cmc10qqtrend063007.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
x
QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
For
the quarterly period ended
JUNE
30, 2007
or
o
TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission
File Number 000-30205
CABOT
MICROELECTRONICS CORPORATION
(Exact
name of registrant as specified in its charter)
DELAWARE
|
36-4324765
|
(State
of Incorporation)
|
(I.R.S.
Employer Identification No.)
|
870
NORTH COMMONS DRIVE
|
60504
|
AURORA,
ILLINOIS
|
(Zip
Code)
|
(Address
of principal executive offices)
|
|
Registrant's telephone number, including area code: (630)
375-6631
Indicate
by check mark whether the registrant (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements
for
the past 90 days.
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange
Act. (Check one):
Large
accelerated filer
|
X
|
Accelerated
filer
|
|
Non-accelerated
filer
|
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
As
of
July 31, 2007, the Company had 23,836,946 shares of Common Stock, par value
$0.001 per share, outstanding.
CABOT
MICROELECTRONICS CORPORATION
INDEX
Part
I. Financial Information
|
Page
|
|
|
|
Item
1.
|
Financial
Statements
|
|
|
|
|
|
Consolidated
Statements of Income
|
|
|
Three
and Nine Months Ended June 30, 2007 and 2006
|
3
|
|
|
|
|
Consolidated
Balance Sheets
|
|
|
June
30, 2007, and September 30, 2006
|
4
|
|
|
|
|
Consolidated
Statements of Cash Flows
|
|
|
Nine
Months Ended June 30, 2007 and 2006
|
5
|
|
|
|
|
Notes
to the Consolidated Financial Statements
|
6
|
|
|
|
Item
2.
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
13
|
|
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
20
|
|
|
|
Item
4.
|
Controls
and Procedures
|
20
|
|
|
|
Part
II. Other Information
|
|
|
|
|
Item
1.
|
Legal
Proceedings
|
21
|
|
|
|
Item
1A.
|
Risk
Factors
|
21
|
|
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
26
|
|
|
|
Item
6.
|
Exhibits
|
26
|
|
|
|
|
Signatures
|
27
|
PART
I. FINANCIAL INFORMATION
ITEM
1.
CABOT
MICROELECTRONICS CORPORATION
CONSOLIDATED
STATEMENTS OF INCOME
(Unaudited
and in thousands, except per share amounts)
|
|
Three
Months Ended
|
|
|
Nine
Months Ended
|
|
|
|
June
30,
|
|
|
June
30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
89,023
|
|
|
$ |
84,936
|
|
|
$ |
247,826
|
|
|
$ |
233,813
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of goods sold
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
42,471
|
|
|
|
40,412
|
|
|
|
115,585
|
|
|
|
110,383
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research,
development and technical
|
|
|
12,033
|
|
|
|
12,060
|
|
|
|
37,761
|
|
|
|
35,040
|
|
Selling
and marketing
|
|
|
6,469
|
|
|
|
5,486
|
|
|
|
17,792
|
|
|
|
15,587
|
|
General
and administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
14,582
|
|
|
|
13,761
|
|
|
|
31,683
|
|
|
|
33,993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense), net
|
|
|
(148 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
|
14,434
|
|
|
|
14,525
|
|
|
|
33,969
|
|
|
|
36,563
|
|
Provision
for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average basic shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average diluted shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
CABOT
MICROELECTRONICS CORPORATION
CONSOLIDATED
BALANCE SHEETS
(Unaudited
and in thousands, except share amounts)
|
|
June
30,
2007
|
|
|
September
30,
2006
|
|
ASSETS
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
49,516
|
|
|
$ |
54,965
|
|
Short-term
investments
|
|
|
134,445
|
|
|
|
110,965
|
|
Accounts
receivable, less allowance for doubtful accounts of $611 at June
30, 2007,
and $551 at September 30, 2006
|
|
|
51,435
|
|
|
|
48,028 |
|
Inventories
|
|
|
35,746
|
|
|
|
40,326
|
|
Prepaid
expenses and other current assets
|
|
|
5,920
|
|
|
|
4,785
|
|
Deferred
income taxes
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
279,972
|
|
|
|
261,505
|
|
|
|
|
|
|
|
|
|
|
Property,
plant and equipment, net
|
|
|
118,704
|
|
|
|
130,176
|
|
Goodwill
|
|
|
7,069
|
|
|
|
4,565
|
|
Other
intangible assets, net
|
|
|
12,358
|
|
|
|
11,447
|
|
Deferred
income taxes
|
|
|
7,112
|
|
|
|
1,365
|
|
Other
long-term assets
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$ |
|
|
|
$ |
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$ |
10,592
|
|
|
$ |
15,104
|
|
Capital
lease obligations
|
|
|
1,320
|
|
|
|
1,254
|
|
Accrued
expenses, income taxes payable and other current
liabilities
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
30,590
|
|
|
|
38,833
|
|
|
|
|
|
|
|
|
|
|
Capital
lease obligations
|
|
|
3,611
|
|
|
|
4,420
|
|
Other
long-term liabilities
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
35,500
|
|
|
|
44,362
|
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies (Note 6)
|
|
|
|
|
|
|
|
|
Stockholders’
equity:
|
|
|
|
|
|
|
|
|
Common
stock:
|
|
|
|
|
|
|
|
|
Authorized:
200,000,000 shares, $0.001 par value
|
|
|
|
|
|
|
|
|
Issued:
25,424,019 shares at June 30, 2007, and 25,254,719 shares at September
30,
2006
|
|
|
24 |
|
|
|
24 |
|
Capital
in excess of par value of common stock
|
|
|
168,091
|
|
|
|
157,463
|
|
Retained
earnings
|
|
|
274,684
|
|
|
|
251,007
|
|
Accumulated
other comprehensive income (loss)
|
|
|
(1,487 |
) |
|
|
272
|
|
Treasury
stock at cost, 1,627,337 shares at June 30, 2007, and 1,297,167 shares
at
September 30, 2006
|
|
|
(50,991 |
) |
|
|
(40,995 |
) |
Total
stockholders’ equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity
|
|
$ |
|
|
|
$ |
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
CABOT
MICROELECTRONICS CORPORATION
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited
and amounts in thousands)
|
|
Nine
Months Ended
June
30,
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
income
|
|
$ |
23,677
|
|
|
$ |
24,790
|
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
18,147
|
|
|
|
14,996
|
|
Impairment
of investment
|
|
|
2,052
|
|
|
|
-
|
|
Loss
on equity investment
|
|
|
-
|
|
|
|
566
|
|
Share-based
compensation expense
|
|
|
9,489
|
|
|
|
7,872
|
|
Deferred
income tax benefit
|
|
|
(6,259 |
) |
|
|
(4,828 |
) |
Non-cash
foreign exchange loss
|
|
|
804
|
|
|
|
1
|
|
Other
|
|
|
724
|
|
|
|
807
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(3,971 |
) |
|
|
(11,286 |
) |
Inventories
|
|
|
4,180
|
|
|
|
(3,425 |
) |
Prepaid
expenses and other assets
|
|
|
(779 |
) |
|
|
379
|
|
Accounts
payable
|
|
|
(3,680 |
) |
|
|
130
|
|
Accrued
expenses, income taxes payable and other liabilities
|
|
|
(5,973 |
) |
|
|
|
|
Net
cash provided by operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Additions
to property, plant and equipment
|
|
|
(7,607 |
) |
|
|
(19,642 |
) |
Proceeds
from the sale of property, plant and equipment
|
|
|
172
|
|
|
|
18
|
|
Acquisition
of business
|
|
|
-
|
|
|
|
(2,282 |
) |
Acquisition
of patent license
|
|
|
(3,000 |
) |
|
|
-
|
|
Purchase
of patents
|
|
|
-
|
|
|
|
(5,000 |
) |
Purchases
of short-term investments
|
|
|
(114,725 |
) |
|
|
(114,755 |
) |
Proceeds
from the sale of short-term investments
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
|
(33,915 |
) |
|
|
(20,269 |
) |
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Repurchases
of common stock
|
|
|
(9,995 |
) |
|
|
(7,995 |
) |
Net
proceeds from issuance of stock
|
|
|
1,138
|
|
|
|
789
|
|
Principal
payments under capital lease obligations
|
|
|
(743 |
) |
|
|
(693 |
) |
Net
cash used in financing activities
|
|
|
(9,600 |
) |
|
|
(7,899 |
) |
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash
|
|
|
(345 |
) |
|
|
|
|
Increase
(decrease) in cash
|
|
|
(5,449 |
) |
|
|
4,981
|
|
Cash
and cash equivalents at beginning of period
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at end of period
|
|
$ |
|
|
|
$ |
|
|
Supplemental
disclosure of noncash investing and financing activities:
|
|
|
|
|
|
|
Purchases
of property, plant and equipment in accrued liabilities and accounts
payable at the end of the period
|
|
$ |
270
|
|
|
$ |
822
|
|
Issuance
of restricted stock
|
|
|
4,515
|
|
|
|
68
|
|
Increase
in goodwill related to accrued earnout
|
|
|
2,500
|
|
|
|
-
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
CABOT
MICROELECTRONICS CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited
and in thousands, except share and per share amounts)
1.
