LRCX Lam Research Corporation

Lam Research Corporation (Nasdaq:LRCX) today announced earnings for the quarter ended June 26, 2005. Revenue for the period was $353.8 million, and net income was $66.5 million, or $0.47 per diluted share, compared to revenue of $349.3 million and net income of $59.5 million, or $0.41 per diluted share, for the March 2005 quarter. Gross margin was $175.9 million and operating expenses were $93.3 million for the June 2005 quarter compared to gross margin of $174.6 million and operating expenses of $95.9 million for the March 2005 quarter. The Company believes the presentation of ongoing results, which excludes certain special items, is useful for analyzing ongoing business trends. In the June 2005 quarter, there were no significant differences between the ongoing results and the results under U.S. Generally Accepted Accounting Principles (GAAP). The March 2005 quarter ongoing presentation removed the effects of a tax refund, which was recorded in selling, general and administrative expenses as well as additional liabilities for unoccupied facilities included in prior restructuring plans. Tables presenting reconciliations of ongoing performance to results under U.S. GAAP are included at the end of this press release and on the Company's web site. Ongoing gross margin for the June 2005 quarter was 49.7 percent of revenue compared to 50.0 percent of revenue in the March 2005 quarter. In the period, ongoing operating expenses increased as planned to $93.3 million from $89.7 million in March 2005, primarily due to accelerated R&D investments. Other income increased due to higher interest income and foreign currency gains. Ongoing net income increased to $66.5 million, or $0.47 per diluted share, in the June 2005 quarter compared with ongoing net income of $64.1 million, or $0.44 per diluted share, for the March 2005 quarter. New orders recorded in backlog remained flat sequentially at $315 million. The geographic distribution of new orders as well as revenue during the June quarter is shown in the following table: -0- *T Region New Orders Revenue ------------- ---------- ------- North America 9% 16% Europe 12% 17% Japan 28% 14% Korea 16% 21% Asia Pacific 35% 32% *T Cash, short-term investments and restricted cash balances increased to $894.3 million at the end of June, and cash flows from operations were $134 million during the quarter. Deferred revenue and deferred profit balances were $150.5 million and $89.7 million, respectively. At the end of the period, unshipped orders in backlog were approximately $351 million, and the anticipated future revenue value of orders shipped from backlog to Japanese customers that are not recorded as deferred revenue was approximately $53 million. "We are pleased with the results for this quarter," stated Steve Newberry, president and chief executive officer for Lam. "We continue to execute to our market share and profitability objectives, despite what has remained a challenging industry environment. "We have made significant strides during the June quarter in advancing our position at leading-edge applications among our global customer base. Customers are selecting Lam based on our extensive production experience and our expertise with new and more challenging integration processes. Our commitment to providing superior products and services plays an important role in our customers' continuous efforts to increase productivity and yield on their leading-edge devices. "We delivered another quarter marked by strong cash generation and market share success. I commend the entire team here at Lam for delivering value for our customers and shareholders," 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 future financial performance, our future plans for products and services, our ability to execute to market share and profitability objectives, and our future ability to develop and produce leading-edge applications and expertise that meet our customers' productivity and yield objectives. Some factors that may affect these forward-looking statements include: changing business conditions in the semiconductor industry and our plans for reacting to those changes, changing customer demands, our competitors' development of new technologies that could affect our market share, the success of our research and development programs, and our ability to develop and retain personnel with expertise needed for our success and valued by our customers. 