,210,859 5,570,782
Net assets available for benefits:
Beginning of year 8,310,935 16,591,463 183,862,943 4,968,760 33,072,888
------------ ------------ ------------- ----------- ------------
End of year $ 10,707,803 $ 24,580,294 $ 204,764,241 $ 6,179,619 $ 38,643,670
============ ============ ============= =========== ============
</TABLE>
<TABLE>
<CAPTION>
FUND F FUND G FUND H FUND I FUND J NOTES TOTAL
----------- ----------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Additions to net assets
attributed to:
Investment income/(loss):
Interest and dividends $ 57,015 $ 11,070 $ 103,240 $ 158,455 $ 2,566 $ - $ 8,865,830
Loan interest - - - - - 584,586 584,586
Net realized and unrealized
appreciation/(depreciation)
in fair value of
investments (11,828) 7,479 (170,847) (105,561) 1,817 - (10,644,550)
----------- ----------- ----------- ----------- ----------- ----------- -------------
45,187 18,549 (67,607) 52,894 4,383 584,586 (1,194,134)
Participant contributions 106,397 54,615 275,979 199,170 11,518 - 41,446,828
Company and AKTA contributions:
Noncash contributions - - - - - - 5,858,151
Cash contributions - - - - - - 10,044,980
----------- ----------- ----------- ----------- ----------- ----------- -------------
Total additions 151,584 73,164 208,372 252,064 15,901 584,586 56,155,825
Deductions from net assets
attributed to:
Benefits paid to participants (130) (4,289) (10,096) (229) (130) (391,820) (7,756,584)
----------- ----------- ----------- ----------- ----------- ----------- -------------
Net increase prior to loans and
interfund transfers 151,454 68,875 198,276 251,835 15,771 192,766 48,399,241
Net loans issued (329) 1,971 10,018 6,127 1,663 1,457,902 -
Interfund transfers 1,256,193 1,047,746 3,093,095 2,413,484 163,756 - -
----------- ----------- ----------- ----------- ----------- ----------- -------------
Net increase 1,407,318 1,118,592 3,301,389 2,671,446 181,190 1,650,668 48,399,241
Net assets available for benefits:
Beginning of year - - - - - 6,116,408 252,923,397
----------- ----------- ----------- ----------- ----------- ----------- -------------
End of year $ 1,407,318 $ 1,118,592 $ 3,301,389 $ 2,671,446 $ 181,190 $ 7,767,076 $ 301,322,638
=========== =========== =========== =========== =========== =========== =============
</TABLE>
See accompanying notes to financial statements.
6
<PAGE> 7
APPLIED MATERIALS, INC.
EMPLOYEE SAVINGS AND RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Basis of Accounting
The financial statements of the Applied Materials, Inc. Employee Savings and
Retirement Plan (the Plan) are prepared using the accrual method of
accounting.
Investment Valuation
The Plan's investments are stated at fair value. The value per unit of $1.00
for the Fidelity Retirement Government Money Market Portfolio (Fund A) and
the Fidelity Institutional Cash Portfolio Money Market (included in Fund C)
have been certified by the Plan Trustee. The closing market share price as of
December 31 is used to value shares of registered investment companies and
the shares of the Company's stock included in Fund C.
Participant notes receivable are valued at cost, which approximates fair
value.
Payment of Benefits
Benefits are recorded when paid.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires the Plan administrator and trustee to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
2. The Plan
General
The Plan is a defined contribution plan covering primarily all U.S. employees
of Applied Materials, Inc. (the Company) and Applied Komatsu Technology
America, Inc. (AKTA). Employees of the Company and AKTA are eligible to
participate in the Plan after receipt of their first paycheck. The Plan
provides for retirement benefits to participants, is subject to the Employee
Retirement Income Security Act of 1974 (ERISA) and is intended to qualify for
favorable tax treatment granted to plans that meet the requirements of
sections 401(a) and (k) of the Internal Revenue Code. As a result of
favorable tax treatment, participant
7
<PAGE> 8
APPLIED MATERIALS, INC.
EMPLOYEE SAVINGS AND RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS
salary deferral contributions, Company and AKTA matching contributions and
any net earnings on these contributions generally will not be taxable to the
participant until they are distributed or withdrawn in accordance with the
terms of the Plan.
