Lam Research Corporation

Lam Research Corporation Announces Financial Results for the Quarter Ended December 25, 2011

FREMONT, CA -- (MARKET WIRE) -- 01/25/12 -- Lam Research Corporation's (NASDAQ: LRCX) highlights for the December 2011 quarter were:


                          Lam Research Corporation

        Financial Highlights for the Quarter Ended December 25, 2011

           (in thousands, except per share data and percentages)



                                                 U.S. GAAP       Non-GAAP

                                               -------------  -------------



Revenue:                                       $     583,981  $     583,981



Operating Margin:                                        8.1%           9.2%



Net Income:                                    $      33,212  $      41,013



Diluted EPS:                                   $        0.27  $        0.34

Lam Research Corporation today announced financial results for the quarter ended December 25, 2011. Revenue for the period was $584.0 million, gross margin was $234.8 million, or 40.2%, operating expenses were $187.3 million, and net income was $33.2 million, or $0.27 per diluted share, compared to revenue of $680.4 million, gross margin of $283.9 million, or 41.7%, operating expenses of $184.5 million, and net income of $71.8 million, or $0.58 per diluted share, for the September 2011 quarter. Shipments for the December 2011 quarter were $563 million compared to $580 million during the September 2011 quarter.

In addition to U.S. Generally Accepted Accounting Principles (GAAP) results, this commentary contains non-GAAP financial measures. The Company's non-GAAP results for both the December 2011 and September 2011 quarters exclude the amortization of convertible note discounts and certain costs for restructuring and impairments. Additionally, the Company's non-GAAP results for the December 2011 quarter exclude certain acquisition related costs. Management uses non-GAAP gross margin, operating income, operating expenses, operating margin, net income, and net income per diluted share to evaluate the Company's operating and financial results. The Company believes the presentation of non-GAAP results is useful to investors for analyzing business trends and comparing performance to prior periods, along with enhancing the investors' ability to view the Company's results from management's perspective. Tables presenting reconciliations of non-GAAP results to U.S. GAAP results are included at the end of this press release and on the Company's web site at http://investor.lamresearch.com.

Non-GAAP net income was $41.0 million, or $0.34 per diluted share, in the December 2011 quarter compared to non-GAAP net income of $78.3 million, or $0.63 per diluted share, for the September 2011 quarter. Non-GAAP gross margin for the December 2011 quarter was $234.0 million, or 40.1%, compared to non-GAAP gross margin of $283.9 million, or 41.7%, for the September 2011 quarter. The sequential decrease in gross margin was due to both lower factory and field utilization as a result of the decline in business volumes and product mix. Non-GAAP operating expenses for the December 2011 quarter decreased to $180.4 million compared with the September 2011 quarter of $182.8 million as a result of reductions in variable compensation associated with the operating income level.

The geographic distribution of shipments and revenue during the December 2011 quarter is shown in the following table:


     Region       Shipments      Revenue

--------------- ------------  ------------

North America             19%           18%

Europe                     8%            9%

Japan                     10%           14%

Korea                     37%           34%

Taiwan                    18%           17%

Asia Pacific               8%            8%

Cash and cash equivalents, short-term investments and restricted cash and investments balances were $2.4 billion at the end of the December 2011 quarter, compared to $2.2 billion at the end of the September 2011 quarter. The increase in cash and cash equivalents, short-term investments and restricted cash and investments balances during the quarter was primarily due to operating activities and the cash settlement of a stock repurchase agreement. Cash flows from operating activities were approximately $169.0 million or 29% of revenue during the December 2011 quarter. Deferred revenue and deferred profit balances at the end of the December 2011 quarter increased to $191.8 million and $117.3 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 $15.5 million as of December 25, 2011.

