Press Release

Press Release

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Cabot Microelectronics Corporation Reports Strong Results for Third Quarter of Fiscal 2016
  • Revenue of $108.2 Million, 11.3 Percent Higher Than Last Year
  • GAAP Gross Profit Margin of 48.1 Percent of Revenue; Non-GAAP 49.2 Percent
  • GAAP Earnings Per Share of 76 Cents, Up 94.9 Percent Compared to Last Year; Non-GAAP 79 Cents
  • Cash Flow From Operations of $25.1 Million

AURORA, Ill., July 28, 2016 (GLOBE NEWSWIRE) -- Cabot Microelectronics Corporation (Nasdaq:CCMP), the world’s leading supplier of chemical mechanical planarization (CMP) polishing slurries and a growing CMP pad supplier to the semiconductor industry, today reported financial results for its third quarter of fiscal 2016, which ended June 30, 2016.

Total revenue during the third fiscal quarter was $108.2 million, 11.3 percent higher than in the same quarter last year, including the benefit of the company’s October, 2015 acquisition of NexPlanar Corporation.  The company achieved record quarterly revenue in its Tungsten slurry product area, and year-over-year revenue growth also in its Pads and Dielectrics slurry product areas.  Gross profit margin was 48.1 percent of revenue; non-GAAP gross profit margin was 49.2 percent of revenue, excluding amortization expense related to NexPlanar.  The company achieved diluted earnings per share of $0.76 for the third fiscal quarter, representing an increase of 94.9 percent compared to the same quarter last year; non-GAAP diluted earnings per share were $0.79, excluding NexPlanar acquisition-related costs and amortization expense.  Cash flow from operations was $25.1 million.  As of June 30, 2016, the company’s balance sheet reflected a cash balance of $243.1 million and $157.5 million of debt outstanding.

“We are delighted with our strong results this quarter, reflecting significant revenue growth compared to last year, and in particular, robust demand for our Tungsten, dielectrics and pad CMP solutions.  In addition, we were pleased with the level of profitability and strong cash flow we achieved,” said David Li, President and CEO of Cabot Microelectronics.  “We believe our performance this quarter is evidence of the continued successful execution of our strategic business initiatives.  In particular, we continued to support our customers’ transitions to advanced logic and memory applications using our Tungsten slurries, customer adoption of our CMP pad solutions, and qualification of our new, high-performing dielectrics slurries.  Based on this, and general expectations of industry participants for continued solid near-term demand, we believe we are well-positioned for continued strong performance during the remainder of our fiscal year.”

Key Financial Information

Total third fiscal quarter revenue of $108.2 million represents an increase of 11.3 percent compared to the same quarter last year, including 12.8 percent revenue growth from the company’s IC CMP consumables products.  The company achieved record quarterly revenue in its Tungsten slurry product area, which grew 7.0 percent year-over-year.  In addition, revenue from the company’s Pads product area grew 81.8 percent compared to the same quarter last year, including $6.4 million from NexPlanar, and revenue from the company’s Dielectrics slurry product area grew 13.9 percent.  Year to date revenue of $307.8 million is 2.0 percent lower than last year, reflecting soft demand within the global semiconductor industry during the first half of the fiscal year, including continued soft demand for PCs, and competitive dynamics in certain dielectrics and data storage applications, all of which the company has previously disclosed.  Year to date revenue includes a $2.4 million adverse impact associated with foreign exchange rate changes, in particular the weaker Korean won versus the U.S. dollar.

Gross profit for the quarter was 48.1 percent, including $1.1 million of NexPlanar amortization expense.  Excluding this amortization expense, non-GAAP gross profit was 49.2 percent of revenue, compared to 50.0 percent of revenue reported in the same quarter a year ago.  Other factors impacting gross profit this quarter compared to last year include higher fixed manufacturing costs, including costs related to NexPlanar, and higher material costs, partially offset by the benefit of higher sales volume and lower incentive compensation costs.  Year to date, gross profit was 48.5 percent of revenue, which includes $0.7 million of acquisition-related costs and $3.2 million of amortization expense related to NexPlanar.  Excluding these costs, year to date non-GAAP gross profit was 49.7 percent of revenue, compared to 51.0 percent last year.  The company currently expects to achieve gross profit for the full fiscal year around 49 percent of revenue, including NexPlanar, compared to its original GAAP guidance range of 49 to 51 percent.

Operating expenses, which include research, development and technical, selling and marketing, and general and administrative expenses, were $29.9 million in the third fiscal quarter, which was the lowest level for the company since the fourth fiscal quarter of 2009.  Operating expenses were $3.5 million lower than the $33.4 million reported in the same quarter a year ago, primarily due to lower incentive compensation costs and the absence of costs associated with last year’s CEO transition, partially offset by NexPlanar costs.  Year to date, total operating expenses were $100.3 million, which includes $1.6 million of acquisition-related costs and $1.3 million of amortization expense related to NexPlanar.  The company is lowering its full fiscal year guidance range for operating expenses to $133 million to $135 million, including NexPlanar; the company’s prior guidance range was $139 million to $143 million.

