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Cabot Microelectronics Reports Results for First Quarter of Fiscal 2005

AURORA, Ill.--(BUSINESS WIRE)--Jan. 27, 2005--Cabot Microelectronics Corporation (Nasdaq:CCMP), the leading supplier of chemical mechanical planarization (CMP) polishing slurries to the semiconductor industry, today reported financial results for its first quarter of fiscal 2005, which ended December 31, 2004.

Total revenue for the first fiscal quarter was $67.1 million, down 18.9% from $82.7 million in the prior quarter and down 12.1% from $76.3 million in the first quarter a year ago. The sequential revenue decrease was primarily due to lower demand for the company's products used in dielectric and tungsten applications, the combined revenue of which declined by 19.4% sequentially. The company attributes the decrease in demand to a reduction in wafer starts during the quarter by a number of customers. Revenue from slurries for copper polishing applications was down sequentially by 25.8% due to the remaining impact of lost business with one customer, which the company previously disclosed, as well as selected price reductions. Revenue from the company's products for data storage applications increased sequentially by 21.3%. Average selling price decreased by 2.9% this quarter compared to the prior quarter, primarily due to price reductions, which were partially offset by a higher valued product mix.

Gross profit for the quarter was $33.6 million, down 16.4% from the prior quarter's $40.2 million, and down 9.8% from $37.3 million in the year ago quarter. As a percentage of revenue, gross profit increased to 50.1% this quarter from 48.6% last quarter and 48.8% in the same quarter last year. Gross profit as a percentage of revenue benefited this quarter from a higher valued product mix, as well as higher yields in the company's manufacturing operations. These benefits were partially offset by the effects of price reductions and lower utilization of the company's manufacturing capacity.

Operating expenses of $19.4 million, consisting of research and development, selling and marketing, and general and administrative expenses, decreased by $1.3 million sequentially from $20.7 million last quarter, and were $0.3 million lower than the $19.7 million reported in the same quarter last year.

Net income for the quarter was $9.8 million, down 25.4% from $13.2 million last quarter and down 15.3% from $11.6 million in the same quarter last year. Diluted earnings per share were $0.40 this quarter, compared to $0.53 in the previous quarter and $0.46 in the year ago quarter.

"We believe that the sequential decrease in revenue that we experienced this quarter, which followed two consecutive quarters of record revenue, primarily reflects the impact of a reduction in semiconductor industry output on our business, which is principally wafer-start based," stated William P. Noglows, Cabot Microelectronics' Chairman and CEO. "In our view, this decrease in semiconductor production to reduce excess product inventories was primarily focused on communications devices that represent more mature technologies. Although broad based, the reduction in output was particularly evident among the foundries, which represent a significant portion of our business. As a result, sales of our products for tungsten and oxide polishing applications decreased significantly. Further, although we also experienced a sharp sequential decrease in revenue from our copper slurries, sales volume remained solid, adjusting for the loss of one customer which we have discussed in previous quarters. Despite the challenging industry conditions this quarter, we are particularly encouraged by results of our efforts to improve productivity and quality through our Six Sigma initiatives, as demonstrated by our improved manufacturing yields within this lower revenue environment, as well as our control of costs throughout the organization. In particular, we believe these improvements contributed to the increase in gross margin as a percentage of revenue that we achieved this quarter. From our perspective, these improvements, along with our demonstrated business model, position us well for continued profitability and strong cash generation."

CONFERENCE CALL

Cabot Microelectronics' quarterly earnings conference call will be held today at 9:00 a.m. Central Time. The live conference call will be available to all interested parties via webcast from the company's website, www.cabotcmp.com, or by phone at (800) 893-3008. Callers outside the U.S. can dial (706) 634-5531. For those who cannot listen to the live broadcast, a replay will be available through February, 17, 2005 by calling (800) 642-1687 or (706) 645-9291, and using access code 3166676, or via webcast at www.cabotcmp.com. A transcript of the formal comments made during the conference call will be available in the Investor Relations section of the company's website.

