EX-99.1 2 f26662exv99w1.htm EXHIBIT 99.1 exv99w1
 

Exhibit 99.1
         
Contacts:
  William H. Kurtz   Robin Yim
 
  Executive Vice President and Chief Financial Officer   Investor Relations
 
  Novellus Systems, Inc.   Novellus Systems, Inc.
 
  Phone: (408) 943-9700   Phone: (408) 943-9700
FOR IMMEDIATE RELEASE
NOVELLUS SYSTEMS REPORTS FOURTH QUARTER AND YEAR-END RESULTS
SAN JOSE, Calif., January 24, 2007—Novellus Systems, Inc. (NASDAQ: NVLS) today reported net sales and results of operations for its fourth quarter and year ended December 31, 2006. Net sales for the fourth quarter were $438.5 million, down $5.5 million or 1.2 percent from third quarter 2006 net sales of $444.0 million, and up $106.2 million or 32.0 percent from fourth quarter 2005 net sales of $332.3 million. Net income for the fourth quarter was $42.6 million, or $0.34 per diluted share, down $27.4 million or 39.2 percent from third quarter 2006 net income of $70.0 million, and up $19.6 million or 85.2 percent from fourth quarter 2005 net income of $23.0 million.
The fourth quarter results reflect a $1.9 million pre-tax reversal of a previously recorded restructuring accrual resulting primarily from a change in estimated sublease income over the remaining lease term. Also recorded in the fourth quarter was a tax charge of $46.1 million related to the planned implementation of a new global business structure. In future years we expect to achieve a lower tax rate, as well as business efficiencies, as a result of this new business structure. The tax charge was partially offset by an $8.5 million tax benefit attributable to the settlement of an IRS audit. As a result, the fourth quarter tax rate was 62.3%. The fourth quarter 2006 net income would have been $79.0 million, or $0.63 per diluted share, excluding these items. The third quarter 2006 results did not include any unusual charges or benefits. The fourth quarter 2005 results reflect net pre-tax restructuring and other charges of $5.9 million. Without the restructuring charges, fourth quarter 2005 net income would have been $26.6 million, or $0.20 per diluted share. A reconciliation of pro forma operating results to U.S. generally accepted accounting principals (“GAAP”) results is included in the financial statements below.
Net sales for the fiscal year 2006 were $1.66 billion, up $318.0 million or 23.7% compared with net sales of $1.34 billion in fiscal year 2005. Net income for the year was $190.0 million or $1.50 per diluted share, compared with fiscal year 2005 net income of $110.1 million, or $0.80 per diluted share.
The fiscal year 2006 results include a pre-tax benefit of $1.5 million from the cumulative effect of a change in accounting principle due to the adoption of SFAS 123(R), a pre-tax net restructuring charge of $10.7 million, a pre-tax charge of $3.3 million for a legal settlement and the $46.1 million tax charge and $8.5 million tax benefit discussed above. Without these charges and benefits, net income for 2006 would have been $235.3 million, or $1.86 per diluted share. In comparison, the fiscal year 2005 results included pre-tax net restructuring charges of $9.2 million and a pre-tax inventory write-down of $5.3 million. Without these charges net income, for 2005 would have been $118.9 million, or $0.86 per diluted share.

 

 

Bookings in the fourth quarter were $441.6 million, down 6.1 percent over third quarter 2006 bookings of $470.3 million. Shipments of $390.2 million in the fourth quarter represent a decrease of $24.1 million or 5.8 percent from $414.2 million reported for the third quarter 2006. Deferred revenue at the end of the fourth quarter was $100.3 million, a decrease of $48.3 million or 32.5 percent from $148.6 million at the end of the third quarter of 2006.
Cash, cash equivalents, restricted cash and short-term investments as of December 31, 2006 were $993.2 million, an increase of $179.9 million or 22.1 percent from the third quarter of 2006 ending balance of $813.3 million.
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 consistency and 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.
“2006 was a record year for bookings, shipments and revenues”, said Richard S. Hill, chairman of the board and CEO. “In addition to our strong top line growth, we significantly improved our bottom line performance as a result of 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 statements regarding (i) our continued progress to improve our bottom line performance resulting from the initiatives we have taken to strengthen our product portfolio and improve our financial operating model, (ii) our expectation that we will achieve a lower tax rate in future years and (iii) our belief that we will improve business efficiencies as a result of the Company’s new global business structure, 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, the Company’s ability to accurately assess and strengthen the Company’s product portfolio and financial operating model due to market fluctuations and unanticipated economic and industry downturns; the Company’s ability to achieve greater tax efficiency and thereby lower the Company’s tax rate in future years; the Company’s ability to efficiently implement the new global business structure, 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 September 30, 2006, July 1, 2006 and April 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. (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

