Therma-Wave Announces Fiscal Second Quarter 2006 Results

Net revenues for the fiscal second quarter of 2006 were $17.3million compared to net revenues of $17.5 million reported for thefiscal first quarter of 2006, ended July 3, 2005. Included in netrevenues for the fiscal first quarter of 2006 was $1.3 million of netrevenue from the Company's CCD-i integrated metrology product line,which was sold during the first quarter of fiscal 2006.

Deferred revenue at October 2, 2005 totaled $8.5 million, areduction of $4.4 million from the July 3, 2005 balance. The quarterend balance is in line with the Company's historical range of between$7 million to $9 million. The $4.4 million sequential reduction indeferred revenue was primarily associated with the final acceptance ofmultiple advanced product systems by a single large customer duringthe fiscal second quarter.

Net loss for the fiscal second quarter of 2006 was $4.1 million,or $(0.11) per basic and diluted share compared to net income of $2.4million, or $0.07 per diluted share, recorded in the fiscal firstquarter of 2006.

Fiscal first quarter of 2006 net income included a gain of $8.6million, or approximately $0.23 per diluted share, related to the saleof Therma-Wave's CCD-i integrated metrology product line and relatedassets and restructuring charges of $1.5 million, or approximately($0.04) per diluted share. Fiscal second quarter 2006 net lossincludes a nominal benefit from the variable accounting treatment ofcertain stock options and restructuring charges of approximately $2.3million, or the equivalent of ($0.06) per diluted share, during thefiscal second quarter of 2006.

Boris Lipkin, Therma-Wave's president and chief executive officerstated, "The strategic initiatives management implemented during thefirst half of fiscal 2006 are yielding positive and measurableresults. With better than forecasted revenues and reduced cashconsumption, as well as bottom line results in line with management'sexpectations, we achieved notable operating improvements during thequarter. Operating expenses as well as cash consumption were reducedsignificantly during the quarter as we took further steps to improveour cash position in order to provide additional financial flexibilitymoving forward. We intend to build on the improvements achieved duringthe first half of fiscal 2006, as we remain focused on driving furthergains in operating efficiencies as well as increasing the marketpenetration of our advanced metrology solutions among customersworldwide. We stand fully committed to our stated goals of achievingquarterly profitability and positive cash flow."

Gross margin for the fiscal second quarter of 2006 was 34%compared to 41% in the fiscal first quarter of 2006. The sequentialdecrease in fiscal second quarter gross margin was primarily relatedto additional inventory provisions of $1.6 million for customerservice inventory and manufacturing inventory.

Cash and cash equivalents totaled $14.5 million as of October 2,2005, compared to $13.2 million as of July 3, 2005. Fiscal secondquarter cash includes $5 million received during the quarter inconjunction with a term loan with Silicon Valley Bank aimed atbolstering cash reserves and improving financial flexibility. Cashconsumption, net of borrowings, during the fiscal second quarter was$3.7 million representing a 59% sequential reduction in cashconsumption. Fiscal second quarter 2006 cash consumption was morefavorable than management's projected guidance of $4 million to $7million.

Guidance

Guidance for the fiscal third quarter of 2006 ending January 1,2006 is as follows:

-- Revenue is expected to be in the range of $15 million to $18 million.

-- Diluted net loss per share is expected to be within the range of $(0.08) to $(0.03), including provisions for interest on debt, excluding non-cash charges or credits for variable accounting of stock options (which will depend on the Company's stock price) and any restructuring charges.

-- New orders are expected to be in a range of $14 million to $17 million.

-- Cash consumption for the fiscal third quarter is expected to be in the range of $3.0 million to $4.5 million. The Company continues to focus on becoming cash neutral in the near-term.

Conference Call Information

Therma-Wave, Inc. will hold a conference call to review financialresults and ongoing operations at 7:00 a.m. Pacific Time, 10:00 a.m.Eastern Time, on Thursday, October 27, 2005. Participating on the callwill be Boris Lipkin, President and Chief Executive Officer, andJoseph Passarello, Senior Vice President of Finance and ChiefFinancial Officer. A live Web cast of the conference call, as well asa replay of the call, may be accessed via the Internet at:www.thermawave.com.

About Therma-Wave, Inc.

Since 1982, Therma-Wave, Inc., has been revolutionizing processcontrol metrology systems through innovative proprietary products andtechnologies. The Company is a worldwide leader in the development,manufacture, marketing and service of process control metrologysystems used in the manufacture of semiconductors. Therma-Wavecurrently offers leading-edge products to the semiconductormanufacturing industry for the measurement of transparent andsemi-transparent thin films; for the measurement of criticaldimensions and profile of IC features; and for the monitoring of ionimplantation. For further information about Therma-Wave, Inc., accessthe Company's web site at: www.thermawave.com.

