Tegal Reports Fiscal 2002 Second-Quarter and Six-Month Results

Petaluma, CA. Tegal Corp. (Nasdaq: TGAL), a leading designer and manufacturer of plasma etch systems used in the production of integrated circuits, today reported results for its second fiscal quarter and six-month period ended Sept. 30, 2001. The results reflect an aggressive cost containment program as the industry continues to face weak market demand.

For the three-month period ended Sept. 30, 2001, Tegal reported a net loss of $2.5 million, or 20 cents per share, which includes a one-time charge of approximately $600,000 related to companywide staff reductions. Excluding the non-recurring charge, Tegal s net loss totaled $1.9 million, or 15 cents per share, compared with a net loss of $2.5 million, or 20 cents per share, in the first fiscal quarter of 2002. In the corresponding prior-year fiscal second quarter, Tegal reported a net loss of $236,000, or 2 cents per share.

Revenues for the second fiscal quarter of 2002 were $4.4 million vs. $12.8 million last year. Before deferring revenue for a system upgrade, revenues would have been $5.3 million in the current second quarter. For the six-month period ended Sept. 30, 2001, the company posted a net loss of $5.0 million, or 39 cents per share. Excluding the one-time charge, net loss for the six-month period was $4.4 million, or 35 cents per share. A year ago, Tegal posted a fiscal first-half net loss of $3.1 million, or 24 cents per share.

Revenues for the six-month period were $12.3 million compared with $20.2 million for the corresponding period in 2000. Before deferring revenue for a system upgrade, revenues would have been $13.2 million in the first half of the fiscal year. The company said that the revenue decrease for the three- and six-month periods was due primarily to the industry s continued soft market conditions.

Many of our customers have implemented additional restructuring programs, including delays, particularly in their capacity-related capital spending plans, said Michael Parodi, chairman, president and chief executive officer. We are actively realigning our cost structure to offset the continued weakness in our primary markets. Since the beginning of the year, we have reduced our overall expense structure by approximately $8 million on an annualized basis. Our goal is to maximize Tegal s operating performance to bring the company s cost structure in line with the current difficult market environment, and enhance the efficiency of our operations.

Tegal noted that the cost reduction program includes the following strategic actions: · The reduction of worldwide head count by 55, as previously announced, is expected to generate annualized savings of $6.0 million in operating expenses. · A reduction in weekly work schedules. · Extended closures for certain holiday periods. · Elimination of all non-essential spending.

While we intend to be vigilant about reducing costs, we will not do so at the expense of sacrificing our investment in our future, Parodi said. Our intent is to continue to invest in essential programs to further strengthen Tegal s technological leadership, as well as position us for long-term growth and profitability when the economy recovers. Tegal s fiscal second-quarter highlights include: · An order for its 903 diode plasma etch tool from a leading manufacturer of radio frequency integrated circuits (RFICs). The system, which is scheduled for installation later this year at the customer s North American production facility, will be used for etching oxide films for new high-performance RFIC communications products. · A follow-on order for a 901g plasma etch system from a Taiwan- based manufacturer of advanced telecommunications devices. The company plans to use the system to etch gallium arsenide devices, which are used in mobile phones and other consumer telecommunication devices. · A contract with a leading European manufacturer of application-specific integrated circuits (ASICs), for two Tegal 901e plasma etch systems. The systems will be used in the production of ASICs for the automotive industry. · A follow-on order for a 901g plasma etch system from a leading Taiwanese producer of devices for the wireless, information and networking markets.

Business Outlook The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially as a result of the factors more specifically referenced below. We firmly believe that, notwithstanding the currently soft market conditions, demand for our technologies will continue to grow over the long term. As such, we are committed to ongoing investment in the development of future products in order to augment Tegal s position as a leading supplier of advanced etch systems for the world s leading chip manufacturers, Parodi said.
Despite continued high levels of pre-sale interest in both our core and critical etch products, our focus right now is on aligning our operations with customers near-term development and production plans, said Parodi. At the same time, we continue to invest our time and efforts in exploring new opportunities that will enable us to enhance and grow Tegal s position as a leading supplier of advanced etch solutions for the next generation of IC, compound semiconductor and nano technologies.
One such opportunity is in the production of non-volatile ferroelectric memory chips used in smart cards and RFID devices. These devices are gaining acceptance in consumer and government markets around the world. The tragic and unfortunate events of September are expected to further increase demand for these smart and RF capable devices. Tegal is the leading supplier of etch systems used in the manufacture of ferroelectric memory devices.

Consumer and industrial demand for advanced IC, telecommunications, wireless and nano technologies is also expected to build despite the current slowdown. While the remainder of the year will be a challenge, we remain confident that in the long run, as manufacturers move beyond their development phases and into production, Tegal will experience increased demand for our critical etch products.

With a strong patent portfolio, a worldwide presence, no long-term debt and a realignment of our operating costs, we believe Tegal is well-positioned to weather this current industry downturn and to maintain our leadership position.
Tegal Corp., with headquarters in Petaluma, is a leading designer and manufacturer of plasma etch systems used in the production of opto-telecom devices, integrated circuits (ICs), and other related microelectronics devices. Etching is a key process and must be repeated multiple times in the production of these devices. Tegal markets and services its systems in all major IC-producing regions of the world. More information is available on the Internet at http://www.tegal.com.
Investor Conference Call

Tegal will host an investor conference call today, Oct. 30, 2001, at 5 p.m. Eastern time to review the company s second-quarter results. The call will be open to all interested investors through a live audio Web broadcast via the Internet at www.tegal.com. For those who are not available to listen to the live broadcast, the call will be archived through 5 p.m. Pacific time, Tuesday, Nov. 13, 2001, on both Web sites. A telephonic playback of the conference call will also be available through 5 p.m. Pacific time, Tuesday, Nov. 6, 2001. Listeners should call 800/633-8284 (domestic) or 858/812-6440 (international) and use Reservation No. 19874561. Safe Harbor Statement

Except for historical information, the matters discussed in this news release are forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties, including, but not limited to, industry conditions, economic conditions, acceptance of new technologies, the growth of the wireless market, as well as other risks set forth in the company s periodic filings with the Securities and Exchange Commission.

Contact: Tegal Corp. Michael Parodi Tel: 707/763-5600 investors@tegal.com or Pondel Wilkinson MS&L Cecilia Wilkinson/Michael Pollock Tel: 310/207-9300