Administrative Committee
The Plan's Administrative Committee (Benefits Committee) has been appointed
by the Stock Option and Compensation Committee of the Board of Directors of
the Company to oversee the Plan and its performance on behalf of the
participants. The Benefits Committee consists of certain officers and
employees of the Company.
Plan Administrator and Trustee
Fidelity Institutional Retirement Services Company has been appointed by the
Administrative Committee to maintain individual participant accounts in which
participant contributions, Company and AKTA matching contributions and
investment results attributable to each participant are recorded. For
purposes of ERISA, the Company is the "plan administrator". The assets of the
Plan are held by Fidelity Management Trust Company (the trustee).
Termination of the Plan
The Company expects to continue the Plan indefinitely and to continue to make
contributions under the Plan. However, there is no contractual commitment
requiring the Company to continue to make these contributions to the Plan.
The Company's Board of Directors has the right to alter or terminate the Plan
at any time and for any reason, subject to the provisions of ERISA. In the
event of Plan termination, participants will become 100 percent vested in
their accounts.
Expenses of the Plan
Expenses incurred in the administration of the Plan, including legal and
trustee fees, are currently paid by the Company, and therefore are not
reflected in the financial statements of the Plan. Brokerage commissions and
other charges incurred in connection with investment transactions are paid
from fund assets.
8
<PAGE> 9
APPLIED MATERIALS, INC.
EMPLOYEE SAVINGS AND RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS
3. Contributions
General guidelines with respect to participant and Company and AKTA matching
contributions are described below. Participants, the Company and AKTA are
subject to certain Internal Revenue Code rules and regulations that may
further limit the contributions allowable.
Participant Contributions
Each participant may elect to defer from 1% to 12% of compensation (defined
as base pay plus overtime), and may change their contribution percentage as
often as they desire. Salary deferral contributions are invested at the
direction of the participant and share in the earnings and gains or losses of
each investment fund selected. Participants are always 100% vested in salary
deferral accounts.
The maximum annual salary deferral contribution was $9,500 for 1996 and will
be the same for 1997. This limitation applies in the aggregate for all
elective deferrals to all plans made by the participant during the year.
Accordingly, new participants who have made contributions to 401(k) plans
with their prior employer must aggregate all contributions for purposes of
the limit.
Company and AKTA Contributions
Participants in the Plan become eligible for Company and AKTA matching
contributions immediately upon joining the Plan. All matching contributions
are invested in the Applied Materials, Inc. Common Stock Fund (Fund C), and
cannot be transferred to other investment funds until a participant is 100%
vested and age 50, or 100% vested and has completed 10 years of service. The
Company and AKTA match 100% of participant contributions up to the first 3%
of compensation contributed, and 50% of every dollar between 4% and 6% of
compensation contributed. The Company's and AKTA's contributions are made
biweekly, and may be in the form of cash, shares of Applied Materials, Inc.
common stock or any combination thereof. The trustee will use cash
contributions to purchase shares of Applied Materials Common Stock on the
open market (at the then prevailing market price), directly from the Company,
or from other persons in private transactions. During 1996, the Company
funded a portion of its matching contribution using 279,011 shares of its
common stock having a fair market value of $5,858,151. All other
contributions were in the form of cash. The Company and AKTA can change the
matching contribution rate, subject to the limits of
9
<PAGE> 10
APPLIED MATERIALS, INC.
EMPLOYEE SAVINGS AND RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS
the Plan and the Internal Revenue Code. No changes in the matching
contribution rate were made during 1996 or 1995.
Participants become fully vested in the portion of Company or AKTA
matching contributions allocated to their accounts if employed by the
Company or AKTA upon a) normal retirement (age 65 or older), b) permanent
disability, c) death, or d) after a designated time period per the vesting
schedule. The vesting schedule is as follows:
<TABLE>
<CAPTION>
Years of Service Vested Percentage
---------------- -----------------
<S> <C>
Less than three years 0%
Three but less than four years 20%
Four but less than five years 40%
Five but less than six years 60%
Six but less than seven years 80%
Seven or more years 100%
</TABLE>
If a participant leaves the Company or AKTA prior to retirement, the portion
of his or her matching account which is not vested will be forfeited.
