Lam Research Corporation

Lam Research Corporation Announces Earnings for the Quarter Ended June 29, 2008

FREMONT, Calif., Jul 29, 2008 (BUSINESS WIRE) -- Lam Research Corporation (NASDAQ:LRCX) highlights for the June 2008 quarter were:

        (in thousands, except per share data and percentages)
----------------------------------------------------------------------

-- Revenue:                              $566,160

-- Operating Margin:    U.S. GAAP:           11.3% Ongoing:      15.3%

-- Net Income:          U.S. GAAP:       $ 72,178  Ongoing:   $75,837

-- Diluted EPS:         U.S. GAAP:       $   0.57  Ongoing:   $  0.60

Lam Research Corporation today announced earnings for the quarter ended June 29, 2008. Revenue for the period was $566.2 million, gross margin was $234.7 million and net income was $72.2 million, or $0.57 per diluted share, compared to revenue of $613.8 million, gross margin of $287.2 million and net income of $103.5 million, or $0.82 per diluted share for the March 2008 quarter. Shipments for the June 2008 quarter were $495 million compared to $658 million during the March 2008 quarter.

The Company's ongoing results for the June quarter exclude certain costs for restructuring activities and asset impairments related to an accelerated integration of SEZ, a net tax benefit as the result of the successful resolution of certain foreign tax matters, foreign currency gains on the purchase of SEZ, and costs associated with its voluntary internal stock option review. The Company's March 2008 quarter excluded certain costs related to the recent acquisition of SEZ, including the foreign currency gains on the purchase and the one-time charge for in-process research and development expense as well as the costs associated with its voluntary internal stock option review. Management uses the presentation of ongoing gross margin, ongoing operating income, ongoing net income, and ongoing diluted earnings per share to evaluate the Company's operating and financial results. The Company believes the presentation of ongoing results is useful to investors for analyzing ongoing business trends and comparing performance to prior periods, and enhances the investor's ability to view the Company's results from management's perspective. A table presenting a reconciliation of ongoing results to results under U.S. GAAP is included at the end of this press release and on the Company's web site.

Ongoing net income was $75.8 million, or $0.60 per diluted share in the June 2008 quarter compared to ongoing net income of $109.8 million, or $0.87 per diluted share, for the March 2008 quarter. Ongoing gross margin for the June 2008 quarter was $247.3 million or 43.7% compared to ongoing gross margin of $293.6 million, or 47.8%, for the March 2008 quarter. The sequential decline was primarily due to unfavorable customer and product mix, factory utilization levels, and inclusion of a full quarter of SEZ results. Ongoing operating expenses for the June 2008 quarter increased to $160.7 million compared with the March 2008 quarter of $148.9 million. This increase was due to the inclusion of a full quarter of SEZ results.

The geographic distribution of shipments and revenue during the June 2008 quarter is shown in the following table:

           Region                    Shipments            Revenue
----------------------------- ----------------------- ----------------
North America                                13%              14%
Europe                                        9%               9%
Japan                                        26%              20%
Korea                                        22%              28%
Asia Pacific                                 30%              29%

Cash and cash equivalents, short-term investments and restricted cash and investments balances increased to $1.2 billion at the end of the June 2008 quarter compared to $1.0 billion at the end of the March 2008 quarter. Cash flows from operating activities were $198.3 million during the June quarter. Deferred revenue and deferred profit balances at the end of the June 2008 quarter were $193.6 million and $128.3 million, respectively. At the end of the June 2008 period, the anticipated future revenue value of orders shipped to Japanese customers that is not recorded as deferred revenue was approximately $52 million.

"During this period of continued reductions in wafer fab equipment investment, Lam Research is leveraging its flexible business model to reduce expenses while utilizing our strong cash generation capability to allow for continued strong investments in R&D activities, both in etch and adjacent new markets, that offer the opportunity for significant long-term revenue and earnings expansion," said Steve Newberry, Lam's president and chief executive officer.

