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Cabot Microelectronics Achieves Solid Business Performance for Fourth Quarter and Full Fiscal Year 2006

Business Editors/Technology Editors

AURORA, Ill.--(BUSINESS WIRE)--Oct. 26, 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 fourth fiscal quarter and full fiscal year 2006, which ended September 30.

Total revenue for the fourth fiscal quarter was $87.0 million, which is consistent with the company's updated outlook that it released on October 12, 2006. This is the highest quarterly revenue ever recorded by the company, and is approximately $2.0 million higher than the prior quarter's $84.9 million in revenue, which was the previous record. The increase was primarily due to revenue contributed by the company's recent QED Technologies acquisition. Revenue from the company's tungsten slurry products increased sequentially, while revenue from its copper, dielectric and data storage product lines each declined sequentially as the company experienced some softening of demand in September. Revenue this quarter was 17.8 percent higher than last year's $73.9 million fourth quarter revenue. Revenue for the full fiscal year was $320.8 million, which was $50.3 million, or 18.6 percent, higher than revenue for the previous fiscal year.

The average selling price for the company's slurry products sold in the fourth quarter increased by 1.6 percent compared to the prior quarter, due to a higher-priced product mix, partially offset by limited price reductions.

Gross profit for the September quarter was $38.7 million, compared with $40.4 million in the prior quarter and $34.6 million in the same quarter a year ago. As a percentage of revenue, gross profit was 44.4 percent this quarter, which is consistent with the company's updated outlook of October 12. Comparable gross profit percentages were 47.6 percent in the prior quarter and 46.9 percent in the same quarter last year. The sequential decrease was primarily due to an asset write-off associated with the company's establishing manufacturing capacity for its new CMP polishing pad business by retrofitting an existing building it owns, and purchase accounting associated with the company's recent acquisitions of the QED business and a portfolio of CMP technology patents from IBM. Other factors impacting gross profit this quarter were higher costs in certain areas, including lower yields in the company's manufacturing operations, partially offset by a higher-valued product mix. Gross profit as a percentage of revenue was 46.5 percent for the full fiscal year, compared with 47.8 percent in the previous year.

Operating expenses, consisting of research, development and technical, selling and marketing, and general and administrative expenses, were $28.2 million in the fourth quarter, which is consistent with the company's announcement on October 12. These expenses increased by $1.6 million from $26.7 million last quarter, and were $4.2 million higher than the $24.0 million in the same quarter last year. The sequential increase was primarily due to ongoing operating expenses associated with the newly acquired QED business, a $1.1 million write-off associated with in-process research and development efforts by QED as required by purchase accounting rules, and a $0.7 million write-off of research and development assets as part of the building conversion to pad manufacturing capacity. These sequential increases were partially offset by lower professional fees, including costs to enforce the company's intellectual property portfolio, and lower usage of research and development materials. The year-over-year increase in operating expenses was primarily due to share-based compensation expense, including stock option expense, which the company began recording in fiscal 2006 according to accounting rules. The company recorded total pre-tax share-based compensation expense of $2.8 million this quarter, of which $2.6 million was included in operating expense. Higher staffing costs, including costs to support a number of the company's strategic initiatives, particularly in Asia, also contributed to the year-over-year increase.

For the full year, operating expenses increased by $19.2 million to $104.6 million from $85.4 million. The single largest factor in the year-over-year increase was $10.7 million in share-based compensation expense that the company recorded, of which $10.0 million was classified as operating expense. The second factor was increased staffing-related expenses to support strategic initiatives.

Net income for the quarter was $8.2 million, down from $9.8 million last quarter. The effects of the asset write-off and purchase accounting described above reduced net income this quarter by approximately $3 million. Net income was only 1.1 percent lower than the $8.3 million in the same quarter last year, despite the effects of the asset write-off, purchase accounting, and share-based compensation expense. Net income for the full fiscal year was $32.9 million, up from $32.5 million in fiscal 2005 including the effects of these factors this year.

Diluted earnings per share were $0.34 this quarter, which reflects an adverse impact of approximately $0.12 for effects of the asset write-off and purchase accounting and approximately $0.08 per share of share-based compensation expense. Earnings per share were $0.06 lower than the $0.40 in the previous quarter and equal to earnings per share reported in the fourth quarter of fiscal 2005. The company did not record share-based compensation expense in the year ago quarter. Earnings per share for full fiscal year 2006 were $1.36, compared with $1.32 for the previous fiscal year, despite the effects of the asset write-off, purchase accounting, and approximately $0.28 of share based compensation expense this year.

William Noglows, Chairman and CEO of Cabot Microelectronics, stated, "This was an exciting and successful year of growth and development for us. Guided by our strategic initiatives of technology leadership, operations excellence and connecting with customers, we continued to invest in our business and enhance our ability to serve our customers. We are happy with our performance this year, which we believe represents significant improvement over fiscal 2005. This year we achieved record revenue in our CMP slurry business, and began to establish our CMP polishing pad business. We also took our first significant steps to expand our business beyond the semiconductor industry, through two acquisitions under our Engineered Surface Finishes initiative. We believe we have strengthened our leadership position, which will help us to continue growing our business and serving our customers."

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) 383-8003. Callers outside the U.S. can dial (617) 597-5330. A replay will be available through November 30, 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 nearly 750 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.

