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Cymer Reports Second Quarter 2005 Operating Results

SAN DIEGO--(BUSINESS WIRE)--July 19, 2005--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 second quarter ended June 30, 2005. Second quarter total revenue and gross margin exceeded Cymer's April 19, 2005 guidance. Highlights of the second quarter included higher than expected non-systems revenue, as well as generation of $34,479,000 in cash from operations, and the successful execution of the company's stock and convertible note repurchase programs. Additionally, Cymer announced earlier today the formation of the TCZ joint venture with Carl Zeiss SMT, AG, to provide production tools to the flat panel display manufacturing industry.

For the second quarter of 2005, net income totaled $11,015,000, equal to $0.30 per share (diluted), compared to net income of $10,201,000, equal to $0.27 per share (diluted), in the second quarter of 2004, and to net income of $5,385,000, equal to $0.14 per share (diluted), in the first quarter of 2005.

Total revenue for the second quarter of 2005 rose to $96,392,000 compared to total revenue of $94,907,000 posted in the second quarter of 2004, and increased 14 percent sequentially over $84,810,000 in total revenue in the first quarter of 2005.

For the first six months of 2005, net income totaled $16,400,000, equal to earnings of $0.45 per share (diluted) compared to net income of $17,357,000, equal to earnings of $0.46 per share (diluted), in the first six months of 2004. Total revenue for the first six months of 2005 was $181,202,000, compared to $182,828,000 in total revenue recorded in the first six months of 2004.

Other Income (Expense) in the second quarter and first half of 2005 was positively impacted by a gain on debt extinguishment of $2,220,000 related to the repurchase of approximately $60 million of the company's convertible subordinated notes during the second quarter of 2005. On a net income basis, the gain amounted to approximately $0.06 per share (diluted) for the second quarter.

Commenting on the second quarter, Bob Akins, Cymer's chief executive officer, said, "We are pleased that second quarter 2005 operating results came in ahead of our expectations, and with the continuing robust acceptance of our product offerings. Our market leadership position at 193nm continued with strong shipments of our XL Series products in the quarter -- a total of 26 systems. We received multiple purchase orders for the XLA 200, our third generation dual chamber MOPA ArF light source, and received our first purchase orders for the XLA 300, the fourth generation in this product line that we introduced last week at SEMICON West, and which is scheduled to begin shipping in the final quarter of this year.

"We recognized revenue on 56 light sources in the second quarter of 2005 compared to 48 light sources in the first quarter of this year," Akins continued. "Cymer installed 77 new light sources in the second quarter compared to 67 light sources in the first quarter of 2005.

"With chipmakers focused on filling out 90nm production lines and preparing for the ramp up of 65nm production which will occur in 2006 or 2007 for most manufacturers, technology buys remained the main driver of system demand in the second quarter. Our second quarter average selling price (ASP) was $941,000 on a currency adjusted basis," Akins stated. "The quarterly average utilization of our light sources at chipmakers in the second quarter increased nearly 5 percent over the previous quarter's average utilization, and drove non-systems product revenue, which consists of consumables and spare parts, upgrades, and service, to $41,000,000, for the second quarter, equal to 43 percent of total revenue."

Nancy Baker, Cymer's chief financial officer, stated, "Product gross margin in the second quarter of 2005 was 40 percent compared to 37 percent in the first quarter of 2005. Cymer recorded operating income of $8,925,000, or 9 percent of revenue in the second quarter of 2005, compared to operating income of $5,077,000, or 6 percent of revenue, in the first quarter of 2005," Baker continued. "Second quarter 2005 bookings totaled $96,368,000, resulting in a second quarter 2005 book-to-bill ratio of 1.0. The 2005 second quarter-end backlog totaled $75,751,000."

Cymer generated $34,479,000 in cash from operations in the second quarter of 2005 compared to $44,473,000 in the first quarter of 2005, and cash generated from operations in the first six months of 2005 totaled $78,952,000. Cash and cash equivalents and short- and long-term investments totaled $342,332,000 at June 30, 2005.

Baker stated, "Capital spending for the second quarter of 2005 totaled $2,669,000 compared to $5,180,000 in the first quarter of 2005. Our free cash flow for the second quarter, calculated as the net cash provided by operating activities less our acquisition of property and equipment, was $31,810,000, and for the first six months of 2005, free cash flow totaled $71,103,000. In addition to our repurchase of approximately $60 million worth of our convertible notes during the second quarter, we also repurchased approximately 1.7 million shares of Cymer's common stock in the open market for a total of approximately $41.7 million."

