SOURCE: Lam Research Corporation

Lam Research Corporation

July 31, 2013 16:05 ET

Lam Research Corporation Reports Financial Results for the Quarter Ended June 30, 2013

FREMONT, CA--(Marketwired - Jul 31, 2013) - Lam Research Corp. (NASDAQ: LRCX) today announced financial results for the quarter ended June 30, 2013.

Highlights for the June 2013 quarter were as follows:

  • Shipments of $1,080 million, up 21% from the prior quarter

  • Revenue of $986 million, up 17% from the prior quarter

  • GAAP gross margin of 42.0%, GAAP operating margin of 8.8% and GAAP diluted EPS of $0.50

  • Non-GAAP gross margin of 44.5%, non-GAAP operating margin of 14.4%, and non-GAAP diluted EPS of $0.80

   
Financial Highlights for the Quarters Ended June 30, 2013 and March 31, 2013  
(in thousands, except per-share data and percentages)  
                   
U.S. GAAP  
    June 2013     March 2013     Change Q/Q  
                       
Revenue   $ 986,214     $ 844,928     +17 %
Gross margin as percentage of revenue     42.0 %     40.2 %   +180 bps  
Operating margin as percentage of revenue     8.8 %     1.3 %   +750 bps  
Diluted EPS   $ 0.50     $ 0.11     +355 %
                       
Non-GAAP  
    June 2013     March 2013     Change Q/Q  
                       
Revenue   $ 986,214     $ 844,928     +17 %
Gross margin as percentage of revenue     44.5 %     43.9 %   +60 bps  
Operating margin as percentage of revenue     14.4 %     8.8 %   +560 bps  
Diluted EPS   $ 0.80     $ 0.44     +82 %
                       

GAAP Financial Results

Revenue for the period was $986.2 million, gross margin was $413.9 million, or 42.0% of revenue, operating expenses were $327.4 million, and net income was $85.7 million, or $0.50 per diluted share on a GAAP basis. This compares to revenue of $844.9 million, gross margin of $339.8 million, or 40.2% of revenue, operating expenses of $329.0 million, and net income of $19.0 million, or $0.11 per diluted share, for the March 2013 quarter.

Non-GAAP Financial Results

Non-GAAP gross margin was $438.8 million, or 44.5% of revenue, non-GAAP operating expenses were $297.0 million, and non-GAAP net income was $136.4 million, or $0.80 per diluted share. This compares to non-GAAP gross margin of $370.7 million, or 43.9% of revenue, non-GAAP operating expenses of $296.0 million, and non-GAAP net income of $74.5 million, or $0.44 per diluted share, for the March 2013 quarter.

"Lam Research had a very strong June 2013 quarter, achieving record shipments and revenue and delivering EPS performance that exceeded our guidance range," said Martin Anstice, Lam's president and chief executive officer. "Our results underscore our strong operational execution and commitment to invest strategically to address our customers' most critical problems and further strengthen our competitive positions. We believe we will benefit from market expansion opportunities and that our focus on technology and productivity innovation positions us well for next-generation technology inflections and investments planned by our customers."

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 June 2013 quarter compared to $2.5 billion at the end of the March 2013 quarter. Cash flows from operating activities were approximately $175 million during the June 2013 quarter, adding to our overall cash position.

Deferred revenue and deferred profit balances at the end of the June 2013 quarter increased to $389.2 million and $225.0 million, respectively, as compared to $326.6 million and $193.3 million, respectively, at the end of the March 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 $69.9 million as of June 30, 2013.

