Axcelis Announces Record Revenues and Earnings for the Third Quarter

BEVERLY, Mass.--(BUSINESS WIRE)--Oct. 16, 2000--Axcelis Technologies, Inc. (Nasdaq: ACLS) today announced record net sales and earnings for its third quarter ended September 30, 2000. Net sales for the quarter were $182.5 million, up 68% from $108.7 million for the third quarter of 1999 and up 10% sequentially from the second quarter of 2000. Net income for the third quarter of 2000 was $28.5 million, an increase of 195% when compared to net income of $9.6 million in the third quarter of 1999 and up 32% sequentially from the second quarter of 2000.

Earnings per share for the third quarter of 2000 were $0.30 per share, up 150% from $0.12 per share in the third quarter of 1999. This improvement comes after giving effect to the issuance of 17.1 million additional shares in July 2000 as part of the Company's initial public offering of the common stock of Axcelis. Earnings per share, excluding the amortization of goodwill and intangibles, were $0.32 per share in the third quarter of 2000, an increase of 113% from $0.15 per share in the third quarter of 1999.

On July 10, 2000, Axcelis completed the initial public offering of its common stock resulting in net proceeds to the Company, after paying a previously declared $300 million dividend to Eaton Corporation, of $52.6 million. Internal cash generated in the third quarter contributed an additional $35.2 million to the quarter end cash and short-term investment balance of $129.8 million.

Eaton Corporation announced today its intention to distribute its 82% ownership interest in Axcelis by year-end in the form of a spin-off to Eaton shareholders, subject to approval by Eaton's Board of Directors. Further details of this transaction can be found in Eaton's news release of this morning.

Brian Bachman, vice chairman and chief executive officer said: "This has been a remarkable quarter for Axcelis, our first as a stand alone public Company, and we are grateful to Eaton for their guidance and support. We continue to experience strong demand for our product portfolio, as customers around the world select our systems for both increased capacity and advanced technology. Sales growth, coupled with our robust operations model, should result in continued strong financial performance in the fourth quarter."

Bachman continued, "We hold an industry leading position in ion implantation with a product suite that features both serial and multi-wafer platform products for maximum productivity, and low cost of ownership across the entire applications space. Our products are aligned with the fastest growing segments in the market, including DSP, high speed communications, mobile memory and advanced ASIC; and most importantly - our products are preferred by the industry leaders in these segments. Momentum for our 300mm products continues, with significant activity in this area in all regions. Our customers are recognizing compelling economic benefits with our 300mm product line: production proven platforms for faster time to revenue, a low risk transition, and maximum manufacturing flexibility uniquely afforded across the tool set."

Safe Harbor Statement

This document contains forward-looking statements under the SEC safe harbor provisions. These statements are based on management's current expectations and should be viewed with caution. They are subject to various risks and uncertainties, many of which are outside the control of the Company, including our ability to implement successfully our profit plans, the continuing demand for semiconductor equipment, relative market segment growth, continuity of business relationships with and purchases by major customers, competitive pressure on sales and pricing, increases in material and other production costs that cannot be recouped in product pricing and global economic and financial conditions.

About Axcelis Technologies, Inc.

Axcelis Technologies, Inc., headquartered in Beverly, Massachusetts, provides innovative, high-productivity manufacturing solutions for the semiconductor industry. Axcelis is dedicated to the design and manufacture of high current, medium current and high energy ion implantation equipment; fast ramp vertical furnaces and rapid thermal processing systems; and photostabilization and photoresist stripping equipment. Axcelis Technologies has manufacturing facilities in Beverly and Rockville, Maryland, as well as in Toyo, Japan through its joint venture Sumitomo Eaton Nova. The Company's Internet address is: www.axcelis.com.

3rd Quarter Earnings Conference Call

Please join us for our 3rd quarter earnings conference call on October 16th, 3PM EST. A webcast of the call can be accessed at our website: www.axcelis.com. A telephone replay will also be available from 5:30pm EST October 16, 2000 until 5:00pm EST October 23, 2000. Dial 1-800-642-1687 (dial 1-706- 645-9291 outside of North America). Please enter conference ID code #669664.

