Lam Research Corporation

Lam Research Corporation Announces Financial Results for the Quarter Ended December 28, 2008

FREMONT, Calif., Jan 28, 2009 (BUSINESS WIRE) -- Lam Research Corporation (NASDAQ:LRCX) highlights for the December 2008 quarter were:

(in thousands, except per share data and percentages)
                   
  Revenue:       $ 283,409          
                   
  Operating Margin:   U.S. GAAP:     -13.2 %   Ongoing:     -6.1 %
                   
  Net Loss:   U.S. GAAP:   $ (24,172 )   Ongoing:   $ (11,748 )
                   
  Diluted EPS:   U.S. GAAP:   $ (0.19 )   Ongoing:   $ (0.09 )

Lam Research Corporation today announced financial results for the quarter ended December 28, 2008. Revenue for the period was $283.4 million, gross margin was $101.4 million and net loss was $(24.2) million, or $(0.19) per diluted share, compared to revenue of $440.4 million, gross margin of $183.1 million and net income of $8.9 million, or $0.07 per diluted share, for the September 2008 quarter. Shipments for the December 2008 quarter were $226 million compared to $345 million during the September 2008 quarter.

The Company's ongoing results for the December 2008 quarter exclude certain costs for restructuring activities and asset impairments designed to better align the Company's cost structure with its business opportunities in consideration of market and economic uncertainties, a net tax benefit related to the renewal of the research and development tax credit, net tax expense on resolution of certain tax items, one-time costs associated with the restructuring of an employee benefit plan, exchange rate loss associated with the Company's accelerated tax planning strategy, and interest on the tax liability associated with the outcome of the Company's previously disclosed voluntary internal stock option review. The Company's September 2008 quarter excluded certain costs for restructuring activities and asset impairments related to the integration of SEZ, net tax expense on accelerated tax planning strategy, and interest on the tax liability associated with the outcome of the Company's previously disclosed 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 loss was $(11.7) million, or $(0.09) per diluted share in the December 2008 quarter compared to ongoing net income of $32.6 million, or $0.26 per diluted share, for the September 2008 quarter. Ongoing gross margin for the December 2008 quarter was $109.1 million or 38.5%, compared to ongoing gross margin of $186.2 million, or 42.3%, for the September 2008 quarter. The sequential decline in gross margin was primarily due to reduced manufacturing and field utilization levels and product mix challenges resulting from the reduced business activity. Ongoing operating expenses for the December 2008 quarter decreased to $126.5 million compared with the September 2008 quarter of $149.9 million. This decrease was driven by a reduction in employee variable compensation expenses, a reduction in deferred compensation liabilities due to recent stock market declines, and the partial quarter impact of the Company's December quarter restructuring activities.

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

Region   Shipments   Revenue
North America   17 %   15 %
Europe   12 %   10 %
Japan   22 %   28 %
Korea   17 %   22 %
Asia Pacific   32 %   25 %

Cash and cash equivalents, short-term investments and restricted cash and investments balances were $1.1 billion at the end of the December 2008 quarter, compared to $1.2 billion at the end of the September 2008 quarter. Cash flows from operating activities were approximately $(39.0) million during the December quarter. Deferred revenue and deferred profit balances at the end of the December 2008 quarter were $68.4 million and $54.2 million, respectively. At the end of the December 2008 quarter, the anticipated future revenue value of orders shipped to Japanese customers that was not recorded as deferred revenue was approximately $8.6 million.

"The global semiconductor industry has entered one of the most difficult periods in its history, one that is presenting severe challenges to our customers and thus severely limiting investment in wafer fab equipment," said Steve Newberry, Lam's president and chief executive officer. "While this environment will persist near-term, we remain optimistic about our long-term technology roadmap in etch, clean and other new markets. During the pause in customer spending we are strategically targeting our capital resources to new penetration opportunities, qualifying our next-generation tools and delivering cost-effective technology solutions aimed at reducing our customers' production costs. Our objective through these actions is to deliver superior value to our customers and emerge from this period of reduced spending well positioned to deliver strong financial and operational performance," 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 our ability to align our cost structure with our business opportunities, our future plans, areas of focus, and technology roadmap, our expectations for our ability to deliver long term strong financial and operational performance, our belief that our efforts will help us emerge from the current environment in a strong position to enable future revenue and profit growth, and our ability to succeed in delivering cost effective technology solutions to our customers. Some factors that may affect these forward-looking statements include: difficult business conditions in the semiconductor industry and the overall economy and the efficacy of our plans for reacting to those conditions, factors that tend to make our quarterly results more volatile (such as exchange rate fluctuations), changing customer demands, and the challenges presented by our new products and the integration of acquired businesses and technologies into our existing business. 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 29, 2008, and Form 10-Q for the quarter ended September 28, 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 ® company. For more information, visit www.lamresearch.com.