"The largest of those new opportunities is in single-wafer clean, where we continue to make significant investments. We have created a new organization for all of our clean products by integrating SEZ together with our C3 linear clean technology and 2300 Coronus plasma bevel clean divisions. We expect the investments in our family of clean products will provide us an excellent opportunity to grow our business in a market that we expect to double in size over the next few years," Newberry concluded.

Statements made in this press release which are not statements of historical fact are forward-looking statements and are subject to the safe harbor provisions created by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements relate, but are not limited, to the future revenue value of orders shipped to Japanese customers, our expectations for wafer fab equipment investment, the leverage we can obtain from our business model and our ability and plan to reduce expenses, the value of continued investments in R&D activities and our family of clean products, the existence and magnitude of any opportunity for long-term revenue and earnings expansion, and the anticipated size of the market for our family of clean products. Some factors that may affect these forward-looking statements include: changing business conditions in the semiconductor industry and the overall economy and the efficacy of our plans for reacting to those changes, changing customer demands, success of our competitors' strategies including their development of new technologies, and the technical challenges presented by our new products. These forward-looking statements are based on current expectations and are subject to uncertainties and changes in condition, significance, value and effect as well as other risks detailed in documents filed with the Securities and Exchange Commission, including specifically the report on Form 10-K for the year ended June 24, 2007, and Forms 10-Q for the quarters ended September 23, 2007, December 23, 2007, and March 30, 2008, which could cause actual results to vary from expectations. The Company undertakes no obligation to update the information or statements made in this press release.

Lam Research Corporation is a major provider of wafer fabrication equipment and services to the world's semiconductor industry. Lam's common stock trades on The NASDAQ Global Select Market(SM) under the symbol LRCX. Lam is a NASDAQ-100 (R) company. The Company's World Wide Web address is www.lamresearch.com.

Consolidated Financial Tables Follow

                       LAM RESEARCH CORPORATION
                CONSOLIDATED STATEMENTS OF OPERATIONS
        (in thousands, except per share data and percentages)


                                           Three Months Ended
                                   ----------------------------------
                                    June 29,    March 30,   June 24,
                                      2008        2008        2007
                                   ----------- ----------- ----------
                                   (unaudited) (unaudited) (unaudited)
Total revenue                      $  566,160  $  613,810  $ 678,519
 Cost of goods sold                   318,900     320,201    335,790
 Cost of goods sold -
  restructuring and asset
  impairments                          12,610           -          -
 Cost of goods sold - 409A expense          -       6,401          -
                                   ----------- ----------- ----------
  Total costs of goods sold           331,510     326,602    335,790
                                   ----------- ----------- ----------
  Gross margin                        234,650     287,208    342,729
  Gross margin as a percent of
   revenue                               41.4%       46.8%      50.5%
Research and development               86,652      80,576     79,601
Selling, general and
 administrative                        77,704      74,491     62,779
409A expense                                -      43,784          -
Restructuring and asset
 impairments                            6,366           -          -
In-process research and
 development                                -       2,074          -
                                   ----------- ----------- ----------
  Total operating expenses            170,722     200,925    142,380
                                   ----------- ----------- ----------
  Operating income                     63,928      86,283    200,349
  Operating margin as a percent of
   revenue                               11.3%       14.1%      29.5%
Other income, net                      10,344      49,605     10,872
                                   ----------- ----------- ----------
  Income before income taxes           74,272     135,888    211,221
Income tax expense                      2,094      32,364     40,990
                                   ----------- ----------- ----------
  Net income                       $   72,178  $  103,524  $ 170,231
                                   =========== =========== ==========
Net income per share:
  Basic net income per share       $     0.58  $     0.83  $    1.31
                                   =========== =========== ==========
  Diluted net income per share     $     0.57  $     0.82  $    1.28
                                   =========== =========== ==========
Number of shares used in per share
 calculations:
  Basic                               125,046     124,768    130,169
                                   =========== =========== ==========
  Diluted                             126,657     126,549    132,868
                                   =========== =========== ==========