ABOUT CABOT MICROELECTRONICS

Cabot Microelectronics Corporation, headquartered in Aurora, Illinois, is the leading supplier of CMP slurries for polishing various materials used in semiconductor manufacturing processes. 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. For more information about Cabot Microelectronics Corporation visit www.cabotcmp.com or contact Mr. David H. Li, Director of Investor Relations, at (630) 499-2600.

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 and technologies, and construction of new facilities by Cabot Microelectronics. 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 "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, 2004, filed with the SEC and available on our website, www.cabotcmp.com. Cabot Microelectronics Corporation assumes no obligation to update this forward-looking information.


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


                                                 Quarter Ended
                                         -----------------------------
                                         Dec. 31,  Sept. 30,  Dec. 31,
                                           2004      2004       2003
                                         --------- --------- ---------

  Revenue                                $ 67,084  $ 82,714  $ 76,279

  Cost of goods sold                       33,472    42,498    39,026
                                         --------- --------- ---------

        Gross profit                       33,612    40,216    37,253

  Operating expenses:

    Research and development                9,544    10,979    10,723

    Selling and marketing                   4,176     3,844     3,783

    General and administrative              5,580     5,819     5,124

    Amortization of intangibles                85        85        85
                                         --------- --------- ---------

        Total operating expenses           19,385    20,727    19,715
                                         --------- --------- ---------

  Operating income                         14,227    19,489    17,538

  Other income (expense), net                 487       117        36
                                         --------- --------- ---------

  Income before income taxes               14,714    19,606    17,574

  Provision for income taxes                4,885     6,439     5,976
                                         --------- --------- ---------

        Net income                       $  9,829  $ 13,167  $ 11,598
                                         ========= ========= =========


Basic earnings per share                 $   0.40  $   0.53  $   0.47
                                         ========= ========= =========

Weighted average basic shares
 outstanding                               24,638    24,689    24,733
                                         ========= ========= =========


Diluted earnings per share               $   0.40  $   0.53  $   0.46
                                         ========= ========= =========

Weighted average diluted shares
 outstanding                               24,721    24,783    24,994
                                         ========= ========= =========



                  CABOT MICROELECTRONICS CORPORATION
                 CONSOLIDATED CONDENSED BALANCE SHEETS
                 (Unaudited and amounts in thousands)

                                           December 31,  September 30,
                                               2004          2004
                                           ------------- -------------
                     ASSETS:

Current assets:
  Cash and cash equivalents                  $  169,796    $  157,318
  Accounts receivable, net                       32,596        41,347
  Inventories, net                               30,480        24,474
  Other current assets                            7,368         6,542
                                           ------------- -------------
      Total current assets                      240,240       229,681

Property, plant and equipment, net              128,526       127,794
Other long-term assets                            5,547         5,816
                                           ------------- -------------
      Total assets                           $  374,313    $  363,291
                                           ============= =============


      LIABILITIES AND STOCKHOLDERS' EQUITY:

Current liabilities:
  Accounts payable                           $   12,429    $   13,080
  Capital lease obligations                       1,111         1,272
  Accrued expenses, income taxes payable
   and other current liabilities                 15,668        18,023
                                           ------------- -------------
      Total current liabilities                  29,208        32,375

Capital lease obligations                         6,153         6,385
Deferred income taxes and other
 long-term liabilities                            9,091         8,909
                                           ------------- -------------
      Total liabilities                          44,452        47,669

Stockholders' equity                            329,861       315,622
                                           ------------- -------------
      Total liabilities and stockholders'
       equity                                $  374,313    $  363,291
                                           ============= =============

    CONTACT: Cabot Microelectronics Corporation
             Mr. David H. Li (Investor Relations), 630-499-2600
             www.cabotcmp.com

    SOURCE: Cabot Microelectronics Corporation

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