Novellus Systems (NVLS) 8-K Novellus Systems Reports Results for the Second Quarter 2005

Exhibit 99.1

Contacts:	John Chenault	Matthew Grech
	Vice President and Chief Financial Officer	Vice President, Investment and Investor Relations
	Novellus Systems, Inc.	Novellus Systems, Inc.
	Phone: (408) 943-9700	Phone: (408) 943-9700

FOR IMMEDIATE RELEASE

NOVELLUS SYSTEMS REPORTS RESULTS FOR THE SECOND QUARTER 2005

SAN JOSE, Calif., July 19, 2005—Novellus Systems, Inc. (Nasdaq NM: NVLS) today reported net sales and results of operations for its second quarter ended July 2, 2005. Net sales for the quarter were $329.6 million, down 3.0 percent from $339.7 million in the first quarter of 2005 and down 2.6 percent from the second quarter 2004 net sales of $338.2 million. Net income for the second quarter of 2005 was $33.2 million or $0.24 per diluted share, up $2.8 million or 9.1 percent from the first quarter 2005 net income of $30.5 million or $0.22 per diluted share and down $4.6 million or 12.1 percent from the second quarter 2004 net income of $37.8 million or $0.25 per diluted share.

The second quarter 2004 results included a $6.1 million charge for in-process research and development associated with the acquisition of Angstron Systems, Inc. Without this charge, the second quarter 2004 net income would have been $43.9 million, or $0.29 per diluted share. The first quarter 2005 results did not include any unusual charges or benefits.

Shipments of $347.6 million in the second quarter of 2005 represent a decrease of $13.1 million or 3.6 percent from $360.7 million reported in the first quarter of 2005. Deferred revenue at the end of the second quarter of 2005 was $181.1 million, an increase of $19.5 million or 12.1 percent from $161.6 million at the end of the first quarter of 2005.

The financial measures set forth above which present net income excluding an unusual charge and revenue on a shipment basis, are not in accordance with U.S. generally accepted accounting principles (GAAP). The Company believes that these non-GAAP financial measures provide further insight into the results of ongoing operations and enhance the comparison of those results to results in other periods, because they assist shareholder understanding of the effect of an unusual charge or benefit on the quarter’s results and allow comparison to the more traditional shipment method of revenue recognition.

Cash, cash equivalents, restricted cash and short-term investments as of July 2, 2005 were $844.9 million, an increase of $1.0 million or 0.1 percent from the first quarter 2005 ending balance of $843.9 million. During

the second quarter of 2005, approximately $69.7 million was used to repurchase shares of Novellus common stock.

“We are pleased with our further gains in PVD and continue to be positive with respect to our market penetration. In addition, we’ve made meaningful progress on our operational efficiency initiatives as shown in our improved gross margin relative to the first quarter,” said Richard Hill, chairman and chief executive officer. He continued, “We believe we are well positioned with a broad product portfolio in a market that is increasingly seeking greater productivity, an area of historical strength for Novellus.”

“Safe Harbor” Statement Under the Private Securities Litigation Reform Act of 1995:

The statements regarding (i) continuing market penetration, (ii) our belief that we are well-positioned with a broad product portfolio, (iii) our belief that the market is seeking greater productivity, and (iv) our belief in our ability to increase customer productivity, as well as other matters discussed in this news release that are not purely historical data, are forward-looking statements. The forward-looking statements involve risks and uncertainties, including, but not limited to, difficulties in implementing our market penetration strategy, inaccurate assessment of the product needs of semiconductor manufacturers, inaccurate assessment of market product priorities, technical or operational difficulties with our products that negatively impact customer productivity, and other risks indicated in our filings with the Securities and Exchange Commission (SEC). Actual results could differ materially. We assume no obligation to update this information. For more details, please refer to our SEC filings, including our Annual Report on Form 10-K for the year ended December 31, 2004, our Quarterly Report on Form 10-Q for the quarter ended April 2, 2005, and our Current Reports on Form 8-K filed or furnished April 7, 2005, April 18, 2005, April 29, 2005, and May 5, 2005.

About Novellus:

Novellus Systems, Inc., an S&P 500 company, manufactures, markets and services advanced deposition, surface preparation and chemical mechanical planarization equipment for today’s advanced integrated circuits. Our products are designed for high-volume production of advanced, leading-edge semiconductor devices at the lowest possible cost. Headquartered in San Jose, Calif., with subsidiaries throughout the United States, as well as in the United Kingdom, France, Germany, the Netherlands, Ireland, Israel, India, China, Japan, Korea, Malaysia, Singapore and Taiwan, we are a publicly traded company on the Nasdaq stock exchange (Nasdaq: NVLS) and a component of the Nasdaq-100 Index^®. Additional information about Novellus is available on our home page at www.novellus.com.

