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Cymer Reports First Quarter 2006 Operating Results

SAN DIEGO--(BUSINESS WIRE)--April 18, 2006--Cymer, Inc. (Nasdaq:CYMI), the world's leading supplier of excimer laser light sources used in semiconductor manufacturing, today announced operating results for the first quarter ended March 31, 2006. First quarter revenue and gross margin exceeded the company's January 31, 2006 guidance, and Cymer achieved record quarterly bookings.

For the first quarter of 2006, net income rose to $20,603,000, equal to $0.52 per share (diluted), a 283 percent increase over net income of $5,385,000, equal to $0.14 per share (diluted), in the first quarter of 2005, and an 18 percent increase over net income of $17,468,000, equal to $0.48 per share (diluted), in the fourth quarter of 2005. Included in the first quarter 2006 net income are the effects of stock option expensing which became effective January 1, 2006. In addition, first quarter 2006 diluted earnings per share were calculated by applying the "if-converted" method associated with the company's convertible subordinated notes outstanding, as their effect was dilutive in the first quarter of 2006, whereas their effect was anti-dilutive in the first and fourth quarters of 2005.

Revenue for the first quarter of 2006 climbed to $127,117,000, a 50 percent increase over revenue of $84,810,000 in the first quarter of 2005, and a 24 percent increase over revenue of $102,793,000 in the fourth quarter of 2005.

Commenting on the first quarter of 2006, Bob Akins, Cymer's chief executive officer, said, "We continued successfully executing our initiatives to increase operating efficiencies and improve financial performance to grow shareholder value, evidenced in our gross margin increasing to 46 percent. We realized a 67 percent quarter-over-quarter increase in operating income on a 24 percent quarter-over-quarter increase in revenue, clearly demonstrating the operating leverage in our business model.

"We recognized revenue on 70 light sources in the first quarter, up 46 percent over the prior quarter," Akins continued. "During the first quarter, we were pleased to see that demand for our krypton fluoride (KrF) light sources grew more than we had anticipated. We also experienced continued strong shipments of our XLA Series of argon fluoride (ArF) products, with approximately 17 percent of system shipments being our most advanced XLA 200 and XLA 300 models. Our XLA 300 is targeted at high volume immersion production and we are currently installing the first unit of this model at a major chipmaker. While only 37 percent of light sources recognized for revenue in the first quarter were XLA Series models, due to their higher average selling price (ASP), they constituted 59 percent of systems revenue."

With the product mix more heavily weighted toward KrF light sources, Cymer's first quarter 2006 ASP declined to $970,000 on a currency adjusted basis. The quarterly average utilization of the company's light sources at chipmakers in the first quarter increased slightly over the previous quarter's level. This drove non-systems product revenue, which consists of consumables and spare parts, upgrades, and service, to $59,021,000 for the first quarter, equal to 46 percent of total revenue.

First quarter 2006 bookings rose to $135,575,000, the highest quarterly level in Cymer's history and a 13 percent increase over bookings of $119,819,000 in the prior quarter. The first quarter 2006 book-to-bill ratio was 1.07, and the quarter-end backlog totaled $99,299,000.

Cymer recorded operating income of $24,273,000, or 19 percent of revenue in the first quarter of 2006, compared to operating income of $14,493,000, or 14 percent of revenue, in the fourth quarter of 2005.

Nancy Baker, Cymer's chief financial officer, stated, "Cymer generated $869,000 in cash from operations in the first quarter of 2006 and incurred capital spending of $3,661,000, resulting in negative free cash flow of $2,792,000. Free cash flow is calculated as the net cash provided by operating activities less the acquisition of property and equipment. The quarter's negative free cash flow is primarily attributable to high account receivable balances resulting from back-end loaded shipments during the quarter, front-end loaded inventory levels to support forecasted growing demand, and the impact of classifying excess tax benefits from stock option exercises in financing activities rather than operating activities, in accordance with SFAS 123R. The receivable and inventory activities are primarily the result of ramping operations to meet 2006 growing demand. Therefore, Cymer expects to generate a significant amount of cash from operations in the second quarter and the remainder of 2006 as revenue and profitability continue to grow and inventory turns increase."

