SOURCE: Lam Research Corporation

Lam Research Corporation

January 23, 2013 16:05 ET

Lam Research Corporation Reports Financial Results for the Quarter Ended December 23, 2012

FREMONT, CA--(Marketwire - Jan 23, 2013) - Lam Research Corp. (NASDAQ: LRCX)

  • Reported revenue of $860.9 million for the December 2012 quarter, down 5% from the prior quarter

  • Reported GAAP gross margin of 36.6%, GAAP operating margin of 0.5% and GAAP EPS of $0.04

  • Delivered non-GAAP gross margin of 44.2%, operating margin of 11.5%, and EPS of $0.45

  • Repurchased 10 million shares of common stock, completing approximately $1.4 billion of $1.6 billion in announced buybacks

Lam Research Corp. (NASDAQ: LRCX) today announced financial results for the quarter ended December 23, 2012. Highlights for the quarter were as follows:

   
Lam Research Corporation  
Financial Highlights for the Quarter Ended December 23, 2012  
(in thousands, except per share data and percentages)  
             
    U.S. GAAP     Non-GAAP  
                 
Revenue:   $ 860,886     $ 860,886  
                 
Operating Margin:     0.5 %     11.5 %
                 
Net Income:   $ 6,408     $ 77,278  
                 
Diluted EPS:   $ 0.04     $ 0.45  
                 
                 

Revenue for the period was $860.9 million, gross margin was $315.4 million, or 36.6% of revenue, operating expenses were $311.4 million, and net income was $6.4 million, or $0.04 per diluted share on a GAAP basis. This compares to revenue of $906.9 million, gross margin of $333.9 million, or 36.8%, operating expenses of $317.2 million, and net income of $2.8 million, or $0.02 per diluted share, for the September 2012 quarter. Shipments for the December 2012 quarter were $803 million, compared to $935 million during the September 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 December 2012 and September 2012 quarters exclude costs associated with the fair value impact of acquisition-related inventory, amortization related to intangible assets acquired in the Novellus transaction, certain acquisition and integration-related costs, the amortization of convertible note discounts, and rationalization of certain product configurations. Additionally, the December 2012 quarter non-GAAP results exclude restructuring charges and tax benefits on successful resolution of certain tax matters. See "Use of Non-GAAP Financial Measures" below for additional information.

Non-GAAP Financial Measures

On a non-GAAP basis, net income was $77.3 million, or $0.45 per diluted share, in the December 2012 quarter compared to $97.0 million, or $0.53 per diluted share, for the September 2012 quarter. Gross margin for the December 2012 quarter was $380.5 million, or 44.2%, compared to $402.3 million, or 44.4%, for the September 2012 quarter. Gross margin performance reflected unfavorable factory utilization as well as product and customer-mix changes. Non-GAAP operating expenses for the December 2012 quarter decreased to $281.5 million compared with the September quarter of $284.3 million. This was primarily due to lower incentive compensation stemming from decreased business volumes and reductions in field and support-group spending.

"Lam closed calendar year 2012 by delivering solid financial performance for the December quarter and strong execution against our integration plans," stated Martin Anstice, Lam's president and chief executive officer. "In the latter part of 2012, demand for semiconductor equipment declined, particularly in the NAND memory segment. Although we expect these conditions will continue in the near-term we remain optimistic in the long-term about the catalysts and inflections for growth. In this environment, we remain committed to funding new technology investments and positioning next-generation products with customers, and at the same time, retaining day-to-day discipline necessary to deliver predictable operating performance."

Cash and cash equivalents, short-term investments and restricted cash and investment balances decreased to $2.7 billion as planned at the end of the December 2012 quarter, compared to $2.9 billion at the end of the September 2012 quarter. This decrease was primarily the result of approximately $355 million of stock repurchases, offset by approximately $193 million in cash flow from operating activities during the December 2012 quarter. Deferred revenue and deferred profit balances at the end of the December 2012 quarter decreased to $282.0 million and $169.0 million, respectively, as compared to $363.5 million and $208.1 million, respectively, at the end of the September 2012 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 $45.7 million as of December 23, 2012.

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

             
Region   Shipments     Revenue  
North America   29 %   24 %
Europe   9 %   8 %
Japan   14 %   10 %
Korea   12 %   12 %
Taiwan   22 %   26 %
Asia Pacific   14 %   20 %
             
             

Use of Non-GAAP Financial Measures

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.

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 expectations for growth and future demand for semiconductor equipment, and our plans pertaining to expense management, funding technology investments and positioning our products with customer as well as our ability to execute on those plans. 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 24, 2012 and Form 10-Q for the three months ended September 23, 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.

