LRCX Lam Research Corporation

Lam Research Corporation’s (NASDAQ: LRCX) highlights for the March 2011 quarter were:

  Lam Research Corporation Financial Highlights for the Quarter Ended March 27, 2011 (in thousands, except per share data and percentages)   U.S. GAAP/Ongoing   Revenue: $ 809,087   Operating Margin: 24.3 %   Net Income: $ 182,240   Diluted EPS: $ 1.45  

Lam Research Corporation today announced financial results for the quarter ended March 27, 2011. Revenue for the period was $809.1 million, gross margin was $374.0 million (46.2%), and net income was $182.2 million, or $1.45 per diluted share, compared to revenue of $870.7 million, gross margin of $407.4 million (46.8%), and net income of $221.9 million, or $1.78 per diluted share, for the December 2010 quarter. Shipments for the March 2011 quarter were $813 million compared to $892 million during the December 2010 quarter.

The Company’s ongoing results for the December 2010 quarter exclude certain benefits for research and development tax credits. There were no adjustments to U.S. GAAP results to determine “ongoing” results for the March 2011 quarter. Management uses 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 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 $182.2 million, or $1.45 per diluted share in the March 2011 quarter compared to ongoing net income of $217.1 million, or $1.74 per diluted share, for the December 2010 quarter. Ongoing gross margin for the March 2011 quarter was $374.0 million or 46.2%, compared to ongoing gross margin of $407.4 million, or 46.8%, for the December 2010 quarter. The sequential decrease in gross margin was primarily due to customer mix. Ongoing operating expenses for the March 2011 quarter were $177.0 million compared with the December 2010 quarter of $166.3 million. This change is consistent with our plans to increase investments in core product research and development as well as customer-specific programs.

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

    Region Shipments Revenue North America 23% 23% Europe 16% 18% Japan 11% 13% Korea 19% 18% Taiwan 18% 14% Asia Pacific 13% 14%  

Cash and cash equivalents, short-term investments and restricted cash and investments balances were $1.4 billion at the end of the March 2011 quarter, compared to $1.2 billion at the end of the December 2010 quarter. Cash flows from operating activities were approximately $241.6 million during the March 2011 quarter. Deferred revenue and deferred profit balances at the end of the March 2011 quarter were $246.6 million and $150.3 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 $36.2 million as of March 27, 2011.

“Lam delivered strong performance in the March quarter providing a solid foundation for the remainder of 2011. I am particularly pleased with our solid cash generation performance, which represented a return of approximately 30% of revenues. Strong demand for smartphones, tablets and other electronic devices is expected to drive a healthy level of investment on the part of our customers over the course of CY’11,” said Steve Newberry, chief executive officer and vice chairman of the board.

“These investment levels create opportunities for Lam, and we remain committed to making the strategic investments necessary to strengthen and grow our market position in both etch and clean. We have increased our level of customer engagement through joint partnerships and programs designed to improve our customers’ manufacturing productivity and address their most complex technical challenges. These customer-centric programs coupled with investments in core product R&D enable Lam Research to be well-positioned for growth in the coming years.”

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 demand for smartphones, tablets and other electronic devices, our customers’ investments and intentions for meeting that demand, our commitment to strategic investments to strengthen and grow our market position as well as the effect of any such investments, our anticipated continued investments in customer engagements such as joint partnerships to address technical challenges and improve productivity solutions as well as our core R&D programs, and 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 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 27, 2010 and the reports on Form 10-Q for the three months ended September 26, 2010 and December 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     Nine Months Ended March 27,   December 26,   March 28, March 27,   March 28,   2011     2010     2010     2011     2010   Revenue $ 809,087 $ 870,714 $ 632,763 $ 2,485,675 $ 1,438,487 Cost of goods sold 435,068 463,281 339,892 1,326,897 795,810 Cost of goods sold - 409A expense   -     -     -     -     (5,816 ) Total costs of goods sold   435,068     463,281     339,892     1,326,897     789,994   Gross margin 374,019 407,433 292,871 1,158,778 648,493 Gross margin as a percent of revenue 46.2 % 46.8 % 46.3 % 46.6 % 45.1 % Research and development 96,880 90,477 81,845 273,710 235,215 Selling, general and administrative 80,143 75,852 61,933 228,137 174,163 Restructuring and asset impairments - - - (5,163 ) 8,012 409A expense   -     -     -     -     (38,590 ) Total operating expenses   177,023     166,329     143,778     496,684     378,800   Operating income 196,996 241,104 149,093 662,094 269,693 Operating margin as a percent of revenue 24.3 % 27.7 % 23.6 % 26.6 % 18.7 % Other income, net   1,663     1,038     1,616     1,722     1,190   Income before income taxes 198,659 242,142 150,709 663,816 270,883 Income tax expense   16,419     20,286     30,408     65,996     64,211   Net income $ 182,240   $ 221,856   $ 120,301   $ 597,820   $ 206,672   Net income per share: Basic net income per share $ 1.47   $ 1.80   $ 0.94   $ 4.84   $ 1.63   Diluted net income per share $ 1.45   $ 1.78   $ 0.94   $ 4.78   $ 1.61   Number of shares used in per share calculations: Basic   123,674     123,101     127,307     123,482     127,127   Diluted   125,293     124,786     128,587     125,097     128,368     LAM RESEARCH CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)     March 27,   December 26,   June 27, 2011 2010 2010 (unaudited) (unaudited) (1) ASSETS Cash and cash equivalents $ 942,710 $ 729,060 $ 545,767 Short-term investments 312,879 303,038 280,690 Accounts receivable, net 637,795 689,400 499,890 Inventories 355,734 333,874 318,479 Deferred income taxes 45,934 47,380 46,158 Other current assets   77,722   76,993   65,677  

