Lam Research Corporation (
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October 20, 2010 5:00 pm ET
Carol Raeburn – Managing Director, IR
Ernie Maddock – SVP & CFO
Steve Newberry – President & CEO
Jim Covello – Goldman Sachs
C.J. Muse – Barclays Capital
Patrick Ho – Stifel Nicolaus
Atif Malik – Morgan Stanley
Krish Sankar – Bank of America-Merrill Lynch
Satya Kumar – Credit Suisse
Gary Hsueh – Oppenheimer & Co.
Stephen Chin – UBS
Timothy Arcuri – Citi
Ben Pang – Caris & Co.
Peter Kim – Deutsche Bank
Jagadish Iyer – Arete Research
Edwin Mok – Needham & Co.
Mehdi Hosseini – Susquehanna
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Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Lam Research Corporation September 2010 quarterly results conference call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator instructions) This call is scheduled to end at 3 P.M. Pacific Standard Time.
I would now like to turn the conference over to Carol Raeburn, Managing Director of Investor Relations. Please go ahead, ma’am.
Good afternoon, everyone and welcome to Lam Research Corporation’s quarterly conference call. Here with me today are Steve Newberry, President and Chief Executive Officer and Ernie Maddock, Senior Vice President and Chief Financial Officer.
Today, we will discuss the financial results for the September 2010 quarter and Steve will share our business outlook for the December 2010 quarter before opening up for Q&A.
The press release detailing our financial results for the quarter ended September 26, 2010 was distributed by Business Wire shortly after 1 O’clock this afternoon and is available on our Web site at lamresearch.com.
Today’s call contains forward-looking statements, including those relating to our forecast of market share, shipments, revenues, expenses, margins, and earnings per share, as well as other statements of the company’s expectations, beliefs and plans. There are important factors that could cause actual results to differ materially from those described in these forward-looking statements, and a list of these factors can be found in the slide package accompanying this conference call and on our most recently filed Form 10-K.
All forward-looking statements are based on information as of today’s date and the company assumes no obligation to update any of them. This call is scheduled to last until 3.00 pm and we ask that you please limit questions to one per firm with a brief follow-up.
With that I will turn the call over to Ernie for a review of the September quarter results.
Thank you, Carol. Before I share the results from our September quarter, I would like to take a moment to recognize and thank Carol Raeburn, who has done an exceptional job heading our Investor Relations team for more than three years now. Carol is moving into a new role within the finance organization, where she will be responsible for supporting Lam’s regional business operations around the world. If Carol is transitioning into her new role, Shanye Hudson will now be responsible for Investor Relations. Shanye has been with Lam for over 10 years and has held Engineering and Business Development role and I am pleased that she will now be applying her talent in heading up Lam’s IR team.
Now, on to the results. September was another strong quarter for the company as we delivered record shipments, revenues, and earnings. Shipments for the September quarter were $808 million, up 16% from the June quarter.
Application and market segment break down for the quarter were as follows. 65 nanometer and below applications represented 89% of total shipments. DRAM accounted for 38% of total system shipments and NAND comprised 19%, thus making the total memory segment 57% of system shipments. Foundry customers accounted for 33% of system shipments, while logic and other constituted the balance of 10%.
September quarter revenues were $805.9 million, slightly exceeding the high end of our guidance range. This represents the sequential increase of approximately 16% over the prior quarter driven by all product lines and in particular our Clean product.
Ongoing gross margin was 46.8%, up slightly from that of the June quarter. Ongoing operating expenses for the September quarter were approximately $158 million, $6 million higher than the previous quarter. The increase is attributable to higher variable compensation associated with the company’s higher revenue and profit levels as well as increased R&D investments to support and grow our market share.
Ongoing operating income was $219 million, reflecting a 27% growth over the June quarter and results in an ongoing operating margin of 27.2%, which exceeded the high end of our guidance.
U.S. GAAP net income for the quarter was favorably impacted by a $3.1 million reversal of certain restructuring and impairment charges related to facilities. This amount is net of taxes. Our ongoing tax rate for the September quarter was 12.5%, a few percentage points lower than we had expected, primarily due to the favorable geographic mix of operating income.
For the December quarter, we expect an ongoing tax rate in the low to mid-teens, and at currently projected levels of business, we would expect the fiscal year tax rate to be similar. For the September quarter, our ongoing diluted EPS was $1.52, based on a share count of 125 million.
Relative to our guidance midpoint, approximately $0.10 of the incremental EPS was generated from our strong operating performance and approximately $0.07 was generated as a result for a favorable tax rate.