Lam Research Corporation Announces Earnings for the Quarter Ended March30, 2008

Lam Research Corporation (NASDAQ:LRCX) highlights for the March2008 quarter were:

Lam Research Corporation today announced earnings for the quarter ended March30, 2008. Revenue for the period was $613.8million, gross margin was $287.2 million and net income was $103.5million, or $0.82 per diluted share, compared to revenue of $610.3million, gross margin of $307.7 million and net income of $115.1million, or $0.91 per diluted share for the December2007 quarter.

The earnings of the SEZ Group, after the March 11, 2008 acquisition date, have been consolidated into the March 2008 quarter results. The Company has decided to adopt an acceptance-based revenue recognition model for the SEZ Group, now known as the Spin Clean Division, which has the effect of deferring almost all of the post-acquisition March quarter Spin Clean Division revenues and the related cost of sales to a future period. Accordingly, Spin Clean Division revenues were limited to $1.7 million, and after operating expenses and an in-process research and development write-off related to the acquisition, the resulting U.S. Generally Accepted Accounting Principles ("U.S. GAAP") loss was $5.6 million after taxes.

(in thousands, except per share data and percentages)

-- Revenue:

$

613,810

-- Operating Margin:

U.S. GAAP:

14.1

%

Ongoing:

23.6 

%

-- Net Income:

U.S. GAAP:

$

103,524

Ongoing: 

$ 

109,827

-- Diluted EPS:

U.S. GAAP:

$

0.82

Ongoing:

$

0.87

The Company's ongoing results for the March 2008 quarter exclude certain costs related to the recent acquisition of the SEZ Group, including the foreign currency gains associated with the acquisition and the one-time charge for in-process research and development expense. In addition, the Company's ongoing results for the March 2008 and December 2007 quarters exclude the costs associated with its voluntary internal stock option review. Management uses the presentation of ongoing gross margin, ongoing operating income, ongoing net income, and ongoing diluted earnings per share to evaluate the Company's operating and financial results. The Company believes the presentation of ongoing results is useful to investors for analyzing ongoing business trends and comparing performance to prior periods, and enhances 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. GAAPis included at the end of this press release and on the Company's web site.

Ongoing net income was $109.8 million, or $0.87 per diluted share in the March 2008 quarter compared to ongoing net income of $118.9 million, or $0.94 per diluted share, for the December 2007 quarter. Ongoing gross margin for the March 2008 quarter slightly exceeded the Company's expectations and was $293.6 million or 47.8% compared to ongoing gross margin of $307.7million, or 50.4%, for the December2007 quarter. The majority of the sequential decline was due to unfavorable customer and product mix. Ongoing operating expenses of $148.9 million for the March 2008 quarter were higher than the December 2007 quarter of $140.0million, primarily due to the inclusion of the Spin Clean Division operating expenses and to a lesser extent higher employee compensation costs at the Company.

The geographic distribution of shipments and revenue during the March2008 quarter is shown in the following table:

Region

Shipments

Revenue

North America

15%

18%

Europe

7%

8%

Japan

17%

17%

Korea

28%

20%

Asia Pacific

33%

37%

Cash and cash equivalents, short-term investments and restricted cash and investments balances were $1.0billion at the end of the March 2008 quarter, including approximately $0.2 billion attributed to the Spin Clean Division. Deferred revenue and deferred profit balances were $270.1million and $162.1 million, respectively. At the end of the March 2008 period, the anticipated future revenue value of orders shipped to Japanese customers that is not recorded as deferred revenue was approximately $43 million.

"Lam's March quarter performance met or slightly exceeded our expectations for shipments, revenues, gross margins and operating income. The headwind of the current economic environment creates challenges for us and many other semiconductor equipment manufacturers in the upcoming quarters, but we believe that our intense focus on creating yield enabling solutions in etch and clean coupled with our investment in long-term new market opportunities, has Lam Research well positioned to resume a strong growth trajectory when our customers recommence increased wafer fabrication equipment spending," said Steve Newberry, Lam Research's president and chief executive officer.

"Our acquisition of the SEZ Group is a significant milestone on our path to become a multi-market, $4+ billion dollar revenue company targeted for calendar year 2010. I am encouraged by the enthusiasm of the Clean Group employees in their initial collaboration efforts, particularly at the customer interface, where we now offer the broadest set of single-wafer wet clean solutions. Our partnership in R&D, where the sharing of process and hardware knowledge offers exciting opportunities, is already extremely active. Taken together, these elements reinforce our belief in the strategic merit of the acquisition. I want to convey appreciation to all employees for their continued hard work in facilitating the next leg of growth for Lam Research," Newberry concluded.

Statements made in this press release which 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 challenges we will face in the current economic environment, our focus on creating yield enabling solutions for our customers, our continued commitment to investing in long-term opportunities, the value of the acquisition of the SEZ Group, our progress toward a multi-market, $4+ billion revenue company, the opportunities presented by the acquisition of SEZ, our belief in the strategic value of the SEZ acquisition, the Company's continuation on its growth trajectory, the resumption by customers of increased wafer fabrication equipment spending, the future revenue value of orders shipped to Japanese customers, and our ability to successfully integrate the SEZ Spin Clean Division. Some factors that may affect these forward-looking statements include: changing business conditions in the semiconductor industry and the overall economy and the efficacy of our plans for reacting to those changes, changing customer demands, success of our competitors' strategies including their development of new technologies, and the technical challenges presented by our 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 June24, 2007, and Form 10-Q for the quarter ended December23, 2007, which 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. The Company's World Wide Web address ishttp://www.lamresearch.com.

