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Varian Semiconductor Equipment Associates Reports Fiscal 2001Fourth Quarter and Full Year Results
GLOUCESTER, Mass.--(BUSINESS WIRE)--Oct. 25, 2001--Varian Semiconductor Equipment Associates, Inc. (NASDAQ: VSEA) today announced results for its fiscal 2001 fourth quarter and full year, ended September 28, 2001, and the transition from its historical accounting policy for recognizing revenue to the new policy required by the Securities and Exchange Commission Staff Accounting Bulletin No. 101 ("SAB 101").
On an historical basis, fourth quarter 2001 revenue totaled $72 million, compared to $229 million for the same period a year ago, a decrease of $157 million. Shipments during the quarter were $72 million. For the fourth quarter of 2001, the Company recorded a net loss of $7 million, or $0.21 per share, compared to net income of $46 million, or $1.34 per diluted share, for the fourth quarter of the prior fiscal year.
Historical revenue for fiscal year 2001 was $599 million, compared to $688 million for fiscal year 2000, a decrease of $89 million. Shipments during fiscal 2001 were $599 million. Net income for fiscal 2001 was $54 million, or $1.59 per diluted share, compared to net income of $100 million, or $2.97 per diluted share, for the prior fiscal year.
Historical gross margin was 25 percent in the fourth quarter and 36 percent for fiscal 2001, as compared to 40 percent and 39 percent, respectively, for the same periods in the previous year. Deterioration in gross margin was primarily a result of declining sales volume.
In addition, Varian Semiconductor restated its results for fiscal 2001,with the implementation of SAB 101 effective as of September 30, 2000. Under SAB 101, revenue for the fiscal 2001 fourth quarter totaled $70 million, gross margin was 24 percent, shipments were $72 million, and the net loss for the quarter was $8 million, or $0.24 per share. Under SAB 101, revenue for the full year of fiscal 2001 was $632 million, gross margin was 37 percent, shipments were $599 million, and net income for the fiscal year was $65 million, or $1.90 per diluted share, before the cumulative effect of the SAB 101 change in accounting principle of $27 million, or $0.80 per diluted share.
Richard A. Aurelio, Varian Semiconductor's chairman and chief executive officer, said, "Although business conditions deteriorated further last quarter, we see fundamentally strong indicators for the value of our technology and products going forward. We have used this time to improve our own business position by advancing our technology and streamlining our operations. We have been able to demonstrate the benefits of our clearly differentiated single wafer, common platform product to our customers and have also steadily increased our market share. We believe our strengths in technology leadership, market share position and customer satisfaction - as well as our work to tighten cost controls in all areas of our business - will help us to emerge from the current economic downturn, maintaining our leadership in ion implantation."
Robert J. Halliday, chief financial officer, added, "We are focused on balancing between tightly managing expenses and investing in our future, while remaining flexible to ensure a timely ramp-up in operations when the market turns around."
Varian Semiconductor ended the year with approximately $279 million in cash, having generated $41 million in cash in the fourth quarter. Halliday also noted that "With the continued lack of visibility in the industry, we remain conservative in our guidance, anticipating shipments between $40 and $50 million and revenues, consistent with SAB 101, of between $42 and $52 million during the first quarter of fiscal 2002."
Varian Semiconductor will hold a conference call, broadcast over the Internet, at 5 p.m. Eastern Time today for interested analysts, investors and media, to discuss the Company's operating results and outlook for the first fiscal quarter of 2002. Access to the call is available through the Company's web site at www.vsea.com, and replays will be available for two weeks after the call.
About Varian Semiconductor
Varian Semiconductor Equipment Associates, Inc. is the leading producer of ion implantation equipment used in the manufacture of semiconductors. The Company is headquartered in Gloucester, Massachusetts, and operates worldwide. Varian Semiconductor maintains a web site at www.vsea.com. The information contained in the Company's web site is not incorporated by reference into this release, and the web site 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, the statements
concerning the industry outlook, the Company's sales growth, market
share, capacity utilization and technological improvements and
benefits, and any statements using the terms "believes,"
"anticipates," "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; significant fluctuations in the
Company's quarterly operating results; risks associated with the
Company's transition to a new information technology infrastructure;
the impact of rapid technological change and the Company's dependence
on the development and introduction of new products; the Company's
concentration on ion implantation systems and related products;
concentration in the Company's customer base and lengthy sales cycles;
the highly competitive market in which the Company competes; risks of
international sales; foreign currency risks; uncertain protection of
patent and other proprietary rights; potential environmental
liabilities; the Company's reliance on a limited group of suppliers;
the ability of the Company's suppliers to respond to increased demand
for parts; the Company's dependence on certain key personnel; as well
as other risk factors described from time to time in the Company's
periodic reports and registration statements filed with the Securities
and Exchange Commission. The Company cannot guarantee any future
results, levels of activity, performance or achievement. The Company
undertakes no obligation to update any of the forward-looking
statements after the date of this press release.
