Exhibit 99.1
CABOT MICROELECTRONICS REPORTS RESULTS
FOR SECOND QUARTER OF FISCAL 2006
AURORA, IL, April 27, 2006 - 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 second quarter of fiscal 2006, which ended March 31.
Total revenue for the second fiscal quarter was $67.4 million, compared with $81.5 million in the first fiscal quarter and $64.5 million in the same quarter a year ago. The sequential decline was primarily due to the company’s previously announced transition to selling directly to customers in Taiwan rather than through a distributor. As anticipated, during the transition period the distributor sold its remaining inventory of the company’s products to customers and the company built inventory needed to serve those customers directly, with a resulting short-term interruption in the company’s sales estimated in the range of $10 million to $11 million. Primarily related to this transition, revenues for all of the company’s major applications decreased sequentially. Average selling price fell by 2.5% compared with the prior quarter, primarily due to selected price reductions and a lower-priced product mix.
Consistent with the impact of the direct sales transition in Taiwan, gross profit for the quarter was lower at $31.5 million, compared with $38.4 million in the prior quarter. Gross profit was $29.8 million in the same quarter a year ago. As a percentage of revenue, gross profit was 46.8% this quarter compared with 47.2% in the prior quarter and 46.2% in the same quarter last year. The sequential decline in the gross profit percentage was primarily due to lower pricing, partially offset by benefits of a higher-valued product mix.
Operating expenses of $24.6 million, consisting of research, development and technical, selling and marketing, and general and administrative expenses, decreased by $0.5 million sequentially from $25.1 million last quarter, and were $3.2 million higher than the $21.4 million in the same quarter last year. The sequential decrease was primarily due to lower costs for cleanroom materials in the company’s research and development activities and lower professional fees, partially offset by higher travel costs. The year-over-year increase in operating expenses was primarily due to new accounting rules that required the company to begin recording stock option expense in fiscal 2006. The company recorded total pre-tax stock option expense of $2.5 million this quarter, of which $2.3 million was included in operating expenses.
Net income for the quarter was $5.4 million, down from $9.6 million last quarter primarily due to the company’s direct sales transition. Net income was $6.1 million in the same quarter last year, a period not impacted by either the direct sales transition or approximately $1.7 million in after-tax stock option expense the company reported this quarter.
Diluted earnings per share were $0.22 this quarter, which included $0.07 of stock option expense. Earnings per share were $0.17 less than the $0.39 in the previous quarter. The company had previously estimated an adverse impact of $0.17 due to the direct sales transition. Earnings per share in the second quarter of fiscal 2005 of $0.25 were not impacted by either the direct sales transition or the stock option expense recorded in the second fiscal quarter of 2006.
William Noglows, Chairman and CEO of Cabot Microelectronics, stated, “We completed what we believe is another solid quarter, benefiting from continued strength in the semiconductor and data storage industries. We manage our business for the long-term, and we achieved a number of accomplishments in the current quarter that we anticipate will provide benefits in the future. Our transition to a direct sales model in Taiwan was smooth and the related financial effects were generally as we had expected. We commercialized two new products and are close to finalizing a third. We also earned significant wins for new tungsten applications with two big memory players. In addition, we continue to pursue our growth initiative to transfer our expertise in CMP for semiconductors into other demanding polishing applications beyond this industry. We are pleased with our performance and look forward to building on our momentum 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) 356-4123. Callers outside the U.S. can dial (617) 597-5393. A replay will be available through May 24, 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 advanced semiconductor devices, enabling its customers to manufacture smaller, faster and more complex devices. Along with the company’s focus on its core CMP business, it is also looking beyond the semiconductor industry to pursue its vision to “be the world leader in shaping, enabling and enhancing the performance of surfaces”. 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, 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 December 31, 2005, 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.
