SOURCE: Credence

August 30, 2007 16:30 ET

Credence Reports Profitable Third Quarter

MILPITAS, CA--(Marketwire - August 30, 2007) - Credence Systems Corporation (NASDAQ: CMOS), a leading provider of innovative and cost-effective test solutions from design to production for the worldwide semiconductor industry, today reported financial results for the third quarter of fiscal 2007 ended August 4, 2007.

Net sales for the third quarter were $123.5 million, up 2.0 percent from prior quarter net sales of $121.1 million and up 7.9 percent from the third quarter of fiscal year 2006 revenue of $114.5 million. Net income for the quarter was $10.3 million or $0.09 per share, versus a net loss of $3.5 million or $0.03 net loss per share in the prior quarter. Net loss from third quarter fiscal 2006 was $461.4 million or $4.61 net loss per share.

"We achieved our revenue plan for the quarter and significantly exceeded our gross margin, cost cutting and net profit goals while strengthening our balance sheet," said Lavi Lev, chief executive officer of Credence. "I am particularly pleased to note that during this quarter we achieved the business model breakeven goal that we had previously announced as our goal for mid 2008. This progress should greatly improve our ability to sustain profitability throughout the industry's cycles."

Fourth quarter fiscal 2007 outlook

Net sales in the fourth quarter of fiscal 2007 are expected to be in the range of $101.0 million to $105.0 million, with per share results at approximately breakeven.

Conference Call/Webcast

Credence will hold a conference call to discuss these results today, Thursday, August 30, 2007, at 5:00 pm ET. The call will be simulcast via the Credence web site at www.credence.com under "Company-Investor Relations." A replay of the call will be available via telephone and web site through September 30, 2007. The replay number in North America is (888) 286-8010, and outside North America is (617) 801-6888. The passcode is 97232549. The web version of the replay will be available at www.credence.com under Investor Relations-Events & Presentations-Past Events.

About Credence

Credence Systems Corporation is a leading provider of debug, characterization and ATE solutions for the global semiconductor industry. With a commitment to applying innovative technology to lower the cost-of-test, Credence delivers competitive cost and performance advantages to integrated device manufacturers (IDMs), wafer foundries, outsource assembly and test (OSAT) suppliers and fabless chip companies worldwide. A global, ISO 9001-certified company with a presence in 20 countries, Credence is headquartered in Milpitas, California. More information is available at http://www.credence.com.

Forward-Looking Statements

This release contains statements that are forward-looking within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding our business model breakeven goal, our ability to sustain profitability, our industry's cyclicality and our expected net sales and earnings per share for the fourth quarter of fiscal 2007. These forward-looking statements involve important factors that could cause our actual results to differ materially from those in the forward-looking statements. Such important factors involve risks and uncertainties including, but not limited to, the volatility of the trading price of our stock, the introduction of new product features including new instruments, the completion, delivery and acceptance by customers of such new product features, the need to focus on different aspects of our business to improve stockholder value, unanticipated challenges in assessing business conditions and the overall market, unanticipated difficulties in implementing improvements to our business model, cyclicality and downturns in the semiconductor industry, rapid technological change in the automatic test equipment market, the timing of new technology, product introductions, customer requirements relating to the customization of products, the risk of a loss or reduction of orders from one or more customers among which our business is concentrated, fluctuation in customer demand, timing and volume of orders and shipments, competition and pricing pressures, reliability and quality issues, our ability to complete the development and commercialization of our new products, product mix, overhead absorption, continued dependence on "turns" orders to achieve revenue objectives, intellectual property issues, the risk of early obsolescence, our ability to control and reduce expenses (including the ability to identify and successfully institute additional cost-saving measures) and our need to achieve and maintain effective internal controls over financial reporting. Reference is made to the discussion of risk factors detailed in our filings with the Securities and Exchange Commission, including our reports on Form 10-K and 10-Q. All projections in this release are based on limited information currently available to us, which is subject to change. Although any such projections and the factors influencing them will likely change, we will not necessarily update the information, since we are only to provide guidance at certain points during the year. Actual events or results could differ materially and no reader of this release should assume later in the quarter that the information provided today is still valid. Such information speaks only as of the date of this release.

