SOURCE: Lam Research Corporation

Lam Research Corporation

January 29, 2014 16:05 ET

Lam Research Corporation Reports Financial Results for the Quarter Ended December 29, 2013

FREMONT, CA--(Marketwired - Jan 29, 2014) - Lam Research Corp. (NASDAQ: LRCX) today announced financial results for the quarter ended December 29, 2013.

Highlights for the December 2013 quarter were as follows:

  • Shipments of $1,139 million, up 15% from the prior quarter
  • Revenue of $1,116 million, up 10% from the prior quarter
  • GAAP gross margin of 43.7%, GAAP operating margin of 14.7% and GAAP diluted EPS of $0.87
  • Non-GAAP gross margin of 45.8%, non-GAAP operating margin of 18.7%, and non-GAAP diluted EPS of $1.10
   
Lam Research Corporation  
Financial Highlights for the Quarters Ended December 29, 2013 and September 29, 2013  
(in thousands, except per share data and percentages)  
                   
U.S. GAAP  
    December 2013     September 2013     Change Q/Q  
                       
Revenue   $ 1,116,061     $ 1,015,059     +10 %
Gross margin as percentage of revenue     43.7 %     42.5 %   +120 bps
Operating margin as percentage of revenue     14.7 %     10.4 %   +430 bps 
Diluted EPS   $ 0.87     $ 0.50     +74 %
                       
Non-GAAP  
      December 2013       September 2013     Change Q/Q  
                       
Revenue   $ 1,116,061     $ 1,015,059     +10 %
Gross margin as percentage of revenue     45.8 %     45.0 %   +80 bps
Operating margin as percentage of revenue     18.7 %     16.2 %   +250 bps
Diluted EPS   $ 1.10     $ 0.81     +36 %
                       

GAAP Financial Results
Revenue for the period was $1,116 million, gross margin was $487.8 million, or 43.7% of revenue, operating expenses were $323.3 million, and net income was $149.0 million, or $0.87 per diluted share on a GAAP basis. This compares to revenue of $1,015 million, gross margin of $431.9 million, or 42.5% of revenue, operating expenses of $326.5 million, and net income of $85.5 million, or $0.50 per diluted share, for the September 2013 quarter.

Non-GAAP Financial Results
Non-GAAP gross margin was $510.8 million, or 45.8% of revenue, non-GAAP operating expenses were $302.1 million, and non-GAAP net income was $188.7 million, or $1.10 per diluted share. This compares to non-GAAP gross margin of $456.7 million, or 45.0% of revenue, non-GAAP operating expenses of $291.9 million, and non-GAAP net income of $139.2 million, or $0.81 per diluted share, for the September 2013 quarter.

"Calendar 2013 was an extraordinary year for Lam Research, highlighted by strong operating and financial performance. Our December quarter results closed the year with record shipments, record revenues and earnings that exceeded our expectations," stated Martin Anstice, Lam Research's president and chief executive officer. "Our outlook for continued healthy levels of wafer fab equipment spending in 2014 reflects our customers' planned investments in key technology inflections tempered by their focus on maintaining balanced supply and demand. Against this industry back drop, we are further strengthening our emphasis on customer trust and improving competitiveness to reinforce the opportunities for future growth and enhanced financial performance of Lam."

Balance Sheet and Cash Flow Results
Cash and cash equivalents, short-term investments, and restricted cash and investment balances increased to $2.7 billion at the end of the December 2013 quarter compared to $2.6 billion at the end of the September 2013 quarter. This increase was primarily the result of approximately $129 million in cash flows from operating activities during the December 2013 quarter, partially offset by $48 million of stock repurchases.

Deferred revenue and deferred profit balances at the end of the December 2013 quarter increased to $405.0 million and $224.4 million, respectively, as compared to $334.0 million and $188.4 million, respectively, at the end of the September 2013 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 $53.5 million as of December 29, 2013.