BACKGROUND AND BASIS OF PRESENTATION
Cabot
Microelectronics Corporation
("Cabot Microelectronics'', "the Company'', "us'', "we'' or "our'') supplies
high-performance polishing slurries used in the manufacture of advanced
integrated circuit (IC) devices within the semiconductor industry, in a process
called chemical mechanical planarization (CMP). CMP polishes surfaces
at an atomic level, thereby enabling IC device manufacturers to produce smaller,
faster and more complex IC devices with fewer defects. We believe we
are the world’s leading supplier of slurries for IC devices. We also
develop, manufacture and sell CMP slurries for polishing certain components
in
hard disk drives, specifically rigid disk substrates and magnetic heads, and
we
believe we are one of the leading suppliers in this area. In
addition, we have commercialized CMP polishing pads, which are used in
conjunction with slurries in the CMP process. We also pursue a
variety of surface modification applications outside of the semiconductor and
hard disk drive industries for which our capabilities and knowledge may provide
previously unseen surface performance or improved productivity. For
additional information, refer to Part 1, Item 1, “Business”, in our annual
report on Form 10-K for the fiscal year ended September 30, 2006.
The
unaudited consolidated financial
statements have been prepared by Cabot Microelectronics Corporation pursuant
to
the rules of the Securities and Exchange Commission (SEC) and accounting
principles generally accepted in the United States of America. In the
opinion of management, these unaudited consolidated financial statements include
all normal recurring adjustments necessary for the fair presentation of Cabot
Microelectronics’ financial position as of June 30, 2007, cash flows for the
nine months ended June 30, 2007, and June 30, 2006, and results of operations
for the three and nine months ended June 30, 2007, and June 30,
2006. The results of operations for the three and nine months ended
June 30, 2007, may not be indicative of the results to be expected for future
periods, including the fiscal year ending September 30, 2007. These
unaudited consolidated financial statements should be read in conjunction with
the consolidated financial statements and related notes thereto included in
Cabot Microelectronics’ annual report on Form 10-K for the fiscal year ended
September 30, 2006. We currently operate predominantly in one
industry segment - the development, manufacture and sale of CMP
slurries.
The
consolidated financial statements
include the accounts of Cabot Microelectronics and its
subsidiaries. All intercompany transactions and balances between the
companies have been eliminated. Certain reclassifications of prior
fiscal year amounts have been made to conform to the current period
presentation.
2.
INVENTORIES
Inventories
consisted of the
following:
|
|
June
30,
|
|
|
September
30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raw
materials
|
|
$ |
17,319
|
|
|
$ |
18,623
|
|
Work
in process
|
|
|
1,702
|
|
|
|
1,805
|
|
Finished
goods
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
|
|
|
$ |
|
|
CABOT
MICROELECTRONICS CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited
and in thousands, except share and per share amounts)
3.
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
was $7,069 and $4,565 as of June 30, 2007, and September 30, 2006,
respectively. The increase resulted from recording a $2,500 earnout
related to our purchase of substantially all of the assets and assumption of
certain liabilities of QED Technologies, Inc. (QED) in July 2006. The
earnout was based on the performance of QED during the first year following
the
purchase; the acquisition agreement includes a provision for an additional
$2,000 earnout in the second year following the purchase if QED meets certain
financial performance goals.
The
components of other intangible assets were as follows:
|
|
June
30, 2007
|
|
|
September
30, 2006
|
|
|
|
Gross
Carrying
|
|
|
Accumulated
|
|
|
Gross
Carrying
|
Accumulated
|
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
Amortization
|
|
|
Other
intangible assets subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
Product
technology
|
|
$ |
5,380
|
|
|
$ |
538
|
|
|
$ |
5,380
|
|
|
$ |
135
|
|
Acquired
patents and licenses *
|
|
|
8,000
|
|
|
|
2,021
|
|
|
|
5,000
|
|
|
|
479
|
|
Trade
secrets and know-how
|
|
|
2,550
|
|
|
|
2,550
|
|
|
|
2,550
|
|
|
|
2,550
|
|
Distribution
rights, customer lists and other
|
|
|
1,457
|
|
|
|
1,199
|
|
|
|
1,457 |
|
|
|
1,059
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other intangible assets subject to amortization
|
|
|
17,387
|
|
|
|
6,308
|
|
|
|
14,387
|
|
|
|
4,223
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other intangible assets not subject to amortization
**
|
|
|
1,279
|
|
|
|
|
|
|
|
1,283 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other intangible assets
|
|
$ |
18,666
|
|
|
$ |
6,308
|
|
|
$ |
15,670
|
|
|
$ |
4,223
|
|
* We
acquired a license of patents for $3,000 in the first fiscal quarter of
2007.
** Total
other intangible assets not subject to amortization primarily consist of trade
names.
Amortization
expense was $720 and
$2,085 for the three and nine months ended June 30, 2007,
respectively. Amortization expense for the three and nine months
ended June 30, 2006, was $19 and $27, respectively. Estimated future
amortization expense for the five succeeding fiscal years is as
follows:
Fiscal
Year
|
|
Estimated
amortization expense
|
|
|
|
|
Remainder
of 2007
|
|
$ 720
|
|
2008
|
|
2,838
|
|
2009
|
|
1,663
|
|
2010
|
|
854
|
|
2011
|
|
847
|
|
2012
|
|
847
|
|
CABOT
MICROELECTRONICS CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited
and in thousands, except share and per share amounts)
4.
OTHER LONG-TERM ASSETS
Other
long-term assets consisted of the
following:
|
|
June
30,
|
|
|
September
30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
in NanoProducts Corporation
|
|
$ |
-
|
|
|
$ |
2,446
|
|
Other
long-term assets
|
|
|
606
|
|
|
|
629
|
|
Total
|
|
$ |
606
|
|
|
$ |
3,075
|
|
In
fiscal 2004 and 2005, we invested a
total of $3,750 to acquire a minority interest in NanoProducts Corporation
(NPC)
and entered into a technology collaboration agreement with NPC. In
the third quarter of fiscal 2007, the Company chose to not renew the
collaboration agreement. Additionally, during the third quarter NPC entered
into
funding arrangements that we believe significantly reduced the likelihood that
the Company would recover the value of our minority
investment. Accordingly, we recorded a $2,052 impairment of our
investment, which reduced the carrying value to zero. This impairment
loss is included in other income and expense in the consolidated statement
of
operations.
5.
ACCRUED EXPENSES, INCOME TAXES PAYABLE AND OTHER CURRENT
LIABILITIES
Accrued
expenses, income taxes payable
and other current liabilities consisted of the following:
|
|
June
30,
|
|
|
September
30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued
compensation
|
|
$ |
9,992
|
|
|
$ |
12,948
|
|
Accrued
earnout (refer to Note 3)
|
|
|
2,500
|
|
|
|
-
|
|
Goods
and services received, not yet invoiced
|
|
|
1,688
|
|
|
|
3,088
|
|
Warranty
accrual
|
|
|
481
|
|
|
|
924
|
|
Income
taxes payable
|
|
|
1,046
|
|
|
|
764
|
|
Taxes,
other than income taxes
|
|
|
1,311
|
|
|
|
2,270
|
|
Other
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
18,678
|
|
|
$ |
22,475
|
|
CABOT
MICROELECTRONICS CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited
and in thousands, except share and per share amounts)
6.