Total current assets

2,372,774 2,179,745 1,756,661 Property and equipment, net 251,954 229,769 200,336 Restricted cash and investments 165,248 165,244 165,234 Deferred income taxes 29,578 28,030 26,218 Goodwill and intangible assets 221,146 225,671 236,906 Other assets   107,795   104,758   102,037   Total assets $ 3,148,495 $ 2,933,217 $ 2,487,392     LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities $ 667,391 $ 689,871 $ 558,657     Long-term debt and capital leases $ 15,949 $ 16,524 $ 17,645 Income taxes payable 116,911 118,323 110,462 Other long-term liabilities 25,088 23,720 32,493 Stockholders' equity   2,323,156   2,084,779   1,768,135   Total liabilities and stockholders' equity $ 3,148,495 $ 2,933,217 $ 2,487,392     1 Derived from audited financial statements   LAM RESEARCH CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)     Three Months Ended     Nine Months Ended March 27,   December 26,   March 28, March 27,   March 28,   2011     2010     2010     2011     2010   CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 182,240 $ 221,856 $ 120,301 $ 597,820 $ 206,672 Adjustments to reconcile net income to net cash provided by (used for) operating activities: Depreciation and amortization 18,176 18,663 17,872 54,787 53,737 Deferred income taxes (733 ) (3,039 ) 640 (4,555 ) 22,351 Restructuring charges, net - - - (5,163 ) 8,012 Equity-based compensation expense 12,456 12,759 10,917 38,224 38,134 Income tax benefit on equity-based compensation plans 15,327 (918 ) 477 19,492 691 Excess tax benefit on equity-based compensation plans (11,878 ) 711 (370 ) (15,106 ) (973 ) Other, net 746 (1,600 ) 1,210 (2,818 ) 2,542 Changes in operating assets and liabilities:   25,259     (62,849 )   (41,781 )   239     (145,886 ) Net cash provided by operating activities   241,593     185,583     109,266     682,920     185,280     CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures and intangible assets (35,769 ) (38,025 ) (10,823 ) (92,924 ) (23,548 ) Net sales/maturities (purchases) of available-for-sale securities (11,068 ) (1,160 ) (3,238 ) (36,734 ) (14,029 ) Purchase of other investments (417 ) - - (417 ) (961 ) Proceeds from sale of assets - 1,544 - 1,544 - Transfer of restricted cash and investments   (4 )   -     19,629     (14 )   13,155   Net cash provided by (used for) investing activities   (47,258 )   (37,641 )   5,568     (128,545 )   (25,383 )   CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on long-term debt and capital lease obligations (1,038 ) (78 ) (17,820 ) (4,449 ) (20,424 ) Net proceeds from issuance of long-term debt - - - - 336 Excess tax benefit on equity-based compensation plans 11,878 (711 ) 370 15,106 973 Cash paid in advance for stock repurchase contracts - (50,000 ) - (50,000 ) - Treasury stock purchases (8,617 ) (4,151 ) (72,240 ) (157,563 ) (75,172 ) Reissuances of treasury stock 6,521 - 5,518 13,676 11,279 Proceeds from issuance of common stock   5,980     3,407     1,441     10,222     7,823   Net cash provided by (used for) financing activities   14,724     (51,533 )   (82,731 )   (173,008 )   (75,185 ) Effect of exchange rate changes on cash 4,591 4,370 (900 ) 15,576 2,490

Net increase in cash and cash equivalents

213,650 100,779 31,203 396,943 87,202 Cash and cash equivalents at beginning of period   729,060     628,281     430,166     545,767     374,167   Cash and cash equivalents at end of period $ 942,710   $ 729,060   $ 461,369   $ 942,710   $ 461,369     Reconciliation of U.S. GAAP Net Income to Ongoing Net Income (in thousands, except per share data) (unaudited)     Three Months Ended     Three Months Ended March 27, December 26, 2011 2010 U.S. GAAP net income $ 182,240 $ 221,856 Net tax benefit of R&D credit   -   (4,763 ) Ongoing net income $ 182,240 $ 217,093   Ongoing net income per diluted share $ 1.45 $ 1.74   Number of shares used for diluted per share calculation 125,293 124,786