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  

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:

Outlook
For the September 2014 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. 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.