LRCX Lam Research Corporation

Lam Research Corporation (NASDAQ: LRCX) highlights for the December 2009 quarter were:

  (in thousands, except per share data and percentages)     ● Revenue: $ 487,176   U.S. GAAP Ongoing ● Operating Margin: 18.8 % 15.6 %   ● Net Income: $ 69,574 $ 60,714   ● Diluted EPS: $ 0.54 $ 0.47  

Lam Research Corporation today announced financial results for the quarter ended December 27, 2009. Revenue for the period was $487.2 million, gross margin was $223.2 million and net income was $69.6 million, or $0.54 per diluted share, compared to revenue of $318.5 million, gross margin of $136.8 million and net income of $16.8 million, or $0.13 per diluted share, for the September 2009 quarter. Shipments for the December 2009 quarter were $519 million compared to $355 million during the September 2009 quarter.

The Company’s ongoing results for the December 2009 quarter exclude certain costs for previously announced restructuring activities, the reversal of accrued liabilities due to final settlement of the remaining liabilities for Internal Revenue Code Section 409A related expenses, and the impairment of an investment. The Company’s ongoing results for the September 2009 quarter excluded certain costs for previously announced restructuring activities and the reversal of accrued liabilities due to settlement of a portion of certain liabilities for Internal Revenue Code Section 409A related expenses. 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.

Ongoing net income was $60.7 million, or $0.47 per diluted share in the December 2009 quarter compared to ongoing net income of $4.2 million, or $0.03 per diluted share, for the September 2009 quarter. Ongoing gross margin for the December 2009 quarter was $218.5 million or 44.8%, compared to ongoing gross margin of $131.3 million, or 41.2%, for the September 2009 quarter. The sequential increase in gross margin was primarily due to improved factory utilization as a result of increased business volume and a more favorable product mix. Ongoing operating expenses for the December 2009 quarter increased to $142.3 million compared with the September 2009 quarter of $123.3 million. This increase was a function of higher variable compensation expense associated with our improvement in profitability, new product material spending to support additional market opportunities arising from an improved business outlook, and the restoration of employee salaries and accompanying benefits (excluding executive management) to levels prior to the actions to reduce base compensation in the March 2009 quarter.

The geographic distribution of shipments and revenue during the December 2009 quarter is shown in the following table:

Region   Shipments   Revenue North America 7 % 8 % Europe 6 % 6 % Japan 12 % 15 % Korea 26 % 25 % Taiwan 37 % 35 % Asia Pacific 12 % 11 %

Cash and cash equivalents, short-term investments and restricted cash and investments balances were $830.6 million at the end of the December 2009 quarter, compared to $761.2 million at the end of the September 2009 quarter. Cash flows from operating activities were approximately $73.3 million during the December 2009 quarter. Deferred revenue and deferred profit balances at the end of the December 2009 quarter were $134.4 million and $73.9 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 $11 million as of December 27, 2009.

“In the December 2009 quarter we saw significant growth in shipments, revenue and earnings for Lam Research. As we move into 2010 we will continue to focus on delivering market share gains in our etch and clean businesses to expand revenues, earnings per share and cash generation from cycle to cycle,” said Steve Newberry, Lam’s president and chief executive officer. “I would like to thank our employees, suppliers and shareholders for their continued commitment to our success,” 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 Lam’s focus on delivering market share gains in its etch and clean businesses to expand revenues, earnings per share and cash generation from cycle to cycle. Some factors that may affect these forward-looking statements include: business conditions in the semiconductor industry and the overall economy, and the efficacy of Lam’s plans for reacting to those conditions, changing customer demands, the actions of Lam’s competitors, and the challenges presented by the development and marketing of new products. 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 28, 2009 and the report on Form 10-Q for the three months ended September 27, 2009. 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 CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited)           Three Months Ended Six Months Ended December 27, September 27, December 28, December 27, December 28,   2009     2009     2008     2009     2008   Total revenue $ 487,176 $ 318,548 $ 283,409 $ 805,724 $ 723,770 Cost of goods sold 268,685 187,233 174,329 455,918 428,532 Cost of goods sold - restructuring and asset impairments - - 7,728 - 10,776 Cost of goods sold - 409A expense   (4,713 )   (5,455 )   -     (10,168 )   -   Total costs of goods sold   263,972     181,778     182,057     445,750     439,308   Gross margin 223,204 136,770 101,352 359,974 284,462 Gross margin as a percent of revenue 45.8 % 42.9 % 35.8 % 44.7 % 39.3 % Research and development 82,171 71,199 68,781 153,370 150,344 Selling, general and administrative 60,111 52,119 57,699 112,230 125,998 Restructuring and asset impairments 5,919 2,093 10,121 8,012 26,089 409A expense   (16,345 )   (17,893 )   2,143     (34,238 )   2,904   Total operating expenses   131,856     107,518     138,744     239,374     305,335   Operating income (loss) 91,348 29,252 (37,392 ) 120,600 (20,873 ) Operating margin as a percent of revenue 18.8 % 9.2 % -13.2 % 15.0 % -2.9 % Other income (expense), net   (58 )   (368 )   (7,233 )   (426 )   1,784   Income (loss) before income taxes 91,290 28,884 (44,625 ) 120,174 (19,089 ) Income tax expense (benefit)   21,716     12,087     (20,453 )   33,803     (3,790 ) Net income (loss) $ 69,574   $ 16,797   $ (24,172 ) $ 86,371   $ (15,299 ) Net income (loss) per share: Basic net income (loss) per share $ 0.55   $ 0.13   $ (0.19 ) $ 0.68   $ (0.12 ) Diluted net income (loss) per share $ 0.54   $ 0.13   $ (0.19 ) $ 0.67   $ (0.12 ) Number of shares used in per share calculations: Basic   127,296     126,774     125,084     127,035     125,266   Diluted   128,829     127,890     125,084     128,389     125,266     See Notes to Condensed Consolidated Financial Statements LAM RESEARCH CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)       December 27, September 27, June 28,   2009   2009   2009   (unaudited) (unaudited)

