SAN JOSE, Calif., Jan. 24 /PRNewswire-FirstCall/ -- 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
December September December December December
(Unaudited) 31 30 31 31 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
NOVELLUS SYSTEMS, INC.
RECONCILIATION OF THE STATEMENTS OF OPERATIONS
(EXCLUDING CERTAIN CHARGES AND BENEFITS)(1)
(In thousands, except per
share amounts Three Months Ended Year Ended
December September December December December
(Unaudited) 31 30 31 31 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 COMPENSATION
(In thousands) Three Months Ended Year Ended
(Unaudited) Dec. 31 Sept. 30 Dec. 31 Dec. 31 Dec. 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.
Source: Novellus Systems, Inc.
CONTACT: William H. Kurtz, Executive Vice President and Chief Financial
Officer, or Robin Yim, Investor Relations, both of Novellus Systems, Inc.,
+1-408-943-9700
