SOURCE: Lam Research Corporation

Lam Research Corporation

July 25, 2012 16:30 ET

Lam Research Corporation Announces Financial Results for the Quarter Ended June 24, 2012

FREMONT, CA--(Marketwire - Jul 25, 2012) - Lam Research Corporation's (NASDAQ: LRCX) highlights for the June 2012 quarter were:

   
Lam Research Corporation  
Financial Highlights for the Quarter Ended June 24, 2012  
(in thousands, except per share data and percentages)  
                   
    Combined
U.S. GAAP
    Combined
 Non-GAAP
    Lam
 Stand-alone
Non-GAAP
 
                         
Revenue:   $ 741,814     $ 741,814     $ 715,971  
                         
Gross Margin:     40.2 %     42.1 %     41.9 %
                         
Operating Margin:     4.4 %     13.2 %     14.7 %
                         
Net Income:   $ 18,069     $ 80,873     $ 88,164  
                         
Diluted EPS:   $ 0.13     $ 0.60     $ 0.75  
                         

Lam Research Corporation today announced financial results for the quarter ended June 24, 2012. The Company completed the merger with Novellus Systems Inc. (Novellus) on June 4, 2012; results reflect twenty days of contributed financial performance resulting from that purchase, prior period comparable results represent Lam Stand-alone performance without exception. Revenue for the period was $741.8 million, gross margin was $298.2 million, or 40.2%, operating expenses were $265.5 million, and net income was $18.1 million, or $0.13 per diluted share, compared to revenue of $659.0 million, gross margin of $267.1 million, or 40.5%, operating expenses of $209.0 million, and net income of $45.6 million, or $0.38 per diluted share, for the March 2012 quarter. Shipments for the June 2012 quarter were $816 million compared to $713 million during the March 2012 quarter.

In addition to U.S. Generally Accepted Accounting Principles (GAAP) results, this commentary contains non-GAAP financial measures. The Company's non-GAAP results for both the June 2012 and March 2012 quarters exclude the amortization of convertible note discounts and certain acquisition and integration-related costs. Additionally, the Company's non-GAAP results for the June 2012 quarter exclude costs associated with rationalization of certain product configurations, amortization related to intangible assets acquired in the Novellus transaction, and acquisition-related inventory fair value impact. The non-GAAP results for the March 2012 quarter exclude certain costs associated with a customer bankruptcy filing. 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 the 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.

Comparative highlights between the June 2012 quarter and March 2012 quarter are as follows:

             
    June 2012
Quarter
    March 2012
Quarter
 
Lam Stand-alone                
                 
  Non-GAAP gross margin   $ 300,253     $ 269,757  
                 
  Non-GAAP gross margin as a percentage of revenue     41.9 %     40.9 %
                 
  Non-GAAP operating expenses   $ 194,678     $ 196,753  
                 
  Non-GAAP net income   $ 88,164     $ 60,621  
                 
  Non-GAAP net income per diluted share   $ 0.75     $ 0.50  
                   

Lam Stand-alone non-GAAP gross margin performance improved in the June 2012 quarter as compared to the March 2012 quarter due to favorable customer and product mix and improved factory and field utilization. Lam Stand-alone non-GAAP operating expenses decreased in the June 2012 quarter as compared to the March 2012 quarter due to reductions in employee-related benefit costs.

The geographic distribution of shipments and revenue during the June 2012 quarter is shown in the following table:

         
    Shipments   Revenue
Region   Combined   Lam
 Stand-alone
  Combined   Lam
 Stand-alone
North America   15%   14%   13%   12%
Europe   6%   6%   7%   7%
Japan   7%   8%   7%   7%
Korea   31%   32%   38%   39%
Taiwan   29%   28%   24%   25%
Asia Pacific   12%   12%   11%   10%
                 
                 
                 
                 

Cash and cash equivalents, short-term investments and restricted cash and investments balances increased to $3.0 billion at the end of the June 2012 quarter, compared to $2.6 billion at the end of the March 2012 quarter. This increase included the impact of $1.1 billion acquired in connection with the Novellus transaction, primarily offset by stock repurchases. Cash flows from operating activities were approximately $96.7 million during the June 2012 quarter. Deferred revenue and deferred profit balances at the end of the June 2012 quarter increased to $335.4 million and $164.8 million, respectively. Deferred revenue and deferred profit balances included $87.1 million and $21.1 million from Novellus related operations, 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 $23.4 million as of June 24, 2012.

"Lam delivered solid financial performance in the June quarter, with sequential growth across our core product and service businesses," said Martin Anstice, Lam's president and chief executive officer. "The quarter also marked the closing of our acquisition of Novellus Systems, and integration is already underway. As we've shared over the past couple of quarters, this combination offers the potential for accelerated growth and we remain focused on aggressively executing our plans to achieve that potential." 