Consolidated Financial Tables Follow

LAM RESEARCH CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data and percentages)

(unaudited)

Three Months Ended

Nine Months Ended

March 30,

December 23,

March 25,

March 30,

March 25,

2008

2007

2007

2008

2007

Total revenue

$

613,810

$

610,320

$

650,270

$

1,908,751

$

1,888,057

Cost of goods sold

320,201

302,659

324,025

963,594

925,732

Cost of goods sold - 409A expense

6,401

-

-

6,401

-

Total costs of goods sold

326,602

302,659

324,025

969,995

925,732

Gross margin

287,208

307,661

326,245

938,756

962,325

Gross margin as a percent of revenue 

46.8

%

50.4

%

50.2

%

49.2

%

51.0

%

Research and development

80,576

80,243

75,064

237,107

205,747

Selling, general and administrative

74,491

66,084

62,208

210,288

178,267

409A expense

43,784

-

-

43,784

-

In-process research and development

2,074

-

-

2,074

-

Total operating expenses

200,925

146,327

137,272

493,253

384,014

Operating income

86,283

161,334

188,973 

445,503

578,311

Operating margin as a percent of revenue

14.1

%

26.4

%

29.1

%

23.3

%

30.6

%

Other income (expense), net

49,605

(37

)

14,751 

57,201

58,191

Income before income taxes

135,888

161,297

203,724

502,704

636,502

Income tax expense

32,364

46,238

38,983

135,533

120,917

Net income

$

103,524

$

115,059

$

164,741

$

367,171

$

515,585

Net income per share:

Basic net income per share

$

0.83

$

0.92

$

1.17

$

2.95

$

3.64

Diluted net income per share

$

0.82

$

0.91

$

1.15

$

2.90

$

3.57

Number of shares used in per share calculations:

Basic

124,768

124,685

140,423

124,509

141,516

Diluted

126,549

126,653

143,052

126,531

144,378

LAM RESEARCH CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

March 30,

June 24,

2008

2007

(unaudited)

(1)

ASSETS

Cash and cash equivalents

$ 

552,353

$

573,967

Short-term investments

290,542

96,724

Accounts receivable, net

599,719

410,013

Inventories

305,802

235,431

Other current assets

142,267

100,226

Total current assets

1,890,683

1,416,361

Property and equipment, net

231,748

113,725

Restricted cash and investments

169,841

360,038

Deferred income taxes

35,164

27,414

Goodwill

264,092

59,741

Intangible assets, net

127,817

70,909

Other assets

74,919

53,417

Total assets

$

2,794,264

$

2,101,605

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

$

712,542

$

672,798

Long-term debt

$

277,950

$

250,000

Income taxes payable

85,501

-

Other long-term liabilities

44,940

2,487

Minority interests

9,274

-

Stockholders' equity

1,664,057

1,176,320

Total liabilities and stockholders' equity

$

2,794,264

$

2,101,605

(1) Derived from audited financial statements

Reconciliation of U.S. GAAP Net Income to Ongoing Net Income

(in thousands, except per share data and percentages)

Three Months Ended

Three Months Ended

March 30,

December 23, 

2008

2007

U.S. GAAP net income

$

103,524

$

115,059

Pre-tax expense incurred to satisfy 409A liabilities - cost of goods sold

6,401

-

Pre-tax expense incurred to satisfy 409A liabilities - operating expenses

43,784

-

Pre-tax legal and accounting expenses incurred as a result of the

voluntary internal stock option review - operating expenses

6,190

6,361

In-process research and development for SEZ acquisition - operating expenses

2,074

-

Pre-tax foreign exchange gain associated with the acquisition of SEZ shares - other income (expense), net

(49,285

)

-

Net tax benefit on ongoing items

(2,861

)

(2,567

)

Ongoing net income

$

109,827

$

118,853

Ongoing net income per diluted share

$

0.87

$ 

0.94

Number of shares used for diluted per share calculation 

126,549

126,653

U.S. GAAP income tax rate

23.8

%

28.7 

%

Ongoing income tax rate 

24.3

%

29.1

%

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)

Three Months Ended

Three Months Ended

March 30,

December 23,

2008

2007

U.S. GAAP gross margin

$

287,208

$

307,661

Pre-tax expense incurred to satisfy 409A liabilities - cost of goods sold

6,401

-

Ongoing gross margin

$

293,609

$

307,661

U.S. GAAP gross margin as a percent of revenue

46.8

%

50.4

%

Ongoing gross margin as a percent of revenue

47.8

%

50.4

%

U.S. GAAP operating expenses

$

200,925

$

146,327

Pre-tax expense incurred to satisfy 409A liabilities - operating expenses

(43,784

)

-

Pre-tax legal and accounting expenses incurred as a result of the voluntary internal stock option review - operating expenses

(6,190

)

(6,361

)

In-process research and development for SEZ acquisition

(2,074 

)

-

Ongoing operating expenses

$

148,877

$

139,966

Ongoing operating income

$

144,732

$

167,695

Ongoing operating income as a percent of revenue

23.6

%

27.5

%