LAM RESEARCH CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data and percentages)
(unaudited)
                     
    Three Months Ended   Six Months Ended
    December 28,   September 28,   December 23,   December 28,   December 23,
      2008       2008       2007       2008       2007  
Total revenue   $ 283,409     $ 440,361     $ 610,320     $ 723,770     $ 1,294,941  
Cost of goods sold     174,329       254,203       302,659       428,532       643,393  
Cost of goods sold - restructuring and asset impairments     7,728       3,048       -       10,776       -  
Total cost of goods sold     182,057       257,251       302,659       439,308       643,393  
Gross margin     101,352       183,110       307,661       284,462       651,548  
Gross margin as a percent of revenue     35.8 %     41.6 %     50.4 %     39.3 %     50.3 %
Research and development     68,781       81,563       80,243       150,344       156,531  
Selling, general and administrative     59,842       69,060       66,084       128,902       135,797  
Restructuring and asset impairments     10,121       15,968       -       26,089       -  
Total operating expenses     138,744       166,591       146,327       305,335       292,328  
Operating income (loss)     (37,392 )     16,519       161,334       (20,873 )     359,220  
Operating margin as a percent of revenue     -13.2 %     3.8 %     26.4 %     -2.9 %     27.7 %
Other income (expense), net     (7,233 )     9,017       (37 )     1,784       7,596  
Income (loss) before income taxes     (44,625 )     25,536       161,297       (19,089 )     366,816  
Income tax expense (benefit)     (20,453 )     16,663       46,238       (3,790 )     103,169  
Net income (loss)   $ (24,172 )   $ 8,873     $ 115,059     $ (15,299 )   $ 263,647  
Net income (loss) per share:                    
Basic net income (loss) per share   $ (0.19 )   $ 0.07     $ 0.92     $ (0.12 )   $ 2.12  
Diluted net income (loss) per share   $ (0.19 )   $ 0.07     $ 0.91     $ (0.12 )   $ 2.08  
Number of shares used in per share calculations:                    
Basic     125,084       125,527       124,685       125,266       124,370  
Diluted     125,084       126,819       126,653       125,266       126,523  
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
             
    December 28,   September 28,   June 29,
      2008     2008     2008
    (unaudited)   (unaudited)    

(1)

ASSETS            
Cash and cash equivalents   $ 652,913   $ 745,432   $ 732,537
Short-term investments     297,399     313,803     326,199
Accounts receivable, net     290,565     311,633     412,356
Inventories     269,959     272,215     282,218
Deferred income taxes     93,002     95,186     96,748
Other current assets     56,648     69,983     67,649
Total current assets     1,660,486     1,808,252     1,917,707
Property and equipment, net     233,250     230,377     235,735
Restricted cash and investments     168,405     156,148     146,072
Deferred income taxes     25,836     33,762     19,793
Goodwill and intangible assets     371,987     374,538     403,187
Other assets     78,457     81,493     84,261
Total assets   $ 2,538,421   $ 2,684,570   $ 2,806,755
             
LIABILITIES AND STOCKHOLDERS' EQUITY            
Current liabilities   $ 446,412   $ 533,722   $ 637,679
             
Long-term debt and capital leases   $ 257,135   $ 269,256   $ 276,121
Income taxes payable     92,382     94,184     85,611
Other long-term liabilities     21,300     21,875     23,400
Minority interests     -     4,789     5,347
Stockholders' equity     1,721,192     1,760,744     1,778,597
Total liabilities and stockholders' equity   $ 2,538,421   $ 2,684,570   $ 2,806,755
             
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 28,   September 28,   December 23,   December 28,   December 23,
      2008       2008       2007       2008       2007  
                     
CASH FLOWS FROM OPERATING ACTIVITIES:                    
Net income (loss)   $ (24,172 )   $ 8,873     $ 115,059     $ (15,299 )   $ 263,647  
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:                    
                   
Depreciation and amortization     17,177       17,896       11,324       35,073       22,563  
Deferred income taxes     10,110       (12,407 )     776       (2,297 )     (10,014 )
Equity-based compensation expense     14,049       15,408       9,813       29,457       20,615  
Income tax benefit on equity-based compensation plans     (7,045 )     5,039       21,277       (2,006 )     57,177  
Excess tax benefit on equity-based compensation plans     3,752       (4,269 )     (16,488 )     (517 )     (37,639 )
Restructuring and asset impairments     17,849       19,016       -       36,865       -  
Other, net     3,200       2,665       9,939       5,865       11,316  
Changes in operating asset accounts     (73,909 )     (9,089 )     (130,260 )     (82,998 )     (83,778 )
Net cash provided by (used for) operating activities     (38,989 )     43,132       21,440       4,143       243,887  
                     
