-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, P5SYAaWNpXBIqnV7pdd4NH5TGEA851UllErumk9ai0l/uKboK9T1rNdhPHYUUPS3 /WckzXDcRZ8BkSiqwVirUA== 0000912057-95-009767.txt : 19951119 0000912057-95-009767.hdr.sgml : 19951119 ACCESSION NUMBER: 0000912057-95-009767 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951113 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: LAM RESEARCH CORP CENTRAL INDEX KEY: 0000707549 STANDARD INDUSTRIAL CLASSIFICATION: SPECIAL INDUSTRY MACHINERY, NEC [3559] IRS NUMBER: 942634797 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-12933 FILM NUMBER: 95590546 BUSINESS ADDRESS: STREET 1: 4650 CUSHING PKWY CITY: FREMONT STATE: CA ZIP: 94538 BUSINESS PHONE: 5106590200 MAIL ADDRESS: STREET 1: 4650 CUSHING PARKWAY CITY: FREMONT STATE: CA ZIP: 94538 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR QUARTER ENDED SEPTEMBER 30, 1995 Commission File No. 0-12933 LAM RESEARCH CORPORATION (Exact name of Registrant as specified in its charter) DELAWARE 94-2634797 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 4650 CUSHING PARKWAY, FREMONT, CALIFORNIA 94538 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (510) 659-0200 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES __X__ NO ____ As of September 30, 1995 there were 27,380,498 shares of Registrant's Common Stock outstanding. INDEX Page No. ---- PART I. FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . 1 Item 1. Financial Statements (unaudited) . . . . . . . . . . . . . . . . . 1 Condensed Consolidated Balance Sheets . . . . . . . . . . . . 1 Condensed Consolidated Statements of Income . . . . . . . . . 2 Condensed Consolidated Statements of Cash Flows . . . . . . . 3 Notes to Condensed Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. . . . . . . . . . . . . . . . 6 Results of Operations . . . . . . . . . . . . . . . . . . . . 6 Liquidity and Capital Resources . . . . . . . . . . . . . . . 8 PART II. OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . 9 Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . 9 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . 9 ITEM 1. FINANCIAL STATEMENTS LAM RESEARCH CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands except per share data) September 30, June 30, 1995 1995 (Unaudited) (Note) ------------ ---------- Assets Cash and cash equivalents $12,532 $43,675 Short-term investments 98,970 57,334 Accounts receivable, net 207,029 195,682 Inventories 185,609 171,401 Prepaid expenses and other assets 11,933 25,263 Deferred income taxes 32,778 32,778 ------------ ---------- Total Current Assets 548,851 526,133 Equipment and leasehold improvements, net 128,686 117,571 Restricted cash 25,024 25,024 Other assets 16,328 13,921 ------------ ---------- Total Assets $718,889 $682,649 ------------ ---------- ------------ ---------- Liabilities and Stockholders' Equity Trade accounts payable $84,784 $82,542 Accrued expenses and other current liabilities 108,087 98,633 Current portion of long-term debt and capital lease obligations 4,964 7,572 ------------ ---------- Total Current Liabilities 197,835 188,747 Long-term debt and capital lease obligations, less current portion 91,995 95,928 Deferred income taxes 2,712 2,712 ------------ ---------- Total Liabilities 292,542 287,387 Preferred stock: 5,000 shares authorized; none outstanding Common Stock at par value of $.001 per share Authorized -- 90,000 shares; issued and outstanding 27,380 shares at September 30, 1995 and 27,275 shares at June 30, 1995 27 27 Additional paid-in capital 225,348 224,730 Retained earnings 200,972 170,505 ------------ ---------- Total Stockholders' Equity 426,347 395,262 ------------ ---------- $718,889 $682,649 ------------ ---------- ------------ ---------- Note -- The Condensed Consolidated Balance Sheet at June 30, 1995 has been derived from the audited financial statements at that date. See Notes to condensed consolidated financial statements. -3- LAM RESEARCH CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands except per share data) (Unaudited) Three Months Ended ------------------------- September 30, ------------------------- 1995 1994 ---------- ---------- Net sales $257,747 $158,920 Royalty income 5,497 2,593 ---------- ---------- Total revenue 263,244 161,513 Costs and expenses: Cost of goods sold 134,707 84,690 Research and development 35,983 25,324 Selling, general and administrative 47,584 29,119 ---------- ---------- Operating income 44,970 22,380 Other expense, net 172 876 ---------- ---------- Income before income taxes 44,798 21,504 Income taxes 14,331 6,451 ---------- ---------- Net income $30,467 $15,053 ---------- ---------- ---------- ---------- Net income per share Primary $1.07 $0.61 ---------- ---------- ---------- ---------- Fully