SOURCE: Lam Research Corporation

Lam Research Corporation

April 20, 2016 16:05 ET

Lam Research Corporation Reports Financial Results for the Quarter Ended March 27, 2016

FREMONT, CA--(Marketwired - April 20, 2016) - Lam Research Corp. (NASDAQ: LRCX) today announced financial results for the quarter ended March 27, 2016 (the "March 2016 quarter").

Highlights for the March 2016 quarter were as follows:

  • Shipments of $1,446 million and revenue of $1,314 million.
  • GAAP gross margin of 43.5%, GAAP operating margin of 14.5%, and GAAP diluted EPS of $0.82.
  • Non-GAAP gross margin of 45.1%, non-GAAP operating margin of 18.4%, and non-GAAP diluted EPS of $1.18.
 
Key Financial Data for the Quarters Ended March 27, 2016 and December 27, 2015 
(in thousands, except per-share data, percentages, and basis points)
 
U.S. GAAP  
  March 2016   December 2015   Change Q/Q  
Shipments $ 1,446,002   $ 1,287,893   + 12 %
Revenue $ 1,314,055   $ 1,425,534   - 8 %
Gross margin as percentage of revenue   43.5 %   43.9 % - 40 bps  
Operating margin as percentage of revenue   14.5 %   16.8 % - 230 bps  
Diluted EPS $ 0.82   $ 1.28   - 36 %
   
Non-GAAP  
    March 2016     December 2015   Change Q/Q  
Shipments $ 1,446,002   $ 1,287,893   + 12 %
Revenue $ 1,314,055   $ 1,425,534   - 8 %
Gross margin as percentage of revenue   45.1 %   45.5 % - 40 bps  
Operating margin as percentage of revenue   18.4 %   20.8 % - 240 bps  
Diluted EPS $ 1.18   $ 1.57   - 25 %

U.S. GAAP Financial Results

For the March 2016 quarter, revenue was $1,314 million, gross margin was $571 million, or 43.5% of revenue, operating expenses were $381 million, operating margin was 14.5% of revenue, and net income was $143 million, or $0.82 per diluted share on a GAAP basis. This compares to revenue of $1,426 million, gross margin of $627 million, or 43.9% of revenue, operating expenses of $388 million, operating margin of 16.8% of revenue, and net income of $223 million, or $1.28 per diluted share, for the quarter ended December 27, 2015 (the "December 2015 quarter").

Non-GAAP Financial Results

For the March 2016 quarter, non-GAAP gross margin was $593 million or 45.1% of revenue, non-GAAP operating expenses were $350 million, non-GAAP operating margin was 18.4% of revenue, and non-GAAP net income was $203 million, or $1.18 per diluted share. This compares to non-GAAP gross margin of $648 million or 45.5% of revenue, non-GAAP operating expenses of $352 million, non-GAAP operating margin of 20.8% of revenue, and non-GAAP net income of $270 million, or $1.57 per diluted share for the December 2015 quarter.

"Lam is off to a very solid 2016 beginning, with our customer trust priority and strong execution combining to deliver financial results that met or exceeded expectations across the board," said Martin Anstice, Lam Research's President and Chief Executive Officer. "By partnering closely with our customers we facilitate key technology inflections like 3D device architectures and multi-patterning process flows, we are increasing our strategic relevance and positioning the company to sustain multi-year outperformance within our industry. We expect to combine with KLA-Tencor mid-year and are focused on accelerating momentum to innovate beyond what is possible currently, for the benefit of all Lam stakeholders and the broad semiconductor eco-system. We are privileged to have this opportunity and are enthusiastic about our potential."

Balance Sheet and Cash Flow Results

Cash and cash equivalents, short-term investments, and restricted cash and investments balances increased to $4.8 billion at the end of the March 2016 quarter compared to $4.7 billion at the end of the December 2015 quarter. This increase was primarily the result of approximately $183 million in cash flows from operating activities which was partially offset by approximately $20 million of common stock repurchases related to net share settlement on employee stock-based compensation; approximately $46 million of capital expenditures; and approximately $48 million of dividends paid to stockholders during the March 2016 quarter.

Deferred revenue at the end of the March 2016 quarter increased to $511 million as compared to $395 million at the end of the December 2015 quarter. Deferred profit at the end of the March 2016 quarter increased to $334 million as compared to $261 million at the end of the December 2015 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 $121 million as of March 27, 2016.