CONTINGENCIES
While
we are not at present involved in
any legal proceedings that we currently believe will have a material impact
on
our consolidated financial position, results of operations or cash flows, we
periodically become a party to legal proceedings in the ordinary course of
business. For example, in January 2007, Cabot Microelectronics filed
a legal action against DuPont Air Products NanoMaterials LLC (DA Nano), a
competitor of ours, in the United States District Court for the District of
Arizona, charging that DA Nano’s manufacture and marketing of certain CMP
slurries infringe five CMP slurry patents that we own. The affected
DA Nano products include those used for tungsten CMP. We filed our
patent infringement complaint as a counterclaim in response to an action filed
by DA Nano in the same court in December 2006 that seeks declaratory relief
and
alleges non-infringement, invalidity and unenforceability regarding some of
the
patents at issue in our complaint against DA Nano. DA Nano filed its
complaint following our refusal of its request that we license to it our patents
raised in its complaint. DA Nano’s complaint does not allege any
infringement by Cabot Microelectronics’ products of intellectual property owned
by DA Nano. While the outcome of this and any legal matter cannot be
predicted with certainty, we believe that our claims and defenses in the pending
action are meritorious, and intend to pursue and defend them
vigorously.
Refer
to Note 15 of “Notes to the
Consolidated Financial Statements” in Item 8 of Part II of our annual report on
Form 10-K for the fiscal year ended September 30, 2006, for additional
information regarding commitments and contingencies.
PRODUCT
WARRANTIES
We
maintain a warranty reserve that
reflects management’s best estimate of the cost to replace product that does not
meet customers’ specifications and performance requirements, and costs related
to such replacement. The warranty reserve is based upon a historical
product replacement rate, adjusted for any specific known conditions or
circumstances. Adjustments to the warranty reserve are recorded in
cost of goods sold. Our warranty reserve requirements changed during
our third quarter of fiscal 2007 as follows:
Balance
as of September 30, 2006
|
|
$ |
924
|
|
Additions
charged to expense
|
|
|
-
|
|
Deductions
|
|
|
(443 |
) |
Balance
as of June 30, 2007
|
|
$ |
481
|
|
7. SHARE-BASED COMPENSATION
PLANS
Effective
October 1, 2005, we adopted Statement of Financial Accounting Standards No.
123
(revised 2004), “Share-Based Payment” (SFAS 123R), which requires all
share-based payments, including stock option grants, restricted stock and
discounts on employee stock purchase plan purchases, to be recognized in the
consolidated statement of operations based on their fair values. We
currently issue share-based payments under the following programs: our Second
Amended and Restated Cabot Microelectronics Corporation 2000 Equity Incentive
Plan, as amended and restated September 26, 2006 (“2000 Equity Incentive Plan”);
our Directors’ Deferred Compensation Plan, as amended September 26, 2006; our
2001 Executive Officer Deposit Share Program; and our Cabot Microelectronics
Corporation Employee Stock Purchase Plan, as amended (“Employee Stock Purchase
Plan”). For additional information regarding these programs, refer to
Note 10 of “Notes to the Consolidated Financial Statements” included in Item 8
of Part II of our annual report on Form 10-K for the fiscal year ended September
30, 2006.
CABOT
MICROELECTRONICS CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited
and in thousands, except share and per share amounts)
Prior
to
fiscal 2007, under our 2000 Equity Incentive Plan, awards and grants made to
employees as part of our annual equity incentive award program and to
non-employee directors for initial and annual grants as part of our non-employee
directors’ compensation program consisted solely of non-qualified stock option
grants. As permitted by the 2000 Equity Incentive Plan, in fiscal
2007 the compensation committee of our Board of Directors decided to begin
to
award a blend of non-qualified stock option grants and restricted stock awards
(restricted stock units for our non-United States employees) to eligible
employees and non-employee directors according to an approximate three-to-one
ratio of non-qualified stock options granted to shares of restricted stock
awarded. Our Board of Directors made these decisions primarily to
address the financial impact of the expensing of equity-based compensation
now
required pursuant to SFAS 123R, as well as to provide a more competitive balance
of equity incentives being awarded to our employees and non-employee directors
under the 2000 Equity Incentive Plan.
Share-based
compensation expense under SFAS 123R for the three and nine months ended June
30, 2007, and June 30, 2006, was as follows:
|
|
Three
Months Ended
|
|
|
Nine
Months Ended
|
|
|
|
June
30,
|
|
|
June
30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of goods sold
|
|
$ |
193
|
|
|
$ |
164
|
|
|
$ |
576
|
|
|
$ |
477
|
|
Research,
development and technical
|
|
|
272
|
|
|
|
239
|
|
|
|
843
|
|
|
|
715
|
|
Selling
and marketing
|
|
|
329
|
|
|
|
262
|
|
|
|
959
|
|
|
|
766
|
|
General
and administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
share-based compensation expense
|
|
|
3,232
|
|
|
|
2,727
|
|
|
|
9,489
|
|
|
|
7,872
|
|
Tax
benefit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
share-based compensation expense, net of tax
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
For
additional information regarding the estimation of fair value, refer to Note
10
of “Notes to the Consolidated Financial Statements” included in Item 8 of Part
II of our annual report on Form 10-K for the fiscal year ended September 30,
2006.
8.
OTHER INCOME AND EXPENSE, NET
Other
income and expense, net, consisted of the following:
|
|
Three
Months Ended
|
|
|
Nine
Months Ended
|
|
|
|
June
30,
|
|
|
June
30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
$ |
1,509
|
|
|
$ |
1,448
|
|
|
$ |
4,300
|
|
|
$ |
3,992
|
|
Interest
expense
|
|
|
(112 |
) |
|
|
(291 |
) |
|
|
(369 |
) |
|
|
(563 |
) |
Other
expense
|
|
|
(1,545 |
) |
|
|
(393 |
) |
|
|
(1,645 |
) |
|
|
(859 |
) |
Total
other income (expense), net
|
|
$ |
(148 |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Other
expense includes $2,052 for the impairment of our investment in NPC, which
is
described in Note 4 above.
CABOT
MICROELECTRONICS CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited
and in thousands, except share and per share amounts)
9.
COMPREHENSIVE INCOME
|
The
components of comprehensive income were as
follows:
|
|
|
Three
Months Ended
|
|
|
Nine
Months Ended
|
|
|
|
June
30,
|
|
|
June
30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
10,061
|
|
|
$ |
9,782
|
|
|
$ |
23,677
|
|
|
$ |
24,790
|
|
Other
comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
unrealized gain on derivative instruments
|
|
|
9 |
|
|
|
9 |
|
|
|
27 |
|
|
|
27 |
|
Foreign
currency translation adjustment
|
|
|
(2,147 |
) |
|
|
|
|
|
|
(1,786 |
) |
|
|
|
|
Total
comprehensive income
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
10.
EARNINGS PER SHARE
Statement
of Financial Accounting
Standards No. 128, “Earnings per Share”, requires companies to provide a
reconciliation of the numerator and denominator of the basic and diluted
earnings per share computations. Basic and diluted earnings per share
were calculated as follows:
|
|
Three
Months Ended
|
|
|
Nine
Months Ended
|
|
|
|
June
30,
|
|
|
June
30,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
available to common shares
|
|
$ |
10,061
|
|
|
$ |
9,782
|
|
|
$ |
23,677
|
|
|
$ |
24,790
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares
|
|
|
23,662,330
|
|
|
|
24,204,586
|
|
|
|
23,736,727
|
|
|
|
24,276,302
|
|
(Denominator
for basic calculation)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based
compensation
|
|
|
24,311
|
|
|
|
19
|
|
|
|
4,375
|
|
|
|
49
|
|
Diluted
weighted average common shares
|
|
|
23,686,641
|
|
|
|
24,204,605
|
|
|
|
23,741,102
|
|
|
|
24,276,351
|
|
(Denominator
for diluted calculation)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
0.43
|
|
|
$ |
0.40
|
|
|
$ |
1.00
|
|
|
$ |
1.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
CABOT
MICROELECTRONICS CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited
and in thousands, except share and per share amounts)
For
each
of the three-month periods ended June 30, 2007 and 2006, approximately 4.6
million shares attributable to outstanding stock options were excluded from
the
calculation of diluted earnings per share because their inclusion would have
been anti-dilutive. For the nine months ended June 30, 2007 and 2006,
approximately 4.5 million and 4.3 million shares, respectively, attributable
to
outstanding stock options were excluded from the calculation of diluted earnings
per share for the same reason.