Caution Regarding Forward-Looking Statements
Statements made in this press release that are not statements 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, but are not limited, to the anticipated revenue from shipments to Japanese customers, the potential for accelerated growth arising from the acquisition of Novellus and the Company's future plans for its business. 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 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 26, 2011 and the reports on Form 10-Q for the three months ended September 25, 2011, December 25, 2011, and March 25, 2012. 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.

Lam Research Corp. is a major supplier of innovative wafer fabrication equipment and services to the worldwide semiconductor industry. For more than 30 years, the Company has driven continuous improvements in chip performance, power consumption, and cost, contributing to the global proliferation of smartphones, computers, tablets, and other electronic products. Lam Research has been the leading supplier of high-throughput plasma etch equipment for more than a decade and expanded its product offerings in 2008 to include single-wafer clean systems. The Company added thin-film deposition and wafer surface preparation technologies to its product portfolio in 2012 with the acquisition of Novellus Systems, Inc. Headquartered in Fremont, Calif., Lam Research maintains a global network of service facilities throughout North America, Asia, and Europe to rapidly meet the needs of its global customer base. It is an S&P 500® company and NASDAQ-100® company whose common stock trades on the NASDAQ Global Select Market(SM) under the symbol LRCX. For more information, please visit http://www.lamresearch.com.

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 24,   March 25,   June 26,   June 24,   June 26,  
    2012   2012   2011   2012   2011  
    (unaudited)   (unaudited)   (unaudited)   (unaudited)   (1)  
Total revenue   $ 741,814   $ 658,961   $ 752,018   $ 2,665,192   $ 3,237,693  
                                 
  Cost of goods sold     443,601     391,814     413,564     1,581,982     1,740,461  
  Cost of goods sold - restructuring and impairments     -     -     -     (859 )   -  
    Total costs of goods sold     443,601     391,814     413,564     1,581,123     1,740,461  
    Gross margin     298,213     267,147     338,454     1,084,069     1,497,232  
    Gross margin as a percent of revenue     40.2 %   40.5 %   45.0 %   40.7 %   46.2 %
Research and development     124,528     113,448     99,583     444,559     373,293  
Selling, general and administrative     141,015     95,581     79,938     400,052     308,075  
Restructuring and impairments     -     -     16,742     1,725     11,579  
    Total operating expenses     265,543     209,029     196,263     846,336     692,947  
    Operating income     32,670     58,118     142,191     237,733     804,285  
    Operating margin as a percent of revenue     4.4 %   8.8 %   18.9 %   8.9 %   24.8 %
Other income (expense), net     (9,889 )   (3,568 )   (5,131 )   (33,315 )   (3,409 )
    Income before income taxes     22,781     54,550     137,060     204,418     800,876  
Income tax expense     4,712     8,946     11,132     35,695     77,128  
    Net income   $ 18,069   $ 45,604   $ 125,928   $ 168,723   $ 723,748  
Net income per share:                                
  Basic net income per share   $ 0.13   $ 0.38   $ 1.02   $ 1.36   $ 5.86  
  Diluted net income per share   $ 0.13   $ 0.38   $ 1.01   $ 1.35   $ 5.79  
Number of shares used in per share calculations:                                
  Basic     133,997     119,841     123,863     124,176     123,529  
  Diluted     135,842     120,956     125,086     125,233     125,019  
                                   

(1)  Derived from audited financial statements 

 
 
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
 
    June 24,   March 25,   June 26,
    2012   2012   2011
    (unaudited)   (unaudited)   (1)
ASSETS                  
Cash and cash equivalents   $ 1,564,752   $ 1,410,267   $ 1,492,132
Short-term investments     1,297,931     993,696     630,115
Accounts receivable, net     765,818     471,776     590,568
Inventories     632,853     376,126     396,607
Deferred income taxes     47,782     78,719     78,435
Other current assets     105,973     93,325     85,408
  Total current assets     4,415,109     3,423,909     3,273,265
Property and equipment, net     584,596     279,955     270,458
Restricted cash and investments     166,335     165,220     165,256
Deferred income taxes     -     -     3,892
Goodwill and intangible assets     2,686,730     203,276     216,616
Other assets     151,882     120,903     124,380
  Total assets   $ 8,004,652   $ 4,193,263   $ 4,053,867
                   
LIABILITIES AND STOCKHOLDERS' EQUITY                  
Current liabilities   $ 1,426,928   $ 651,655   $ 680,759
                   
Long-term debt and capital leases   $ 761,783   $ 755,427   $ 738,488
Income taxes payable     274,240     115,570     113,582
Other long-term liabilities     219,577     61,469     51,193
  Total liabilities   $ 2,682,528   $ 1,584,121   $ 1,584,022
                   