Geographic Distribution

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

             
Region   Shipments     Revenue  
Taiwan   19 %   27 %
Korea   25 %   27 %
Japan   12 %   13 %
China   27 %   15 %
United States   6 %   7 %
Southeast Asia   8 %   7 %
Europe   3 %   4 %
             

Outlook

For the June 2016 quarter, Lam is providing the following guidance:

           
  U.S. GAAP   Reconciling 
Items
  Non-GAAP
Shipments $ 1.575 Billion   +/-   $ 75 Million     -   $ 1.575 Billion   +/-   $ 75 Million
Revenue $ 1.525 Billion   +/-   $ 75 Million     -   $ 1.525 Billion   +/-   $ 75 Million
Gross margin   44.6%   +/-     1%   $ 21 Million     46.0%   +/-     1%
Operating margin   19.6%   +/-     1%   $ 37 Million     22.0%   +/-     1%
Net income per diluted share $ 1.37   +/-   $ 0.10   $ 42 Million   $ 1.63   +/-   $ 0.10
Diluted share count   175 Million     2 Million     173 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 KLA-Tencor related acquisition or integration expenses, 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, $7 million; amortization of bridge loan issuance costs and related fees associated with the KLA-Tencor acquisition, $7 million; and associated tax benefit for non-GAAP items ($9) million; totaling $42 million.
  • Diluted share count -- impact of a note hedge issued contemporaneously with the convertible notes due 2016 and 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 March 2016 and December 2015 quarters exclude amortization related to intangible assets acquired in the Novellus transaction, restructuring impacts, costs associated with the KLA-Tencor acquisition, amortization of bridge loan issuance costs and other related fees associated with the KLA-Tencor acquisition, the amortization of notes discounts, and tax benefit of non-GAAP items. Additionally, the March 2016 quarter excludes income tax benefit on resolution of certain tax matters and the December 2015 quarter non-GAAP results exclude Novellus acquisition transaction related inventory fair value impact and income tax benefit from tax extenders, primarily the research and development 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 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 ability to facilitate key technology inflections or increase the strategic relevance of the company, our ability to position the company to sustain multi-year outperformance within our industry, the legal and business factors that may affect our future tax rate, our ability to close our proposed acquisition of KLA-Tencor Corporation ("KLA-Tencor"), and our guidance for shipments, revenue, gross margin, operating margin, net income 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 and December 27, 2015. 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, 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     Nine Months Ended  
    March 27,
2016
    December 27, 2015     March 29,
2015
    March 27,
2016
    March 29,
2015
 
    (unaudited)  
Revenue   $ 1,314,055     $ 1,425,534     $ 1,393,333     $ 4,339,632     $ 3,777,942  
Cost of goods sold     742,790       799,024       792,731       2,419,494       2,135,144  
    Gross margin     571,265       626,510       600,602       1,920,138       1,642,798  
    Gross margin as a percent of revenue     43.5 %     43.9 %     43.1 %     44.2 %     43.5 %
Research and development     221,494       220,754       217,865       676,457       603,567  
Selling, general and administrative     159,018       166,922       142,772       478,666       442,227  
    Total operating expenses     380,512       387,676       360,637       1,155,123       1,045,794  
    Operating income     190,753       238,834       239,965       765,015       597,004  
    Operating income as a percent of revenue     14.5 %     16.8 %     17.2 %     17.6 %     15.8 %
Other expense, net     (29,834 )     (29,935 )     (11,389 )     (86,890 )     (26,836 )
    Income before income taxes     160,919       208,899       228,576       678,125       570,168  
Income tax (expense) benefit     (17,468 )     14,081       (22,291 )     (23,015 )     (45,862 )
    Net income   $ 143,451     $ 222,980     $ 206,285     $ 655,110     $ 524,306  
Net income per share:                                        
  Basic   $ 0.90     $ 1.41     $ 1.30     $ 4.13     $ 3.28  
  Diluted   $ 0.82     $ 1.28     $ 1.16     $ 3.76     $ 2.96  
Number of shares used in per share calculations:                                        
  Basic     159,039       158,424       158,992       158,605       159,975  
  Diluted     174,373       174,242       177,531       174,329       177,231  
Cash dividend declared per common share   $ 0.30     $ 0.30     $ 0.18     $ 0.90     $ 0.54  
 
 
 
