Novellus Systems Reports Third Quarter 2006 Results
Tuesday October 17, 4:05 pm ET
SAN JOSE, Calif., Oct. 17 /PRNewswire-FirstCall/ -- Novellus Systems, Inc. (Nasdaq: NVLS - News) today reported net sales and results of operations for its third quarter ended September 30, 2006. Net sales for the third quarter were $444.0 million, up $34.0 million or 8.3 percent from second quarter 2006 net sales of $410.1 million, and up $105.2 million or 31.0 percent from third quarter 2005 net sales of $338.9 million. Net income for the third quarter was $70.0 million, or $0.57 per diluted share, up $17.3 million or 32.9 percent from second quarter 2006 net income of $52.7 million, and up $46.6 million or 199.0 percent from third quarter 2005 net income of $23.4 million.
The third quarter 2006 results did not include any unusual charges or benefits. The third quarter 2005 net income would have been $28.7 million, or $0.21 per diluted share, excluding any unusual charges or benefits. The third quarter 2005 results included a pre-tax inventory write-down of $5.2 million within cost of goods sold and $6.3 million of other pre-tax costs associated with the restructuring, partially offset by a pre-tax reversal of $3.0 million of a previously recorded restructuring accrual. A reconciliation of pro forma operating results and U.S. generally accepted accounting principals ("GAAP") results is included in the financial statements below.
Bookings in the third quarter were $470.3 million, up 2.8 percent over second quarter 2006 bookings of $457.5 million. Shipments of $414.2 million in the third quarter represent a decrease of $43.1 million or 9.4 percent from $457.3 million reported for the second quarter 2006. Deferred revenue at the end of the third quarter was $148.6 million, a decrease of $29.8 million or 16.7 percent from $178.5 million at the end of the second quarter of 2006.
The financial measures set forth above that present net income excluding certain charges and benefits, revenue on a shipments basis and bookings, are not in accordance with GAAP. The Company believes that these non-GAAP financial measures provide further insight into the results of operations and enhance the comparability of those results to results in prior periods because they assist shareholder understanding of the effects of certain charges and benefits on the quarter's results.
Cash, cash equivalents, restricted cash and short-term investments as of September 30, 2006 were $807.6 million, an increase of $136.6 million or 20.3 percent from the second quarter of 2006 ending balance of $671.1 million.
"We are pleased with our continued progress to improve our operational and financial results in the third quarter," said Richard S. Hill, chairman of the board and CEO. "Our reported Net Profit after Tax in the third quarter has exceeded our target model of 15%, resulting from the initiatives we have taken to strengthen our product portfolio and improve our financial operating model."
"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 continued progress to improve our operational and financial results and (ii) our initiatives to strengthen our product portfolio and improve our financial operating model, as well as other matters discussed in this news release that are not purely historical data, are forward-looking statements. 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, inaccurate assessment of the performance metrics' usefulness in understanding the Company's ongoing operations; quarterly fluctuations in customer demand and the timing and volume of orders and shipments, whether due to economic and geopolitical conditions, competition, pricing pressures, or other factors; inaccurate projections regarding future capacity expansion in the semiconductor industry; unanticipated economic downturns; weakening demand for our products; failure of our products to effectively and timely respond to industry developments and customer demands, and other risks indicated in our filings with the Securities and Exchange Commission (SEC), including our Annual Report on Form 10-K for the year ended December 31, 2005, our Quarterly Reports on Form 10-Q for the quarters ended April 1, 2006 and July 1, 2006 and our Current Reports on Form 8-K and 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. 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, Calif. with subsidiary offices across the globe. For more information please visit www.novellus.com
NOVELLUS SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands,
except per share
amounts) Three Months Ended Nine Months Ended
(Unaudited) Sept. 30 July 1 Oct. 1 Sept. 30 Oct. 1
2006 2006 2005 2006 2005
Net sales $444,032 $410,073 $338,878 $1,220,011 $1,008,203
Cost of sales 217,507 205,309 191,684 621,182 549,578
Gross profit 226,525 204,764 147,194 598,829 458,625
% 51.0% 49.9% 43.4% 49.1% 45.5%
Operating expenses:
Selling, general
and administrative 67,664 66,311 53,365 192,457 155,450
Research and
development 60,645 63,298 61,263 187,726 186,823
Restructuring and
other charges
(benefits) - - 3,361 12,629 3,287
Legal settlement - - - 3,250 -
Total operating
expenses 128,309 129,609 117,989 396,062 345,560
% 28.9% 31.6% 34.8% 32.5% 34.3%
Income from
operations 98,216 75,155 29,205 202,767 113,065
% 22.1% 18.3% 8.6% 16.6% 11.2%
Other income, net 9,574 7,611 2,405 23,264 9,548
Income before income
taxes and cumulative
effect of a change
in accounting
principle 107,790 82,766 31,610 226,031 122,613
Provision for income
taxes 37,770 30,061 8,195 79,537 35,496
Income before
cumulative effect
of a change
in accounting
principle 70,020 52,705 23,415 146,494 87,117
Cumulative effect of
a change in
accounting
principle, net of
tax - - - 948 -
Net income $70,020 $52,705 $23,415 $147,442 $87,117
Net income per
share:
Basic
Income before
cumulative
effect of a
change in
accounting
principle $0.57 $0.42 $0.17 $1.16 $0.63
Cumulative effect
of a change in
accounting
principle, net
of tax - - - 0.01 -
Basic net income
per share $0.57 $0.42 $0.17 $1.17 $0.63
Diluted
Income before
cumulative
effect of a
change in
accounting
principle $0.57 $0.42 $0.17 $1.15 $0.62
Cumulative effect
of a change in
accounting
principle, net
of tax - - - 0.01 -
Diluted net
income per share $0.57 $0.42 $0.17 $1.16 $0.62
Shares used in basic
per share
calculation 122,150 125,124 137,848 126,125 138,602
Shares used in
diluted per share
calculation 123,357 125,910 138,895 127,177 139,646
NOVELLUS SYSTEMS, INC.
