SOURCE: Lam Research Corporation

Lam Research Corporation

July 30, 2014 16:05 ET

Lam Research Corporation Reports Financial Results for the Quarter Ended June 29, 2014

FREMONT, CA--(Marketwired - July 30, 2014) - Lam Research Corp. (NASDAQ: LRCX) today announced financial results for the quarter ended June 29, 2014.

Highlights for the June 2014 quarter were as follows:

  • Revenue of $1,249 million, up 2% from the prior quarter 
  • GAAP gross margin of 44.6%, GAAP operating margin of 17.3% and GAAP diluted EPS of $1.35 
  • Non-GAAP gross margin of 46.4%, non-GAAP operating margin of 20.6%, and non-GAAP diluted EPS of $1.25  
  
Financial Highlights for the Quarters Ended June 29, 2014 and March 30, 2014 
(in thousands, except per-share data and percentages) 
          
U.S. GAAP 
  June 2014  March 2014  Change Q/Q 
            
Revenue $1,248,797  $1,227,392  +2%
Gross margin as percentage of revenue  44.6%  43.2% +140bps 
Operating margin as percentage of revenue  17.3%  15.6% +170 bps 
Diluted EPS $1.35  $0.96  +41%
            
Non-GAAP 
   June 2014   March 2014  Change Q/Q 
            
Revenue $1,248,797  $1,227,392  +2%
Gross margin as percentage of revenue  46.4%  45.5% +90 bps 
Operating margin as percentage of revenue  20.6%  20.2% +40 bps 
Diluted EPS $1.25  $1.26  -1%
            

GAAP Financial Results
Revenue for the period was $1,249 million, gross margin was $557.0 million, or 44.6% of revenue, operating expenses were $341.2 million, operating margin was 17.3% of revenue, and net income was $233.4 million, or $1.35 per diluted share on a GAAP basis. This compares to revenue of $1,227 million, gross margin of $530.8 million, or 43.2% of revenue, operating expenses of $338.9 million, operating margin of 15.6% of revenue, and net income of $164.4 million, or $0.96 per diluted share, for the March 2014 quarter. Our June 2014 results benefited from an $83 million gain on sale of non-essential real estate.

Non-GAAP Financial Results
Non-GAAP gross margin was $579.9 million or 46.4% of revenue, non-GAAP operating expenses were $322.2 million, non-GAAP operating margin was 20.6% of revenue, and non-GAAP net income was $217.2 million, or $1.25 per diluted share. This compares to non-GAAP gross margin of $558.9 million or 45.5% of revenue, non-GAAP operating expenses of $311.0 million, non-GAAP operating margin of 20.2% of revenue, and non-GAAP net income of $216.4 million, or $1.26 per diluted share for the March 2014 quarter.

"Lam's June quarter and fiscal year results demonstrate strong execution of our growth strategy during a transformative period for the Company," stated Martin Anstice, Lam Research's president and chief executive officer. "­­­­­­­­­­­­­­­­­­­­­­­­­­­­­Fiscal year results included record revenues in each successive quarter and operating income more than doubled year-over-year. Central to our financial and operational outperformance is our close collaboration with our customers in addressing the technical and economic challenges of scaling. We believe these efforts provide opportunities to build upon this foundation with market growth and share gains at the key inflections that will drive wafer fab equipment investment for the foreseeable future." 

Balance Sheet and Cash Flow Results
Cash and cash equivalents, short-term investments, and restricted cash and investment balances increased to $3.2 billion at the end of the June 2014 quarter compared to $2.9 billion at the end of the March 2014 quarter. This increase was primarily the result of approximately $246 million in cash flows from operating activities and approximately $135 million of cash proceeds on sale of assets during the June 2014 quarter and was partially offset by approximately $42 million of capital expenditures and approximately $40 million of stock repurchases.

Deferred revenue and deferred profit balances at the end of the June 2014 quarter decreased to $361.6 million and $235.9 million, respectively, as compared to $431.5 million and $257.3 million, respectively, at the end of the March 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 $34.0 million as of June 29, 2014.

