Zygo Results Hit by Semiconductor Downturn

Jan. 31, 2002
Zygo Corp. announced net sales of $19,006,000 for the second quarter and $39,962,000 for the six months ended December 30, 2001 decreased by $13,725,000, or 42%, and $16,701,000, or 29%, from the comparable prior year periods

Zygo Corp. announced net sales of $19,006,000 for the second quarter and $39,962,000 for the six months ended December 30, 2001 decreased by $13,725,000, or 42%, and $16,701,000, or 29%, from the comparable prior year periods.

For the second quarter of fiscal 2002, net sales in the semiconductor segment were $8,119,000, or 43% of total net sales, as compared to $20,713,000, or 63%, in the prior year period; net sales in the industrial segment were $9,157,000, or 48% of total net sales, as compared to $8,649,000, or 27%, in the prior year period; and net sales in the telecommunications segment were $1,730,000, or 9% of total net sales, as compared to $3,369,000, or 10%, in the prior year period.

For the first half of fiscal 2002, net sales in the semiconductor segment were $18,503,000, or 46% of total net sales, as compared to $35,803,000, or 63%, in the prior year period; net sales in the industrial segment were $17,430,000, or 44% of total net sales, as compared to $16,167,000, or 29%, in the prior year period; and net sales in the telecommunications segment were $4,029,000, or 10% of total net sales, as compared to $4,693,000, or 8%, in the prior year period. The Company continues to be impacted significantly by the downturn in the semiconductor industry.

The Company recorded a net loss of $3,019,000 for the second quarter ended December 30, 2001 as compared to net earnings of $1,905,000 for the comparable quarter ended December 30, 2000. Excluding the gain on the sale of the Automation Systems Group in Longmont, CO, of $6,117,000 and related exit costs ($1,920,000), inventory write-downs ($808,000), and tax expense ($1,288,000), the net loss for the second quarter ended December 30, 2001 was $5,120,000. On a diluted per share basis, the net loss was $.17 per share (net loss of $.29 per share excluding the gain on sale and related exit costs, inventory write-downs, and tax expense) for the quarter ended December 30, 2001, compared with net earnings of $.13 per share in the comparable prior year period.

For the first half of fiscal 2002, the Company recorded a net loss of $5,390,000, or $.31 per share, as compared to net earnings of $2,722,000, or $.18 per share, for the comparable prior year period. Excluding the gain on sale and related exit costs, inventory write-downs, and tax expense, for the first half of fiscal 2002 the net loss was $7,491,000, or $.43 on a diluted per share basis. The net loss per share is based on the weighted average basic shares outstanding which equals the diluted weighted average shares.

The basic and fully diluted weighted average number of shares outstanding for the quarter ended December 30, 2001 were 17,390,000 as compared to 14,359,000 basic shares and 15,123,000 fully diluted shares for the quarter ended December 30, 2000. The basic and fully diluted weighted average number of shares outstanding for the first half of fiscal 2002 were 17,390,000 as compared to 14,329,000 basic shares and 15,166,000 fully diluted shares for the comparable prior year period ended December 30, 2000. The increases in the number of shares outstanding were due to the 2,924,500 shares issued in March 2001 in the secondary offering of the Company's common stock and the exercise of stock options.

Gross profit for the second quarter of fiscal 2002 totaled $4,678,000 (including $808,000 of inventory write-downs related to the sale of the Automation Systems Group), a decrease of $8,933,000, or 66%, from $13,611,000 in the second quarter of fiscal 2001. Gross profit as a percentage of sales for the second quarter of fiscal 2002 was 25%, as compared to 42% for the comparable prior year period. Gross profit for the first half of fiscal 2002 totaled $11,703,000, a decrease of $11,877,000, or 50%, from $23,580,000 for the first half of fiscal 2001. Gross profit as a percentage of sales for the first half of fiscal 2002 was 29%, as compared to 42% for the comparable prior year period.

