Lam Research Corporation

Lam Research Corporation Reports Financial Results for the Quarter Ended September 28, 2014

FREMONT, CA -- (Marketwired) -- 10/22/14 -- Lam Research Corp. (NASDAQ: LRCX) today announced financial results for the quarter ended September 28, 2014. Highlights for the September 2014 quarter were as follows:

Lam Research Corporation  
Financial Highlights for the Quarters Ended September 28, 2014 and June 29, 2014  
(in thousands, except per share data and percentages)  
                   
U.S. GAAP  
    September 2014     June 2014     Change Q/Q  
                       
Revenue   $ 1,152,368     $ 1,248,797     -8 %
Gross margin as percentage of revenue     43.9 %     44.6 %   -70 bps  
Operating margin as percentage of revenue     14.6 %     17.3 %   -270 bps  
Diluted EPS   $ 0.80     $ 1.35     -41 %
                       
                       
Non-GAAP  
    September 2014     June 2014     Change Q/Q  
                       
Revenue   $ 1,152,368     $ 1,248,797     -8 %
Gross margin as percentage of revenue     45.8 %     46.4 %   -60 bps  
Operating margin as percentage of revenue     18.0 %     20.6 %   -260 bps  
Diluted EPS   $ 0.96     $ 1.25     -23 %

GAAP Financial Results
Revenue for the September 2014 quarter was $1,152.4 million, gross margin was $505.5 million, or 43.9% of revenue, operating expenses were $337.2 million, operating margin was 14.6% of revenue, and net income was $141.1 million, or $0.80 per diluted share on a GAAP basis. This compares to revenue of $1,248.8 million, gross margin of $557.0 million, or 44.6% of revenue, operating expenses of $341.2 million, operating margin of 17.3% of revenue, and net income of $233.4 million, or $1.35 per diluted share, for the June 2014 quarter. Our June 2014 results benefited from an $83.1 million gain on sale of non-essential real estate.

Non-GAAP Financial Results
Non-GAAP gross margin for the September 2014 quarter was $528.0 million or 45.8% of revenue, non-GAAP operating expenses were $321.2 million, non-GAAP operating margin was 18.0% of revenue, and non-GAAP net income was $167.7 million, or $0.96 per diluted share. This compares to non-GAAP gross margin of $579.9 million or 46.4% of revenue, non-GAAP operating expenses of $322.2 million, non-GAAP operating margin of 20.6% of revenue, and non-GAAP net income of $217.2 million, or $1.25 per diluted share for the June 2014 quarter.

"Lam delivered another quarter of strong execution, with performance that met or exceeded our plans and continued our theme of outperformance relative to the semiconductor equipment industry," said Martin Anstice, Lam Research's president and chief executive officer. "We are executing on the tremendous opportunity in front of us as key technology inflections in areas like multi-patterning, FinFET, 3DNAND and advanced packaging drive a multi-year, significant expansion in our served market. Central to our present and future success is our commitment to investment at the leading edge, collaborating with our customers to solve their most critical challenges."

Balance Sheet and Cash Flow Results
Cash and cash equivalents, short-term investments, and restricted cash and investment balances decreased to $3.0 billion at the end of the September 2014 quarter compared to $3.2 billion at the end of the June 2014 quarter. This decrease was primarily the result of approximately $308 million in cash flows used for treasury stock purchases including net share settlement on employee stock-based compensation during the September 2014 quarter and was partially offset by approximately $141 million of cash provided by operating activities.

Deferred revenue at the end of the September 2014 quarter decreased to $356.8 million as compared to $361.6 million at the end of the June 2014 quarter. Deferred profit at the end of the September 2014 quarter increased to $251.8 million as compared to $235.9 million at the end of the June 2014 quarter. Lam's deferred revenue balance does not include shipments to Japanese customers, to whom title does not transfer until customer acceptance. Shipments to Japanese customers are classified as inventory at cost until the time of acceptance. The anticipated future revenue from shipments to Japanese customers was approximately $34.3 million as of September 28, 2014.