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

       
Region Shipments  Revenue 
United States 23% 18%
Europe 7% 6%
Japan 14% 14%
Korea 25% 28%
Taiwan 18% 20%
Southeast Asia 4% 3%
China 9% 11%
       

Outlook
For the September 2014 quarter, Lam is providing the following guidance: 

         
  GAAPReconciling ItemsNon-GAAP
Shipments $1.11 Billion+/-$50 Million-$1.11 Billion+/-$50 Million
Revenue $1.15 Billion+/-$50 Million-$1.15 Billion+/-$50 Million
Gross margin 43.7%+/-1%$21 Million45.5%+/-1%
Operating margin 14.3%+/-1%$37 Million17.5%+/-1%
Earnings per share $0.71+/-$0.07$38 Million$0.92+/-$0.07
Diluted share count 177 Million 177 Million
     

The information provided above is only an estimate of what the Company believes is realizable as of 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; the amortization of convertible note discounts, $8 million; and the associated tax benefit for non-GAAP items ($7) million, totaling $38 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 June 2014 and March 2014 quarters exclude rationalization of certain product configurations, 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 June 2014 quarter non-GAAP results exclude the release of acquisition-related inventory fair value impacts, restructuring charges, cost associated with the disposition of business, gain on sale of real estate, and tax benefit on successful resolution of certain tax matters. The March 2014 quarter non-GAAP results also exclude the impairment of a long-lived asset and expenses associated with the synthetic lease impairment.

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 during transformative periods, our ability to continue to successfully collaborate closely with customers, our ability to address the technical and economic challenges of scaling, our ability to achieve market growth and share gains at key inflections, our ability to obtain and maintain market share in wafer fab equipment investment, our ability to deliver growth and value for our customers and our shareholders, 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 Forms 10-Q for the three months ended September 29, 2013, December 29, 2013 and March 30, 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 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.

  
LAM RESEARCH CORPORATION  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
(in thousands, except per share data and percentages)  
                      
   Three Months Ended   Twelve Months Ended  
   June 29,   March 30,   June 30,   June 29,   June 30,  
   2014   2014   2013   2014   2013  
   (unaudited)   (unaudited)   (unaudited)   (unaudited)   (1)  
Revenue  $1,248,797   $1,227,392   $986,214   $4,607,309   $3,598,916  
                           
 Cost of goods sold   691,761    696,594    572,287    2,599,828    2,195,857  
  Gross margin   557,036    530,798    413,927    2,007,481    1,403,059  
  Gross margin as a percent of revenue   44.6 %  43.2 %  42.0 %  43.6 %  39.0 %
Research and development   185,449    185,978    180,220    716,471    683,688  
Selling, general and administrative   155,737    152,883    147,209    613,341    601,300  
  Total operating expenses   341,186    338,861    327,429    1,329,812    1,284,988  
  Operating income   215,850    191,937    86,498    677,669    118,071  
  Operating margin as a percent of revenue   17.3 %  15.6 %  8.8 %  14.7 %  3.3 %
Gain on sale of real estate   83,090    -    -    83,090    -  
Other expense, net   (9,442 )  (9,855 )  (12,251 )  (37,396 )  (51,413 )
  Income (loss) before income taxes   289,498    182,082    74,247    723,363    66,658  
Income tax expense (benefit)   56,103    17,686    (11,460 )  91,074    (47,221 )
  Net income  $233,395   $164,396   $85,707   $632,289   $113,879  
Net income per share:                          
 Basic net income per share  $1.44   $1.01   $0.53   $3.84   $0.67  
 Diluted net income per share  $1.35   $0.96   $0.50   $3.62   $0.66  
Number of shares used in per share calculations:                          
 Basic   162,215    162,238    162,520    164,741    168,932  
 Diluted   173,345    171,636    169,722    174,503    173,430  
Cash dividend declared per share  $0.18   $-   $-   $0.18   $-  
                           
