Lam Research Corporation Reports Financial Results for the Quarter Ended June 26, 2016

FREMONT, CA--(Marketwired - July 27, 2016) - Lam Research Corp. (NASDAQ: LRCX) today announced financial results for the quarter ended June 26, 2016 (the "June 2016 quarter").

Highlights for the June 2016 quarter were as follows:

• Shipments of $1,587 million and revenue of $1,546 million.
• GAAP gross margin of 45.2%, GAAP operating margin of 20.0%, and GAAP diluted EPS of $1.46.
• Non-GAAP gross margin of 46.6%, non-GAAP operating margin of 23.2%, and non-GAAP diluted EPS of $1.80.

U.S. GAAP Financial Results

For the June 2016 quarter, revenue was $1,546 million, gross margin was $699 million, or 45.2% of revenue, operating expenses were $390 million, operating margin was 20.0% of revenue, and net income was $259 million, or $1.46 per diluted share on a GAAP basis. This compares to revenue of $1,314 million, gross margin of $571 million, or 43.5% of revenue, operating expenses of $381 million, operating margin of 14.5% of revenue, and net income of $143 million, or $0.82 per diluted share, for the quarter ended March 27, 2016 (the "March 2016 quarter").

Non-GAAP Financial Results

For the June 2016 quarter, non-GAAP gross margin was $720 million or 46.6% of revenue, non-GAAP operating expenses were $361 million, non-GAAP operating margin was 23.2% of revenue, and non-GAAP net income was $315 million, or $1.80 per diluted share. This compares to non-GAAP gross margin of $593 million or 45.1% of revenue, non-GAAP operating expenses of $350 million, non-GAAP operating margin of 18.4% of revenue, and non-GAAP net income of $203 million, or $1.18 per diluted share for the March 2016 quarter.

"The June quarter was characterized by very positive momentum as the Company met or exceeded expectations across the board," said Martin Anstice, Lam Research's President and Chief Executive Officer. "Sequential quarterly operating profit growth of approximately 500 basis points is a strong endorsement of Lam's opportunity and execution capabilities. Our guidance for record shipments in September and outlook for second half 2016 growth confirms our increased strategic relevance, strong customer trust and the differentiation of our core values. We believe that our underlying fundamentals and multi-year outperformance opportunity remain strong on a standalone basis, and subsequent to closing our merger with KLA-Tencor we are focused on further strengthening that position and accelerating innovation for the benefit of our customers."

Balance Sheet and Cash Flow Results

Cash and cash equivalents, short-term investments, and restricted cash and investments balances increased to $7.1 billion at the end of the June 2016 quarter compared to $4.8 billion at the end of the March 2016 quarter. This increase was primarily the result of approximately $1.9 billion in debt proceeds, net repayments of maturing debt, combined with $424 million of cash generated in operating activities.

Deferred revenue at the end of the June 2016 quarter increased to $566 million as compared to $511 million at the end of the March 2016 quarter. Deferred profit at the end of the June 2016 quarter increased to $349 million as compared to $334 million at the end of the March 2016 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 estimated future revenue from shipments to Japanese customers was approximately $132 million as of June 26, 2016.

Geographic Distribution

The geographic distribution of shipments and revenue during the June 2016 quarter is shown in the following table:

Outlook

For the September 2016 quarter, 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 KLA-Tencor related acquisition or integration expenses other than the net interest expense associated with the KLA-Tencor pre-acquisition funding, 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; net interest expense associated with KLA-Tencor pre-acquisition funding, $18 million; amortization of note discounts, $6 million; and associated tax benefit for non-GAAP items ($13) million; totaling $48 million.
• Diluted share count - impact of a note hedge issued contemporaneously with the convertible notes due 2018, 2 million shares.

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 2016 and March 2016 quarters exclude amortization related to intangible assets acquired in the Novellus transaction, restructuring impacts, the amortization of notes discounts, costs associated with the KLA-Tencor acquisition, amortization of bridge loan issuance costs and other related fees associated with the KLA-Tencor acquisition, tax benefit of non-GAAP items, and income tax benefit on resolution of certain tax matters. Additionally, the June 2016 quarter excludes Novellus acquisition transaction related inventory fair value impact, cost associated with campus consolidation, gain on sale of real property net of associated exit costs, KLA-Tencor pre-acquisition funding net interest expense, and change to income tax benefit from court ruling.

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 website 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 created by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements relate to, but are not limited to; the estimated future revenue from shipments to Japanese customers; our second half calendar year 2016 growth outlook and its impact on our strategic relevance, customer trust and differentiation of our core values; the extent of our underlying fundamentals and multi-year outperformance opportunities as a standalone entity and our ability to strengthen those positions and accelerate innovation for the benefit of our customers following the proposed acquisition of KLA-Tencor Corporation ("KLA-Tencor"); the legal and business factors that may affect our future tax rate; our ability to close the proposed acquisition of KLA-Tencor; and our guidance for shipments, revenue, gross margin, operating margin, net income or earnings per diluted share, and diluted share count. Some factors that may affect these forward-looking statements include: the proposed transaction with KLA-Tencor may not close and if it does close we may not receive the expected benefits of the proposed transaction, such as the scale and breadth of critical technologies and better financial performance for our stockholders; business conditions in the consumer electronics industry, the semiconductor industry and the overall economy may deteriorate or change; and the actions of our customers and competitors may be inconsistent with our expectations, as well as the other risks and uncertainties that are described in the documents filed or furnished by us with the Securities and Exchange Commission, including specifically the Risk Factors described in our annual report on Form 10-K for the fiscal year ended June 28, 2015 and quarterly reports on Form 10-Q for the fiscal quarters ended September 27, 2015, December 27, 2015 and March 27, 2016. These uncertainties and changes could materially affect the forward looking statements and cause actual results to vary from expectations in a material way. The Company undertakes no obligation to update the information or statements made in this 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, and clean 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, more powerful, 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.