"Lam delivered solid financial results in the December quarter consistent with expectations, supported by initial leading edge capacity shipments across all segments," said Martin Anstice, Lam's president and chief executive officer. "Throughout 2011, we executed on our long-term growth strategy by investing in the technology and productivity solutions that address our customers' most critical needs and position Lam to solidify and grow its position in etch and single-wafer clean. In addition, as announced in December, we plan to extend our product and services portfolio and leadership in wafer fab equipment via the acquisition of Novellus Systems. We believe that the complementary market positions, technologies, product capabilities and leadership of both companies will provide more comprehensive and faster solutions to our customers and provide improved financial performance for our shareholders," Anstice concluded.

Participants in the Solicitation

The directors and executive officers of Lam Research and Novellus Systems, Inc. ("Novellus," and together with Lam Research and their subsidiaries, the "Merged Company") may be deemed to be participants in the solicitation of proxies in connection with the approval of the proposed merger of Lam Research and Novellus (the "Merger"). Lam Research plans to file the registration statement that includes the joint proxy statement/prospectus with the Securities and Exchange Commission ("SEC") in connection with the solicitation of proxies to approve the proposed transaction. Information regarding Lam Research's directors and executive officers and their respective interests in Lam Research by security holdings or otherwise is available in its Annual Report on Form 10-K filed with the SEC on August 19, 2011 and its Proxy Statement on Schedule 14A filed with the SEC on September 19, 2011. Information regarding Novellus Systems' directors and executive officers and their respective interests in Novellus Systems by security holdings or otherwise is available in its Annual Report on Form 10-K filed with the SEC on February 25, 2011 and its Proxy Statement on Schedule 14A filed with the SEC on April 8, 2011. Additional information regarding the interests of such potential participants is or will be included in the joint proxy statement/prospectus and registration statement, and other relevant materials to be filed with the SEC, when they become available, including in connection with the solicitation of proxies to approve the proposed transaction and to elect directors.

How to Find Further Information

This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities, or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. In connection with the proposed merger, Lam Research intends to file with the SEC a registration statement on Form S-4 that will include a joint proxy statement of Lam Research and Novellus Systems that also constitutes a prospectus of Lam Research. Lam Research and Novellus Systems will furnish the joint proxy statement/prospectus and other relevant documents to their respective security holders in connection with the proposed merger of Lam Research and Novellus Systems. BEFORE MAKING ANY VOTING OR INVESTMENT DECISION, WE URGE SECURITY HOLDERS AND INVESTORS TO READ THE JOINT PROXY STATEMENT/PROSPECTUS (INCLUDING ALL AMENDMENTS AND SUPPLEMENTS THERETO) AND OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT LAM RESEARCH AND NOVELLUS SYSTEMS AND THE PROPOSED MERGER. The proposals for the merger will be made solely through the joint proxy statement/prospectus. In addition, a copy of the joint proxy statement/prospectus (when it becomes available) may be obtained free of charge from Lam Research Corporation, Investor Relations, 4650 Cushing Parkway, Fremont, CA 94538-6401, or from Novellus Systems, Investor Relations, 4000 North First Street, San Jose, CA 95134. Security holders will be able to obtain, free of charge, copies of the joint proxy statement/prospectus and S-4 Registration Statement and any other documents filed by Lam Research or Novellus Systems with the SEC in connection with the proposed Merger at the SEC's website at http://www.sec.gov, and at the companies' websites at www.LamResearch.com and www.Novellus.com, respectively.

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, the closure of our acquisition of Novellus Systems and the benefits of that acquisition, such as faster customer solutions and better financial performance for our shareholders. Some factors that may affect these forward-looking statements include: the shareholder votes on the planned Novellus acquisition, business conditions in the consumer electronics industry, 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 26, 2011 and the report on Form 10-Q for the three months ended September 25, 2011. 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.

Nothing contained herein shall be deemed to be a forecast, projection or estimate of the future financial performance of Lam Research, Novellus Systems, or the Merged Company, following the implementation of the Merger or otherwise. No statement in this announcement should be interpreted to mean that the earnings per share, profits, margins or cash flows of Lam Research or the Merged Company for the current or future financial years would necessarily match or exceed the historical published figures.

