LAM Research Corporation. Q1 2010 Earnings Call Transcript

LAM Research Corporation. Q1 2010 Earnings Call Transcript
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LAM Research Corporation (LRCX)

Q1 2010 Earnings Call

April 21, 2010 5:00 pm ET

Executives

Carol Raeburn - Managing Director, IR

Ernie Maddock - SVP, CFO

Steve Newberry - President, CEO

Analysts

Satya Kumar - Credit Suisse

C.J. Muse - Barclays Capital

Stephen O'Rourke - Deutsche Bank

Krish Sankar - Bank of America/Merrill Lynch

Patrick Ho - Stifel Nicolaus

Jim Covello - Goldman Sachs

Stephen Chin - UBS

Gary Hsueh - Oppenheimer & Company

Raj Seth - Cowen & Co

Ben Pang - Caris & Company

Presentation

Operator

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Good day ladies and gentlemen, thank you for standing by. Welcome to the Lam Research Corporation March 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 opened for questions. (Operator Instructions). The call is scheduled to conclude at 3 o'clock p.m. Pacific Standard 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 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 March 2010 quarter and Steve will share our business outlook for the June 2010 quarter before opening up for Q&A. A press release detailing our financial results for the quarter ended March 28, 2010 was distributed by the business wire shortly after 1 p.m. this afternoon and is available on our website 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 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 March quarter results.

Ernie Maddock

Thank you, Carol. I'm pleased to report results for the March quarter that met or exceeded guidance in all areas led by record shipments and strong revenue performance for the company. Indicative of market share gains and in response to customer demands, Lam’s March quarter shipments were $735 million, up 41% sequentially. The flexibility and responsiveness demonstrated by our operation’s groups and global supply chain enabled the company to effectively respond to our customer’s request for short cycle timed delivery in the March quarter. Virtually, all of our systems shipments are now for 300 millimeter applications and sub 60 nanometer applications comprised 89% of system shipments.

Components of our shipment activity by market segment are as follows. DRAM represented approximately 44% of total shipments and NAND comprised 21%, bringing the total memory segment to 65% of system shipments. Foundry customers were 27% of system shipments and logic and other were at 8%. Revenue for the March quarter was 633 million slightly exceeding our guidance range. Revenue was up 30% sequentially over the December quarter and reflects increased system shipments and customer acceptances in all product lines as well as strong performance in our installed base business.

For the March quarter, ongoing gross margin was 46.3% up from 44.8% in the December quarter. This improvement was the result of strong revenue performance coupled with favorable product mix and improved factory absorption.

Ongoing operating expenses for the March quarter were $144 million and reflected only partial quarter expenses related to employee equity brand and non-recurring benefits related to R&D materials and supplies. Our employee headcount at March end was approximately 3,100. Ongoing operating profit for the March quarter was $149 million roughly double that in the December quarter with a corresponding expansion in operating margin to 23.6%.

Ongoing other income was $1.6 million derived primarily from interest income. Our ongoing tax rate for the March quarter was 20.2% in line with expectation. We are anticipating a rate of between 20% and 22% for fiscal year 2010 and expected the rate in June will be similar to that in March. This rate would be favorably impact the Congress ratified the extension in the federal R&D tax credit prior to the end of our fiscal quarter. Based on a share count of 129 million shares, earnings per share was $0.94 exceeding the mid point of our guidance range by $0.14.

Turning to our balance sheet and cash flows, our cash in short term investments including restricted cash totaled $844 million we generated $109 million in cash from operations in the March quarter and used that cash to repurchase shares in the amount of $69 million and made an $18 million of repayment of certain loans and $11 million in capital expenditures. Lam repurchased $2 million shares during the quarter, consistent with our goal of offsetting dilution relating to employee equity plans.

Our priority remains on building on cash balances before considering more aggressive stock repurchases. Accounts receivable days outstanding were 75 days down slightly from 79 days in the December quarter and inventory returns were 4.8 up from 4.4 returns in the December quarter.

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