Cabot Microelectronics Corporation ( CCMP) F4Q2010 Earnings Call Transcript October 28, 2010 10:00 am ET Executives Bill Johnson – VP and CFO Bill Noglows – Chairman, President and CEO Analysts Jay Harris – Goldsmith & Harris Dmitry Silversteyn – Longbow Research Chris Kapsch – BDR Research Group Avinash Kant – D.A. Davidson & Co. Presentation Operator
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I will now turn the call over to Bill Noglows.Bill Noglows Thanks, Bill. Good morning, everyone, and thanks for joining us. This morning we announced record financial results for our fourth quarter and full fiscal year 2010. We are delighted to close this terrific fiscal year with a particularly strong fourth quarter, during which we achieved revenue of $110.3 million, which represents our fourth consecutive quarter of record revenue, gross profit margin of 48.7% of revenue, and earnings per share of $0.66. Fiscal 2010 marks our tenth year as a public company, and it is very rewarding to report record annual revenue of $408.2 million, gross profit margin of 49.9% of revenue, which is our highest annual level since 2003, and record earnings per share of $2.13 for the fiscal year. You will recall that during the downturn of 2009, the global semiconductor industry was in flux, there were mixed signals as to the pace and timing of a recovery, particularly with the U.S. economy, and there was limited visibility into global semiconductor demand. Despite the uncertain environment, we were able to leverage our business model to manage costs, while retaining our intellectual capital, maintain flexibility in our operations and continue to execute against our growth strategies and key initiatives. These actions positioned our company to respond quickly to improving trends and to accelerate out of the downturn. Our record results for fiscal 2010 demonstrate that we were prepared for the upturn in the industry, we were able to successfully respond to sustained increased demand for our products, and we grew our total revenue by 40% during the year, which we believe exceeds the semiconductor market growth rate projections of about 30% for calendar year 2010. 2010 has been a banner year for the industry relative to last year, and we continue to see a number of positive signs indicating this favorable environment is likely to continue in the near term. Fab utilization is at an all-time high and end-device inventory levels appear to be appropriate. Indications from our customers suggest the current strength in demand that the industry is seeing will continue through the next couple of quarters, subject to normal seasonal softness the industry typically experiences in the December and March quarters.
As I said last quarter, the main factor limiting growth is the capacity constraints of our customers. However, we are starting to see new capacity additions come online with certain customers and we expect this trend will continue through 2011. We believe that the strong results we achieved this fiscal year reflect a consistent focus on our primary strategy to strengthen and grow our core CMP consumables business through the execution of our three strategic initiatives, Technology Leadership, Operations Excellence and Connecting with Customers.I would now like to review the progress we made in these three areas during 2010. Starting with our Technology Leadership initiative, we believe that our robust new product pipeline contains high value, improved products that will provide customers with enabling solutions in all major CMP application areas. During the year, we achieved strong revenue growth in our advanced copper and barrier products, which are designed for low cost and high throughput. We also made meaningful progress within our pad business with continued revenue growth, as well as by advancing our next generation tunable D200 pad platform to alpha testing with selected customers. In addition, we recently launched three new CMP polishing pads from our D100 platform that are intended to address customers’ specific needs by polishing application. Each of the three new D100 pad products provide enhanced defect performance and either a shorter break-in time or longer pad life for advanced copper, tungsten and shallow trench isolation applications. Next I would like to discuss how our achievements through our Operations Excellence initiative contributed to our solid performance this year. We have now completed the sixth year of our Six Sigma process, which is our vehicle for improving productivity and driving out variation in our products and throughout our supply chain. Once again in fiscal 2010, we achieved improvements in manufacturing yields for our slurry products and further optimized our manufacturing capacity. With the benefit of strong demand and high production levels, we achieved a record level of productivity improvement in fiscal 2010. Additionally, over the past six years, we have reduced product variation by more than 90%. Read the rest of this transcript for free on seekingalpha.com