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EXHIBIT 99.1
CONTACTS: Kevin S. Royal 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 THIRD QUARTER 2004 RESULTS
SAN JOSE, Calif., October 13, 2004--Novellus Systems, Inc. (Nasdaq: NVLS)
today reported net sales and results of operations for its third quarter ended
September 25, 2004. Net sales for the quarter were $415.9 million, up 23.0
percent from $338.2 million in the second quarter of 2004 and up 88.1 percent
from the third quarter 2003 net sales of $221.1 million. Net income for the
quarter was $64.7 million or $0.45 per diluted share, up $26.9 million or 71.0
percent from the second quarter 2004 net income of $37.8 million or $0.25 per
diluted share compared with a third quarter 2003 net loss of $97.6 million or
($0.64) per diluted share.
The current quarter results include, in other income, net, a cash receipt of
$8.0 million and, in selling, general and administrative, the reversal of $8.1
million previously accrued as a result of the settlement of litigation with
Applied Materials, Inc. The quarter results also include a pre-tax charge of
$2.9 million related to the settlement of litigation with Semitool, Inc. and the
reversal of a previously recorded restructuring accrual of $0.9 million. Without
these net benefits, third quarter net income would have been $54.7 million, or
$0.38 per diluted share. In comparison, results for the second quarter of 2004
included a $6.1 million charge for acquired in-process research and development
associated with the acquisition of Angstron Systems, Inc. Without this charge,
second quarter net income would have been $43.9 million, or $0.29 per diluted
share.
Last year's third quarter results included an after-tax charge of $62.8 million
for a cumulative effect of a change in accounting principle related to the
consolidation of certain properties previously accounted for as synthetic
leases, a $59.8 million charge for restructuring and inventory write-down and a
litigation settlement of $2.7 million. Without these charges, net income for the
third quarter of 2003 would have been $6.1 million, or $0.04 per diluted share.
Shipments of $382.2 million in the current quarter represent an increase of
$16.2 million or 4.4 percent from $366.1 million reported in the second quarter
of 2004. Deferred revenue at the end of the quarter was $147.4 million, a
decrease of $33.7 million or 18.6 percent from $181.1 million at the end of the
second quarter of 2004.
The financial measures set forth above, which present net income excluding
unusual charges and benefits and revenue on a shipments 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 comparability of those results to results in prior periods because
they assist shareholder understanding of the effects of unusual charges and
benefits on the quarter's results and allow comparability to revenue recognition
on a shipments basis.
Cash, cash equivalents, restricted cash and short-term investments as of
September 25, 2004 were $688.0 million, a decrease of $194.3 million or 22.0
percent from the second quarter 2004 ending balance of $882.3 million. During
the third quarter of 2004, approximately $219.2 million was used to repurchase
common shares.
"We saw a significant weakening in our bookings outlook in the month of
September. We believe this is a direct result of customer cautiousness stemming
from the well-discussed inventory correction that is occurring in the
semiconductor industry," said Richard S. Hill, chairman and chief executive
officer of Novellus Systems, Inc. "Despite this near term choppiness, we remain
confident in our relative product positioning within the semiconductor equipment
industry as well as in the longer term prospects for our industry."
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995:
The statements regarding the Company's (i) belief that its weakening bookings
outlook results from customer cautiousness related to the semiconductor industry
inventory correction, (ii) confidence in its product positioning relative to
that of its competitors, and (iii) confidence in the longer term prospects of
the semiconductor equipment industry, 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, misattribution of the Company's weakening
bookings outlook to an industry inventory correction, inaccurate assessment of
the product needs of semiconductor manufacturers, a long-term downturn in the
semiconductor industry, 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, 2003, our Quarterly Reports on Form 10-Q
for the quarters ended March 27, 2004 and June 26, 2004, and our Current Reports
on Form 8-K filed July 12, 2004, September 10, 2004 and September 24, 2004.
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, Italy, 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(R). Additional
information about Novellus is available on our home page at www.novellus.com.