Geographic Distribution
The geographic distribution of shipments and revenue during the September 2014 quarter is shown in the following table:

             
Region   Shipments     Revenue  
United States   25 %   28 %
Korea   16 %   19 %
Taiwan   21 %   18 %
Japan   11 %   10 %
China   8 %   9 %
Southeast Asia   11 %   9 %
Europe   8 %   7 %
             

Outlook
For the December 2014 quarter, Lam is providing the following guidance:

               
  GAAP Reconciling Items Non-GAAP
Shipments $1.24 Billion +/- $50 Million - $1.24 Billion +/- $50 Million
Revenue $1.23 Billion +/- $50 Million - $1.23 Billion +/- $50 Million
Gross margin 43.8% +/- 1% $21 Million 45.5% +/- 1%
Operating margin 16.0% +/- 1% $37 Million 19.0% +/- 1%
Earnings per share $0.89 +/- $0.07 $38 Million $1.12 +/- $0.07
Diluted share count 175 Million 2 Million 173 Million

The information provided above is only an estimate of what the Company believes is realizable as of the date of this release. GAAP to non-GAAP reconciling items provided include only those items that are known and can be estimated as of the date of this release. Actual results will vary from this model and the variations may be material. Reconciling items included above are as follows:

Use of Non-GAAP Financial Results
In addition to U.S. GAAP results, this press release also contains non-GAAP financial results. The Company's non-GAAP results for both the September 2014 and June 2014 quarters exclude rationalization of certain product configurations, amortization related to intangible assets acquired in the Novellus transaction, the amortization of convertible note discounts, and tax expense (benefit) of non-GAAP items. Additionally, the September 2014 quarter non-GAAP results include the impact of the note hedge issued contemporaneously with the convertible notes due in 2016 and 2018 and exclude a net gain associated with the disposition of business and tax benefit on valuation allowance adjustment. The June 2014 quarter non-GAAP results also exclude the release of acquisition-related inventory fair value impacts, restructuring charges, cost associated with the disposition of business, gain on sale of real estate, and tax benefit on successful resolution of certain tax matters.

Management uses non-GAAP gross margin, operating income, operating expenses, operating margin, net income, and net income per diluted share to evaluate the Company's operating and financial results. The Company believes the presentation of non-GAAP results is useful to investors for analyzing business trends and comparing performance to prior periods, along with enhancing investors' ability to view the Company's results from management's perspective. Tables presenting reconciliations of non-GAAP results to U.S. GAAP results are included at the end of this press release and on the Company's web site at http://investor.lamresearch.com.

Caution Regarding Forward-Looking Statements
Statements made in this press release that are not of historical fact are forward-looking statements and are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements relate to, but are not limited to, the anticipated revenue from shipments to Japanese customers; our ability to continue to outperform the semiconductor equipment industry; our ability to execute and deliver performance that meets or exceeds our plans; the scope of opportunities we have; our ability to execute on these opportunities, including areas like multi-patterning, FinFET, 3DNAND and advanced packaging; our ability to expand our served market; our ability and commitment to invest at the leading edge; our ability to continue to successfully collaborate with customers and to solve their most critical challenges; and our guidance for shipments, revenue, gross margin, operating margin, earnings per share, and diluted share count. Some factors that may affect these forward-looking statements include: business conditions in the consumer electronics industry, the semiconductor industry and the overall economy; the strength of the financial performance of our existing and prospective customers; the introduction of new and innovative technologies; the occurrence and pace of technology transitions and conversions; the actions of our competitors, consumers, semiconductor companies and key suppliers and subcontractors; and the success of research and development and sales and marketing programs. 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, including those detailed in documents filed by us with the Securities and Exchange Commission, including specifically our report on Form 10-K for the year ended June 29, 2014. These uncertainties and changes could cause actual results to vary from expectations. The Company undertakes no obligation to update the information or statements made in this press release.

About Lam Research
Lam Research Corp. (NASDAQ: LRCX) is a trusted global supplier of innovative wafer fabrication equipment and services to the semiconductor industry. Lam's broad portfolio of market-leading deposition, etch, strip and wafer cleaning solutions help customers achieve success on the wafer by enabling device features that are 1,000 times smaller than a grain of sand, resulting in smaller, faster, and more power-efficient chips. Through collaboration, continuous innovation and delivering on commitments, Lam is transforming atomic-scale engineering and enabling our customers to shape the future of technology. Based in Fremont, Calif., Lam Research is an S&P 500 ® company whose common stock trades on the NASDAQ Global Select Market under the symbol LRCX. For more information, please visit http://www.lamresearch.com. (LRCX-F)

Consolidated Financial Tables Follow.