Forfeitures can be used to offset the Company's or AKTA's required matching
contribution, as applicable. Forfeitures in 1996 and 1995 were $1,033,170 and
$834,087, respectively.
The Plan contains a rehire provision whereby if a participant leaves the
Company or AKTA and is rehired before being separated for five consecutive
years, the forfeited portion of his or her account will be restored as of the
date of rehire.
4. Investments
The Plan permits participants to direct their prospective salary deferrals
and their existing salary deferral account balances to any of the available
investment funds, or to allocate the amounts to multiple investment funds.
During 1996, the Company expanded the investment options available to Plan
participants with the introduction of five additional funds.
10
<PAGE> 11
APPLIED MATERIALS, INC.
EMPLOYEE SAVINGS AND RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS
Certain information with respect to the ten investment funds available during
1996 is as follows:
Fund A: "Fidelity Retirement Government Money Market Portfolio" (RGMMP) -
seeks to preserve capital and liquidity while producing reasonable
interest income. Investments are in units of the Fidelity RGMMP.
RGMMP's assets are invested only in obligations issued or guaranteed
as to principal and interest by the U.S. government, its agencies or
instrumentalities.
Fund B: "Fidelity Equity-Income Fund" - seeks reasonable income with the
potential for capital appreciation by investing in income-producing
equity securities. The Fund invests in securities of varying quality,
but the fund does not expect to purchase securities of companies
without proven earnings or credit. The fund diversifies investments
among a variety of industries to help reduce overall investment risk.
Fund C: "Company Stock Fund" - invests primarily in the Company's common
stock. The Fund also buys a small amount of money market investments
so that exchanges, withdrawals and distributions can be more readily
handled.
Fund D: "Fidelity Intermediate Bond Fund" - seeks a high level of current
income by investing in corporate debt obligations, mortgage
securities, U.S. government obligations and obligations of U.S.
banks, including certificates of deposit and banker's
acceptances. The average portfolio maturity ranges from three to
ten years.
Fund E: "Fidelity Magellan Fund" - seeks long-term capital appreciation by
investing in the stocks of both well-known and lesser known companies
with above average growth potential. Securities may be of foreign,
domestic or multinational companies. The fund diversifies investments
among a variety of industries and sectors within the market to reduce
overall investment risk.
Fund F: "Fidelity Contrafund" - seeks long-term capital appreciation by
investing in securities of companies believed to be out of favor or
undervalued. The Fund invests in domestic and foreign common stocks
and securities convertible into common stock, but may purchase other
securities with potential for capital appreciation.
11
<PAGE> 12
APPLIED MATERIALS, INC.
EMPLOYEE SAVINGS AND RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS
Fund G: "Fidelity U.S. Equity Index Portfolio" - seeks current income and
capital appreciation by attempting to duplicate the composition and
total return of the Standard and Poor's 500 Index.
Fund H: "PBHG Emerging Growth Fund" - seeks long-term capital appreciation
primarily by investing in common stocks of micro and small-sized U.S.
companies with market capitalizations ranging from $10 to $250
million. At times, the Fund may be heavily concentrated in relatively
few industries.
Fund I: "Janus Worldwide Fund" - seeks long-term capital appreciation by
investing primarily in common stocks of foreign and domestic
companies of all sizes. Typically, the Fund invests in issuers from
at least five different countries (including the United States), but
may be concentrated in a single country at any point in time.
Fund J: "INVESCO Total Return Fund" - seeks high total returns through
capital growth and current income. The Fund typically invests 30% in
stocks and 30% in fixed and variable income securities (bonds), with
the remaining 40% allocated between stocks and bonds depending on
current market conditions. Investments may include stocks and
securities of foreign issuers.
Presently, Funds A, B, D, E, F and G are invested in Fidelity mutual fund and
money market shares bearing the name of the respective Funds (collectively
the "Fidelity Funds"). Funds H, I and J are invested in PBHG, Janus and
Invesco mutual fund shares, respectively. The Fidelity, PGHG, Janus and
Invesco Funds are open-end, diversified investment companies ("mutual
funds"), the shares of which are publicly held.
12
<PAGE> 13
APPLIED MATERIALS, INC.
