EXHIBIT 99.1
CONTACTS: Kevin S. Royal
Vice President and Chief Financial Officer
Novellus Systems, Inc.
Phone: (408) 943-9700
Matthew Grech
Vice President, Investment and Investor Relations
Novellus Systems, Inc.
Phone: (408) 943-9700
FOR IMMEDIATE RELEASE
NOVELLUS SYSTEMS REPORTS FOURTH QUARTER AND YEAR-END RESULTS
SAN JOSE, Calif., January 27, 2004 -- Novellus Systems, Inc. (Nasdaq: NVLS)
today reported net sales and results of operations for its fourth quarter and
year ended December 31, 2004. Net sales for the fourth quarter were $340.3
million, down 18.2 percent from $415.9 million in the third quarter 2004 and up
50.2 percent from net sales of $226.5 million for the fourth quarter 2003. Net
income for the quarter was $37.5 million or $0.27 per diluted share, down $27.1
million or 42.0 percent from the third quarter 2004 net income of $64.7 million
or $0.45 per diluted share. Net income for the fourth quarter increased by 259.1
percent from the fourth quarter net income of $10.5 million or $0.07 per diluted
share in the prior year.
The fourth quarter results include restructuring and other charges of $2.4
million. Without these charges, net income would have been $39.2 million, or
$0.28 per diluted share. The third quarter 2004 results included a cash receipt
of $8.0 million, and the reversal of $8.1 million in previously accrued royalty
payments, as a result of the settlement of litigation with Applied Materials,
Inc. The third quarter 2004 results also included 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 2004 net income would have been $54.7 million,
or $0.38 per diluted share. The fourth quarter 2003 results do not include any
unusual charges or benefits.
Net sales for the fiscal year 2004 were $1.4 billion, up 46.7 percent from
$925.1 million in fiscal year 2003. Net income for the year was $156.7 million,
or $1.06 per diluted share, compared with the fiscal year 2003 net loss of $67.8
million, or $0.45 per diluted share.
The fiscal year 2004 results include net restructuring and other charges of $1.5
million, acquired in-process research and development write-offs of $6.1
million, net recovery from legal settlements of $2.6 million and the reversal of
previously accrued royalty payments of $8.1 million. Without these charges and
benefits, net income for fiscal year 2004 would have been $156.3 million, or
$1.06 per diluted share. In comparison, the fiscal year 2003 net loss of $67.8
million includes restructuring and other charges of $62.5 million and a non-cash
charge of $62.8 million, net of tax, recorded as a cumulative effect of a change
in accounting principle to consolidate properties previously accounted for as
synthetic leases. Without these charges, net income for fiscal year 2003 would
have been $35.9 million, or $0.23 per diluted share.
Shipments of $335.1 million in the fourth quarter represent a decrease of $47.2
million or 12.3 percent from $382.2 million reported in the third quarter 2004.
Deferred revenue at the end of the quarter was $140.8 million, a decrease of
$6.6 million or 4.5 percent from $147.4 million at the end of the third quarter
2004.
The financial measures, 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 and the year's results and allow
comparability to revenue recognition on a shipments basis.
Cash, cash equivalents, restricted cash and short-term investments as of
December 31, 2004 were $759.7 million, an increase of $71.7 million or 10.4
percent from the third quarter 2004 ending balance of $688.0 million.
"Fourth quarter bookings came in slightly better than the $325 - $330 million
that we communicated in our last mid-quarter update. Still, we continue to
contend with a choppy bookings environment, a trend that began back in
September. While we believe the worst is behind us, many of our customers are
dealing with declining utilization rates," said Richard S. Hill, chairman and
chief executive officer of Novellus Systems, Inc. "This near term uncertainty,
however, should not cloud the progress we've made on our product portfolio.
Specifically, we are pleased with our improved position within the PVD product
category."
