Lam Research Corporation (LRCX)

F4Q10 (Qtr End 06/27/10) Earnings Call

July 28, 2010 5:00 p.m. ET


Carol Raeburn - Managing Director, IR

Ernie Maddock - SVP, CFO

Steve Newberry - President, CEO


Satya Kumar - Credit Suisse

Patrick Ho - Stifel Nicolaus

Krish Sankar - Bank of America/Merrill Lynch

Stephen Chin - UBS

Peter Kim - Deutsche Bank

C.J. Muse - Barclays Capital

Jim Covello - Goldman Sachs

Atif Malik - Morgan Stanley

Edwin Mok - Needham & Company

Tim Evans - Citigroup Global Markets

Gary Hsueh - Oppenheimer & Company

Ben Pang - Caris & Company



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Good afternoon ladies and gentlemen, thank you so much for standby. Welcome to the Lam Research Corporation June 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). As a reminder this call is scheduled to conclude at 3 PM Pacific Day light time.

I would now like to turn the conference over to Ms. Carol Raeburn, Managing Director of Investor Relations. Please go ahead ma'am.

Carol Raeburn

Good afternoon everyone. 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 June 2010 quarter and Steve will share our business outlook for the September 2010 quarter before opening up for Q&A. The press release detailing our financial results for the quarter ended June 27, 2010 was distributed by Business Wire shortly after 1 p.m. this afternoon and is available on our website at

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 p.m. and we ask that you please limit questions to one per firm with a brief follow-up.

With that I'll turn the call over to Ernie for a review of the June quarter results.

Ernie Maddock

Thank you, Carol. I'll be sharing the results of another strong quarter for the company. In June we delivered record revenue together with strong operating profits and earnings performance.

Shipments for the June quarter were 694 million down approximately 5% from the record shipment levels that we reported in the March quarter. Application and market segment breakdown for the quarter were as follows; Applications at 65 nanometer and below represented 96% of total system shipments. DRAM accounted for 37% of total systems shipments with NAND comprising 30% and other memory customers approximately 2% such that the total memory segment customers were 69% of system shipments. Foundry customers accounted to 23% of system shipments while logic and others were 8%.

June quarter revenue was 695 million up 10% over the March quarter driven by strengthening demands for Etch and Clean products as well as related service and spare parts. On going gross margin was 46.7% up 40 basis points from the March quarter. This improvement was primarily the result of favorable product mix and initial benefits for our efforts to improve efficiencies in our Clean products business.

Ongoing operating expenses for the June quarter were 152 million and included the acceleration of R&D spending on new products as well as variable compensation expenses associated with the company's higher revenue and profit levels. Ongoing operating profit was 172 million and reflects 16% growth over the March quarter resulting in ongoing operating margin of 24.8%. Other income was 3.5 million largely due to interest income and favorable impacts from currency movements.

We incurred net expenses of non-ongoing nature of 16.7 million during the quarter which includes 13.3 million related to a reassessment of obligations associated with certain facility arrangements and 3.4 million related to asset impairments. Our ongoing tax rate for the June quarter was 15.3% primarily due to favorable geographic mix of operating income and adjustments related to non U.S. reserves.

For the full fiscal year the ongoing tax rate was 18.8%. For the September quarter we expect an ongoing tax rate in the mid-teens and current rate projected levels of business we would expect the fiscal year 2011 tax rate to be similar.

For the June quarter our ongoing EPS was a $1.17 based on account of 128 million share. Relative to our expected performance of $0.94 approximately $0.09 of the incremental EPS was generated as the result of the favorable tax rate, while the remaining $0.14 was generated from our strong operating performance.

Turning to the balance sheet, our cash and short-term investments including restricted cash totaled 992 million. In June we generate 165 million in cash from operation translating to 24% of total revenue

During the June quarter we continued making share repurchases to offset dilution from employee equity plans and repurchased approximately 700,000 shares at an average price of $39.56. A portion of these shares purchased settled outside of the June quarter a will be reflected in our September quarter cash flow statement. Accounts receivables days outstanding were 65 days; a decline from 75 days in the June quarter and inventory returns was 4.7.

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