diluted $1.00 $0.58 ---------- ---------- ---------- ---------- Number of shares used in per share calculations Primary 28,400 24,500 ---------- ---------- ---------- ---------- Fully diluted 31,125 27,275 ---------- ---------- ---------- ---------- See Notes to condensed consolidated financial statements. -2- LAM RESEARCH CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Three Months Ended ------------------------------ September 30, September 30, 1995 1994 --------------- -------------- Cash flows from operating activities: Net income $30,467 $15,053 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 7,153 4,877 Change in certain working capital accounts (12,566) (18,607) --------------- -------------- Net cash provided by operating activities 25,054 1,323 Cash flows from investing activites: Capital expenditures (18,206) (12,581) Purchase of short-term investments (95,759) -- Sale of short-term investments 54,123 -- Restricted cash -- (2,618) Proceeds from sales of securities 12,038 -- Other (2,470) (69) --------------- -------------- Net cash used in investing activities (50,274) (15,268) --------------- -------------- Cash flows from financing activities: Sale of stock, net of issuance costs 618 105,283 Principal payments on long-term debt and capital lease obligations (6,541) (2,912) --------------- -------------- Net cash provided by (used in) financing activities (5,923) 102,371 --------------- -------------- Net increase (decrease) in cash and cash equivalents (31,143) 88,426 Cash and cash equivalents at beginning of period 43,675 24,092 --------------- -------------- Cash and cash equivalents at end of period $12,532 $112,518 --------------- -------------- --------------- -------------- See Notes to condensed consolidated financial statements. -3- LAM RESEARCH CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 1995 (Unaudited) NOTE A -- BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements of Lam Research Corporation (the "Company") for the year ended June 30, 1995, which are included in the Annual Report on Form 10-K, File number 0-12933. The results of operations for the three months ended September 30, 1995 are not necessarily indicative of the results that may be expected for the entire fiscal year ending June 30, 1996. NOTE B -- INVENTORIES Inventories consist of the following: September 30, June 30, 1995 1995 ------------- ---------- (in thousands) Raw materials $86,799 $80,910 Work-in-process 77,445 73,183 Finished goods 21,365 17,308 ---------- ---------- $185,609 $171,401 ---------- ---------- ---------- ---------- NOTE C -- EQUIPMENT AND LEASEHOLD IMPROVEMENTS Equipment and leasehold improvements consist of the following: September 30, June 30, 1995 1995 ------------- ---------- (in thousands) Equipment $80,986 $80,910 Furniture & fixtures 27,968 25,372 Leasehold improvements 79,477 64,707 ---------- ---------- 188,431 170,989 Accumulated depreciation and amortization (59,745) (53,418) ---------- ---------- $128,686 $117,571 ---------- ---------- ---------- ---------- -4- NOTE D -- OTHER EXPENSE, NET The significant components of other expense, net are as follows (in thousands): Three Months Ended September 30, 1995 1994 ------------- ---------- Interest Expense $1,968 $1,436 Interest Income (1,375) (497) Other (421) (63) ---------- ---------- $172 $876 ---------- ---------- ---------- ---------- NOTE E -- NET INCOME PER SHARE For the three month periods ended September 30, 1995 and 1994, primary net income per share is calculated using the weighted average number of shares of common stock and common stock equivalents outstanding during the period. The common stock equivalents include shares issuable upon the assumed exercise of stock options reflected under the treasury stock method. In addition, fully diluted net income per share reflects the assumed conversion of the Company's convertible subordinated debentures at the beginning of each period, and also adds the interest expense incurred on the debentures, net of income tax effect, to the net income amount for use in the fully diluted calculation. NOTE F -- LITIGATION See Part II, item 1 for discussion of litigation -5- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The components of the Company's statements of income, expressed as a percentage of total revenue, are as follows: Three Months Ended September 30, 1995 1994 ------- ------- Net Sales 97.9% 98.4% Royalty income 2.1 1.6 ------- ------- 100.0 100.0 Cost of goods sold 51.2 52.4 Research and development 13.6 15.7 Selling, general & administrative 18.1 18.0 ------- ------- Operating income 17.1 13.9 Other expense, net 0.1 0.6 ------- ------- Income before taxes 17.0 13.3 Income taxes 5.4 4.0 ------- ------- Net income 11.6% 9.3% ------- ------- ------- ------- RESULTS OF OPERATIONS Net sales for the three month period ended September 30, 1995 increased by 62% over the comparable prior year period. Increased unit sales of Transformer Coupled Plasma-trademark- (TCP-trademark-) and Rainbow-trademark- systems accounted for approximately 65% of the sales increase for the first quarter of fiscal year 1996 as compared to the comparable prior year period. The semiconductor manufacturing industry's continued acceptance of the TCP family of products has made it the fastest growing (in terms of revenue) product line in the Company's history. Export sales increased to 61% of net sales, for the three months ended September 30, 1995, from 52% of net sales for the same period of the prior year. Increased sales of all Lam product lines in Korea accounted for 29% of the overall net sales increase; net sales in Europe were also much stronger than in the year-ago period. In addition, service and spares revenue which represented approximately 22% of total revenue, increased 72% as compared to the same period of the prior fiscal year, as a result of increases in the Company's installed machine base. Royalty income increased by 112% from the year-ago quarter due to continued improvement in the Japanese semiconductor market which resulted in increased sales of products incorporating the Company's technology being licensed by Tokyo Electron Limited (TEL) and Sumitomo Metal Industries, Ltd. (SMI). -6- The Company's gross margin percentage improved to 48.8% in the first quarter of fiscal 1996 as compared to 47.6% in the comparable quarter of fiscal 1995. The improvement in gross margin percentage resulted from increased shipments of Rainbow machines with a higher margin during the quarter ended September 30, 1995 as compared to the comparable period in the prior year. Partially offsetting the increase in margin from Rainbow sales were increased shipments of Alliance machines at lower margins during the quarter ended September 30, 1995 as compared to the prior year period. Research and development (R&D) expense increased for the three month period ended September 30, 1995 by 42% over the prior year period but as a percentage of total revenue was lower than the comparable prior year period. The increased expense was due to continued expenditures on advanced etch applications, continued development of CVD technologies including Epic-trademark- and Integrity-Registered Trademark- and further enhancements of the TCP and Rainbow products. Although the Company has significantly increased engineering headcount and spending, these expenditures have increased at a slightly slower rate than the Company's revenue. The Company believes it is critical to continue to make investments in R&D programs in order to maintain its position as a technology leader. The Company's new research and development facility at its Fremont campus, which the Company began occupying in the first quarter of fiscal 1995 is now complete and fully operational. The Company is currently planning to lease another engineering facility to be constructed at its Fremont campus which is expected to be operational by the end of the current fiscal year. Selling, general and administrative (S,G&A) expenses for the three month period ended September 30, 1995 increased by 63% over the prior year period but were almost equal to the prior year period as a percentage of revenue. The Company has added employees in all customer support, sales and administration areas to accommodate the increased sales volume. SG&A expenditures by the Company's foreign subsidiaries increased at a rate higher than that in the United States. The increase in the foreign expenditures for SG&A was needed to accommodate the increase in sales in foreign regions, particularly Asia Pacific. The Company opened a new manufacturing facility in Korea in July 1995 and is expanding its facilities in Japan and Taiwan. The Company therefore expects that SG&A expenses in Asia Pacific and Japan will continue to increase over the remainder of the fiscal year. The effective tax rate for the fiscal 1996 period is 32% compared to 30% for the prior year period due primarily to the expiration of the federal research and development credit. -7- LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operating activities was $25.1 million for the three months ended September 30, 1995, derived from income before depreciation and amortization expenses totaling $37.6 million, offset by the increases in inventories and accounts receivable related to the sales volume increase. Cash receipts from investing activities of $12.1 million were provided from the sale of Brooks Automation, Inc. securities. In