VSEA Varian Semiconductor (MM)

Varian Semiconductor Equipment Associates, Inc. ("Varian Semiconductor") (Nasdaq: VSEA) today announced results for its fiscal 2005 and fourth quarter ended September 30, 2005. Revenue for the fourth quarter of fiscal 2005 totaled $146.3 million, compared to revenue of $154.8 million for the same period a year ago. Varian Semiconductor recorded net income of $13.6 million, or $0.36 per diluted share during the fourth quarter of fiscal 2005, compared to net income of $23.0 million, or $0.62 per diluted share for the same period a year ago. Revenue for fiscal 2005 totaled $600.5 million, compared to revenue of $530.1 million for fiscal 2004. Varian Semiconductor recorded net income of $72.0 million, or $1.92 per diluted share for fiscal 2005, compared to net income of $61.1 million, or $1.65 per diluted share for fiscal 2004. Gary Dickerson, Varian Semiconductor's chief executive officer, said, "We are encouraged by our continued momentum in gaining market share, especially in the high current implant segment, as evidenced by our recent selections at a major Japanese chipmaker and at a major North American logic manufacturer. Furthermore, at the 65nm node, customer evaluations of our tools are proceeding well, and the outlook for additional selections is positive. We estimate that our 2005 calendar year market share will approximate 40% for both high current and overall implant business." Robert Halliday, chief financial officer, provided forward guidance for the first quarter of fiscal 2006. "We currently expect revenue to be between $150 and $160 million. Earnings per share are anticipated to range from $0.30 to $0.38 per diluted share, excluding stock-based compensation costs and the impact of an anticipated tax benefit. The impact from the new accounting pronouncement related to stock-based compensation is expected to range from $0.05 to $0.07 per diluted share. Additionally, in the first quarter of fiscal 2006, we anticipate recognizing a tax benefit of $0.21 to $0.30 per diluted share related to the favorable conclusion of a multi-year tax examination." Varian Semiconductor will hold a conference call, broadcast over the Internet, at 5:30 p.m. eastern time today to discuss Varian Semiconductor's operating results and outlook. Access to the call is available through the investor relations page on Varian Semiconductor's website at www.vsea.com. Replays will be available via the website for two weeks after the call. About Varian Semiconductor Equipment Associates, Inc. Varian Semiconductor is the leading producer of ion implantation equipment used in the manufacture of semiconductors. Varian Semiconductor is headquartered in Gloucester, Massachusetts, and operates worldwide. Varian Semiconductor maintains a website at www.vsea.com. The information contained in Varian Semiconductor'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, Varian Semiconductor's guidance for first quarter fiscal 2006 revenue, gross margin and earnings per share, market share, competitive position, expected first quarter fiscal 2006 product shipments, 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; Varian Semiconductor's dependence on a small number of customers; fluctuations in Varian Semiconductor's quarterly operating results; Varian Semiconductor's transition to new products; Varian Semiconductor's exposure to risks of operating internationally; uncertain protection of Varian Semiconductor's patent and other proprietary rights; Varian Semiconductor's reliance on a limited group of suppliers; potential environmental liabilities; Varian Semiconductor's ability to manage potential growth, decline and strategic transactions; Varian Semiconductor's reliance on one primary manufacturing facility; Varian Semiconductor's dependence on certain key personnel; and the risk of substantial indemnification obligations under the agreements governing the spin-off of Varian Semiconductor from Varian Associates, Inc. on April 2, 1999. These and other important risk factors that may affect actual results are discussed in detail under the caption "Risk Factors" in Varian Semiconductor's Annual Report on Form 10-K and in other reports filed by Varian Semiconductor with the Securities and Exchange Commission. Varian Semiconductor cannot guarantee any future results, levels of activity, performance