EMPLOYEE SAVINGS AND RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS
The Company Stock Fund (Fund C) includes the Company's common stock and a
small amount of money market investments. In order to allocate the fair
market value of these components to participants with account balances, the
fund assigns units of participation. At December 31, 1996, the Fund contained
26,353,184 participation units with a net asset value per unit of $7.77. The
net asset value per unit reported on the 1996 participant account statements
dated March 31, June 30 and September 30 was $7.54, $6.60 and $5.98,
respectively.
None of the investment funds described above carries a guarantee of principal
or rate of return.
5. Loans to Plan Participants
Participants may borrow up to 50% of their vested account balance, subject to
minimum and maximum loan amounts of $1,000 and $50,000, respectively. Certain
participants, as required by law, have lower maximum permitted loan amounts.
Loans are secured by the participant's account balance and bear a fixed rate
of interest at prime plus 1% at the time of the borrowing. Interest rates on
loans outstanding at December 31, 1996 range from 7% to 10%. Loan repayments
are made by payroll deductions in equal installments over the life of the
loan, which can be a minimum of one year and a maximum of five years. Loans
are payable in full upon the participant's termination of employment from the
Company or AKTA, or the occurrence of certain other events.
6. Federal Income Tax Status of the Plan
The Company received a favorable determination letter from the Internal
Revenue Service (IRS) dated May 1996, for amendments to the Plan through such
date. The Company continues to believe that the Plan constitutes a qualified
plan and is being operated in compliance with the applicable requirements of
the Internal Revenue Code and that the trust, which forms a part of the Plan,
is exempt from income tax. The Company is not aware of any subsequent event
which could adversely affect the Plan's tax qualification. Accordingly, no
provision for Federal or State income taxes has been made in the financial
statements of the Plan.
13
<PAGE> 14
APPLIED MATERIALS, INC.
EMPLOYEE SAVINGS AND RETIREMENT PLAN
SCHEDULE 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Shares or Approximate
Principal Historical Market
Amount Cost Value
----------- ----------- ------------
<S> <C> <C> <C>
Fund A:
Fidelity Retirement Government
Money Market Portfolio 10,956,875 $ 10,956,875 $ 10,956,875
Fund B:
Fidelity Equity-Income Fund 573,904 20,394,647 24,580,294
Fund C:
Applied Materials, Inc. Common Stock 5,632,367 109,427,520 202,475,438
Fund D:
Fidelity Intermediate Bond Fund 613,057 6,254,663 6,179,619
Fund E:
Fidelity Magellan Fund 479,153 36,149,434 38,643,670
Fund F:
Fidelity Contrafund 33,388 1,420,242 1,407,318
Fund G:
Fidelity U.S. Equity Index 41,506 1,111,813 1,118,592
Fund H:
PBHG Emerging Growth 136,252 3,462,871 3,301,389
Fund I:
Janus Worldwide 79,295 2,776,802 2,671,446
Fund J:
Invesco Total Return 7,456 179,374 181,190
Fidelity Institutional Cash Portfolio Money Market 2,288,803 2,288,803 2,288,803
Participant notes with interest rates
which range from 7% to 10% 7,767,076
------------
Investments total $301,571,710
============
</TABLE>
14
<PAGE> 15
APPLIED MATERIALS, INC.
EMPLOYEE SAVINGS AND RETIREMENT PLAN
SCHEDULE 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Purchase Price and Sales Price and Historical
Current Value of Asset Current Value of Asset Cost of Net
Issuer On Transaction Date On Transaction Date Assets Sold Gain/(Loss)
- --------------------------- ---------------------- ---------------------- ------------ -----------
<S> <C> <C> <C> <C>
Fidelity Retirement Government
Money Market Portfolio $ 7,987,956 $ - $ - $ -
Fidelity Retirement Government
Money Market Portfolio - 6,562,065 6,562,065 -
Fidelity Equity Income Fund 14,297,270
Fidelity Equity Income Fund - 8,924,035 8,082,832 841,203
Applied Materials, Inc. Common Stock 53,713,400
Applied Materials, Inc. Common Stock - 21,906,706 14,414,371 7,492,335
Fidelity Magellan Fund 23,688,102
Fidelity Magellan Fund - 16,184,224 15,937,452 246,772
</TABLE>
15
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-52072) of Applied Materials, Inc. of our report
dated June 11, 1997 which appears on page 4 of this Form 11-K.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
San Jose, California
June 25, 1997
16