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
 
    March 27,   December 27,   June 28,
    2016   2015   2015
    (unaudited)   (unaudited)   (1)
ASSETS                  
Cash and cash equivalents   $ 2,232,021   $ 1,967,873   $ 1,501,539
Investments     2,306,718     2,507,607     2,574,947
Accounts receivable, net     1,236,617     1,089,850     1,093,582
Inventories     934,932     879,821     943,346
Other current assets     231,277     225,046     157,435
  Total current assets     6,941,565     6,670,197     6,270,849
Property and equipment, net     664,424     643,746     621,418
Restricted cash and investments     227,838     207,568     170,969
Goodwill and intangible assets     1,999,338     2,039,213     2,115,649
Other assets     191,097     189,697     185,763
    Total assets   $ 10,024,262   $ 9,750,421   $ 9,364,648
LIABILITIES AND STOCKHOLDERS' EQUITY                  
Current portion of convertible notes and capital leases   $ 978,982   $ 973,697   $ 1,359,650
Other current liabilities     1,363,204     1,249,283     1,271,711
  Total current liabilities     2,342,186     2,222,980     2,631,361
Long-term debt and capital leases     1,407,250     1,404,683     1,001,382
Income taxes payable     266,681     257,502     202,930
Other long-term liabilities     137,017     135,303     184,023
  Total liabilities     4,153,134     4,020,468     4,019,696
Temporary equity, convertible notes     178,789     177,662     241,808
Stockholders' equity (2)     5,692,339     5,552,291     5,103,144
    Total liabilities and stockholders' equity   $ 10,024,262   $ 9,750,421   $ 9,364,648
                   
(1)   Derived from audited financial statements
(2)   Common shares issued and outstanding were 159,319 as of March 27, 2016, 158,568 as of December 27, 2015, and 158,531 as of June 28, 2015.
     
     
     

LAM RESEARCH CORPORATION  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(in thousands)  
   
    Three Months Ended     Nine Months Ended  
    March 27,
2016
    December 27, 2015     March 29,
2015
    March 27,
2016
    March 29,
2015
 
    (unaudited)  
CASH FLOWS FROM OPERATING ACTIVITIES:                                        
Net income   $ 143,451     $ 222,980     $ 206,285     $ 655,110     $ 524,306  
Adjustments to reconcile net income to net cash provided by operating activities:                                        
  Depreciation and amortization     73,664       71,798       70,322       216,052       207,743  
  Deferred income taxes     (4,908 )     8,176       1,739       (2,295 )     8,245  
  Equity-based compensation expense     34,716       32,570       32,948       103,060       95,620  
  Income tax benefit on equity-based compensation plans     1,312       2,168       2,438       7,025       13,440  
  Excess tax benefit on equity-based compensation plans     (2,262 )     (2,181 )     (2,204 )     (8,015 )     (13,207 )
  Amortization of note discounts and issuance costs     22,458       23,649       9,352       55,938       27,651  
  Gain on sale of business                             (7,431 )
  Other, net     10,256       10,592       1,902       30,859       9,035  
  Changes in operating assets and liabilities     (95,776 )     (75,207 )     (131,745 )     (131,281 )     (371,965 )
    Net cash provided by operating activities     182,911       294,545       191,037       926,453       493,437  
CASH FLOWS FROM INVESTING ACTIVITIES:                                        
Capital expenditures and intangible assets     (46,007 )     (28,143 )     (31,898 )     (123,604 )     (135,132 )
Business acquisitions, net of cash acquired                             (1,137 )
Net sale (purchase) of available-for-sale securities     181,938       39,202       (359,416 )     192,937       (671,361 )
(Issuance) repayment of notes receivable     (200 )     8,082             7,882       3,978  
Proceeds from sale of business                             41,212  
Other, net           (4,746 )     (3,322 )     (6,246 )     (3,200 )
    Net cash provided by (used for) investing activities     135,731       14,395       (394,636 )     70,969       (765,640 )
CASH FLOWS FROM FINANCING ACTIVITIES:                                        
Principal payments on long-term debt and capital lease obligations and payments for debt issuance costs     (8,479 )     (28,374 )     (119 )     (36,949 )     (900 )
Proceeds from issuance of long-term debt, net of issuance costs                 991,880             991,880  
Excess tax benefit on equity-based compensation plans     2,262       2,181       2,204       8,015       13,207  
Treasury stock purchases     (20,092 )     (12,798 )     (124,943 )     (131,275 )     (498,901 )
Dividends paid     (47,539 )     (47,896 )     (28,724 )     (143,094 )     (87,345 )
Re-issuance of treasury stock related to employee stock purchase plan     16,387             14,934       35,632       31,853  
Proceeds from issuance of common stock     308       1,173       7,403       1,858       16,235  
Other, net     (7 )     (22 )           (329 )      
    Net cash (used for) provided by financing activities     (57,160 )     (85,736 )     862,635       (266,142 )     466,029  
Effect of exchange rate changes on cash and cash equivalents     2,666       344       (4,675 )     (798 )     (10,867 )
Net increase in cash and cash equivalents     264,148       223,548       654,361       730,482       182,959  
Cash and cash equivalents at beginning of period     1,967,873       1,744,325       981,275       1,501,539       1,452,677  
Cash and cash equivalents at end of period   $ 2,232,021     $ 1,967,873     $ 1,635,636     $ 2,232,021     $ 1,635,636  
                                         
