SOURCE: Lam Research Corporation

Lam Research Corporation

July 29, 2015 16:05 ET

Lam Research Corporation Reports Financial Results for the Quarter Ended June 28, 2015

FREMONT, CA--(Marketwired - July 29, 2015) - Lam Research Corp. (NASDAQ: LRCX) today announced financial results for the quarter ended June 28, 2015.

Highlights for the June 2015 quarter were as follows:

  • Shipments of $1,616 million, up 8% from the prior quarter
  • Revenue of $1,481 million, up 6% from the prior quarter
  • GAAP gross margin of 43.3%, GAAP operating margin of 12.9% and GAAP diluted EPS of $0.74
  • Non-GAAP gross margin of 45.5%, non-GAAP operating margin of 21.6%, and non-GAAP diluted EPS of $1.50
   
   
Financial Highlights for the Quarters Ended June 28, 2015 and March 29, 2015  
(in thousands, except per-share data, percentages, and basis points)  
   
U.S. GAAP  
   June 2015   March 2015   Change Q/Q  
              
Revenue  $1,481,370   $1,393,333   +6 %
Gross margin as percentage of revenue   43.3 %  43.1 % +20bps  
Operating margin as percentage of revenue   12.9 %  17.2 % -430 bps  
Diluted EPS  $0.74   $1.16   -36 %
                
Non-GAAP  
    June 2015   March 2015   Change Q/Q  
                
Revenue  $1,481,370   $1,393,333   +6 %
Gross margin as percentage of revenue   45.5 %  44.7 % +80 bps  
Operating margin as percentage of revenue   21.6 %  19.9 % +170 bps  
Diluted EPS  $1.50   $1.40   +7 %
            

GAAP Financial Results

For the June 2015 quarter, revenue was $1,481.4 million, gross margin was $641.5 million, or 43.3% of revenue, operating expenses were $450.5 million, operating margin was 12.9% of revenue, and net income was $131.3 million, or $0.74 per diluted share on a GAAP basis. This compares to revenue of $1,393.3 million, gross margin of $600.6 million, or 43.1% of revenue, operating expenses of $360.6 million, operating margin of 17.2% of revenue, and net income of $206.3 million, or $1.16 per diluted share, for the quarter ended March 29, 2015 (the "March 2015 quarter"). The June 2015 operating expenses, operating margin, net income and income per diluted share were negatively impacted by a goodwill impairment charge of $79.4 million. In addition, gross margin, operating margin, net income and income per diluted share were negatively impacted by an impairment charge related to a long-lived asset of $9.8 million.

Non-GAAP Financial Results

For the June 2015 quarter, non-GAAP gross margin was $673.8 million or 45.5% of revenue, non-GAAP operating expenses were $354.5 million, non-GAAP operating margin was 21.6% of revenue, and non-GAAP net income was $260.0 million, or $1.50 per diluted share. This compares to non-GAAP gross margin of $622.2 million or 44.7% of revenue, non-GAAP operating expenses of $345.0 million, non-GAAP operating margin of 19.9% of revenue, and non-GAAP net income of $244.9 million, or $1.40 per diluted share for the March 2015 quarter.

"Lam posted record June quarter results and concluded the strongest fiscal year in our history by delivering over $5 billion in both shipments and revenue and $1 billion in operating income for the first time," said Martin Anstice, Lam Research's president and chief executive officer. "The inflection driven expansion in our served available market over the next several years combined with our enduring focus on supporting our customers' long term success, creates exciting opportunity. Our technology and productivity leadership, our execution discipline and our model of collaboration, we believe, position us for continued outperformance."

Balance Sheet and Cash Flow Results

Cash and cash equivalents, short-term investments, and restricted cash and investment balances increased to $4.2 billion at the end of the June 2015 quarter compared to $4.1 billion at the end of the March 2015 quarter. This increase was primarily the result of approximately $292.1 million in cash flows from operating activities which was partially offset by approximately $74.3 million of treasury stock repurchases, including net share settlement on employee stock-based compensation; approximately $63.1 million of capital expenditures; and approximately $28.7 million of dividends paid to stockholders during the June 2015 quarter.

Deferred revenue and profit balances at the end of June 2015 quarter increased to $518.1 million and $322.1 million, respectively, as compared to $485.2 million and $303.3 million at the end of the March 2015 quarter, 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 $164.4 million as of June 28, 2015.