About Lam Research

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 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)  
(unaudited)  
                               
    Three Months Ended     Six Months Ended  
    December 23, 2012     September 23, 2012     December 25, 2011     December 23,  012     December 25, 2011  
Revenue   $ 860,886     $ 906,888     $ 583,981     $ 1,767,774     $ 1,264,417  
  Cost of goods sold     545,472       573,002       350,014       1,118,474       746,567  
  Cost of goods sold - restructuring and impairments     -       -       (859 )     -       (859 )
    Total cost of goods sold     545,472       573,002       349,155       1,118,474       745,708  
    Gross margin     315,414       333,886       234,826       649,300       518,709  
    Gross margin as a percent of revenue     36.6 %     36.8 %     40.2 %     36.7 %     41.0 %
Research and development     165,951       163,311       104,024       329,262       206,583  
Selling, general and administrative     144,400       153,863       83,256       298,263       163,456  
Restructuring and impairments     1,021       -       -       1,021       1,725  
    Total operating expenses     311,372       317,174       187,280       628,546       371,764  
    Operating income     4,042       16,712       47,546       20,754       146,945  
    Operating margin as a percent of revenue     0.5 %     1.8 %     8.1 %     1.2 %     11.6 %
Other income (expense), net     (13,390 )     (9,938 )     (7,785 )     (23,328 )     (19,858 )
    Income (loss) before income taxes     (9,348 )     6,774       39,761       (2,574 )     127,087  
Income tax expense (benefit)     (15,756 )     4,006       6,549       (11,750 )     22,037  
    Net income   $ 6,408     $ 2,768     $ 33,212     $ 9,176     $ 105,050  
Net income per share:                                        
  Basic net income per share   $ 0.04     $ 0.02     $ 0.28     $ 0.05     $ 0.87  
  Diluted net income per share   $ 0.04     $ 0.02     $ 0.27     $ 0.05     $ 0.86  
Number of shares used in per share calculations:                                        
  Basic     170,699       179,928       119,739       175,314       121,435  
  Diluted     173,027       181,926       120,873       177,490       122,382  
                                         
                                         
 
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
             
    December 23,
2012
  September 23,
2012
  June 24,
2012
    (unaudited)   (unaudited)   (1)
ASSETS                  
Cash and cash equivalents   $ 1,190,189   $ 1,411,466   $ 1,564,752
Short-term investments     1,330,498     1,312,767     1,297,931
Accounts receivable, net     590,925     640,217     765,818
Inventories     530,272     567,920     632,853
Deferred income taxes     139,300     136,556     47,782
Other current assets     65,224     100,490     105,973
  Total current assets     3,846,408     4,169,416     4,415,109
Property and equipment, net     590,547     593,202     584,596
Restricted cash and investments     166,166     166,196     166,335
Deferred income taxes     344     -     -
Goodwill and intangible assets     2,608,221     2,642,770     2,686,730
Other assets     151,478     152,762     151,882
  Total assets   $ 7,363,164   $ 7,724,346   $ 8,004,652
                   
LIABILITIES AND STOCKHOLDERS' EQUITY                  
Current liabilities   $ 825,482   $ 854,257   $ 1,426,928
                   
Long-term debt, convertible notes, and capital leases   $ 1,286,729   $ 1,278,792   $ 761,783
Income taxes payable     260,063     282,844     274,240
Other long-term liabilities     294,300     296,807     219,577
  Total liabilities     2,666,574     2,712,700     2,682,528
                   
Senior convertible notes     -     -     190,343
Stockholders' equity     4,696,590     5,011,646     5,131,781
  Total liabilities and stockholders' equity   $ 7,363,164   $ 7,724,346   $ 8,004,652
                     
   
(1) Derived from audited financial statements
   
   
LAM RESEARCH CORPORATION  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(in thousands)  
(unaudited)  
                               
    Three Months Ended     Six Months Ended  
    December 23, 2012     September 23, 2012     December 25, 2011     December 23, 2012     December 25, 2011  
CASH FLOWS FROM OPERATING ACTIVITIES:                                        
Net income   $ 6,408     $ 2,768     $ 33,212     $ 9,176     $ 105,050  
Adjustments to reconcile net income to net cash provided by operating activities:                                        
  Depreciation and amortization     78,388       74,816       22,372       153,204       43,732  
  Deferred income taxes     (7,320 )     (12,017 )     (633 )     (19,337 )     (633 )
  Restructuring and impairment charges, net     1,021       -       (859 )     1,021       866  
  Equity-based compensation expense     24,027       24,414       18,224       48,441       35,968  
  Income tax benefit on equity-based compensation plans     -       -       470       -       1,129  
  Excess tax benefit on equity-based compensation plans     -       -       (204 )     -       (2,155 )
  Amortization of convertible note discount     7,843       7,752       6,671       15,595       13,264  
  Impairment of investment     -       -       -       -       1,724  
  Other, net     13,673       11,050       1,083       24,723       2,506  
  Changes in operating assets and liabilities:     69,186       140,479       88,680       209,665       54,465  
    Net cash provided by operating activities     193,226       249,262       169,016       442,488       255,916  
                                         