(1) Derived from audited financial statements  
                           
 
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
          
   June 29,  March 30,  June 30,
   2014  2014  2013
   (unaudited)  (unaudited)  (1)
ASSETS            
Cash and cash equivalents  $1,452,677  $1,292,301  $1,162,473
Short-term investments   1,612,967   1,462,171   1,334,745
Accounts receivable, net   800,616   818,390   602,624
Inventories   740,503   717,356   559,317
Other current assets   176,899   157,131   134,670
 Total current assets   4,783,662   4,447,349   3,793,829
Property and equipment, net   543,496   552,591   603,910
Restricted cash and investments   146,492   143,914   166,536
Goodwill and intangible assets   2,360,303   2,408,913   2,526,541
Other assets   159,353   154,600   159,499
 Total assets  $7,993,306  $7,707,367  $7,250,315
             
LIABILITIES AND STOCKHOLDERS' EQUITY            
Current liabilities  $1,582,001  $1,542,705  $1,404,475
             
Long-term debt and capital leases  $817,202  $810,688  $789,256
Income taxes payable   258,357   251,080   246,479
Other long-term liabilities   122,662   111,346   134,313
 Total liabilities  $2,780,222  $2,715,819  $2,574,523
             
Senior convertible notes   183,349   184,256   186,920
             
Stockholders' equity (2)   5,029,735   4,807,292   4,488,872
 Total liabilities and stockholders' equity  $7,993,306  $7,707,367  $7,250,315
             
(1) Derived from audited financial statements
 
(2) Common shares issued and outstanding were 162,350 as of June 29, 2014, 161,988 shares as of March 30, 2014, and 162,873 shares as of June 30, 2013.
  
LAM RESEARCH CORPORATION  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(in thousands)  
                      
   Three Months Ended   Twelve Months Ended  
   June 29,   March 30,   June 30,   June 29,   June 30,  
   2014   2014   2013   2014   2013  
   (unaudited)   (unaudited)   (unaudited)   (unaudited)   (1)  
CASH FLOWS FROM OPERATING ACTIVITIES:                          
Net income  $233,395   $164,396   $85,707   $632,289   $113,879  
Adjustments to reconcile net income to net cash providedby operating activities:                          
 Depreciation and amortization   71,115    73,256    76,051    292,254    304,116  
 Deferred income taxes   (4,104 )  (816 )  (22,884 )  7,537    (70,155 )
 Impairment of long-lived assets   -    4,000    -    11,632    -  
 Equity-based compensation expense   33,085    24,334    25,241    103,700    99,330  
 Impairment of investment   -    -    -    -    3,711  
 Income tax benefit on equity-based compensation plans   6,269    (296 )  364    5,973    (483 )
 Excess tax benefit on equity-based compensation plans   (6,361 )  296    (364 )  (6,065 )  539  
 Amortization of convertible note discount   8,411    8,313    8,028    33,063    31,558  
 Gain on sale of real estate   (83,090 )  -    -    (83,090 )  -  
 Other, net   8,241    2,741    5,342    12,669    37,201  
 Changes in operating asset and liabilities:   (21,070 )  13,986    (2,497 )  (292,913 )  200,237  
  Net cash provided by operating activities   245,891    290,210    174,988    717,049    719,933  
                           
CASH FLOWS FROM INVESTING ACTIVITIES:                          
Capital expenditures and intangible assets   (41,764 )  (41,638 )  (43,140 )  (145,503 )  (160,795 )
Cash paid for business acquisition   (11,839 )  -    (800 )  (30,227 )  (9,916 )
Net purchases of available-for-sale securities   (155,035 )  (82,744 )  (6,442 )  (283,966 )  (58,405 )
(Issuance) repayments of notes receivable   -    -    (10,000 )  10,000    (10,000 )
Proceeds from sale of assets   134,762    -    -    156,397    660  
Transfer of restricted cash and investments   (637 )  28,572    (328 )  28,085    (181 )
  Net cash used for investing activities   (74,513 )  (95,810 )  (60,710 )  (265,214 )  (238,637 )
                           