 

 

NOVELLUS SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                         
 
(In thousands, except per share amounts)   Three Months Ended   Year Ended  
(Unaudited)   December 31     September 30     December 31     December 31     December 31  
    2006     2006     2005     2006     2005  
 
 
                                        
Net sales
   $ 438,505     $ 444,032     $ 332,268     $ 1,658,516     $ 1,340,471  
Cost of sales
     212,985       217,507       191,767       834,167       741,345  
 
                              
 
                                        
Gross profit
     225,520       226,525       140,501       824,349       599,126  
%
     51.4 %     51.0 %     42.3 %     49.7 %     44.7 %
 
                                        
Operating expenses:
                                        
Selling, general and administrative
     68,932       67,664       51,489       261,389       206,939  
Research and development
     56,475       60,645       60,492       244,201       247,315  
Restructuring and other charges (benefits)
     (1,894 )     —       5,888       10,735       9,175  
Legal settlement
     —       —       —       3,250       —  
 
                              
 
                                        
Total operating expenses
     123,513       128,309       117,869       519,575       463,429  
%
     28.2 %     28.9 %     35.5 %     31.3 %     34.6 %
 
                              
 
                                        
Income from operations
     102,007       98,216       22,632       304,774       135,697  
%
     23.3 %     22.1 %     6.8 %     18.4 %     10.1 %
 
                                        
Other income, net
     10,881       9,574       13,368       34,145       22,916  
 
                              
Income before income taxes and cumulative effect of a change in accounting principle
     112,888       107,790       36,000       338,919       158,613  
Provision for income taxes
     70,314       37,770       13,010       149,851       48,506  
 
                              
 
                                        
Income before cumulative effect of a change in accounting principle
     42,574       70,020       22,990       189,068       110,107  
 
                                        
Cumulative effect of a change in accounting principle, net of tax
     —       —       —       948       —  
 
                                        
 
                              
Net income
   $ 42,574     $ 70,020     $ 22,990     $ 190,016     $ 110,107  
 
                              
 
                                        
Net income per share:
                                        
Basic
                                        
Income before cumulative effect of a change in accounting principle
   $ 0.35     $ 0.57     $ 0.17     $ 1.51     $ 0.80  
 
                                        
Cumulative effect of a change in accounting principle, net of tax
     —       —       —       0.01       —  
 
                                        
 
                              
Basic net income per share
   $ 0.35     $ 0.57     $ 0.17     $ 1.52     $ 0.80  
 
                              
Diluted
                                        
Income before cumulative effect of a change in accounting principle
   $ 0.34     $ 0.57     $ 0.17     $ 1.49     $ 0.80  
 
                                        
Cumulative effect of a change in accounting principle, net of tax
     —       —       —       0.01       —  
 
                                        
 
                              
Diluted net income per share
   $ 0.34     $ 0.57     $ 0.17     $ 1.50     $ 0.80  
 
                              
 
                                        
Shares used in basic per share calculation
     122,766       122,150       133,980       125,286       137,447  
 
                              
Shares used in diluted per share calculation
     124,447       123,357       134,752       126,483       138,423  
 
                              

1

 

NOVELLUS SYSTEMS, INC.
RECONCILIATION OF THE STATEMENTS OF O PERATIONS
(EXCLUDING CERTAIN CHARGES AND BENEFITS) (1)
                                         
 
(In thousands, except per share amounts)   Three Months Ended   Year Ended  
(Unaudited)   December 31     September 30     December 31     December 31     December 31  
    2006     2006     2005     2006     2005  
 
 
                                        
Net income excluding certain charges and benefits
   $ 78,979     $ 70,020     $ 26,611     $ 235,310     $ 118,947  
 
                                        
Charges and benefits:
                                        
Cumulative effect of a change in accounting principle
     —       —       —       1,542       —  
Restructuring and other (charges) benefits
     1,894       —       (5,888 )     (10,735 )     (9,175 )
Inventory write-down
     —       —       —       —       (5,250 )
Legal settlement
     —       —       —       (3,250 )     —  
 
                              
Total charges and benefits
     1,894       —       (5,888 )     (12,443 )     (14,425 )
Adjustments on provision for income taxes:
                                        