NOVELLUS SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------------------- --------------------------
(In thousands, except per share amounts) SEPTEMBER 25 JUNE 26 SEPTEMBER 27 SEPTEMBER 25 SEPTEMBER 27
(Unaudited) 2004 2004 2003 2004 2003
- --------------------------------------------------------------- ------------- ---------- ------------ ------------ -------------
Net sales $ 415,935 $ 338,219 $ 221,099 $1,017,016 $ 698,559
Cost of sales 214,824 168,539 162,323 521,620 424,647
------------ --------- ----------- ---------- -----------
Gross profit 201,111 169,680 58,776 495,396 273,912
% 48.4% 50.2% 26.6% 48.7% 39.2%
Operating expenses:
Selling, general and administrative 49,585 47,225 40,123 139,213 127,197
Research and development 68,202 63,471 59,858 190,630 173,374
Restructuring and other charges (benefits) (923) - 15,838 (923) 15,838
Acquired in-process research and development - 6,124 - 6,124 -
Legal settlement 2,900 - 2,691 5,400 2,691
------------ --------- ----------- ---------- -----------
Total operating expenses 119,764 116,820 118,510 340,444 319,100
% 28.8% 34.5% 53.6% 33.5% 45.7%
Income (loss) from operations 81,347 52,860 (59,734) 154,952 (45,188)
% 19.6% 15.6% -27.0% 15.2% -6.5%
Other income, net 9,726 2,896 2,722 15,371 13,911
------------ --------- ----------- ---------- -----------
Income (loss) before income taxes 91,073 55,756 (57,012) 170,323 (31,277)
Provision (benefit) for income taxes 26,411 17,945 (22,224) 51,169 (15,791)
------------ --------- ----------- ---------- -----------
Income (loss) before cumulative effect of a change
in accounting principle 64,662 37,811 (34,788) 119,154 (15,486)
Cumulative effect of a change in accounting principle,
net of tax - - (62,780) - (62,780)
------------ --------- ----------- ---------- -----------
Net income (loss) 64,662 37,811 (97,568) 119,154 (78,266)
============ ========= =========== ========== ===========
Net income (loss) per share:
Basic
Income (loss) before cumulative effect of a change
in accounting principle $ 0.45 $ 0.25 $ (0.23) $ 0.80 $ (0.10)
Cumulative effect of a change in accounting principle,
net of tax - - (0.41) - (0.42)
------------ --------- ----------- ---------- -----------
Basic net income (loss) per share $ 0.45 $ 0.25 $ (0.64) $ 0.80 $ (0.52)
============ ========= =========== ========== ===========
Diluted
Income (loss) before cumulative effect of a change
in accounting principle $ 0.45 $ 0.25 $ (0.23) $ 0.79 $ (0.10)
Cumulative effect of a change in accounting principle,
net of tax - - (0.41) - (0.42)
------------ --------- ----------- ---------- -----------
Diluted net income (loss) per share $ 0.45 $ 0.25 $ (0.64) $ 0.79 $ (0.52)
============ ========= =========== ========== ===========
Shares used in basic per share calculation 142,333 149,112 151,280 148,119 150,221
============ ========= =========== ========== ===========
Shares used in diluted per share calculation 143,574 151,386 151,280 150,353 150,221
============ ========= =========== ========== ===========
NOVELLUS SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(EXCLUDING CERTAIN UNUSUAL (CHARGES) BENEFITS)(1)
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------------------- ---------------------------
(In thousands, except per share amounts) SEPTEMBER 25 JUNE 26 SEPTEMBER 27 SEPTEMBER 25 SEPTEMBER 27
(Unaudited) 2004 2004 2003 2004 2003
- ----------------------------------------------------- ------------ ----------- ------------ ------------- ------------
Net sales $ 415,935 $ 338,219 $ 221,099 $ 1,017,016 $ 698,559
Cost of sales 214,824 168,539 118,371 521,620 380,695
----------- ---------- ----------- ------------ -----------
Gross profit 201,111 169,680 102,728 495,396 317,864
% 48.4% 50.2% 46.5% 48.7% 45.5%
Operating expenses:
Selling, general and administrative 57,661 47,225 40,123 147,289 127,197
Research and development 68,202 63,471 59,858 190,630 173,374
----------- ---------- ----------- ------------ -----------
Total operating expenses 125,863 110,696 99,981 337,919 300,571
% 30.3% 32.7% 45.2% 33.2% 43.0%
Income from operations 75,248 58,984 2,747 157,477 17,293
% 18.1% 17.4% 1.2% 15.5% 2.5%
