Exhibit 99.1
Contact:
Tegal Corporation Nagle & Ferri Investor Relations
Thomas Mika (EVP and CFO) Frank Nagle or Bob Ferri, 415/575-1999
707/763-5600
TEGAL CORPORATION REPORTS
THIRD QUARTER FISCAL 2004 FINANCIAL RESULTS
New $25 million structured secondary offering facility
to fund expansion in semicap equipment and nanotechnology
Petaluma, Calif., February 12, 2004 -- 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 financial results for the third quarter of its fiscal year 2004, which
ended December 31, 2003.
Tegal today also announced the signing of a new $25 million structured secondary
offering facility with Kingsbridge Capital. The facility is designed to provide
cost-effective growth capital for expansion in semiconductor capital equipment,
nanotechnology and related markets.
Tegal's revenues for the third quarter of fiscal 2004 were $3.3 million, a
decrease of 11% from $3.7 million for the same quarter last year. The Company
reported a net loss of $6.7 million, or ($0.29) per share, for the quarter,
compared to a net loss of $3.3 million, or ($0.20) per share in the comparable
quarter one year ago. For the nine-month period ending December 31, 2003, the
Company's revenues were $10.4 million, compared to $10.1 million in the same
period one year ago. Tegal's net loss in the nine-month period decreased to $9.6
million or ($0.52) per share, compared to a $10.9 million or ($0.73) per share
loss in the nine months ending December 31, 2002.
Tegal's loss this quarter included non-cash charges for: (i) accelerated
interest expense of $2.0 million related to the convertible debt financing; (ii)
a $2.2 million one-time expensing of in-process research and development (IPR&D)
related to its recent acquisition of the assets 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 was $1.4 million, which was about the
same as its pro-forma earnings for the first two quarters of this fiscal year.
Gross profits for the third fiscal quarter were a negative $0.1 million compared
to a positive $0.1 million in the comparable quarter last year. Excluding the
non-cash charge for additional inventory reserves, the Company's gross profit
was $0.9 million, or 27% of sales. For the nine-month period, the Company's
gross profits were $2.0 million, versus a negative $1.3 million for the same
period a year ago. Operating expenses for the third fiscal quarter increased to
$4.6 million compared to $3.4 million in the comparable quarter one year ago,
including the one-time non-cash IPR&D expense of $2.2 million. Without this
expense, operating expenses were $2.4 million, compared to $3.4 million in the
same quarter one year ago. Operating expenses for the nine-month period were
$9.2 million compared to $9.4 million in the same period one year ago.
Cash at the end of the third fiscal quarter stood at $5.1 million, a substantial
improvement from $0.9 million at the end of March, 2003, owing to the
convertible debt financings completed in June and September of 2003.
"Except for an unexpected delay in revenue recognition for systems shipped to
one of our key European accounts, our quarter went exactly as planned," said
Michael Parodi, Chairman, President and CEO of Tegal. "The signing of our $25
million secondary facility and our recent acquisition of Simplus Systems
Corporation's nanotechnology-related assets, provide important building blocks
for future growth."
The new $25 million structured secondary offering facility with Kingsbridge
Capital will provide the Company with additional capital to support future
growth, primarily through acquisitions. The arrangement will allow Tegal to sell
equity at its sole discretion over a 24-month period on a "when and if needed"
basis, and Kingsbridge is required under the terms of the arrangement to
purchase Tegal's stock, subject to certain conditions contained in the
agreement.
"The financing agreement with Kingsbridge represents an important source of
financial strength for Tegal as we execute our business plan over the next 12 to
24 months," said Thomas Mika, Executive Vice President and Chief Financial
Officer of Tegal. "The facility is a cost-effective way to access additional
capital while retaining control over the timing and price of the common stock
issued. We will now be able to consider seriously expansion opportunities that
were not previously available to us."
The 24-month agreement enables Tegal to obtain up to $25 million by issuing
shares of its common stock to Kingsbridge via a series of periodic drawdowns of
funds following the effectiveness of the registration statement. The price of
the common shares issued under the agreement will be based on a discount to the
volume-weighted average market price during a specified drawdown period.
