SOURCE: Varian Semiconductor

July 27, 2006 16:25 ET

Varian Semiconductor Equipment Associates Reports Fiscal 2006 Third Quarter Results

GLOUCESTER, MA -- (MARKET WIRE) -- July 27, 2006 -- Varian Semiconductor Equipment Associates, Inc. ("Varian Semiconductor") (NASDAQ: VSEA) today announced results for its fiscal 2006 third quarter ended June 30, 2006.

Revenue for the third quarter of fiscal 2006 totaled $186.2 million, compared to revenue of $166.7 million for the same period a year ago. Varian Semiconductor recorded net income of $24.7 million, or $0.43 per share during the third quarter of fiscal 2006, compared to net income of $19.3 million, or $0.34 per share for the same period a year ago. As a result of the adoption of SFAS 123® "Stock Based Compensation," Varian Semiconductor's results include equity compensation costs of $3.0 million, net of tax, or $0.05 per share in the third quarter of fiscal 2006. Additionally, during the third quarter of fiscal 2006, Varian Semiconductor repurchased $33.8 million of its common stock under a previously announced share repurchase program.

Chief Executive Officer Gary Dickerson said, "The third quarter of 2006 was a record-setting one for Varian Semiconductor as we shipped more single wafer high current systems than any quarter in our history. We are confident that continued strong demand for our market share leading high current and medium current systems, as well as the growing demand for our high energy and VIISta PLAD plasma doping system, should translate into higher overall market share in 2006 and 2007. We continue to see positive customer feedback for the enhancements we are making to extend the cost and yield architectural advantages of our products for current and future device technologies. This was best expressed by our #1 ranking in customer satisfaction among Large Suppliers of Wafer Processing Equipment for the ninth time in 10 years by VLSI Research."

Chief Financial Officer Robert Halliday provided forward guidance for the fourth quarter of fiscal 2006. "We currently expect revenue to be between $205 and $215 million. Earnings per share are anticipated to range from $0.52 to $0.58 per share, including equity compensation costs. The impact from equity compensation is expected to be approximately $0.05 per share."

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.

Results of operations include the following amounts related to equity
compensation expense:

                               Fiscal Three Months   Fiscal Nine Months
                                     Ended                 Ended
                               June 30,   July 1,    June 30,   July 1,
                                 2006       2005       2006       2005
                               ---------  ---------  ---------  ---------

Cost of revenue                $     492  $       3  $   1,504  $       3
Research and development             817        455      2,804        455
Marketing, general and
 administrative                    3,175        234     10,065      3,148
                               ---------  ---------  ---------  ---------
Expense before taxes               4,484        692     14,373      3,606
                               ---------  ---------  ---------  ---------
Provision for income taxes        (1,467)      (215)    (4,484)    (1,119)
                               ---------  ---------  ---------  ---------
       Total                   $   3,017  $     477  $   9,889  $   2,487
                               =========  =========  =========  =========

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 fourth quarter fiscal 2006 revenue, gross margin, earnings per share and equity compensation costs, market share, demand for products, competitive position, expected fourth 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 Quarterly Report on Form 10-Q for the quarter ended March 31, 2006 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.

              VARIAN SEMICONDUCTOR EQUIPMENT ASSOCIATES, INC.
                CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                 (In thousands, except per share amounts)


                                    Fiscal Three Months Fiscal Nine Months
                                          Ended               Ended
                                    June 30,  July 1,   June 30,  July 1,
                                      2006      2005      2006      2005
                                    --------- --------- --------- ---------
Revenue
Product                             $ 162,656 $ 144,227 $ 452,031 $ 367,359
Service                                20,747    19,902    58,801    60,584
Royalty                                 2,783     2,561     6,786    26,269
                                    --------- --------- --------- ---------
      Total revenue                   186,186   166,690   517,618   454,212
Cost of revenue                       105,091    96,233   302,756   249,348
                                    --------- --------- --------- ---------
Gross profit                           81,095    70,457   214,862   204,864
                                    --------- --------- --------- ---------
Operating expenses
Research and development               22,872    19,351    66,731    57,081
Marketing, general and
 administrative                        27,829    26,243    87,631    77,953
Restructuring                               -         -         -       914
                                    --------- --------- --------- ---------
      Total operating expenses         50,701    45,594   154,362   135,948
                                    --------- --------- --------- ---------
      Operating income                 30,394    24,863    60,500    68,916
Interest income, net                    5,755     2,926    16,124    12,935
Other income, net                         651        17       611     2,754
                                    --------- --------- --------- ---------
Income before income taxes             36,800    27,806    77,235    84,605
Provision for income taxes             12,126     8,506    15,465    26,227
                                    --------- --------- --------- ---------
Net income                          $  24,674 $  19,300 $  61,770 $  58,378
                                    ========= ========= ========= =========
Weighted average shares outstanding
 - basic                               56,767    55,197    56,686    54,929
Weighted average shares outstanding
 - diluted                             57,473    56,395    57,444    56,064
      Net income per share - basic  $    0.43 $    0.35 $    1.09 $    1.06
      Net income per share -
       diluted                      $    0.43 $    0.34 $    1.08 $    1.04


Note: Prior period shares outstanding and earnings per share have been
adjusted for the three-for-two stock split effected as a dividend, which
became effective on February 28, 2006 for shareholders of record on
February 13, 2006.


              VARIAN SEMICONDUCTOR EQUIPMENT ASSOCIATES, INC.
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                              (In thousands)


                                              June 30,     September 30,
                                                2006            2005
                                           --------------  --------------
              ASSETS
Current assets
      Cash and cash equivalents            $      218,517  $      193,426
      Short-term investments                      167,176         280,646
      Accounts receivable, net                    151,556         123,612
      Inventories                                 129,894         127,374
      Deferred income taxes                        34,942          30,865
      Other current assets                         15,317          32,796
                                           --------------  --------------
        Total current assets                      717,402         788,719
      Long-term investments                       131,864               -
      Property, plant and equipment, net           60,211          58,435
      Other assets                                 16,464          15,665
                                           --------------  --------------
        Total assets                       $      925,941  $      862,819
                                           ==============  ==============

      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
      Notes payable and current portion of
       long-term debt                      $          455  $          426
      Accounts payable                             47,311          33,272
      Accrued expenses                             56,082          59,280
      Product warranty                              9,671           8,585
      Deferred revenue                             51,742          52,118
                                           --------------  --------------
        Total current liabilities                 165,261         153,681
      Long-term accrued expenses                    9,894          10,849
      Deferred income taxes                         4,926           5,477
      Long-term debt                                3,391           3,736
                                           --------------  --------------
        Total liabilities                         183,472         173,743
                                           --------------  --------------

Stockholders' equity
      Common stock                                    581             380
      Capital in excess of par value              420,696         382,445
      Less: Cost of treasury stock                (53,833)              -
      Retained earnings                           378,100         316,330
      Deferred compensation                             -          (9,366)
      Accumulated other comprehensive loss         (3,075)           (713)
                                           --------------  --------------
        Total stockholders' equity                742,469         689,076
                                           --------------  --------------
          Total liabilities and
           stockholders' equity            $      925,941  $      862,819
                                           ==============  ==============

Contact Information

  • Contacts:
    Bob Halliday
    Executive Vice President
    Chief Financial Officer
    978.282.7597

    Mary Wright
    Director, Investor Relations
    978.282.5859