Safe Harbor Statement

This press release contains forward-looking statements thatinvolve risks and uncertainties, as well as assumptions that, if theydo not fully materialize or prove incorrect, could cause our actualresults to differ materially from those expressed or implied by suchforward-looking statements. Such forward-looking statements includeour positioning to address current and future market needs, ourability to improve long-term profitability, our ability to improvecash consumption, our ability to provide cost efficiencies, theability of our products to gain momentum in the global market and ourfuture financial guidance. Factors that could cause actual results todiffer materially from the forward-looking statements include thecyclicality of our business, the loss of one or more large customers,including the delay or cancellation of a significant order, ourability to protect our intellectual property, our ability tosuccessfully compete against larger companies, our ability to accessadditional capital in the future, our ability to develop new andadvanced products in the future, our ability to attract and retain keypersonnel, our ability to receive supplies from single sourcesuppliers, possible disruptions to our business and the impact onremaining employees of the restructuring activities, disruptions atour manufacturing facility and general political, economic and stockmarket conditions and events, both domestically and internationally.These factors and others are described in more detail in our publicreports filed with the Securities and Exchange Commission, such asthose discussed in the "Factors Affecting Future Results" section ofour Annual Report on Form 10-K for the fiscal year ended April 3,2005, all quarterly reports on Form 10-Q for the following fiscalquarters, all subsequent current reports on Form 8-K and all of ourprior press releases. All forward-looking statements in this pressrelease are based on information available to us as of the datehereof, and we assume no duty to update these forward-lookingstatements.


THERMA-WAVE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)

October 2, April 3,
2005 2005
--------------- --------------

Assets
Current assets:
Cash and cash equivalents $ 14,538 $ 13,419
Accounts receivable, net 11,713 15,678
Inventories 24,618 30,870
Other current assets 1,768 2,680
--------------- --------------
Total current assets 52,637 62,647
Property and equipment, net 1,339 2,976
Other assets, net 1,396 1,950
--------------- --------------
Total assets $ 55,372 $ 67,573
=============== ==============

Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 3,675 $ 8,227
Other current liabilities 12,320 15,784
Deferred revenues 7,317 15,804
Term loan facility 4,879 -
--------------- --------------
Total current liabilities 28,191 39,815
Long-term liabilities:
Non-current deferred revenues 1,150 1,425
Other long-term liabilities 1,547 370
--------------- --------------
Total liabilities 30,888 41,610
Stockholders' equity 24,484 25,963
--------------- --------------
Total liabilities and
stockholders' equity $ 55,372 $ 67,573
=============== ==============


THERMA-WAVE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

Three Months Ended Six Months Ended
October 2, September 26, October 2, September 26,
2005 2004 2005 2004
---------- ------------- ---------- -------------

Net
revenues
Product $ 12,348 $ 17,528 $ 25,068 $ 33,717
Service and parts 4,917 5,074 9,736 10,036
---------- ------------- ---------- -------------
Total net
revenues 17,265 22,602 34,804 43,753
Cost of revenues 11,321 11,830 21,745 22,261
---------- ------------- ---------- -------------
Gross profit 5,944 10,772 13,059 21,492
---------- ------------- ---------- -------------
Operating expenses:
Research and
development 3,052 3,848 6,888 9,113
Selling, general
and
administrative 4,922 5,631 12,676 11,934
Restructuring,
severance and
other 2,264 - 3,731 373
---------- ------------- ---------- -------------
Total operating
expenses 10,238 9,479 23,295 21,420
---------- ------------- ---------- -------------
Operating income
(loss) (4,294) 1,293 (10,236) 72
Other operating
income (expense):
Gain on sale of
product line 171 - 8,721 -
Interest expense (90) (8) (147) (8)
Interest income 43 48 75 90
Other, net 33 (13) (63) (3)
---------- ------------- ---------- -------------
Total other
income, net 157 27 8,586 79
---------- ------------- ---------- -------------
Income (loss) before
provision for
income taxes (4,137) 1,320 (1,650) 151
---------- ------------- ---------- -------------
Provision for income
taxes 11 3 52 3
---------- ------------- ---------- -------------
Net income (loss) $ (4,148) $ 1,317 $ (1,702) $ 148
========== ============= ========== =============

Net income (loss)
per share:
Basic $ (0.11) $ 0.04 $ (0.05) $ -
========== ============= ========== =============
Diluted $ (0.11) $ 0.03 $ (0.05) $ -
========== ============= ========== =============

Weighted average
number of shares
outstanding:
Basic 36,682 35,824 36,530 35,731
========== ============= ========== =============
Diluted 36,682 37,949 36,530 37,882
========== ============= ========== =============