CCMP CMC Materials Inc

Cabot Microelectronics Corporation (Nasdaq:CCMP), the world's leading supplier of chemical mechanical planarization (CMP) polishing slurries to the semiconductor industry, today reported financial results for its third quarter of fiscal 2006, which ended June 30. Total revenue for the third fiscal quarter was $84.9 million, which is the highest quarterly revenue ever recorded by the company. This was $17.5 million higher than the prior quarter's $67.4 million in revenue, primarily due to strong industry demand and the significant impact in the prior quarter of the company's transition to selling directly to customers in Taiwan rather than through a distributor. Revenues from each of the company's major business areas increased sequentially, with tungsten and dielectric slurry revenues each setting quarterly records and copper slurry revenues at the second highest level ever. Revenue for the June quarter of 2006 was $19.9 million higher than the $65.0 million in revenue recorded in the same quarter last year. The average selling price for the company's slurry products rose by 4.9% compared with the prior quarter, primarily due to the company's ability to generally maintain customer pricing with its transition to direct sales in Taiwan, along with a higher-priced product mix. Gross profit for the June quarter was $40.4 million, compared with $31.5 million in the prior quarter and $31.2 million in the same quarter a year ago. As a percentage of revenue, gross profit was 47.6% this quarter compared with 46.8% in the prior quarter and 48.0% in the same quarter last year. The sequential increase in the gross profit percentage was primarily due to benefits of higher manufacturing capacity utilization on the higher level of sales this quarter and higher pricing, largely offset by higher costs, including logistics costs associated with selling direct in Taiwan. Operating expenses, consisting of research, development and technical, selling and marketing, and general and administrative expenses, were $26.7 million in the third quarter. These expenses increased by $2.1 million sequentially from $24.6 million last quarter, and were $6.1 million higher than the $20.6 million in the same quarter last year. The sequential increase was primarily due to higher accruals for the company's annual incentive program, greater usage of research and development materials, and higher professional fees, including costs to enforce the company's intellectual property portfolio. The year-over-year increase in operating expenses was primarily due to higher staffing costs. These include costs to support a number of the company's strategic initiatives, as well as stock option expense, which the company began recording in fiscal 2006 according to accounting rules. The company recorded total pre-tax stock option expense of $2.6 million this quarter, of which $2.5 million was included in operating expenses. Net income for the quarter was $9.8 million, up from $5.4 million last quarter when the company transitioned to direct sales in Taiwan. Net income was 17.3% higher than the $8.3 million in the same quarter last year, despite the inclusion this quarter of approximately $1.6 million in after-tax stock option expense. Diluted earnings per share were $0.40 this quarter, which included $0.07 of stock option expense. Earnings per share were $0.18 higher than the $0.22 in the previous quarter and $0.06 higher than the $0.34 in the third quarter of fiscal 2005, a quarter not impacted by the stock option expense recorded this quarter. William Noglows, Chairman and CEO of Cabot Microelectronics, stated, "This was an outstanding quarter for Cabot Microelectronics. In our core CMP business, we achieved record levels of revenue and volume, reflecting what we see as strong demand both by the industry overall and for our own robust products. We believe that customer interest remains high in our new CMP slurry products for leading edge applications for both logic and memory devices, and our polishing pad business continues to gain traction in the marketplace. We recently made exciting progress in our Engineered Surface Finishes growth initiative, as we acquired the assets of QED Technologies, Inc. in early July. During the June quarter, we took significant steps to strengthen our intellectual property portfolio by acquiring some external technology and by successfully protecting our own technology against infringement by another company. In addition, earlier this month, we were honored to host a visit by President George W. Bush to our headquarters in Aurora. Through the continued execution of our three strategic initiatives - technology leadership, operations excellence and getting closer to our customers - we believe we have positioned the company to capture the many opportunities presented by today's semiconductor market and that we are well-prepared for continued success in the future." CONFERENCE CALL Cabot Microelectronics Corporation's quarterly earnings conference call will be held today at 9:00 a.m. Central Time. The live conference call will be available via webcast from the company's website, www.cabotcmp.com, or by phone at (866) 356-4279. Callers outside the U.S. can dial (617) 597-5394. A replay will be available through August 25, 2006 via webcast at www.cabotcmp.com. A transcript of the formal comments made during the conference call will also be available in the Investor Relations section of the company's website. ABOUT CABOT MICROELECTRONICS CORPORATION Cabot Microelectronics Corporation, headquartered in Aurora, Illinois, is the world's leading supplier of CMP slurries used in semiconductor and data storage manufacturing. The company's products play a critical role