Electroglas Reports Fourth Quarter 2002 Results.

Business Editors

SAN JOSE, Calif.--(BUSINESS WIRE)--Jan. 30, 2003

Electroglas, Inc. (Nasdaq:EGLS), a leading supplier of process management tools for the semiconductor industry, today reported operating results for its fourth quarter ended December 31, 2002.

Revenue was $13.2 million for the fourth quarter, up 13% from the third quarter and on par with the fourth quarter of 2001. Pro forma net loss for the fourth quarter of 2002 was $11.2 million, or $0.53 per share before product inventory write downs, restructuring charges, asset impairments and tax benefits. Including all charges, the net loss was $25.2 million, or $1.19 per share, compared with a loss of $15.8 million or $0.75 per share for the third quarter of 2002, and a net loss of $14.6 million, or $0.70 per share, for the fourth quarter of 2001. At December 31, 2002, the Company had cash and short-term investments of $58.2 million, or $2.74 per share.

"The semiconductor and equipment industry is still being impacted by the delayed recovery of the economy, poor demand for technology products and the uncertain world situation all of which has slowed the recovery that we were seeing in the first half of the year," commented Curt Wozniak, CEO of Electroglas. "Customers tightly controlled year-end purchases and have reassessed their current capacity in light of the expected slow growth in semiconductor demand into 2003. Gross bookings came in at $10.7 million for the fourth quarter, down compared with the third quarter of 2002. As a result of all these cautionary factors, our outlook is for sales in the first quarter of 2003 to be between $10 million and $14 million."

Continued Wozniak, "Given the impaired market demand, Electroglas has taken significant steps to streamline its operations, organization and product offerings to position the company for the anticipated market recovery, which we now anticipate to occur in the latter part of 2003 or early 2004. Headcount was reduced an additional 20% during the quarter, bringing our total reduction to over 30%. Following the completion of our Singapore manufacturing facility, the facility is now capable of producing and supporting our 4090u 200mm prober, and we expect product-cost reductions of 10-20% from the Singapore effort. We are accelerating the realization of these cost reductions and we are stepping up the production transfer program and anticipate completion of the EG 5/300 transfer, by the end of Q1-2003, a full 3-6 months ahead of previous estimates. As a result of these and other efficiencies gained during the quarter, we were able to reduce our cash usage to $7.6 million for the quarter, compared with $18.2 million for Q3. The company is not content with these improvements, and through the efforts of our employees, we have continued expense controls, salary reductions and shutdowns to reduce expenses."

Concluded Wozniak, "Overall, the outlook for semiconductor equipment during 2003 is of slowly improving conditions. Most expectations for the year are for a slow first half, with better growth in the second half, leading to a full recovery in 2004 as utilization continues to increase with semiconductor demand. The general range of forecasts by independent industry analysts for 2003 is for the equipment industry to increase between 7-18%. Against this outlook, we are continuing to reduce the breakeven point of Electroglas through significant spending reductions. However, we are continuing to focus on new-product development to insure we are ready to benefit from the next expansion in the industry."

Electroglas' fourth-quarter results conference call will be held at 11:00 a.m. PT/2:00 p.m. ET today; the number is 706-679-0411. A replay will be available from 2:00 p.m. PT/5:00 p.m. ET today through February 6th. The call-in number for the replay is 706-645-9291, access code 7290785. There will be a simultaneous webcast of the conference call, which can be accessed through the Electroglas web site, http://www.electroglas.com.

Legal Notice Regarding Forward-Looking Statements 

This press release contains forward-looking statements including statements relating to the current and expected business condition and recovery of the semiconductor industry, our guidance for sales in the first quarter 2003 to be between $10 and $14 million, the results of our efforts to streamline our operations, organization and product offerings, the anticipated market recovery in the latter part of 2003 and full recovery in 2003, expected product cost reductions of 10-20% as a result of our Singapore manufacturing effort, anticipated completion of the EG 5/300 transfer, by the end of Q1-2003, forecasted increase in the semiconductor equipment industry of 7-18% in 2003, efforts to reduce our breakeven point, our ability to take advantage of a semiconductor industry upturn as a result of our new product development efforts and increasing customer utilization rates and demand. These forward-looking statements involve risks and uncertainties including, but not limited to, the risk of adverse changes in global and domestic economic conditions, terrorist activity, armed conflict, civil or military unrest or political instability in the United States, Iraq, Singapore or other locations, prolonged downturn in the semiconductor and electronics industries, continued downturn or further decrease in customer utilization rates, unforeseen technical difficulties related to the development and manufacture of our products, and a failure of our new products to achieve broad market acceptance as a result of competing technologies. Electroglas assumes no obligation to update this information. For a further discussion of risks and uncertainties that could cause actual results to differ from those expressed in these forward-looking statements, as well as risks relating to Electroglas' business in general, see the risk disclosures in Electroglas' SEC filings, including its most recent Annual Report on Form 10-K for the year ended December 31, 2001 and its quarterly reports on Form 10-Q filed from time to time with the SEC.

About Electroglas: Electroglas delivers essential tools for process management to enhance the profitability of semiconductor manufacturers. The Company's wafer probers, inspection systems and software solutions serve as data collection, management and analysis tools that semiconductor manufacturers depend on to improve their productivity and process control by optimizing sort-floor efficiency. Electroglas has been a leading supplier of wafer probers for over 40 years and has an installed base of more than 15,000 systems. The Company's stock trades on the Nasdaq National Market under the symbol EGLS. The Company's World Wide Web site is located at http://www.electroglas.com.

