SOURCE: Novellus Systems, Inc.

Novellus Systems, Inc.

October 26, 2011 16:05 ET

Novellus Systems Reports Third Quarter Results

SAN JOSE, CA--(Marketwire - Oct 26, 2011) - Novellus Systems, Inc. (NASDAQ: NVLS) today reported operating results for its third quarter ended September 24, 2011. Net sales for the third quarter were $306.7 million, down $43.5 million or 12.4 percent from second quarter 2011 net sales of $350.2 million, and down $60.5 million or 16.5 percent from third quarter 2010 net sales of $367.2 million. Net income for the third quarter was $51.1 million, or $0.73 per diluted share, down $13.6 million from second quarter 2011 net income of $64.7 million, or $0.79 per diluted share, and down $25.2 million from third quarter 2010 net income of $76.3 million, or $0.82 per diluted share.

Bookings in the third quarter of 2011 were $226.9 million, down $84.7 million or 27.2 percent from second quarter 2011 bookings of $311.6 million. Third quarter shipments of $301.6 million were down $57.7 million or 16.1 percent from $359.3 million in the second quarter of 2011. (1)

Cash, cash equivalents, and short-term investments at the end of the third quarter were $736.6 million, a decrease of $75.8 million or 9.3 percent from the second quarter 2011 ending balance of $812.4 million. Long-term investments and non-current restricted cash and cash equivalents at the end of the third quarter were $186.0 million, a decrease of $2.8 million or 1.5 percent from the second quarter 2011 ending balance of $188.8 million. During the third quarter of 2011, we repurchased 5.2 million shares of our common stock at an average price of $29.19 per share, for $150.6 million. Cash flows from operations during the third quarter of 2011 were $99.7 million, up $4.5 million or 4.7 percent from $95.2 million in the second quarter of 2011, and up $17.9 million or 21.9 percent from $81.8 million in the third quarter of 2010.

Richard S. Hill, Chairman and Chief Executive Officer, said, "The current global market volatility has affected capital intensive business investment but we are optimistic that the underlying demand for technology products will enable us to profitably ride through this period of uncertainty." Hill added, "We remain confident that our investments in Novellus' core products, and our investments in new technologies to support the enabling processing trends in 3-dimensional NAND, advanced logic, and advanced packaging are the right technologies at the right time. We believe this will allow us to drive revenue growth and profitability for the long term."

"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of 1995:
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including the statements regarding (i) our belief that the underlying demand for technology products will enable us to profitably ride through this period of uncertainty; (ii) our investments in our core products and in new technologies are the right technologies at the right time, and our belief that this will allow us to drive revenue growth and profitability for the long term; and (iii) our belief in the future of 3-dimensional NAND, advanced logic, and advanced packaging. Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those contemplated by such statements. These risks and uncertainties include but are not limited to (i) disruptions in the economy or the specific markets in which we operate; (ii) our ability to manage costs of operation; (iii) increased competition from new competitors or current competitors with new products; (iv) our ability to maintain customer satisfaction; (v) our continued efforts in product development; (vi) demand and growth in the semiconductor industry; and (vii) other risks indicated in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K, and any amendments to such reports. Forward-looking statements are made and based on information available to us on the date of this press release. We do not assume, and expressly disclaim, any obligation to update this information.

About Novellus:
Novellus Systems, Inc. (NASDAQ: NVLS) is a leading provider of advanced process equipment for the global semiconductor industry. The Company's products deliver value to customers by providing innovative technology backed by trusted productivity. An S&P 500 company, Novellus is headquartered in San Jose, CA with subsidiary offices across the globe. For more information please visit www.novellus.com.