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995:
The statements regarding the Company's (i) belief that the worst is behind it
with regard to bookings, (ii) progress on its product portfolio, and (iii)
satisfaction with its improved position within the PVD product category, 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, inaccurate assessment of
future demand for the Company's products, unanticipated technical difficulties
with new products, competitor introduction of superior PVD products that take
market share from the Company's products, 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, June 26, 2004 and September 25, 2004, and
our Current Reports on Form 8-K filed July 12, 2004, September 10, 2004,
September 24, 2004, December 2, 2004 and December 15, 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 YEAR ENDED
--------------------------------------- ---------------------------
DECEMBER 31 SEPTEMBER 25 DECEMBER 31 DECEMBER 31 DECEMBER 31
(In thousands, except per share amounts) 2004 2004 2003 2004 2003
(Unaudited) ----------- ------------ ----------- ---------- -----------
Net sales $340,272 $415,935 $226,511 $1,357,288 $ 925,070
Cost of sales 170,538 214,824 120,424 692,158 545,070
-------- -------- -------- ---------- ---------
Gross profit 169,734 201,111 106,087 665,130 380,000
% 49.9% 48.4% 46.8% 49.0% 41.1%
Operating expenses:
Selling, general and administrative 55,439 49,585 38,422 194,652 165,618
Research and development 61,453 68,202 54,064 252,083 227,439
Restructuring and other charges (benefits) 2,407 (923) -- 1,484 15,838
Acquired in-process research and development -- -- -- 6,124 --
Legal settlement -- 2,900 -- 5,400 2,691
-------- -------- -------- ---------- ---------
Total operating expenses 119,299 119,764 92,486 459,743 411,586
% 35.1% 28.8% 40.8% 33.9% 44.5%
Income (loss) from operations 50,435 81,347 13,601 205,387 (31,586)
% 14.8% 19.6% 6.0% 15.1% -3.4%
Other income, net 2,433 9,726 2,356 17,804 16,266
-------- -------- -------- ---------- ---------
Income (loss) before income taxes and cumulative
effect of a change in accounting principle 52,868 91,073 15,957 223,191 (15,320)
Provision (benefit) for income taxes 15,332 26,411 5,505 66,501 (10,286)
-------- -------- -------- ---------- ---------
Income (loss) before cumulative effect of a change
in accounting principle 37,536 64,662 10,452 156,690 (5,034)
Cumulative effect of a change in accounting principle,
net of tax -- -- -- -- (62,780)
-------- -------- -------- ---------- ---------
Net income (loss) $ 37,536 $ 64,662 $ 10,452 $ 156,690 $ (67,814)
======== ======== ======== ========== =========
Net income (loss) per share:
Basic
Income (loss) before cumulative effect of a change
in accounting principle $ 0.27 $ 0.45 $ 0.07 $ 1.07 $ (0.03)
Cumulative effect of a change in accounting principle,
net of tax -- -- -- -- (0.42)
-------- -------- -------- ---------- ---------
Basic net income (loss) per share $ 0.27 $ 0.45 $ 0.07 $ 1.07 $ (0.45)
======== ======== ======== ========== =========
Diluted
Income (loss) before cumulative effect of a change
in accounting principle $ 0.27 $ 0.45 $ 0.07 $ 1.06 $ (0.03)
Cumulative effect of a change in accounting principle,
net of tax -- -- -- -- (0.42)
-------- -------- -------- ---------- ---------
Diluted net income (loss) per share $ 0.27 $ 0.45 $ 0.07 $ 1.06 $ (0.45)
======== ======== ======== ========== =========
Shares used in basic per share calculation 139,466 142,333 152,057 145,956 150,680
======== ======== ======== ========== =========
Shares used in diluted per share calculation 140,687 143,574 156,580 147,937 150,680
======== ======== ======== ========== =========
NOVELLUS SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(EXCLUDING CERTAIN UNUSUAL (CHARGES) BENEFITS)(1)
THREE MONTHS ENDED YEAR ENDED
------------------------------------------ ----------------------------
(In thousands, except per share amounts) DECEMBER 31 SEPTEMBER 25 DECEMBER 31 DECEMBER 31 DECEMBER 31
(Unaudited) 2004 2004 2003 2004 2003
----------- ------------ ----------- ----------- ----------
