Cymer Reports Fourth Quarter and 2004 Operating Results
Cymer, Inc. (Nasdaq:CYMI), the world's leading supplier of deep ultraviolet (DUV) light sources used in
semiconductor manufacturing, today announced operating results for the fourth quarter and year ended
December 31, 2004. Among the highlights for the fourth quarter, revenue, gross margin and average selling
prices (ASP) exceeded the ranges provided in the company's guidance update on December 8, 2004.
Research and development (R&D) and selling, general and administrative expenses (SG&A) were higher than
December guidance.
For the fourth quarter of 2004, net income totaled $8,384,000, equal to $0.22 per share (diluted), compared to
net income of $1,674,000, equal to $0.04 per share (diluted), in the fourth quarter of 2003. On a sequential
basis, fourth quarter 2004 net income compared to net income of $15,421,000, equal to $0.41 per share
(diluted), in the third quarter of 2004.
Total revenue for the fourth quarter of 2004 was $99,592,000, a 38 percent increase over total revenue of
$72,430,000 posted in the fourth quarter of 2003, and a sequential 7 percent decline from $107,140,000 in total
revenue in the third quarter of 2004.
For the year ended December 31, 2004, net income totaled $41,162,000, equal to earnings of $1.10 per share
(diluted), compared to a net loss of $15,400,000, equal to a loss of $0.44 per share (diluted), posted in 2003.
Total revenue for 2004 rose to a record $389,560,000, a 47% increase over $265,873,000 in total revenue
recorded in 2003.
Commenting on some of the highlights of the fourth quarter and full year, Bob Akins, Cymer's chief executive
officer, said, "We are pleased that fourth quarter 2004 total revenue was higher than anticipated, bolstered
by a stronger than expected transition of our light source sales to argon fluoride (ArF), and to a higher level
of consumables sales just before the end of the quarter. Record shipments of our XLA Series light sources,
our most advanced ArF products based on our dual-chamber Master Oscillator Power Amplifier (MOPA)
technology, drove fourth quarter ASPs to higher than anticipated levels. Total revenue reached a record
level for the year, as did revenue for consumables, spare parts and service.
"We recognized revenue on 70 light sources in the fourth quarter of 2004 compared to 86 light sources in the
third quarter of 2004," Akins continued. "Cymer installed 65 new light sources in the fourth quarter. We
estimate that Cymer's rolling four-quarter share of light sources installed at chipmakers as of December 31
was 82 percent. Going forward, we expect 300mm ArF technology buys to comprise a more significant
fraction of total market demand, which plays well to our competitive strength and should have a beneficial
effect on our share beginning in the second quarter of 2005."
"In the fourth quarter, sales of technology driven ArF light sources rose substantially to 46 percent of unit
shipments, and sales of capacity driven krypton fluoride (KrF) light sources made up 54 percent of unit
shipments," Akins noted. "With the fourth quarter product mix shifting more toward ArF products, which carry
higher selling prices, our ASP increased more than anticipated, on a currency adjusted basis, to $957,000, 20
percent above the $798,000 ASP in the third quarter of 2004. In the fourth quarter, our DUV light source
utilization at chipmakers declined about 5 percent from the third quarter level, resulting in our non-systems
product revenue, which consists of upgrades, consumables and spare parts and service, declining to
$33,690,000, 14 percent below the third quarter. For the full year, non-systems revenue reached $143,937,000, the highest level in Cymer's history."
Nancy Baker, Cymer's chief financial officer, stated, "Product gross margin in the fourth quarter of 2004
exceeded our December guidance and came in at 40 percent compared to 47 percent in the third quarter of
2004. Two items had an impact on fourth quarter gross margin performance: First, because we made the
decision to reduce factory loading to work down our inventory, gross margin was negatively impacted by
approximately eight margin points. Second, this was offset by a two margin point improvement related to a
Korean customs refund of approximately $2,300,000, recognized during the fourth quarter of 2004.
