Lam Research Corporation

Lam Research Corporation Announces Financial Results for the Quarter Ended June 27, 2010

FREMONT, Calif., Jul 28, 2010 (BUSINESS WIRE) -- Lam Research Corporation (NASDAQ: LRCX) highlights for the June 2010 quarter were:

Lam Research Corporation
Financial Highlights for the Quarter Ended June 27, 2010
(in thousands, except per share data and percentages)
U.S. GAAP Ongoing
- Revenue: $ 695,289 $ 695,289
- Operating Margin: 22.4 % 24.8 %
- Net Income: $ 139,997 $ 149,070
- Diluted EPS: $ 1.10 $ 1.17

Lam Research Corporation today announced financial results for the quarter ended June 27, 2010. Revenue for the period was $695.3 million, gross margin was $321.4 million and net income was $140.0 million, or $1.10 per diluted share, compared to revenue of $632.8 million, gross margin of $292.9 million and net income of $120.3 million, or $0.94 per diluted share, for the March 2010 quarter. Shipments for the June 2010 quarter were $694 million compared to $735 million during the March 2010 quarter.

The Company's ongoing results for the June 2010 quarter exclude certain costs for restructuring activities and asset impairments. There were no adjustments to U.S. GAAP results to determine ongoing results for the March 2010 quarter. Management uses the presentation of ongoing gross margin, ongoing operating expenses, ongoing operating income, ongoing operating margin, ongoing net income, and ongoing net income per diluted share to evaluate the Company's operating and financial results. The Company believes the presentation of ongoing results is useful to investors for analyzing business trends and comparing performance to prior periods, along with enhancing 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 at http://investor.lamrc.com.

Ongoing net income was $149.1 million, or $1.17 per diluted share in the June 2010 quarter compared to ongoing net income of $120.3 million, or $0.94 per diluted share, for the March 2010 quarter. Ongoing gross margin for the June 2010 quarter was $324.9 million or 46.7%, compared to ongoing gross margin of $292.9 million, or 46.3%, for the March 2010 quarter. The sequential increase in gross margin was primarily due to improved factory and field utilization and a more favorable product mix. Ongoing operating expenses for the June 2010 quarter increased to $152.4 million compared with the March 2010 quarter of $143.8 million. This change is a result of higher R&D spending related to customer penetration activities associated with new products and increased variable compensation resulting from improved overall financial performance.

The geographic distribution of shipments and revenue during the June 2010 quarter is shown in the following table:

Region Shipments Revenue
North America 8% 8%
Europe 10% 7%
Japan 22% 17%
Korea 29% 27%
Taiwan 23% 33%
Asia Pacific 8% 8%

Cash and cash equivalents, short-term investments and restricted cash and investments balances were $991.7 million at the end of the June 2010 quarter, compared to $843.8 million at the end of the March 2010 quarter. Cash flows from operating activities were approximately $165.4 million during the June 2010 quarter. Deferred revenue and deferred profit balances at the end of the June 2010 quarter were $207.4 million and $123.2 million, respectively. Lam's deferred revenue balance does not include shipments to Japanese customers, to whom title does not transfer until customer acceptance. Shipments to Japanese customers are classified as inventory at cost until the time of acceptance. The anticipated future revenue from shipments to Japanese customers was approximately $52 million as of June 27, 2010.

"Market share gains and solid execution drove strong results for the June quarter," said Steve Newberry, Lam's president and chief executive officer. "We believe that we will achieve substantial shipped market share gains in both the etch and clean businesses for calendar year 2010. We continued to win important new applications in the first half of 2010 in both businesses."

"We are committed to creating value for our customers and shareholders and believe that we are demonstrating the results of that commitment through our business and financial performance," Newberry concluded.

Statements made in this press release that 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 anticipated revenue from shipments to Japanese customers and continued market share gains for both the etch and clean businesses. Some factors that may affect these forward-looking statements include: business conditions in the semiconductor industry and the overall economy; the strength of the financial performance of our existing and prospective customers; the introduction of new and innovative technologies; the occurrence and pace of technology transitions and conversions; the actions of our competitors, consumers, semiconductor companies and key suppliers and subcontractors; and the success of research and development and sales and marketing programs. 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 by us with the Securities and Exchange Commission, including specifically our report on Form 10-K for the year ended June 28, 2009 and the reports on Form 10-Q for the three months ended September 27, 2009, December 27, 2009, and March 28, 2010. These uncertainties and changes 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. For more information, visit www.lamresearch.com.