                                                Twelve Months Ended
                                              ------------------------
                                               June 29,     June 24,
                                                 2008         2007
                                              -----------  -----------
                                              (unaudited)      (1)
Total revenue                                 $2,474,911   $2,566,576
 Cost of goods sold                            1,282,494    1,261,522
 Cost of goods sold - restructuring and asset
  impairments                                     12,610            -
 Cost of goods sold - 409A expense                 6,401            -
                                              -----------  -----------
  Total costs of goods sold                    1,301,505    1,261,522
                                              -----------  -----------
  Gross margin                                 1,173,406    1,305,054
  Gross margin as a percent of revenue              47.4%        50.8%
Research and development                         323,759      285,348
Selling, general and administrative              287,992      241,046
409A expense                                      43,784            -
Restructuring and asset impairments                6,366            -
In-process research and development                2,074            -
                                              -----------  -----------
  Total operating expenses                       663,975      526,394
                                              -----------  -----------
  Operating income                               509,431      778,660
  Operating margin as a percent of revenue          20.6%        30.3%
Other income, net                                 67,545       69,063
                                              -----------  -----------
  Income before income taxes                     576,976      847,723
Income tax expense                               137,627      161,907
                                              -----------  -----------
  Net income                                  $  439,349   $  685,816
                                              ===========  ===========
Net income per share:
  Basic net income per share                  $     3.52   $     4.94
                                              ===========  ===========
  Diluted net income per share                $     3.47   $     4.85
                                              ===========  ===========
Number of shares used in per share
 calculations:
  Basic                                          124,647      138,714
                                              ===========  ===========
  Diluted                                        126,504      141,524
                                              ===========  ===========


(1) Derived from audited financial statements

                       LAM RESEARCH CORPORATION
                CONDENSED CONSOLIDATED BALANCE SHEETS
                            (in thousands)

                                    June 29,    March 30,   June 24,
                                       2008        2008        2007
                                   ----------- ----------- -----------
                                   (unaudited) (unaudited)     (1)
ASSETS
Cash and cash equivalents          $   781,181 $   552,353 $   573,967
Short-term investments                 277,555     290,542      96,724
Accounts receivable, net               412,356     599,719     410,013
Inventories                            282,218     305,802     235,431
Deferred income taxes                   96,748      76,725      61,727
Other current assets                    67,649      65,542      38,499
                                   ----------- ----------- -----------
   Total current assets              1,917,707   1,890,683   1,416,361
Property and equipment, net            235,735     231,748     113,725
Restricted cash and investments        146,072     169,841     360,038
Deferred income taxes                   19,793      35,164      27,414
Goodwill and intangible assets         403,187     391,909     130,650
Other assets                            84,261      74,919      53,417
                                   ----------- ----------- -----------
    Total assets                   $ 2,806,755 $ 2,794,264 $ 2,101,605
                                   =========== =========== ===========

LIABILITIES AND STOCKHOLDERS'
 EQUITY
Current liabilities                $   637,679 $   725,042 $   672,798
                                   ----------- ----------- -----------

Long-term debt and capital leases  $   276,503 $   287,330 $   250,000
Income taxes payable                    85,611      85,501           -
Other long-term liabilities             23,018      23,060       2,487
Minority interests                       5,347       9,274           -
Stockholders' equity                 1,778,597   1,664,057   1,176,320
                                   ----------- ----------- -----------
    Total liabilities and
     stockholders' equity          $ 2,806,755 $ 2,794,264 $ 2,101,605
                                   =========== =========== ===========

(1) Derived from audited financial statements

                       LAM RESEARCH CORPORATION
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (in thousands)


                                           Three Months Ended
                                   ----------------------------------
                                    June 29,    March 30,   June 24,
                                       2008        2008       2007
                                   ----------- ----------- ----------
                                   (unaudited) (unaudited) (unaudited)
CASH FLOWS FROM OPERATING
 ACTIVITIES:
Net income                           $ 72,178   $ 103,524  $ 170,231

