Lam Research Corporation

Lam Research Corporation Reports Financial Results for the Quarter Ended June 28, 2015

FREMONT, CA -- (Marketwired) -- 07/29/15 -- Lam Research Corp. (NASDAQ: LRCX) today announced financial results for the quarter ended June 28, 2015.

Highlights for the June 2015 quarter were as follows:

   
   
Financial Highlights for the Quarters Ended June 28, 2015 and March 29, 2015  
(in thousands, except per-share data, percentages, and basis points)  
   
U.S. GAAP  
    June 2015     March 2015     Change Q/Q  
                   
Revenue   $ 1,481,370     $ 1,393,333     +6 %
Gross margin as percentage of revenue     43.3 %     43.1 %   +20bps  
Operating margin as percentage of revenue     12.9 %     17.2 %   -430 bps  
Diluted EPS   $ 0.74     $ 1.16     -36 %
                       
Non-GAAP  
     June 2015     March 2015     Change Q/Q  
                       
Revenue   $ 1,481,370     $ 1,393,333     +6 %
Gross margin as percentage of revenue     45.5 %     44.7 %   +80 bps  
Operating margin as percentage of revenue     21.6 %     19.9 %   +170 bps  
Diluted EPS   $ 1.50     $ 1.40     +7 %
                       

GAAP Financial Results

For the June 2015 quarter, revenue was $1,481.4 million, gross margin was $641.5 million, or 43.3% of revenue, operating expenses were $450.5 million, operating margin was 12.9% of revenue, and net income was $131.3 million, or $0.74 per diluted share on a GAAP basis. This compares to revenue of $1,393.3 million, gross margin of $600.6 million, or 43.1% of revenue, operating expenses of $360.6 million, operating margin of 17.2% of revenue, and net income of $206.3 million, or $1.16 per diluted share, for the quarter ended March 29, 2015 (the "March 2015 quarter"). The June 2015 operating expenses, operating margin, net income and income per diluted share were negatively impacted by a goodwill impairment charge of $79.4 million. In addition, gross margin, operating margin, net income and income per diluted share were negatively impacted by an impairment charge related to a long-lived asset of $9.8 million.

Non-GAAP Financial Results

For the June 2015 quarter, non-GAAP gross margin was $673.8 million or 45.5% of revenue, non-GAAP operating expenses were $354.5 million, non-GAAP operating margin was 21.6% of revenue, and non-GAAP net income was $260.0 million, or $1.50 per diluted share. This compares to non-GAAP gross margin of $622.2 million or 44.7% of revenue, non-GAAP operating expenses of $345.0 million, non-GAAP operating margin of 19.9% of revenue, and non-GAAP net income of $244.9 million, or $1.40 per diluted share for the March 2015 quarter.

"Lam posted record June quarter results and concluded the strongest fiscal year in our history by delivering over $5 billion in both shipments and revenue and $1 billion in operating income for the first time," said Martin Anstice, Lam Research's president and chief executive officer. "The inflection driven expansion in our served available market over the next several years combined with our enduring focus on supporting our customers' long term success, creates exciting opportunity. Our technology and productivity leadership, our execution discipline and our model of collaboration, we believe, position us for continued outperformance."

Balance Sheet and Cash Flow Results

Cash and cash equivalents, short-term investments, and restricted cash and investment balances increased to $4.2 billion at the end of the June 2015 quarter compared to $4.1 billion at the end of the March 2015 quarter. This increase was primarily the result of approximately $292.1 million in cash flows from operating activities which was partially offset by approximately $74.3 million of treasury stock repurchases, including net share settlement on employee stock-based compensation; approximately $63.1 million of capital expenditures; and approximately $28.7 million of dividends paid to stockholders during the June 2015 quarter.

Deferred revenue and profit balances at the end of June 2015 quarter increased to $518.1 million and $322.1 million, respectively, as compared to $485.2 million and $303.3 million at the end of the March 2015 quarter, respectively. 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 $164.4 million as of June 28, 2015.