Other income, net 1,726 2,896 2,722 7,371 13,911
----------- ---------- ----------- ------------ -----------
Income before income taxes 76,974 61,880 5,469 164,848 31,204
Provision (benefit) for income taxes 22,322 17,945 (668) 47,805 5,765
----------- ---------- ----------- ------------ -----------
Net income 54,652 43,935 6,137 117,043 25,439
=========== ========== =========== ============ ===========
Net income per share:
Basic net income per share $ 0.38 $ 0.29 $ 0.04 $ 0.79 $ 0.17
=========== ========== =========== ============ ===========
Diluted net income per share $ 0.38 $ 0.29 $ 0.04 $ 0.78 $ 0.17
=========== ========== =========== ============ ===========
Shares used in basic per share calculation 142,333 149,112 151,280 148,119 150,221
=========== ========== =========== ============ ===========
Shares used in diluted per share calculation 143,574 151,386 155,452 150,353 153,572
=========== ========== =========== ============ ===========
A reconciliation of our net income excluding certain unusual charges and
benefits to our net income (loss) under accounting principles generally accepted
in the United States of America is presented below:
NET INCOME EXCLUDING UNUSUAL
(CHARGES) AND BENEFITS $ 54,652 $ 43,935 $ 6,137 $ 117,043 $ 25,439
UNUSUAL (CHARGES) AND BENEFITS:
Acquired in-process research and development - (6,124) - (6,124) -
Cumulative effect of a change
in accounting principle - - (62,780) - (62,780)
Inventory write-down - - (43,952) - (43,952)
Restructuring and other (charges) benefits 923 - (15,838) 923 (15,838)
Legal settlement (2,900) - (2,691) (5,400) (2,691)
Reversal of liability in connection with Applied
Materials settlement (included in SG&A) 8,076 - - 8,076 -
Cash receipt from Applied Materials
settlement (included in Other income, net) 8,000 - - 8,000 -
----------- ---------- ----------- ------------ -----------
Total (charges) and benefits 14,099 (6,124) (125,261) 5,475 (125,261)
Adjustments to provision (benefit) for income taxes (4,089) - 21,556 (3,364) 21,556
----------- ---------- ----------- ------------ -----------
NET INCOME (LOSS) $ 64,662 $ 37,811 $ (97,568) $ 119,154 $ (78,266)
=========== ========== =========== ============ ===========
(1) The condensed consolidated statements of operations (excluding certain
unusual charges and benefits) are intended to present our operating
results, excluding certain unusual charges, benefits and related
adjustments to provision (benefit) for income taxes. These condensed
consolidated statements of operations are not in accordance with or an
alternative for accounting principles generally accepted in the United
States of America and may be different from similar measures by other
companies.
NOVELLUS SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 25 DECEMBER 31
2004 2003
(In thousands) (Unaudited) *
- ---------------------------------------------- ------------ -----------
ASSETS
Current assets:
Cash and short-term investments $ 510,386 $1,002,132
Accounts receivable, net 426,658 231,760
Inventories 250,161 199,100
Deferred taxes and other current assets 155,859 138,996
---------- ----------
Total current assets 1,343,064 1,571,988
Property and equipment, net 486,229 506,567
Restricted cash 177,637 2,861
Goodwill 277,922 173,267
Intangible and other assets 113,581 84,217
---------- ----------
TOTAL ASSETS $2,398,433 $2,338,900
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 244,639 $ 150,945
Deferred profit 71,998 46,821
Income taxes payable 54,378 10,293
Current obligations under lines of credit 5,399 13,023
---------- ----------
Total current liabilities 376,414 221,082
Long-term debt 154,925 -
Other liabilities 50,895 45,958
---------- ----------
Total liabilities 582,234 267,040
---------- ----------
Shareholders' equity:
Common stock 1,445,797 1,565,926
Retained earnings and accumulated other
comprehensive income 370,402 505,934
---------- ----------
Total shareholders' equity 1,816,199 2,071,860
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,398,433 $2,338,900
========== ==========
* The December 31, 2003 condensed consolidated balance sheet was derived
from our audited consolidated financial statements.