Geographic Distribution

The geographic distribution of shipments and revenue during the June 2015 quarter is shown in the following table:

       
Region  Shipments  Revenue
Korea  23%  28%
Taiwan  24%  19%
China  12%  17%
United States  13%  14%
Japan  20%  14%
Europe  4%  4%
Southeast Asia  4%  4%
     

Outlook

For the September 2015 quarter, Lam is providing the following guidance:

        
  GAAP Reconciling Items Non-GAAP
Shipments $1.58 Billion  +/- $75 Million - $1.58 Billion +/- $75 Million
Revenue $1.60 Billion  +/- $75 Million - $1.60 Billion +/- $75 Million
Gross margin 44.2%  +/- 1% $21 Million 45.5% +/- 1%
Operating margin 20.2%  +/- 1% $37 Million 22.5% +/- 1%
Net income per diluted share $1.46  +/- $0.10 $38 Million $1.70 +/- $0.10
Diluted share count 177 Million   174 Million
        

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 note discounts, $9 million; and associated tax benefit for non-GAAP items ($8) 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 U.S. GAAP results, this press release also contains non-GAAP financial results. The Company's non-GAAP results for both the June 2015 and March 2015 quarters exclude amortization related to intangible assets acquired in the Novellus transaction, acquisition-related inventory fair value impact, restructuring impacts, the amortization of notes discounts, tax expense (benefit) of non-GAAP items, and net income tax benefit on successful resolution of certain tax matters. Additionally, the June 2015 quarter non-GAAP results exclude long-lived asset impairment, goodwill impairment, and additional accrual for certain tax matters.

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 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 successfully execute our growth strategy, our ability to continue to successfully collaborate closely with and to support our customers and their long term success, our ability to achieve market growth and share gains at key inflections, our ability to continue to outperform, our ability to deliver growth and value for our customers and our stockholders, the extent of inflection driven expansion in our served available market, and our guidance for shipments, revenue, gross margin, operating margin, earnings per share, and diluted earnings per share and 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 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 Forms 10-Q for the quarters ended September 28, 2014, December 28, 2014 and March 29, 2015. 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.

  
  
LAM RESEARCH CORPORATION  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
(in thousands, except per share data and percentages)  
   
   Three Months Ended  Twelve Months Ended  
   June 28,  March 29,  June 29,  June 28,  June 29,  
   2015  2015  2014  2015  2014  
   (unaudited)  (unaudited)  (unaudited)  (unaudited)  (1)  
Revenue  $1,481,370  $1,393,333  $1,248,797  $5,259,312  $4,607,309  
                       
 Cost of goods sold   839,832   792,731   691,761   2,974,976   2,599,828  
  Gross margin   641,538   600,602   557,036   2,284,336   2,007,481  
  Gross margin as a percent of revenue   43.3 % 43.1 % 44.6 % 43.4 % 43.6 %
Research and development   221,675   217,865   185,449   825,242   716,471  
Selling, general and administrative   149,384   142,772   155,737   591,611   613,341  
Goodwill impairment   79,444   -   -   79,444   -  
  Total operating expenses   450,503   360,637   341,186   1,496,297   1,329,812  
  Operating income   191,035   239,965   215,850   788,039   677,669  
  Operating margin as a percent of revenue   12.9 % 17.2 % 17.3 % 15.0 % 14.7 %
Gain on sale of real estate   -   -   83,090   -   83,090  
Other expense, net   (20,353 ) (11,389 ) (9,442 ) (47,189 ) (37,396 )
  Income (loss) before income taxes   170,682   228,576   289,498   740,850   723,363  
Income tax expense (benefit)   39,411   22,291   56,103   85,273   91,074  
  Net income  $131,271  $206,285  $233,395  $655,577  $632,289  
Net income per share:                      
 Basic net income per share  $0.83  $1.30  $1.44  $4.11  $3.84  
 Diluted net income per share  $0.74  $1.16  $1.35  $3.70  $3.62  
Number of shares used in per share calculations:                      
 Basic   158,590   158,992   162,215   159,629   164,741  
 Diluted   176,575   177,531   173,345   177,067   174,503  
Cash dividend declared per share  $0.30  $0.18  $0.18  $0.84  $0.18  
   
(1) Derived from audited financial statements
   
   
   
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
          
   June 28,  March 29,  June 29,
   2015  2015  2014
   (unaudited)  (unaudited)  (1)
ASSETS            
Cash and cash equivalents  $1,501,539  $1,635,636  $1,452,677
Short-term investments   2,574,947   2,313,495   1,612,967
Accounts receivable, net   1,093,582   1,046,800   800,616
Inventories   943,346   919,679   740,503
Other current assets   157,435   145,357   176,899
 Total current assets   6,270,849   6,060,967   4,783,662
Property and equipment, net   621,418   579,824   543,496
Restricted cash and investments   170,969   164,300   146,492
Goodwill and intangible assets   2,115,649   2,242,977   2,360,303
Other assets   185,763   190,473   159,353
 Total assets  $9,364,648  $9,238,541  $7,993,306
             
