For the fourth quarter of 2008:
Net income totaled $3,984,000, equal to $0.13 per share diluted, compared to net income of $21,437,000, equal to $0.67 per share diluted in the fourth quarter of 2007 and net income of $5,331,000, equal to $0.18 per share diluted, in the third quarter of 2008;
Revenue totaled $100,448,000, compared to revenue of $139,922,000 in the fourth quarter of 2007 and revenue of $110,619,000* in the third quarter of 2008.
Commenting on the fourth quarter results, Bob Akins, chief executive officer of Cymer said, Cymer employees executed well in a very difficult business environment. Our operating results were generally in line with our fourth quarter guidance. We extended our argon fluoride (ArF) immersion market leadership and made continued progress towards the development and commercialization of our extreme ultraviolet (EUV) light source technology.
In the fourth quarter of 2008, the company shipped 19 light sources, including 15 XLRs, resulting in an average selling price (ASP) of about $1.9 million. Installed Base Products (IBP) revenue totaled $63.2 million. During the quarter, the company installed 15 light sources at chipmaker locations. The company reported gross profit on product sales of $44.7 million, yielding a 44.5% gross margin. Fourth quarter 2008 cost of revenues included additional field inventory charges of about $2.3 million in response to lower chipmaker utilization. Excluding the additional field inventory charge, non-GAAP gross margin would have been 46.8%. Operating expenses of $40.3 million included $1.9 million of costs associated with the November 2008 reduction in workforce and a $1.9 million additional allowance for doubtful accounts receivable related to certain customer’s deteriorating financial condition. Operating income totaled $4.4 million, and the fourth quarter effective tax rate was about 5%, primarily due to the passage of the federal research and development tax credit in October 2008 which was effective retroactively to January 1, 2008.
Deep ultraviolet (DUV) bookings for the fourth quarter of 2008 totaled $83.7 million, resulting in a book-to-bill ratio of 0.83. All of the light source systems bookings in the fourth quarter were XLR. The company ended the quarter with a DUV backlog of about $33.7 million, with ArF immersion light sources comprising about 84% of the value of systems in backlog.
For the full year 2008, the company shipped a total of 100 light sources, including 48 XLRs for advanced chip making applications. Higher average selling prices, driven by the strong adoption of the XL Series of products, and about 10% annual growth in IBP revenue helped offset the decline in lithography light source demand. Through increased operational efficiency and XL platform reliability improvements, the company achieved a gross margin of 47.3% on product sales in 2008.
During the fourth quarter, the company increased cash and investments by about $16 million, and at December 31, 2008, cash and investments totaled $293 million. The company anticipates repaying its $140.7 million convertible note when it matures on February 15, 2009.
Corporate Outlook:
Commenting on the outlook, Akins said, The current business environment is quite uncertain, characterized by shrinking lithography tool demand, and decreasing chipmaker factory utilization in the second half of 2008. Looking at the first quarter of 2009, demand for new light sources and installed base products has declined further since our mid January preliminary revenue estimate. It is noteworthy that utilization of our light sources held steady for the month of January in all three chip sectors. While visibility into 2009 is extremely limited, our expectation for the year is for advanced ArF immersion orders to continue to represent the vast majority of scanner and light source demand. We have taken action to reduce Cymer’s cost structure, and we will continue to focus on maintaining operating costs in-line with business conditions. We feel Cymer is well positioned for the future with our strong DUV, EUV, Installed Base Products and TCZ portfolio.
Based on information available at this time, the company is currently providing the following guidance for the first quarter of 2009, and anticipates:
Revenue to decrease about 45%, plus or minus 5% compared to the revenue reported for the fourth quarter of 2008;
Foreign currency adjusted ASP to be about $ 1.6 million to $1.7 million due to the anticipated inclusion of some KrF shipments;
Gross margin to be about 40%, plus or minus 3%, depending on revenue levels;
R&D expenses to be about $18.5 million to $19 million;
SG&A expenses to be about $11.5 million to $12 million;
Charges related to the January 15, 2009 cost reduction actions to be about $4.5 million, with about 25% associated with cost of revenues and 75% attributable to operating expenses;
The company estimated first quarter effective tax rate to be about 30%. This rate may vary significantly depending on the actual extent of loss before tax.