Geographic Distribution

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

         
Region   Shipments   Revenue
North America   13%   15%
Europe   7%   8%
Japan   13%   11%
Korea   20%   17%
Taiwan   32%   33%
Asia Pacific   15%   16%
         

Outlook

For the September 2013 quarter, Lam is providing the following guidance on a non-GAAP basis:

  • Shipments of approximately $1 billion plus or minus $30 million
  • Revenue of approximately $1 billion plus or minus $30 million
  • Gross margin of approximately 44.0% plus or minus 1.0%
  • Operating margin as a percent of revenue of approximately 14.0% plus or minus 1.5%
  • Earnings per share of approximately $0.68 plus or minus $0.07, based on a diluted share count of 170 million

Use of Non-GAAP Financial Results

In addition to U.S. GAAP results, this commentary also contains non-GAAP financial results. The Company's non-GAAP results for both the June 2013 and March 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, the amortization of convertible note discounts, rationalization of certain product configurations, and tax expense associated with legal-entity integration. Additionally, the June 2013 quarter non-GAAP results exclude restructuring charges and tax benefits from the successful resolution of certain tax matters, and the March 2013 quarter non-GAAP results exclude the impairment of an investment and tax benefit on reinstatement of R&D tax credit.

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 future competitive positioning, our ability to benefit from market expansion opportunities and next generation technology investments, 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 24, 2012 and Form 10-Qs for the three months ended September 23, 2012, December 23, 2012, and March 31, 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)  
                               
    Three Months Ended     Twelve Months Ended  
    June 30,     March 31,     June 24,     June 30,     June 24,  
    2013     2013     2012     2013     2012  
    (unaudited)     (unaudited)     (unaudited)     (unaudited)     (1)  
Revenue   $ 986,214     $ 844,928     $ 741,814     $ 3,598,916     $ 2,665,192  
                                         
  Cost of goods sold     572,287       505,096       443,601       2,195,857       1,581,982  
  Cost of goods sold - restructuring and impairments     -       -       -       -       (859 )
    Total costs of goods sold     572,287       505,096       443,601       2,195,857       1,581,123  
    Gross margin     413,927       339,832       298,213       1,403,059       1,084,069  
    Gross margin as a percent of revenue     42.0 %     40.2 %     40.2 %     39.0 %     40.7 %
Research and development     180,220       174,206       124,528       683,688       444,559  
Selling, general and administrative     146,417       154,807       141,015       599,487       400,052  
Restructuring and impairments     792       -       -       1,813       1,725  
    Total operating expenses     327,429       329,013       265,543       1,284,988       846,336  
    Operating income     86,498       10,819       32,670       118,071       237,733  
    Operating margin as a percent of revenue     8.8 %     1.3 %     4.4 %     3.3 %     8.9 %
Other expense, net     (12,251 )     (15,834 )     (9,889 )     (51,413 )     (33,315 )
    Income (loss) before income taxes     74,247       (5,015 )     22,781       66,658       204,418  
Income tax expense (benefit)     (11,460 )     (24,011 )     4,712       (47,221 )     35,695  
    Net income   $ 85,707     $ 18,996     $ 18,069     $ 113,879     $ 168,723  
Net income per share:                                        
  Basic net income per share   $ 0.53     $ 0.12     $ 0.13     $ 0.67     $ 1.36  
  Diluted net income per share   $ 0.50     $ 0.11     $ 0.13     $ 0.66     $ 1.35  
Number of shares used in per share calculations:                                        
  Basic     162,520       163,034       133,997       168,932       124,176  
  Diluted     169,722       168,504       135,842       173,430       125,233  
                                         
                                         
(1) Derived from audited financial statements  
 
 
 
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
             
    June 30,   March 31,   June 24,
    2013   2013   2012
    (unaudited)   (unaudited)   (1)
ASSETS                  
Cash and cash equivalents   $ 1,162,473   $ 1,019,109   $ 1,564,752
Short-term investments     1,334,745     1,337,819     1,297,931
Accounts receivable, net     602,624     544,070     765,818
Inventories     559,317     545,036     632,853
Deferred income taxes     27,674     137,729     47,782
Other current assets     106,996     86,156     105,973
  Total current assets     3,793,829     3,669,919     4,415,109
Property and equipment, net     603,910     594,916     584,596
Restricted cash and investments     166,536     166,196     166,335
Goodwill and intangible assets     2,526,541     2,562,986     2,686,730
Other assets     159,499     152,285     151,882
  Total assets   $ 7,250,315   $ 7,146,302   $ 8,004,652
                   