LIABILITIES AND STOCKHOLDERS' EQUITY            
Current portion of long-term debt, convertible notes, and capital leases $1,359,650 $518,267 $520,686
Other current liabilities  1,271,711  1,216,729  1,061,315
 Total current liabilities   2,631,361   1,734,996   1,582,001
             
Long-term debt and capital leases  $1,001,382  $1,831,094  $817,202
Income taxes payable   202,930   205,536   258,357
Other long-term liabilities   184,023   189,291   122,662
 Total liabilities  $4,019,696  $3,960,917  $2,780,222
             
Senior convertible notes   241,808   180,569   183,349
             
Stockholders' equity (2)   5,103,144   5,097,055   5,029,735
 Total liabilities and stockholders' equity  $9,364,648  $9,238,541  $7,993,306
   
(1) Derived from audited financial statements
   
(2) Common shares issued and outstanding were 158,531 as of June 28, 2015, 158,485 shares as of March 29, 2015, and 162,350 shares as of June 29, 2014.
  
  
  
LAM RESEARCH CORPORATION  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(in thousands)  
   
   Three Months Ended  Twelve Months Ended  
   June 28,  March 29,  June 29,  June 28,  June 29,  
   2015  2015  2014  2015  2014  
   (unaudited)  (unaudited)  (unaudited)  (unaudited)  (1)  
CASH FLOWS FROM OPERATING ACTIVITIES:                      
Net income  $131,271  $206,285  $233,395  $655,577  $632,289  
Adjustments to reconcile net income to net cash provided by operating activities:                      
 Depreciation and amortization   70,177   70,322   71,115   277,920   292,254  
 Deferred income taxes   (2,694 ) 1,739   (4,104 ) 5,551   7,537  
 Impairment of long-lived assets   9,821   -   -   9,821   11,632  
 Equity-based compensation expense   39,734   32,948   33,085   135,354   103,700  
 Income tax benefit (expense) on equity-based compensation plans   (2,124 ) 2,438   6,269   11,316   5,973  
 Excess tax (benefit) expense on equity-based compensation plans   1,809   (2,204 ) (6,361 ) (11,398 ) (6,065 )
 Amortization of note discounts and issuance costs   11,023   9,409   9,002   37,550   35,482  
 Gain on sale of business   -   -   -   (7,431 ) -  
 Gain on sale of real estate   -   -   (83,090 ) -   (83,090 )
 Goodwill impairment   79,444   -   -   79,444   -  
 Other, net   3,621   1,902   8,241   12,656   12,669  
 Changes in operating asset and liabilities:   (50,016 ) (131,802 ) (21,661 ) (420,857 ) (295,332 )
  Net cash provided by operating activities   292,066   191,037   245,891   785,503   717,049  
                       
CASH FLOWS FROM INVESTING ACTIVITIES:                      
Capital expenditures and intangible assets   (63,133 ) (31,898 ) (41,764 ) (198,265 ) (145,503 )
Cash paid for business acquisition   -   -   (11,839 ) (1,137 ) (30,227 )
Net purchases of available-for-sale securities   (278,379 ) (359,416 ) (155,035 ) (949,740 ) (283,966 )
Proceeds from sale of business   -   -   -   41,212   -  
Purchase of other investment   -   (2,500 ) -   (2,500 ) -  
Repayments of notes receivable   -   -   -   3,978   10,000  
Proceeds from sale of assets   -   -   134,762   -   156,397  
Transfer of restricted cash and investments   1,056   (822 ) (637 ) 356   28,085  
  Net cash used for investing activities   (340,456 ) (394,636 ) (74,513 ) (1,106,096 ) (265,214 )
                       
CASH FLOWS FROM FINANCING ACTIVITIES:                      
Principal payments on long-term debt and capital lease obligations   (615 ) (119 ) (739 ) (1,515 ) (1,658 )
Proceeds from issuance of long-term debt, net issuance costs and captial lease obligations   345   991,880   -   992,225   -  
Excess tax benefit (expense) on equity-based compensation plans   (1,809 ) 2,204   6,361   11,398   6,065  
Treasury stock purchases   (74,339 ) (124,943 ) (40,249 ) (573,240 ) (244,859 )
Dividends paid   (28,714 ) (28,724 ) -   (116,059 ) -  
Reissuances of treasury stock related to employee stock purchase plan   16,950   14,934   14,597   48,803   42,926  
Proceeds from issuance of common stock   1,285   7,403   8,657   17,520   34,791  
Other   (660 ) -   -   (660 ) -  
  Net cash provided by (used for) financing activities   (87,557 ) 862,635   (11,373 ) 378,472   (162,735 )
Effect of exchange rate changes on cash   1,850   (4,675 ) 371   (9,017 ) 1,104  
Net increase (decrease) in cash and cash equivalents   (134,097 ) 654,361   160,376   48,862   290,204  
Cash and cash equivalents at beginning of period   1,635,636   981,275   1,292,301   1,452,677   1,162,473  
Cash and cash equivalents at end of period  $1,501,539  $1,635,636  $1,452,677  $1,501,539  $1,452,677  
                                    
