Lam Research Corporation

Lam Research Corporation Reports Financial Results for the Quarter Ended March 29, 2015

FREMONT, CA -- (Marketwired) -- 04/20/15 -- Lam Research Corp. (NASDAQ: LRCX) today announced financial results for the quarter ended March 29, 2015 (the "March 2015 quarter").

Highlights for the March 2015 quarter were as follows:

 
Lam Research Corporation
Financial Highlights for the Quarters Ended March 29, 2015 and December 28, 2014
(in thousands, except per share data and percentages)
             
GAAP
    March 2015   December 2014   Change Q/Q
                 
Revenue   $ 1,393,333   $ 1,232,241   13%
Gross margin as percentage of revenue     43.1%     43.6%   -50 bps
Operating margin as percentage of revenue     17.2%     15.3%   190 bps
Diluted EPS   $ 1.16   $ 1.00   16%
                 
Non-GAAP
    March 2015   December 2014   Change Q/Q
                 
Revenue   $ 1,393,333   $ 1,232,241   13%
Gross margin as percentage of revenue     44.7%     45.4%   -70 bps
Operating margin as percentage of revenue     19.9%     18.7%   120 bps
Diluted EPS   $ 1.40   $ 1.19   18%
                 

GAAP Financial Results

For the March 2015 quarter, revenue was $1,393.3 million, gross margin was $600.6 million, or 43.1% of revenue, operating expenses were $360.6 million, operating margin was 17.2% of revenue, and net income was $206.3 million, or $1.16 per diluted share on a GAAP basis. This compares to revenue of $1,232.2 million, gross margin of $536.7 million, or 43.6% of revenue, operating expenses of $347.9 million, operating margin of 15.3% of revenue, and net income of $176.9 million, or $1.00 per diluted share, for the quarter ended December 28, 2014 (the "December 2014 quarter").

Non-GAAP Financial Results

For the March 2015 quarter, non-GAAP gross margin was $622.2 million or 44.7% of revenue, non-GAAP operating expenses were $345.0 million, non-GAAP operating margin was 19.9% of revenue, and non-GAAP net income was $244.9 million, or $1.40 per diluted share on a non-GAAP basis. This compares to non-GAAP gross margin of $560.0 million or 45.4% of revenue, non-GAAP operating expenses of $330.2 million, non-GAAP operating margin of 18.7% of revenue, and non-GAAP net income of $207.6 million, or $1.19 per diluted share for the December 2014 quarter.

"­­Lam's March quarter results reached record levels further extending our outperformance trajectory," said Martin Anstice, Lam Research's president and chief executive officer. "Our differentiated products and services are directly addressing the market driving technology inflections of multi-patterning, 3D device architecture and advanced packaging. Through ever closer collaboration with our customers we are partnering to solve their most critical challenges solidifying our growth opportunity."

Balance Sheet and Cash Flow Results

The successful issuance of $1.0 billion in bonds in the March 2015 quarter helped increase cash and cash equivalents, short-term investments, and restricted cash and investment balances to $4.1 billion at the end of the March 2015 quarter compared to $3.0 billion at the end of the December 2014 quarter. Cash provided by operating activities was utilized for approximately $124.9 million of treasury stock purchases, including net share settlement on employee stock-based compensation, $31.9 million of capital expenditures and $28.7 million of cash dividends paid to stockholders during the March 2015 quarter.

Deferred revenue at the end of the March 2015 quarter increased to $485.2 million as compared to $373.7 million at the end of the December 2014 quarter. Deferred profit at the end of the March 2015 quarter increased to $303.3 million as compared to $254.8 million at the end of the December 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 $45.4 million as of March 29, 2015.

