Tegal Corporation Reports Fourth Quarter and Fiscal Year 2004 Financial Results
Business Wire - May 06, 2004 16:19
PETALUMA, Calif., May 6, 2004 (BUSINESS WIRE) -- Tegal Corporation (Nasdaq:TGAL), a leading designer and manufacturer of plasma etch and deposition systems used in the production of integrated circuits and nanotechnology devices, today announced preliminary financial results for the fourth quarter and fiscal year 2004, which ended March 31, 2004. The financial results reported in this release will be confirmed following review of a non-cash item relating to the Company's convertible debentures. This review will not have an impact on Tegal's revenue, operating income and proforma net income for fiscal 2004 announced today.
Fourth Quarter and Fiscal 2004 Highlights
-- Revenues for the fourth quarter were $6.2 million, an increase
of 88% from $3.3 million reported in the fiscal third quarter
of 2004 and an increase of 54% from the same quarter one year
ago. Revenues for the fiscal year were $16.5 million, an
increase of 17% from $14.1 million in the prior fiscal year.
-- Net losses for the fourth quarter were $1.6 million or $0.06
per share and for the full year were $12.7 million or $0.57
per share. Non-recurring, non-cash expenses included in the
quarter were $1.7 million and for the full year were $8.7
million.
-- The Company achieved its goal of reaching cash break-even in
the fourth quarter, as gross margin increased to 43.4%
compared to 31.9% in the same quarter one year ago, and
operating income rose to a positive $62 thousand, compared to
a loss of $1.8 million in the fourth quarter of the preceding
fiscal year.
-- The Company shipped an even mix of plasma etch and sputtering
systems during the year, including 4 systems to 4 new
customers. Customers are using these systems for the
production of CCD arrays, non-volatile memories, including
FeRAM and MRAM, EUV masks and several types of MEMS
applications.
-- Tegal entered into a Joint Development Program with Sharp
Laboratories of America to speed the commercialization of its
recently acquired Nano-layer deposition technology.
-- Tegal recently announced the signing of definitive agreements
to acquire for common stock First Derivative Systems, Inc.,
extending its proprietary PVD technology into 300mm mainstream
application areas.
Financial Results
Revenues for the fiscal fourth quarter ended March 31, 2004 were $6.2 million, an increase of 54% from $4.0 million for the fiscal fourth quarter of 2003, and an increase of 88% from $3.3 million in the fiscal third quarter of 2004. Tegal reported a net loss of $1.6 million, or $0.06 per share, for the quarter, compared to a net loss of $1.7 million, or $0.11 per share in the comparable quarter one year ago. Sequentially, Tegal's reported loss declined from $8.1 million or $0.35 per share, in the fiscal third quarter of 2004.
For the full year of fiscal 2004, revenues were $16.5 million, an increase of 17% from $14.1 million for fiscal 2003. Tegal reported a net loss of $12.7 million, or $0.57 per share, for fiscal 2004, compared to a net loss of $12.6 million, or $0.82 per share in the previous fiscal year. Tegal's loss for the year included non-cash charges for: (i) interest expense of $5.6 million related to the convertible debt financing; (ii) a $2.2 million expensing of in-process research and development (IPR&D) related to its acquisition of Simplus Systems; and (iii) a $1.0 million increase of excess inventory reserves. Excluding these non-cash charges, Tegal's pro-forma non-GAAP loss for the year was $3.9 million.
Gross margin for the fiscal fourth quarter was 43.4% compared to 31.9% in the same quarter one year ago. The improvement of margin in the quarter resulted from a more efficient absorption of overhead costs. For the year ended March 31, 2004, gross margin was 28.1% versus a negative 0.5% in the prior fiscal year. Gross profits for both years were negatively affected by low overhead absorption and increased inventory reserves.
Operating expenses for the fourth quarter were $2.6 million, a decrease of $0.5 million from the fourth quarter of fiscal 2003. For the year ended March 31, 2004, total operating expenses were $11.8 million, which included a non-cash IPR&D charge of $2.2 million. This is compared to operating expenses of $12.6 million in the prior fiscal year. Operating income for the fourth quarter was $62 thousand, compared to a loss of $1.8 million in the comparable quarter one year ago. The company's operating loss for the full fiscal year was $7.2 million, an improvement over the $12.6 million operating loss in the prior year.
In connection with the year-end closing, the company determined that the amount of a non-cash, non-operating interest expense item previously reported in Tegal's unaudited condensed consolidated quarterly financial statements for the third fiscal 2004 quarter ended December 31, 2003, was understated by approximately $1.5 million. The non-cash interest expense originally reported for the third fiscal quarter of 2004 did not accurately reflect the impact of the acceleration of the amortization of the beneficial conversion feature and the impact of certain debt issuance costs related to the portion of our convertible debentures converted into common stock during that quarter. The preliminary correction affects reported interest expense for the quarter, which in turn affects the reported net loss and net loss per common share. The preliminary correction has no effect on previously reported revenue, operating expenses, operating loss, pro-forma results or cash flows. The Company will be filing an amendment to its Form 10-Q for the third fiscal 2004 quarter to restate its financial statements to correct this error. The tables appended to this press release set out the previously disclosed and preliminary corrected line items based on our calculation of the company's consolidated statements of operations for the three and nine-month periods ending December 31, 2003. The full review of this matter is still ongoing, and the Company expects to affirm or update the financial results included in this press release by May 12, 2004.