Senior convertible notes     190,343     -     -
                   
Stockholders' equity     5,131,781     2,609,142     2,469,845
  Total liabilities and stockholders' equity   $ 8,004,652   $ 4,193,263   $ 4,053,867
                     

(1)  Derived from audited financial statements

   
   
LAM RESEARCH CORPORATION  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(in thousands)  
   
    Three Months Ended   Twelve Months Ended  
    June 24,   March 25,   June 26,   June 24,   June 26,  
    2012   2012   2011   2012   2011  
    (unaudited)   (unaudited)   (unaudited)   (unaudited)   (1)  
CASH FLOWS FROM OPERATING ACTIVITIES:                                
Net income   $ 18,069   $ 45,604   $ 125,928   $ 168,723   $ 723,748  
Adjustments to reconcile net income to net cash provided by operating activities:                                
  Depreciation and amortization     34,576     22,517     19,972     100,825     74,759  
  Deferred income taxes     39,356     3,723     (6,166 )   42,446     (10,721 )
  Restructuring charges, net     -     -     16,742     866     11,579  
  Equity-based compensation expense     29,174     16,417     14,788     81,559     53,012  
  Income tax benefit on equity-based compensation plans     1,429     (1,048 )   9,283     1,510     28,775  
  Excess tax benefit on equity-based compensation plans     (394 )   (137 )   (8,184 )   (2,686 )   (23,290 )
  Impairment of investment     -     -     -     1,724     -  
  Amortization of convertible note discount     7,014     6,750     3,554     27,028     3,554  
  Other, net     7,206     1,165     477     10,877     (2,341 )
  Changes in operating asset and liabilities:     (39,715 )   51,406     21,714     66,156     21,953  
    Net cash provided by operating activities     96,715     146,397     198,108     499,028     881,028  
                                 
CASH FLOWS FROM INVESTING ACTIVITIES:                                
Capital expenditures and intangible assets     (36,880 )   (27,978 )   (34,571 )   (107,272 )   (127,495 )
Cash acquired in business acquisition     418,681     -     -     418,681     -  
Purchase of other investments     -     -     -     -     (417 )
Net sales/maturities (purchases) of available-for-sale securities     329,689     (282,225 )   (316,789 )   (41,989 )   (353,523 )
Purchase of equity method investment     -     -     -     (10,740 )   -  
Receipt of loan payments     -     -     -     8,375     -  
Proceeds from sale of assets     -     -     -     2,677     1,544  
Transfer of restricted cash and investments     (29 )   3     (8 )   (6 )   (22 )
    Net cash provided by (used for) investing activities     711,461     (310,200 )   (351,368 )   269,726     (479,913 )
                                 
CASH FLOWS FROM FINANCING ACTIVITIES:                                
Principal payments on long-term debt and capital lease obligations     (1,101 )   (1,024 )   (81 )   (5,265 )   (4,530 )
Net proceeds from issuance of long-term debt     -     -     882,831     -     882,831  
Proceeds from sale of warrants     -     -     133,830     -     133,830  
Purchase of convertible note hedge     -     -     (181,125 )   -     (181,125 )
Excess tax benefit on equity-based compensation plans     394     137     8,184     2,686     23,290  
Treasury stock purchases     (661,059 )   (18,909 )   (53,753 )   (772,663 )   (211,316 )
Net cash received in settlement of (paid in advance for) stock repurchase contracts     -     79,189     (99,589 )   55,194     (149,589 )
Reissuances of treasury stock     8,765     7,902     7,518     25,525     21,194  
Proceeds from issuance of common stock     -     301     2,179     1,776     12,401  
    Net cash provided by (used for) financing activities     (653,001 )   67,596     699,994     (692,747 )   526,986  
Effect of exchange rate changes on cash     (690 )   (454 )   2,688     (3,387 )   18,264  
Net increase (decrease) in cash and cash equivalents     154,485     (96,661 )   549,422     72,620     946,365  
Cash and cash equivalents at beginning of period     1,410,267     1,506,928     942,710     1,492,132     545,767  
Cash and cash equivalents at end of period   $ 1,564,752   $ 1,410,267   $ 1,492,132   $ 1,564,752   $ 1,492,132  
                                 

(1)  Derived from audited financial statements

   
   
   
Reconciliation of U.S. GAAP Net Income to Non-GAAP Net Income  
(in thousands, except per share data)  
(unaudited)  
             