Lam Research Corporation is a major supplier of wafer fabrication equipment and services to the world's semiconductor industry, where the company has been advancing semiconductor manufacturing for more than 30 years. As a technology and market share leader in plasma etch and single-wafer clean, Lam Research is leveraging its combined expertise to address some of today's most advanced semiconductor processing challenges. Headquartered in Fremont, Calif., Lam Research maintains a global network of service facilities throughout North America, Asia, and Europe to meet the complex and changing needs of its global customer base. Lam's common stock trades on The NASDAQ Global Select MarketSM under the symbol LRCX. Lam is a NASDAQ-100® company. For more information, visit http://www.lamresearch.com.

Consolidated Financial Tables Follow


                          LAM RESEARCH CORPORATION

              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

           (in thousands, except per share data and percentages)

                                (unaudited)



                          Three Months Ended            Six Months Ended

                   --------------------------------  ----------------------

                    December   September   December   December    December

                      25,         25,        26,         25,         26,

                      2011       2011        2010       2011        2010

                   ---------  ----------  ---------  ----------  ----------

Revenue            $ 583,981  $  680,436  $ 870,714  $1,264,417  $1,676,588



  Cost of goods

   sold              350,014     396,553    463,281     746,567     891,829

  Cost of goods

   sold -

   restructuring

   and asset

   impairments          (859)          -          -        (859)          -

                   ---------  ----------  ---------  ----------  ----------

    Total costs of

     goods sold      349,155     396,553    463,281     745,708     891,829

                   ---------  ----------  ---------  ----------  ----------

    Gross margin     234,826     283,883    407,433     518,709     784,759

    Gross margin

     as a percent

     of revenue         40.2%       41.7%      46.8%       41.0%       46.8%

Research and

 development         104,024     102,559     90,477     206,583     176,830

Selling, general

 and

 administrative       83,256      80,200     75,852     163,456     147,994

Restructuring and

 impairments               -       1,725          -       1,725      (5,163)

                   ---------  ----------  ---------  ----------  ----------

    Total

     operating

     expenses        187,280     184,484    166,329     371,764     319,661

                   ---------  ----------  ---------  ----------  ----------

    Operating

     income           47,546      99,399    241,104     146,945     465,098

    Operating

     margin as a

     percent of

     revenue             8.1%       14.6%      27.7%       11.6%       27.7%

Other income

 (expense), net       (7,785)    (12,073)     1,038     (19,858)         59

                   ---------  ----------  ---------  ----------  ----------

    Income before

     income taxes     39,761      87,326    242,142     127,087     465,157

Income tax expense     6,549      15,488     20,286      22,037      49,577

                   ---------  ----------  ---------  ----------  ----------

    Net income     $  33,212  $   71,838  $ 221,856  $  105,050  $  415,580

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

Net income per

 share:

  Basic net income

   per share       $    0.28  $     0.58  $    1.80  $     0.87  $     3.37

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

  Diluted net

   income per

   share           $    0.27  $     0.58  $    1.78  $     0.86  $     3.32

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

Number of shares

 used in per share

 calculations:

  Basic              119,739     123,130    123,101     121,435     123,384

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

  Diluted            120,873     124,049    124,786     122,382     124,999

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






                          LAM RESEARCH CORPORATION

                    CONDENSED CONSOLIDATED BALANCE SHEETS

                               (in thousands)



                                    December 25, September 25,    June 26,

                                        2011          2011          2011

                                   ------------- ------------- -------------

                                    (unaudited)   (unaudited)       (1)

