Press Releases

NOVELLUS SYSTEMS REPORTS FOURTH QUARTER AND YEAR-END 1998 RESULTS

San Jose, Calif. -- Jan. 19, 1999 -- Novellus Systems, Inc. (Nasdaq NM: NVLS) today reported net sales and results of operations for its fiscal year ended December 31, 1998. Net sales for the quarter were $106.0 million, a decrease of 35 percent over fourth quarter 1997 net sales of $162.8 million. Net income of $8.1 million and $0.23 per share was recorded for the fourth quarter of 1998, down 64 percent as compared to the fourth quarter 1997 net income of $22.4 million or $0.64 per share. The per share amounts are stated on a diluted basis.

Net sales for the year were $518.8 million, a decrease of 3 percent from 1997 net sales of $534.0 million. Net income for the year was $52.8 million or $1.51 per share as compared to the net loss posted in the comparable period in 1997 of $95.7 million or $2.88 per share. Without the special pre-tax charges of $235.2 million recorded during the second quarter of 1997, net income for the comparable period would have been $75.3 million or $2.17 per share.

Cash and short-term investments at December 31, 1998 were $130.8 million, an increase of 18 percent over third quarter 1998 balances of $111.3 million. Backlog on December 31, 1998 was $108.5 million, a decrease of 52% from the $224.0 million reported on December 31, 1997. Bookings exceeded a 1:1 book to bill threshold for the fourth quarter of 1998.

"We are pleased with the continued execution of our cost control and asset management efforts during the quarter, which allowed us to realize a sequential quarterly increase in net income in spite of flat net sales," said Robert Smith, Executive Vice President and Chief Financial Officer. "In addition, cash and short-term investment balances grew for the sixth consecutive quarter. The Company will continue to tightly control its expenditures as it manages through the current business climate."

"Given the challenges during the industry slowdown, the financial performance of Novellus during 1998 is a credit to our Company-wide focus on managing a return to our shareholders," added Richard Hill, Chairman and Chief Executive Officer. "We are also pleased with the momentum in our bookings during the fourth quarter. As economic conditions continue to improve, the Company's position in emerging, leading-edge products will allow it to take advantage of the long-term growth potential of the industry."

Hill also noted, "1998 was significant for Novellus in several ways. While we were financially driven to control costs during the semiconductor capital spending slowdown in 1998, we maintained our commitment to investment in new products. We introduced Damascus^TM Complete Copper^TM, a full spectrum of production-worthy products designed to deliver advanced copper interconnects for integrated circuit fabrication. Damascus includes not only industry-leading chemical vapor deposition (CVD) and physical vapor deposition (PVD) products, but also a revolutionary copper electrofill system called SABRE^TM, which was also introduced during 1998. Coupled with the announcements of our pioneering cross-industry alliances, Damascus encompasses not only deposition technologies, but also equipment and processes from other leading suppliers in etch and Chemical Mechanical Planarization (CMP). During the year we also announced our exclusive development partnership with IBM for copper electrofill. Despite this exclusive partnership, Novellus has delivered multiple SABRE^TM electrofill and INOVA^TM PVD systems to several leading semiconductor manufacturers around the world. The ability of Novellus to provide innovative solutions for our customers has enabled Novellus to better weather the downturn during 1998, and positions the Company for future growth."

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: The statements regarding (i) the Company's intention to tightly control its expenditures, (ii) the Company's ability to take advantage of the long-term growth potential of the industry, (iii) the momentum in the Company's bookings, and (iv) the Company's ability to continue to provide innovative solutions, positioning it or future growth, 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 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.

(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 special 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 special charges.