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| CABOT MICROELECTRONICS CORPORATION | | | | | | | | | | | | | | | | |
| CONSOLIDATED STATEMENTS OF INCOME | | | | | | | | | | | | | | | | |
| (Unaudited and amounts in thousands, except per share amounts) | | Quarter Ended | | Six Months Ended |
| | March 31, 2006 | | | December 31, 2005 | | | March 31, 2005 | | | March 31, 2006 | | | March 31, 2005 | |
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| Revenue | | $ | 67,389 | | $ | 81,488 | | $ | 64,502 | | $ | 148,877 | | $ | 131,586 | |
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| Cost of goods sold * | | | 35,855 | | | 43,051 | | | 34,733 | | | 78,906 | | | 68,205 | |
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| Gross profit | | | 31,534 | | | 38,437 | | | 29,769 | | | 69,971 | | | 63,381 | |
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| Operating expenses: | | | | | | | | | | | | | | | | |
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| Research, development & technical * | | | 11,321 | | | 11,659 | | | 10,857 | | | 22,980 | | | 20,401 | |
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| Selling and marketing * | | | 5,075 | | | 5,026 | | | 4,012 | | | 10,101 | | | 8,188 | |
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| General and administrative * | | | 8,240 | | | 8,410 | | | 6,457 | | | 16,650 | | | 12,037 | |
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| Amortization of intangibles | | | 4 | | | 4 | | | 85 | | | 8 | | | 170 | |
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| Total operating expenses | | | 24,640 | | | 25,099 | | | 21,411 | | | 49,739 | | | 40,796 | |
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| Operating income | | | 6,894 | | | 13,338 | | | 8,358 | | | 20,232 | | | 22,585 | |
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| Other income, net | | | 1,090 | | | 716 | | | 458 | | | 1,806 | | | 945 | |
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| Income before income taxes | | | 7,984 | | | 14,054 | | | 8,816 | | | 22,038 | | | 23,530 | |
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| Provision for income taxes * | | | 2,547 | | | 4,483 | | | 2,762 | | | 7,030 | | | 7,647 | |
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| Net income | | $ | 5,437 | | $ | 9,571 | | $ | 6,054 | | $ | 15,008 | | $ | 15,883 | |
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| Basic earnings per share | | $ | 0.22 | | $ | 0.39 | | $ | 0.25 | | $ | 0.62 | | $ | 0.64 | |
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| Weighted average basic shares outstanding | | | 24,233 | | | 24,363 | | | 24,642 | | | 24,299 | | | 24,634 | |
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| Diluted earnings per share | | $ | 0.22 | | $ | 0.39 | | $ | 0.25 | | $ | 0.62 | | $ | 0.64 | |
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| Weighted average diluted shares outstanding | | | 24,233 | | | 24,363 | | | 24,685 | | | 24,299 | | | 24,698 | |
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| * Includes the following amounts related to share-based compensation expense: | | | | | | | | | | | | | | | | |
| Cost of goods sold | | $ | 163 | | $ | 150 | | $ | - | | $ | 313 | | $ | - | |
| Research, development & technical | | | 243 | | | 233 | | | - | | | 476 | | | - | |
| Selling and marketing | | | 259 | | | 245 | | | - | | | 504 | | | - | |
| General and administrative | | | 1,877 | | | 1,762 | | | - | | | 3,639 | | | - | |
| Provision for income taxes | | | (811) | | | (762 | ) | | - | | | (1,573 | ) | | - | |
| Total share-based compensation expense, net of tax | | $ | 1,731 | | $ | 1,628 | | $ | - | | $ | 3,359 | | $ | - | |
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CABOT MICROELECTRONICS CORPORATION | | | | | | | |
CONSOLIDATED CONDENSED BALANCE SHEETS | | | | | | | |
| (Unaudited and amounts in thousands) | | | | | | | |
| | | | March 31, 2006 | | | September 30, 2005 | |
| ASSETS: | | | | | | | |
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| Current assets: | | | | | | | |
| Cash, cash equivalents, and short-term investments | | $ | 173,712 | | $ | 171,041 | |
| Accounts receivable, net | | | 34,140 | | | 36,759 | |
| Inventories, net | | | 32,890 | | | 28,797 | |
| Other current assets | | | 7,108 | | | 9,210 | |
| Total current assets | | | 247,850 | | | 245,807 | |
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| Property, plant and equipment, net | | | 134,384 | | | 135,784 | |
| Other long-term assets | | | 5,262 | | | 5,172 | |
| Total assets | | $ | 387,496 | | $ | 386,763 | |
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| LIABILITIES AND STOCKHOLDERS' EQUITY: | | | | | | | |
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| Current liabilities: | | | | | | | |
| Accounts payable | | $ | 12,582 | | $ | 10,236 | |
| Capital lease obligations | | | 1,209 | | | 1,170 | |
| Accrued expenses, income taxes payable and other current liabilities | | | 14,467 | | | 24,216 | |
| Total current liabilities | | | 28,258 | | | 35,622 | |
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| Capital lease obligations | | | 4,937 | | | 5,436 | |
| Deferred income taxes and other long-term liabilities | | | 3,815 | | | 6,621 | |
| Total liabilities | | | 37,010 | | | 47,679 | |
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| Stockholders' equity | | | 350,486 | | | 339,084 | |
| Total liabilities and stockholders' equity | | $ | 387,496 | | $ | 386,763 | |
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