11.
EFFECTS OF RECENT ACCOUNTING PRONOUNCEMENTS
In
February 2007, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standard No. 159, “The Fair Value Option for Financial
Assets and Financial Liabilities – Including an Amendment of FASB Statement No.
115” (SFAS 159). SFAS 159 allows measurement at fair value of
eligible financial assets and liabilities that are not otherwise measured at
fair value. If the fair value option for an eligible item is elected,
unrealized gains and losses for that item shall be reported in current earnings
at each subsequent reporting date. This SFAS is effective for fiscal
years beginning after November 15, 2007. We do not expect the
adoption of SFAS 159 to have a material impact on our consolidated financial
position, results of operations or cash flows.
ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF
OPERATIONS
The
following "Management's Discussion
and Analysis of Financial Condition and Results of Operations", as well as
disclosures included elsewhere in this Form 10-Q, include "forward-looking
statements" within the meaning of the Private Securities Litigation Reform
Act
of 1995. This Act provides a safe harbor for forward-looking
statements to encourage companies to provide prospective information about
themselves so long as they identify these statements as forward-looking and
provide meaningful cautionary statements identifying important factors that
could cause actual results to differ from the projected results. All
statements other than statements of historical fact we make in this Form 10-Q
are forward-looking. In particular, the statements herein regarding
future sales and operating results; Company and industry growth or trends;
growth of the markets in which the Company participates; international events;
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
acquisition of or investment in other entities; the construction of new or
refurbishment of existing facilities by the Company; and statements preceded
by,
followed by or that include the words "intends", "estimates", "plans",
"believes", "expects", "anticipates", "should", "could" or similar expressions,
are forward-looking statements. Forward-looking statements reflect
our current expectations and are inherently uncertain. Our actual
results may differ significantly from our expectations. We assume no
obligation to update this forward-looking information. The section
entitled "Risk Factors" describes some, but not all, of the factors that could
cause these differences.
This
section, "Management's Discussion and Analysis of Financial Condition and
Results of Operations”, should be read in conjunction with Cabot
Microelectronics’ annual report on Form 10-K for the fiscal year ended September
30, 2006, including the consolidated financial statements and related notes
thereto.
THIRD
QUARTER OF FISCAL 2007 OVERVIEW
We
believe we are the world’s leading supplier of high-performance polishing
slurries used in the manufacture of advanced integrated circuit (IC) devices
within the semiconductor industry, in a process called chemical mechanical
planarization (CMP). CMP is a polishing process used by IC device
manufacturers to planarize or flatten many of the multiple layers of material
that are built upon silicon wafers in the production of advanced
ICs. We develop, produce and sell CMP slurries for polishing
materials such as copper, tungsten and dielectric in IC devices, and also for
polishing the coatings on disks in hard disk drives and magnetic
heads. In addition, we have commercialized CMP polishing pads, which
are used in conjunction with slurries in the CMP process. Demand for
our CMP products for IC devices is primarily based on the number of wafers,
or
“wafer starts”, of these advanced devices produced by semiconductor
manufacturers.
In
addition to strengthening and
growing our core CMP business, through our Engineered Surface Finishes (ESF)
growth initiative we are exploring a variety of surface modification
applications where we believe our technical ability to shape, enable and enhance
the performance of surfaces at an atomic level may provide previously unseen
surface performance or improved productivity. By supplementing our
internal development efforts with some externally acquired technologies and
businesses, we seek to leverage our expertise in CMP formulation, materials
and
polishing techniques for the semiconductor industry to address other demanding
market applications requiring nanoscale control of surface shape and finish,
and
gain access to a variety of markets that we do not currently
serve. One example of this is our July 2006 purchase of substantially
all of the assets and assumption of certain liabilities of QED Technologies,
Inc. (QED), a company specializing in unique, patented polishing and metrology
systems for shaping and polishing of high precision optics.
Revenue
for our third fiscal quarter of
$89.0 million was the highest quarterly revenue recorded in our Company’s
history, and it increased 15.6%, or $12.0 million, from the previous fiscal
quarter. This increase is primarily due to improved semiconductor
industry conditions following two quarters of relatively soft industry demand
as
well as strong performance by QED. During the first half of fiscal
2007, we believe a number of our key customers had reduced production in
response to excess inventory of semiconductor devices and this reduced demand
for our products. Revenue in our third fiscal quarter was 4.8%, or
$4.1 million, higher than in the three months ended June 30, 2006, which did
not
include QED.
There
are several factors that make it
difficult for us to predict future revenue trends for our business, including:
the cyclical nature of the semiconductor industry; short order to delivery
time
for our products and the associated lack of visibility to future customer
orders; the effect of competition on pricing; quarter to quarter changes in
customer orders regardless of industry strength; and the timing of
acquisitions. Some factors that affect demand for our products
include customers’ production of logic versus memory devices, their transition
from 200 mm to 300 mm wafers, customers’ specific integration schemes, share
gains and losses and pricing changes by us and our competitors.
Gross
profit expressed as a percentage
of revenue for our third fiscal quarter was 47.7%, which increased from both
the
43.9% reported in the previous fiscal quarter and the 47.6% reported in the
third quarter of fiscal 2006. The increase in gross profit as a
percentage of revenue over the previous fiscal quarter was primarily driven
by
higher manufacturing capacity utilization on our higher level of sales, as
well
as higher manufacturing yields and lower fixed manufacturing
costs. We continue to expect our gross profit as a percentage of
revenue to be in the range of 46% to 48% for the full fiscal year
2007. We may experience quarterly gross profit above or below this
range, as we did in the first two quarters of fiscal 2007, due to a number
of
factors, including fluctuations in our product mix.
Operating
expenses were $27.9 million
in our third quarter of fiscal 2007, compared to $28.9 million in the previous
fiscal quarter of 2007 and $26.7 million in the third quarter of fiscal
2006. The decrease from the previous fiscal quarter was due to
decreased staffing and compensation related expenses and lower depreciation
expenses. We continue to expect operating expenses to be in the range
of approximately $27 million to $30 million in our fourth fiscal quarter of
2007.
Diluted
earnings per share for our third fiscal quarter was $0.42, an increase from
the
$0.19 per share reported in the previous fiscal quarter and the $0.40 per share
reported in the same quarter of fiscal 2006. Earnings per share in
our third fiscal quarter of 2007 was adversely affected by approximately $0.06
due to the impairment of our investment in NanoProducts Corporation (NPC),
which
resulted from our decision to not renew our collaboration agreement with NPC
as
well as NPC entering into funding arrangements that we believe significantly
reduced the likelihood that the Company would recover the value of our
investment in NPC.
CRITICAL
ACCOUNTING POLICIES AND ESTIMATES AND EFFECTS OF RECENT ACCOUNTING
PRONOUNCEMENTS
We
discuss our critical accounting
estimates and effects of recent accounting pronouncements in “Management’s
Discussion and Analysis of Financial Condition and Results of Operations”
included in Item 7 of Part II of our annual report on Form 10-K for the fiscal
year ended September 30, 2006. We believe there have been no material
changes in our critical accounting estimates during the first nine months of
fiscal 2007.
In
February 2007, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standard No. 159, “The Fair Value Option for Financial
Assets and Financial Liabilities – Including an Amendment of FASB Statement No.
115” (SFAS 159). SFAS 159 allows measurement at fair value of
eligible financial assets and liabilities that are not otherwise measured at
fair value. If the fair value option for an eligible item is elected,
unrealized gains and losses for that item shall be reported in current earnings
at each subsequent reporting date. This SFAS is effective for fiscal
years beginning after November 15, 2007. We do not expect the
adoption of SFAS 159 to have a material impact on our consolidated financial
position, results of operations or cash flows.
RESULTS
OF OPERATIONS
We
acquired substantially all of the
assets and assumed certain current liabilities of QED in July
2006. Therefore, the prior year comparable periods, the three and
nine months ended June 30, 2006, do not include QED results of
operations.