CASH FLOWS FROM INVESTING ACTIVITIES:                    
Capital expenditures and intangible assets     (12,417 )     (15,151 )     (24,417 )     (27,568 )     (38,561 )
Acquisitions of businesses, net of cash acquired     (8,763 )     (2,427 )     -       (11,190 )     -  
Net sales (purchases) of available-for-sale securities     39,767       6,980       (15,900 )     46,747       (31,885 )
Purchase of call option     -       -       (10,279 )     -       (10,279 )
Purchases of other investments     -       -       (4,560 )     -       (4,560 )
Other     (2,000 )     -       (2,248 )     (2,000 )     (2,248 )
Transfer of restricted cash and investments     (32,178 )     (16,128 )     (1,074 )     (48,306 )     (1,074 )
Net cash used for investing activities     (15,591 )     (26,726 )     (58,478 )     (42,317 )     (88,607 )
                     
CASH FLOWS FROM FINANCING ACTIVITIES:                    
Principal payments on long-term debt and capital lease obligations     (13,060 )     (2,390 )     (51 )     (15,450 )     (100 )
Net proceeds from issuance of long-term debt     515       127       -       642       -  
Excess tax benefit on equity-based compensation plans     (3,752 )     4,269       16,488       517       37,639  
Treasury stock purchases     (24,448 )     (2,755 )     (761 )     (27,203 )     (10,225 )
Reissuances of treasury stock     -       7,584       -       7,584       7,301  
Proceeds from issuance of common stock     1,294       3,150       3,398       4,444       10,106  
Net cash provided by (used for) financing activities     (39,451 )     9,985       19,074       (29,466 )     44,721  
Effect of exchange rate changes on cash     1,512       (13,496 )     851       (11,984 )     2,087  
Net increase (decrease) in cash and cash equivalents     (92,519 )     12,895       (17,113 )     (79,624 )     202,088  
Cash and cash equivalents at beginning of period     745,432       732,537       793,168       732,537       573,967  
Cash and cash equivalents at end of period   $ 652,913     $ 745,432     $ 776,055     $ 652,913     $ 776,055  
Reconciliation of U.S. GAAP Net Income (Loss) to Ongoing Net Income (Loss)
(in thousands, except per share data and percentages)
         
    Three Months Ended   Three Months Ended
    December 28,   September 28,
      2008       2008  
U.S. GAAP net income (loss)   $ (24,172 )   $ 8,873  
Pre-tax non-ongoing items:        
Restructuring and asset impairments - cost of goods sold     7,728       3,048  
Restructuring and asset impairments - operating expenses     10,121       15,968  
Restructuring of employee benefit plan - operating expenses     1,300       -  
Voluntary internal stock option review - operating expenses     843       761  
Exchange rate loss associated with accelerated tax planning strategy - other income (expense), net     7,569       -  
Net tax benefit on non-ongoing items     (7,375 )     (5,325 )
Net tax benefit on renewal of r&d tax credit     (5,751 )     -  
Net tax expense on resolution of certain tax matters     1,396       -  
Net tax expense (benefit) on accelerated tax planning strategy     (3,407 )     9,310  
Ongoing net income (loss)   $ (11,748 )   $ 32,635  
Ongoing net income (loss) per diluted share   $ (0.09 )   $ 0.26  
Number of shares used for diluted per share calculation     125,084       126,819  
U.S. GAAP income tax rate     45.8 %     65.3 %
Ongoing income tax rate     31.2 %     28.0 %
         
         
Reconciliation of U.S. GAAP Gross Margin, Operating Expenses and Operating Income (Loss) to Ongoing Gross Margin, Operating Expenses and Operating Income (Loss)
(in thousands, except percentages)
         
    Three Months Ended   Three Months Ended
    December 28,   September 28,
      2008       2008  
U.S. GAAP gross margin   $ 101,352     $ 183,110  
Pre-tax non-ongoing items:        
Restructuring and asset impairments - cost of goods sold     7,728       3,048  
Ongoing gross margin   $ 109,080     $ 186,158  
U.S. GAAP gross margin as a percent of revenue     35.8 %     41.6 %
Ongoing gross margin as a percent of revenue     38.5 %     42.3 %
U.S. GAAP operating expenses   $ 138,744     $ 166,591  
Pre-tax non-ongoing items:        
Restructuring and asset impairments - operating expenses     (10,121 )     (15,968 )
Restructuring of employee benefit plan - operating expenses     (1,300 )     -  
Voluntary internal stock option review - operating expenses     (843 )     (761 )
Ongoing operating expenses   $ 126,480     $ 149,862  
Ongoing operating income (loss)   $ (17,400 )   $ 36,296  
Ongoing operating income (loss) as a percent of revenue     -6.1 %     8.2 %

SOURCE: Lam Research Corporation

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

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