(1) Bookings and shipments are non-GAAP measures; they are not in accordance with or an alternative for U.S. GAAP (generally accepted accounting principles) and may be different from similar measures used by other companies. For more information regarding non-GAAP measures, please see footnote (2).
NOVELLUS SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended
(In thousands, except per share amounts)
(Unaudited)
September 24, 2011 June 25, 2011 September 25, 2010 September 24, 2011 September 25, 2010
Net sales $ 306,731 $ 350,223 $ 367,203 $ 1,070,139 $ 964,801
Cost of sales 158,824 173,913 186,774 537,644 493,468
Gross profit 147,907 176,310 180,429 532,495 471,333
% 48.2 % 50.3 % 49.1 % 49.8 % 48.9 %
Selling, general and administrative 44,364 47,378 46,426 141,082 134,509
Research and development 47,827 47,270 44,271 141,818 124,747
Restructuring charges (benefits), net (1,258 ) 141 240 (936 ) 657
Total operating expenses 90,933 94,789 90,937 281,964 259,913
% 29.6 % 27.1 % 24.8 % 26.3 % 26.9 %
Income from operations 56,974 81,521 89,492 250,531 211,420
% 18.6 % 23.3 % 24.4 % 23.4 % 21.9 %
Interest income 1,340 1,484 1,549 4,321 5,625
Interest expense (5,979 ) (3,253 ) (411 ) (9,658 ) (1,037 )
Other income (expense) 2,785 (1,236 ) (1,270 ) 1,195 (998 )
Income before income taxes 55,120 78,516 89,360 246,389 215,010
Provision for income taxes 4,038 13,783 13,095 34,216 34,181
Net income $ 51,082 $ 64,733 $ 76,265 $ 212,173 $ 180,829
Net income per share:
Basic $ 0.74 $ 0.81 $ 0.83 $ 2.67 $ 1.93
Diluted $ 0.73 $ 0.79 $ 0.82 $ 2.60 $ 1.90
Shares used in basic per share calculation 68,883 80,068 91,512 79,401 93,833
Shares used in diluted per share calculation 70,379 82,074 92,859 81,464 94,986
NOVELLUS SYSTEMS, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (2)
Three Months Ended Nine Months Ended
(In thousands, except per share amounts)
(Unaudited)
September 24, 2011 June 25, 2011 September 25, 2010 September 24, 2011 September 25, 2010
Gross profit - GAAP $ 147,907 $ 176,310 $ 180,429 $ 532,495 $ 471,333
% of sales 48.2 % 50.3 % 49.1 % 49.8 % 48.9 %
Adjustment for:
Consolidation of IAG manufacturing in Germany -- -- 2,474 -- 2,474
Reductions in workforce -- -- -- -- 126
Consolidation of semiconductor manufacturing in Oregon -- -- -- -- 484
Gross profit excluding certain charges and benefits $ 147,907 $ 176,310 $ 182,903 $ 532,495 $ 474,417
% of sales 48.2 % 50.3 % 49.8 % 49.8 % 49.2 %
Operating expenses - GAAP $ 90,933 $ 94,789 $ 90,937 $ 281,964 $ 259,913
% of sales 29.6 % 27.1 % 24.8 % 26.3 % 26.9 %
Adjustment for:
Supplier settlement 2,350 -- -- 2,350 --
Consolidation of IAG manufacturing in Germany -- -- (2,386 ) -- (2,386 )
Reductions in workforce (1,962 ) -- -- (1,962 ) (385 )
Consolidation of semiconductor manufacturing in Oregon -- -- -- -- (390 )
Restructuring charges 1,258 (141 ) (240 ) 936 (657 )
Legal fees for Linear trial -- -- -- -- (4,428 )
Operating expenses excluding certain charges and benefits $ 92,579 $ 94,648 $ 88,311 $ 283,288 $ 251,667
% of sales 30.2 % 27.0 % 24.0 % 26.5 % 26.1 %
Operating income - GAAP $ 56,974 $ 81,521 $ 89,492 $ 250,531 $ 211,420
% of sales 18.6 % 23.3 % 24.4 % 23.4 % 21.9 %
Adjustment for:
Supplier settlement (2,350 ) -- -- (2,350 ) --
Consolidation of IAG manufacturing in Germany -- -- 4,861 -- 4,861
Reductions in workforce 1,962 -- -- 1,962 511
Consolidation of semiconductor manufacturing in Oregon -- -- -- -- 875
Restructuring charges (1,258 ) 141 240 (936 ) 657
Legal fees for Linear trial -- -- -- -- 4,428
Operating income excluding certain charges and benefits $ 55,328 $ 81,662 $ 94,593 $ 249,207 $ 222,752
% of sales 18.0 % 23.3 % 25.8 % 23.3 % 23.1 %
