Varian Semiconductor Equipment Associates Reports Fiscal 2003 Third Quarter Results
BizWire (07/24/2003 4:15 PM ET)

    Business Editors

    GLOUCESTER, Mass.--(BUSINESS WIRE)--July 24, 2003--Varian Semiconductor Equipment Associates, Inc. (Nasdaq: VSEA) today announced results for its fiscal 2003 third quarter ended June 27, 2003.

    Revenue for the third quarter of fiscal 2003 totaled $83 million, compared to revenue of $95 million for the same period a year ago. Shipments for the third quarter of fiscal 2003 were $79 million. The Company recorded net income of $1 million, or $0.04 per diluted share during the third quarter of fiscal 2003, compared to $3 million, or $0.07 per diluted share for the same period a year ago. Gross margin for the third quarter of fiscal 2003 was 44 percent, compared to 39 percent for the same period a year ago.

    Gross margin was favorably affected by the sale of certain inventory for which the net carrying value had been reduced in previous periods by $2 million. The decline in management, general and administrative expenses during the third quarter of fiscal 2003 compared to the same period a year ago was primarily due to a decrease in headcount and reductions in the cost of variable compensation programs.

    Richard A. Aurelio, Varian Semiconductor's chairman and chief executive officer, said, "The productivity advantages of our VIISta products and the inherent benefits of our single wafer tools are becoming more apparent to our customers, which we expect will give us a competitive advantage in the marketplace."

    Robert J. Halliday, chief financial officer, added, "We continue to invest heavily in new product development - research and development spending has increased in each consecutive quarter of fiscal 2003 and is expected to continue to increase in the fourth quarter. We are able to make these critical investments in our products because we have been profitable or breakeven in 9 out of the last 10 quarters."

    Halliday also provided forward guidance, noting that, "We currently expect revenue for the fourth quarter of fiscal 2003 to be between $78 and $88 million, and shipments to range from $74 to $84 million. In the fourth quarter, gross margin as a percentage of revenue is expected to be in the low to mid 40s and breakeven results are anticipated."

    Varian Semiconductor will hold a conference call, broadcast over the Internet, at 5:30 p.m. eastern time today to discuss the Company's operating results and outlook. Access to the call is available through the investor relations page on the Company's website at www.vsea.com. Replays will be available via the website for two weeks after the call.

    About Varian Semiconductor

    Varian Semiconductor Equipment Associates, Inc. is a leading producer of ion implantation equipment used in the manufacture of semiconductors. The Company is headquartered in Gloucester, Massachusetts, and operates worldwide. Varian Semiconductor maintains a website at www.vsea.com. The information contained in the Company's website is not incorporated by reference into this release, and the website address is included in this release as an inactive textual reference only.

    Note: This press release contains forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. For this purpose, statements concerning the industry outlook, the Company's guidance for fourth quarter fiscal 2003 revenue, gross margin and earnings per share, market share, competitive position, productivity advantages, investment in research and development, and technological improvements and benefits, and any statements using the terms "believes," "anticipates," "will," "expects," "plans" or similar expressions, are forward-looking statements. The forward-looking statements involve a number of risks and uncertainties. Among the important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are: volatility in the semiconductor equipment industry; intense competition in the semiconductor equipment industry; the Company's dependence on a small number of customers; the Company's ability to manage factory operations and efficiently use resources; fluctuations in the Company's quarterly operating results; the Company's transition to new products; uncertain protection of the Company's patent and other proprietary rights; concentration in the Company's customer base and lengthy sales cycles; the Company's reliance on a limited group of suppliers; potential environmental liabilities; the Company's dependence on certain key personnel; the Company's limited operating history; and the risk of substantial indemnification obligations under the agreements governing the spin-off of the Company from Varian Associates, Inc. on April 2, 1999. These and other important risk factors that may affect our actual results are discussed in detail under the caption "Risk Factors" in the Company's Annual Report on Form 10-K and in other reports filed by the Company with the Securities and Exchange Commission. The Company cannot guarantee any future results, levels of activity, performance or achievement. The Company undertakes no obligation to update any of the forward-looking statements after the date of this release.

