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Cabot Microelectronics Reports Results for Third Quarter of Fiscal 2005

AURORA, Ill.--(BUSINESS WIRE)--July 28, 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 third quarter of fiscal 2005, which ended June 30, 2005.

Total revenue for the third fiscal quarter was $65.0 million, up 0.8% from $64.5 million in the prior quarter and down 15.5% from $76.9 million in the third quarter a year ago. Combined revenue from the company's products for tungsten and dielectric polishing applications increased sequentially by 3.7%, and revenue from its data storage slurry products increased slightly. Revenue from products for copper polishing applications decreased by 9.0% compared to the prior quarter, due to lower sales to the company's largest customer, a distributor in Taiwan and China. The company attributes this mainly to a reduction of CMP slurry inventory by the distributor; sales of the company's copper slurries to its other customers increased in aggregate by 6.0% sequentially. The company's average selling price fell by 2.8% this quarter compared to the prior quarter, primarily due to selected price reductions, along with the effect of Japanese yen to U.S. dollar exchange rate fluctuations.

Gross profit for the quarter was $31.2 million, up 4.8% from $29.8 million in the prior quarter and down 20.0% from $39.0 million in the year ago quarter. As a percentage of revenue, gross profit represented 48.0% this quarter, up from 46.2% last quarter and down from 50.7% in the same quarter last year. Gross profit as a percentage of revenue improved this quarter largely due to a higher valued product mix, partially offset by selected price reductions.

Operating expenses of $20.6 million, consisting of research and development, selling and marketing, and general and administrative expenses, decreased by $0.8 million sequentially from $21.4 million last quarter, and were $0.5 million lower than the $21.1 million reported in the same quarter last year. The sequential decrease was primarily related to lower staffing costs, including lower accruals for the company's annual bonus plan, partially offset by higher costs for cleanroom supplies in research and development and higher professional fees, including costs of the company's Sarbanes Oxley Section 404 compliance efforts.

Net income for the quarter was $8.3 million, up 37.7% from the $6.1 million reported last quarter and down 31.9% from $12.2 million in the same quarter last year. Diluted earnings per share were $0.34 this quarter, compared to $0.25 in the previous quarter and $0.49 in the year ago quarter.

"We believe that our results this quarter reflect a likely "bottoming" of the semiconductor industry downcycle that has affected portions of the industry recently, and which has negatively impacted our results thus far in fiscal 2005," stated William P. Noglows, Cabot Microelectronics' Chairman and CEO. "However, we are encouraged by industry forecasts for a recovery in the second half of the calendar year. We are pleased with the progress we made last quarter in implementing our strategy of getting closer to our customers. We earned supplier quality awards from three important customers, and executed long term supply arrangements with two more customers. In addition, we have extended our Six Sigma program, which previously had focused on internal improvement activities, to now incorporate joint projects with customers to improve quality and consistency in their manufacturing processes as well. We believe that these accomplishments are evidence of the enhanced trust and confidence we are building with many of our strategic customers. We are also focusing increasing energy on identifying and capturing growth opportunities that leverage our CMP technology from the semiconductor industry into other technically demanding applications that are synergistic to our core CMP slurry business. For example, we are actively pursuing a variety of surface modification applications where our technical ability to shape, enable and enhance the performance of surfaces at an atomic level can add value either through improved productivity or improved ultimate performance. We believe our strong balance sheet and cash flow provide us with the flexibility to both acquire business positions in a number of these areas as well as grow and develop organically, as appropriate to create value for our business and our customers."

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 August 18, 2005 by calling (800) 642-1687 or (706) 645-9291, and using access code 4381279, 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 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, technologies and markets, the acquisition of or investment in other entities, and the 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 quarterly report on Form 10-Q for the quarter ended March 31, 2005, and our Annual Report on Form 10-K for the fiscal year ended September 30, 2004, both filed with the SEC. Cabot Microelectronics Corporation 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          Nine Months Ended
                     ----------------------------- -------------------
                     June 30,  March 31, June 30,  June 30,  June 30,
                       2005      2005      2004      2005      2004
                     --------- --------- --------- --------- ---------

Revenue               $65,037   $64,502   $76,925  $196,623  $226,719

Cost of goods sold     33,843    34,733    37,915   102,048   114,307
                     --------- --------- --------- --------- ---------

    Gross profit       31,194    29,769    39,010    94,575   112,412

Operating expenses:

  Research and
   development         10,462    10,857    11,158    30,863    33,024

  Selling and
   marketing            3,938     4,012     4,235    12,126    12,381

  General and
   administrative       6,106     6,457     5,659    18,143    16,532

  Amortization of
   intangibles             85        85        85       255       255
                     --------- --------- --------- --------- ---------

    Total operating
     expenses          20,591    21,411    21,137    61,387    62,192
                     --------- --------- --------- --------- ---------

Operating income       10,603     8,358    17,873    33,188    50,220

Other income, net         969       458        72     1,914        22
                     --------- --------- --------- --------- ---------

Income before income
 taxes                 11,572     8,816    17,945    35,102    50,242

Provision for income
 taxes                  3,234     2,762     5,699    10,881    16,681
                     --------- --------- --------- --------- ---------

    Net income         $8,338    $6,054   $12,246   $24,221   $33,561
                     ========= ========= ========= ========= =========


Basic earnings per
 share                  $0.34     $0.25     $0.49     $0.98     $1.35
                     ========= ========= ========= ========= =========

Weighted average
 basic shares
 outstanding           24,609    24,642    24,818    24,611    24,775
                     ========= ========= ========= ========= =========


Diluted earnings per
 share                  $0.34     $0.25     $0.49     $0.98     $1.35
                     ========= ========= ========= ========= =========

Weighted average
 diluted shares
 outstanding           24,610    24,685    24,912    24,660    24,919
                     ========= ========= ========= ========= =========



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

                                              June 30,   September 30,
                                                2005         2004
                                           ------------- -------------
                   ASSETS:

Current assets:
  Cash, cash equivalents and short-term
   investments                                 $165,702      $157,318
  Accounts receivable, net                       31,952        41,347
  Inventories, net                               32,702        24,474
  Other current assets                           10,910         6,542
                                           ------------- -------------
    Total current assets                        241,266       229,681

Property, plant and equipment, net              126,363       127,794
Other long-term assets                            5,240         5,816
                                           ------------- -------------
    Total assets                               $372,869      $363,291
                                           ============= =============


    LIABILITIES AND STOCKHOLDERS' EQUITY:

Current
 liabilities:
  Accounts payable                               $8,612       $13,080
  Capital lease obligations                       1,150         1,272
  Accrued expenses, income taxes payable
   and other current liabilities                 13,541        18,023
                                           ------------- -------------
    Total current liabilities                    23,303        32,375

Capital lease obligations                         5,679         6,385
Deferred income taxes and other long-term
 liabilities                                      9,615         8,909
                                           ------------- -------------
    Total liabilities                            38,597        47,669

Stockholders' equity                            334,272       315,622
                                           ------------- -------------
    Total liabilities and stockholders'
     equity                                    $372,869      $363,291
                                           ============= =============

    CONTACT: Cabot Microelectronics Corporation
             William S. Johnson, 630-375-6631

    SOURCE: Cabot Microelectronics Corporation

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