in the production of the most advanced semiconductor devices, enabling the manufacture of smaller, faster and more complex devices by its customers. Since becoming an independent public company in 2000, the company has grown to approximately 650 employees who work at research and development labs, sales and business offices, manufacturing facilities and customer service centers in China, France, Germany, Japan, Singapore, South Korea, Taiwan, the United Kingdom and the United States. The company's vision is to become the world leader in shaping, enabling and enhancing the performance of surfaces, and thus looks beyond its core CMP business in the semiconductor industry. For more information about Cabot Microelectronics Corporation, visit www.cabotcmp.com or contact Barbara Ven Horst, Director of Investor Relations at 630-375-5412. SAFE HARBOR STATEMENT This news release may include statements that constitute "forward looking statements" within the meaning of federal securities regulations. These forward-looking statements include statements related to: future sales and operating results; company and industry growth and trends; growth of the markets in which the company participates; international events; product performance; the generation, protection and acquisition of intellectual property; new product introductions; development of new products, technologies and markets; the acquisition of or investment in other entities; and the construction of new facilities by Cabot Microelectronics Corporation. These forward-looking statements involve a number of risks, uncertainties, and other factors, including those described from time to time in Cabot Microelectronics' filings with the Securities and Exchange Commission (SEC), that could cause actual results to differ materially from those described by these forward-looking statements. In particular, see "Risk Factors" in Other Information in our quarterly report on Form 10-Q for the quarter ended March 31, 2006, and "Risks Relating to Our Business" in Management's Discussion and Analysis in our annual report on Form 10-K for the fiscal year ended September 30, 2005, both filed with the SEC. Cabot Microelectronics Corporation assumes no obligation to update this forward looking information. -0- *T CABOT MICROELECTRONICS CORPORATION CONSOLIDATED STATEMENTS OF INCOME (Unaudited and amounts in thousands, except per share amounts) Quarter Ended Nine Months Ended --------------------------- ------------------- June 30, March 31, June 30, June 30, June 30, 2006 2006 2005 2006 2005 -------- --------- -------- --------- --------- Revenue $84,936 $67,389 $65,037 $233,813 $196,623 Cost of goods sold(a) 44,524 35,855 33,843 123,430 102,048 -------- --------- -------- --------- --------- Gross profit 40,412 31,534 31,194 110,383 94,575 Operating expenses: Research, development & technical(a) 12,060 11,321 10,462 35,040 30,863 Selling and marketing(a) 5,486 5,075 3,938 15,587 12,126 General and administrative(a) 9,086 8,240 6,106 25,736 18,143 Amortization of intangibles 19 4 85 27 255 -------- --------- -------- --------- --------- Total operating expenses 26,651 24,640 20,591 76,390 61,387 -------- --------- -------- --------- --------- Operating income 13,761 6,894 10,603 33,993 33,188 Other income, net 764 1,090 969 2,570 1,914 -------- --------- -------- --------- --------- Income before income taxes 14,525 7,984 11,572 36,563 35,102 Provision for income taxes 4,743 2,547 3,234 11,773 10,881 -------- --------- -------- --------- --------- Net income $9,782 $5,437 $8,338 $24,790 $24,221 ======== ========= ======== ========= ========= Basic earnings per share $0.40 $0.22 $0.34 $1.02 $0.98 ======== ========= ======== ========= ========= Weighted average basic shares outstanding 24,205 24,233 24,609 24,276 24,611 ======== ========= ======== ========= ========= Diluted earnings per share $0.40 $0.22 $0.34 $1.02 $0.98 ======== ========= ======== ========= ========= Weighted average diluted shares outstanding 24,205 24,233 24,610 24,276 24,660 ======== ========= ======== ========= ========= (a)Includes the following amounts related to share-based compensation expense: Cost of goods sold $164 $163 $- $477 $- Research, development & technical 239 243 - 715 - Selling and marketing 262 259 - 766 - General and administrative 1,951 1,877 - 5,590 - Tax benefit (968) (941) - (2,793) - -------- --------- -------- --------- --------- Total share-based compensation expense, net of tax $1,648 $1,601 $- $4,755 $- ======== ========= ======== ========= ========= CABOT MICROELECTRONICS CORPORATION CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited and amounts in thousands) June 30, September 30, 2006 2005 ------------- ------------- ASSETS: Current assets: Cash, cash equivalents and short-term investments $169,482 $171,041 Accounts receivable, net 48,215 36,759 Inventories, net 32,201 28,797 Other current assets 8,486 9,210 ------------- ------------- Total current assets 258,384 245,807 Property, plant and equipment, net 133,977 135,784 Other long-term assets 10,655 5,172 ------------- ------------- Total assets $403,016 $386,763 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY: Current liabilities: Accounts payable $10,748 $10,236 Capital lease obligations 1,232 1,170 Accrued expenses, income taxes payable and other current liabilities 19,375 24,216 ------------- ------------- Total current liabilities 31,355 35,622 Capital lease obligations 4,680 5,436 Deferred income taxes and other long-term liabilities 2,097 6,621 ------------- ------------- Total liabilities 38,132 47,679 Stockholders' equity 364,884 339,084 ------------- ------------- Total liabilities and stockholders' equity $403,016 $386,763 ============= ============= *T