NOVELLUS SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)	Three Months Ended									Six Months Ended
(Unaudited)	July 2			April 2			June 26			July 2			June 26
	2005			2005			2004			2005			2004
Net sales	$	329,585		$	339,740		$	338,219		$	669,325		$	601,081
Cost of sales		172,023			185,871			168,539			357,894			306,796
Gross profit		157,562			153,869			169,680			311,431			294,285
%		47.8	%		45.3	%		50.2	%		46.5	%		49.0	%
Operating expenses:
Selling, general and administrative		50,325			51,760			47,225			102,085			89,628
Research and development		63,512			62,048			63,471			125,560			122,428
Acquired in-process research and development		—			—			6,124			—			6,124
Legal settlement		—			—			—			—			2,500
Restructuring and other benefits		(74	)		—			—			(74	)		—
Total operating expenses		113,763			113,808			116,820			227,571			220,680
%		34.5	%		33.5	%		34.5	%		34.0	%		36.7	%
Income from operations		43,799			40,061			52,860			83,860			73,605
%		13.3	%		11.8	%		15.6	%		12.5	%		12.2	%
Other income, net		3,674			3,469			2,896			7,143			5,645
Income before income taxes		47,473			43,530			55,756			91,003			79,250
Provision for income taxes		14,242			13,059			17,945			27,301			24,758
Net income	$	33,231		$	30,471		$	37,811		$	63,702		$	54,492
Net income per share:
Basic net income per share	$	0.24		$	0.22		$	0.25		$	0.46		$	0.36
Diluted net income per share	$	0.24		$	0.22		$	0.25		$	0.45		$	0.35
Shares used in basic per share calculation		138,068			139,890			149,112			138,979			151,012
Shares used in diluted per share calculation		138,944			141,099			151,386			140,022			153,743

NOVELLUS SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(EXCLUDING CERTAIN UNUSUAL CHARGES)⁽¹⁾

(In thousands, except per share amounts)	Three Months Ended									Six Months Ended
(Unaudited)	July 2			April 2			June 26			July 2			June 26
	2005			2005			2004			2005			2004
Net sales	$	329,585		$	339,740		$	338,219		$	669,325		$	601,081
Cost of sales		172,023			185,871			168,539			357,894			306,796
Gross profit		157,562			153,869			169,680			311,431			294,285
%		47.8	%		45.3	%		50.2	%		46.5	%		49.0	%
Operating expenses:
Selling, general and administrative		50,325			51,760			47,225			102,085			89,628
Research and development		63,512			62,048			63,471			125,560			122,428
Total operating expenses		113,837			113,808			110,696			227,645			212,056
%		34.5	%		33.5	%		32.7	%		34.0	%		35.3	%
Income from operations		43,725			40,061			58,984			83,786			82,229
%		13.3	%		11.8	%		17.4	%		12.5	%		13.7	%
Other income, net		3,674			3,469			2,896			7,143			5,645
Income before income taxes		47,399			43,530			61,880			90,929			87,874
Provision for income taxes		14,220			13,059			17,945			27,279			25,483
Net income	$	33,179		$	30,471		$	43,935		$	63,650		$	62,391
Net income per share:
Basic net income per share	$	0.24		$	0.22		$	0.29		$	0.46		$	0.41
Diluted net income per share	$	0.24		$	0.22		$	0.29		$	0.45		$	0.41
Shares used in basic per share calculation		138,068			139,890			149,112			138,979			151,012
Shares used in diluted per share calculation		138,944			141,099			151,386			140,022			153,743
A reconciliation of our net income excluding certain unusual charges and benefits to our net income under U.S. generally accepted accounting principles is presented below:
Net income excluding unusual (charges) and benefits	$	33,179		$	30,471		$	43,935		$	63,650		$	62,391
Unusual (charges) and benefits:
Acquired in-process research and development		—			—			(6,124	)		—			(6,124	)
Legal settlement		—			—			—			—			(2,500	)
Restructuring and other benefit		74			—			—			74			—
Total charges and benefits		74			—			(6,124	)		74			(8,624	)
Adjustments on provision for income taxes		(22	)		—			—			(22	)		725
Net income	$	33,231		$	30,471		$	37,811		$	63,702		$	54,492

⁽¹⁾ The condensed consolidated statements of operations (excluding certain unusual charges) are intended to present our operating results, excluding certain unusual charges, benefits and related adjustments on provisions for income taxes. These condensed consolidated 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.
CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)	July 2		December 31
	2005		2004
	(Unaudited)		*
ASSETS
Current assets:
Cash and short-term investments	$	685,133	$	587,762
Accounts receivable, net		321,234		395,522
Inventories		236,220		261,046
Deferred taxes and other current assets		144,058		124,994
Total current assets		1,386,645		1,369,324
Property and equipment, net		457,519		476,492
Restricted cash		159,783		176,708
Goodwill		265,084		278,972
Intangible and other assets		112,634		100,336
Total assets	$	2,381,665	$	2,401,832
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	216,831	$	235,020
Deferred profit		74,145		71,216
Income taxes payable		19,830		14,691
Current obligations under lines of credit		11,996		3,103
Total current liabilities		322,802		324,030
Long-term debt		132,995		161,103
Other liabilities		50,732		54,865
Total liabilities		506,529		539,998
Shareholders’ equity:
Common stock		1,445,247		1,456,670
Retained earnings and accumulated other comprehensive income		429,889		405,164
Total shareholders’ equity		1,875,136		1,861,834
Total liabilities and shareholders’ equity	$	2,381,665	$	2,401,832

* The December 31, 2004 condensed consolidated balance sheet was derived from our audited consolidated financial statements.