THREE
MONTHS ENDED JUNE 30, 2007, VERSUS THREE MONTHS ENDED JUNE 30,
2006
REVENUE
Revenue
was $89.0 million for the three
months ended June 30, 2007, which represented an increase of 4.8%, or $4.1
million, from the three months ended June 30, 2006. Of this increase,
$6.6 million was contributed by QED and $1.0 million was due to a higher average
selling price for our slurry products. These increases were partially
offset by a $3.5 million decrease in sales volume in our core CMP
business. The average selling price for our slurry products increased
by 1.0% from the third quarter of fiscal 2006, primarily due to a higher-priced
product mix.
COST
OF GOODS SOLD
Total
cost of goods sold was $46.6
million for the three months ended June 30, 2007, which represented an increase
of 4.6%, or $2.0 million, from the three months ended June 30,
2006. Of this increase, $3.3 million was related to QED and $0.5
million was due to a higher average cost per unit. These increases
were partially offset by $1.8 million related to lower sales volumes in our
core
CMP business. The higher average unit cost primarily resulted from
lower utilization of our manufacturing capacity due to the lower level of sales
as well as higher fixed costs.
Fumed
metal oxides, such as fumed
silica and fumed alumina, are significant raw materials that we use in many
of
our CMP slurries. In an effort to mitigate our risk to rising raw
material costs and to increase supply assurance and quality performance
requirements, we have entered into multi-year supply agreements with a number
of
suppliers. For more financial information about our supply contracts,
see “Tabular Disclosure of Contractual Obligations” in this filing as well as in
Item 7 of Part II of our annual report on Form 10-K for the fiscal year ended
September 30, 2006.
Our
need for additional quantities or
different kinds of key raw materials has required, and will continue to require,
that we enter into new supply arrangements with third parties. Future
arrangements may result in costs which are different from those in the existing
agreements. In addition, rising energy or other costs may also impact
the cost of raw materials, packaging and freight. We expect to
continue to invest in our operations excellence initiative to improve product
quality, reduce variability and improve product yields in our manufacturing
process.
GROSS
PROFIT
Our
gross profit as a percentage of
revenue was 47.7% for the three months ended June 30, 2007, compared with 47.6%
for the three months ended June 30, 2006. The increase resulted
primarily from a higher-valued product mix and certain lower variable costs,
partially offset by lower utilization of our manufacturing capacity and higher
fixed costs. We continue to expect our gross profit as a percentage
of revenue to be in the range of 46% to 48% for full fiscal year
2007. Quarterly gross profit may be above or below this range, as
demonstrated in the first two quarters of the fiscal year, due to a number
of
factors, including fluctuations in our product mix.
RESEARCH,
DEVELOPMENT AND TECHNICAL
Research,
development and technical
expenses were $12.0 million in the three months ended June 30, 2007, which
was
unchanged from the same period in the previous fiscal year. Our
research, development and technical efforts are focused on the following main
areas:
·
|
Research
related to fundamental CMP
technology;
|
·
|
Development
and formulation of new and enhanced CMP slurry and pad
products;
|
·
|
Process
development to support rapid and effective commercialization of new
products;
|
·
|
Evaluation
of new polishing applications related to our ESF initiative;
and
|
SELLING
AND MARKETING
Selling
and marketing expenses were
$6.5 million in the three months ended June 30, 2007, which represented an
increase of 17.9%, or $1.0 million, from the three months ended June 30,
2006. Selling and marketing expenses increased primarily due to
increased staffing related costs of $0.8 million.
GENERAL
AND ADMINISTRATIVE
General
and administrative expenses
were $9.4 million in the three months ended June 30, 2007, which represented
an
increase of 3.1%, or $0.3 million, from the three months ended June 30,
2006. The increase resulted primarily from a $0.6 million
increase in professional fees including costs to enforce our intellectual
property portfolio, partially offset by a $0.3 million decrease in depreciation
and amortization largely due to certain information technology assets becoming
fully depreciated.
OTHER
INCOME AND EXPENSE, NET
Other
income and expense, net, was $0.1 million expense in the three months ended
June
30, 2007, compared with $0.8 million income in the three months ended June
30,
2006. The decrease resulted primarily from a $2.1 million impairment
of our investment in NPC as explained in the “Third Quarter of Fiscal 2007
Overview” section above. This was partially offset by foreign
exchange gains due to the weakening of the Japanese Yen relative to the U.S.
Dollar.
PROVISION
FOR INCOME TAXES
Our
effective income tax rate was 30.3%
for the three months ended June 30, 2007, and 32.7% for the three months ended
June 30, 2006. The decrease in the effective tax rate was primarily
due to higher tax-exempt interest income and increased research and
experimentation tax credits.
NET
INCOME
Net
income was $10.1 million for the
three months ended June 30, 2007, which represented an increase of 2.9%, or
$0.3
million, from the three months ended June 30, 2006, as a result of the factors
discussed above.
NINE
MONTHS ENDED JUNE 30, 2007, VERSUS NINE MONTHS ENDED JUNE 30,
2006
REVENUE
Revenue
was $247.8 million for the nine
months ended June 30, 2007, which represented an increase of 6.0%, or $14.0
million, from the nine months ended June 30, 2006. Of this increase,
$14.2 million was contributed by QED and $5.8 million was due to a higher
average selling price for our slurry products. These increases were
partially offset by a $6.0 million decrease due to reduced sales volume in
our
core CMP business. The higher average selling price for our slurry
products resulted primarily from a higher-priced product mix and higher selling
prices. The higher selling prices were mainly attributable to our
April 2006 transition to selling directly to customers in Taiwan rather than
through a distributor.
COST
OF GOODS SOLD
Total
cost of goods sold was $132.2
million for the nine months ended June 30, 2007, which represented an increase
of 7.1%, or $8.8 million, from the same period in the previous fiscal
year. Of this increase, $7.6 million was related to QED and $4.5
million was due to an increase in the average cost per unit. These
increases were partially offset by a $3.2 million decrease in cost of goods
sold
due to a decrease in sales volume in our core CMP business. The
higher average unit cost resulted primarily from lower utilization of our
manufacturing capacity due to the lower level of sales and higher fixed costs,
partially offset by a lower-cost product mix.
GROSS
PROFIT
Our
gross profit as a percentage of
revenue was 46.6% for the nine months ended June 30, 2007, compared with 47.2%
for the nine months ended June 30, 2006. The decrease in gross profit
expressed as a percentage of revenue resulted primarily from higher fixed costs
and a lower utilization of our manufacturing capacity due to the lower level
of
sales, partially offset by a higher-valued product mix.
RESEARCH,
DEVELOPMENT AND TECHNICAL
Research,
development and technical
expenses were $37.8 million in the nine months ended June 30, 2007, which
represented an increase of 7.8%, or $2.7 million, from the nine months ended
June 30, 2006. Research, development and technical expenses increased
primarily due to increased staffing related costs of $1.2 million largely
resulting from the inclusion of QED in fiscal 2007, and increased depreciation
and amortization costs of $0.7 million principally related to our data storage
laboratory in Singapore and our Asia Pacific technology center in
Japan. Higher professional fees of $0.3 million also contributed to
the increase.
SELLING
AND MARKETING
Selling
and marketing expenses were
$17.8 million in the nine months ended June 30, 2007, which represented an
increase of 14.1%, or $2.2 million, from the same period in the previous fiscal
year. The single largest factor causing the increase was higher
staffing related costs.
GENERAL
AND ADMINISTRATIVE
General
and administrative expenses
were $28.3 million in the nine months ended June 30, 2007, which represented
an
increase of 10.0%, or $2.6 million, from the nine months ended June 30,
2006. The increase resulted primarily from a $1.7 million
increase in staffing related costs, including $1.3 million in higher share-based
compensation expense, and a $1.0 million increase in professional fees,
including costs to enforce our intellectual property.
OTHER
INCOME AND EXPENSE, NET
Other
income was $2.3 million in the
nine months ended June 30, 2007, compared with $2.6 million in the nine months
ended June 30, 2006. The decrease in other income was primarily due
to a $2.1 million impairment of our investment in NPC, as explained in the
“Third Quarter of Fiscal 2007 Overview” section above. This decrease
was partially offset by foreign exchange gains due to the weakening of the
Japanese Yen relative to the U.S. Dollar.
PROVISION
FOR INCOME TAXES
Our
effective income tax rate was 30.3%
for the nine months ended June 30, 2007, and 32.2% for nine months ended June
30, 2006. The decrease in the effective tax rate was primarily
attributable to higher tax-exempt interest income and increased research and
experimentation tax credits.