addition, $24.9 million was provided from the sale of yen-denominated Japanese receivables to a bank (under an agreement entered into during fiscal 1995 whereby the Company may sell up to $50.0 million of yen-denominated Japanese receivables to the bank). Capital expenditures for the current three month period were $18.2 million, primarily for new facility leasehold improvements, and furnishings at both the Fremont campus and the new manufacturing facility in Korea. The Company had net purchases of short-term investments of $41.6 million. In addition, contributing to the overall use of cash were payments of $6.5 million relating to long-term debt and capital lease obligations. As of September 30, 1995, the Company had $111.5 million in cash, cash equivalents and short-term investments compared with $101.0 million at June 30, 1995. The Company has a total of $50.0 million available under four bank lines of credit which expire between March and June 1996. There were no borrowings on any of the lines at September 30, 1995. The Company is currently renegotiating its pledge agreement to reduce the amount of restricted investments. The Company's cash, cash equivalents, short-term investments and available lines of credit at the end of the first quarter of fiscal 1996 are considered adequate to support current levels of operations for at least the next twelve months. -8- PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In October 1993, Varian Associates, Inc. ("Varian") brought suit against the Company in the United States District Court, Northern District of California, seeking monetary damages and injunctive relief based on the Company's alleged infringement of certain patents held by Varian. The lawsuit is in the late stages of discovery. The Company has asserted defenses of invalidity and unenforceability of the patents that are the subject of the lawsuit, as well as noninfringement of such patents by the Company's products. While litigation is subject to inherent uncertainties and no assurance can be given that the Company will prevail in such litigation or will obtain a license under such patents on commercially reasonable terms or at all if such patents are held valid and infringement by the Company's products, the Company believes that the Varian lawsuit will not have a material adverse effect on the Company's consolidated financial statements. In addition, the Company is from time to time notified by various parties that it may be in violation of certain patents. In such cases, it is the Company's intention to seek negotiated licenses where it is considered appropriate. The outcome of these matters will not, in management's opinion, have a material impact on the Company's consolidated financial position, operating results or cash flow statements. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit 11.1 Statement Re: Computation of Earnings Per Share Exhibit 27 Financial Data Schedule (b) No reports on Form 8-K were filed by the Registrant during the quarter ended September 30, 1995. -9- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. Date: November 13, 1995 LAM RESEARCH CORPORATION By: -------------------------------- Henk J. Evenhuis, Executive Vice President, Finance & Chief Financial Officer -10- EX-11.1 2 EXHIBIT 11.1 EXHIBIT 11.1 LAM RESEARCH CORPORATION STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE Three Months Ended (In thousands except per share data) --------------------------------------- September 30, September 30, 1995 1994 ------- ------- ------- ------- Fully Fully Primary Diluted Primary Diluted ------- ------- ------- ------- Net income $30,467 $30,467 $15,053 $15,053 Add interest expense on convertible subordinated debentures, net of income tax effect 803 749 ------- ------- ------- ------- $30,467 $31,270 $15,053 $15,802 ------- ------- ------- ------- ------- ------- ------- ------- Average shares outstanding 27,293 27,293 23,660 23,660 Net effect of dilutive stock options 1,107 1,192 840 975 Assumed conversion of convertible subordinated debentures 2,640 2,640 ------- ------- ------- ------- 28,400 31,125 24,500 27,275 ------- ------- ------- ------- ------- ------- ------- ------- Net income per share $1.07 $1.00 $0.61 $0.58 ------- ------- ------- ------- EX-27 3 EXHIBIT 27 (FDS)
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED STATEMENT OF OPERATIONS, THE CONSOLIDATED BALANCE SHEET AND THE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS JUN-30-1996 JUL-01-1995 SEP-30-1995 12,532 98,970 208,216 1,187 185,609 548,851 188,431 59,745 718,889 197,835 66,000 27 0 0 426,320 718,889 263,244 263,244 134,707 218,274 0 0 1,968 44,798 14,331 30,467 0 0 0 30,467 1.07 1.00
-----END PRIVACY-ENHANCED MESSAGE-----