Geographic Distribution

The geographic distribution of shipments and revenue during the March 2015 quarter is shown in the following table:

         
Region   Shipments   Revenue
Korea   34%   35%
Taiwan   19%   20%
China   19%   15%
Japan   10%   11%
United States   10%   10%
Europe   6%   7%
Southeast Asia   2%   2%
         

Outlook

For the quarter ending June 28, 2015, Lam is providing the following guidance:

                     
    GAAP   Reconciling Items   Non-GAAP
Shipments   $1.60 Billion +/- $50 Million   -   $1.60 Billion +/- $50 Million
Revenue   $1.46 Billion +/- $50 Million   -   $1.46 Billion +/- $50 Million
Gross margin   44.1% +/- 1%   $21 Million   45.5% +/- 1%
Operating margin   18.5% +/- 1%   $37 Million   21.0% +/- 1%
Earnings per share   $1.21 +/- $0.07   $39 Million   $1.46 +/- $0.07
Diluted share count   177 Million   3 Million   174 Million
             

The information provided above is only an estimate of what the Company believes is realizable as of the date of this release, and does not incorporate the potential impact of any business combinations, asset acquisitions, divestitures, financing arrangements, other investments, or other significant transactions that may be completed after 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 GAAP results, this press release also contains non-GAAP financial results. The Company's non-GAAP results for both the March 2015 and December 2014 quarters include the impact of the note hedge issued contemporaneously with the convertible notes due in 2016 and 2018 and exclude amortization related to intangible assets acquired in the Novellus transaction; acquisition-related inventory fair value impact; selected restructuring charges, net; the amortization of note discounts; and tax benefit of non-GAAP items. Additionally, the March 2015 quarter non-GAAP results exclude the tax benefit on the successful resolution of certain tax matters. The December 2014 quarter non-GAAP results exclude the net tax benefit on the reinstatement of the research and development credit.

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 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 reach record levels and outperform the semiconductor equipment industry; our ability to collaborate with our customers and partner to solve their most critical challenges; our ability to continue to grow our revenue and make progress on our market share objectives; our ability to differentiate our products and services, address market driving technology inflections, and deliver performance that meets or exceeds our plans, including our abilities to execute on our priorities, and deliver growth; the scope of opportunities we have; our ability to expand our served market; the ability of the market to continue to expand and the extent of any such expansion; 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 and our reports on Form 10-Q for the quarters ended September 28, 2014 and December 28, 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 helps 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 its customers to shape the future of technology. Based in Fremont, Calif., Lam Research is a NASDAQ-100 Index ® and 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)  
(unaudited)  
                               
    Three Months Ended     Nine Months Ended  
    March 29,
2015
    December
28, 
2014
    March 30,
2014
    March 29,
2015
    March 30,
2014
 
Revenue   $ 1,393,333     $ 1,232,241     $ 1,227,392     $ 3,777,942     $ 3,358,512  
  Cost of goods sold     792,731       695,584       696,594       2,135,144       1,908,067  
    Gross margin     600,602       536,657       530,798       1,642,798       1,450,445  
    Gross margin as a percent of revenue     43.1 %     43.6 %     43.2 %     43.5 %     43.2 %
Research and development     217,865       196,768       185,978       603,567       531,022  
Selling, general and administrative     142,772       151,148       152,883       442,227       457,604  
    Total operating expenses     360,637       347,916       338,861       1,045,794       988,626  
    Operating income     239,965       188,741       191,937       597,004       461,819  
    Operating margin as a percent of revenue     17.2 %     15.3 %     15.6 %     15.8 %     13.8 %
Other expense, net     (11,389 )     (9,799 )     (9,855 )     (26,836 )     (27,954 )
    Income before income taxes     228,576       178,942       182,082       570,168       433,865  
Income tax expense     22,291       2,002       17,686       45,862       34,971  
    Net income   $ 206,285     $ 176,940     $ 164,396     $ 524,306     $ 398,894  
Net income per share:                                        
  Basic net income per share   $ 1.30     $ 1.11     $ 1.01     $ 3.28     $ 2.46  
  Diluted net income per share   $ 1.16     $ 1.00     $ 0.96     $ 2.96     $ 2.33  
Number of shares used in per share calculations:                                        
  Basic     158,992       159,248       162,238       159,975       161,904  
  Diluted     177,531       177,046       171,636       177,231       171,051  
                                         