"We ended the year with $7.0 million in cash, up substantially from under $1.0 million a year ago. In addition, our cash increased $2.0 million from our third fiscal quarter which ended December 31, 2003, as we began again to utilize our credit facilities," said Thomas Mika, Executive Vice President and Chief Financial Officer of Tegal. "Combined with our ability to raise additional capital from Kingsbridge Capital, we are confident that we will have the capital needed to bring our recently acquired deposition products to market."
Outlook
"Fiscal 2004 proved to be a successful year for Tegal. We reached our expected cash-break even number during the quarter, added two new product lines with great potential, re-capitalized the company and added new customers, including ones in the first tier of semiconductor manufacturing," said Michael Parodi, Chairman, President and CEO of Tegal Corporation. "In the coming year, we will focus on expanding our sales and marketing presence in those areas that we are truly differentiated, continue the development of our leading-edge products and build our reputation among key semiconductor and nanotechnology device manufacturers."
Investor Conference Call
Tegal Corporation will discuss these results and further details of its fourth quarter and fiscal 2004 during a conference call today, May 6, 2004, at 5:00 p.m. (EST), which is open to all interested investors. The call-in numbers are (800) 299-7635 or (617) 786-2901. For either dial-in number, investors should reference Tegal or reservation number: 90457343. A digital recording will be made available one hour after the completion of the conference call, and it will be accessible through midnight on Thursday, May 13, 2004. To access, investors should dial (888) 286-8010 or (617) 801-6888 and enter pass code: 85924956.
The conference call also will be available online via the Investor Section of the Company's website at:
www.tegal.com. An online replay of the teleconference, along with a copy of the Company's earnings release, will also be available on the Company's website.
Safe Harbor Statement
Except for historical information, matters discussed in this news release contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking statements, which are based on assumptions and describe our future plans, strategies and expectations, are generally identifiable by the use of the words "anticipate," "believe," "estimate," "expect," "intend," "project" or similar expressions. These forward-looking statements are subject to risks, uncertainties and assumptions about the company including, but not limited to industry conditions, economic conditions, acceptance of new technologies and market acceptance of the company's products and services. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements in this paragraph. For a further discussion of these risks and uncertainties, please refer to the company's periodic filings with the Securities and Exchange Commission.
About Tegal
Tegal provides process and equipment solutions to leading edge suppliers of advanced semiconductor and nanotechnology devices. Incorporating unique, patented etch and deposition technologies, Tegal's system solutions are backed by over 35 years of advanced development and over 100 patents. Some examples of devices enabled by Tegal technology are energy efficient memories found in portable computers, cellphones, PDAs and RFID applications; megapixel imaging chips used in digital and cellphone cameras; power amplifiers for portable handsets and wireless networking gear; and MEMS devices like accelerometers for automotive airbags, microfluidic control devices for ink jet printers; and laboratory-on-a-chip medical test kits.
More information is available on the Internet at:
www.tegal.com.
TEGAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
ASSETS
March 31, March 31,
2004 2003
-------- --------
Current assets:
Cash and cash equivalents $7,049 $912
Trade receivables, net 4,729 2,681
Inventories 3,719 7,032
Prepaid expenses and other current assets 1,077 465
-------- --------
Total current assets 16,574 11,090
Property and equipment, net 4,039 4,916
Intangible assets, net 1,190 959
Other assets 1,027 244
-------- --------
Total assets $22,830 $17,209
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $1,103 $389
Bank line of credit 1,347 --
2% convertible debentures, net 90 --
Accounts payable 1,645 1,923
Product warranty 366 734
Accrued expenses and other current liabilities 2,604 2,679
Deferred revenue 440 324
-------- --------
Total current liabilities 7,595 6,049
Other long-term obligations 98 -
Long-term portion of capital lease obligation 26 37
-------- --------
Total liabilities 7,719 6,086
-------- --------
Stockholders' equity:
Common stock 366 161
Additional paid-in capital 85,623 68,806
Accumulated other comprehensive income 124 465
Accumulated deficit (71,002) (58,309)
-------- --------
Total stockholders' equity 15,111 11,123
-------- --------
$22,830 $17,209
======== ========
TEGAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Three Months Twelve Months
Ended Ended
March 31, March 31,
----------------- -------------------
2004 2003 2004 2003
-------- -------- --------- ---------
Revenue $6,157 $4,002 $16,528 $14,100
Cost of revenue 3,484 2,727 11,881 14,166
-------- -------- --------- ---------
Gross profit (loss) 2,673 1,275 4,647 (66)
-------- -------- --------- ---------
Operating expenses:
Research and development 815 1,418 3,305 4,815
Sales and marketing 587 662 2,347 2,922
General and administrative 1,209 1,038 3,973 4,814
In-process research and
development - - 2,202 -
-------- -------- --------- ---------
Total operating expenses 2,611 3,118 11,827 12,551
-------- -------- --------- ---------
Operating income (loss) 62 (1,843) (7,180) (12,617)
Other income (expense), net
Interest expense, net (1,713) 31 (5,610) (329)
Other income (expense) 32 117 97 321
-------- -------- --------- ---------
Total other income
(expense), net (1,681) 148 (5,513) (8)
-------- -------- --------- ---------
Net loss $(1,619) $(1,695) $(12,693) $(12,625)
======== ======== ========= =========
Net loss per share, basic
and diluted $(0.06) $(0.11) $(0.57) $(0.82)
======== ======== ========= =========
Shares used in per share
computation:
Basic 27,375 16,064 22,442 15,311
Diluted 27,375 16,064 22,442 15,311
Reconciliation from GAAP to non-GAAP Measures of Performance
Three Months Twelve Months
Ended Ended
March 31, March 31,
---------------- ------------------
2004 2003 2004 2003
------- -------- -------- ---------
Revenue $6,157 $4,002 $16,528 $14,100
GAAP Cost of revenue 3,484 2,727 11,881 14,166
------- -------- -------- ---------
Non-cash inventory provision - - (967) (1,922)
------- -------- -------- ---------
Non GAAP Cost of revenue 3,484 2,727 10,914 12,244
------- -------- -------- ---------
Non GAAP Gross profit 2,673 1,275 5,614 1,856
------- -------- -------- ---------
GAAP Total operating expenses 2,611 3,118 11,827 12,551
Non-cash IPR&D expense - - (2,202) -
------- -------- -------- ---------
Non GAAP total operating
expenses 2,611 3,118 9,625 12,551
------- -------- -------- ---------
Non GAAP Operating loss 62 (1,843) (4,011) (10,695)
GAAP Total other income
(expense), net (1,681) 148 (5,513) (8)
Non-cash interest expense
associated with Debentures 1,713 - 5,610 -
------- -------- -------- ---------
Non GAAP total other income
(expense), net 32 148 97 (8)
------- -------- -------- ---------
Non GAAP Net income (loss) $94 $(1,695) $(3,914) $(10,703)
======= ======== ======== =========
Non GAAP Net loss per share,
basic $0.00 $(0.11) $(0.17) $(0.70)
======= ======== ======== =========
Non GAAP Net income (loss) per
share, diluted $0.00 $(0.11) $(0.17) $(0.70)
======= ======== ======== =========
Shares used in per share
computation:
Basic 27,375 16,064 22,442 15,311
Diluted 40,204 16,064 22,442 15,311
The above pro-forma financial information is presented for
informational purposes only. Our presentation excludes a non-cash
inventory provision, a non-cash, non-recurring IPR&D charge, and
non-cash interest expense resulting from our debentures financing.
Because of these exclusions, our presentation is not in accordance
with Generally Accepted Accounting Principles (GAAP). Additionally,
our presentation of pro-forma financial information may not be
consistent with that of other companies.
We believe that the exclusion of these non-cash charges may help
the investor better understand our liquidity position and the use of
tangible resources in our operations and the exclusion of unusual or
infrequent items provides an alternative measure which may help the
investor evaluate our underlying operating performance. Pro-forma
information is not, and should not be considered, a substitute for
financial information prepared in accordance with GAAP.
TEGAL CORPORATION AND SUBSIDIARIES
Detail of Third Quarter Restatement
(Unaudited)
(In thousands, except per share data)
Three months ended December 31, 2003
As
Originally As
Reported Adjustments Restated
----------- ----------- ---------
Interest expense, net (2,055) (1,488) (3,543)
Other income (expense) 6 - 6
----------- ----------- ---------
Total other income (expense), net (2,049) (1,488) (3,537)
Net loss $(6,661) $(1,488) $(8,149)
=========== =========== =========
Net loss per share basic and
diluted $(0.29) $(0.06) $(0.35)
=========== =========== =========
Nine months ended December 31, 2003
As
Originally As
Reported Adjustments Restated
----------- ----------- ---------
Interest expense, net (2,408) (1,488) (3,896)
Other income (expense) 66 - 66
----------- ----------- ---------
Total other income (expense), net (2,342) (1,488) (3,830)
Net loss $(9,584) $(1,488) $(11,072)
=========== =========== =========
Net loss per share basic and
diluted $(0.52) $(0.08) $(0.60)
=========== =========== =========
SOURCE: Tegal Corporation
Tegal Corporation
Thomas Mika, 707-763-5600 (EVP and CFO)
or
Nagle & Ferri Investor Relations
Frank Nagle or Bob Ferri, 415-575-1999
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