Net sales $ 340,272 $ 415,935 $226,511 $ 1,357,288 $ 925,070
Cost of sales 170,538 214,824 120,424 692,158 501,118
--------- --------- -------- ----------- ---------
Gross profit 169,734 201,111 106,087 665,130 423,952
% 49.9% 48.4% 46.8% 49.0% 45.8%
Operating expenses:
Selling, general and administrative 55,439 57,661 38,422 202,728 165,618
Research and development 61,453 68,202 54,064 252,083 227,439
--------- --------- -------- ----------- ---------
Total operating expenses 116,892 125,863 92,486 454,811 393,057
% 34.4% 30.3% 40.8% 33.5% 42.5%
Income from operations 52,842 75,248 13,601 210,319 30,895
% 15.5% 18.1% 6.0% 15.5% 3.3%
Other income, net 2,433 1,726 2,356 9,804 16,266
--------- --------- -------- ----------- ---------
Income before income taxes 55,275 76,974 15,957 220,123 47,161
Provision for income taxes 16,030 22,322 5,505 63,835 11,270
--------- --------- -------- ----------- ---------
Net income $ 39,245 $ 54,652 $ 10,452 $ 156,288 $ 35,891
========= ========= ======== =========== =========
Net income per share:
Basic net income per share $ 0.28 $ 0.38 $ 0.07 $ 1.07 $ 0.24
========= ========= ======== =========== =========
Diluted net income per share $ 0.28 $ 0.38 $ 0.07 $ 1.06 $ 0.23
========= ========= ======== =========== =========
Shares used in basic per share calculation 139,466 142,333 152,057 145,956 150,680
========= ========= ======== =========== =========
Shares used in diluted per share calculation 140,687 143,574 156,580 147,937 154,324
========= ========= ======== =========== =========
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 $ 39,245 $ 54,652 $ 10,452 $ 156,288 $ 35,891
UNUSUAL (CHARGES) AND BENEFITS:
Inventory write-down -- -- -- -- (43,952)
Reversal of liability in connection with Applied
Materials settlement (included in SG&A) -- 8,076 -- 8,076 --
Restructuring and other (charges) benefits (2,407) 923 -- (1,484) (15,838)
Acquired in-process research and development -- -- -- (6,124) --
Legal settlement -- (2,900) -- (5,400) (2,691)
Cash receipt from Applied Materials
settlement (included in Other income, net) -- 8,000 -- 8,000 --
Cumulative effect of a change
in accounting principle -- -- -- -- (62,780)
--------- --------- -------- ----------- ---------
Total (charges) and benefits (2,407) 14,099 -- 3,068 (125,261)
Adjustments on provision for income taxes 698 (4,089) -- (2,666) 21,556
--------- --------- -------- ----------- ---------
NET INCOME (LOSS) $ 37,536 $ 64,662 $ 10,452 $ 156,690 $ (67,814)
========= ========= ======== =========== =========
(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 on provisions 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 used by other companies.
NOVELLUS SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands) DECEMBER 31 DECEMBER 31
2004 2003
(Unaudited) *
----------- -----------
ASSETS
Current assets:
Cash and short-term investments $ 583,021 $1,002,132
Accounts receivable, net 395,522 231,760
Inventories 261,046 199,100
Deferred taxes and other current assets 129,735 138,996
---------- ----------
Total current assets 1,369,324 1,571,988
Property and equipment, net 476,492 506,567
Restricted cash 176,708 2,861
Goodwill 278,972 173,267
Intangible and other assets 100,336 84,217
---------- ----------
TOTAL ASSETS $2,401,832 $2,338,900
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 242,037 $ 150,945
Deferred profit 71,216 46,821
Income taxes payable 14,691 10,293
Current obligations under lines of credit 3,103 13,023
---------- ----------
Total current liabilities 331,047 221,082
Long-term debt 161,103 --
Other liabilities 47,848 45,958
---------- ----------
Total liabilities 539,998 267,040
---------- ----------
Shareholders' equity:
Common stock 1,456,670 1,565,926
Retained earnings and accumulated other
comprehensive income 405,164 505,934
---------- ----------
Total shareholders' equity 1,861,834 2,071,860
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,401,832 $2,338,900
========== ==========
* The December 31, 2003 condensed consolidated balance sheet was derived from
our audited consolidated financial statements.