Geographic Distribution
The geographic distribution of shipments and revenue during the December 2013 quarter is shown in the following table:

         
Region   Shipments   Revenue
North America   9%   13%
Europe   7%   5%
Japan   13%   17%
Korea   24%   19%
Taiwan   22%   28%
Asia Pacific   25%   18%
         

Outlook

For the March 2014 quarter, Lam is providing the following guidance on a non-GAAP basis:

  • Shipments of approximately $1.250 billion plus or minus $30 million
  • Revenue of approximately $1.215 billion plus or minus $30 million
  • Gross margin of approximately 45.0% plus or minus 1.0%
  • Operating margin as a percent of revenue of approximately 19.5% plus or minus 1.0%
  • Earnings per share of approximately $1.15 plus or minus $0.05, assuming a diluted share count of 173 million

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 December 2013 and September 2013 quarters exclude costs associated with the fair-value impact of acquisition-related inventory, amortization related to intangible assets acquired in the Novellus transaction, certain integration-related costs, rationalization of certain product configurations, the impairment of a long-lived asset, the amortization of convertible note discounts, and the tax benefit on successful resolution of certain tax matters. Additionally, the December 2013 quarter non-GAAP results exclude the gain on sale of an investment and the September 2013 quarter non-GAAP results excluded certain restructuring charges and the tax expense associated with legal-entity integration.

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 opportunities for growth, our financial performance, our wafer fab equipment spending outlook, the expected rate of investment in key technology inflections, the success of our strategies for maintaining customer trust and improving competitiveness, the support from our customers, and our guidance for shipments, revenue, gross margin, operating margin, and earnings per share. 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 30, 2013 and Form 10-Q for the three months ended September 29, 2013. 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 etch, deposition, strip, and wafer cleaning solutions help 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 our customers to shape the future of technology. Based in Fremont, Calif., Lam Research is an 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 .

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 29,     September 29,     December 23,     December 29,     December 23,  
    2013     2013     2012     2013     2012  
Revenue   $ 1,116,061     $ 1,015,059     $ 860,886     $ 2,131,120     $ 1,767,774  
  Cost of goods sold     628,272       583,201       545,472       1,211,473       1,118,474  
    Gross margin     487,789       431,858       315,414       919,647       649,300  
    Gross margin as a percent of revenue     43.7 %     42.5 %     36.6 %     43.2 %     36.7 %
Research and development     174,477       170,567       165,951       345,044       329,262  
Selling, general and administrative     148,838       155,883       145,421       304,721       299,284  
    Total operating expenses     323,315       326,450       311,372       649,765       628,546  
    Operating income     164,474       105,408       4,042       269,882       20,754  
    Operating margin as a percent of revenue     14.7 %     10.4 %     0.5 %     12.7 %     1.2 %
Other expense, net     (3,837 )     (14,262 )     (13,390 )     (18,099 )     (23,328 )
  Income before income taxes     160,637       91,146       (9,348 )     251,783       (2,574 )
Income tax expense (benefit)     11,645       5,640       (15,756 )     17,285       (11,750 )
  Net income   $ 148,992     $ 85,506     $ 6,408     $ 234,498     $ 9,176  
Net income per share:                                        
  Basic net income per share   $ 0.92     $ 0.52     $ 0.04     $ 1.44     $ 0.05  
  Diluted net income per share   $ 0.87     $ 0.50     $ 0.04     $ 1.37     $ 0.05  
Number of shares used in per share calculations:                                        
  Basic     162,305       162,896       170,699       162,603       175,314  
  Diluted     171,757       171,363       173,027       171,592       177,490  
                                         
                                         
                                         
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
             
    December 29,   September 29,   June 30,
    2013   2013   2013
    (unaudited)   (unaudited)   (1)
ASSETS                  
Cash and cash equivalents   $ 1,132,555   $ 1,156,184   $ 1,162,473
Short-term investments     1,389,735     1,300,031     1,334,745
Accounts receivable, net     909,720     713,524     602,624
Inventories     661,572     614,790     559,317
Deferred income taxes     17,095     29,090     27,674
Other current assets     138,359     110,633     106,996
  Total current assets     4,249,036     3,924,252     3,793,829
Property and equipment, net     546,193     564,845     603,910
Restricted cash and investments     166,395     166,385     166,536
Goodwill and intangible assets     2,453,066     2,484,900     2,526,541
Other assets     141,108     149,963     159,499
  Total assets   $ 7,555,798   $ 7,290,345   $ 7,250,315
                   
