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

FREMONT, CA--(Marketwired - January 28, 2015) - Lam Research Corp. (NASDAQ: LRCX) today announced financial results for the quarter ended December 28, 2014 (the "December 2014 quarter").

Highlights for the December 2014 quarter were as follows:

• Shipments of $1,247 million, up 12% from the prior quarter.
• Revenue of $1,232 million, up 7% from the prior quarter.
• GAAP gross margin of 43.6%, GAAP operating margin of 15.3% and GAAP diluted EPS of $1.00
• Non-GAAP gross margin of 45.4%, non-GAAP operating margin of 18.7%, and non-GAAP diluted EPS of $1.19

GAAP Financial Results

For the December 2014 quarter, revenue was $1,232.2 million, gross margin was $536.7 million, or 43.6% of revenue, operating expenses were $347.9 million, operating margin was 15.3% of revenue, and net income was $176.9 million, or $1.00 per diluted share on a GAAP basis. This compares to revenue of $1,152.4 million, gross margin of $505.5 million, or 43.9% of revenue, operating expenses of $337.2 million, operating margin of 14.6% of revenue, and net income of $141.1 million, or $0.80 per diluted share, for the quarter ended September 28, 2014 (the "September 2014 quarter").

Non-GAAP Financial Results

For the December 2014 quarter, non-GAAP gross margin was $560.0 million or 45.4% of revenue, non-GAAP operating expenses were $330.2 million, non-GAAP operating margin was 18.7% of revenue, and non-GAAP net income was $207.6 million, or $1.19 per diluted share. This compares to non-GAAP gross margin of $528.0 million or 45.8% of revenue, non-GAAP operating expenses of $321.2 million, non-GAAP operating margin of 18.0% of revenue, and non-GAAP net income of $167.7 million, or $0.96 per diluted share for the September 2014 quarter.

"Lam's December quarter concludes a record calendar year for the Company defined by outperformance in our industry and strong execution on our priorities," said Martin Anstice, Lam Research's president and chief executive officer. "For the year we grew revenue at twice the rate of the industry and made good progress on our market share objectives. Our strong execution combined with a meaningful market expansion is enabling a compelling multi-year growth opportunity." 

Balance Sheet and Cash Flow Results

Cash and cash equivalents, short-term investments, and restricted cash and investment balances remained steady at $3.0 billion at the end of both the December 2014 quarter and the September 2014 quarter. Cash provided by operating activities was utilized for approximately $65.5 million of treasury stock purchases including net share settlement on employee stock-based compensation, $61.4 million of capital expenditures and $29.4 million of cash dividends paid to stockholders during the December 2014 quarter.

Deferred revenue at the end of the December 2014 quarter increased to $373.7 million as compared to $356.8 million at the end of the September 2014 quarter. Deferred profit at the end of the December 2014 quarter increased to $254.8 million as compared to $251.8 million at the end of the September 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 $53.2 million as of December 28, 2014.

Geographic Distribution

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

Outlook

For the quarter ending March 29, 2015, Lam is providing the following guidance:

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:

• Gross margin -- amortization related to intangible assets acquired in the Novellus transaction, $21 million.
• Operating margin -- amortization related to intangible assets acquired in the Novellus transaction, $37 million.
• Earnings per share -- amortization related to intangible assets acquired in the Novellus transaction, $37 million; amortization of convertible note discounts, $8 million; and associated tax benefit for non-GAAP items ($7) million; totaling $38 million.
• Diluted share count -- impact of a note hedge issued contemporaneously with the convertible notes due in 2016 and 2018, 3 million shares.

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 December 2014 and September 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, the amortization of convertible note discounts, and tax expense (benefit) of non-GAAP items. Additionally, the December 2014 quarter non-GAAP results exclude acquisition-related inventory fair value adjustments, cost of restructuring and tax benefit on reinstatement of research and development credit. The September 2014 quarter non-GAAP results also exclude the rationalization of certain product configurations, gain associated with disposition of a business, and tax benefit on valuation allowance adjustment.

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 outperform the semiconductor equipment industry; our ability to continue to grow our revenue and make progress on our market share objectives; our ability to execute and deliver performance that meets or exceeds our plans, including our abilities to execute on our priorities, and deliver multi-year 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 the Form 10-Q for the quarter ended September 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.