Cash dividend declared per share   $ 0.18     $ 0.18     $ -     $ 0.54     $ -  
                                         
 
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
             
    March 29,   December 28,   June 29,
    2015   2014   2014
    (unaudited)   (unaudited)   (1)
ASSETS                  
Cash and cash equivalents   $ 1,635,636   $ 981,275   $ 1,452,677
Short-term investments     2,313,495     1,902,402     1,612,967
Accounts receivable, net     1,046,800     944,014     800,616
Inventories     919,679     913,390     740,503
Other current assets     145,357     173,731     176,899
  Total current assets     6,060,967     4,914,812     4,783,662
Property and equipment, net     579,824     585,372     543,496
Restricted cash and investments     164,300     155,455     146,492
Goodwill and intangible assets     2,242,977     2,282,006     2,360,303
Other assets     190,473     173,044     159,353
  Total assets   $ 9,238,541   $ 8,110,689   $ 7,993,306
                   
LIABILITIES AND STOCKHOLDERS' EQUITY                  
Current liabilities   $ 1,734,996   $ 1,708,656   $ 1,582,001
                   
Long-term debt, convertible notes, and capital leases   $ 1,831,094   $ 830,880   $ 817,202
Income taxes payable     205,536     205,535     258,357
Other long-term liabilities     189,291     183,678     122,662
  Total liabilities     3,960,917     2,928,749     2,780,222
                   
Senior convertible notes     180,569     181,505     183,349
Stockholders' equity (2)     5,097,055     5,000,435     5,029,735
  Total liabilities and stockholders' equity   $ 9,238,541   $ 8,110,689   $ 7,993,306
                   
(1) Derived from audited financial statements
   
(2) Common shares issued and outstanding were 158,485 shares as of March 29, 2015, 159,294 shares as of December 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     Nine Months Ended  
    March 29,
2015
    December
28, 
2014
    March 30,
2014
    March 29,
2015
    March 30,
2014
 
CASH FLOWS FROM OPERATING ACTIVITIES:                                        
Net income   $ 206,285     $ 176,940     $ 164,396     $ 524,306     $ 398,894  
Adjustments to reconcile net income to net cash provided by operating activities:                                        
  Depreciation and amortization     70,322       69,536       73,256       207,743       221,139  
  Deferred income taxes     1,739       3,320       (816 )     8,245       11,641  
  Impairment of long-lived asset     -       -       4,000       -       11,632  
  Equity-based compensation expense     32,948       30,632       24,334       95,620       70,615  
  Income tax benefit on equity-based compensation plans     2,438       1,141       -       13,440       -  
  Excess tax benefit on equity-based compensation plans     (2,204 )     (599 )     -       (13,207 )     -  
  Amortization of convertible note discount     8,749       8,609       8,313       25,867       24,652  
  Gain on sale of business     -       -       -       (7,431 )     -  
  Other, net     1,902       1,607       2,741       9,035       4,428  
  Changes in operating assets and liabilities:     (131,142 )     (129,947 )     13,986       (370,181 )     (271,843 )
    Net cash provided by operating activities     191,037       161,239       290,210       493,437       471,158  
                                         
CASH FLOWS FROM INVESTING ACTIVITIES:                                        
Capital expenditures and intangible assets     (31,898 )     (61,363 )     (41,638 )     (135,132 )     (103,739 )
Cash paid for business acquisition     -       -       -       (1,137 )     (18,388 )
Net purchases of available-for-sale securities     (359,416 )     (321,590 )     (82,744 )     (671,361 )     (128,931 )
Purchase of other investment     (2,500 )     -       -       (2,500 )     -  
Repayment of notes receivable     -       3,978       -       3,978       10,000  
Proceeds from sale of business, net     -       -       -       41,212       -  
Proceeds from sale of assets     -       -       -       -       21,635  
Transfer of restricted cash and investments     (822 )     100       28,572       (700 )     28,722  
    Net cash used for investing activities     (394,636 )     (378,875 )     (95,810 )     (765,640 )     (190,701 )
                                         