Credence is a registered trademark, and Credence Systems is a trademark, of Credence Systems Corporation. Other trademarks that may be mentioned in this release are the intellectual property of their respective owners.

                    CREDENCE SYSTEMS CORPORATION
          CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
              (in thousands, except per share amounts)
                            (Unaudited)


                                           Prior
                                           Quarter
                     Three Months Ended    Ended      Nine Months Ended
                   ---------------------  ---------  ---------------------
                   August 4,   July 31,    May 5,    August 4,   July 31,
                   ---------  ----------  ---------  ---------  ----------
                     2007        2006       2007       2007        2006
                   ---------  ----------  ---------  ---------  ----------

Net sales(1)       $ 123,532  $  114,476  $ 121,141  $ 363,470  $  366,226

Cost of goods sold
 - on net sales(1)
 (2)                  60,228      88,868     65,925    193,448     238,603
                   ---------  ----------  ---------  ---------  ----------
Gross margin          63,304      25,608     55,216    170,022     127,623

Operating
 expenses:

Research and
 development (3)      18,696      22,576     20,362     60,236      70,847

Selling, general &
 administrative(1)
 (4)                  27,042      30,782     29,114     81,995      89,852

Amortization of
 purchased
 intangible assets     4,451       4,338      4,454     13,360      12,709

Reduction of
 goodwill                 --     423,875         --         --     423,875

Restructuring
 charges                  (9)      1,792        526      1,009       3,166
                   ---------  ----------  ---------  ---------  ----------

   Total operating
    expenses          50,180     483,363     54,456    156,600     600,449
                   ---------  ----------  ---------  ---------  ----------

Operating income /
 (loss)               13,124    (457,755)       760     13,422    (472,826)

Interest and other
 income, net(5)       (1,163)     (1,501)    (2,325)      (983)     (1,973)
                   ---------  ----------  ---------  ---------  ----------

Income / (loss)
 before income
 taxes                11,961    (459,256)    (1,565)    12,439    (474,799)

Income taxes           1,623       2,110      1,889      5,566       4,844
                   ---------  ----------  ---------  ---------  ----------

Net income /
 (loss)            $  10,338  ($ 461,366) ($  3,454) $   6,873  ($ 479,643)
                   =========  ==========  =========  =========  ==========

Net income /
 (loss) per share
   Basic           $    0.10  ($    4.61) ($   0.03) $    0.07  ($    4.81)
                   =========  ==========  =========  =========  ==========
   Diluted         $    0.09  ($    4.61) ($   0.03) $    0.07  ($    4.81)
                   =========  ==========  =========  =========  ==========

Number of shares
 used in computing
 per share amounts
   Basic             101,194     100,017    101,028    100,940      99,798
                   =========  ==========  =========  =========  ==========
   Diluted           122,574     100,017    101,028    101,067      99,798
                   =========  ==========  =========  =========  ==========


(1)  Effective the first quarter of fiscal 2007, Credence reclassified
     engineering consulting and customized services as revenue instead of
     as an offset to selling, general, and administrative expenses.  The
     labor and material associated with the delivery of these services
     which had previously been reported as selling, general, and
     administrative expenses are classified as cost of goods sold.  For the
     three and nine month periods ended August 4, 2007, the total amount of
     engineering consulting and customized services classified as net sales
     is $2.6 million and $11.4 million respectively.  For the three and
     nine month periods ended August 4, 2007, the total amount of cost of
     goods sold is $1.6 million and $8.2 million, respectively.  For the
     three month period ended May 5, 2007 the total amount of engineering

     consulting and customized services classified as net sales is $3.3
     million and the related cost of goods sold is $2.9 million.  For
     comparative purposes, for the three and nine month periods ended July
     31, 2006, $4.9 million and $13.7 million, respectively has been
     reclassified as net sales.  The related cost of goods sold of $3.1
     million and $8.3 million for the three and nine month periods ended
     July 31, 2006, respectively has been reclassified to cost of goods
     sold from selling, general, and administrative expenses.

