Press Releases

NOVELLUS SYSTEMS REPORTS THIRD QUARTER RESULTS

San Jose, Calif. -- Oct. 12, 1998 -- Novellus Systems, Inc. (Nasdaq NM: NVLS) today reported net sales and results of operations for its third quarter ended September 26, 1998. Net sales for the quarter were $106.7 million, a decrease of 31 percent over third quarter 1997 net sales of $155.1 million. Net income of $7.6 million and $0.22 per share was recorded for the quarter, down 62 percent as compared to the third quarter 1997 net income of $20.1 million or $0.57 per share. The per share amounts are stated on a diluted basis.

For the nine months ended September 26, 1998, net sales were $412.8 million, which includes nine months of net sales of PVD products from the June 1997 Varian Thin Film Systems division acquisition, an increase of 11 percent from net sales of $371.2 million in the same period of 1997. Net income for the nine months ended September 26, 1998 was $44.7 million or $1.28 per share as compared to the net loss posted in the comparable period in 1997 of $118.0 million or $3.57 per share. Without the one-time pre-tax charges of $235.2 million recorded during the second quarter of 1997, net income for the comparable period would have been $52.9 million or $1.53 per share.

Cash and short term investments at September 26, 1998 were $111.3 million, up 4 percent over second quarter 1998 balances of $107.4 million. Bookings fell short of achieving a 1:1 book to bill ratio for the third quarter of 1998.

"Given the severity of the current industry downturn, we are proud of the Company performance during the quarter," said Robert Smith, Executive Vice President and Chief Financial Officer. "The execution of our aggressive cost control measures, as reflected in the 18 percent decrease in operating expenses from the second quarter of 1998, is a tribute to the efforts of our employees worldwide. These efforts allowed us to post a sequential increase in cash and short-term investment balances for the fifth consecutive quarter."

"The Company's net sales is a result of the continued slowdown during the quarter of capital spending by semiconductor manufacturers, especially for capacity expansion," said Richard Hill, Chairman and Chief Executive Officer. "During the quarter, we announced cost reduction measures across all areas of the Company in response to the current industry slowdown. Despite these reductions, we have maintained our expenditures and staffing levels for key new product development projects. The Company remains committed to strengthening its market position through investments in new products, which will further advantage the Company when economic conditions become more favorable."

"While capacity purchases by semiconductor manufacturers have continued to be slow, strong interest in emerging, advanced technology products continues," Hill added. "The ability of Novellus to provide innovative, leading-edge technologies for production, such as Damascus^TM Complete Copper^TM, a full spectrum of production-worthy products delivering advanced copper interconnect structures for integrated circuit fabrication, has enabled Novellus to better weather this downturn."

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: The statements regarding (i) the Company's commitment to its investment in new products in order to strengthen its market position, (ii) the advantage provided by the Company's new product investment, and (iii) the Company's ability to weather the current industry downturn, as well as other matters discussed in the 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, a possible continuing slowdown in new orders, the difficulty of curtailing expenses to necessary levels and the inability of the Company's product development efforts to continue its position as an industry leader in deposition technologies, and other risks indicated in filings with the Securities and Exchange Commission (SEC). Actual results could differ materially. Novellus assumes no obligation to update this information. For more details, please refer to Novellus' SEC filings, including its most recent Annual Report on Form 10-K and quarterly reports on Form 10-Q.

Novellus Systems, Inc. manufactures, markets, and services advanced automated wafer fabrication systems for the deposition of thin films. Novellus deposition systems are designed for high-volume production of advanced, leading-edge semiconductors at the lowest overall cost. The Company's stock trades on the Nasdaq Stock Market's National Market under the symbol "NVLS". Additional information about the company is available on the Novellus Systems home page on the World Wide Web, located at http://www.novellus.com.

Note: the earnings per share amounts have been adjusted for the 2-for-1 split effective October 1997

(1) The Company's reported loss of $153.7 million or $4.66 per share for the quarter ended June 28, 1997 includes pre-tax one-time charges totaling $235.2 million. This supplemental financial information does not purport to be financial statements prepared in accordance with generally accepted accounting principles. The information in the tables shows operating income, net income and net income per share excluding the one-time charges.