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Novellus Systems Inc. Reports Operating Results (10-Q)

May 07, 2012 | About:
Jonathan D. Poland

10qk

18 followers
Novellus Systems Inc. (NVLS) filed Quarterly Report for the period ended 2012-03-31.

Novellus Sys has a market cap of $3.31 billion; its shares were traded at around $44.99 with a P/E ratio of 18.2 and P/S ratio of 2.5.

Highlight of Business Operations:

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.

Semiconductor Group net sales for the first quarter of 2012 increased by 21% compared to the fourth quarter of 2011 and decreased by 24% compared to the first quarter of 2011. These changes resulted primarily from fluctuations in demand. Sales levels in the first quarter of 2011 reflected a peak in demand for capital equipment as a result of the economic recovery occurring throughout 2010; shipments increased sequentially, peaking in the fourth quarter of 2010. Demand subsequently declined throughout 2011 as reflected in fourth quarter 2011 net sales. Net sales in the first quarter of 2012 resulted primarily from another upturn in demand, as shown by a 21% increase in shipments in the first quarter of 2012 over the fourth quarter of 2011.

IAG net sales for the first quarter of 2012 decreased by 22% compared to the fourth quarter of 2011 and increased by 30% compared to the first quarter of 2011. These changes also resulted primarily from fluctuations in demand. Sales levels for IAG in the first quarter of 2011 reflect lower relative demand, which then rose to a peak in the fourth quarter of 2011; IAG shipments increased sequentially from the first quarter of 2010 to the fourth quarter of 2011. However, net sales in the first quarter of 2012 reflected a downturn in demand for industrial products; IAG shipments decreased 23% in the first quarter 2012 over the fourth quarter 2011.

The decrease in our first-quarter effective tax rate compared to our effective tax rate for the fourth quarter of 2011 and the first quarter of 2011 was primarily driven by the mix of earnings by jurisdiction, which resulted in a lower forecasted annual rate. The effective tax rate for the first three months of 2012 was relatively constant compared to the same prior-year period.

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