Statements of Combined Operations
In thousands, except per share amounts

                             Three Months Ended    Nine Months Ended
                                 September 30,        September 30,
                                2000      1999       2000      1999

Net Sales                   $ 182,509 $ 108,658  $ 491,404 $ 266,596
Cost of Products Sold         101,327    66,398    275,480   162,056

Gross Profit                   81,182    42,260    215,924   104,540

Operating expenses:
 Research & development        17,527    12,347     51,029    37,079
 Selling                       15,881    10,085     40,899    27,657
 General & administrative      15,670    10,608     43,295    29,971
 Amortization of goodwill 
  & intangible assets           2,320     2,320      6,960     6,960

Income from operations         29,784     6,900     73,741     2,873

Other income (expense):
Royalty income                  3,296     1,455     11,068     4,180
Equity income of Sumitomo
Eaton Nova Corporation          5,479     4,981     12,135     1,232
Other income (expense) - net    2,824      (259)     3,039      (851)

Income before 
 income taxes                  41,383    13,077     99,983     7,434

Income taxes                   12,903     3,428     31,070     1,948

Net Income                   $ 28,480   $ 9,649   $ 68,913   $ 5,486


Basic & diluted 
 net income 
 per share                     $ 0.30    $ 0.12     $ 0.81    $ 0.07

Shares used in 
 computing basic 
 & diluted net 
 income per share              95,028    80,000     85,046    80,000

Condensed Combined Balance Sheets
In thousands

                                           September 30, December 31, 
                                               2000         1999
ASSETS

Current assets:
 Cash & short-term investments               $129,780     $  3,530
 Receivable from Eaton Corporation                 --       11,241
 Accounts receivable                          134,006      101,335
 Inventories                                  121,939       83,326
 Deferred income taxes &
  other current assets                         31,312       36,060
Total current assets                          417,037      235,492

Property, plant & equipment                    65,896       73,809
Investment in Sumitomo
 Eaton Nova Corporation                        37,324       22,210
Goodwill, intangible &
 other long-term assets                        85,157       91,324
Total assets                                 $605,414     $422,835

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
 Accounts payable &
  other current liabilities                  $ 82,710     $ 47,165
 Warranty reserve                              32,347       18,568
 Payable to Eaton Corporation                  14,423           --
Total current liabilities                     129,480       65,733

Deferred income taxes &
 other long-term liabilities                   13,670       14,806
Shareholders' equity                          462,264      342,296
Total Liabilities and
 shareholders' equity                        $605,414     $422,835

Notes to the Third Quarter 2000 Earnings Release

Initial Public Offering of Axcelis Technologies, Inc.

On July 10, 2000, the Company commenced its initial public offering (IPO) of 15,500,000 shares of common stock. On July 20, 2000, the IPO was completed when the underwriters of the IPO exercised their over-allotment option to purchase an additional 1,550,000 shares. At the offering price of $22.00 per share, the Company received $352.6 million from these transactions, net of underwriting discounts and commissions. The net proceeds, together with cash from other sources, were used to pay a previously declared $300 million dividend to Eaton. Remaining proceeds will be used for general corporate purposes. Prior to the IPO, Eaton owned 100% of the 80,000,000 shares of the outstanding Axcelis common stock. As a result of the IPO, Eaton now owns 82.4% of the Company's 97,050,000 outstanding shares of common stock.

Eaton currently plans to complete the divestiture of the Axcelis common stock by year-end 2000 through a dividend of the Axcelis stock to Eaton shareholders in a tax-free spin-off. Eaton has received confirmation from the Internal Revenue Service that the divestiture will be tax-free to Eaton and its shareholders. The final divestiture is subject to approval by Eaton's Board of Directors which requires that 1) there is no legal restraint preventing the divestiture and 2) the divestiture would not have a material adverse effect on Eaton or its shareholders.

Net Income (Loss) per Share

Beginning in the third quarter of 2000, basic net income per share is calculated based on the weighted average number of shares of common stock outstanding during the period. This average includes 15,500,000 shares of common stock sold in the IPO and the additional 1,550,000 shares of common stock sold upon exercise of the underwriters' over-allotment option. Diluted net income per share is calculated based on the weighted average number of shares of common stock outstanding as described previously, plus the dilutive effect of stock options, calculated using the treasury stock method.

Basic and diluted net income per share amounts, prior to the third quarter of 2000, are calculated based on 80,000,000 shares of common stock that were outstanding prior to the IPO, as described above.

--30--dp/bos*