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 reports on Form 10-K for the year ended June 27, 2004, and the Form 10-Q for the quarter ended March 27, 2005, 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 supplier of wafer fabrication equipment and services to the world's semiconductor industry. Lam's common stock trades on the Nasdaq National Market under the symbol LRCX. The Company's World Wide Web address is http://www.lamrc.com. Consolidated Financial Tables Follow -0- *T LAM RESEARCH CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data and percentages) Three Months Ended Twelve Months Ended ----------------------------------- --------------------- June 26, March 27, June 27, June 26, June 27, 2005 2005 2004 2005 2004 ----------- ----------- ----------- ----------- --------- (unaudited) (unaudited) (unaudited) (unaudited) (1) Total revenue $353,767 $349,337 $329,572 $1,502,453 $935,946 Cost of goods sold 177,908 174,767 170,369 738,361 506,548 Cost of goods sold - restruc- turing recoveries - - - - (1,651) ----------- ----------- ----------- ----------- --------- Total cost of goods sold 177,908 174,767 170,369 738,361 504,897 Gross margin 175,859 174,570 159,203 764,092 431,049 Gross margin as a percent of revenue 49.7% 50.0% 48.3% 50.9% 46.1% Research and develop- ment 49,474 47,226 49,961 194,115 170,479 Selling, general and admini- strative 43,854 34,518 40,711 164,774 146,063 Restruc- turing charges, net - 14,201 - 14,201 8,327 ----------- ----------- ----------- ----------- --------- Total operat- ing expenses 93,328 95,945 90,672 373,090 324,869 Operating income 82,531 78,625 68,531 391,002 106,180 Other income, net 6,171 643 1,676 8,120 4,470 ----------- ----------- ----------- ----------- --------- Income before income taxes 88,702 79,268 70,207 399,122 110,650 Income tax expense 22,176 19,817 17,552 99,781 27,662 ----------- ----------- ----------- ----------- --------- Net income $66,526 $59,451 $52,655 $299,341 $82,988 =========== =========== =========== =========== ========= Net income per share: Basic $0.48 $0.42 $0.39 $2.17 $0.63 =========== =========== =========== =========== ========= Diluted(2) $0.47 $0.41 $0.38 $2.10 $0.59 =========== =========== =========== =========== ========= Number of shares used in per share calcu- lations: Basic 138,208 139,967 134,414 137,727 131,776 =========== =========== =========== =========== ========= Diluted(2) 142,518 144,756 139,820 142,417 144,928 =========== =========== =========== =========== ========= (1) Derived from audited financial statements. (2) Diluted net income per share for the twelve months ended June 27, 2004 includes the assumed conversion of convertible 4% notes. Accordingly, interest expense, net of taxes, of $3.2 million must be added back to net income for computing diluted earnings per share. LAM RESEARCH CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) June 26, March 27, June 27, 2005 2005 2004 (unaudited) (unaudited) (1) ----------- ----------- ----------- Assets: Cash, cash equivalents and short- term investments $809,253 $726,292 $429,472 Accounts receivable, net 232,005 257,496 245,508 Inventories 110,051 120,353 108,249 Other current assets 93,527 79,739 113,159 ----------- ----------- ----------- Total current assets 1,244,836 1,183,880 896,388 Property and equipment, net 41,082 43,167 42,444 Restricted cash 85,038 112,468 112,468 Other assets 77,859 143,506 147,326 ----------- ----------- ----------- Total assets $1,448,815 $1,483,021 $1,198,626 =========== =========== =========== Liabilities and stockholders' equity: Current liabilities $379,133 $375,352 $376,606 ----------- ----------- ----------- Other long-term liabilities $2,786 $3,318 $9,554 Stockholders' equity 1,066,896 1,104,351 812,466 ----------- ----------- ----------- Total liabilities and stockholders' equity $1,448,815 $1,483,021 $1,198,626 =========== =========== =========== (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 Months Ended ---------------------------- June 26, March 27, 2005 2005 -------------- ------------- U.S. GAAP net income $66,526 $59,451 Pre-tax net tax refund - operating expenses - (7,962) Pre-tax net restructuring charges - operating expenses - 14,201 Tax benefit on net restructuring charges and net tax refund - (1,560) -------------- ------------- Ongoing net income $66,526 $64,130 ============== ============= Ongoing net income per diluted share $0.47 $0.44 ============== ============= Number of shares used for diluted per share calculation 142,518 144,756 Income tax rate 25% 25% Reconciliation of U.S. GAAP Gross Margin, Operating Expenses and Operating Income to Ongoing Gross Margin, Operating Expenses and Operating Income (in thousands) Three Months Ended ---------------------------- June 26, March 27, 2005 2005 -------------- ------------- U.S. GAAP gross margin $175,859 $174,570 Restructuring recoveries - cost of goods sold - - -------------- ------------- Ongoing gross margin $175,859 $174,570 U.S. GAAP operating expenses $93,328 $95,945 Net tax refund - operating expenses - 7,962 Net restructuring charges - operating expenses - (14,201) -------------- ------------- Ongoing operating expenses $93,328 $89,706 -------------- ------------- Ongoing operating income $82,531 $84,864 ============== ============= *T