Therma-Wave Announces Fiscal Third Quarter 2006 Results

Net revenues for the fiscal third quarter of 2006 were $15.4million compared to net revenues of $17.3 million in the priorquarter. Net revenues for the quarter were within the Company's statedguidance range.

Net loss for the fiscal third quarter of 2006 was $3.9 million, or$(0.11) per diluted share, compared to net loss of $4.1 million, or$(0.11) per diluted share, in the prior quarter. Therma-Wave recordeda charge related to previously announced restructuring initiatives ofapproximately $0.8 million, or the equivalent of $0.02 per shareduring the fiscal third quarter of 2006. The Company had estimated adiluted net loss per share in the range of $(0.03) to $(0.08),excluding the impact of any restructuring charges during the quarter.Included in the fiscal third quarter 2006 net loss is approximately$98,000 in accretion related to the preferred stock financingconducted during the quarter.

Boris Lipkin, Therma-Wave's president and chief executive officer,stated, "Our progress during the fiscal third quarter improvedTherma-Wave's positioning on several key fronts as we made gainstowards our strategic objectives. Gains were particularly evident interms of reducing our quarterly operating expenses and improving ouroverall cash management. With new bookings of approximately $14.8million during the quarter our new order rate was in line withindustry book to bill spending levels over the same period. We alsotook additional steps during the quarter to further improve ourpositioning for the future. These actions include a follow-on round offinancing which has strengthened our balance sheet and offered usadditional financial flexibility as well as the execution ofadditional initiatives which are expected to yield future costsavings.

"In an effort to further streamline our corporate structure,during the quarter we shifted our sales structure in Europe to arepresentative model, naming Teltech, our 20 year partner in theregion as our exclusive representative. We believe this action willprovide our European customers with higher levels of local support andfollows our successful transition to a similar model in select Asianmarkets earlier in fiscal 2006. Overall, we continue to make progresstowards our goal of reducing our quarterly cash usage and bringing theCompany back to profitability," continued Mr. Lipkin.

Gross margin for the fiscal third quarter of 2006 was 35% comparedto 34% in the prior quarter of 2006.

Cash and cash equivalents totaled $21.8 million as of January 1,2006, compared to $14.5 million as of October 2, 2005. Fiscal thirdquarter cash includes net proceeds of $9.9 million received during thequarter following the private placement of convertible preferred stockand warrants. Cash consumption for the fiscal third quarter, net ofproceeds from the private placement, was $2.6 million, representing a28% sequential reduction in cash consumption. Fiscal third quarter2006 cash consumption was more favorable than management's guidancefor the quarter of $3 million to $4.5 million.

Guidance

The Company's statements about its future financial performanceare based on current information and expectations and the Companyundertakes no duty to update such statements. The statements areforward-looking and actual results could differ materially due tovarious risks and uncertainties, some of which are described below.

Guidance for the fiscal fourth quarter of 2006 ending April 2,2006 is as follows:

-- Revenue is expected to be within the range of $13 million to $16 million.

-- Diluted net loss per share is expected to be within the range of $(0.05) to $(0.10), excluding non-cash charges or credits for variable accounting of stock options and any restructuring charges.

-- New orders are expected to be within the range of $13 million to $16 million.

-- Cash consumption is expected to be within the range of $1.5 million to $3 million.

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 Tuesday, January 31, 2006. 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 includefinancial guidance for the next quarter, our progress towards ourfinancial goals and the gains towards our strategic objectives, amongothers. Factors that could cause actual results to differ materiallyfrom the forward-looking statements include the cyclicality of ourbusiness, the loss of one or more large customers, including the delayor cancellation of a significant order, our ability to protect ourintellectual property, our ability to successfully compete againstlarger companies, our ability to access additional capital in thefuture, our ability to develop new and advanced products in thefuture, our ability to attract and retain key personnel, our abilityto receive services and materials, 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)


January 1, April 3,
2006 2005
---------- --------

Assets
Current assets:
Cash and cash equivalents $ 21,835 $13,419
Accounts receivable, net 12,628 15,678
Inventories 21,345 30,870
Other current assets 1,485 2,680
---------- --------
Total current assets 57,293 62,647
Property and equipment, net 1,059 2,976
Other assets, net 1,321 1,950
---------- --------
Total assets $ 59,673 $67,573
========== ========

Liabilities, redeemable convertible preferred
stock and stockholders' equity
Current liabilities:
Accounts payable $ 3,361 $ 8,227
Other current liabilities 14,294 15,784
Deferred revenues 5,628 15,804
Term loan facility 4,887 -
---------- --------
Total current liabilities 28,170 39,815
Long-term liabilities:
Non-current deferred revenues 1,091 1,425
Other long-term liabilities 1,433 370
---------- --------
Total liabilities 30,694 41,610

Series B Redeemable Convertible Preferred
Stock 8,569 -

Stockholders' equity 20,410 25,963
---------- --------
Total liabilities, redeemable
convertible preferred stock
and stockholders' equity $ 59,673 $67,573
========== ========



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


Three Months Ended Nine Months Ended
January December January December
1, 26, 1, 26,
2006 2004 2006 2004
---------- -------- --------- --------

Net
revenues
Product $ 10,488 $16,044 $ 35,556 $49,761
Service and parts 4,940 5,426 14,676 15,462
---------- -------- --------- --------
Total net
revenues 15,428 21,470 50,232 65,223

Cost of revenues 10,060 12,368 31,805 34,629
---------- -------- --------- --------
Gross profit 5,368 9,102 18,427 30,594
---------- -------- --------- --------
Operating expenses:
Research and
development 2,755 4,363 9,643 13,476
Selling, general
and administrative 5,707 6,493 18,384 18,427
Restructuring,
severance and other 800 - 4,530 373
---------- -------- --------- --------
Total operating
expenses 9,262 10,856 32,557 32,276
---------- -------- --------- --------

Operating loss (3,894) (1,754) (14,130) (1,682)
Other operating income
(expense):
Gain on sale of
product line - - 8,721 -

Interest expense (205) (7) (352) (15)

Interest income 103 52 178 142

Other, net (1) 7 (64) 4
---------- -------- --------- --------
Total other
income, net (103) 52 8,483 131
---------- -------- --------- --------
Loss before provision for
income taxes (3,997) (1,702) (5,647) (1,551)
---------- -------- --------- --------
Provision for income taxes
(benefit) (157) 209 (105) 212
---------- -------- --------- --------
Net loss (3,840) (1,911) (5,542) (1,763)
Accretion of Series B preferred
stock to redemption value (98) - (98) -
---------- -------- --------- --------
Net loss available to common
stockholders $ (3,938) $(1,911) $ (5,640) $(1,763)
========== ======== ========= ========

Net loss per share:
Basic $ (0.11) $ (0.05) $ (0.15) $ (0.05)
========== ======== ========= ========
Diluted $ (0.11) $ (0.05) $ (0.15) $ (0.05)
========== ======== ========= ========

Weighted average number of
shares outstanding:

Basic 36,879 36,004 36,647 35,822
========== ======== ========= ========
Diluted 36,879 36,004 36,647 35,822
========== ======== ========= ========