CASH FLOWS FROM FINANCING ACTIVITIES:                                        
Principal payments on long-term debt and capital lease obligations     (119 )     (674 )     (112 )     (900 )     (919 )
Proceeds from issuance of long-term debt, net issuance costs     991,880       -       -       991,880       -  
Excess tax benefit (expense) on equity-based compensation plans     2,204       599       (296 )     13,207       (296 )
Treasury stock purchases     (124,943 )     (65,536 )     (52,415 )     (498,901 )     (204,610 )
Dividends paid     (28,724 )     (29,381 )     -       (87,345 )     -  
Reissuances of treasury stock related to employee stock purchase plan     14,934       -       13,210       31,853       28,329  
Proceeds from issuance of common stock     7,403       4,223       5,111       16,235       26,134  
    Net cash provided by (used for) financing activities     862,635       (90,769 )     (34,502 )     466,029       (151,362 )
Effect of exchange rate changes on cash     (4,675 )     (3,998 )     (152 )     (10,867 )     733  
Net increase (decrease) in cash and cash equivalents     654,361       (312,403 )     159,746       182,959       129,828  
Cash and cash equivalents at beginning of period     981,275       1,293,678       1,132,555       1,452,677       1,162,473  
Cash and cash equivalents at end of period   $ 1,635,636     $ 981,275     $ 1,292,301     $ 1,635,636     $ 1,292,301  
                                         
 
Non-GAAP Financial Summary
(in thousands, except percentages, share, and per share data)
(unaudited)
         
    Three Months Ended   Three Months Ended
    March 29,   December 28,
    2015   2014
             
Revenue   $ 1,393,333   $ 1,232,241
Gross margin   $ 622,196   $ 560,044
Gross margin as percentage of revenue     44.7%     45.4%
Operating expenses   $ 345,049   $ 330,213
Operating income   $ 277,147   $ 229,831
Operating margin as a percentage of revenue     19.9%     18.7%
Net income   $ 244,911   $ 207,631
Net income per diluted share   $ 1.40   $ 1.19
Shares used in per share calculation - diluted     174,471     174,316
             
   
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  
    March 29,     December 28,  
    2015     2014  
U.S. GAAP net income   $ 206,285     $ 176,940  
Pre-tax non-GAAP items:                
  Amortization related to intangible assets acquired in Novellus transaction - cost of goods sold     21,286       21,286  
  Acquisition-related inventory fair value impact - cost of goods sold     308       2,101  
  Amortization related to intangible assets acquired in Novellus transaction - operating expenses     16,083       16,083  
  Restructuring (benefits) charges - operating expenses     (495 )     1,620  
  Amortization of note discounts - other expense, net     8,749       8,609  
Net tax benefit on non-GAAP items     (7,181 )     (7,914 )
Net tax benefit on reinstatement of research and development credit     -       (11,094 )
Net tax benefit on successful resolution of certain tax matters     (124 )     -  
Non-GAAP net income   $ 244,911     $ 207,631  
Non-GAAP net income per diluted share   $ 1.40     $ 1.19  
                 
U.S. GAAP number of shares used for diluted per share calculation     177,531       177,046  
Effect of convertible note hedge     (3,060 )     (2,730 )
Non-GAAP number of shares used for diluted per share calculation     174,471       174,316  
                 
                 
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  
    March 29,     December 28,  
    2015     2014  
U.S. GAAP gross margin   $ 600,602     $ 536,657  
Pre-tax non-GAAP items:                
  Amortization related to intangible assets acquired in Novellus transaction - cost of goods sold     21,286       21,286  
  Acquisition-related inventory fair value impact - cost of goods sold     308       2,101  
Non-GAAP gross margin   $ 622,196     $ 560,044  
U.S. GAAP gross margin as a percentage of revenue     43.1 %     43.6 %
Non-GAAP gross margin as a percentage of revenue     44.7 %     45.4 %
U.S. GAAP operating expenses   $ 360,637     $ 347,916  
Pre-tax non-GAAP items:                
  Amortization related to intangible assets acquired in Novellus transaction - operating expenses     (16,083 )     (16,083 )
  Restructuring benefits (charges) - operating expenses     495       (1,620 )
Non-GAAP operating expenses   $ 345,049     $ 330,213  
Non-GAAP operating income   $ 277,147     $ 229,831  
GAAP operating margin as a percent of revenue     17.2 %     15.6 %
Non-GAAP operating margin as a percent of revenue     19.9 %     18.7 %
                 

Lam Research Corporation Contact:
Audrey Charles
Investor Relations
phone: 510-572-1615
e-mail: audrey.charles@lamresearch.com

Source: Lam Research Corporation

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