or achievement. Varian Semiconductor undertakes no obligation to update any of the forward-looking statements after the date of this release. This press release includes, within Varian Semiconductor's forward guidance, a non-GAAP measure of earnings per share. The non-GAAP earnings per share excludes stock-based compensation costs and the impact of an anticipated tax benefit. To be comparable with fiscal 2005 fourth quarter results, the earnings per share forward guidance for the first quarter of fiscal 2006 excludes stock-based compensation costs, a direct result of the implementation of FAS 123(R), which is effective for Varian Semiconductor on October 1, 2005. The forward guidance also excludes the impact of the anticipated tax benefit as it is a non-recurring event. Management believes that investors may find it useful for these items to be excluded. The reconciliation of GAAP earnings per share is as follows: -0- *T First Quarter Fiscal 2006 Guidance Low High Non-GAAP EPS Range $0.30 $0.38 Stock-Based Compensation (0.05) (0.07) Anticipated Tax Benefit 0.21 0.30 GAAP EPS Range $0.46 $0.61 VARIAN SEMICONDUCTOR EQUIPMENT ASSOCIATES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) Fiscal Fiscal Three Months Ended Year Ended Sept. 30, Oct. 1, Sept. 30, Oct. 1, 2005 2004 2005 2004 ----------- ----------- ----------- ----------- Revenue Product $ 121,360 $ 133,351 $ 488,719 $ 456,217 Service 23,494 19,650 84,078 65,947 Royalty 1,455 1,804 27,724 7,945 ----------- ----------- ----------- ----------- Total revenue 146,309 154,805 600,521 530,109 Cost of revenue 82,466 81,992 331,814 290,269 ----------- ----------- ----------- ----------- Gross profit 63,843 72,813 268,707 239,840 ----------- ----------- ----------- ----------- Operating expenses Research and development 20,580 16,995 77,661 67,715 Marketing, general & administrative 26,930 23,059 104,883 85,615 Restructuring costs -- -- 914 -- ----------- ----------- ----------- ----------- Total operating expenses 47,510 40,054 183,458 153,330 ----------- ----------- ----------- ----------- Operating income 16,333 32,759 85,249 86,510 Interest income, net 3,413 1,507 16,348 4,277 Other income (expense), net 11 (425) 2,765 (923) ----------- ----------- ----------- ----------- Income before income taxes 19,757 33,841 104,362 89,864 Provision for income taxes 6,125 10,829 32,352 28,756 ----------- ----------- ----------- ----------- Net income $ 13,632 $ 23,012 $ 72,010 $ 61,108 =========== =========== =========== =========== Weighted average shares outstanding - basic 37,397 36,390 36,813 36,085 Weighted average shares outstanding - diluted 38,235 36,944 37,597 36,978 Net income per share - basic $ 0.36 $ 0.63 $ 1.96 $ 1.69 Net income per share - diluted $ 0.36 $ 0.62 $ 1.92 $ 1.65 VARIAN SEMICONDUCTOR EQUIPMENT ASSOCIATES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) September 30, October 1, 2005 2004 -------------- ------------- ASSETS Current assets Cash and cash equivalents $ 193,426 $ 218,578 Short-term investments 280,646 173,891 Accounts receivable, net 123,612 123,749 Inventories 127,374 99,356 Deferred income taxes 30,865 27,691 Other current assets 32,796 38,482 -------------- ------------- Total current assets 788,719 681,747 Property, plant and equipment, net 58,435 52,344 Other assets 15,665 15,405 -------------- ------------- Total assets $ 862,819 $ 749,496 ============== ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Notes payable and current portion of long-term debt $ 426 $ 4,016 Accounts payable 33,272 34,134 Accrued expenses 59,280 53,234 Product warranty 8,585 7,841 Deferred revenue 52,118 54,509 -------------- ------------- Total current liabilities 153,681 153,734 Long-term accrued expenses 10,849 10,905 Deferred income taxes 5,477 4,615 Long-term debt 3,736 4,162 -------------- ------------- Total liabilities 173,743 173,416 -------------- ------------- Stockholders' equity Common stock 380 364 Capital in excess of par value 382,445 331,701 Retained earnings 316,330 244,320 Deferred compensation (9,366) (149) Accumulated other comprehensive loss (713) (156) -------------- ------------- Total stockholders' equity 689,076 576,080 -------------- ------------- Total liabilities and stockholders' equity $ 862,819 $ 749,496 ============== ============= Backlog $ 166,637 $ 184,370 ============== ============= *T