Novellus Sys has a market cap of $3.12 billion; its shares were traded at around $45.24 with a P/E ratio of 15.6 and P/S ratio of 2.3.
Highlight of Business Operations:The statement in Item 1. Business Competition regarding our belief as to our ability to compete favorably in our Semiconductor Group, which statement is subject to various risks and uncertainties, including, among others, the greater financial, marketing, technical or other resources, broader product lines, greater customer service capabilities and larger and more established sales organizations and customer bases that some of our competitors possess; future competition from new market entrants from overseas and domestic sources; our competitors improvement of the design and performance of their products that may offer superior price or performance features as compared to our products and our ability to successfully select, develop, manufacture and market our new products or enhance our existing products;
We focus on certain key financial data to manage our business. Net sales, gross profit, net income, and net income per share are the primary measures we use to monitor performance. We also use certain financial measures that are not in accordance with U.S. generally accepted accounting principles (GAAP), such as shipments and net orders to assess business trends and performance. We discuss these non-GAAP measures because we believe they assist investors in assessing certain business trends in the same way that these trends are analyzed by management. Shipments consist of products shipped to customers, without regard to net sales adjustments such as deferrals associated with customer acceptance. Net orders, which in our industry are also referred to as bookings, consist of current period orders less current period cancellations and other adjustments. Shipments and net orders are used to forecast and plan future operations. We do not report orders for systems with delivery dates more than 12 months from the latest balance sheet date.
We expect net orders to fluctuate due to the cyclical nature of our business. The receipt of net orders in a particular quarter affects revenue in subsequent quarters. Net orders typically result in revenue either at shipment and transfer of title or upon customer acceptance of the equipment. Our revenue recognition policy, as discussed in our Critical Accounting Policies below, addresses the distinction between the revenue recognized upon shipment and transfer of title and the revenue recognized upon customer acceptance. Equipment generally ships within two to six months of receiving the related order, and if applicable, customer acceptance is typically received one to six months after shipment. These time lines are general estimates and actual times may vary depending on varying circumstances.
Gross margin in 2010 was 49%, an increase of 11 percentage points compared to 2009 gross margin of 38%. This improvement in gross margin was driven by economies of scale from manufacturing and logistics infrastructure due to the 124% increase in shipments and favorable product mix. Lower inventory write-downs, including sales of previously written-down inventory, accounted for 2 percentage points of the total increase in gross margin compared to 2009.
Accounts receivable, net decreased $68.3 million, or 27%, as of December 31, 2011 compared with December 31, 2010 due to lower shipment volume in the second half of 2011 as compared to 2010. However, average Accounts receivable, net in 2011 increased by $40.9 million from 2010, while net sales remained flat year over year which increased DSO from 52 days in 2010 to 63 days in 2011.
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