VARIAN SEMICONDUCTOR EQUIPMENT ASSOCIATES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Fiscal Three Fiscal Nine 
Months Ended Months Ended
June 27, June 28, June 27, June 28,
2003 2002 2003 2002
Revenue
Product $ 62,968 $ 74,834 $219,052 $156,840
Service 17,488 17,635 51,891 48,843
Royalty and license 2,295 2,188 6,716 33,972
-------- -------- -------- --------
Total revenue 82,751 94,657 277,659 239,655
Cost of revenue 46,172 57,765 163,934 138,176
-------- -------- -------- --------
Gross profit 36,579 36,892 113,725 101,479
-------- -------- -------- --------
Operating expenses
Research and development 15,644 12,515 43,623 37,997
Marketing, general and
administrative 18,287 22,086 56,991 59,451
Restructuring costs 1,138 - 1,296 2,200
-------- -------- -------- --------
Total operating expenses 35,069 34,601 101,910 99,648
-------- -------- -------- --------
Operating income 1,510 2,291 11,815 1,831
Interest income, net 905 1,469 3,132 4,405
Other (expense)income, net (266) - (401) 5,149
-------- -------- -------- --------
Income before income taxes 2,149 3,760 14,546 11,385
Provision for income taxes 708 1,141 4,800 3,757
-------- -------- -------- --------
Net income $ 1,441 $ 2,619 $ 9,746 $ 7,628
======== ======== ======== ========
Weighted average shares
outstanding - basic 34,199 33,420 34,085 32,990
Weighted average shares
outstanding - diluted 35,018 35,269 34,920 34,827
Net income per share - basic $ 0.04 $ 0.08 $ 0.29 $ 0.23
Net income per share - diluted $ 0.04 $ 0.07 $ 0.28 $ 0.22
VARIAN SEMICONDUCTOR EQUIPMENT ASSOCIATES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
June 27, Sept. 27,
2003 2002
--------- ----------
ASSETS
Current assets
Cash and cash equivalents $ 285,973 $ 307,840
Short-term investments 40,210 -
Accounts receivable, net 74,874 85,793
Inventories, net 59,701 81,779
Deferred income taxes 36,313 42,311
Other current assets 11,352 9,530
--------- ----------
Total current assets 508,423 527,253
Property, plant and equipment, net 48,495 46,718
Other assets 15,568 15,534
--------- ----------
Total assets $ 572,486 $ 589,505
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable and other short-term borrowings $ 5,457 $ 5,779
Accounts payable 17,084 21,398
Accrued expenses 40,110 48,560
Product warranty 8,195 8,656
Deferred revenue 33,477 60,269
--------- ----------
Total current liabilities 104,323 144,662
Long-term accrued expenses 5,538 5,674
Deferred income taxes 2,933 2,933
Long-term debt 4,642 -
--------- ----------
Total liabilities 117,436 153,269
--------- ----------
Stockholders' equity
Common stock 342 338
Capital in excess of par value 272,511 263,470
Retained earnings 182,174 172,428
Other comprehensive income 23 -
--------- ----------
Total stockholders' equity 455,050 436,236
--------- ----------
Total liabilities and stockholders' equity $ 572,486 $ 589,505
========= ==========

--30--KC/bo* CONTACT: Varian Semiconductor Equipment Associates, Inc. Bob Halliday, 978-282-7597 Chief Financial Officer bob.halliday@vsea.com or Mary Wright, 978-282-5859 Director, Financial Communications mary.wright@vsea.com KEYWORD: MASSACHUSETTS INDUSTRY KEYWORD: HARDWARE COMPUTERS/ELECTRONICS CONFERENCE CALLS EARNINGS SOURCE: Varian Semiconductor Equipment Associates, Inc.