Kingsbridge is prohibited under the agreement from holding a short position in
Tegal's common stock. The Company has no obligation to draw down all or any
portion of the commitment. In connection with the agreement, Tegal issued
warrants to Kingsbridge to purchase 300,000 shares of the Company's common stock
at an exercise price of $4.11 per share.
Kingsbridge Capital specializes in the financing of small to medium sized
technology-based companies. Adam Gurney, Managing Director of Kingsbridge,
stated, "We are excited by Tegal's position in the emerging new markets for
semiconductor and nanotechnology applications. Kingsbridge is very pleased to be
helping the Company at a turning point for its future expansion plans."
"During the past 18 months, we have put into place the cornerstones of an
aggressive plan to move Tegal to a new level of capability, size and reach, even
while the semiconductor capital equipment industry was in stubborn decline," Mr.
Parodi said. "As a result, we have three major advanced product lines serving
customers in new, emerging markets, such as nanotechnology, radio frequency
identification devices (RFID's), non-volatile magnetic memories, thinned wafers,
photomasks and other devices based on new materials."
Highlights of Tegal's third fiscal quarter included:
|_| Closing of the purchase of substantially all of the assets and certain
liabilities of Simplus Systems Corporation, developer of a unique Nano
Layer Deposition cluster tool and processes for barrier, copper seed
and high-K dielectric applications;
|_| A multiple 980 series etch systems order from a leading European
semiconductor manufacturer to equip its new nanotechnology laboratory;
|_| A repeat 980 series order from the world's leading microfluidic MEMS
device manufacturer;
|_| An order for a 900 series etch system from an Australian-based MEMS
manufacturer.
In January, Tegal also announced an order for a 6510 series critical silicon
etch system from a leading Japanese opto device maker. In addition, Tegal
shipped, as planned, its newly developed system for extreme ultra violet (EUV)
photomask production to a leading IC manufacturer in the United States. The
EndeavorEUV(TM) is uniquely suited for the virtually defect-free and severe
stress-control requirements of EUV photomasks and will play an integral role in
helping this customer achieve its stated goal of full production EUV lithography
for sub-70 nanometer design rules.
Tegal also recently entered into a new line of credit facility with Silicon
Valley Bank that will be available until January 19, 2005. The new line of
credit has a maximum borrowing capacity of $3.5 million.
Investor Conference Call
Tegal will host an investor conference call today, February 12 at 5:00 p.m.
(EST), which is open to all interested investors. The call-in numbers are (800)
901-5217 or (617) 786-2964. For either dial-in number, investors should
reference Tegal or reservation number: 68051908. 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, February 19, 2004. To access,
investors should dial (888) 286-8010 or (617) 801-6888 and enter passcode:
67368442. 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 be
available on the Company's website, as well.
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.