Adjustments to reconcile net income
 to net cash provided by operating
 activities:
 Depreciation and amortization         19,227      12,914     10,920
 Deferred income taxes                 (4,652)    (11,995)     8,334
 Equity-based compensation expense     11,629      10,272     11,766
 Income tax benefit on equity-based
  compensation plans                   26,815        (520)    12,621
 Excess tax benefit on equity-based
  compensation plans                  (21,666)        401    (10,449)
 Net gain on settlement of call
  option                                  399     (33,694)         -
 Restructuring and asset
  impairments                          18,976           -          -
 Other, net                              (996)    (14,183)       597
 Changes in operating asset
  accounts                             76,377      79,266     89,473
                                   ----------- ----------- ----------
  Net cash provided by operating
   activities                         198,287     145,985    293,493
                                   ----------- ----------- ----------

CASH FLOWS FROM INVESTING
 ACTIVITIES:
Capital expenditures and intangible
 assets                               (18,951)    (19,291)   (14,305)
Acquisitions of businesses, net of
 cash acquired                         (4,758)   (475,656)    (4,000)
Sales of other investments                  -           -      3,000
Net sales (purchases) of available-
 for-sale securities                   16,150      83,201    540,076
Purchase of call option                     -      (3,227)         -
Proceeds from settlement of call
 option                                   383      46,962          -
Purchase of other investments               -           -          -
Transfer of restricted cash and
 investments                           17,233        (688)         -
Other                                       -       2,248          -
                                   ----------- ----------- ----------
  Net cash provided by (used for)
   investing activities                10,057    (366,451)   524,771
                                   ----------- ----------- ----------

CASH FLOWS FROM FINANCING
 ACTIVITIES:
Principal payments on long-term
 debt and capital lease obligations    (1,500)   (250,114)       (51)
Net proceeds from issuance of long-
 term debt                              1,915     250,000          -
Excess tax benefit on equity-based
 compensation plans                    21,666        (401)    10,449
Treasury stock purchases               (3,590)       (737)  (768,400)
Reissuances of treasury stock           1,262           -      6,835
Proceeds from issuance of common
 stock                                  2,588           -     12,175
                                   ----------- ----------- ----------
  Net cash provided by (used for)
   financing activities                22,341      (1,252)  (738,992)
                                   ----------- ----------- ----------
Effect of exchange rate changes on
 cash                                  (1,857)     (1,984)      (112)
Net increase (decrease) in cash and
 cash equivalents                     228,828    (223,702)    79,160
Cash and cash equivalents at
 beginning of period                  552,353     776,055    494,807
                                   ----------- ----------- ----------
Cash and cash equivalents at end of
 period                              $781,181   $ 552,353  $ 573,967
                                   =========== =========== ==========



                                                Twelve Months Ended
                                              ------------------------
                                               June 29,     June 24,
                                                  2008        2007
                                              ----------- ------------
                                              (unaudited)     (1)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                     $ 439,349  $   685,816

Adjustments to reconcile net income to net
 cash provided by operating activities:
 Depreciation and amortization                    54,704       38,097
 Deferred income taxes                           (26,661)      17,055
 Equity-based compensation expense                42,516       35,554
 Income tax benefit on equity-based
  compensation plans                              83,472       62,437
 Excess tax benefit on equity-based
  compensation plans                             (58,904)     (44,990)
 Net gain on settlement of call option           (33,295)           -
 Restructuring and asset impairments              18,976            -
 Other, net                                       (3,863)         625
 Changes in operating asset accounts              71,865       28,965
                                              ----------- ------------
  Net cash provided by operating activities      588,159      823,559
                                              ----------- ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures and intangible assets       (76,803)     (59,968)
Acquisitions of businesses, net of cash
 acquired                                       (480,414)    (181,108)
Sales of other investments                             -        3,000
Net sales (purchases) of available-for-sale
 securities                                       67,466       45,230
Purchase of call option                          (13,506)           -
Proceeds from settlement of call option           47,345            -
Purchase of other investments                     (4,560)           -
Transfer of restricted cash and investments       15,471      110,000
Other                                                  -            -
                                              ----------- ------------
  Net cash provided by (used for) investing
   activities                                   (445,001)     (82,846)
                                              ----------- ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt and
 capital lease obligations                      (251,714)    (100,171)
Net proceeds from issuance of long-term debt     251,915            -
Excess tax benefit on equity-based
 compensation plans                               58,904       44,990
Treasury stock purchases                         (14,552)  (1,083,745)
Reissuances of treasury stock                      8,563       18,123
Proceeds from issuance of common stock            12,694       42,468
                                              ----------- ------------
  Net cash provided by (used for) financing
   activities                                     65,810   (1,078,335)
                                              ----------- ------------
Effect of exchange rate changes on cash           (1,754)         774
Net increase (decrease) in cash and cash
 equivalents                                     207,214     (336,848)
Cash and cash equivalents at beginning of
 period                                          573,967      910,815
                                              ----------- ------------
Cash and cash equivalents at end of period     $ 781,181  $   573,967
                                              =========== ============