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ASSETS Cash and cash equivalents $ 430,166 $ 361,163 $ 374,167 Short-term investments 215,567 215,031 205,221 Accounts receivable, net 420,486 325,756 253,585 Inventories 241,296 220,083 233,410 Deferred income taxes 47,984 57,293 69,043 Other current assets   79,482   61,128   60,401   Total current assets 1,434,981 1,240,454 1,195,827 Property and equipment, net 205,089 211,348 215,666 Restricted cash and investments 184,913 185,010 178,439 Deferred income taxes 16,399 16,298 17,007 Goodwill and intangible assets 248,838 254,816 260,787 Other assets   94,622   87,179   84,145   Total assets $ 2,184,842 $ 1,995,105 $ 1,951,871     LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities $ 445,243 $ 336,911 $ 340,763     Long-term debt and capital leases $ 35,145 $ 35,787 $ 40,886 Income taxes payable 107,273 105,925 102,999 Other long-term liabilities 12,397 12,722 14,134 Stockholders' equity   1,584,784   1,503,760   1,453,089   Total liabilities and stockholders' equity $ 2,184,842 $ 1,995,105 $ 1,951,871     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 27, September 27, December 28, December 27, December 28,   2009     2009     2008     2009     2008   CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 69,574 $ 16,797 $ (24,172 ) $ 86,371 $ (15,299 )

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

Depreciation and amortization 18,184 17,681 17,177 35,865 35,073 Deferred income taxes 9,229 12,482 10,110 21,711 (2,297 ) Restructuring charges, net 5,919 2,093 17,849 8,012 36,865 Equity-based compensation expense 13,259 13,958 14,049 27,217 29,457 Income tax benefit on equity-based compensation plans 303 (89 ) (7,045 ) 214 (2,006 ) Excess tax benefit on equity-based compensation plans (235 ) (368 ) 3,752 (603 ) (517 ) Other, net 173 1,159 3,200 1,332 5,865 Changes in operating asset and liabilities:   (43,096 )   (61,009 )   (73,909 )   (104,105 )   (82,998 ) Net cash provided by (used for) operating activities   73,310     2,704     (38,989 )   76,014     4,143     CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures and intangible assets (6,893 ) (5,832 ) (12,417 ) (12,725 ) (27,568 ) Acquisitions of businesses, net of cash acquired - - (8,763 ) - (11,190 ) Net sales/maturities (purchases) of available-for-sale securities (1,016 ) (9,775 ) 39,767 (10,791 ) 46,747 Purchase of other investments - (961 ) - (961 ) - Transfer of restricted cash and investments 97 (6,571 ) (32,178 ) (6,474 ) (48,306 ) Other   -     -     (2,000 )   -     (2,000 ) Net cash used for investing activities   (7,812 )   (23,139 )   (15,591 )   (30,951 )   (42,317 )   CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on long-term debt and capital lease obligations (689 ) (1,915 ) (13,060 ) (2,604 ) (15,433 ) Net proceeds from issuance of long-term debt 52 284 515 336 625 Excess tax benefit on equity-based compensation plans 235 368 (3,752 ) 603 517 Treasury stock purchases (576 ) (2,356 ) (24,448 ) (2,932 ) (27,203 ) Reissuances of treasury stock - 5,761 - 5,761 7,584 Proceeds from issuance of common stock   4,126     2,256     1,294     6,382     4,444   Net cash provided by (used for) financing activities   3,148     4,398     (39,451 )   7,546     (29,466 ) Effect of exchange rate changes on cash 357 3,033 1,512 3,390 (11,984 ) Net increase (decrease) in cash and cash equivalents 69,003 (13,004 ) (92,519 ) 55,999 (79,624 ) Cash and cash equivalents at beginning of period   361,163     374,167     745,432     374,167     732,537   Cash and cash equivalents at end of period $ 430,166   $ 361,163   $ 652,913   $ 430,166   $ 652,913       See Notes to Condensed Consolidated 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 December 27, September 27,   2009     2009   U.S. GAAP net income $ 69,574 $ 16,797 Pre-tax non-ongoing items: Restructuring and asset impairments - operating expenses 5,919 2,093 409A expense - cost of goods sold (4,713 ) (5,455 ) 409A expense - operating expenses (16,345 ) (17,893 ) Impairment of investment - other income (expense), net 927 - Net tax expense on non-ongoing items   5,352     8,639   Ongoing net income $ 60,714   $ 4,181   Ongoing net income per diluted share $ 0.47   $ 0.03   Number of shares used for diluted per share calculation 128,829 127,890     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 December 27, September 27,   2009     2009   U.S. GAAP gross margin $ 223,204 $ 136,770 Pre-tax non-ongoing items: Pre-tax 409A expense - cost of goods sold   (4,713 )   (5,455 ) Ongoing gross margin $ 218,491   $ 131,315   U.S. GAAP gross margin as a percent of revenue 45.8 % 42.9 % Ongoing gross margin as a percent of revenue 44.8 % 41.2 %   U.S. GAAP operating expenses $ 131,856 $ 107,518 Pre-tax non-ongoing items: Restructuring and asset impairments - operating expenses (5,919 ) (2,093 ) 409A expense - operating expenses   16,345     17,893   Ongoing operating expenses $ 142,282   $ 123,318   Ongoing operating income $ 76,209   $ 7,997   Ongoing operating margin as a percent of revenue 15.6 % 2.5 %