LAM RESEARCH CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data and percentages)
Three Months Ended Twelve Months Ended
June 27, March 28, June 28, June 27, June 28,
2010 2010 2009 2010 2009
(unaudited) (unaudited) (unaudited) (unaudited) (1)
Total revenue $ 695,289 $ 632,763 $ 217,764 $ 2,133,776 $ 1,115,946
Cost of goods sold 370,409 339,892 150,007 1,166,219 706,219
Cost of goods sold - restructuring and asset impairments 3,438 - - 3,438 20,993
Cost of goods sold - 409A expense - - - (10,168 ) -
Total costs of goods sold 373,847 339,892 150,007 1,159,489 727,212
Gross margin 321,442 292,871 67,757 974,287 388,734
Gross margin as a percent of revenue 46.2 % 46.3 % 31.1 % 45.7 % 34.8 %
Research and development 85,644 81,845 67,491 320,859 288,269
Selling, general and administrative 66,779 61,933 47,248 240,942 233,061
Goodwill impairment - - 7,179 - 96,255
Restructuring and asset impairments 13,302 - 5,396 21,314 44,513
409A expense - - 982 (34,238 ) 3,232
Legal judgment - - 4,647 - 4,647
Total operating expenses 165,725 143,778 132,943 548,877 669,977
Operating income (loss) 155,717 149,093 (65,186 ) 425,410 (281,243 )
Operating margin as a percent of revenue 22.4 % 23.6 % -29.9 % 19.9 % -25.2 %
Other income, net 3,541 1,616 2,869 4,731 18,150
Income (loss) before income taxes 159,258 150,709 (62,317 ) 430,141 (263,093 )
Income tax expense 19,261 30,408 26,173 83,472 39,055
Net income (loss) $ 139,997 $ 120,301 $ (88,490 ) $ 346,669 $ (302,148 )
Net income (loss) per share:
Basic net income (loss) per share $ 1.11 $ 0.94 $ (0.70 ) $ 2.73 $ (2.41 )
Diluted net income (loss) per share $ 1.10 $ 0.94 $ (0.70 ) $ 2.71 $ (2.41 )
Number of shares used in per share calculations:
Basic 126,339 127,307 126,273 126,933 125,595
Diluted 127,786 128,587 126,273 128,126 125,595
1 Derived from audited financial statements
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
June 27, March 28, June 28,
2010 2010 2009
(unaudited) (unaudited) (1)
ASSETS
Cash and cash equivalents $ 545,767 $ 461,369 $ 374,167
Short-term investments 280,690 217,178 205,221
Accounts receivable, net 499,890 521,810 253,585
Inventories 318,479 281,469 233,410
Deferred income taxes 46,158 49,363 69,043
Other current assets 65,677 73,546 101,714
Total current assets 1,756,661 1,604,735 1,237,140
Property and equipment, net 200,336 203,037 215,666
Restricted cash and investments 165,234 165,284 178,439
Deferred income taxes 26,218 14,380 17,007
Goodwill and intangible assets 236,906 242,868 260,787
Other assets 102,037 94,055 84,145
Total assets $ 2,487,392 $ 2,324,359 $ 1,993,184
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 558,657 $ 533,361 $ 382,076
Long-term debt and capital leases $ 17,645 $ 20,314 $ 40,886
Income taxes payable 110,462 113,364 102,999
Other long-term liabilities 32,493 12,872 14,134
Stockholders' equity 1,768,135 1,644,448 1,453,089
Total liabilities and stockholders' equity $ 2,487,392 $ 2,324,359 $ 1,993,184
1 Derived from audited financial statements
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended Twelve Months Ended
June 27, March 28, June 28, June 27, June 28,
2010 2010 2009 2010 2009
(unaudited) (unaudited) (unaudited) (unaudited) (1)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 139,997 $ 120,301 $ (88,490 ) $ 346,669 $ (302,148 )

Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:

Depreciation and amortization 17,664 17,872 17,694 71,401 72,417
Deferred income taxes (8,633 ) 640 19,913 13,718 30,545
Restructuring charges, net 16,740 - 5,396 24,752 65,506
Goodwill impairment - - 7,179 - 96,255
Equity-based compensation expense 12,329 10,917 13,358 50,463 53,042
Income tax benefit on equity-based compensation plans 9,944 477 (1,173 ) 10,635 (14,294 )
Excess tax benefit on equity-based compensation plans (9,261 ) (370 ) (237 ) (10,234 ) 6,273
Other, net 648 1,210 2,535 3,190 9,353
Changes in operating asset and liabilities: (13,995 ) (41,781 ) (34,295 ) (159,881 ) (95,078 )
Net cash provided by (used for) operating activities 165,433 109,266 (58,120 ) 350,713 (78,129 )
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures and intangible assets (12,042 ) (10,823 ) (5,848 ) (35,590 ) (44,282 )
Acquisitions of businesses, net of cash acquired - - - - (19,457 )
Net sales/maturities (purchases) of available-for-sale securities (63,958 ) (3,238 ) 93,056 (77,987 ) 173,764
Purchase of other investments (1,223 ) - - (2,184 ) (3,439 )
Transfer of restricted cash and investments 50 19,629 (44,458 ) 13,205 (92,206 )
Other (800 ) - 2,000 (800 ) (8,375 )
Net cash provided by (used for) investing activities (77,973 ) 5,568 44,750 (103,356 ) 6,005
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt and capital lease obligations (616 ) (17,820 ) (911 ) (21,040 ) (256,047 )
Net proceeds from issuance of long-term debt - - - 336 625
Excess tax benefit on equity-based compensation plans 9,261 370 237 10,234 (6,273 )
Treasury stock purchases (17,860 ) (72,240 ) (3,197 ) (93,032 ) (30,946 )
Reissuances of treasury stock 6,173 5,518 6,271 17,452 19,797
Proceeds from issuance of common stock 5,563 1,441 6,287 13,386 12,014
Net cash provided by (used for) financing activities 2,521 (82,731 ) 8,687 (72,664 ) (260,830 )
Effect of exchange rate changes on cash (5,583 ) (900 ) 4,202 (3,093 ) (25,416 )
Net increase (decrease) in cash and cash equivalents 84,398 31,203 (481 ) 171,600 (358,370 )
Cash and cash equivalents at beginning of period 461,369 430,166 374,648 374,167 732,537
Cash and cash equivalents at end of period $ 545,767 $ 461,369 $ 374,167 $ 545,767 $ 374,167
1 Derived from audited financial statements
Reconciliation of U.S. GAAP Net Income to Ongoing Net Income
(in thousands, except per share data)
(unaudited)
Three Months Ended Three Months Ended
June 27, March 28,
2010 2010
U.S. GAAP net income $ 139,997 $ 120,301
Pre-tax non-ongoing items:
Restructuring and asset impairments - cost of goods sold 3,438 -
Restructuring and asset impairments - operating expenses 13,302 -
Net tax (benefit) on non-ongoing items (7,667 ) -
Ongoing net income $ 149,070 $ 120,301
Ongoing net income per diluted share $ 1.17 $ 0.94
Number of shares used for diluted per share calculation 127,786 128,587

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)
(unaudited)
Three Months Ended Three Months Ended
June 27, March 28,
2010 2010
U.S. GAAP gross margin $ 321,442 $ 292,871
Pre-tax non-ongoing items:
Restructuring and asset impairments - cost of goods sold 3,438 -
Ongoing gross margin $ 324,880 $ 292,871
U.S. GAAP gross margin as a percent of revenue 46.2 % 46.3 %
Ongoing gross margin as a percent of revenue 46.7 % 46.3 %
U.S. GAAP operating expenses $ 165,725 $ 143,778
Pre-tax non-ongoing items:
Restructuring and asset impairments - operating expenses (13,302 ) -
Ongoing operating expenses $ 152,423 $ 143,778
Ongoing operating income $ 172,457 $ 149,093
Ongoing operating margin as a percent of revenue 24.8 % 23.6 %

SOURCE: Lam Research Corporation

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

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