ASSETS

Cash and cash equivalents          $   1,506,928 $   1,339,318 $   1,492,132

Short-term investments                   712,856       713,087       630,115

Accounts receivable, net                 462,243       523,240       590,568

Inventories                              373,130       396,301       396,607

Deferred income taxes                     78,479        78,330        78,435

Other current assets                      79,215        81,740        85,408

                                   ------------- ------------- -------------

  Total current assets                 3,212,851     3,132,016     3,273,265

Property and equipment, net              272,409       266,411       270,458

Restricted cash and investments          165,217       165,239       165,256

Deferred income taxes                      4,184         4,718         3,892

Goodwill and intangible assets           207,568       212,087       216,616

Other assets                             115,918       117,870       124,380

                                   ------------- ------------- -------------

  Total assets                     $   3,978,147 $   3,898,341 $   4,053,867

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



LIABILITIES AND STOCKHOLDERS'

 EQUITY

Current liabilities                $     593,605 $     591,981 $     680,759

                                   ------------- ------------- -------------



Long-term debt, convertible notes,

 and capital leases                $     749,078 $     743,252 $     738,488

Income taxes payable                     115,616       116,509       113,582

Other long-term liabilities               57,104        56,717        51,193

Stockholders' equity                   2,462,744     2,389,882     2,469,845

                                   ------------- ------------- -------------

  Total liabilities and

   stockholders' equity            $   3,978,147 $   3,898,341 $   4,053,867

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





(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    September   December   December    December

                       25,         25,        26,         25,        26,

                      2011        2011        2010       2011        2010

                   ----------  ----------  ---------  ----------  ---------

CASH FLOWS FROM

 OPERATING

 ACTIVITIES:

Net income         $   33,212  $   71,838  $ 221,856  $  105,050  $ 415,580

Adjustments to

 reconcile net

 income to net

 cash provided by

 (used for)

 operating

 activities:

  Depreciation and

   amortization        22,372      21,360     18,663      43,732     36,611

  Deferred income

   taxes                 (633)          -     (3,039)       (633)    (3,822)

  Restructuring

   and impairment

   charges, net          (859)      1,725          -         866     (5,163)

  Equity-based

   compensation

   expense             18,224      17,744     12,759      35,968     25,768

  Income tax

   benefit on

   equity-based

   compensation

   plans                  470         659       (918)      1,129      4,165

  Excess tax

   benefit on

   equity-based

   compensation

   plans                 (204)     (1,951)       711      (2,155)    (3,228)

  Amortization of

   convertible

   note discount        6,671       6,593          -      13,264          -

  Impairment of

   investment               -       1,724          -       1,724          -

  Loss on equity

   method

   investment             202           -          -         202          -

  Other, net              881       1,423     (1,600)      2,304     (3,564)

  Changes in

   operating

   assets and

   liabilities:        88,680     (34,215)   (62,849)     54,465    (25,020)

                   ----------  ----------  ---------  ----------  ---------

    Net cash

     provided by

     operating

     activities       169,016      86,900    185,583     255,916    441,327

                   ----------  ----------  ---------  ----------  ---------



CASH FLOWS FROM

 INVESTING

 ACTIVITIES:

Capital

 expenditures and

 intangible assets    (26,682)    (15,732)   (38,025)    (42,414)   (57,155)

Net

 sales/maturities

 (purchases) of

 available-for-

 sale securities       (4,194)    (85,259)    (1,160)    (89,453)   (25,666)

Purchase of equity

 method investment    (10,740)          -          -     (10,740)         -

Receipt of loan

 payments               8,375           -          -       8,375          -

Proceeds from sale

 of assets              2,677           -      1,544       2,677      1,544

Transfer of

 restricted cash

 and investments            3          17          -          20        (10)

                   ----------  ----------  ---------  ----------  ---------

    Net cash used

     for investing

     activities       (30,561)   (100,974)   (37,641)   (131,535)   (81,287)

                   ----------  ----------  ---------  ----------  ---------



CASH FLOWS FROM

 FINANCING

 ACTIVITIES:

Principal payments

 on long-term debt

 and capital lease

 obligations           (1,576)     (1,564)       (78)     (3,140)    (3,411)