Corporate Outlook

Commenting on Cymer's outlook, Akins noted, "The growth opportunities we see for semiconductor equipment in general and for lithography in particular are based on strong continuing demand for consumer electronics. Medium-term growth opportunities are promising because of the large number of multi-year product cycles that are in early stages of development, including NAND flash-enabled portable devices, new video game platforms, and mobile broadband internet use, to name a few. Fab utilization was in the low to mid-90 percent range in the first quarter, and is expected to remain high in the near to medium term. A number of chipmakers have recently announced their intentions to increase their capital spending substantially either in 2006, or in both 2006 and 2007. Chipmakers' order patterns are remaining rational and disciplined relative to their lithography tool purchases, and we believe DUV lithography will grow even faster than lithography overall as more wafer layers must transition to DUV production."

Based on information available at this time, Cymer is currently providing the following guidance for the second quarter of 2006:

    --  We currently estimate that total revenue in the second quarter
        of 2006 should be up between 5 and 10 percent over first
        quarter 2006 revenue.

    --  We are forecasting that foreign currency adjusted ASPs should
        be relatively flat with the $970,000 reported for the first
        quarter of 2006. Growth in demand for lower priced, capacity
        related KrF light sources is offsetting ASP growth that would
        otherwise result from strong demand for our XLA Series of
        light sources.

    --  We expect that gross margin should be between 48 and 49

    --  We anticipate that R&D expenses should be between $18.5
        million and $19.5 million.

    --  We expect SG&A expenses to be between $17.0 million and $17.5

    --  Our 2006 estimated annual effective tax rate is expected to be
        approximately 34 percent, which is higher than our previous
        estimate due to an increase in our currently forecasted growth
        rate for 2006 and the associated rise in pre-tax income, as
        well as the expiration of the federal research credit which
        Congress has yet to renew for 2006.

Cymer's management will hold a conference call at 2:00 pm (PDT) today, April 18, 2006, to discuss first quarter 2006 results and second quarter guidance. This press release, the conference call and accompanying slides may be accessed on the investor relations page of 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 future cash generation and inventory turns increasing, and the statements under the caption "Corporate Outlook" above. 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 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 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 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. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. All forward-looking statements are qualified in their entirety by this cautionary statement, and the company undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this press release.

About Cymer

Cymer, Inc. is the world's leading supplier of DUV laser 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.

                     Free Cash Flow Reconciliation

    Cash provided by operating activities            $  869,000
    Less acquisition of property and equipment       $3,661,000
    Free cash flow                                  ($2,792,000)

Cymer, Inc.                               Three months ended March 31,
                                               2005          2006
Total revenues                              $84,810,000  $127,117,000

Net income                                   $5,385,000   $20,603,000
Diluted earnings per share                        $0.14         $0.52
Weighted average common and common
 equivalent shares outstanding (diluted)     37,230,000    41,126,000

(In thousands, except per share data)

                                               For the three months
                                                  ended March 31,
                                                   2005      2006
   Product sales                                 $84,609  $124,902
   Product sales - related party                       -     2,154
   Other                                             201        61
                                               ---------- ---------
     Total revenues                               84,810   127,117
                                               ---------- ---------

   Cost of product sales                          53,031    68,691
   Research and development                       14,624    18,124
   Sales and marketing                             5,774     6,849
   General and administrative                      6,304     9,180
                                               ---------- ---------

     Total costs and expenses                     79,733   102,844
                                               ---------- ---------

OPERATING INCOME                                   5,077    24,273
                                               ---------- ---------

   Foreign currency exchange gain (loss) - net      (194)      619
   Interest and other income                       2,401     6,986
   Interest and other expense                     (2,127)   (1,402)
                                               ---------- ---------

     Total other income - net                         80     6,203
                                               ---------- ---------

   AND MINORITY INTEREST                           5,157    30,476
                                               ---------- ---------

INCOME TAX PROVISION                                   -    10,554
MINORITY INTEREST                                    228       681
                                               ---------- ---------

NET INCOME                                        $5,385   $20,603
                                               ========== =========

   Basic earnings per share                        $0.15     $0.55
                                               ========== =========

   Weighted average common shares
    outstanding-basic                             36,884    37,278
                                               ========== =========

   Diluted earnings per share                      $0.14     $0.52 (a)
                                               ========== =========

   Weighted average common shares
    outstanding-diluted                           37,230    41,126 (a)
                                               ========== =========

(a) As a result of applying the if-converted method for calculating
    diluted earnings per share, shares have been adjusted by an
    additional 2.8 million assuming conversion of our 3.5% convertible
    subordinated notes, and net income has been adjusted by $873,000
    for an add back of related interest expense, net of tax.