CASH FLOWS FROM FINANCING ACTIVITIES:                          
Principal payments on long-term debt and capital lease obligations   (739 )  (112 )  (698 )  (1,658 )  (2,234 )
Excess tax benefit on equity-based compensation plans   6,361    (296 )  364    6,065    (539 )
Treasury stock purchases   (40,249 )  (52,415 )  (2,275 )  (244,859 )  (955,661 )
Reissuances of treasury stock related to employee stock purchase plan   14,597    13,210    12,846    42,926    31,265  
Proceeds from issuance of common stock   8,657    5,111    16,713    34,791    39,379  
  Net cash provided by (used for) financing activities   (11,373 )  (34,502 )  26,950    (162,735 )  (887,790 )
Effect of exchange rate changes on cash   371    (152 )  2,136    1,104    4,215  
Net increase (decrease) in cash and cash equivalents   160,376    159,746    143,364    290,204    (402,279 )
Cash and cash equivalents at beginning of period   1,292,301    1,132,555    1,019,109    1,162,473    1,564,752  
Cash and cash equivalents at end of period  $1,452,677   $1,292,301   $1,162,473   $1,452,677   $1,162,473  
                           
(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 29,   March 30,  
   2014   2014  
            
Revenue  $1,248,797   $1,227,392  
Gross margin  $579,888   $558,881  
Gross margin as percentage of revenue   46.4 %  45.5 %
Operating expenses  $322,155   $311,046  
Operating income  $257,733   $247,835  
Operating margin as a percentage of revenue   20.6 %  20.2 %
Net income  $217,228   $216,384  
Net income per diluted share  $1.25   $1.26  
Shares used in per share calculation - diluted   173,345    171,636  
         
  
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  
   June 29,   March 30,  
   2014   2014  
U.S. GAAP net income  $233,395   $164,396  
Pre-tax non-GAAP items:           
 Amortization related to intangible assets acquired in Novellus transaction - cost of goods sold   21,685    21,670  
 Costs associated with rationalization of certain product configurations - cost of goods sold   -    4,855  
 Acquisition-related inventory fair value impact - cost of goods sold   1,167    -  
 Synthetic lease impairment - cost of goods sold   -    1,558  
 Amortization related to intangible assets acquired in Novellus transaction - operating expenses   16,547    16,537  
 Restructuring charges - operating expenses   295    -  
 Costs associated with rationalization of certain product configurations - operating expenses   1,086    1,922  
 Cost associated with disposition of business - operating expense   1,103    -  
 Impairment of long lived asset - operating expense   -    4,000  
 Synthetic lease impairment - operating expense   -    5,356  
 Amortization of convertible note discount, Lam notes - other expense, net   7,504    7,416  
 Amortization of convertible note discount, Novellus assumed notes - other expense, net   763    999  
 Gain on sale of real estate   (83,090 )  -  
Net tax expense (benefit) on non-GAAP items   17,075    (12,325 )
Net income tax benefit on sucessful resolution of certain tax matters   (302 )  -  
Non-GAAP net income  $217,228   $216,384  
Non-GAAP net income per diluted share  $1.25   $1.26  
Number of shares used for diluted per share calculation   173,345    171,636  
            

 

          
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  
   June 29,   March 30,  
   2014   2014  
U.S. GAAP gross margin  $557,036   $530,798  
Pre-tax non-GAAP items:           
 Amortization related to intangible assets acquired in Novellus transaction - cost of goods sold   21,685    21,670  
 Costs associated with rationalization of certain product configurations - cost of goods sold   -    4,855  
 Acquisition-related inventory fair value impact - cost of goods sold   1,167    -  
 Synthetic lease impairment - cost of goods sold   -    1,558  
Non-GAAP gross margin  $579,888   $558,881  
U.S. GAAP gross margin as a percentage of revenue   44.6 %  43.2 %
Non-GAAP gross margin as a percentage of revenue   46.4 %  45.5 %
U.S. GAAP operating expenses  $341,186   $338,861  
Pre-tax non-GAAP items:           
 Amortization related to intangible assets acquired in Novellus transaction - operating expenses   (16,547 )  (16,537 )
 Restructuring charges - operating expenses   (295 )  -  
 Costs associated with rationalization of certain product configurations - operating expenses   (1,086 )  (1,922 )
 Cost associated with disposition of business - operating expense   (1,103 )  -  
 Impairment of long lived asset - operating expense   -    (4,000 )
 Synthetic lease impairment - operating expense   -    (5,356 )
Non-GAAP operating expenses  $322,155   $311,046  
Non-GAAP operating income  $257,733   $247,835  
Non-GAAP operating margin as a percent of revenue   20.6 %  20.2 %

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