Income before income taxes - GAAP $ 55,120 $ 78,516 $ 89,360 $ 246,389 $ 215,010
Adjustment for:
Supplier settlement (2,350 ) -- -- (2,350 ) --
Consolidation of IAG manufacturing in Germany -- -- 4,861 -- 4,861
Reductions in workforce 1,962 -- -- 1,962 511
Consolidation of semiconductor manufacturing in Oregon -- -- -- -- 875
Restructuring charges (1,258 ) 141 240 (936 ) 657
Legal fees for Linear trial -- -- -- -- 4,428
Income before income taxes excluding certain charges and benefits $ 53,474 $ 78,657 $ 94,461 $ 245,065 $ 226,342
Provision for income taxes - GAAP $ 4,038 $ 13,783 $ 13,095 $ 34,216 $ 34,181
% of income before income taxes 7.3 % 17.6 % 14.7 % 13.9 % 15.9 %
Income tax effect of non-GAAP adjustments (1,081 ) 53 26 (960 ) 1,840
Provision for income taxes excluding certain charges and benefits $ 2,957 $ 13,836 $ 13,121 $ 33,256 $ 36,021
% of income before income taxes excluding certain charges and benefits 5.5 % 17.6 % 13.9 % 13.6 % 15.9 %
Net income - GAAP $ 51,082 $ 64,733 $ 76,265 $ 212,173 $ 180,829
Adjustment for:
Supplier settlement (2,350 ) -- -- (2,350 ) --
Consolidation of IAG manufacturing in Germany -- -- 4,861 -- 4,861
Reductions in workforce 1,962 -- -- 1,962 511
Consolidation of semiconductor manufacturing in Oregon -- -- -- -- 875
Restructuring charges (1,258 ) 141 240 (936 ) 657
Legal fees for Linear trial -- -- -- -- 4,428
Income tax effect of non-GAAP adjustments 1,081 (53 ) (26 ) 960 (1,840 )
Net income excluding certain charges and benefits $ 50,517 $ 64,821 $ 81,340 $ 211,809 $ 190,321
Net income per diluted share - GAAP $ 0.73 $ 0.79 $ 0.82 $ 2.60 $ 1.90
Adjustment for certain charges and benefits (0.01 ) 0.00 0.06 0.00 0.10
Net income per diluted share excluding certain charges and benefits $ 0.72 $ 0.79 $ 0.88 $ 2.60 $ 2.00
(2) The discussion of bookings and shipments and the presentation of gross profit, operating expenses, operating income, income before taxes, provision for income taxes, effective tax rate, net income, and net income per diluted share, set forth in the table above, each excludes certain charges and benefits and are not in accordance with U.S. GAAP and may differ from non-GAAP methods of accounting and reporting used by other companies. The non-GAAP financial measures we provide have certain limitations because they do not reflect all of the costs associated with the operation of our business as determined in accordance with GAAP. The non-GAAP measures are in addition to, and not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. We endeavor to compensate for the limitations of these non-GAAP measures by providing GAAP financial statements, descriptions of the reconciling items, and a reconciliation of the non-GAAP measures to the most directly comparable GAAP measures so that investors can appropriately incorporate the non-GAAP measures and their limitations into their analyses.
Management uses certain non-GAAP measures to evaluate operating performance. We discuss these non-GAAP measures because we believe they provide additional insight into underlying operating results and prospects for the future, allowing investors to assess certain business trends in the same way that these trends are utilized by management in its financial and operational decision making. Shipments consist of products shipped to customers, without regard to net sales adjustments such as deferrals associated with customer acceptance. Bookings consist of current period orders less current period cancellations and other adjustments. We do not report bookings for systems with delivery dates more than 12 months from the latest balance sheet date. Shipments and bookings are used to forecast and plan future operations. Further, we believe the presentation of non-GAAP measures provides investors with additional insight into underlying operating results by excluding certain charges and benefits related to (i) supplier settlements, (ii) consolidation of our IAG manufacturing in Germany, (iii) reductions in workforce, (iv) consolidation of semiconductor manufacturing in Oregon, (v) restructuring charges, and (vi) certain legal expenses. These certain charges and benefits may not be indicative of our ongoing operations or economic performance.