(In thousands, except share data)

                                                December 31, March 31,
                                                    2005       2006

   Cash and cash equivalents                       $233,745  $269,937
   Short-term investments                           130,204   151,213
   Accounts receivable - net                         89,818   111,571
   Accounts receivable - related party                  588     2,789
   Foreign currency forward exchange contracts        1,776       276
   Inventories                                       89,046   101,252
   Deferred income taxes                             33,338    33,855
   Prepaid expenses and other assets                  6,497     5,963
                                                ----------- ----------

     Total current assets                           585,012   676,856

PROPERTY AND EQUIPMENT - NET                        117,251   115,252
LONG TERM INVESTMENTS                                29,395    29,369
DEFERRED INCOME TAXES                                34,429    29,603
GOODWILL - NET                                        8,358     8,833
INTANGIBLE ASSETS - NET                              10,474     9,839
OTHER ASSETS                                          6,457     6,116
                                                ----------- ----------

TOTAL ASSETS                                       $791,376  $875,868
                                                =========== ==========


   Accounts payable                                 $17,710   $23,911
   Accounts payable - related party                  $4,975    $4,157
   Accrued warranty and installation                 30,775    31,666
   Accrued payroll and benefits                      12,461    14,003
   Accrued patents, royalties and other fees          7,180     6,214
   Income taxes payable                               7,268     1,135
   Unearned income                                    1,726     1,782
   Accrued and other current liabilities              3,247     2,130
                                                ----------- ----------

     Total current liabilities                       85,342    84,998

CONVERTIBLE SUBORDINATED NOTES                      140,722   140,722
OTHER LIABILITIES                                    10,582    12,478
                                                ----------- ----------

     Total liabilities                              236,646   238,198
                                                ----------- ----------

MINORITY INTEREST                                    16,276     9,046
                                                ----------- ----------


   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
    38,036,000 and 39,869,000 shares                     38        40
   Additional paid-in capital                       407,549   474,312
   Treasury stock at cost (1,943,000 common
    shares)                                         (50,000)  (50,000)
   Accumulated other comprehensive loss              (9,025)   (6,223)
   Retained earnings                                189,892   210,495
                                                ----------- ----------

     Total stockholders' equity                     538,454   628,624
                                                ----------- ----------

                                                =========== ==========

(In thousands)

                                                  For the three months
                                                     ended March 31
                                                     2005      2006

   Net income                                        $5,385   $20,603
   Adjustments to reconcile net income to net
    cash provided by operating activities:
     Depreciation and amortization                    7,264     6,484
     Non-cash stock based compensation                  152     2,519
     Amortization of unearned compensation               16         -
     Minority interest                                 (228)     (681)
     Provision for deferred income taxes                 89     4,230
     Loss on disposal or impairment of property
      and equipment                                       2         6
     Change in assets and liabilities:
       Accounts receivable - net                     30,988   (21,753)
       Accounts receivable - related party                -    (2,201)
       Foreign currency forward exchange
        contracts                                    (1,898)    1,636
       Inventories                                    7,361   (12,206)
       Prepaid expenses and other assets                160       680
       Accounts payable                                 891     6,201
       Accounts payable - related party                   -      (818)
       Accrued and other liabilities                 (5,194)    2,246
       Unearned income                                  774        56
       Income taxes payable                          (1,289)   (6,133)
                                                 ----------- ---------

          Net cash provided by operating
           activities                                44,473       869
                                                 ----------- ---------

   Acquisition of property and equipment             (5,180)   (3,661)
   Purchases of investments                        (141,521)  (54,484)
   Proceeds from sold or matured investments        133,719    33,572
   Acquisition of minority interest                       -    (7,024)
                                                 ----------- ---------

          Net cash used in investing activities     (12,982)  (31,597)
                                                 ----------- ---------

   Proceeds from issuance of common stock             1,557    54,090
   Excess tax benefits from equity-based
    compensation plans                                    -    10,154
   Payments on capital lease obligations                (12)        -
   Purchase of treasury stock                        (8,287)        -
                                                 ----------- ---------

          Net cash provided by (used in)
           financing activities                      (6,742)   64,244
                                                 ----------- ---------

  CASH EQUIVALENTS                                      484     2,676
                                                 ----------- ---------

 PERIOD                                             114,246   233,745

                                                 =========== =========

   Interest paid                                     $3,627    $2,522
                                                 =========== =========
   Income taxes paid, net                            $1,356    $1,536
                                                 =========== =========

    CONTACT: Cymer, Inc.
             Investor Relations Contact:
             Terry Slavin, 858-385-5232
             Media Contact:
             Meggan Powers, 858-385-6327

    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.