VARIAN SEMICONDUCTOR EQUIPMENT ASSOCIATES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Fiscal Three Months Ended
Sept. 28, Sept. 28, Sept. 29,
2001 2001 2000
(with SAB 101) (pre-SAB 101) (pre-SAB 101)
Revenue
Product revenue $ 55,250 $ 59,415 $ 209,995
Service revenue 12,687 10,330 15,474
Royalties 1,843 1,843 3,447
Total revenue 69,780 71,588 228,916
Cost of revenue 53,245 53,863 138,366
Gross profit 16,535 17,725 90,550
Operating expenses
Research and
development 11,341 11,341 13,053
Marketing, general
and
administrative 18,616 18,616 27,679
Total operating
expenses 29,957 29,957 40,732
Operating (loss)
income (13,422) (12,232) 49,818
Other income, net - - 16,000
Interest income, net 1,949 1,949 1,502
(Loss) income before
(benefit) provision
for income taxes (11,473) (10,283) 67,320
(Benefit) provision
for income taxes (3,786) (3,393) 21,559
Net (loss) income $ (7,687) $ (6,890) $ 45,761
Weighted average
shares outstanding
- basic 32,550 32,550 32,066
Weighted average
shares outstanding
- diluted 32,550 32,550 34,275
Net (loss) income
per share
- basic $ (0.24) $ (0.21) $ 1.43
Net (loss) income
per share
- diluted $ (0.24) $ (0.21) $ 1.34
VARIAN SEMICONDUCTOR EQUIPMENT ASSOCIATES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Fiscal Year Ended
Sept. 28, Sept. 28, Sept. 29,
2001 2001 2000
(with SAB 101) (pre-SAB 101) (pre-SAB 101)
Revenue
Product revenue $ 534,451 $ 539,259 $ 626,219
Service revenue 82,191 44,864 51,432
Royalties 15,337 15,337 10,068
Total revenue 631,979 599,460 687,719
Cost of revenue 398,807 382,289 416,989
Gross profit 233,172 217,171 270,730
Operating expenses
Research and
development 49,817 49,817 47,025
Marketing, general
and administrative 95,051 95,051 98,063
Total operating
expenses 144,868 144,868 145,088
Operating income 88,304 72,303 125,642
Other income, net - - 18,700
Interest income, net 8,237 8,237 4,597
Income before taxes
and cumulative effect
of change in
accounting
principle 96,541 80,540 148,939
Provision for
income taxes 31,859 26,578 49,072
Income before
cumulative effect of
change in accounting
principle 64,682 53,962 99,867
Cumulative effect of
change in accounting
principle,
net of tax (27,038) - -
Net income $37,644 $ 53,962 $ 99,867
Weighted average
shares outstanding
- basic 32,275 32,275 31,375
Weighted average
shares outstanding
- diluted 34,009 34,009 33,681
Net income per share
before cumulative effect
of change in
accounting principle
- basic $ 2.00 $ 1.67 $ 3.18
Net income per share
before cumulative effect
of change in
accounting principle
- diluted $ 1.90 $ 1.59 $ 2.97
Cumulative effect
of change in accounting
principle - basic $(0.84) - -
Cumulative effect of
change in accounting
principle - diluted $(0.80) - -
Net income per share
- basic $ 1.16 $ 1.67 $ 3.18
Net income per share
- diluted $ 1.10 $ 1.59 $ 2.97
VARIAN SEMICONDUCTOR EQUIPMENT ASSOCIATES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
At September 28, At September 29,
2001 2000
(with SAB 101) (pre-SAB 101)
ASSETS
Current assets
Cash and cash equivalents $ 278,641 $ 121,692
Accounts receivable, net 85,455 182,396
Inventories, net 115,689 148,234
Other current assets 44,525 17,749
Total current assets 524,310 470,071
Property, plant and equipment, net 46,288 43,755
Other assets 17,459 19,869
Total assets $ 588,057 $ 533,695
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable and
short-term borrowings $ 15,900 $ 5,541
Accounts payable 19,271 63,392
Accrued expenses 43,149 55,869
Product warranty 20,075 28,190
Deferred revenue 81,137 23,006
Total current liabilities 179,532 175,998
Long-term accrued expenses 7,292 6,792
Deferred taxes 1,788 1,546
Total liabilities 9,080 8,338
Stockholders' equity
Common stock 327 321
Capital in excess of par value 235,699 223,263
Retained earnings 163,419 125,775
Total stockholders' equity 399,445 349,359
Total liabilities and
stockholders' equity $ 588,057 $ 533,695
Backlog $ 160,000 $ 360,000
VARIAN SEMICONDUCTOR EQUIPMENT ASSOCIATES, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
Fiscal Three Months Ended
Dec. 29, March 30, June 29,
2000 2001 2001
(with SAB 101) (with SAB 101) (with SAB 101)
Revenue