LAM RESEARCH CORPORATION  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
(in thousands, except per share data and percentages)  
                   
    Three Months Ended  
    September 28,     June 29,     September 29,  
    2014     2014     2013  
    (unaudited)     (1)     (unaudited)  
Revenue   $ 1,152,368     $ 1,248,797     $ 1,015,059  
  Cost of goods sold     646,829       691,761       583,201  
    Gross margin     505,539       557,036       431,858  
    Gross margin as a percent of revenue     43.9 %     44.6 %     42.5 %
Research and development     188,934       185,449       170,567  
Selling, general and administrative     148,307       155,737       155,883  
    Total operating expenses     337,241       341,186       326,450  
    Operating income     168,298       215,850       105,408  
    Operating margin as a percent of revenue     14.6 %     17.3 %     10.4 %
Gain on sale of real estate     -       83,090       -  
Other expense, net     (5,648 )     (9,442 )     (14,262 )
    Income before income taxes     162,650       289,498       91,146  
Income tax expense     21,569       56,103       5,640  
    Net income   $ 141,081     $ 233,395     $ 85,506  
Net income per share:                        
  Basic net income per share   $ 0.87     $ 1.44     $ 0.52  
  Diluted net income per share   $ 0.80     $ 1.35     $ 0.50  
Number of shares used in per share calculations:                        
  Basic     161,685       162,215       162,896  
  Diluted     177,118       173,345       171,363  
                         
Cash dividend declared per share   $ 0.18     $ 0.18     $ -  
                         
(1) Derived from audited financial statements  
   
   
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
       
  September 28,   June 29,
  2014   2014
  (unaudited)   (1)
ASSETS          
Cash and cash equivalents $ 1,293,678   $ 1,452,677
Short-term investments   1,593,668     1,612,967
Accounts receivable, net   864,403     800,616
Inventories   815,612     740,503
Other current assets   123,615     176,899
  Total current assets   4,690,976     4,783,662
Property and equipment, net   555,658     543,496
Restricted cash and investments   149,483     146,492
Goodwill and intangible assets   2,322,153     2,360,303
Other assets   175,558     159,353
  Total assets $ 7,893,828   $ 7,993,306
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
Current liabilities $ 1,599,625   $ 1,582,001
           
Long-term debt, convertible notes, and capital leases $ 824,269   $ 817,202
Income taxes payable   217,118     258,357
Other long-term liabilities   179,711     122,662
  Total liabilities   2,820,723     2,780,222
           
Senior convertible notes   182,432     183,349
Stockholders' equity (2)   4,890,673     5,029,735
  Total liabilities and stockholders' equity $ 7,893,828   $ 7,993,306
           
(1) Derived from audited financial statements          
           
(2) Common shares issued and outstanding were 159,384 shares as of September 28, 2014 and 162,350 shares as of June 29, 2014.
 
 
LAM RESEARCH CORPORATION  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(in thousands)  
(unaudited)  
                   
    Three Months Ended  
    September 28,     June 29,     September 29,  
    2014     2014     2013  
CASH FLOWS FROM OPERATING ACTIVITIES:                        
Net income   $ 141,081     $ 233,395     $ 85,506  
Adjustments to reconcile net income to net cash provided by operating activities:                        
  Depreciation and amortization     67,885       71,115       74,331  
  Deferred income taxes     3,186       (4,104 )     -  
  Impairment of long-lived asset     -       -       7,004  
  Equity-based compensation expense     32,040       33,085       23,235  
  Income tax benefit on equity-based compensation plans     9,861       6,269       -  
  Excess tax benefit on equity-based compensation plans     (10,404 )     (6,361 )     -  
  Amortization of convertible note discount     8,509       8,411       8,122  
  Gain on sale of business     (7,431 )     -       -  
  Gain on sale of real estate     -       (83,090 )     -  
  Other, net     5,526       8,241       4,115  
  Changes in operating assets and liabilities:     (109,092 )     (21,070 )     (150,388 )
    Net cash provided by operating activities     141,161       245,891       51,925  
                         
CASH FLOWS FROM INVESTING ACTIVITIES:                        
Capital expenditures and intangible assets     (41,871 )     (41,764 )     (23,778 )
Cash paid for business acquisition     (1,137 )     (11,839 )     -  
Net sales/maturities (purchases) of available-for-sale securities     9,645       (155,035 )     42,567  
Proceeds from sale of business, net     41,212       -       -  
Proceeds from sale of assets     -       134,762       -  
Transfer of restricted cash and investments     22       (637 )     150  
    Net cash (used for) provided by investing activities     7,871       (74,513 )     18,939  
                         
CASH FLOWS FROM FINANCING ACTIVITIES:                        
Principal payments on long-term debt and capital lease obligations     (107 )     (739 )     (88 )
Excess tax benefit on equity-based compensation plans     10,404       6,361       -  
Treasury stock purchases     (308,422 )     (40,249 )     (104,285 )
Dividends paid     (29,240 )     -       -  
Reissuances of treasury stock related to employee stock purchase plan     16,919       14,597       15,154  
Proceeds from issuance of common stock     4,609       8,657       12,574  
    Net cash used for financing activities     (305,837 )     (11,373 )     (76,645 )
Effect of exchange rate changes on cash     (2,194 )     371       (508 )
Net (decrease) increase in cash and cash equivalents     (158,999 )     160,376       (6,289 )
Cash and cash equivalents at beginning of period     1,452,677       1,292,301       1,162,473  
Cash and cash equivalents at end of period   $ 1,293,678     $ 1,452,677     $ 1,156,184  
                         