LIABILITIES AND STOCKHOLDERS' EQUITY                  
Current liabilities   $ 1,522,572   $ 1,402,890   $ 1,404,475
                   
Long-term debt, convertible notes, and capital leases   $ 803,276   $ 796,373   $ 789,256
Income taxes payable     248,996     248,462     246,479
Other long-term liabilities     129,710     129,306     134,313
  Total liabilities     2,704,554     2,577,031     2,574,523
                   
Senior convertible notes     185,154     186,042     186,920
Stockholders' equity (2)     4,666,090     4,527,272     4,488,872
  Total liabilities and stockholders' equity   $ 7,555,798   $ 7,290,345   $ 7,250,315
                   
(1) Derived from audited financial statements         
 
(2) Common shares issued and outstanding were 162,169 shares as of December 29, 2013, 162,217 shares as of September 29, 2013 and 162,873 shares as of June 30, 2013.
 
 
 
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
                             
  Three Months Ended     Six Months Ended  
  December 29,     September 29,     December 23,     December 29,     December 23,  
  2013     2013     2012     2013     2012  
CASH FLOWS FROM OPERATING ACTIVITIES:                                      
Net income $ 148,992     $ 85,506     $ 6,408     $ 234,498     $ 9,176  
Adjustments to reconcile net income to net cash provided by operating activities:                                      
  Depreciation and amortization   73,552       74,331       78,388       147,883       153,204  
  Deferred income taxes   12,457       -       (7,320 )     12,457       (19,337 )
  Impairment of long-lived asset   628       7,004       -       7,632       -  
  Equity-based compensation expense   23,046       23,235       24,027       46,281       48,441  
  Amortization of convertible note discount   8,217       8,122       7,843       16,339       15,595  
  Other, net   (2,428 )     4,115       14,694       1,687       25,744  
  Changes in operating assets and liabilities:   (135,441 )     (150,388 )     69,186       (285,829 )     209,665  
    Net cash provided by operating activities   129,023       51,925       193,226       180,948       442,488  
                                       
CASH FLOWS FROM INVESTING ACTIVITIES:                                      
Capital expenditures and intangible assets   (38,323 )     (23,778 )     (38,924 )     (62,101 )     (82,889 )
Cash paid for business acquisition   (18,388 )     -       (8,716 )     (18,388 )     (8,716 )
Net sales/maturities (purchases) of available-for-sale securities   (88,754 )     42,567       (23,250 )     (46,187 )     (39,888 )
(Issuance) repayments of notes receivable   10,000       -       -       10,000       -  
Proceeds from sale of assets   21,635       -       660       21,635       660  
Transfer of restricted cash and investments   -       150       33       150       179  
    Net cash provided by (used for) investing activities   (113,830 )     18,939       (70,197 )     (94,891 )     (130,654 )
                                       
CASH FLOWS FROM FINANCING ACTIVITIES:                                      
Principal payments on long-term debt and capital lease obligations   (719 )     (88 )     (115 )     (807 )     (780 )
Treasury stock purchases   (47,910 )     (104,285 )     (355,010 )     (152,195 )     (710,089 )
Reissuances of treasury stock related to employee stock purchase plan   (35 )     15,154       -       15,119       9,925  
Proceeds from issuance of common stock   8,449       12,574       6,583       21,023       7,534  
    Net cash used for financing activities   (40,215 )     (76,645 )     (348,542 )     (116,860 )     (693,410 )
Effect of exchange rate changes on cash   1,393       (508 )     4,236       885       7,013  
Net decrease in cash and cash equivalents   (23,629 )     (6,289 )     (221,277 )     (29,918 )     (374,563 )
Cash and cash equivalents at beginning of period   1,156,184       1,162,473       1,411,466       1,162,473       1,564,752  
Cash and cash equivalents at end of period $ 1,132,555     $ 1,156,184     $ 1,190,189     $ 1,132,555     $ 1,190,189  
                                       