RECONCILIATION OF THE STATEMENTS OF OPERATIONS
(EXCLUDING CERTAIN CHARGES AND BENEFITS) (1)
(In thousands, except per
share amounts) Three Months Ended Nine Months Ended
(Unaudited) Sept. 30 July 1 Oct. 1 Sept. 30 Oct. 1
2006 2006 2005 2006 2005
Net income excluding
certain charges and
benefits $70,020 $52,705 $28,686 $156,260 $92,336
Charges and benefits:
Cumulative effect of a
change in
accounting principle - - - 1,542 -
Restructuring and other
charges benefits - - (3,361) (12,629) (3,287)
Inventory write-down - - (5,250) - (5,250)
Legal settlement - - - (3,250) -
Total charges and
benefits - - (8,611) (14,337) (8,537)
Adjustments on
provision for income
taxes - - 3,340 5,519 3,318
Net income $70,020 $52,705 $23,415 $147,442 $87,117
Net income per diluted
share excluding
certain charges and
benefits $0.57 $0.42 $0.21 $1.23 $0.66
Charges and benefits:
Cumulative effect of a
change in
accounting principle - - - 0.01 -
Restructuring and other
charges benefits - - (0.02) (0.10) (0.02)
Inventory write-down - - (0.04) - (0.04)
Legal settlement - - - (0.03) -
Adjustments on
provision for income
taxes - - 0.02 0.05 0.02
Net income per diluted
share $0.57 $0.42 $0.17 $1.16 $0.62
(1) The reconciliation of the statements of operations (excluding certain charges and benefits) are intended to present our operating results, excluding certain charges, benefits and related adjustments on provisions for income taxes. The reconciliation of the statements of operations are not in accordance with or an alternative for U.S. generally accepted accounting principles and may be different from similar measures by other companies.
NOVELLUS SYSTEMS, INC.
SCHEDULE OF SHARE-BASED COMPENSATION
(In thousands) Three Months Ended Nine Months Ended
(Unaudited) Sept. 30 July 1 Oct. 1 Sept. 30 Oct. 1
2006 2006 2005 2006 2005
(1) (3) (2) (1) (2)
Cost of sales $400 $538 $76 $1,246 $472
Selling, general and
administrative 5,516 5,590 225 16,545 1,390
Research and development 2,741 2,664 136 8,466 837
Total share-based
compensation expenses 8,657 8,792 437 26,257 2,699
Benefit from income taxes 3,333 3,385 168 10,109 1,039
Net share-based compensation
expenses $5,324 $5,407 $269 $16,148 $1,660
(1) Amounts include amortization expense related to stock options of
$6.3 million and $19.2 million, employee stock purchase plan of $0.5
million and $1.7 million, and restricted stock awards of $1.7
million and $5.2 million for the three and nine months ended
September 30, 2006, respectively.
(2) Amounts include amortization expense related to restricted stock
awards of $0.4 million and $2.7 million for the three and nine
months ended October 1, 2005, respectively.
(3) Amounts include amortization expense related to stock options of
$6.5 million, employee stock purchase plan of $0.6 million, and
restricted stock awards of $1.7 million.
NOVELLUS SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands) September 30, December 31,
2006 2005
(Unaudited) *
ASSETS
Current assets:
Cash and short-term investments $662,788 $649,240
Accounts receivable, net 410,512 397,534
Inventories 198,425 193,787
Deferred taxes and other current
assets 127,520 122,951
Total current assets 1,399,245 1,363,512
Property and equipment, net 369,839 423,749
Restricted cash 144,857 140,212
Goodwill 259,838 255,584
Intangible and other assets 112,326 107,192
Total assets $2,286,105 $2,290,249
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities $268,099 $253,984
Deferred profit 74,506 68,718
Income taxes payable 7,417 5,898
Current obligations under lines
of credit 24,681 15,744
Total current liabilities 374,703 344,344
Long-term debt 127,010 124,858
Other liabilities 43,469 41,764
Total liabilities 545,182 510,966
Shareholders' equity:
Common stock 1,341,580 1,393,805
Retained earnings and accumulated
other
comprehensive income 399,343 385,478
Total shareholders' equity 1,740,923 1,779,283
Total liabilities and shareholders'
equity $2,286,105 $2,290,249
* The December 31, 2005 condensed consolidated balance sheet was derived
from our audited consolidated financial statements.
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Source: Novellus Systems, Inc. |