LIABILITIES AND STOCKHOLDERS' EQUITY                  
Current liabilities   $ 1,404,475   $ 801,013   $ 1,426,928
                   
Long-term debt and capital leases   $ 789,256   $ 1,294,599   $ 761,783
Income taxes payable     246,479     250,339     274,240
Other long-term liabilities     134,313     258,151     219,577
  Total liabilities   $ 2,574,523   $ 2,604,102   $ 2,682,528
                   
Senior convertible notes     186,920     -     190,343
                   
Stockholders' equity (2)     4,488,872     4,542,200     5,131,781
  Total liabilities and stockholders' equity   $ 7,250,315   $ 7,146,302   $ 8,004,652
                   
(1) Derived from audited financial statements
                   
(2) Common shares issued and outstanding were 162,873 as of June 30, 2013, 161,802 shares as of March 31, 2013, and 186,656 shares as of June 24, 2012.
                   
   
   
LAM RESEARCH CORPORATION  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(in thousands)  
                               
    Three Months Ended     Twelve Months Ended  
    June 30,     March 31,     June 24,     June 30,     June 24,  
    2013     2013     2012     2013     2012  
    (unaudited)     (unaudited)     (unaudited)     (unaudited)     (1)  
CASH FLOWS FROM OPERATING ACTIVITIES:                                        
Net income   $ 85,707     $ 18,996     $ 18,069     $ 113,879     $ 168,723  
Adjustments to reconcile net income to net cash provided by operating activities:                                        
  Depreciation and amortization     76,051       74,861       34,576       304,116       100,825  
  Deferred income taxes     (22,884 )     (27,934 )     39,356       (70,155 )     42,446  
  Restructuring charges, net     792       -       -       1,813       866  
  Equity-based compensation expense     25,241       25,648       29,174       99,330       81,559  
  Income tax benefit on equity-based compensation plans     364       (847 )     1,429       (483 )     1,510  
  Excess tax benefit on equity-based compensation plans     (364 )     903       (394 )     539       (2,686 )
  Impairment of investment     -       3,711       -       3,711       1,724  
  Amortization of convertible note discount     8,028       7,935       7,014       31,558       27,028  
  Other, net     4,550       6,115       7,206       35,388       10,877  
  Changes in operating asset and liabilities:     (2,497 )     (6,931 )     (39,715 )     200,237       66,156  
    Net cash provided by operating activities     174,988       102,457       96,715       719,933       499,028  
                                         
CASH FLOWS FROM INVESTING ACTIVITIES:                                        
Capital expenditures and intangible assets     (43,140 )     (34,766 )     (36,880 )     (160,795 )     (107,272 )
Cash acquired in (paid for) business acquisition     (800 )     (400 )     418,681       (9,916 )     418,681  
Net sales/maturities (purchases) of available-for-sale securities     (6,442 )     (12,075 )     329,689       (58,405 )     (41,989 )
Purchase of equity method investment     -       -       -       -       (10,740 )
(Issuance) repayments of notes receivable     (10,000 )     -       -       (10,000 )     8,375  
Proceeds from sale of assets     -       -       -       660       2,677  
Transfer of restricted cash and investments     (328 )     (32 )     (29 )     (181 )     (6 )
    Net cash provided by (used for) investing activities     (60,710 )     (47,273 )     711,461       (238,637 )     269,726  
                                         
CASH FLOWS FROM FINANCING ACTIVITIES:                                        
Principal payments on long-term debt and capital lease obligations     (698 )     (756 )     (1,101 )     (2,234 )     (5,265 )
Excess tax benefit on equity-based compensation plans     364       (903 )     394       (539 )     2,686  
Treasury stock purchases     (2,275 )     (243,297 )     (661,059 )     (955,661 )     (772,663 )
Net cash received in settlement of stock repurchase contracts     -       -       -       -       55,194  
Reissuances of treasury stock related to employee stock purchase plan     12,846       8,494       8,765       31,265       25,525  
Proceeds from issuance of common stock     16,713       15,132       -       39,379       1,776  
    Net cash provided by (used for) financing activities     26,950       (221,330 )     (653,001 )     (887,790 )     (692,747 )
Effect of exchange rate changes on cash     2,136       (4,934 )     (690 )     4,215       (3,387 )
Net increase (decrease) in cash and cash equivalents     143,364       (171,080 )     154,485       (402,279 )     72,620  
Cash and cash equivalents at beginning of period     1,019,109       1,190,189       1,410,267       1,564,752       1,492,132  
Cash and cash equivalents at end of period   $ 1,162,473     $ 1,019,109     $ 1,564,752     $ 1,162,473     $ 1,564,752  
                                         