                         
Non-GAAP Financial Summary  
(in thousands, except percentages and per share data)  
(unaudited)  
           
  Three Months Ended     Three Months Ended  
  September 28,     June 29,  
  2014     2014  
               
Revenue $ 1,152,368     $ 1,248,797  
Gross margin $ 528,032     $ 579,888  
Gross margin as percentage of revenue   45.8 %     46.4 %
Operating expenses $ 321,158     $ 322,155  
Operating income $ 206,874     $ 257,733  
Operating margin as a percentage of revenue   18.0 %     20.6 %
Net income $ 167,671     $ 217,228  
Net income per diluted share $ 0.96     $ 1.25  
Shares used in per share calculation - diluted   175,433       173,345  
               
               
Reconciliation of U.S. GAAP Net Income to Non-GAAP Net Income and U.S. GAAP number of dilutive shares to Non-GAAP number of dilutive shares  
(in thousands, except share and per share data)  
(unaudited)  
           
  Three Months Ended     Three Months Ended  
  September 28,     June 29,  
  2014     2014  
U.S. GAAP net income $ 141,081     $ 233,395  
Pre-tax non-GAAP items:              
  Amortization related to intangible assets acquired in Novellus transaction - cost of goods sold   20,893       21,685  
  Costs associated with rationalization of certain product configurations - cost of goods sold   1,600       -  
  Acquisition-related inventory fair value impact - cost of goods sold   -       1,167  
  Amortization related to intangible assets acquired in Novellus transaction - operating expenses   16,083       16,547  
  Restructuring charges - operating expenses   -       295  
  Costs associated with rationalization of certain product configurations - operating expenses   -       1,086  
  Costs associated with disposition of business - operating expenses   -       1,103  
  Amortization of convertible note discount, Lam notes - other expense, net   7,593       7,504  
  Amortization of convertible note discount, Novellus assumed notes - other expense, net   911       763  
  Net gain associated with disposition of business - other expense, net   (4,331 )     -  
  Gain on sale of real estate   -       (83,090 )
Net tax (benefit) expense on non-GAAP items   (13,348 )     17,075  
Net tax benefit on valuation allowance adjustment   (2,811 )     -  
Net tax benefit on successful resolution of certain tax matters   -       (302 )
Non-GAAP net income $ 167,671     $ 217,228  
Non-GAAP net income per diluted share $ 0.96     $ 1.25  
               
U.S. GAAP number of shares used for diluted per share calculation   177,118       173,345  
Effect of convertible note hedge   (1,685 )     -  
Non-GAAP number of shares used for diluted per share calculation   175,433       173,345  
               
               
               
               
Reconciliation of U.S. GAAP Gross Margin, Operating Expenses and Operating Income to Non-GAAP Gross Margin, Operating Expenses and Operating Income  
(in thousands, except percentages)  
(unaudited)  
           
  Three Months Ended     Three Months Ended  
    September 28,       June 29,  
    2014       2014  
U.S. GAAP gross margin $ 505,539     $ 557,036  
Pre-tax non-GAAP items:              
  Amortization related to intangible assets acquired in Novellus transaction - cost of goods sold   20,893       21,685  
  Costs associated with rationalization of certain product configurations - cost of goods sold   1,600       -  
  Acquisition-related inventory fair value impact - cost of goods sold   -       1,167  
Non-GAAP gross margin $ 528,032     $ 579,888  
U.S. GAAP gross margin as a percentage of revenue   43.9 %     44.6 %
Non-GAAP gross margin as a percentage of revenue   45.8 %     46.4 %
U.S. GAAP operating expenses $ 337,241     $ 341,186  
Pre-tax non-GAAP items:              
  Amortization related to intangible assets acquired in Novellus transaction - operating expenses   (16,083 )     (16,547 )
  Restructuring charges - operating expenses   -       (295 )
  Costs associated with rationalization of certain product configurations - operating expenses   -       (1,086 )
  Costs associated with disposition of business - operating expenses   -       (1,103 )
Non-GAAP operating expenses $ 321,158     $ 322,155  
Non-GAAP operating income $ 206,874     $ 257,733  
Non-GAAP operating margin as a percent of revenue   18.0 %     20.6 %

Lam Research Corporation Contact:
Carol Raeburn
Investor Relations
phone: 510-572-4450
e-mail: carol.raeburn@lamresearch.com

Source: Lam Research Corporation

News Provided by Acquire Media