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AMAT reduces expenses $138M:

Form 8-K for APPLIED MATERIALS INC /DE


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5-Aug-2005

Entry into Material Agreement



Item 1.01. Entry into a Material Definitive Agreement.
On August 4, 2005, the Human Resources and Compensation Committee of the Board of Directors of Applied Materials, Inc. ("Applied") approved the vesting acceleration of certain unvested, "out-of-the-money" stock options outstanding under Applied's employee stock option plans effective August 5, 2005. Vesting was accelerated for stock options that had exercise prices per share higher than the closing price of Applied common stock on August 5, 2005, which was $17.85. Stock options held by Applied's most senior executive officers, namely James C. Morgan, Michael R. Splinter, Nancy H. Handel, Franz Janker and David N.K.Wang; non-employee directors; and consultants were not included in the vesting acceleration.

This acceleration will reduce the impact of future compensation expense that Applied would otherwise be required to recognize in future consolidated statements of operations pursuant to the Financial Accounting Standards Board Statement of Financial Accounting Standards No. 123 (Revised 2004), Share-Based Payment ("SFAS 123R"). Applied will be required to implement the expense recognition provisions of SFAS 123R starting with the first quarter of its fiscal year 2006 that begins on October 31, 2005. As a result of the acceleration, Applied expects to reduce compensation expense it otherwise would be required to record by approximately $138 million on a pre-tax basis over fiscal years 2006, 2007 and 2008. The vesting acceleration of these stock options is not expected to result in a charge to earnings based on accounting principles generally accepted in the U.S. This accelerated vesting may also have a positive effect on employee morale and retention.

This report contains forward-looking statements, including those relating to the estimated reduction in compensation expense required to be recognized under SFAS 123R, the accounting treatment for the acceleration and the effect upon employees. 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, without limitation, the possibility that subsequent pronouncements or interpretations of SFAS 123R may alter the accounting treatment of stock options, as well as other risks described in Applied Materials' most recent Forms 10-Q and 10-K filed with the Securities and Exchange Commission. All forward-looking statements are based on management's estimates, projections and assumptions as of the date hereof and Applied Materials undertakes no obligation to update any such statements.