Lam Research Corporation

Lam Research Corporation Announces Financial Results for the Quarter Ended December 26, 2010

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

Lam Research Corporation
Financial Highlights for the Quarter Ended December 26, 2010
(in thousands, except per share data and percentages)
   
U.S. GAAP Ongoing
 
• Revenue: $ 870,714 $ 870,714
 
• Operating Margin: 27.7 % 27.7 %
 
• Net Income: $ 221,856 $ 217,093
 
• Diluted EPS: $ 1.78 $ 1.74
 

Lam Research Corporation today announced financial results for the quarter ended December 26, 2010. Revenue for the period was $870.7 million, gross margin was $407.4 million (46.8%), and net income was $221.9 million, or $1.78 per diluted share, compared to revenue of $805.9 million, gross margin of $377.3 million (46.8%), and net income of $193.7 million, or $1.55 per diluted share, for the September 2010 quarter. Shipments for the December 2010 quarter were $892 million compared to $808 million during the September 2010 quarter.

The Company's ongoing results for the December 2010 quarter exclude certain benefits for research and development tax credits. The Company's ongoing results for the September 2010 quarter exclude certain benefits for restructuring activities and asset impairments. Management uses the presentation of ongoing operating income, ongoing operating expenses, 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 net income, ongoing operating income, ongoing operating expenses, and ongoing operating margin 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 $217.1 million, or $1.74 per diluted share in the December 2010 quarter compared to ongoing net income of $190.6 million, or $1.52 per diluted share, for the September 2010 quarter. Ongoing operating expenses for the December 2010 quarter were $166.3 million compared with the September 2010 quarter of $158.5 million. This change is primarily due to increased research and development activities and enhanced levels of sales and marketing expense associated with customer joint development projects.

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

Region   Shipments   Revenue
North America 11 % 6 %
Europe 13 % 13 %
Japan 10 % 11 %
Korea 18 % 18 %
Taiwan 29 % 38 %
Asia Pacific 19 % 14 %
 

Cash and cash equivalents, short-term investments and restricted cash and investments balances were $1.2 billion at the end of the December 2010 quarter, compared to $1.1 billion at the end of the September 2010 quarter. Cash flows from operating activities were approximately $185.6 million during the December 2010 quarter. Deferred revenue and deferred profit balances at the end of the December 2010 quarter were $222.9 million and $135.1 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 $47.7 million as of December 26, 2010.

"Lam delivered record shipments, revenues and earnings per share for the December quarter. In calendar year 2010, our system shipments grew by nearly 200%, significantly outperforming the 120% growth in wafer fab equipment spending and leading to record levels of revenue and earnings at $3 billion and $5.35 per share respectively," stated Steve Newberry, chief executive officer and vice chairman of the board. "Our performance reflects the strong market share gains we achieved in 2010 across both etch and clean product lines. Looking ahead, we are focused on further strengthening our market positions by increasing our investments in field-based customer technology and productivity solutions, as well as core R&D programs targeted at meeting our customers' future technology needs."

Caution Regarding Forward-Looking Statements

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 of 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; our anticipated continued investments in field-based customer technology and productivity solutions as well as our core R&D programs, our ability to meet customers' future technology needs and our future market position. 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 27, 2010 and the report on Form 10-Q for the three months ended September 26, 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® company. For more information, visit www.lamresearch.com.