Product revenue $ 195,577 $ 160,755 $ 122,869
Service revenue 25,491 23,623 20,390
Royalties 5,346 4,239 3,909
Total revenue 226,414 188,617 147,168
Cost of revenue 128,868 115,559 101,135
Gross profit 97,546 73,058 46,033
Operating expenses
Research and
development 13,865 12,914 11,697
Marketing, general
and administrative 25,274 26,749 24,412
Total operating
expenses 39,139 39,663 36,109
Operating income 58,407 33,395 9,924
Other income, net - - -
Interest income, net 2,043 1,975 2,270
Income before taxes
and cumulative effect
of change in
accounting
principle 60,450 35,370 12,194
Provision for
income taxes 19,949 11,672 4,024
Income before
cumulative effect of
change in
accounting
principle 40,501 23,698 8,170
Cumulative effect of
change in accounting
principle,
net of tax (27,038) - -
Net income $ 13,463 $ 23,698 $ 8,170
Weighted average
shares outstanding
- basic 32,092 32,123 32,340
Weighted average
shares outstanding
- diluted 33,480 33,797 34,456
Net income per share
before cumulative effect
of change in
accounting principle
- basic $ 1.26 $ 0.74 $ 0.25
Net income per share
before cumulative effect
of change in
accounting principle
- diluted $ 1.21 $ 0.70 $ 0.24
Cumulative effect of
change in accounting
principle - Basic $(0.84) - -
Cumulative effect of
change in accounting
principle - Diluted $(0.81) - -
Net income per share
- basic $ 0.42 $ 0.74 $ 0.25
Net income per share
- diluted $ 0.40 $ 0.70 $ 0.24
Explanation of Revenue Recognition under SAB 101 Summary
In December 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial Statements." SAB 101 summarizes the staff's view in applying generally accepted accounting principles to selected revenue recognition issues, including the timing of revenue recognition for sales that involve contractual customer acceptance provisions and installation of the product if these events occur after shipment and transfer of title and risk of loss. The Company's previous revenue recognition policy was to recognize revenue at the time the customer takes title to the product, generally at the time of shipment. In October 2000, the SEC issued Staff Accounting Bulletin No. 101: Revenue Recognition in Financial Statements - Frequently Asked Questions and Answers ("SAB 101 FAQ"). The SAB 101 FAQ was issued to clarify many of the implementation questions surrounding SAB 101.
Explanation of Revenue Recognition under SAB 101
Varian Semiconductor derives revenues from three sources - product revenue, service revenue and royalties. There are different revenue recognition points under SAB 101, which are described as follows:
Product Revenue
Established Products: Equipment sales, which meet a defined set of internal Company standards, are accounted for as multiple-element arrangements. Upon shipment, the lesser of the amount allocated to the equipment or the contractual amount billable upon shipment is recorded as product revenue upon transfer of title and risk of loss. The amount deferred is recognized as revenue upon customer acceptance.
New Products: For equipment sales, which do not meet the defined set of internal Company standards, revenue allocated to the equipment is recognized upon customer acceptance.
Spare Parts: Revenue related to spare parts sales are recognized upon shipment.
Service Revenue
Service Revenue: Revenue related to maintenance and service contracts is recognized ratably over the duration of the contracts. Revenue related to paid service is recorded when earned. The fair value of installation and training is recorded upon fulfillment of the service obligation.
Royalties
Royalty revenue is recognized when contractual obligations are met and collection is reasonably assured.
Cumulative Effect of Change in Accounting Principle
As a result of the change in accounting to SAB 101, Varian Semiconductor has reported a change in accounting principle in accordance with APB Opinion No. 20, Accounting Changes, by a cumulative effect adjustment. The Company recorded a non-cash charge of $27 million (after reduction for income taxes of $16 million), or ($0.80) per diluted share, to reflect the cumulative effect of the accounting change as of the beginning of the fiscal year. |
