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.

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:

Outlook

For the June 2016 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, 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.