LAM RESEARCH CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data and percentages)
(unaudited)
         
Three Months Ended Six Months Ended
December 26, September 26, December 27, December 26, December 27,
2010 2010 2009 2010 2009
Revenue $ 870,714 $ 805,874 $ 487,176 $ 1,676,588 $ 805,724
Cost of goods sold 463,281 428,548 268,685 891,829 455,918
Cost of goods sold - 409A expense   -     -     (2,696 )   -     (5,816 )
Total costs of goods sold   463,281     428,548     265,989     891,829     450,102  
Gross margin 407,433 377,326 221,187 784,759 355,622
Gross margin as a percent of revenue 46.8 % 46.8 % 45.4 % 46.8 % 44.1 %
Research and development 90,477 86,353 82,171 176,830 153,370
Selling, general and administrative 75,852 72,142 60,111 147,994 112,230
Restructuring and asset impairments - (5,163 ) 5,919 (5,163 ) 8,012
409A expense   -     -     (18,362 )   -     (38,590 )
Total operating expenses   166,329     153,332     129,839     319,661     235,022  
Operating income 241,104 223,994 91,348 465,098 120,600
Operating margin as a percent of revenue 27.7 % 27.8 % 18.8 % 27.7 % 15.0 %
Other income (expense), net   1,038     (979 )   (58 )   59     (426 )
Income before income taxes 242,142 223,015 91,290 465,157 120,174
Income tax expense   20,286     29,291     21,716     49,577     33,803  
Net income $ 221,856   $ 193,724   $ 69,574   $ 415,580   $ 86,371  
Net income per share:
Basic net income per share $ 1.80   $ 1.57   $ 0.55   $ 3.37   $ 0.68  
Diluted net income per share $ 1.78   $ 1.55   $ 0.54   $ 3.32   $ 0.67  
Number of shares used in per share calculations:
Basic   123,101     123,665     127,296     123,384     127,035  
Diluted   124,786     125,202     128,829     124,999     128,389  
 
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
     
December 26, September 26, June 27,
2010 2010 2010
(unaudited) (unaudited) (1)
ASSETS
Cash and cash equivalents $ 729,060 $ 628,281 $ 545,767
Short-term investments 303,038 304,992 280,690
Accounts receivable, net 689,400 526,904 499,890
Inventories 333,874 338,335 318,479
Deferred income taxes 47,380 46,191 46,158
Other current assets   76,993   74,728   65,677  
Total current assets 2,179,745 1,919,431 1,756,661
Property and equipment, net 229,769 206,238 200,336
Restricted cash and investments 165,244 165,244 165,234
Deferred income taxes 28,030 26,968 26,218
Goodwill and intangible assets 225,671 231,688 236,906
Other assets   104,758   102,727   102,037  
Total assets $ 2,933,217 $ 2,652,296 $ 2,487,392  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 689,871 $ 612,397 $ 558,657  
 
Long-term debt and capital leases $ 16,524 $ 15,077 $ 17,645
Income taxes payable 118,323 114,946 110,462
Other long-term liabilities 23,720 23,248 32,493
Stockholders' equity   2,084,779   1,886,628   1,768,135  
Total liabilities and stockholders' equity $ 2,933,217 $ 2,652,296 $ 2,487,392  
 
1 Derived from audited financial statements
 
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
         
Three Months Ended Six Months Ended
December 26, September 26, December 27, December 26, December 27,
2010 2010 2009 2010 2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 221,856 $ 193,724 $ 69,574 $ 415,580 $ 86,371