NET
INCOME
Net
income was $23.7 million for the
nine months ended June 30, 2007, which represented a decrease of 4.5%, or $1.1
million, from the nine months ended June 30, 2006, as a result of the factors
discussed above.
LIQUIDITY
AND CAPITAL RESOURCES
We
had cash flows from operating
activities of $38.4 million in the nine months ended June 30, 2007, and $33.1
million in the nine months ended June 30, 2006. Our cash provided by
operating activities in the first nine months of fiscal 2007 originated from
$48.6 million of net income adjusted for non-cash items, partially offset by
a
$10.2 million net increase in working capital.
In
the first nine months of fiscal
2007, cash flows used in investing activities were $33.9 million, of which
$23.5
million was used for net purchases of short-term investments. Also,
$7.6 million in cash was used for purchases of property, plant and equipment
including payments for the expansion of our pad manufacturing capabilities
in
the U.S. and Taiwan as well as purchases for QED, and $3.0 million was used
to
acquire a license of patents. In the first nine months of fiscal
2006, cash flows used in investing activities were $20.3
million. Purchases of property, plant and equipment of $19.6 million
were made primarily for the construction of our Asia Pacific technology center
and for projects in our slurry manufacturing operations. In addition,
we used $5.0 million to acquire patents and associated rights relating to CMP
slurry technology and $2.3 million to acquire substantially all of the assets
and assume certain liabilities of Surface Finishes Co., Inc. These
cash outflows were partially offset by $6.6 million received as net proceeds
from short-term investments.
In
the first nine months of fiscal
2007, cash flows used in financing activities were $9.6 million, primarily
as a
result of $10.0 million in purchases of common stock under our share repurchase
program. These cash outflows were partially offset by net proceeds
from the issuance of stock, including proceeds received under our employee
stock
purchase plan, of $1.1 million. In the first nine months of fiscal
2006, cash flows used in financing activities were $7.9 million, primarily
due
to $8.0 million in purchases of common stock under our share repurchase
program. This share repurchase program, which was authorized by our
Board of Directors in October 2005 for up to $40.0 million, had $14.0 million
remaining available for share repurchases at June 30, 2007, although it may
be
suspended or terminated at any time, at the Company’s discretion.
We
have an unsecured revolving credit
facility of $50.0 million with an option to increase the facility up to $80.0
million. This agreement runs through November 2008. Interest accrues
on any outstanding balance at either the institution’s base rate or the
Eurodollar rate plus an applicable margin. We also pay a non-use
fee. Loans under this facility are anticipated to be used primarily
for general corporate purposes, including working capital and capital
expenditures. The credit agreement also contains various
covenants. No amounts are currently outstanding under this credit
facility and we believe we are currently in compliance with the
covenants.
We
believe that cash generated by our
operations and available borrowings under our revolving credit facility will
be
sufficient to fund our operations, expected capital expenditures, including
limited merger and acquisition activities, and share repurchases for the
foreseeable future. However, we plan to expand our business and
continue to improve our technology, and to do so may require us to raise
additional funds in the future through public or private equity or debt
financing, strategic relationships or other arrangements.
OFF-BALANCE
SHEET ARRANGEMENTS
At
June
30, 2007, and September 30, 2006, we did not have any unconsolidated entities
or
financial partnerships, such as entities often referred to as structured finance
or special purpose entities, which might have been established for the purpose
of facilitating off-balance sheet arrangements.
TABULAR
DISCLOSURE OF CONTRACTUAL OBLIGATIONS
The
following summarizes our
contractual obligations at June 30, 2007, and the effect such obligations are
expected to have on our liquidity and cash flow in future periods.
CONTRACTUAL
OBLIGATIONS
|
|
|
|
|
Less
Than
|
|
|
|
1-3
|
|
|
|
3-5
|
|
|
After
5
|
|
(In
millions)
|
|
Total
|
|
|
1
Year
|
|
|
Years
|
|
|
Years
|
|
|
Years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
lease obligations
|
|
$ |
4.9
|
|
|
$ |
1.3
|
|
|
$ |
2.3
|
|
|
$ |
1.3
|
|
|
$ |
-
|
|
Operating
leases
|
|
|
2.0
|
|
|
|
1.4
|
|
|
|
0.6
|
|
|
|
-
|
|
|
|
-
|
|
Purchase
obligations
|
|
|
45.9
|
|
|
|
37.5
|
|
|
|
6.5
|
|
|
|
1.9
|
|
|
|
-
|
|
Other
long-term liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
contractual obligations
|
|
$ |
54.1
|
|
|
$ |
40.2
|
|
|
$ |
9.4
|
|
|
$ |
3.2
|
|
|
$ |
1.3
|
|
We
operate under a fumed silica supply
agreement with Cabot Corporation under which we are obligated to purchase at
least 90% of our six-month volume forecast for certain of our slurry products
and to pay for the shortfall if we purchase less than that
amount. This agreement has an initial six-year term, which expires in
December 2009 and will automatically renew unless either party gives certain
notice of non-renewal. We currently anticipate meeting minimum
forecasted purchase volume requirements. We also operate under a
fumed alumina supply agreement with Cabot Corporation that runs through December
2011, under which we are obligated to pay certain fixed, capital and variable
costs. Purchase obligations include an aggregate amount of $24.8
million of contractual commitments for fumed silica and fumed alumina under
these contracts.
In
addition to the $19.0 million in
cash that we paid related to our July 2006 QED acquisition, we are obligated
to
pay another $2.5 million based on the performance of the QED business in the
12
months following its acquisition, and we may be obligated to pay up to an
additional $2.0 million depending upon the performance of the QED business
in
the second year following the acquisition. The first-year payment of
$2.5 million is expected to be paid in our fourth quarter of fiscal
2007. Purchase obligations at June 30, 2007, include $4.5 million
related to this agreement, with the conservative assumption that the additional
payment will be made in the maximum amount.
Refer
to Item 7 “Management’s
Discussion and Analysis of Financial Condition and Results of Operations”
of Part II of
our
annual report on Form 10-K for the fiscal year ended September 30, 2006,
for additional information regarding our contractual obligations.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
EFFECT
OF CURRENCY EXCHANGE RATES AND EXCHANGE RATE RISK
MANAGEMENT
We
conduct business operations outside
of the United States through our foreign operations. Some of our
foreign operations maintain their accounting records in their local
currencies. Consequently, period to period comparability of results
of operations is affected by fluctuations in exchange rates. The
primary foreign currencies to which we have exposure are the Japanese Yen and,
to a lesser extent, the British Pound and the Euro. From time to time
we enter into forward contracts in an effort to manage foreign currency exchange
exposure. However, we may be unable to hedge these exposures
completely. Approximately 15% of our revenue is transacted in
currencies other than the U.S. dollar. We do not currently enter into
forward exchange contracts or other derivative instruments for speculative
or
trading purposes.
MARKET
RISK AND SENSITIVITY ANALYSIS RELATED TO FOREIGN EXCHANGE RATE
RISK
We
have performed a sensitivity
analysis assuming a hypothetical 10% adverse movement in foreign exchange
rates. As of June 30, 2007, the analysis demonstrated that such
market movements would not have a material adverse effect on our consolidated
financial position, results of operations or cash flows over a one-year
period. Actual gains and losses in the future may differ materially
from this analysis based on changes in the timing and amount of foreign currency
rate movements and our actual exposures.
ITEM
4. CONTROLS AND PROCEDURES
EVALUATION
OF DISCLOSURE CONTROLS AND PROCEDURES
Our
management, with the participation of our Chief Executive Officer and Chief
Financial Officer, has conducted an evaluation of the effectiveness of the
design and operation of our disclosure controls and procedures (as defined
in
Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of
the
end of the period covered by this report. Based on that evaluation,
our Chief Executive Officer and Chief Financial Officer have concluded that
our
disclosure controls and procedures were effective as of June 30,
2007.
While
we
believe the present design of our disclosure controls and procedures is
effective enough to make known to our senior management in a timely fashion
all
material information concerning our business, we intend to continue to improve
the design and effectiveness of our disclosure controls and procedures to the
extent we believe necessary in the future to provide our senior management
with
timely access to such material information, and to correct deficiencies that
we
may discover in the future, as appropriate.