(1)  Derived from audited financial statements                                 
   
   
   
Non-GAAP Financial Summary  
(in thousands, except percentages and per share data)  
(unaudited)  
          
   Three Months Ended   Three Months Ended  
   June 28,   March 29,  
   2015   2015  
            
Revenue  $1,481,370   $1,393,333  
Gross margin  $673,837   $622,196  
Gross margin as percentage of revenue   45.5 %  44.7 %
Operating expenses  $354,542   $345,049  
Operating income  $319,295   $277,147  
Operating margin as a percentage of revenue   21.6 %  19.9 %
Net income  $260,023   $244,911  
Net income per diluted share  $1.50   $1.40  
Shares used in per share calculation - diluted   173,641    174,471  
 
 
 
Reconciliation of U.S. GAAP Net Income to Non-GAAP Net Income and U.S. GAAP number of dilutive shares to Non-GAAP number of dilutive shares
(in thousands, except per share data)
(unaudited)
        
  Three Months Ended  Three Months Ended  
  June 28,  March 29,  
  2015  2015  
U.S. GAAP net income $131,271  $206,285  
Pre-tax non-GAAP items:         
 Amortization related to intangible assets acquired in Novellus transaction - cost of goods sold  21,286   21,286  
 Acquisition-related inventory fair value impact - cost of goods sold  1,192   308  
 Impairment of long lived asset - cost of goods sold  9,821   -  
 Amortization related to intangible assets acquired in Novellus transaction - operating expenses  16,083   16,083  
 Restructuring charges/(benefits) - operating expenses  434   (495 )
 Goodwill impairment - operating expenses  79,444   -  
 Amortization of note discounts - other expense, net  9,019   8,749  
Net tax benefit on non-GAAP items  (9,605 ) (7,181 )
Net income tax expense (benefit) on resolution or additional accrual for certain tax matters  1,078   (124 )
Non-GAAP net income $260,023  $244,911  
Non-GAAP net income per diluted share $1.50  $1.40  
U.S. GAAP number of shares used for diluted per share calculation  176,575   177,531  
Effect of convertible note hedge  (2,934 ) (3,060 )
Non-GAAP number of shares used for diluted per share calculation  173,641   174,471  
          
                      
                      
Reconciliation of U.S. GAAP Gross Margin, Operating Expenses and Operating Income to Non-GAAP Gross Margin, Operating Expenses and Operating Income  
(unaudited)  
                  
   Three Months Ended   Three Months Ended   Three Months Ended   Three Months Ended  
   June 28,   March 29,   December 28,   September 28,  
   2015   2015   2014   2014  
U.S. GAAP gross margin  $641,538   $600,602   $536,657   $505,539  
Pre-tax non-GAAP items:                     
 Amortization related to intangible assets acquired in Novellus transaction - cost of goods sold   21,286    21,286    21,286    20,893  
 Acquisition-related inventory fair value impact - cost of goods sold   1,192    308    2,101    -  
 Impairment of long lived asset - cost of goods sold   9,821    -    -    -  
 Costs associted with rationalization of certain product configurations - cost of goods sold   -    -    -    1,600  
Non-GAAP gross margin  $673,837   $622,196   $560,044   $528,032  
U.S. GAAP gross margin as a percentage of revenue   43.3 %  43.1 %  43.6 %  43.9 %
Non-GAAP gross margin as a percentage of revenue   45.5 %  44.7 %  45.4 %  45.8 %
U.S. GAAP operating expenses  $450,503   $360,637   $347,916   $337,241  
Pre-tax non-GAAP items:                     
 Amortization related to intangible assets acquired in Novellus transaction - operating expenses   (16,083 )  (16,083 )  (16,083 )  (16,083 )
 Restructuring (charges)/benefits - operating expenses   (434 )  495    (1,620 )  -  
 Goodwill impairment - operating expenses   (79,444 )  -    -    -  
Non-GAAP operating expenses  $354,542   $345,049   $330,213   $321,158  
Non-GAAP operating income  $319,295   $277,147   $229,831   $206,874  
GAAP operating margin as percent of revenue   12.9 %  17.2 %  15.3 %  14.6 %
Non-GAAP operating margin as a percent of revenue   21.6 %  19.9 %  18.7 %  18.0 %

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