CASH FLOWS FROM INVESTING ACTIVITIES:                                        
Capital expenditures and intangible assets     (38,924 )     (43,965 )     (26,682 )     (82,889 )     (42,414 )
Cash acquired in (paid for) business acquisition     (8,716 )     -       -       (8,716 )     -  
Net sales/maturities (purchases) of available-for-sale securities     (23,250 )     (16,638 )     (4,194 )     (39,888 )     (89,453 )
Purchase of equity method investment     -       -       (10,740 )     -       (10,740 )
Receipt of loan payment     -       -       8,375       -       8,375  
Proceeds from sale of assets     660       -       2,677       660       2,677  
Transfer of restricted cash and investments     33       146       3       179       20  
    Net cash provided by (used for) investing activities     (70,197 )     (60,457 )     (30,561 )     (130,654 )     (131,535 )
                                         
CASH FLOWS FROM FINANCING ACTIVITIES:                                        
Principal payments on long-term debt and capital lease obligations     (115 )     (665 )     (1,576 )     (780 )     (3,140 )
Excess tax benefit on equity-based compensation plans     -       -       204       -       2,155  
Net cash received in settlement (paid in advance for) stock repurchase contracts     -       -       51,005       -       (23,995 )
Treasury stock purchases     (355,010 )     (355,079 )     (20,642 )     (710,089 )     (92,695 )
Reissuances of treasury stock related to employee stock purchase plan     -       9,925       -       9,925       8,858  
Proceeds from issuance of common stock     6,583       951       1,311       7,534       1,475  
    Net cash used for financing activities     (348,542 )     (344,868 )     30,302       (693,410 )     (107,342 )
Effect of exchange rate changes on cash     4,236       2,777       (1,147 )     7,013       (2,243 )
Net increase (decrease) in cash and cash equivalents     (221,277 )     (153,286 )     167,610       (374,563 )     14,796  
Cash and cash equivalents at beginning of period     1,411,466       1,564,752       1,339,318       1,564,752       1,492,132  
Cash and cash equivalents at end of period   $ 1,190,189     $ 1,411,466     $ 1,506,928     $ 1,190,189     $ 1,506,928  
                                         
                                         
   
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  
    December 23,
2012
    September 23,
2012
 
U.S. GAAP net income   $ 6,408     $ 2,768  
Pre-tax non-GAAP items:                
  Costs associated with rationalization of certain product configurations - cost of goods sold     17,434       3,210  
  Amortization related to intangible assets acquired in Novellus transaction - cost of goods sold     20,745       20,715  
  Acquisition-related inventory fair value impact - cost of goods sold     26,882       43,842  
  Integration costs - cost of goods sold     -       694  
  Integration costs - operating expenses     8,971       13,500  
  Amortization related to intangible assets acquired in Novellus transaction - operating expenses     19,438       19,418  
  Restructuring charges - operating expenses     1,021       -  
  Costs associated with rationalization of certain product configurations - operating expenses     443       -  
  Amortization of convertible note discount, Lam notes - other income (expense), net     6,992       6,910  
  Amortization of convertible note discount, Novellus assumed notes - other income (expense), net     821       842  
Net tax benefit on non-GAAP items     (14,883 )     (14,886 )
Net tax benefit on successful resolution of certain tax matters     (16,994 )     -  
Non-GAAP net income   $ 77,278     $ 97,013  
Non-GAAP net income per diluted share   $ 0.45     $ 0.53  
Number of shares used for diluted per share calculation     173,027       181,926  
                 
                 
                 
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  
    December 23,
2012
    September 23,
2012
 
U.S. GAAP gross margin   $ 315,414     $ 333,886  
Pre-tax non-GAAP items:                
  Costs associated with rationalization of certain product configurations - cost of goods sold     17,434       3,210  
  Amortization related to intangible assets acquired in Novellus transaction - cost of goods sold     20,745       20,715  
  Acquisition-related inventory fair value impact - cost of goods sold     26,882       43,842  
  Integration costs - cost of goods sold     -       694  
Non-GAAP gross margin   $ 380,475     $ 402,347  
U.S. GAAP gross margin as a percentage of revenue     36.6 %     36.8 %
Non-GAAP gross margin as a percentage of revenue     44.2 %     44.4 %
U.S. GAAP operating expenses   $ 311,372     $ 317,174  
Pre-tax non-GAAP items:                
  Integration costs - operating expenses     (8,971 )     (13,500 )
  Amortization related to intangible assets acquired in Novellus transaction - operating expenses     (19,438 )     (19,418 )
  Restructuring charges - operating expenses     (1,021 )     -  
  Costs associated with rationalization of certain product configurations - operating expenses     (443 )     -  
Non-GAAP operating expenses   $ 281,499     $ 284,256  
Non-GAAP operating income   $ 98,976     $ 118,091  
Non-GAAP operating margin as a percent of revenue     11.5 %     13.0 %
                 
                 

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