(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 30,     March 31,  
    2013     2013  
                 
Revenue   $ 986,214     $ 844,928  
Gross margin   $ 438,823     $ 370,658  
Gross margin as percentage of revenue     44.5 %     43.9 %
Operating expenses   $ 297,048     $ 296,002  
Operating income   $ 141,775     $ 74,656  
Operating margin as a percentage of revenue     14.4 %     8.8 %
Net income   $ 136,440     $ 74,474  
Net income per diluted share   $ 0.80     $ 0.44  
Shares used in per share calculation - diluted     169,722       168,504  
                 
   
   
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 30,     March 31,  
    2013     2013  
U.S. GAAP net income   $ 85,707     $ 18,996  
Pre-tax non-GAAP items:                
  Costs associated with rationalization of certain product configurations - cost of goods sold     (896 )     207  
  Amortization related to intangible assets acquired in Novellus transaction - cost of goods sold     20,748       20,763  
  Acquisition-related inventory fair-value impact - cost of goods sold     4,266       7,448  
  Integration costs - cost of goods sold     778       2,408  
  Integration costs - operating expenses     9,579       13,123  
  Amortization related to intangible assets acquired in Novellus transaction - operating expenses     18,888       19,445  
  Restructuring charges - operating expenses     792       -  
  Costs associated with rationalization of certain product configurations - operating expenses     1,122       443  
  Amortization of convertible note discount, Lam notes - other expense, net     7,159       7,075  
  Amortization of convertible note discount, Novellus assumed notes - other expense, net     781       893  
  Impairment of investment - other expense, net     -       3,711  
Net tax benefit on non-GAAP items     (10,252 )     (11,700 )
Net tax benefit on successful resolution of certain tax matters     (2,699 )     -  
Tax benefit on reinstatement of R&D tax credit     -       (11,493 )
Tax expense associated with legal-entity integration     467       3,155  
Non-GAAP net income   $ 136,440     $ 74,474  
Non-GAAP net income per diluted share   $ 0.80     $ 0.44  
Number of shares used for diluted per share calculation     169,722       168,504  
                 
   
   
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 30,     March 31,  
    2013     2013  
U.S. GAAP gross margin   $ 413,927     $ 339,832  
Pre-tax non-GAAP items:                
  Costs associated with rationalization of certain product configurations - cost of goods sold     (896 )     207  
  Amortization related to intangible assets acquired in Novellus transaction - cost of goods sold     20,748       20,763  
  Acquisition-related inventory fair-value impact - cost of goods sold     4,266       7,448  
  Integration costs - cost of goods sold     778       2,408  
Non-GAAP gross margin   $ 438,823     $ 370,658  
U.S. GAAP gross margin as a percentage of revenue     42.0 %     40.2 %
Non-GAAP gross margin as a percentage of revenue     44.5 %     43.9 %
U.S. GAAP operating expenses   $ 327,429     $ 329,013  
Pre-tax non-GAAP items:                
  Integration costs - operating expenses     (9,579 )     (13,123 )
  Amortization related to intangible assets acquired in Novellus transaction - operating expenses     (18,888 )     (19,445 )
  Restructuring charges - operating expenses     (792 )     -  
  Costs associated with rationalization of certain product configurations - operating expenses     (1,122 )     (443 )
Non-GAAP operating expenses   $ 297,048     $ 296,002  
Non-GAAP operating income   $ 141,775     $ 74,656  
Non-GAAP operating margin as a percent of revenue     14.4 %     8.8 %
                 

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