Net income for the quarter was $18.7 million, or $19.4 million on a non-GAAP basis, excluding NexPlanar acquisition-related costs and amortization expense, up 89.2 percent from $9.9 million reported in the same quarter last year.  Net income increased primarily due to higher revenue, lower operating expenses and a lower tax rate, primarily related to a $0.9 million incremental benefit.  Year to date, net income was $39.1 million, or $43.5 million on a non-GAAP basis, excluding the referenced costs related to the NexPlanar acquisition, compared to $43.6 million reported last year.

Diluted earnings per share were $0.76 this quarter, or $0.79 on a non-GAAP basis, excluding the referenced costs related to the NexPlanar acquisition, 94.9 percent higher than the $0.39 reported in the third quarter of fiscal 2015, which included a $0.07 adverse impact related to costs associated with material quality and certain tax items.  Year to date, diluted earnings per share were $1.59, or $1.77 on a non-GAAP basis, excluding the referenced costs related to the NexPlanar acquisition, compared to $1.75 last year, which included the $0.07 adverse impact referenced above.

CONFERENCE CALL
Cabot Microelectronics Corporation’s quarterly earnings conference call will be held today at 9:00 a.m. Central Time.  The conference call will be available via live webcast and replay from the company’s website, www.cabotcmp.com, or by phone at (844) 825-4410.  Callers outside the U.S. can dial (973) 638-3236.  The conference code for the call is 39611224.  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.

USE OF NON-GAAP FINANCIAL INFORMATION
The company presented the following measures considered as non-GAAP by the U.S. Securities and Exchange Commission:  gross profit margin, net income and diluted earnings per share excluding the effects of NexPlanar acquisition-related costs and amortization expense.  The non-GAAP financial information provided in this press release is a supplement to, and not a substitute for, the company’s financial results presented in accordance with U.S. GAAP.  These non-GAAP financial measures are provided to enhance the investor's understanding about the company's ongoing operations.  Specifically, the company believes the NexPlanar acquisition-related costs and amortization expense are not indicative of its core operating results, and thus presents its gross profit margin, net income and diluted earnings per share excluding these costs.  The presentation of non-GAAP financial information is not meant to be considered in isolation or as a substitute for results prepared and presented in accordance with U.S. GAAP.  A reconciliation table of GAAP to non-GAAP financial measures, including gross profit percentage, net income and diluted earnings per share, is contained in this press release.

ABOUT CABOT MICROELECTRONICS
Cabot Microelectronics Corporation, headquartered in Aurora, Illinois, is the world's leading supplier of CMP polishing slurries and a growing CMP pad supplier to the semiconductor industry.  The company’s products play a critical role in the production of advanced semiconductor devices, enabling the manufacture of smaller, faster and more complex devices by its customers.  The company's mission is to create value by developing reliable and innovative solutions, through close customer collaboration, that solve today's challenges and help enable tomorrow's technology.  The company has approximately 1,125 employees on a global basis.  For more information about Cabot Microelectronics Corporation, visit www.cabotcmp.com or contact Trisha Tuntland, 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; growth or contraction, and trends in the industry and markets in which the company participates; the company’s management; various economic factors and international events; regulatory or legislative activity; product performance; the generation, protection and acquisition of intellectual property, and litigation related to such intellectual property; new product introductions; development of new products, technologies and markets; the company’s supply chain; natural disasters; the acquisition of or investment in other entities; uses and investment of the company’s cash balance, including dividends and share repurchases, which may be suspended, terminated or modified at any time for any reason, based on a variety of factors; financing facilities and related debt, payment of principal and interest, and compliance with covenants and other terms; the company’s capital structure; the company’s current or future tax rate; and the operation of 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 SEC, that could cause actual results to differ materially from those described by these forward-looking statements.  In particular, see "Risk Factors" in the company's quarterly report on Form 10-Q for the quarter ended March 31, 2016 and in the company’s annual report on Form 10-K for the fiscal year ended September 30, 2015, 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 Nine Months Ended
  June 30, March 31, June 30, June 30, June 30,
    2016     2016     2015     2016     2015  
   
Revenue $   108,152   $   99,244   $   97,168   $   307,765   $   313,960  
           
Cost of goods sold    56,127     52,348     48,609     158,649     153,751  
           
Gross profit   52,025     46,896     48,559     149,116     160,209  
           
Operating expenses:          
           
Research, development & technical    12,928     14,934     14,773     42,690     44,922  
           
Selling & marketing    6,243     6,668     5,804     19,660     19,220  
           
General & administrative    10,738     12,990     12,830     37,991     38,877  
           
Total operating expenses   29,909     34,592     33,407     100,341     103,019  
           
Operating income   22,116     12,304     15,152     48,775     57,190  
           
Interest expense   1,178     1,191     1,065     3,536     3,030  
           
Other income (expense), net   (246 )   452     (160 )   396     565  
           
Income before income taxes   20,692     11,565     13,927     45,635     54,725  
           
Provision for income taxes    1,990     2,434     4,041     6,493     11,112  
           
Net income $   18,702   $   9,131   $   9,886   $   39,142   $   43,613  
           
           
           