Geographic Distribution

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

         
Region   Shipments   Revenue
Korea   23%   28%
Taiwan   24%   19%
China   12%   17%
United States   13%   14%
Japan   20%   14%
Europe   4%   4%
Southeast Asia   4%   4%
         

Outlook

For the September 2015 quarter, Lam is providing the following guidance:

        
  GAAP Reconciling Items Non-GAAP
Shipments $1.58 Billion   +/- $75 Million - $1.58 Billion +/- $75 Million
Revenue $1.60 Billion   +/- $75 Million - $1.60 Billion +/- $75 Million
Gross margin 44.2%   +/- 1% $21 Million 45.5% +/- 1%
Operating margin 20.2%   +/- 1% $37 Million 22.5% +/- 1%
Net income per diluted share $1.46   +/- $0.10 $38 Million $1.70 +/- $0.10
Diluted share count 177 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 U.S. GAAP results, this press release also contains non-GAAP financial results. The Company's non-GAAP results for both the June 2015 and March 2015 quarters exclude amortization related to intangible assets acquired in the Novellus transaction, acquisition-related inventory fair value impact, restructuring impacts, the amortization of notes discounts, tax expense (benefit) of non-GAAP items, and net income tax benefit on successful resolution of certain tax matters. Additionally, the June 2015 quarter non-GAAP results exclude long-lived asset impairment, goodwill impairment, and additional accrual for 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 successfully execute our growth strategy, our ability to continue to successfully collaborate closely with and to support our customers and their long term success, our ability to achieve market growth and share gains at key inflections, our ability to continue to outperform, our ability to deliver growth and value for our customers and our stockholders, the extent of inflection driven expansion in our served available market, and our guidance for shipments, revenue, gross margin, operating margin, earnings per share, and diluted earnings per share and 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 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 Forms 10-Q for the quarters ended September 28, 2014, December 28, 2014 and March 29, 2015. 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)  
   
    Three Months Ended   Twelve Months Ended  
    June 28,   March 29,   June 29,   June 28,   June 29,  
    2015   2015   2014   2015   2014  
    (unaudited)   (unaudited)   (unaudited)   (unaudited)   (1)  
Revenue   $ 1,481,370   $ 1,393,333   $ 1,248,797   $ 5,259,312   $ 4,607,309  
                                 
  Cost of goods sold     839,832     792,731     691,761     2,974,976     2,599,828  
    Gross margin     641,538     600,602     557,036     2,284,336     2,007,481  
    Gross margin as a percent of revenue     43.3 %   43.1 %   44.6 %   43.4 %   43.6 %
Research and development     221,675     217,865     185,449     825,242     716,471  
Selling, general and administrative     149,384     142,772     155,737     591,611     613,341  
Goodwill impairment     79,444     -     -     79,444     -  
    Total operating expenses     450,503     360,637     341,186     1,496,297     1,329,812  
    Operating income     191,035     239,965     215,850     788,039     677,669  
    Operating margin as a percent of revenue     12.9 %   17.2 %   17.3 %   15.0 %   14.7 %
Gain on sale of real estate     -     -     83,090     -     83,090  
Other expense, net     (20,353 )   (11,389 )   (9,442 )   (47,189 )   (37,396 )
    Income (loss) before income taxes     170,682     228,576     289,498     740,850     723,363  
Income tax expense (benefit)     39,411     22,291     56,103     85,273     91,074  
    Net income   $ 131,271   $ 206,285   $ 233,395   $ 655,577   $ 632,289  
Net income per share:                                
  Basic net income per share   $ 0.83   $ 1.30   $ 1.44   $ 4.11   $ 3.84  
  Diluted net income per share   $ 0.74   $ 1.16   $ 1.35   $ 3.70   $ 3.62  
Number of shares used in per share calculations:                                
  Basic     158,590     158,992     162,215     159,629     164,741  
  Diluted     176,575     177,531     173,345     177,067     174,503  
Cash dividend declared per share   $ 0.30   $ 0.18   $ 0.18   $ 0.84   $ 0.18  
     
(1)   Derived from audited financial statements
     
     
     
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
             
    June 28,   March 29,   June 29,
    2015   2015   2014
    (unaudited)   (unaudited)   (1)
ASSETS                  
Cash and cash equivalents   $ 1,501,539   $ 1,635,636   $ 1,452,677
Short-term investments     2,574,947     2,313,495     1,612,967
Accounts receivable, net     1,093,582     1,046,800     800,616
Inventories     943,346     919,679     740,503
Other current assets     157,435     145,357     176,899
  Total current assets     6,270,849     6,060,967     4,783,662
Property and equipment, net     621,418     579,824     543,496
Restricted cash and investments     170,969     164,300     146,492
Goodwill and intangible assets     2,115,649     2,242,977     2,360,303
Other assets     185,763     190,473     159,353
  Total assets   $ 9,364,648   $ 9,238,541   $ 7,993,306
                   
LIABILITIES AND STOCKHOLDERS' EQUITY                  
Current portion of long-term debt, convertible notes, and capital leases   $ 1,359,650   $ 518,267   $ 520,686
Other current liabilities     1,271,711     1,216,729     1,061,315
  Total current liabilities     2,631,361     1,734,996     1,582,001
                   