CHANGES
IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There
were no changes in our internal control over financial reporting that occurred
during our most recent fiscal quarter that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
INHERENT
LIMITATIONS ON EFFECTIVENESS OF CONTROLS
Because
of inherent limitations, our
disclosure controls or our internal control over financial reporting may not
prevent all errors and all fraud. A control system, no matter how
well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Further,
the design of a control system must take into account the benefits of controls
relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, within the Company have
been
detected. These inherent limitations include possible faulty judgment
in decision making and breakdowns due to a simple error or
mistake. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people or by management
override of the controls. The design of any system of controls also
is based in part upon certain assumptions about the likelihood of future events,
and there can be no assurance that any design will succeed in achieving its
stated goals under all potential future conditions. Over time,
controls may become inadequate because of changes in conditions, or the degree
of compliance with policies or procedures may deteriorate. Because of
the inherent limitations in a cost-effective control system, misstatements
due
to error or fraud may occur and not be detected.
PART
II. OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS
While
we are not at present involved in
any legal proceedings that we currently believe will have a material impact
on
our consolidated financial position, results of operations or cash flows, we
periodically become a party to legal proceedings in the ordinary course of
business. For example, in January 2007, Cabot Microelectronics filed
a legal action against DuPont Air Products NanoMaterials LLC (DA Nano), a
competitor of ours, in the United States District Court for the District of
Arizona, charging that DA Nano’s manufacture and marketing of certain CMP
slurries infringe five CMP slurry patents that we own. The affected
DA Nano products include those used for tungsten CMP. We filed our
patent infringement complaint as a counterclaim in response to an action filed
by DA Nano in the same court in December 2006 that seeks declaratory relief
and
alleges non-infringement, invalidity and unenforceability regarding some of
the
patents at issue in our complaint against DA Nano. DA Nano filed its
complaint following our refusal of its request that we license to it our patents
raised in its complaint. DA Nano’s complaint does not allege any
infringement by Cabot Microelectronics’ products of intellectual property owned
by DA Nano. While the outcome of this and any legal matter cannot be
predicted with certainty, we believe that our claims and defenses in the pending
action are meritorious, and intend to pursue and defend them
vigorously.
ITEM
1A. RISK FACTORS
We
do not believe there have been any
material changes in our risk factors since the filing of our annual report
on
Form 10-K for the fiscal year ended September 30, 2006. However, we
may update our risk factors in our SEC filings from time to time for
clarification purposes or to include additional information, at management's
discretion, even when there have been no material changes.
RISKS
RELATING TO OUR BUSINESS
WE
HAVE A NARROW PRODUCT RANGE AND OUR PRODUCTS MAY BECOME OBSOLETE, OR
TECHNOLOGICAL CHANGES MAY REDUCE OR LIMIT INCREASES IN CMP
CONSUMPTION
Our
business is substantially dependent
on a single class of products, CMP slurries, which historically has accounted
for almost all of our revenue. Our business would suffer if these products
became obsolete or if consumption of these products decreased. Our
success depends on our ability to keep pace with technological changes and
advances in the semiconductor industry and to adapt, improve and customize
our
products for advanced IC applications in response to evolving customer needs
and
industry trends. Since its inception, the semiconductor industry has
experienced rapid technological changes and advances in the design, manufacture,
performance and application of IC devices, and our customers continually pursue
lower cost of ownership of materials consumed in their manufacturing processes,
including CMP slurries. We expect these technological changes and
advances, and this drive toward lower costs, to continue in the
future. Emerging technologies in the semiconductor industry, as well
as our customers’ efforts to reduce consumption of CMP slurries, could render
our products less important to the IC device manufacturing process.
A
SIGNIFICANT AMOUNT OF OUR BUSINESS COMES FROM A LIMITED NUMBER OF LARGE
CUSTOMERS AND OUR REVENUE AND PROFITS COULD DECREASE SIGNIFICANTLY IF WE LOST
ONE OR MORE OF THEM AS CUSTOMERS
Our
customer base is concentrated among
a limited number of large customers. One or more of these principal
customers may stop buying CMP slurries from us or may substantially reduce
the
quantity of CMP slurries they purchase from us. Our principal
customers also hold considerable purchasing power, which can impact the pricing
and terms of sale of our products. Any deferral or significant reduction in
CMP
slurries sold to these principal customers, or a significant number of smaller
customers, could seriously harm our business, financial condition and results
of
operations.
In
the nine months ended June 30, 2007,
our five largest customers accounted for approximately 42% of our revenue;
Taiwan Semiconductor Manufacturing Company (TSMC) was our largest customer,
accounting for approximately 17% of our revenue. In fiscal 2006, our
five largest customers accounted for approximately 44% of our revenue;
Marketech, a distributor, was our largest customer at that
time. Effective April 2006, with our transition to direct sales in
Taiwan, we began selling directly to TSMC and other customers in Taiwan rather
than through Marketech. Due to the timing of this transition, TSMC
accounted for approximately 10% of our revenue for the full fiscal year
2006.
OUR
BUSINESS COULD BE SERIOUSLY HARMED IF OUR EXISTING OR FUTURE COMPETITORS DEVELOP
SUPERIOR SLURRY PRODUCTS, OFFER BETTER PRICING TERMS OR SERVICE, OR OBTAIN
CERTAIN INTELLECTUAL PROPERTY RIGHTS
Competition
from current CMP slurry
manufacturers or new entrants to the CMP slurry market could seriously harm
our
business and results of operations. Competition from other existing providers
of
CMP slurries could continue to increase, and opportunities exist for other
companies with sufficient financial or technological resources to emerge as
potential competitors by developing their own CMP slurry
products. Increased competition has and may continue to impact the
prices we are able to charge for our slurry products as well as our overall
business. In addition, our competitors could have or obtain
intellectual property rights which could restrict our ability to market our
existing products and/or to innovate and develop new products.
ANY
PROBLEM OR INTERRUPTION IN SUPPLY OF OUR MOST IMPORTANT RAW MATERIALS, INCLUDING
FUMED METAL OXIDES, COULD DELAY OUR SLURRY PRODUCTION AND ADVERSELY AFFECT
OUR
SALES
Our
business would suffer from any
problem or interruption in our supply of the key raw materials we use in our
CMP
slurries, including fumed metal oxides such as fumed alumina and fumed
silica. For example, Cabot Corporation continues to be our primary
supplier of particular amounts and types of fumed alumina and fumed
silica. We believe it would be difficult to promptly secure
alternative sources of key raw materials, including fumed metal oxides, in
the
event one of our suppliers becomes unable to supply us with sufficient
quantities of raw materials that meet the quality and technical specifications
required by our customers. In addition, contractual amendments to the
existing agreements with, or non-performance by, our suppliers could adversely
affect us.
Also,
if we change the supplier or type
of key raw materials we use to make our CMP slurries, or are required to
purchase them from a different manufacturer or manufacturing facility or
otherwise modify our products, in certain circumstances our customers might
have
to requalify our CMP slurries for their manufacturing processes and
products. The requalification process could take a significant amount
of time and expense to complete and could motivate our customers to consider
purchasing products from our competitors, possibly interrupting or reducing
our
sales of CMP slurries to these customers.
WE
ARE SUBJECT TO RISKS ASSOCIATED WITH OUR FOREIGN
OPERATIONS
We
currently have operations and a
large customer base outside of the United States. Approximately 78%
of our revenue was generated by sales to customers outside of the United States
for the nine months ended June 30, 2007. Approximately 79% of our
revenue was generated by sales to customers outside of the United States for
the
fiscal year ended September 30, 2006. We encounter risks in doing
business in certain foreign countries, including, but not limited to, adverse
changes in economic and political conditions, as well as difficulty in enforcing
business and customer contracts and agreements, including protection of
intellectual property rights.
BECAUSE
WE HAVE LIMITED EXPERIENCE IN BUSINESS AREAS OUTSIDE OF CMP SLURRIES, EXPANSION
OF OUR BUSINESS INTO NEW PRODUCTS AND APPLICATIONS MAY NOT BE
SUCCESSFUL
An
element of our strategy has been to
leverage our current customer relationships and technological expertise to
expand our CMP business from CMP slurries into other areas, such as polishing
pads. Additionally, under our engineered surface finishes initiative
we are actively pursuing a variety of surface modification applications, such
as
high precision optics. Expanding our business into new product areas
could involve technologies, production processes and business models in which
we
have limited experience, and we may not be able to develop and produce products
or provide services that satisfy customers’ needs or we may be unable to keep
pace with technological or other developments. Also, our competitors
may have or obtain intellectual property rights which could restrict our ability
to market our existing products and/or to innovate and develop new
products.