Corporate Outlook

Commenting on Cymer's outlook, Akins noted, "At SEMICON West last week, the overall tone of the show was mixed, with some equipment companies indicating that their business had leveled off and that they expected orders to improve late this year. Though chipmakers for the most part continue to make strategic purchases for their 300mm fabs to fill out their 90nm production lines, and prepare for the coming transition to the 65nm node, certain segments have slowed as they install equipment ordered in recent quarters. Specific to Cymer, while the second quarter pickup in our light source utilization rates is encouraging, until overall fab utilization increases from its current level in the high 80 percent range and is sustained at levels well above 90 percent we would expect business to remain at or near its current levels."

Based on information available at this time, Cymer is currently providing the following guidance for the third quarter of 2005, which includes expectations for the financial impact of the recently announced joint venture:

    --  We currently estimate that total product revenue in the third
        quarter of 2005 should be flat to down approximately five
        percent compared to second quarter 2005 revenue.

    --  We are forecasting that foreign currency adjusted ASPs should
        be approximately $940,000.

    --  We expect that gross margin should be between 38 and 40
        percent.

    --  We anticipate that R&D expenses should be between $16.5
        million and $17.5 million.

    --  We expect SG&A expenses to be between $13.0 million and $13.5
        million.

    --  We currently estimate the third quarter 2005 annualized
        effective tax rate to be approximately 9 percent. U.S. GAAP
        requirements prevent recognizing certain expected tax benefits
        until the quarter in which they occur. With the realization of
        anticipated discrete fourth quarter events, we expect that our
        annual effective tax rate will return to approximately 0
        percent for 2005 by year-end.

Cymer's management will hold a conference call at 2:00 pm (PDT) today, July 19, 2005, to discuss second quarter 2005 results and third quarter 2005 guidance, and to answer questions regarding the formation of the TCZ joint venture announced today. This press release, the conference call and accompanying slides may be accessed on the company's Web site at www.cymer.com.

Forward Looking Statements

Statements in this press release that are not strictly historical in nature are forward-looking statements. These statements include, but are not limited to statements regarding expectations for the ramp-up of 65nm production, and the statements under the caption "Corporate Outlook" above, including implications regarding the financial impact of the formation of the joint venture with Carl Zeiss SMT, AG. These statements are predictions based on current information and expectations and involve a number of risks and uncertainties. In addition, statements regarding backlog and book-to-bill ratios should not be read as predictions or projections of future performance. Actual events or results may differ materially from those projected in any of such statements due to various factors, including but not limited to: the demand for semiconductors in general, and, in particular, for leading-edge devices with smaller geometries; the timing of customer orders, shipments and acceptances; delays or cancellations by customers of their orders; cyclicality in the market for semiconductor manufacturing equipment; the rate at which semiconductor manufacturers take delivery of photolithography tools from the company's customers; the performance and market acceptance of the company's new products or technologies; new and enhanced product offerings by competitors; the company's ability to meet its production and product development schedules; the company's ability to secure adequate supplies of critical components for its advanced products; and the company's ability to manage its expense levels and unanticipated expenses. For a discussion of these and other factors which may cause our actual events or results to differ from those projected, please refer to the company's most recent annual report on Form 10-K and quarterly reports on Form 10-Q, as well as other subsequent filings with the Securities and Exchange Commission.

About Cymer

Cymer, Inc. is the world's leading supplier of DUV illumination sources, the essential light source for DUV photolithography systems. DUV lithography is a key enabling technology, which has allowed the semiconductor industry to meet the exacting specifications and manufacturing requirements for volume production of today's advanced semiconductor chips. Further information on Cymer may be obtained from the Company's SEC filings, the Internet at www.cymer.com or by contacting the company directly.