Excess tax benefit

 on equity-based

 compensation

 plans                    204       1,951       (711)      2,155      3,228

Net cash received

 in settlement

 (paid in advance

 for) stock

 repurchase

 contracts             51,005     (75,000)   (50,000)    (23,995)   (50,000)

Treasury stock

 purchases            (20,642)    (72,053)    (4,151)    (92,695)  (148,946)

Reissuances of

 treasury stock

 related to

 employee stock

 purchase plan              -       8,858          -       8,858      7,155

Proceeds from

 issuance of

 common stock           1,311         164      3,407       1,475      4,242

                   ----------  ----------  ---------  ----------  ---------

    Net cash

     provided by

     (used for)

     financing

     activities        30,302    (137,644)   (51,533)   (107,342)  (187,732)

                   ----------  ----------  ---------  ----------  ---------

Effect of exchange

 rate changes on

 cash                  (1,147)     (1,096)     4,370      (2,243)    10,985

Net increase

 (decrease) in

 cash and cash

 equivalents          167,610    (152,814)   100,779      14,796    183,293

Cash and cash

 equivalents at

 beginning of

 period             1,339,318   1,492,132    628,281   1,492,132    545,767

                   ----------  ----------  ---------  ----------  ---------

Cash and cash

 equivalents at

 end of period     $1,506,928  $1,339,318  $ 729,060  $1,506,928  $ 729,060

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




       Reconciliation of U.S. GAAP Net Income to Non-GAAP Net Income

                   (in thousands, except per share data)

                                (unaudited)



                                                Three Months   Three Months

                                                   Ended          Ended

                                               -------------  -------------

                                                December 25,  September 25,

                                                    2011           2011

                                               -------------  -------------

U.S. GAAP net income                           $      33,212  $      71,838

Pre-tax non-GAAP items:

  Restructuring and impairments - cost of

   goods sold                                           (859)             -

  Restructuring and impairments - operating

   expenses                                                -          1,725

  Acquisition costs - operating expenses               6,860              -

  Amortization of convertible note discount -

   other income (expense), net                         6,671          6,593

  Impairment of investment - other income

   (expense), net                                          -          1,724

Net tax benefit on non-GAAP items                     (4,871)        (3,615)

                                               -------------  -------------

Non-GAAP net income                            $      41,013  $      78,265

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

Non-GAAP net income per diluted share          $        0.34  $        0.63

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

Number of shares used for diluted per share

 calculation                                         120,873        124,049





 Reconciliation of U.S. GAAP Gross Margin, Operating Expenses and Operating

                      Income to Non-GAAP Gross Margin,

                   Operating Expenses and Operating Income

                     (in thousands, except percentages)

                                (unaudited)



                                                Three Months   Three Months

                                                   Ended          Ended

                                               -------------  -------------

                                                December 25,  September 25,

                                                    2011           2011

                                               -------------  -------------

U.S. GAAP gross margin                         $     234,826  $     283,883

Pre-tax non-GAAP items:

  Restructuring and impairments - cost of

   goods sold                                           (859)             -

                                               -------------  -------------

Non-GAAP gross margin                          $     233,967  $     283,883

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

U.S. GAAP gross margin as a percentage of

 revenue                                                40.2%          41.7%

Non-GAAP gross margin as a percentage of

 revenue                                                40.1%          41.7%



U.S. GAAP operating expenses                   $     187,280  $     184,484

Pre-tax non-GAAP items:

  Restructuring and impairments - operating

   expenses                                                -         (1,725)

  Acquisition costs - operating expenses              (6,860)             -

                                               -------------  -------------

Non-GAAP operating expenses                    $     180,420  $     182,759

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

Non-GAAP operating income                      $      53,547  $     101,124

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

Non-GAAP operating margin as a percent of

 revenue                                                 9.2%          14.9%



Lam Research Corporation Contact:

Shanye Hudson

Director, Investor Relations

Phone: 510-572-4589

e-mail: shanye.hudson@lamresearch.com



Source: Lam Research Corporation

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