    Three Months Ended     Three Months Ended  
    June 24,     March 25,  
    2012     2012  
U.S. GAAP net income   $ 18,069     $ 45,604  
Pre-tax non-GAAP items:                
  Costs associated with rationalization of certain product configurations - cost of goods sold     4,045       -  
  Amortization related to intangible assets acquired in Novellus transaction - cost of goods sold     4,540       -  
  Acquisition-related inventory fair value impact - cost of goods sold     5,864       -  
  Costs associated with customer bankruptcy filing - cost of goods sold     -       2,610  
  Acquisition-related costs - operating expenses     37,374       3,195  
  Integration costs - operating expenses     7,293       8,441  
  Amortization related to intangible assets acquired in Novellus transaction - operating expenses     4,256       -  
  Costs associated with rationalization of certain product configurations - operating expenses     1,850       -  
  Bad debt and other expenses associated with customer bankruptcy filing - operating expenses     -       640  
  Amortization of convertible note discount, Lam notes - other income (expense), net     6,830       6,750  
  Amortization of convertible note discount, Novellus assumed notes - other income (expense), net     184       -  
  Acquisition-related costs - other income (expense), net     2,300       -  
Net tax benefit on non-GAAP items     (11,732 )     (6,619 )
Non-GAAP net income   $ 80,873     $ 60,621  
Non-GAAP net income per diluted share   $ 0.60     $ 0.50  
Number of shares used for diluted per share calculation     135,842       120,956  
                 
                 
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  
    June 24,     March 25,  
    2012     2012  
U.S. GAAP gross margin   $ 298,213     $ 267,147  
Pre-tax non-GAAP items:                
  Costs associated with rationalization of certain product configurations - cost of goods sold     4,045       -  
  Amortization related to intangible assets acquired in Novellus transaction - cost of goods sold     4,540       -  
  Acquisition-related inventory fair value impact - cost of goods sold     5,864       -  
  Costs associated with customer bankruptcy filing - cost of goods sold     -       2,610  
Non-GAAP gross margin   $ 312,662     $ 269,757  
U.S. GAAP gross margin as a percentage of revenue     40.2 %     40.5 %
Non-GAAP gross margin as a percentage of revenue     42.1 %     40.9 %
U.S. GAAP operating expenses   $ 265,543     $ 209,029  
Pre-tax non-GAAP items:                
  Acquisition-related costs - operating expenses     (37,374 )     (3,195 )
  Integration costs - operating expenses     (7,293 )     (8,441 )
  Amortization related to intangible assets acquired in Novellus transaction - operating expenses     (4,256 )     -  
  Costs associated with rationalization of certain product configurations - operating expenses     (1,850 )     -  
  Bad debt and other expenses associated with customer bankruptcy filing - operating expenses     -       (640 )
Non-GAAP operating expenses   $ 214,770     $ 196,753  
Non-GAAP operating income   $ 97,892     $ 73,004  
Non-GAAP operating margin as a percent of revenue     13.2 %     11.1 %
                 
                 
Reconciliation of U.S. GAAP Other Income (Expense), Net to Non-GAAP Other Income (Expense), Net  
(in thousands)  
(unaudited)  
   
    Three Months Ended  
    June 24,     March 25,  
    2012     2012  
U.S. GAAP other income (expense), net   $ (9,889 )   $ (3,568 )
Pre-tax non-GAAP items:                
  Amortization of convertible note discount, Lam notes     6,830       6,750  
  Amortization of convertible note discount, Novellus assumed notes     184       -  
  Acquisition-related costs     2,300       -  
Non-GAAP other income (expense), net   $ (575 )   $ 3,182  
                 
                 
Reconciliation of Combined Non-GAAP Statement of Operations to Lam Stand-alone Non-GAAP Statement of Operations  
Three Months Ended June 24, 2012  
(in thousands, except per share data and percentages)  
(unaudited)  
   
    Combined
Non-GAAP
    Less:
Non-GAAP Results Attributable to Novellus
      Lam
Stand-alone
Non-GAAP
 
                           
Revenue   $ 741,814     $ 25,843       $ 715,971  
Cost of goods sold     429,152       13,434         415,718  
    Gross margin     312,662       12,409         300,253  
    Gross margin as a percent of revenue     42.1 %               41.9 %
Total operating expenses     214,770       20,092         194,678  
    Operating income (loss)     97,892       (7,683 )       105,575  
    Operating margin as a percent of revenue     13.2 %               14.7 %
Other income (expense), net     (575 )     (572 )       (3 )
    Income (loss) before income taxes     97,317       (8,255 )       105,572  
Income tax expense (benefit)     16,444       (964 )       17,408  
    Net income (loss)   $ 80,873     $ (7,291 )     $ 88,164  
Net income per share:                          
  Basic net income per share   $ 0.60               $ 0.76  
  Diluted net income per share   $ 0.60               $ 0.75  
Number of shares used in per share calculations:                          
  Basic     133,997       18,167     1   115,830  
  Diluted     135,842       19,027     2   116,815  
                             
(1) Excludes shares issued as acquisition consideration and acquired stock compensation award activity subsequent to acquisition
(2) Excludes dilutive impact of assumed Novellus stock compensation awards and convertible note

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