                           ELECTROGLAS, INC.
            CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
               (In thousands, except per-share amounts)

                                  Quarters ended       Years ended
                                   December 31,        December 31,
                               ------------------- -------------------
                                 2002      2001      2002      2001
                               --------- --------- --------- ---------
Net sales                       $13,204   $13,210   $57,135   $84,662
Cost of sales                    18,857    12,226    60,358    63,430
                               --------- --------- --------- ---------
Gross profit (loss)              (5,653)      984    (3,223)   21,232
                               --------- --------- --------- ---------
Operating expenses:
  Engineering, research and
   development                    7,128     7,361    31,552    31,552
  Selling, general and
   administrative                 9,408     9,257    39,180    38,890
  In-process research and
   development                       --        --        --       281
  Impairment charges              1,879        --     1,879        --
  Restructuring charges           3,282        --     4,613        --
                               --------- --------- --------- ---------
Total operating expenses         21,697    16,618    77,224    70,723
                               --------- --------- --------- ---------
Operating loss                  (27,350)  (15,634)  (80,447)  (49,491)
Interest income                     371     1,659     2,261     7,639
Other income (expense), net      (1,150)      114       414       214
                               --------- --------- --------- ---------
Loss before income taxes        (28,129)  (13,861)  (77,772)  (41,638)
Provision (benefit) for income
 taxes                           (2,911)      739    (4,141)   16,431
                               --------- --------- --------- ---------
Net loss                       $(25,218) $(14,600) $(73,631) $(58,069)
                               ========= ========= ========= =========

Basic and diluted net loss per
 share                           $(1.19)   $(0.70)   $(3.49)   $(2.78)
                               ========= ========= ========= =========

Shares used in basic and
 diluted calculation             21,125    20,950    21,068    20,910
                               ========= ========= ========= =========

Pro Forma Financial Information for the quarter ended December 31, 2002

Management believes that pro forma financial information provides useful information to aid in understanding operating results. Pro Forma Net Loss is prepared by beginning with the Consolidated Operating Statement, which complies with U.S. Generally Accepted Accounting Principles ("GAAP"), and then excluding items, which we believe, are unusual or non-recurring items. In Q4 of 2002, we exclude the following from GAAP Net Loss to calculate Pro Forma Net Loss: valuation of assets, tax benefits and one-time charges on product inventory write downs, restructuring charges and asset impairments.

Quarter Ended December 31, 2002 -- (in thousands, except per share
amounts)

GAAP Loss before taxes                   ($28,129)

Pro Forma Adjustments:

(1) Asset Impairments                    $4,704

(2) Inventory Write Downs                $6,033

(3) Restructuring                        $3,282

Pro Forma Loss Before Taxes              ($14,110)

(4) Pro Forma Tax Benefit                $2,911

Pro Forma Net Loss                       ($11,199)

Pro Forma EPS                            ($0.53)

    (1) - $4.7 million charge for Asset Impairment was primarily
    related to land and buildings in California and to a lesser extent
    long lived assets and long term investments. The charge relating
    to land and buildings $2.8 million is included in selling, general
    and administrative line and the remainder $1.9 million, for
    long-lived assets ($1.5 million) and equity investments ($0.4
    million) is included in impairment charges on the GAAP Operating
    Statement.
    (2) - $6.0 million charge for Inventory Write Downs related to
    three segments: $2.4 million for obsolete inventory to be
    scrapped; $2.2 million charge related to inventory that was
    assessed for "lower cost or market" condition and $1.4 million
    excess inventory, all of which are included in the GAAP Operating
    statement, Cost of Sales line.
    (3) - $2.4 million Restructuring relates to workforce reduction
    for approximately 120 people across all functional groups and
    divisions. The remaining $0.8 charge was for office closures
    consisting of future lease commitments on facilities, which will
    be exited prior to the end of the lease term, refurbishment of
    premises, write off of local assets and attorney fees for closure.
    These charges are included in the restructuring of operations in
    the GAAP Operating Statement.
    (4) - $2.9 million Benefit is realized as a result of a reduction
    of the company's income tax rate.

                           ELECTROGLAS, INC.
                 CONSOLIDATED CONDENSED BALANCE SHEETS
                            (In thousands)

                                                   December  December
                                                   31, 2002  31, 2001
                                                   --------- ---------
Assets
Current assets:
  Cash and short-term investments                   $58,155   $86,784
  Accounts receivable, net                           11,803    12,053
  Inventories                                        26,650    40,249
  Prepaid expenses and other current assets           1,428     1,572
                                                   --------- ---------

    Total current assets                             98,036   140,658

Restricted cash                                       7,245    48,300
Long-term receivables                                41,055        --
Equipment and leasehold improvements, net            15,391    16,100
Other assets                                         11,453     8,813
                                                   --------- ---------
Total assets                                       $173,180  $213,871
                                                   ========= =========

Liabilities and stockholders' equity
Current liabilities:
  Short-term borrowings                                $110    $1,171
  Accounts payable                                    3,955     3,461
  Accrued liabilities                                16,411    16,829
                                                   --------- ---------
    Total current liabilities                        20,476    21,461

Convertible subordinated notes                       33,169        --
Non-current liabilities                              11,490    12,594
Stockholders' equity                                108,045   179,816
                                                   --------- ---------
Total liabilities and stockholders' equity         $173,180  $213,871
                                                   ========= =========