(2)  Includes stock-based compensation under FAS 123R (adopted on November
     1, 2005) of $0.1 million and $0.3 million for the three and nine month
     periods ended August 4, 2007, respectively.  For the three months
     ended May 5, 2007 stock-based compensation expense was $0.1 million.
     For the three and nine month periods ended July 31, 2006, stock-based
     compensation expense was $0.3 million and $0.5 million, respectively.
     The three and nine month periods ended August 4, 2007 include a
     benefit of reclaimed VAT in the amount of  $1.1 million. Also,
     includes amortization expenses resulting from the write-up to fair
     value of the inventory, spares and fixed assets acquired as part of
     our acquisition of NPTest of $0.4 million and $1.7 million for the
     three and nine months ended July 31, 2006, respectively.

(3)  Includes stock-based compensation under FAS 123R of $0.5 million and
     $1.2 million for the three and nine month periods ended August 4,
     2007, respectively.  For the three month period ended May 5, 2007,
     stock-based compensation expense was $0.3 million.  For the three and
     nine month periods ended July 31, 2006, stock-based compensation
     expense was $0.6 million and $1.5 million, respectively.

(4)  Includes stock-based compensation under FAS 123R of $0.6 million and
     $2.6 million for the three and nine month periods ended August 4,
     2007, respectively.   For the three month period ended May 5, 2007,
     stock-based compensation expense was $0.9 million.  For the three and
     nine month periods ended July 31, 2006, stock-based compensation
     expense was $0.8 million and $2.4 million, respectively.  In addition,
     it includes amortization of the fixed assets write-up to fair value,
     resulting from NPTest acquisition of approximately $0.2 million for
     the nine month period July 31, 2006.

(5)  Includes a gain of $3.0 million associated with the exchange of $72.5
     million of the convertible notes and a loss on the sale of land of
     $1.0 million for the nine months ended August 4, 2007.

(6)  Beginning in Q1 2007, Credence changed its fiscal year end from a
     calendar date ending October 31 to a 52 or 53 week calendar ending
     on the Saturday closest to October 31.  There were 91 days in the
     third quarter of fiscal year 2007 and fiscal year 2007 will be a 52
     week fiscal year ending November 3, 2007.  This change has no impact
     on Credence’s results of operations, financial position, or cash
     flows.



                   CREDENCE SYSTEMS CORPORATION
              CONDENSED CONSOLIDATED BALANCE SHEETS
                          (in thousands)


                                                      Prior
                                                      Quarter
                                        August 4,     May 5,    October 31,
                                        ----------- ----------- -----------
                                           2007        2007      2006 (1)
                                        ----------- ----------- -----------
                                        (unaudited) (unaudited)
ASSETS

Current assets:
  Cash and cash equivalents             $   118,056 $   123,704 $    95,635

  Short-term investments                     72,816      45,371       7,177

  Accounts receivable, net                  108,269     125,506     114,796

  Inventories                                67,461      62,965      55,200

  Other current assets                       26,732      24,378      24,661
                                        ----------- ----------- -----------

   Total current assets                     393,334     381,924     297,469

Property and equipment, net                  78,369      79,591      87,175

Other assets                                124,305     130,144     132,950
                                        ----------- ----------- -----------

   Total assets                         $   596,008 $   591,659 $   517,594
                                        =========== =========== ===========

LIABILITIES AND STOCKHOLDERS'
EQUITY

Current liabilities:
  Convertible subordinated notes        $    72,500 $        -- $        --

  Accounts payable                           25,320      26,064      32,477

  Accrued liabilities                       100,513     100,307     105,089

  Deferred profits                            6,295      11,967       6,143
                                        ----------- ----------- -----------

   Total current liabilities                204,628     138,338     143,709

Convertible subordinated notes              119,278     195,000     145,000

Other liabilities                            35,381      33,157       6,686

Long-term deferred income taxes               9,473       9,473       9,473

Stockholders' equity                        227,248     215,691     212,726
                                        ----------- ----------- -----------

   Total liabilities and stockholder’s
    equity                              $   596,008 $   591,659 $   517,594
                                        =========== =========== ===========


(1)  Derived from the audited financial statements for the year ended
     October 31, 2006.