(1) Derived from audited financial statements

     Reconciliation of U.S. GAAP Net Income to Ongoing Net Income
        (in thousands, except per share data and percentages)

                                                    Three     Three
                                                    Months    Months
                                                     Ended     Ended
                                                   --------- ---------
                                                   June 29,  March 30,
                                                     2008      2008
                                                   --------- ---------
U.S. GAAP net income                               $ 72,178  $103,524
Pre-tax non-ongoing items:
  Restructuring and asset impairments - cost of
   goods sold                                        12,610         -
  Restructuring and asset impairments - operating
   expenses                                           6,366         -
  409A expense - cost of goods sold                       -     6,401
  409A expense - operating expenses                       -    43,784
  Voluntary internal stock option review -
   operating expenses                                 3,669     6,190
  Foreign exchange gain on SEZ acquisition - other
   income (expense), net                               (570)  (49,285)
  Net tax benefit on ongoing items                   (6,141)   (2,861)
In-process r&d for SEZ acquisition - operating
 expenses                                                 -     2,074
Net tax benefit on successful resolution of certain
 foreign tax matters                                (12,275)        -
                                                   --------- ---------
Ongoing net income                                 $ 75,837  $109,827
                                                   ========= =========
Ongoing net income per diluted share               $   0.60  $   0.87
                                                   ========= =========
Number of shares used for diluted per share
 calculation                                        126,657   126,549
U.S. GAAP income tax rate                               2.8%     23.8%
Ongoing income tax rate                                21.3%     24.3%


  Reconciliation of U.S. GAAP Gross Margin, Operating Expenses and
   Operating Income to Ongoing Gross Margin, Operating Expenses and
                           Operating Income
                  (in thousands, except percentages)

                                                    Three     Three
                                                    Months    Months
                                                     Ended     Ended
                                                   --------- ---------
                                                   June 29,  March 30,
                                                     2008      2008
                                                   --------- ---------
U.S. GAAP gross margin                             $234,650  $287,208
Pre-tax non-ongoing items:
  Restructuring and asset impairments - cost of
   goods sold                                        12,610         -
  409A expense - cost of goods sold                       -     6,401
                                                   --------- ---------
Ongoing gross margin                               $247,260  $293,609
                                                   ===================
U.S. GAAP gross margin as a percent of revenue         41.4%     46.8%
Ongoing gross margin as a percent of revenue           43.7%     47.8%
U.S. GAAP operating expenses                       $170,722  $200,925
Pre-tax non-ongoing items:
  Restructuring and asset impairments - operating
   expenses                                          (6,366)        -
  409A expense - operating expenses                       -   (43,784)
  Voluntary internal stock option review -
   operating expenses                                (3,669)   (6,190)
In-process r&d for SEZ acquisition - operating
 expenses                                                 -    (2,074)
                                                   --------- ---------
Ongoing operating expenses                         $160,687  $148,877
                                                   ========= =========
Ongoing operating income                           $ 86,573  $144,732
                                                   ========= =========
Ongoing operating income as a percent of revenue       15.3%     23.6%

SOURCE: Lam Research

Lam Research Corporation
Carol Raeburn, 510-572-4450
Senior Director, Investor Relations
carol.raeburn@lamresearch.com

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