Income available to common shareholders $   18,592   $   9,090   $   9,741   $   38,882   $   43,221  
           
           
Basic earnings per share  $ 0.78   $ 0.38   $ 0.40   $ 1.62   $ 1.80  
           
Weighted average basic shares outstanding    23,929     24,061     24,333     24,023     24,005  
           
Diluted earnings per share  $ 0.76   $ 0.37   $ 0.39   $ 1.59   $ 1.75  
           
Weighted average diluted shares outstanding    24,325     24,408     24,813     24,403     24,655  

 

CABOT MICROELECTRONICS CORPORATION      
CONSOLIDATED CONDENSED BALANCE SHEETS      
(Unaudited and amounts in thousands)      
       
  June 30, September 30,  
    2016     2015    
ASSETS:      
       
Current assets:      
Cash and cash equivalents $   243,087   $   354,190    
Accounts receivable, net      55,840       49,405    
Inventories, net     74,645       70,678    
Other current assets     17,798       20,235    
Total current assets   391,370     494,508    
       
Property, plant and equipment, net     105,457       93,743    
Other long-term assets     185,047       72,223    
Total assets $   681,874   $   660,474    
       
       
LIABILITIES AND STOCKHOLDERS' EQUITY:      
       
Current liabilities:      
Accounts payable $   13,840   $   15,448    
Current portion of long-term debt     9,844       8,750    
Accrued expenses, income taxes payable and other current liabilities     33,997       36,446    
Total current liabilities   57,681     60,644    
       
Long-term debt, net of current portion     147,656       155,313    
Other long-term liabilities     17,564       15,553    
Total liabilities     222,901       231,510    
       
Stockholders' equity     458,973       428,964    
Total liabilities and stockholders' equity $   681,874   $   660,474    
       

 

CABOT MICROELECTRONICS CORPORATION            
U.S. GAAP to Non-GAAP Reconciliation                
Gross Profit as a Percentage of Revenue, Net Income and Diluted Earnings Per Share        
(Unaudited and amounts in thousands, except per share and percentage amounts)          
                 
The following presents reconciliation of the Non-GAAP financial measures included in the Cabot        
Microelectronics Corporation press release dated July 28, 2016.            
                 
                 
  Three Months Ended June 30, 2016 Nine Months Ended June 30, 2016    
                 
  U.S. GAAP Adjustments Non-GAAP U.S. GAAP Adjustments Non-GAAP    
Gross profit $   52,025   $   1,143   $   53,168   $   149,116     3,877   $   152,993      
Gross profit as a percentage of revenue (1)   48.1 %     49.2 %   48.5 %     49.7 %    
                 
                 
Net income (2) $   18,702   $   745   $   19,447   $   39,142   $   4,378   $   43,520      
                 
                 
Diluted earnings per share (3) $ 0.76   $ 0.03   $ 0.79   $ 1.59   $ 0.18   $ 1.77      
                 
                 
(1) Non-GAAP gross profit as a percentage of revenue for the three months ended June 30, 2016 excludes $1,143 of NexPlanar amortization expense.
  Non-GAAP gross profit as a percentage of revenue for the nine months ended June 30, 2016 excludes $706 of NexPlanar acquisition-related costs 
  and $3,171 of NexPlanar amortization expense.  Acquisition-related costs include the fair value markup of NexPlanar inventory sold and post-acquisition
  employee severance.                 
                 
                 
(2) Non-GAAP net income for the three months ended June 30, 2016 excludes the items mentioned above in (1) plus $467 of NexPlanar amortization
  expense recorded in operating expenses and a reversal of $451 in share-based compensation for certain unvested NexPlanar stock options settled in
  cash at the date of acquisition.  These adjustments are partially offset by a $414 related increase in the provision for income taxes.  Non-GAAP  
  net income for the nine months ended June 30, 2016 excludes the items mentioned above in (1) plus $1,623 of NexPlanar acquisition-related costs and
  $1,296 of NexPlanar amortization expense recorded in operating expenses.  The $1,623 in acquisition-related costs include share-based compensation
  expense for certain unvested NexPlanar stock options settled in cash at the date of the acquisition, post-acquisition employee severance, share-based
  compensation expense for accelerated vesting of certain replacement stock options, and professional fees incurred directly related to the acquisition. 
  These adjustments are partially offset by a $2,418 related increase in the provision for income taxes.         
                 
                 
(3) Non-GAAP diluted earnings per share is calculated based upon Non-GAAP net income.        

 

For more information about Cabot Microelectronics Corporation, visit www.cabotcmp.com or contact Trisha Tuntland, Director of Investor Relations at 630-499-2600. 

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