SOURCE: Varian Semiconductor

October 26, 2006 16:25 ET

Varian Semiconductor Equipment Associates Reports Record Fiscal 2006 and Fourth Quarter Results

GLOUCESTER, MA -- (MARKET WIRE) -- October 26, 2006 -- Varian Semiconductor Equipment Associates, Inc. ("Varian Semiconductor") (NASDAQ: VSEA) today announced results for its fiscal year 2006 and fourth quarter ended September 29, 2006.

Revenue for the fourth quarter of fiscal 2006 totaled $213.1 million, compared to revenue of $146.3 million for the same period a year ago. Varian Semiconductor recorded net income of $32.9 million, or $0.58 per diluted share during the fourth quarter of fiscal 2006, compared to net income of $13.6 million, or $0.24 per diluted share for the same period a year ago.

Revenue for fiscal 2006 totaled $730.7 million, compared to revenue of $600.5 million for fiscal 2005. Varian Semiconductor recorded net income of $94.7 million, or $1.66 per diluted share for fiscal 2006, compared to net income of $72.0 million, or $1.28 per diluted share for fiscal 2005.

Gary Dickerson, Varian Semiconductor's chief executive officer, said, "The fourth quarter of 2006 was particularly strong for us as we set a company record for single wafer high current revenue. For fiscal year 2006, we had our highest total revenue ever. We also saw gross margin increase sequentially throughout the fiscal year. Given optimism for a continued strong market in 2007, we expect to continue to post gains in market share driven by our continued strength in memory and the growing momentum we are seeing in the foundry and logic segments."

Robert Halliday, chief financial officer, provided forward guidance for the first quarter of fiscal 2007. "We currently expect revenue to be between $215 and $225 million. Earnings per share are anticipated to range from $0.55 to $0.61 per diluted 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 Ended        Fiscal Year Ended
                 --------------------------------------------------------
                 September 29,  September 30,  September 29, September 30,
                      2006           2005           2006          2005
                 ------------   ------------   ------------   -----------
Cost of revenue       $   546        $    32        $ 2,050       $    35
Research and
 development              869            167          3,673           622
Marketing, general
 and administrative     3,128            344         13,193         3,492
                 ------------   ------------   ------------   -----------
Expense before taxes    4,543            543         18,916         4,149
                 ------------   ------------   ------------   -----------
Provision for income
 taxes                 (1,569)          (166)        (6,053)       (1,285)
                 ------------   ------------   ------------   -----------
    Total             $ 2,974        $   377        $12,863       $ 2,864
                 ============   ============   ============   ===========

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 2007 revenue, gross margin and earnings per share, market share, competitive position, expected first quarter fiscal 2007 product shipments, and financial performance, market conditions for 2007, 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 Report on Form 10-Q for the quarter ended June 30, 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          Fiscal Year
                                  Months Ended             Ended
                             -------------------------------------------
                             September  September   September  September
                                 29,        30,         29,        30,
                                2006       2005        2006       2005
                             ---------  ---------   ---------  ---------
Revenue
      Product                $ 190,007  $ 121,360   $ 642,038  $ 488,719
      Service                   20,421     23,494      79,222     84,078
      Royalty                    2,668      1,455       9,454     27,724
                             ---------  ---------   ---------  ---------
            Total revenue      213,096    146,309     730,714    600,521
Cost of revenue                118,428     82,466     421,184    331,814
                             ---------  ---------   ---------  ---------
Gross profit                    94,668     63,843     309,530    268,707
                             ---------  ---------   ---------  ---------
Operating expenses
      Research and development  23,873     20,580      90,604     77,661
      Marketing, general &
       administrative           28,432     26,930     116,063    104,883
      Restructuring costs           --         --          --        914
                             ---------  ---------   ---------  ---------
            Total operating
             expenses           52,305     47,510     206,667    183,458
                             ---------  ---------   ---------  ---------
            Operating income    42,363     16,333     102,863     85,249
Interest income, net             5,390      3,413      21,514     16,348
Other income, net                  307         11         918      2,765
                             ---------  ---------   ---------  ---------
Income before income taxes      48,060     19,757     125,295    104,362
Provision for income taxes      15,146      6,125      30,611     32,352
                             ---------  ---------   ---------  ---------
Net income                   $  32,914  $  13,632   $  94,684  $  72,010
                             =========  =========   =========  =========
Weighted average shares
 outstanding – basic            55,551     56,095      56,403     55,219
Weighted average shares
 outstanding – diluted          56,389     57,352      57,193     56,395
            Net income per
             share – basic   $    0.59  $    0.24   $    1.68  $    1.30
            Net income per
             share – diluted $    0.58  $    0.24   $    1.66  $    1.28






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

                                             September 29,  September 30,
                                                  2006           2005
                                             ------------   ------------
       ASSETS
Current assets
      Cash and cash equivalents              $    258,891   $    193,426
      Short-term investments                      154,810        280,646
      Accounts receivable, net                    125,992        123,612
      Inventories                                 133,929        127,374
      Deferred income taxes                        31,592         30,865
      Other current assets                         18,102         32,796
                                             ------------   ------------
         Total current assets                     723,316        788,719
      Long-term investments                       135,777             --
      Property, plant and equipment, net           62,249         58,435
      Other assets                                 17,024         15,665
                                             ------------   ------------
         Total assets                        $    938,366   $    862,819
                                             ============   ============

       LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
      Notes payable and current portion of
       long-term debt                        $        466   $        426
      Accounts payable                             45,937         33,272
      Accrued expenses                             54,070         59,280
      Product warranty                              8,934          8,323
      Deferred revenue                             49,840         46,958
                                             ------------   ------------
         Total current liabilities                159,247        153,681
      Long-term accrued expenses and other
       liabilities                                 17,300         16,271
      Deferred income taxes                         3,722          5,477
      Long-term debt                                3,270          3,736
                                             ------------   ------------
         Total liabilities                        183,539        173,743
                                             ------------   ------------

Stockholders' equity
      Common stock                                    593            380
      Capital in excess of par value              453,229        382,445
      Less: Cost of treasury stock               (108,910)            --
      Retained earnings                           411,014        316,330
      Deferred compensation                            --         (9,366)
      Accumulated other comprehensive loss         (1,099)          (713)
                                             ------------   ------------
         Total stockholders' equity               754,827        689,076
                                             ------------   ------------
           Total liabilities and
            stockholders' equity             $    938,366   $    862,819
                                             ============   ============

Backlog                                      $    255,122   $    166,637
                                             ============   ============

Contact Information


  • Contacts:
    Bob Halliday
    Executive Vice President and Chief Financial Officer
    978.282.7597
    or
    Mary Wright
    Director, Investor Relations
    978.282.5859