Tax effect of the above charges and benefits
     (720 )     —       2,267       4,728       5,585  
Settlement of IRS audit
     8,527       —       —       8,527       —  
Tax charge associated with new global business structure
     (46,106 )     —       —       (46,106 )     —  
 
                              
Net income
   $ 42,574     $ 70,020       22,990     $ 190,016     $ 110,107  
 
                              
 
                                        
Net income per diluted share excluding certain charges and benefits
   $ 0.63     $ 0.57     $ 0.20     $ 1.86     $ 0.86  
 
                                        
Charges and benefits:
                                        
Cumulative effect of a change in accounting principle
     —       —       —       0.01       —  
Restructuring and other (charges) benefits
     0.02       —       (0.05 )     (0.09 )     (0.06 )
Inventory write-down
     —       —       —       —       (0.04 )
Legal settlement
     —       —       —       (0.03 )     —  
Adjustments on provision for income taxes:
                                        
Tax effect of the above charges and benefits
     (0.01 )     —       0.02       0.04       0.04  
Settlement of IRS audit
     0.07       —       —       0.07       —  
Tax charge associated with new global business structure
     (0.37 )     —       —       (0.36 )     —  
 
                              
Net income per diluted share
   $ 0.34     $ 0.57     $ 0.17     $ 1.50     $ 0.80  
 
                              
 
(1)   The reconciliation of the statements of operations (excluding certain charges and benefits) is 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 is 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 CO MPENSATION
                                         
 
(In thousands)   Three Months Ended     Year Ended  
(Unaudited)   December 31     September 30     December 31     December 31     December 31  
    2006     2006     2005     2006     2005  
 
 
                                        
 
     (1 )     (3 )     (2 )     (1 )     (2 )
 
Cost of sales
   $ 179     $ 400     $ 264     $ 1,425     $ 736  
Selling, general and administrative
     5,792       5,516       778       22,337       2,168  
Research and development
     2,713       2,741       468       11,179       1,305  
 
                              
 
                                        
Total share-based compensation expenses
     8,684       8,657       1,510       34,941       4,209  
 
                                        
Benefit from income taxes
     2,866       2,857       581       11,531       1,620  
 
                              
 
                                        
Net share-based compensation expenses
   $ 5,818     $ 5,800     $ 929     $ 23,410     $ 2,589  
 
                              
 
(1)   Amounts include amortization expense related to stock options of $5.9 million and $25.1 million, employee stock purchase plan of $0.6 million and $2.4 million, and restricted stock awards of $2.2 million and $7.5 million for the three and twelve months ended December 31, 2006, respectively.
 
(2)   Amounts include amortization expense related to restricted stock awards of $1.5 million and $4.2 million for the three and twelve months ended December 31, 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)   December 31,     December 31,  
    2006     2005  
    (Unaudited)     *  
 
ASSETS
                
 
                
Current assets:
                
Cash and short-term investments
   $ 849,407     $ 654,983  
Accounts receivable, net
     310,888       391,791  
Inventories
     198,571       193,787  
Deferred taxes and other current assets
     142,439       122,951  
 
            
Total current assets
     1,501,305       1,363,512  
 
                
Property and equipment, net
     364,599       423,749  
Restricted cash
     143,769       140,212  
Goodwill
     225,431       255,584  
Intangible and other assets
     122,012       107,192  
 
            
 
                
Total assets
  $ 2,357,116     $ 2,290,249  
 
            
 
                
LIABILITIES AND SHAREHOLDERS’ EQUITY
                
Current liabilities:
                
Accounts payable and accrued liabilities
   $ 261,659     $ 253,984  
Deferred profit
     41,351       68,718  
Income taxes payable
     37,750       5,898  
Current obligations under lines of credit
     15,559       15,744  
 
            
Total current liabilities
     356,319       344,344  
 
                
Long-term debt
     127,862       124,858  
Other liabilities
     38,556       41,764  
 
            
Total liabilities
     522,737       510,966  
 
            
 
                
Shareholders’ equity:
                
Common stock
     1,393,588       1,393,805  
Retained earnings and accumulated other comprehensive income
     440,791       385,478  
 
            
Total shareholders’ equity
     1,834,379       1,779,283  
 
            
 
                
Total liabilities and shareholders’ equity
  $ 2,357,116     $ 2,290,249  
 
            
 
*   The December 31, 2005 condensed consolidated balance sheet was derived from our audited consolidated financial statements.