                                       
                                       
Non-GAAP Financial Summary  
(in thousands, except percentages and per share data)  
(unaudited)  
             
    Three Months Ended     Three Months Ended  
    December 29,     September 29,  
    2013     2013  
                 
Revenue   $ 1,116,061     $ 1,015,059  
Gross margin   $ 510,769     $ 456,709  
Gross margin as percentage of revenue     45.8 %     45.0 %
Operating expenses   $ 302,103     $ 291,887  
Operating income   $ 208,666     $ 164,882  
Operating margin as a percentage of revenue     18.7 %     16.2 %
Net income   $ 188,745     $ 139,227  
Net income per diluted share   $ 1.10     $ 0.81  
Shares used in per share calculation - diluted     171,757       171,363  
                 
                 
                 
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 29,     September 29,  
    2013     2013  
U.S. GAAP net income   $ 148,992     $ 85,506  
Pre-tax non-GAAP items:                
  Amortization related to intangible assets acquired in Novellus transaction - cost of goods sold     21,491       21,480  
  Acquisition-related inventory fair value impact - cost of goods sold     1,225       2,047  
  Integration costs - cost of goods sold     264       1,324  
  Integration costs - operating expenses     2,785       8,063  
  Amortization related to intangible assets acquired in Novellus transaction - operating expenses     16,953       16,947  
  Restructuring charges - operating expenses     -       1,705  
  Costs associated with rationalization of certain product configurations - operating expenses     846       844  
  Impairment of long lived asset - operating expenses     628       7,004  
  Amortization of convertible note discount, Lam notes - other expense, net     7,329       7,243  
  Amortization of convertible note discount, Novellus assumed notes - other expense, net     762       859  
  Gain on sale of investment - other expense, net     (4,813 )     -  
Net tax benefit on non-GAAP items     (6,404 )     (11,646 )
Net tax benefit on successful resolution of certain tax matters     (1,313 )     (2,286 )
Tax expense associated with legal-entity integration     -       137  
Non-GAAP net income   $ 188,745     $ 139,227  
Non-GAAP net income per diluted share   $ 1.10     $ 0.81  
Number of shares used for diluted per share calculation     171,757       171,363  
                 
                 
                 
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 29,     September 29,  
    2013     2013  
U.S. GAAP gross margin   $ 487,789     $ 431,858  
Pre-tax non-GAAP items:                
  Amortization related to intangible assets acquired in Novellus transaction - cost of goods sold     21,491       21,480  
  Acquisition-related inventory fair value impact - cost of goods sold     1,225       2,047  
  Integration costs - cost of goods sold     264       1,324  
Non-GAAP gross margin   $ 510,769     $ 456,709  
U.S. GAAP gross margin as a percentage of revenue     43.7 %     42.5 %
Non-GAAP gross margin as a percentage of revenue     45.8 %     45.0 %
U.S. GAAP operating expenses   $ 323,315     $ 326,450  
Pre-tax non-GAAP items:                
  Integration costs - operating expenses     (2,785 )     (8,063 )
  Amortization related to intangible assets acquired in Novellus transaction - operating expenses     (16,953 )     (16,947 )
  Restructuring charges - operating expenses     -       (1,705 )
  Costs associated with rationalization of certain product configurations - operating expenses     (846 )     (844 )
  Impairment of long lived asset - operating expenses     (628 )     (7,004 )
Non-GAAP operating expenses   $ 302,103     $ 291,887  
Non-GAAP operating income   $ 208,666     $ 164,822  
Non-GAAP operating margin as a percent of revenue     18.7 %     16.2 %
                 
                 
                 

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