Long-term debt and capital leases   $ 1,001,382   $ 1,831,094   $ 817,202
Income taxes payable     202,930     205,536     258,357
Other long-term liabilities     184,023     189,291     122,662
  Total liabilities   $ 4,019,696   $ 3,960,917   $ 2,780,222
                   
Senior convertible notes     241,808     180,569     183,349
                   
Stockholders' equity (2)     5,103,144     5,097,055     5,029,735
  Total liabilities and stockholders' equity   $ 9,364,648   $ 9,238,541   $ 7,993,306
     
(1)   Derived from audited financial statements
     
(2)   Common shares issued and outstanding were 158,531 as of June 28, 2015, 158,485 shares as of March 29, 2015, and 162,350 shares as of June 29, 2014.
   
   
   
LAM RESEARCH CORPORATION  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(in thousands)  
   
    Three Months Ended   Twelve Months Ended  
    June 28,   March 29,   June 29,   June 28,   June 29,  
    2015   2015   2014   2015   2014  
    (unaudited)   (unaudited)   (unaudited)   (unaudited)   (1)  
CASH FLOWS FROM OPERATING ACTIVITIES:                                
Net income   $ 131,271   $ 206,285   $ 233,395   $ 655,577   $ 632,289  
Adjustments to reconcile net income to net cash provided by operating activities:                                
  Depreciation and amortization     70,177     70,322     71,115     277,920     292,254  
  Deferred income taxes     (2,694 )   1,739     (4,104 )   5,551     7,537  
  Impairment of long-lived assets     9,821     -     -     9,821     11,632  
  Equity-based compensation expense     39,734     32,948     33,085     135,354     103,700  
  Income tax benefit (expense) on equity-based compensation plans     (2,124 )   2,438     6,269     11,316     5,973  
  Excess tax (benefit) expense on equity-based compensation plans     1,809     (2,204 )   (6,361 )   (11,398 )   (6,065 )
  Amortization of note discounts and issuance costs     11,023     9,409     9,002     37,550     35,482  
  Gain on sale of business     -     -     -     (7,431 )   -  
  Gain on sale of real estate     -     -     (83,090 )   -     (83,090 )
  Goodwill impairment     79,444     -     -     79,444     -  
  Other, net     3,621     1,902     8,241     12,656     12,669  
  Changes in operating asset and liabilities:     (50,016 )   (131,802 )   (21,661 )   (420,857 )   (295,332 )
    Net cash provided by operating activities     292,066     191,037     245,891     785,503     717,049  
                                 
CASH FLOWS FROM INVESTING ACTIVITIES:                                
Capital expenditures and intangible assets     (63,133 )   (31,898 )   (41,764 )   (198,265 )   (145,503 )
Cash paid for business acquisition     -     -     (11,839 )   (1,137 )   (30,227 )
Net purchases of available-for-sale securities     (278,379 )   (359,416 )   (155,035 )   (949,740 )   (283,966 )
Proceeds from sale of business     -     -     -     41,212     -  
Purchase of other investment     -     (2,500 )   -     (2,500 )   -  
Repayments of notes receivable     -     -     -     3,978     10,000  
Proceeds from sale of assets     -     -     134,762     -     156,397  
Transfer of restricted cash and investments     1,056     (822 )   (637 )   356     28,085  
    Net cash used for investing activities     (340,456 )   (394,636 )   (74,513 )   (1,106,096 )   (265,214 )
                                 
CASH FLOWS FROM FINANCING ACTIVITIES:                                
Principal payments on long-term debt and capital lease obligations     (615 )   (119 )   (739 )   (1,515 )   (1,658 )
Proceeds from issuance of long-term debt, net issuance costs and captial lease obligations     345     991,880     -     992,225     -  
Excess tax benefit (expense) on equity-based compensation plans     (1,809 )   2,204     6,361     11,398     6,065  
Treasury stock purchases     (74,339 )   (124,943 )   (40,249 )   (573,240 )   (244,859 )
Dividends paid     (28,714 )   (28,724 )   -     (116,059 )   -  
Reissuances of treasury stock related to employee stock purchase plan     16,950     14,934     14,597     48,803     42,926  
Proceeds from issuance of common stock     1,285     7,403     8,657     17,520     34,791  
Other     (660 )   -     -     (660 )   -  
    Net cash provided by (used for) financing activities     (87,557 )   862,635     (11,373 )   378,472     (162,735 )
Effect of exchange rate changes on cash     1,850     (4,675 )   371     (9,017 )   1,104  
Net increase (decrease) in cash and cash equivalents     (134,097 )   654,361     160,376     48,862     290,204  
Cash and cash equivalents at beginning of period     1,635,636     981,275     1,292,301     1,452,677     1,162,473  
Cash and cash equivalents at end of period   $ 1,501,539   $ 1,635,636   $ 1,452,677   $ 1,501,539   $ 1,452,677  
                                      
