Before we begin, let me remind everyone that today's discussion contains forward-looking statements about Novellus' business outlook, the future performance of Novellus, our products and forecasts as key metrics for the fourth quarter of 2011. Specific forward-looking statements include, but are not limited to, estimates, projections and forecasts for our industry in 2011 and 2012; PC unit growth, demand for PCs and electronics, semiconductor and smartphone markets; contract prices for DRAM and NAND; and our customers' capital expenditures, the forecasted bookings, shipment volumes, revenues, gross margin, earnings per share and tax rates for the fourth quarter of 2011 and our effective tax rate for the year and other unanticipated future events.We caution you that forward-looking statements are projections and expectations regarding future events, which may involve risks and uncertainties that could cause actual results to differ materially from the results contemplated. Information concerning these risks is included in today's press release and our filings with the Securities and Exchange Commission, including our Form 10-K for fiscal 2010, our Form 10-Q for the first and second quarters of 2011 and our most recent Form 8-K. Forward-looking statements are based on information as of today, and we assume no obligation to update any of these statements. John Hertz will begin today's call with a review of the financial results for the third quarter. Then Rick Hill will discuss the state of the business and our industry outlook, followed by guidance for the fourth quarter of 2011, and then he'll open the call for the question-and-answer session. So now I'll turn the call over to John. John D. Hertz Thank you, Robin, and good afternoon. I'll report on our third quarter results, which were within the guidance ranges for all financial measures with EPS at the high end of the guidance range, and that's despite all other metrics landing at the lower end of our guidance range. And I'll discuss in further detail in a moment, the EPS upside resulted from combination of factors within operating expense, other income and a better-than-expected tax rate for the quarter.
So with that, our third quarter net bookings were $227 million, that is down 27% sequentially and within our guidance range of down 15% to 30%.Shipments in the quarter were down 16% from Q2 at $302 million and within our guidance range of $300 million to $320 million. Third quarter revenues were down 12% sequentially at $307 million and within our guidance range of $300 million to $320 million. The geographic breakdown of our revenues in the quarter was as follows: United States, 36%; Greater China, 22%; Korea, 21%; Japan, 10%; Europe, 11%. Now turning to gross margins. Third quarter gross margin was 48.2%, compared to the guidance range of 49%, plus or minus 1 point. Unabsorbed overhead associated with lower production volumes combined with an increased mix of international applications revenue did have the quarter-over-quarter decline in the margin. Operating expenses in the quarter totaled $91 million on a GAAP basis, that's down $4 million from Q2, which resulted in an operating margin of 19%. Our third quarter operating expenses were favorably impacted by a net $1.6 million nonrecurring benefit as detailed in our press release and resulting primarily from the favorable resolution of a vendor dispute that was partially offset by severance payments associated with some restructuring actions in our Industrial business. Our third quarter interest expense increased to $6 million, that's due to a full quarter's impact of interest on the convertible bonds and other income increased to $2.8 million, primarily due to put option premiums as well as positive impact of strengthening U.S. dollar. In conjunction with our stock buyback program, during the quarter we sold put options that gave the counterparties the right to sell up to 2 million shares of Novellus stock to the company at a stated price on a stated date. Those put options expired unexercised. Read the rest of this transcript for free on seekingalpha.com