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

Depreciation and amortization 18,663 17,948 18,184 36,611 35,865
Deferred income taxes (3,039 ) (783 ) 9,229 (3,822 ) 21,711
Restructuring charges, net - (5,163 ) 5,919 (5,163 ) 8,012
Equity-based compensation expense 12,759 13,009 13,259 25,768 27,217
Income tax benefit on equity-based compensation plans (918 ) 5,083 303 4,165 214
Excess tax benefit on equity-based compensation plans 711 (3,939 ) (235 ) (3,228 ) (603 )
Other, net (1,600 ) (1,964 ) 173 (3,564 ) 1,332
Changes in operating assets and liabilities:   (62,849 )   37,829     (43,096 )   (25,020 )   (104,105 )
Net cash provided by operating activities   185,583     255,744     73,310     441,327     76,014  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures and intangible assets (38,025 ) (19,130 ) (6,893 ) (57,155 ) (12,725 )
Net sales/maturities (purchases) of available-for-sale securities (1,160 ) (24,506 ) (1,016 ) (25,666 ) (10,791 )
Purchase of other investments - - - - (961 )
Proceeds from sale of assets 1,544 - - 1,544 -
Transfer of restricted cash and investments   -     (10 )   97     (10 )   (6,474 )
Net cash used for investing activities   (37,641 )   (43,646 )   (7,812 )   (81,287 )   (30,951 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt and capital lease obligations (78 ) (3,333 ) (689 ) (3,411 ) (2,604 )
Net proceeds from issuance of long-term debt - - 52 - 336
Excess tax benefit on equity-based compensation plans (711 ) 3,939 235 3,228 603
Cash paid in advance for stock repurchase contracts (50,000 ) - - (50,000 ) -
Treasury stock purchases (4,151 ) (144,795 ) (576 ) (148,946 ) (2,932 )
Reissuances of treasury stock - 7,155 - 7,155 5,761
Proceeds from issuance of common stock   3,407     835     4,126     4,242     6,382  
Net cash provided by (used for) financing activities   (51,533 )   (136,199 )   3,148     (187,732 )   7,546  
Effect of exchange rate changes on cash 4,370 6,615 357 10,985 3,390
Net increase in cash and cash equivalents 100,779 82,514 69,003 183,293 55,999
Cash and cash equivalents at beginning of period   628,281     545,767     361,163     545,767     374,167  
Cash and cash equivalents at end of period $ 729,060   $ 628,281   $ 430,166   $ 729,060   $ 430,166  
 
Reconciliation of U.S. GAAP Net Income to Ongoing Net Income
(in thousands, except per share data)
(unaudited)
   
Three Months Ended Three Months Ended
December 26, September 26,
2010 2010
U.S. GAAP net income $ 221,856 $ 193,724
Pre-tax non-ongoing items:
Restructuring and asset impairments - operating expenses - (5,163 )
Net tax expense on non-ongoing item - 2,061
Net tax benefit of R&D credit   (4,763 )   -  
Ongoing net income $ 217,093   $ 190,622  
Ongoing net income per diluted share $ 1.74   $ 1.52  
Number of shares used for diluted per share calculation 124,786 125,202
 
 

Reconciliation of U.S. GAAP Operating Expenses and Operating Income to Ongoing Operating Expenses and Operating Income

(in thousands, except percentages)
(unaudited)
 
Three Months Ended Three Months Ended
December 26, September 26,
2010 2010
U.S. GAAP gross margin $ 407,433 $ 377,326
 
U.S. GAAP operating expenses $ 166,329 $ 153,332
Pre-tax non-ongoing items:
Restructuring and asset impairments - operating expenses   -     5,163  
Ongoing operating expenses $ 166,329   $ 158,495  
Ongoing operating income $ 241,104   $ 218,831  
Ongoing operating margin as a percent of revenue 27.7 % 27.2 %
 
Reconciliation of U.S. GAAP Earnings to Ongoing Earnings Per Share
(in thousands, except per share data)
(unaudited)
 
Twelve Months Ended
December 26,
2010
U.S. GAAP net income $ 675,878
Pre-tax non-ongoing items:
Restructuring and asset impairments - cost of goods sold 3,438
Restructuring and asset impairments - operating expenses 8,139
Net tax expense on non-ongoing items (5,606 )
Net tax benefit of R&D credit   (4,763 )
Ongoing net income $ 677,086  
Ongoing net income per diluted share $ 5.35  
Number of shares used for diluted per share calculation* 126,590
 

* Shares for twelve months ended December 26, 2010 calculated using diluted share count for March through December 2010 quarters divided by four.

Lam Research Corporation
Shanye Hudson, 510-572-4589
Director, Investor Relations
shanye.hudson@lamresearch.com

Source: Lam Research Corporation

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