Cymer, Inc.     Three Months Ended June 30,  Six Months Ended June 30,
                     2004         2005          2004          2005
                 ------------ ------------- ------------ -------------
Total revenues   $94,907,000  $96,392,000  $182,828,000  $181,202,000

Net income       $10,201,000  $11,015,000   $17,357,000   $16,400,000
Basic earnings
 per share             $0.28        $0.31         $0.47         $0.45
Diluted earnings
 per share             $0.27        $0.30         $0.46         $0.45
Weighted average
 common shares
 outstanding -
 diluted          37,673,000   36,166,000    37,846,000    36,695,000



CYMER, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share data)
----------------------------------------------------------------------



                              For the three months For the six months
                                 ended June 30,      ended June 30,
                              -------------------- -------------------
                                 2004      2005      2004      2005
REVENUES:
   Product sales                 $94,722  $95,797  $182,593  $180,406
   Other                             185      595       235       796
                              ----------- -------- --------- ---------

     Total revenues               94,907   96,392   182,828   181,202
                              ----------- -------- --------- ---------


COST AND EXPENSES:
   Cost of product sales          49,975   57,731   102,143   110,762
   Research and development       14,832   16,937    27,202    31,541
   Sales and marketing             5,879    6,777    11,702    12,551
   General and administrative      8,154    6,022    14,769    12,326
   Amortization of
    intangibles                       40       --        80        20
                              ----------- -------- --------- ---------


     Total costs and expenses     78,880   87,467   155,896   167,200
                              ----------- -------- --------- ---------


OPERATING INCOME                  16,027    8,925    26,932    14,002
                              ----------- -------- --------- ---------


OTHER INCOME (EXPENSE):
   Foreign currency exchange
    loss - net                      (399)    (573)     (345)     (767)
   Gain on debt
    extinguishment                    --    2,220        --     2,220
   Interest and other income       1,603    2,597     3,499     4,998
   Interest and other expense     (2,511)  (1,776)   (5,067)   (3,903)
                              ----------- -------- --------- ---------


     Total other income
      (expense) - net             (1,307)   2,468    (1,913)    2,548
                              ----------- -------- --------- ---------


INCOME BEFORE INCOME TAX
 PROVISION AND MINORITY
 INTEREST                         14,720   11,393    25,019    16,550
                              ----------- -------- --------- ---------


INCOME TAX PROVISION               3,386      912     5,754       912
MINORITY INTEREST                 (1,133)     534    (1,908)      762
                              ----------- -------- --------- ---------


NET INCOME                       $10,201  $11,015   $17,357   $16,400
                              =========== ======== ========= =========


EARNINGS PER SHARE:


   Basic earnings per share        $0.28    $0.31     $0.47     $0.45
                              =========== ======== ========= =========

   Weighted average common
    shares outstanding-basic      36,735   35,841    36,661    36,360
                              =========== ======== ========= =========



   Diluted earnings per share      $0.27    $0.30     $0.46     $0.45
                              =========== ======== ========= =========

   Weighted average common
    shares outstanding-
    diluted                       37,673   36,166    37,846    36,695
                              =========== ======== ========= =========





CYMER, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except share data)
----------------------------------------------------------------------




                                         December 31,      June 30,
                                        --------------- --------------
                                             2004           2005
ASSETS

CURRENT ASSETS:
   Cash and cash equivalents                  $114,246       $149,049
   Short-term investments                      175,866        134,473
   Accounts receivable - net                   110,680         71,032
   Foreign currency forward exchange
    contracts                                       --          2,060
   Inventories                                 110,022         90,350
   Deferred income taxes                         7,470          7,585
   Prepaid expenses and other assets             5,726          5,085
                                        --------------- --------------


     Total current assets                      524,010        459,634

PROPERTY AND EQUIPMENT - NET                   123,548        118,606
LONG TERM INVESTMENTS                           84,561         58,810
DEFERRED INCOME TAXES                           67,722         67,134
GOODWILL - NET                                   8,358          8,358
INTANGIBLE ASSETS - NET                         10,394          9,188
OTHER ASSETS                                     7,185          6,600
                                        --------------- --------------


TOTAL ASSETS                                  $825,778       $728,330
                                        =============== ==============


LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
   Accounts payable                            $13,949        $13,590
   Accrued warranty and installation            28,546         27,712
   Accrued payroll and benefits                 16,284         12,796
   Accrued patents, royalties and other
    fees                                         6,318          6,210
   Foreign currency forward exchange
    contracts                                    1,901             --
   Income taxes payable                         10,397         10,478
   Unearned income                               6,152          4,428
   Accrued and other current
    liabilities                                  4,456          3,734
                                        --------------- --------------