CABOT MICROELECTRONICS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited and amounts in thousands, except per share amounts)



                                          Quarter Ended
                              --------------------------------------
                              September 30,  June 30,  September 30,
                                  2006         2006        2005
                              ------------- ---------- -------------


  Revenue                          $86,982    $84,936       $73,861

  Cost of goods sold (a)            48,328     44,524        39,234
                              ------------- ---------- -------------

      Gross profit                  38,654     40,412        34,627

  Operating expenses:

    Research, development &
     technical (a)                  13,030     12,060        12,147

    Selling & marketing (a)          5,528      5,486         4,863

    General & administrative
     (a)                             8,556      9,105         7,029

    Purchased in-process
     research & development          1,120          -             -
                              ------------- ---------- -------------

      Total operating
       expenses                     28,234     26,651        24,039
                              ------------- ---------- -------------

  Operating income                  10,420     13,761        10,588

  Other income, net                  1,541        764           833
                              ------------- ---------- -------------

  Income before income taxes        11,961     14,525        11,421

  Provision for income taxes         3,803      4,743         3,169
                              ------------- ---------- -------------

      Net income                    $8,158     $9,782        $8,252
                              ============= ========== =============


Basic earnings per share             $0.34      $0.40         $0.34
                              ============= ========== =============

Weighted average basic shares
 outstanding                        24,087     24,205        24,459
                              ============= ========== =============


Diluted earnings per share           $0.34      $0.40         $0.34
                              ============= ========== =============

Weighted average diluted
 shares outstanding                 24,087     24,205        24,460
                              ============= ========== =============


(a) Includes the following
 amounts related to share-
 based compensation expense:
    Cost of goods sold                $171       $164            $-
    Research, development &
     technical                         244        239             -
    Selling & marketing                271        262             -
    General & administrative         2,106      2,062             -
    Tax benefit                       (897)    (1,009)            -
                              ------------- ---------- -------------
      Total share-based
       compensation expense,
       net of tax                   $1,895     $1,718            $-
                              ============= ========== =============


      Certain reclassifications of prior fiscal year and fiscal
       quarter amounts have been made to conform with the current
       period presentation.



                                               Twelve Months Ended
                                           ---------------------------
                                           September 30, September 30,
                                               2006          2005
                                           ------------- -------------


  Revenue                                      $320,795      $270,484

  Cost of goods sold (a)                        171,758       141,282
                                           ------------- -------------

      Gross profit                              149,037       129,202

  Operating expenses:

    Research, development &
     technical (a)                               48,070        43,010

    Selling & marketing (a)                      21,115        16,989

    General & administrative
     (a)                                         34,319        25,427

    Purchased in-process
     research & development                       1,120             -
                                           ------------- -------------

      Total operating
       expenses                                 104,624        85,426
                                           ------------- -------------

  Operating income                               44,413        43,776

  Other income, net                               4,111         2,747
                                           ------------- -------------

  Income before income taxes                     48,524        46,523

  Provision for income taxes                     15,576        14,050
                                           ------------- -------------

      Net income                                $32,948       $32,473
                                           ============= =============


Basic earnings per share                          $1.36         $1.32
                                           ============= =============

Weighted average basic shares
 outstanding                                     24,228        24,563
                                           ============= =============


Diluted earnings per share                        $1.36         $1.32
                                           ============= =============

Weighted average diluted
 shares outstanding                              24,228        24,612
                                           ============= =============


(a) Includes the following
 amounts related to share-
 based compensation expense:
    Cost of goods sold                             $648            $-
    Research, development &
     technical                                      959             -
    Selling & marketing                           1,037             -
    General & administrative                      8,020             -
    Tax benefit                                  (3,809)            -
                                           ------------- -------------
      Total share-based
       compensation expense,
       net of tax                                $6,855            $-
                                           ============= =============


      Certain reclassifications of prior fiscal year and fiscal
       quarter amounts have been made to conform with the current
       period presentation.
CABOT MICROELECTRONICS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited and amounts in thousands)

                                           September 30, September 30,
                                               2006          2005
                                           ------------- -------------

                   ASSETS:

Current assets:
  Cash, cash equivalents and short-term
   investments                                 $165,930      $171,041
  Accounts receivable, net                       48,028        36,759
  Inventories, net                               40,326        28,797
  Other current assets                            7,221         9,210
                                           ------------- -------------
    Total current assets                        261,505       245,807

Property, plant and equipment, net              130,176       135,784
Other long-term assets                           20,452         5,172
                                           ------------- -------------
    Total assets                               $412,133      $386,763
                                           ============= =============


    LIABILITIES AND STOCKHOLDERS' EQUITY:

Current liabilities:
  Accounts payable                              $15,104       $10,236
  Capital lease obligations                       1,254         1,170
  Accrued expenses, income taxes payable
   and other current liabilities                 22,475        24,216
                                           ------------- -------------
    Total current liabilities                    38,833        35,622

Capital lease obligations                         4,420         5,436
Deferred income taxes and other long-term
 liabilities                                      1,109         6,621
                                           ------------- -------------
    Total liabilities                            44,362        47,679

Stockholders' equity                            367,771       339,084
                                           ------------- -------------
    Total liabilities and stockholders'
     equity                                    $412,133      $386,763
                                           ============= =============

CONTACT: Cabot Microelectronics Corporation
Barbara Ven Horst, 630-375-5412

SOURCE: Cabot Microelectronics Corporation

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