AG Associates Reports First Quarter Results for Fiscal 1999.

SAN JOSE, Calif.--(BUSINESS WIRE)--Jan. 20, 1999--AG Associates (Nasdaq:AGAI), a leading supplier of advanced, single-wafer rapid thermal processing (RTP) equipment used in the manufacture of integrated circuits (ICs), today reported results for the first quarter of fiscal 1999 ended Dec. 31, 1998.

Net sales for the quarter were $14.3 million, compared to $8.2 million in the prior quarter and $16.4 million in the first quarter of fiscal 1998. This represents an increase of 75 percent from the prior quarter and a 13 percent decline from the first quarter of fiscal 1998.

Net loss for the first quarter of 1999 was $369,000, or ($0.06) per share, compared to a net loss of $7.0 million, or ($1.14) per share, for the prior quarter and a net profit of $9,000, or ($0.00) per share, for the same period last year. For the first quarter of fiscal 1999, the net loss was adversely impacted by the company's inability to record a credit for income taxes.

The company ended the first quarter of fiscal 1999 with $2.6 million in cash and cash equivalents and $9.5 million borrowed under the $12.0 million credit facility. The facility's availability is contingent upon the company meeting certain financial covenants and borrowing requirements.

On Jan. 19, 1999, the company announced it had entered into a definitive agreement for STEAG Electronic Systems GmbH to acquire all of the outstanding shares of AG Associates for $5.50 per share in cash.

Except for historical information, the matters discussed in this news release, including the statements related to the availability of the credit facility, are forward-looking statements. These statements are subject to certain risks and uncertainties that could cause the actual results to differ materially from those projected, including but not limited to the company's ability to meet the minimum net worth covenant of $15.0 million, the amount of eligible accounts receivable and inventory as a borrowing base and other risks detailed from time to time in the company's SEC reports. The company assumes no obligation to update the forward-looking information in this release.

AG Associates is a leading supplier of rapid thermal processing (RTP) equipment to the worldwide semiconductor industry. Founded in 1981, AG Associates is headquartered in San Jose and maintains customer service and support centers in the United States, Europe and Far East to support its global customer base.

The company's common stock trades on the Nasdaq Stock Market under the symbol AGAI. For more information on the company, visit AG Associates at: http://www.agassociates.com on the World Wide Web. -0-

                         AG ASSOCIATES, INC.
                CONSOLIDATED STATEMENTS OF OPERATIONS
                (in thousands, except per share data)
                             (unaudited)

                                       Three Months Ended December 31
                                         (unaudited)      (unaudited)
                                             1998             1997

Net sales                               $   14,328        $  16,433
Costs and expenses:
  Cost of sales                              9,187           10,185
  Research and development                   3,129            3,948
  Selling, general and
   administrative                            2,294            2,361
Total costs and expenses                    14,610           16,494
Loss from operations                          (282)             (61)
Other income (expense) net                     (87)              76
Profit (Loss) before income taxes             (369)              15
Provision for income taxes                       0                6
Net (loss) income                           ($ 369)             $ 9

Basic net loss per share                    ($0.06)           $0.00
Diluted net loss per share                  ($0.06)           $0.00

Shares used in basic
  per share calculation                      6,203            6,066
Shares used in diluted
  per share calculation                      6,203            6,132


                          AG ASSOCIATES, INC.
                      CONSOLIDATED BALANCE SHEETS
                            (in thousands)
                                                  Dec. 31,   Sept. 30,
                                                    1998        1998
                                                 (unaudited)     (1)
Assets
  Cash, equivalents and short-term investments     $ 2,616     $ 1,332
  Accounts receivable, net                          12,007       5,681
  Inventories                                        9,164      11,843
  Income taxes refundable                            1,291       1,291
  Prepaid expenses and other current assets          1,094       1,027
Total Current Assets                                26,172      21,174
  Property and equipment, net                       10,185       9,596
Total Assets                                       $36,357     $30,770

Liabilities and Shareholders' Equity
  Accounts payable                                 $ 5,739     $ 3,506
  Accrued liabilities                                2,606       2,730
  Warranty reserve                                     727         901
  Current portion of long-term obligations           9,750       5,731
Total Current Liabilities                           18,822      12,868
  Shareholders' equity                              17,535      17,902
Total Liabilities and Shareholders' Equity         $36,357     $30,770

(1)  Derived from audited financial statements