"Cymer reported operating income of $9,966,000, or 10 percent of revenue in the fourth quarter of 2004,
compared to operating income of $22,093,000, or 21 percent of revenue, in the third quarter of 2004," Baker
continued. "Fourth quarter 2004 bookings of $74,132,000 were 29 percent below third quarter 2004 bookings of
$103,979,000. The fourth quarter 2004 book-to-bill ratio was 0.74. This 24% decline from our third quarter
book-to-bill level of 0.97 is in line with the declines reported by many of our peers. The 2004 fourth
quarter-end backlog totaled $79,115,000, compared to the third quarter-end of $104,575,000."
Cymer generated $15,528,000 in cash from operations in the fourth quarter of 2004 compared to $11,816,000 in
the previous quarter, and generated $34,170,000 in cash from operations during 2004. Cash and cash
equivalents and short- and long-term investments totaled $374,673,000 at December 31, 2004. Capital
spending for the fourth quarter of 2004 totaled $4,901,000 compared to $6,444,000 in the third quarter of 2004.
Additionally, during the quarter Cymer sub-leased the second of two San Diego facilities vacated in 2003, and
combined with the sub-leasing of the first facility during the third quarter of 2004, the company expects a
quarterly reduction in SG&A costs of approximately $750,000 moving forward.
Corporate Outlook
Commenting on Cymer's outlook, Akins noted, "Entering 2005, we are intensifying our management focus on
improved asset management with particular emphasis on inventory management and turn rate, improving
operating efficiency, and ensuring the competitiveness of our product offerings. At this time, we continue to
experience less than one quarter's visibility on the order front. Our current bookings and the conversations
we are conducting with our customers indicate that, at least in the near term, we will be responding to
orders heavily weighted toward the more advanced technology, playing to our competitive strength. The
timing for resumption of capacity demand remains uncertain."
Baker commented, "In line with slower industry conditions, we believe it prudent to complete the
consumables and spares field inventory correction we began in the fourth quarter of 2004. In the first quarter
of this year, we will aggressively work down our inventory again by 10 percent or more, which will negatively
impact our gross margin due to lower factory loading. This inventory reduction effort and improved inventory
management coupled with other initiatives will help enable us to reach our goals in 2005 of generating
significant amounts of cash and achieving higher returns on assets and invested capital."
Based on information available at this time, Cymer is currently providing the following guidance for the first
quarter of 2005, which includes effects associated with the inventory reduction:
-- We currently estimate that total product revenue in the first
quarter of 2005 will be down approximately 20 percent from fourth quarter 2004 revenue.
-- We are forecasting that foreign currency adjusted ASPs will
remain flat with the fourth quarter 2004 level of
approximately $957,000.
-- We expect that gross margin will be between 35 and 38 percent.
-- We anticipate that R&D expenses in the first quarter will be
between $14 million and $15 million.
-- We expect SG&A expenses to be between $11.4 million and $11.9
million.
-- We currently estimate that Net Other Income and Expense will
be at breakeven for the first quarter, excluding net effects
of foreign currency exchange gains or losses.
-- We estimate the annual effective tax rate for 2005 to be
approximately 0 percent. The tax rate is based on a
conservative outlook for continued industry slowing in 2005,
and incorporates tax benefits associated with Cymer's foreign
sales, manufacturing and research activities. Given our lack
of visibility for the full year 2005, combined with the
continued expectation of significant tax benefits previously
mentioned, we feel this is the most prudent estimate we can
make at this time.
Beginning this quarter, Cymer will discontinue the practice of issuing regular mid-quarter guidance updates.
Cymer's management will hold a conference call at 2:00 p.m. (PST) today, January 25, 2005, to discuss annual
and fourth quarter 2004 results and first quarter 2005 guidance. This press release may be accessed on the
company's Web site, and the call and accompanying slides may be accessed on the Investor Relations page
of the company's Web site, at www.cymer.com. |