BECAUSE
WE RELY HEAVILY ON OUR INTELLECTUAL PROPERTY, OUR FAILURE TO ADEQUATELY OBTAIN
OR PROTECT IT COULD SERIOUSLY HARM OUR BUSINESS
Protection
of intellectual property is
particularly important in our industry because CMP slurry and pad manufacturers
develop complex technical formulas for CMP products which are proprietary in
nature and differentiate their products from those of
competitors. Our intellectual property is important to our success
and ability to compete. We attempt to protect our intellectual
property rights through a combination of patent, trademark, copyright and trade
secret laws, as well as employee and third-party nondisclosure and assignment
agreements. Due to our international operations, we pursue protection
in different jurisdictions, which may require varying degrees of protection,
and
we cannot provide assurance that we can obtain adequate protection in each
such
jurisdiction. Our failure to obtain or maintain adequate protection
of our intellectual property rights for any reason, including through the patent
prosecution process or in the event of litigation related to such intellectual
property, such as the current litigation between us and DA Nano described above,
could seriously harm our business. In addition, the costs of
obtaining or protecting our intellectual property could negatively affect our
operating results.
WE
MAY PURSUE ACQUISITIONS OF, INVESTMENTS IN, AND STRATEGIC ALLIANCES WITH OTHER
ENTITIES, WHICH COULD DISRUPT OUR OPERATIONS AND HARM OUR OPERATING RESULTS
IF
THEY ARE UNSUCCESSFUL
We
expect to continue to make
investments in companies, either through acquisitions, investments or alliances,
in order to supplement our internal growth and development
efforts. Acquisitions and investments involve numerous risks,
including the following: difficulties in integrating the operations,
technologies, products and personnel of acquired companies; diversion of
management’s attention from normal daily operations of the business; potential
difficulties in entering markets in which we have limited or no direct prior
experience and where competitors in such markets have stronger market positions;
potential difficulties in operating new businesses with different business
models; potential difficulties with regulatory or contract compliance in areas
in which we have limited experience; initial dependence on unfamiliar supply
chains or relatively small supply partners; insufficient revenues to offset
increased expenses associated with acquisitions; potential loss of key employees
of the acquired companies; or inability to effectively cooperate and collaborate
with our alliance partners.
Further,
we may never realize the perceived or anticipated benefits of a business
combination or investments in other entities. Acquisitions by us
could have negative effects on our results of operations, such as contingent
liabilities, gross profit margins, amortization charges related to intangible
assets and other effects of accounting for the purchases of other business
entities. Investments and acquisitions of technology and development
stage companies are inherently risky because these businesses may never develop,
and we may incur losses related to these investments. In addition, we
may be required to write down the carrying value of these investments to reflect
other than temporary declines in their value, which could harm our business
and
results of operations.
DEMAND
FOR OUR PRODUCTS AND OUR BUSINESS MAY BE ADVERSELY AFFECTED BY WORLDWIDE
ECONOMIC AND INDUSTRY CONDITIONS
Our
business is affected by economic
and industry conditions, and our revenue is dependent on semiconductor
demand. Semiconductor demand, in turn, is impacted by semiconductor
industry cycles, and these cycles can dramatically affect our
business. During the first two quarters of fiscal 2007, for example,
the apparent softening of demand for our products due to excess inventory of
semiconductor devices caused our CMP slurry revenue to decrease during the
inventory correction. Some additional factors that affect demand for
our products include customers’ production of logic versus memory devices, their
transition from 200 mm to 300 mm wafers, customers’ specific integration
schemes, share gains and losses and pricing changes by us and our
competitors.
OUR
INABILITY TO ATTRACT AND RETAIN KEY PERSONNEL COULD CAUSE OUR BUSINESS TO
SUFFER
If
we fail to attract and retain the
necessary managerial, technical and customer support personnel, our business
and
our ability to maintain existing and obtain new customers, develop new products
and provide acceptable levels of customer service could
suffer. Competition for qualified personnel, particularly those with
significant experience in the semiconductor industry, is intense. The
loss of services of key employees could harm our business and results of
operations.
RISKS
RELATING TO THE MARKET FOR OUR COMMON STOCK
THE
MARKET PRICE MAY FLUCTUATE SIGNIFICANTLY AND RAPIDLY
The
market price of our common stock
has fluctuated and could continue to fluctuate significantly as a result of
factors such as: economic and stock market conditions generally and specifically
as they may impact participants in the semiconductor and related industries;
changes in financial estimates and recommendations by securities analysts who
follow our stock; earnings and other announcements by, and changes in market
evaluations of, us or participants in the semiconductor and related industries;
changes in business or regulatory conditions affecting us or participants in
the
semiconductor and related industries; announcements or implementation by us,
our
competitors, or our customers of technological innovations, new products or
different business strategies; and trading volume of our common
stock.
ANTI-TAKEOVER
PROVISIONS UNDER OUR CERTIFICATE OF INCORPORATION AND BYLAWS AND OUR RIGHTS
PLAN
MAY DISCOURAGE THIRD PARTIES FROM MAKING AN UNSOLICITED BID FOR OUR
COMPANY
Our
certificate of incorporation, our
bylaws, our rights plan and various provisions of the Delaware General
Corporation Law may make it more difficult to effect a change in control of
our
Company. For example, our amended and restated certificate of
incorporation authorizes our Board of Directors to issue up to 20 million shares
of blank check preferred stock and to attach special rights and preferences
to
this preferred stock. Also our amended and restated certificate of
incorporation provides for the division of our Board of Directors into three
classes as nearly equal in size as possible with staggered three-year
terms. In addition, the rights issued to our stockholders under our
rights plan may make it more difficult or expensive for another person or entity
to acquire control of us without the consent of our Board of
Directors.
We
have adopted change in control
arrangements covering our executive officers and other key
employees. These arrangements provide for a cash severance payment,
continued medical benefits and other ancillary payments and benefits upon
termination of service of a covered employee’s employment following a change in
control.
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
ISSUER
PURCHASES OF EQUITY SECURITIES
Period
|
|
Total
Number of Shares Purchased
|
|
|
Average
Price Paid Per Share
|
|
|
Total
Number of Shares Purchased as Part of Publicly Announced Plans or
Programs
|
|
|
Approximate
Dollar Value of Shares that May Yet Be Purchased Under the Plans
or
Programs (in thousands)
|
|
Apr.
1 through
Apr.
30, 2007
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$ |
14,009
|
|
May
1 through
May
31, 2007
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$ |
14,009
|
|
Jun.
1 through
Jun.
30, 2007
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$ |
14,009
|
|
Total
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$ |
14,009
|
|
In
October 2005, we announced that our
Board of Directors had authorized a share repurchase program for up to $40.0
million of our outstanding common stock. Shares are purchased
from time to time, depending on market conditions, in open market transactions,
at management’s discretion. We fund share purchases from our existing
cash balance. The program, which became effective on the
authorization date, may be suspended or terminated at any time, at the Company’s
discretion. We view the program as an effective means to return cash
to stockholders.
ITEM
6. EXHIBITS
|
The
exhibit numbers in the following list correspond to the number assigned
to
such exhibits in the Exhibit Table of Item 601 of Regulation
S-K:
|
Exhibit
Number
|
Description
|
|
|
31.1
|
Certification
of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a)
of the
Securities Exchange Act of 1934, as adopted pursuant to Section 302
of the
Sarbanes-Oxley Act of 2002.
|
|
|
31.2
|
Certification
of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a)
of the
Securities Exchange Act of 1934, as adopted pursuant to Section 302
of the
Sarbanes-Oxley Act of 2002.
|
|
|
32.1
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002.
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
CABOT
MICROELECTRONICS CORPORATION
|
|
|
|
|
Date:
August 8, 2007
|
/s/
WILLIAM S. JOHNSON
|
|
William
S. Johnson
|
|
Vice
President and Chief Financial Officer
|
|
[Principal
Financial Officer]
|
|
|
|
|
Date:
August 8, 2007
|
/s/
THOMAS S. ROMAN
|
|
Thomas
S. Roman
|
|
Corporate
Controller
|
|
[Principal
Accounting Officer]
|