Varian Semiconductor Equipment Associates Reports Fiscal 2005 Second Q

    Business Editors

    GLOUCESTER, Mass.--(BUSINESS WIRE)--April 28, 2005--Varian Semiconductor Equipment Associates, Inc. ("Varian Semiconductor") (Nasdaq: VSEA) today announced results for its fiscal 2005 second quarter ended April 1, 2005.
    Revenue for the second quarter of fiscal 2005 totaled $139.1 million, compared to revenue of $127.3 million for the same period a year ago. Varian Semiconductor recorded net income of $11.1 million, or $0.30 per diluted share during the second quarter of fiscal 2005, compared to net income of $14.0 million, or $0.38 per diluted share for the same period a year ago. Gross margin for the second quarter of fiscal 2005 was 42 percent, compared to 45 percent for the same period a year ago.
    Gary E. Dickerson, Varian Semiconductor's chief executive officer, commented, "Our growth in revenue is evidence of the market acceptance of our VIISta HC and VIISta 810 XE systems. Both systems have been accepted at multiple sites, as our customers continue to realize the yield and productivity advantages of our single wafer architecture. In our second quarter, we shipped more single wafer high current tools than any quarter in our history."
    Robert J. Halliday, chief financial officer, provided forward guidance, "We currently expect revenue for the third quarter of fiscal 2005 to be between $158 and $168 million and gross margin as a percentage of revenue to be in the low 40's. Earnings per share is anticipated to range from $0.45 to $0.53 per diluted share."
    Halliday further added, "Our projected revenue growth in the third quarter is being driven by rapid market acceptance of our single wafer high current tool, the VIISta HC. Our positive company outlook for 2005 is somewhat tempered by uncertain overall market conditions."
    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 a 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 third quarter fiscal 2005 revenue, gross margin and earnings per share, market share, competitive position, expected third quarter fiscal 2005 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.

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

Fiscal Three Fiscal Six Months Ended Months Ended April 1, April 2, April 1, April 2, 2005 2004 2005 2004 -------- -------- --------- --------- Revenue Product $116,044 $109,368 $ 223,132 $ 195,807 Service 21,287 16,260 40,682 29,570 Royalty 1,766 1,698 23,708 3,792 -------- -------- --------- --------- Total revenue 139,097 127,326 287,522 229,169 Cost of revenue 80,831 69,631 153,115 129,092 -------- -------- --------- --------- Gross profit 58,266 57,695 134,407 100,077 -------- -------- --------- --------- Operating expenses Research and development 19,077 16,958 37,730 33,223 Marketing, general and administrative 24,330 21,011 51,710 40,819 Restructuring 914 - 914 - -------- -------- --------- --------- Total operating expenses 44,321 37,969 90,354 74,042 -------- -------- --------- --------- Operating income 13,945 19,726 44,053 26,035

Interest income, net 2,404 904 10,009 1,760 Other income (expense), net (82) (115) 2,737 (112) -------- -------- --------- --------- Income before income taxes 16,267 20,515 56,799 27,683 Provision for income taxes 5,156 6,493 17,721 8,858 -------- -------- --------- --------- Net income $ 11,111 $ 14,022 $ 39,078 $ 18,825 ======== ======== ========= ========= Weighted average shares outstanding - basic 36,601 36,135 36,529 35,819 Weighted average shares outstanding - diluted 37,347 37,103 37,269 36,907 Net income per share - basic $ 0.30 $ 0.39 $ 1.07 $ 0.53 Net income per share - diluted $ 0.30 $ 0.38 $ 1.05 $ 0.51

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

April 1, October 1, 2005 2004 ------------- -------------- ASSETS Current assets Cash and cash equivalents $ 186,767 $ 218,578 Short-term investments 249,983 173,891 Accounts receivable, net 107,964 123,749 Inventories 141,391 104,900 Deferred income taxes 27,740 27,691 Other current assets 19,964 32,938 ------------- -------------- Total current assets 733,809 681,747 Property, plant and equipment, net 59,290 52,344 Other assets 15,455 15,405 ------------- -------------- Total assets $ 808,554 $ 749,496 ============= ==============

LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Notes payable and current portion of long-term debt $ 715 $ 4,170 Accounts payable 48,500 33,980 Accrued expenses 45,243 53,234 Product warranty 8,239 7,841 Deferred revenue 62,814 54,509 ------------- -------------- Total current liabilities 165,511 153,734 Long-term accrued expenses 10,608 10,905 Deferred income taxes 4,615 4,615 Long-term debt 3,954 4,162 ------------- -------------- Total liabilities 184,688 173,416 ------------- --------------

Stockholders' equity Common stock 368 364 Capital in excess of par value 345,312 331,701 Retained earnings 283,398 244,320 Deferred compensation (3,285) (149) Accumulated other comprehensive loss (1,927) (156) ------------- -------------- Total stockholders' equity 623,866 576,080 ------------- -------------- Total liabilities and stockholders' equity $ 808,554 $ 749,496 ============= ==============

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CONTACT: Varian Semiconductor Bob Halliday Executive Vice President and Chief Financial Officer 978.282.7597 bob.halliday@vsea.com or Mary Wright Director, Investor Relations 978.282.5859 mary.wright@vsea.com

KEYWORD: MASSACHUSETTS INDUSTRY KEYWORD: HARDWARE EARNINGS CONFERENCE CALLS SOURCE: Varian Semiconductor Equipment Associates, Inc.

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