NOVELLUS SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands) September 24, 2011 December 31, 2010
(Unaudited) *
ASSETS
Current assets:
Cash and cash equivalents and short-term investments $ 736,609 $ 671,251
Accounts receivable, net 222,764 256,731
Inventories 216,865 208,894
Deferred taxes and other current assets 84,778 65,525
Total current assets 1,261,016 1,202,401
Property and equipment, net 205,783 218,569
Non-current restricted cash and cash equivalents 132,540 121,226
Long-term investments 53,456 68,645
Goodwill 125,468 125,043
Intangible and other assets 95,010 96,513
Total assets $ 1,873,273 $ 1,832,397
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 230,857 $ 261,318
Deferred profit 20,775 29,693
Total current liabilities 251,632 291,011
Senior convertible notes 271,291 --
Other long-term debt obligations 108,235 105,592
Long-term income taxes payable 63,073 61,381
Long-term deferred tax liabilities 169,810 3,815
Other liabilities 39,051 42,460
Total liabilities 903,092 504,259
Shareholders' equity:
Common stock 1,195,235 1,206,887
Retained earnings (accumulated deficit) and accumulated other comprehensive income (loss) (225,054 ) 121,251
Total shareholders' equity 970,181 1,328,138
Total liabilities and shareholders' equity $ 1,873,273 $ 1,832,397
* The December 31, 2010 condensed consolidated balance sheet was derived from our audited consolidated financial statements.
NOVELLUS SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 24, 2011 September 25, 2010
(In thousands)
Cash flows from operating activities:
Net income $ 212,173 $ 180,829
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 26,466 30,775
Deferred income taxes 22,859 (2,876 )
Stock-based compensation 31,307 25,706
Excess tax benefit from stock-based compensation 0 (392 )
Other non-cash charges, net 4,713 4,939
Changes in operating assets and liabilities, net (18,872 ) 9,030
Net cash provided by operating activities 278,646 248,011
Cash flows from investing activities:
Net sales, maturities and purchases of investments 33,221 (25,151 )
Capital expenditures (15,509 ) (12,916 )
Decrease (increase) in restricted cash and cash equivalents (9,590 ) 8,652
Net cash provided by (used in) investing activities 8,122 (29,415 )
Cash flows from financing activities:
Proceeds from employee stock compensation plans 112,711 7,641
Proceeds from senior convertible notes, net of issuance costs 684,250 --
Net proceeds from (repayments of) other debt obligations (72 ) 510
Repurchases of common stock (977,666 ) (161,037 )
Excess tax benefit from stock-based compensation 0 392
Net cash used in financing activities (180,777 ) (152,494 )
Effects of exchange rate changes on cash and cash equivalents 81 (262 )
Net increase in cash and cash equivalents 106,072 65,840
Cash and cash equivalents at the beginning of the period 247,055 142,047
Cash and cash equivalents at the end of the period $ 353,127 $ 207,887

Contact Information

  • Contacts:
    John Hertz
    Chief Financial Officer
    Novellus Systems, Inc.
    Phone: (408) 943-9700

    Robin Yim
    Investor Relations
    Novellus Systems, Inc.
    Phone: (408) 943-9700