Cabot Microelectronics Updates Outlook for Fourth Fiscal Quarter 2006
October 12 2006 - 7:30AM
Business Wire
Cabot Microelectronics Corporation (Nasdaq:CCMP), the world�s
leading supplier of chemical mechanical planarization (CMP)
polishing slurries to the semiconductor industry, today updated its
outlook for its financial performance for the fourth quarter of
fiscal 2006, which ended September 30. The company now expects
gross profit for its fiscal fourth quarter to be between 44 and 45
percent of revenue. This is below the guidance range of 48 percent
plus or minus two percentage points that it provided in its fiscal
third quarter conference call in July. Factors causing gross profit
to fall below this guidance range include an asset write-off and
accounting for the company�s recent QED acquisition as well as its
third fiscal quarter purchase of a portfolio of CMP technology
patents from IBM. Additionally, the company now expects operating
expenses of between $28 and $29 million for the quarter, which is
approximately $2 million lower than indicated in its July
conference call. The company expects to write-off approximately
$1.8 million of assets related to converting an existing building
previously used for CMP slurry production and research and
development activities into a polishing pad manufacturing facility.
The write-off is expected to increase cost of goods sold by
approximately $1.1 million and increase research and development
expense by around $0.7 million in the fourth fiscal quarter.
Retrofitting the existing building, which is near completion,
should provide a lower cost approach versus competitors� greenfield
investment strategies. Cost of goods sold in the quarter will also
increase by approximately $0.9 million more than was previously
anticipated due to accounting for the company�s QED acquisition,
which required writing-up acquired inventories to fair market
value. The QED business enjoyed robust sales of some of this
written-up inventory during the quarter, which increased costs and
reduced margin. In the future, these higher costs should dissipate
as the rest of the acquired inventory is sold, and margins on QED
sales should trend toward Cabot Microelectronics� average gross
profit. Finally, approximately $0.6 million of amortization expense
related to intangible assets acquired with the QED business and the
patent portfolio will be recorded as cost of goods sold in the
quarter, as well as in each quarter of fiscal 2007. The QED and
patent acquisitions are expected to support continued revenue
momentum and product innovation. On an operating basis, management
is pleased with the quarter�s preliminary results. Revenue is
expected to be between $86 and $87 million, or 1 to 2 percent
higher than the prior quarter�s $84.9 million, which was a record
for the company, and 16 to 18 percent higher than revenue in the
fourth quarter of fiscal 2005. Demand for the company�s CMP slurry
products remained strong in July and August, but softened somewhat
in September, and pricing remained generally stable in the quarter.
Expected sales by QED of approximately $5 million met management�s
expectations. William Noglows, Chairman and CEO of Cabot
Microelectronics, said, �During 2006 we continued to strengthen our
business by executing our three strategic initiatives: technology
leadership, operations excellence and connecting with customers.
Demand for our CMP slurries in fiscal 2006 was strong and we
continue to establish our pads business. We are also encouraged by
our progress growing in areas adjacent to our core CMP business, as
with the QED acquisition.� Financial results for the fourth quarter
of fiscal 2006 have not yet been finalized. Therefore, information
regarding this period is subject to change, and actual results for
the quarter may differ from these preliminary results. Cabot
Microelectronics will report fourth fiscal quarter results the
morning of October 26, 2006, followed by a conference call to
discuss the quarter. ABOUT CABOT MICROELECTRONICS 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 or refurbishment of existing 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 June 30,
2006, and �Risks Related 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 assumes no obligation to update this
forward-looking information. Notwithstanding today�s foregoing
announcement, it continues to be Cabot Microelectronics� regular
policy to not provide periodic financial guidance updates outside
of its quarterly earnings release and associated conference calls,
or to comment upon financial analysts� estimates. Cabot
Microelectronics Corporation (Nasdaq:CCMP), the world's leading
supplier of chemical mechanical planarization (CMP) polishing
slurries to the semiconductor industry, today updated its outlook
for its financial performance for the fourth quarter of fiscal
2006, which ended September 30. The company now expects gross
profit for its fiscal fourth quarter to be between 44 and 45
percent of revenue. This is below the guidance range of 48 percent
plus or minus two percentage points that it provided in its fiscal
third quarter conference call in July. Factors causing gross profit
to fall below this guidance range include an asset write-off and
accounting for the company's recent QED acquisition as well as its
third fiscal quarter purchase of a portfolio of CMP technology
patents from IBM. Additionally, the company now expects operating
expenses of between $28 and $29 million for the quarter, which is
approximately $2 million lower than indicated in its July
conference call. The company expects to write-off approximately
$1.8 million of assets related to converting an existing building
previously used for CMP slurry production and research and
development activities into a polishing pad manufacturing facility.
The write-off is expected to increase cost of goods sold by
approximately $1.1 million and increase research and development
expense by around $0.7 million in the fourth fiscal quarter.
Retrofitting the existing building, which is near completion,
should provide a lower cost approach versus competitors' greenfield
investment strategies. Cost of goods sold in the quarter will also
increase by approximately $0.9 million more than was previously
anticipated due to accounting for the company's QED acquisition,
which required writing-up acquired inventories to fair market
value. The QED business enjoyed robust sales of some of this
written-up inventory during the quarter, which increased costs and
reduced margin. In the future, these higher costs should dissipate
as the rest of the acquired inventory is sold, and margins on QED
sales should trend toward Cabot Microelectronics' average gross
profit. Finally, approximately $0.6 million of amortization expense
related to intangible assets acquired with the QED business and the
patent portfolio will be recorded as cost of goods sold in the
quarter, as well as in each quarter of fiscal 2007. The QED and
patent acquisitions are expected to support continued revenue
momentum and product innovation. On an operating basis, management
is pleased with the quarter's preliminary results. Revenue is
expected to be between $86 and $87 million, or 1 to 2 percent
higher than the prior quarter's $84.9 million, which was a record
for the company, and 16 to 18 percent higher than revenue in the
fourth quarter of fiscal 2005. Demand for the company's CMP slurry
products remained strong in July and August, but softened somewhat
in September, and pricing remained generally stable in the quarter.
Expected sales by QED of approximately $5 million met management's
expectations. William Noglows, Chairman and CEO of Cabot
Microelectronics, said, "During 2006 we continued to strengthen our
business by executing our three strategic initiatives: technology
leadership, operations excellence and connecting with customers.
Demand for our CMP slurries in fiscal 2006 was strong and we
continue to establish our pads business. We are also encouraged by
our progress growing in areas adjacent to our core CMP business, as
with the QED acquisition." Financial results for the fourth quarter
of fiscal 2006 have not yet been finalized. Therefore, information
regarding this period is subject to change, and actual results for
the quarter may differ from these preliminary results. Cabot
Microelectronics will report fourth fiscal quarter results the
morning of October 26, 2006, followed by a conference call to
discuss the quarter. ABOUT CABOT MICROELECTRONICS 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 or refurbishment of existing 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 June 30,
2006, and "Risks Related 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 assumes no obligation to update this
forward-looking information. Notwithstanding today's foregoing
announcement, it continues to be Cabot Microelectronics' regular
policy to not provide periodic financial guidance updates outside
of its quarterly earnings release and associated conference calls,
or to comment upon financial analysts' estimates.
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