(Financial Exhibits Follow)
TEGAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
ASSETS
December 31, March 31,
2003 2003
------------- ---------
Current assets:
Cash and cash equivalents....................................... $ 5,089 $ 912
Trade receivables, net.......................................... 2,985 2,681
Inventories..................................................... 4,914 7,032
Prepaid expenses and other current assets....................... 2,983 465
---------- ----------
Total current assets........................................ 15,971 11,090
Property and equipment, net....................................... 4,093 4,916
Intangible assets, net............................................ 1,251 959
Other assets...................................................... 267 244
---------- ----------
Total assets................................................ $ 21,582 $ 17,209
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable................................................... $ 166 $ 389
2% convertible debentures, net ................................. 72 --
Accounts payable................................................ 1,494 1,923
Product warranty................................................ 286 734
Customer deposits............................................... 1,142 --
Accrued expenses and other current liabilities.................. 2,997 2,679
Deferred revenue............................................... 331 324
---------- ----------
Total current liabilities................................... 6,488 6,049
Other long-term obligations....................................... 111 -
Long-term portion of capital lease obligation..................... 54 37
---------- ----------
Total liabilities........................................... 6,653 6,086
---------- ----------
Stockholders' equity:
Common stock.................................................... 300 161
Additional paid-in capital...................................... 82,268 68,806
Accumulated other comprehensive income.......................... 254 465
Accumulated deficit............................................. (67,893) (58,309)
----------- ----------
Total stockholders' equity.................................. 14,929 11,123
---------- ----------
$ 21,582 $ 17,209
========== ==========
TEGAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Three Months Ended Nine Months Ended
December 31, December 31,
2003 2002 2003 2002
----------- --------- --------- ---------
Revenue.................................................. $ 3,276 $ 3,701 $ 10,371 $ 10,098
Cost of revenue.......................................... 3,331 3,613 8,397 11,439
----------- --------- --------- ---------
Gross profit (loss) .................................. (55) 88 1,974 (1,341)
------------ --------- ----------- ----------
Operating expenses:
Research and development.............................. 951 1,102 2,490 3,397
Sales and marketing................................... 592 855 1,760 2,260
General and administrative............................ 812 1,452 2,764 3,776
In-process research and development.................. 2,202 - 2,202 -
----------- ----------- ----------- -----------
Total operating expenses........................... 4,557 3,409 9,216 9,433
----------- --------- ----------- ---------
Operating loss..................................... (4,612) (3,321) (7,242) (10,774)
Other income (expense), net
Interest expense, net.................................. (2,055) (54) (2,408) (360)
Other income (expense) ................................ 6 113 66 204
----------- ----------- ----------- -----------
Total other income (expense), net................... (2,049) 59 (2,342) (156)
------------ --------- ------------ ----------
Net loss ....................................... $ (6,661) $ (3,262) $ (9,584) $ (10,930)
============ ========== ============ ==========
Net loss per share, basic and diluted................... $ (0.29) $ (0.20) $ (0.52) $ (0.73)
============ ========== ============ ==========
Shares used in per share computation:
Basic................................................. 23,234 16,002 18,588 15,048
Diluted............................................... 23,234 16,002 18,588 15,048
Reconciliation from GAAP to non-GAAP Measures of Performance
Three Months Ended Nine Months Ended
December 31, December 31,
------------------------- -------------------------
2003 2002 2003 2002
------------ ----------- ------------ ------------
Revenue.................................................. $ 3,276 $ 3,701 $ 10,371 $ 10,098
GAAP Cost of revenue..................................... 3,331 3,613 8,397 11,439
Non-cash increase in inventory reserve................... (967) - (967) (1,922)
------------ ----------- ------------ ------------
Non GAAP Cost of revenue................................. 2,364 88 7,430 9,517
----------- ----------- ----------- -----------
Non GAAP Gross profit (loss) ......................... 912 88 2,941 581
----------- --------- ----------- ---------
GAAP Total operating expenses............................ 4,557 3,409 9,216 9,433
Non-cash IPR&D expense.................................. (2,202) - (2,202) -
------------ ----------- ------------ -----------
Non GAAP total operating expenses.................. 2,355 3,409 7,014 9,433
----------- --------- ----------- ---------
Non GAAP Operating loss............................ (1,443) (3,321) (4,073) (8,852)
GAAP Total other income (expense), net................... (2,049) 59 (2,342) (156)
Non-cash interest expense associated with Debentures... 2,044 - 2,347 -
----------- ----------- ----------- -----------
Non GAAP total other income (expense), net............. (5) 59 5 (156)
------------ ----------- ----------- ------------
Non GAAP Net loss .............................. $ (1,448) $ (3,262) $ (4,068) $ (9,008)
============ ========== ============ ==========
Non GAAP Net loss per share, basic and diluted.......... $ (0.06) $ (0.20) $ (0.22) $ (0.60)
============ ========== ============ ==========
Shares used in per share computation:
Basic................................................. 23,234 16,002 18,588 15,048
Diluted............................................... 23,234 16,002 18,588 15,048
The above pro-forma financial information is presented for informational
purposes only. Our presentation excludes a non-cash increase in inventory
reserves, a non-cash, non-recurring IPR&D charge, and non-cash interest expenses
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.