(1)    Derived from audited financial statements                                 
   
   
   
Non-GAAP Financial Summary  
(in thousands, except percentages and per share data)  
(unaudited)  
             
    Three Months Ended     Three Months Ended  
    June 28,     March 29,  
    2015     2015  
                 
Revenue   $ 1,481,370     $ 1,393,333  
Gross margin   $ 673,837     $ 622,196  
Gross margin as percentage of revenue     45.5 %     44.7 %
Operating expenses   $ 354,542     $ 345,049  
Operating income   $ 319,295     $ 277,147  
Operating margin as a percentage of revenue     21.6 %     19.9 %
Net income   $ 260,023     $ 244,911  
Net income per diluted share   $ 1.50     $ 1.40  
Shares used in per share calculation - diluted     173,641       174,471  
 
 
 
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 per share data)
(unaudited)
         
  Three Months Ended   Three Months Ended  
  June 28,   March 29,  
  2015   2015  
U.S. GAAP net income $ 131,271   $ 206,285  
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   1,192     308  
  Impairment of long lived asset - cost of goods sold   9,821     -  
  Amortization related to intangible assets acquired in Novellus transaction - operating expenses   16,083     16,083  
  Restructuring charges/(benefits) - operating expenses   434     (495 )
  Goodwill impairment - operating expenses   79,444     -  
  Amortization of note discounts - other expense, net   9,019     8,749  
Net tax benefit on non-GAAP items   (9,605 )   (7,181 )
Net income tax expense (benefit) on resolution or additional accrual for certain tax matters   1,078     (124 )
Non-GAAP net income $ 260,023   $ 244,911  
Non-GAAP net income per diluted share $ 1.50   $ 1.40  
U.S. GAAP number of shares used for diluted per share calculation   176,575     177,531  
Effect of convertible note hedge   (2,934 )   (3,060 )
Non-GAAP number of shares used for diluted per share calculation   173,641     174,471  
             
                                 
                                 
Reconciliation of U.S. GAAP Gross Margin, Operating Expenses and Operating Income to Non-GAAP Gross Margin, Operating Expenses and Operating Income  
(unaudited)  
                         
    Three Months Ended     Three Months Ended     Three Months Ended     Three Months Ended  
    June 28,     March 29,     December 28,     September 28,  
    2015     2015     2014     2014  
U.S. GAAP gross margin   $ 641,538     $ 600,602     $ 536,657     $ 505,539  
Pre-tax non-GAAP items:                                
  Amortization related to intangible assets acquired in Novellus transaction - cost of goods sold     21,286       21,286       21,286       20,893  
  Acquisition-related inventory fair value impact - cost of goods sold     1,192       308       2,101       -  
  Impairment of long lived asset - cost of goods sold     9,821       -       -       -  
  Costs associted with rationalization of certain product configurations - cost of goods sold     -       -       -       1,600  
Non-GAAP gross margin   $ 673,837     $ 622,196     $ 560,044     $ 528,032  
U.S. GAAP gross margin as a percentage of revenue     43.3 %     43.1 %     43.6 %     43.9 %
Non-GAAP gross margin as a percentage of revenue     45.5 %     44.7 %     45.4 %     45.8 %
U.S. GAAP operating expenses   $ 450,503     $ 360,637     $ 347,916     $ 337,241  
Pre-tax non-GAAP items:                                
  Amortization related to intangible assets acquired in Novellus transaction - operating expenses     (16,083 )     (16,083 )     (16,083 )     (16,083 )
  Restructuring (charges)/benefits - operating expenses     (434 )     495       (1,620 )     -  
  Goodwill impairment - operating expenses     (79,444 )     -       -       -  
Non-GAAP operating expenses   $ 354,542     $ 345,049     $ 330,213     $ 321,158  
Non-GAAP operating income   $ 319,295     $ 277,147     $ 229,831     $ 206,874  
GAAP operating margin as percent of revenue     12.9 %     17.2 %     15.3 %     14.6 %
Non-GAAP operating margin as a percent of revenue     21.6 %     19.9 %     18.7 %     18.0 %

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

Source: Lam Research Corporation

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