Novellus Systems Reports Third Quarter 2004 Results
Wednesday October 13, 4:05 pm ET
SAN JOSE, Calif., Oct. 13 /PRNewswire-FirstCall/ -- Novellus Systems, Inc. (Nasdaq: NVLS - News) 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 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 Nine Months Ended
September June September September September
(Unaudited) 25 26 27 25 27
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)
(In thousands, except
per share amounts) Three Months Ended Nine Months Ended
September June September September September
(Unaudited) 25 26 27 25 27
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
(In thousands) September 25 December 31
2004 2003
(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.
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Source: Novellus Systems, Inc. |
