MIDDLEFIELD, CONNECTICUT August 23, 2001......Zygo Corporation (NASDAQ:ZIGO)

Net sales of $37,870,000 for the fourth quarter and $133,250,000 for the fiscal year ended June 30, 2001, increased by $14,000,000, or 59% and $46,007,000, or 53%, respectively, from the net sales in the comparable prior-year periods. For the fourth quarter, net sales in the semiconductor segment were $23,744,000, or 63%, net sales in the industrial segment were $10,204,000, or 27%, and net sales in the telecommunications segment were $3,922,000, or 10%. For the fiscal year 2001, net sales in the semiconductor segment were $84,561,000, or 64%, net sales in the industrial segment were $35,178,000, or 26%, and net sales in the telecommunications segment were $13,511,000, or 10%.

The Company recorded net earnings of $4,730,000 for the fourth quarter 2001, as compared to a net loss of $16,462,000 (net earnings of $1,301,000 excluding nonrecurring charges) for the fourth quarter of 2000. Net earnings on a diluted per share basis were $0.26 (including $0.08 resulting from an effective tax rate reduction in the fourth quarter) for the fourth quarter 2001, compared with a net loss of $1.17 (net earnings of $.08 excluding nonrecurring charges) on a diluted per share basis in the comparable prior-year period. For the fiscal year 2001, the Company recorded net earnings of $10,659,000 or $0.66 (including $0.09 resulting from an effective tax rate reduction over the full year) per share, as compared to a net loss of $16,047,000 or $1.28 per share in fiscal 2000. Excluding nonrecurring charges for the fiscal year ended June 30, 2000, net earnings were $4,798,000, or $0.34 on a diluted per share basis.

The effective tax rate for fiscal 2001 has been reduced from 34% for the nine months ended March 31, 2001 to 24% primarily due to the impact of transactions involving the early sale of stock resulting from the exercise of incentive stock options by former employees of Firefly Technologies, Inc. which became Zygo TeraOptix. If the tax rate had remained at 34% for the fourth quarter 2001, net earnings for the quarter would have been $3,188,000, or $.18 per share and for fiscal year 2001, $9,117,000, or $.57 per share.

The fully diluted weighted average number of shares outstanding for the fourth quarter and full fiscal year ended June 30, 2001 were 18,141,000 and 16,123,000, respectively, as compared to 14,036,000 and 12,511,000 in the respective prior year periods. The increases in the number of shares outstanding were due to the 2,924,500 shares issued in March 2001 in the secondary offering and the impact of stock options.

The Company did not record any nonrecurring charges in the fourth quarter or fiscal year ended June 30, 2001. Nonrecurring charges of $21,487,000 and $24,568,000 (before taxes) were recorded in the fourth quarter and fiscal year ended June 30, 2000, respectively. The Company recorded nonrecurring acquisition-related charges of $10,920,000 and $14,001,000 for the fourth quarter and fiscal year ended June 30, 2000, respectively. These nonrecurring charges were for non-cash compensation charges resulting from the difference in the Firefly stock option exercise price and the deemed fair market value on the date of grant. Nonrecurring charges of $10,567,000 (before taxes) were recorded for both the fourth quarter and fiscal year ended June 30, 2000 as a result of the Company's reorganization of its West Coast operations, principally for the write-off of goodwill and inventory.

The Company's backlog at June 30, 2001 totaled $55,502,000, a decrease of $14,851,000, or (21%), from $70,353,000 at March 31, 2001 and an increase of $9,559,000, or 21%, from $45,943,000 at June 30, 2000. The significant decrease in the backlog between the third and fourth quarters of fiscal 2001 resulted from the well-publicized slowdown in the semiconductor and telecommunications markets. Orders for fourth quarter fiscal 2001 totaled $23,019,000 and consisted of $17,308,000, or 75%, in the semiconductor segment, $7,711,000, or 34%, in the industrial segment, and net debooking of $2,000,000, or (9%), in the telecommunications segment. The net debooking in the telecommunications segment was primarily due to cancellations of $8,806,000 from two major customers due to market conditions.

The Company maintained cash, cash equivalents and marketable securities at June 30, 2001 totaling $59,751,000. This represents an increase of $35,885,000 over the prior fiscal year due to the net proceeds from the secondary offering of $51,800,000 offset by investments in fixed assets and inventories. The increase in property, plant and equipment in fiscal 2001 of $28,982,000 is, in part, due to the purchase of a building and equipment for Zygo TeraOptix in Westborough, Massachusetts ($13,549,000), and the purchase of optics coating chambers ($4,905,000). The new facility was partially financed through a mortgage on the property of $12,560,000, which is reflected in long-term debt.

Management's View
Bruce Robinson, Zygo's chairman and CEO, commented, "The optimism and energy with which we began fiscal year 2001 have resulted in record performance and major accomplishments. The addition of new markets and customers during fiscal 2001 has positioned the Company for growth when demand in the markets we serve recovers. We are seeing a reduction in capital spending by our customers, in both the semiconductor and telecommunications markets, which is consistent with economic indicators. In response, we will initiate a reduction in personnel of 10% in addition to maintaining tight cost control across the operation.

Despite the present economic conditions, we will continue to invest in R&D for new product development and customer design-ins as we build our technology base for the next upturn. We are confident that our commitment to our markets will be rewarded.

Zygo's current estimate for the results of operations for the quarter ended September 30, 2001 is for revenues in the $20 million to $23 million range with a loss per share between ($0.10) and ($0.16). There is a lack of visibility at the present time in terms of the markets we serve, accordingly, we cannot provide useful guidance beyond our current thinking for the first quarter."

Zygo Corporation (NASDAQ; ZIGO), headquartered in Middlefield, Connecticut, is a worldwide developer and supplier of high precision optics, optical, and fiber optic assemblies, high performance metrology instruments, and automation for the telecommunications, semiconductor, data storage, and industrial markets. See ZYGO's web site at www.zygo.com for additional information. Zygo's teleconference to discuss the results of fiscal 2001 will be held at 6 PM Eastern Standard Time on August 23, 2001 and can be reached at 800-348-6379.

This press release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which reflect the Company's (ZYGO's) current judgment on certain issues. Because such statements apply to future events, they are subject to risks and uncertainties that could cause the actual results to differ materially. Important factors, which could cause actual results to differ materially, are described in the Company's reports on Form 10-K and 10-Q on file with the Securities and Exchange Commission.

Zygo Corporation and Consolidated Subsidiaries
Consolidated Statements of Earnings

(1) Includes nonrecurring charges of $10,567,000 related to the reorganization of the West Coast operations for both the three months and fiscal year ended June 30, 2000.
(2) Nonrecurring acquisition-related charges of $10,920,000 and $14,001,000 for the three months and fiscal year ended June 30, 2000, respectively, represent non-cash compensation charges related to stock options.
(3) The difference between basic shares outstanding and diluted shares outstanding is the assumed conversion of common stock equivalents (stock options) in the amounts of 547,000 and 665,000 for the three months and fiscal year ended June 30, 2001, respectively.
(4) As per generally accepted accounting principles, the computation of the net loss per share is based on the weighted average basic shares outstanding.

Zygo Corporation and Consolidated Subsidiaries
Condensed Consolidated Balance Sheets