     Total current liabilities                  88,003         78,948

CONVERTIBLE SUBORDINATED NOTES                 200,753        140,722
DEFERRED INCOME TAXES                            6,237          6,237
OTHER LIABILITIES                                7,282          8,137
                                        --------------- --------------


     Total liabilities                         302,275        234,044
                                        --------------- --------------


MINORITY INTEREST                                6,183          5,421
                                        --------------- --------------


COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
   Preferred stock - authorized
    5,000,000 shares; $.001 par value,
    no shares issued or outstanding                 --             --
   Common stock - authorized
    100,000,000 shares; $.001 par
    value, issued and outstanding
    36,993,000 and 37,191,000 shares                37             37
   Additional paid-in capital                  378,414        382,928
   Treasury stock at cost (1,943,000
    common shares)                                  --        (50,000)
   Unearned compensation                           (16)            --
   Accumulated other comprehensive loss         (4,455)        (3,840)
   Retained earnings                           143,340        159,740
                                        --------------- --------------


     Total stockholders' equity                517,320        488,865
                                        --------------- --------------


TOTAL LIABILITIES AND STOCKHOLDERS'
 EQUITY                                       $825,778       $728,330
                                        =============== ==============



CYMER, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
----------------------------------------------------------------------



                                               For the six months
                                                 ended June 30,
                                          ----------------------------
                                              2004           2005

OPERATING ACTIVITIES:
   Net income                                  $17,357        $16,400
   Adjustments to reconcile net income to
    net cash provided by operating
    activities:
     Gain on debt extinguishment                    --         (2,220)
     Depreciation and amortization              13,949         14,440
     Non-cash stock based compensation             261            360
     Amortization of unearned
      compensation                                  67             16
     Minority interest                           1,908           (762)
     Provision for deferred income taxes          (490)            46
     Loss on disposal or impairment of
      property and equipment                        58             35
     Change in assets and liabilities:
       Accounts receivable - net               (26,009)        39,648
       Foreign currency forward exchange
        contracts                               (2,127)        (2,677)
       Inventories                             (17,776)        19,672
       Prepaid expenses and other assets        (2,126)          (277)
       Accounts payable                          3,466           (359)
       Accrued and other liabilities            13,998         (5,451)
       Income taxes payable                      4,290             81
                                          -------------  -------------

          Net cash provided by operating
           activities                            6,826         78,952
                                          -------------  -------------

INVESTING ACTIVITIES:
   Acquisition of property and equipment        (8,140)        (7,849)
   Purchases of investments                   (195,602)      (201,673)
   Proceeds from sold or matured
    investments                                189,441        268,200
   Acquisition of patents                       (5,990)            --
   Acquisition of minority interest             (2,000)            --
                                          -------------  -------------

          Net cash provided by (used in)
           investing activities                (22,291)        58,678
                                          -------------  -------------

FINANCING ACTIVITIES:
   Proceeds from issuance of common stock       10,410          4,154
   Redemption of convertible subordinated
    notes                                            -        (57,336)
   Payments on capital lease obligations           (24)           (20)
   Purchase of treasury stock                        -        (50,000)
                                          -------------  -------------

          Net cash provided by (used in)
           financing activities                 10,386       (103,202)
                                          -------------  -------------

EFFECT OF EXCHANGE RATE CHANGES ON CASH
 AND CASH EQUIVALENTS                           (1,847)           375
                                          -------------  -------------

NET INCREASE (DECREASE) IN CASH AND CASH
 EQUIVALENTS                                    (6,926)        34,803
CASH AND CASH EQUIVALENTS AT BEGINNING
 OF THE PERIOD                                 110,632        114,246
                                          ----------------------------

CASH AND CASH EQUIVALENTS AT END OF THE
 PERIOD                                       $103,706       $149,049
                                          =============  =============



SUPPLEMENTAL DISCLOSURE OF CASH FLOW
 INFORMATION:
   Interest paid                                $4,482         $4,324
                                          =============  =============
   Income taxes paid, net                       $2,159         $1,569
                                          =============  =============

    CONTACT: Cymer, Inc.
             Terry Slavin, 858-385-5232 (Investor Relations Contact)
             tslavin@cymer.com
             Meggan Powers, 858-385-6327 (Media Contact)
             mpowers@cymer.com

    SOURCE: Cymer, Inc.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding Cymer, Inc.'s business which are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's Annual Report or Form 10-K for the most recently ended fiscal year.