The decrease in gross profit and in gross profit as a percentage of sales is primarily due to lower production volumes, a change in product mix from the semiconductor to the industrial segment, which carries a lower margin due to the government business, and inventory write-downs related to the sale of the Automation Systems Group.

Research, development, and engineering expenses ("R&D") for the second quarter of fiscal 2002 totaled $6,529,000, an increase of $2,313,000, or 55%, from $4,216,000 in the comparable prior year period. R&D for the first half of fiscal 2002 totaled $11,753,000, an increase of $4,282,000, or 57%, from $7,471,000 in the comparable prior year period. This increase primarily is due to continued investment in the semiconductor and telecommunication segments, including telecommunication automation. These investments are due to increased customer interest in new technology products.

On December 12, 2001, the Company sold its Automation Systems Group in Longmont, Colorado, to Brooks Automation, Inc. (NASDAQ: BRKS - news) of Chelmsford, Massachusetts, in a cash transaction, for $12,165,000 (including a receivable of $772,000 related to post closing adjustments). Substantially all of the assets were sold to Brooks and substantially all the liabilities were assumed by Brooks. The gain on the sale was $6,117,000 with related exit costs of $1,920,000 to be paid from the proceeds, inventory write-downs of $808,000, and tax expense of $1,288,000. The majority of the exit costs relate to a portion of the lease on the Longmont facility not assumed by Brooks.

Backlog at December 30, 2001 totaled $53,410,000 (excluding $3,053,000 related to the Automation Systems Group), an increase of $2,569,000, or 5%, from $50,841,000 (excluding $3,905,000 related to the Automation Systems Group) at September 30, 2001. Backlog at December 30, 2001, decreased $12,512,000, or 19%, from $65,922,000 at December 30, 2000. Orders for the second quarter of fiscal 2002 totaled $20,723,000 (including $948,000 related to the Automation Systems Group), and consisted of $4,941,000, or 24%, in the semiconductor segment; $12,238,000, or 59%, in the industrial segment; and $3,544,000, or 17%, in the telecommunications segment. Orders for the first half of fiscal 2002 totaled $40,923,000 (including $1,448,000 related to the Automation Systems Group) and consisted of $11,203,000, or 28%, in the semiconductor segment; $21,789,000, or 53%, in the industrial segment; and $7,931,000, or 19%, in the telecommunications segment.

The Company maintained cash, cash equivalents, and marketable securities at December 30, 2001 totaling $51,093,000. This represents a decrease of $8,658,000 from June 30, 2001. Excluding the cash received from the sale of the Automation Systems Group ($11,393,000), there would have been a decrease of $20,051,000 for the first six months of fiscal 2002. The decrease was due to the operating loss, increases in inventories and costs in excess of billings, decreases in accounts payable and accrued expenses, and investments in property, plant, and equipment, partially offset by a decrease in receivables (in all cases, after excluding the Automation System Group assets and liabilities from the June 30, 2001 balance sheet which were transferred to Brooks). The decrease in accrued expenses was due to payments of profit sharing and other incentive compensation that were in accrued liabilities at June 30, 2001. The investments in property, plant, and equipment are primarily due to investments in optical equipment ($2,518,000) and the completion of the TeraOptix facility in Westborough, MA ($6,222,000). The TeraOptix facility is substantially complete.

"Zygo Corporation's business was essentially flat in the quarter," said Bruce Robinson, president and chief executive officer. "Continued reduction in semiconductor capital spending affected the optics and stage metrology divisions, while the industrial bookings continued to improve with customer interest in both optics and metrology. Although the telecom market has not shown any sign of recovery, we are encouraged by the growing acceptance by our customers of our telecommunications manufacturing and design services. We increased our visibility with 'TIER 1' telecom customers over the last six months, and are qualifying on a number of products. In spite of the positive signs in activity, we believe the quarter ending in March will remain challenging."

Zygo Corp., headquartered in Middlefield, CT, is a worldwide developer and supplier of high precision optics, optical, and fiber optic assemblies, high performance metrology instruments, and automation for the telecommunications, semiconductor, and industrial markets. See ZYGO's web site at www.zygo.com for additional information.

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