   
   
Non-GAAP Financial Summary  
(in thousands, except percentages and per share data)  
(unaudited)  
   
    Three Months Ended  
    March 27,     December 27  
    2016     2015  
Revenue   $ 1,314,055     $ 1,425,534  
Gross margin   $ 592,515     $ 648,409  
Gross margin as percentage of revenue     45.1 %     45.5 %
Operating expenses   $ 350,235     $ 352,135  
Operating income   $ 242,280     $ 296,274  
Operating margin as a percentage of revenue     18.4 %     20.8 %
Net income   $ 202,821     $ 270,313  
Net income per diluted share   $ 1.18     $ 1.57  
Shares used in per share calculation - diluted     172,153       171,796  
                 
                 
                 
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  
    March 27,     December 27,  
    2016     2015  
U.S. GAAP net income   $ 143,451     $ 222,980  
Pre-tax non-GAAP items:                
  Amortization related to intangible assets acquired in Novellus transaction - cost of goods sold     21,250       21,250  
  Novellus acquisition-related inventory fair value impact - cost of goods sold           649  
  Restructuring charges - research and development     72       34  
  KLA-Tencor acquisition-related costs - selling, general and administrative     14,323       17,392  
  Amortization related to intangible assets acquired in Novellus transaction - selling, general and administrative     16,084       16,083  
  Restructuring (benefit) charges - selling, general and administrative     (202 )     2,032  
  Amortization of note discounts - other expense, net     9,333       9,258  
  Amortization of bridge loan issuance costs and other related fees - other expense, net     13,332       13,573  
Net income tax benefit on non-GAAP items     (14,320 )     (19,335 )
Income tax benefit on resolution of certain tax matters     (502 )      
Income tax benefit from tax extenders, primarily the research and development credit           (13,603 )
Non-GAAP net income   $ 202,821     $ 270,313  
Non-GAAP net income per diluted share   $ 1.18     $ 1.57  
U.S. GAAP number of shares used for per diluted share calculation     174,373       174,242  
Effect of convertible note hedge     (2,220 )     (2,446 )
Non-GAAP number of shares used for per diluted share calculation     172,153       171,796  
                 
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  
    March 27,     December 27,  
    2016     2015  
U.S. GAAP gross margin   $ 571,265     $ 626,510  
Pre-tax non-GAAP items:                
  Amortization related to intangible assets acquired in Novellus transaction - cost of goods sold     21,250       21,250  
  Novellus acquisition-related inventory fair value impact - cost of goods sold           649  
Non-GAAP gross margin   $ 592,515     $ 648,409  
U.S. GAAP gross margin as a percentage of revenue     43.5 %     43.9 %
Non-GAAP gross margin as a percentage of revenue     45.1 %     45.5 %
U.S. GAAP operating expenses   $ 380,512     $ 387,676  
Pre-tax non-GAAP items:                
  Restructuring charges - research and development     (72 )     (34 )
  KLA-Tencor acquisition-related costs - selling, general and administrative     (14,323 )     (17,392 )
  Amortization related to intangible assets acquired in Novellus transaction - selling, general and administrative     (16,084 )     (16,083 )
  Restructuring benefit (charges) - selling, general and administrative     202       (2,032 )
Non-GAAP operating expenses   $ 350,235     $ 352,135  
Non-GAAP operating income   $ 242,280     $ 296,274  
GAAP operating margin as percent of revenue     14.5 %     16.8 %
Non-GAAP operating margin as a percent of revenue     18.4 %     20.8 %

Contact Information