SOURCE: Lam Research Corporation

Lam Research Corporation

April 23, 2014 16:16 ET

Lam Research Corporation Reports Financial Results for the Quarter Ended March 30, 2014

FREMONT, CA--(Marketwired - Apr 23, 2014) -  Lam Research Corp. (NASDAQ: LRCX) today announced financial results for the quarter ended March 30, 2014.

Highlights for the March 2014 quarter were as follows:

  • Shipments of $1,264 million, up 11% from the prior quarter

  • Revenue of $1,227 million, up 10% from the prior quarter

  • GAAP gross margin of 43.2%, GAAP operating margin of 15.6% and GAAP diluted EPS of $0.96

  • Non-GAAP gross margin of 45.5%, non-GAAP operating margin of 20.2%, and non-GAAP diluted EPS of $1.26
   
Lam Research Corporation  
Financial Highlights for the Quarters Ended March 30, 2014 and December 29, 2013  
(in thousands, except per share data and percentages)  
                   
U.S. GAAP  
    March 2014     December 2013     Change Q/Q  
                       
Revenue   $ 1,227,392     $ 1,116,061     +10 %
Gross margin as percentage of revenue     43.2 %     43.7 %   -50 bps  
Operating margin as percentage of revenue     15.6 %     14.7 %   +90 bps  
Diluted EPS   $ 0.96     $ 0.87     +10 %
                       
Non-GAAP  
    March 2014     December 2013     Change Q/Q  
                       
Revenue   $ 1,227,392     $ 1,116,061     +10 %
Gross margin as percentage of revenue     45.5 %     45.8 %   -30 bps  
Operating margin as percentage of revenue     20.2 %     18.7 %   +150 bps  
Diluted EPS   $ 1.26     $ 1.10     +15 %
                       

GAAP Financial Results

Revenue for the period was $1,227 million, gross margin was $530.8 million, or 43.2% of revenue, operating expenses were $338.9 million, operating margin was 15.6% of revenue, and net income was $164.4 million, or $0.96 per diluted share on a GAAP basis. This compares to revenue of $1,116 million, gross margin of $487.8 million, or 43.7% of revenue, operating expenses of $323.3 million, operating margin of 14.7% of revenue, and net income of $149.0 million, or $0.87 per diluted share, for the December 2013 quarter.

Non-GAAP Financial Results

Non-GAAP gross margin was $558.9 million or 45.5% of revenue, non-GAAP operating expenses were $311.0 million, non-GAAP operating margin was 20.2% of revenue, and non-GAAP net income was $216.4 million, or $1.26 per diluted share. This compares to non-GAAP gross margin of $510.8 million or 45.8% of revenue, non-GAAP operating expenses of $302.1 million, non-GAAP operating margin of 18.7% of revenue, and non-GAAP net income of $188.7 million or $1.10 per diluted share for the December 2013 quarter.

"We began 2014 by delivering another solid quarter with record shipments, record revenue, sequential operating margin expansion and very strong free cash flow," stated Martin Anstice, Lam Research's president and chief executive officer. "The consistency of our results reinforces the potential to deliver sustained outperformance through solid execution of our growth strategy. We believe that our product portfolio combined with the scale of our new technology offerings create a unique opportunity for Lam through the multi-patterning, 3D device and advanced packaging industry transitions. Together this combination of capability and opportunity underscores our commitment to deliver growth and value for our customers and our shareholders alike."

Balance Sheet and Cash Flow Results

Cash and cash equivalents, short-term investments, and restricted cash and investment balances increased to $2.9 billion at the end of the March 2014 quarter compared to $2.7 billion at the end of the December 2013 quarter. This increase was primarily the result of approximately $290 million in cash flows from operating activities during the March 2014 quarter, partially offset by $52 million of stock repurchases.

Deferred revenue and deferred profit balances at the end of the March 2014 quarter increased to $431.5 million and $257.3 million, respectively, as compared to $405.0 million and $224.4 million, respectively, at the end of the December 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 $56.7 million as of March 30, 2014.

Geographic Distribution

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

             
  Region   Shipments   Revenue  
  United States   11%   10%  
  Europe   5%   6%  
  Japan   11%   11%  
  Korea   28%   28%  
  Taiwan   22%   19%  
  China   20%   22%  
  Southeast Asia   3%   4%  
             

Outlook

For the June 2014 quarter, Lam is providing the following guidance:

                   
  GAAP Reconciling Items Non-GAAP
Shipments $1.15 Billion +/-   $50 Million - $1.15 Billion +/-   $50 Million
Revenue $1.24 Billion +/-   $50 Million - $1.24 Billion +/-   $50 Million
Gross margin 45% +/-   1% $12 Million 46% +/-   1%
Operating margin 17% +/-   1% $38 Million 20% +/-   1%
Earning per share $0.98 +/-   $0.07 $39 Million $1.21 +/-   $0.07
Diluted share count 172 Million   172 Million
       

Reconciling items include:

  • Amortization related to intangible assets acquired in the Novellus transaction, $12 million in gross margin.
  • Amortization related to intangible assets acquired in the Novellus transaction, $38 million in operating margin.
  • Amortization related to intangible assets acquired in the Novellus transaction, $38 million; the amortization of convertible note discounts, $8 million; and the associated tax benefit for non-GAAP items ($7) million, in earnings per share.

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 2014 and December 2013 quarters exclude rationalization of certain product configurations, amortization related to intangible assets acquired in the Novellus transaction, the impairment of long-lived assets, and the amortization of convertible note discounts. Additionally, the March 2014 quarter non-GAAP results exclude expenses associated with the synthetic lease impairment and the December 2013 quarter non-GAAP results exclude costs associated with the fair-value impact of acquisition-related inventory, certain integration-related costs, the gain on sale of an investment, and the tax benefit on successful resolution of certain tax matters.

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 potential to deliver sustained outperformance, the results of our growth strategy, the opportunity created by our product portfolio combined with the scale of new technology offerings, the effect of multi-patterning, 3D device and advanced packaging industry transitions on our business, 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 and December 29, 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)  
(unaudited)  
                             
  Three Months Ended     Nine Months Ended  
  March 30,     December     March 31,     March 30,     March 31,  
  2014     29, 2013     2013     2014     2013  
Revenue $ 1,227,392     $ 1,116,061     $ 844,928     $ 3,358,512     $ 2,612,702  
  Cost of goods sold   696,594       628,272       505,096       1,908,067       1,623,570  
    Gross margin   530,798       487,789       339,832       1,450,445       989,132  
    Gross margin as a percent of revenue   43.2 %     43.7 %     40.2 %     43.2 %     37.9 %
Research and development   185,978       174,477       174,206       531,022       503,468  
Selling, general and administrative   152,883       148,838       154,807       457,604       454,091  
    Total operating expenses   338,861       323,315       329,013       988,626       957,559  
    Operating income   191,937       164,474       10,819       461,819       31,573  
    Operating margin as a percent of revenue   15.6 %     14.7 %     1.3 %     13.8 %     1.2 %
Other expense, net   (9,855 )     (3,837 )     (15,834 )     (27,954 )     (39,162 )
    Income (loss) before income taxes   182,082       160,637       (5,015 )     433,865       (7,589 )
Income tax expense (benefit)   17,686       11,645       (24,011 )     34,971       (35,761 )
    Net income $ 164,396     $ 148,992     $ 18,996     $ 398,894     $ 28,172  
Net income per share:                                      
  Basic net income per share $ 1.01     $ 0.92     $ 0.12     $ 2.46     $ 0.16  
  Diluted net income per share $ 0.96     $ 0.87     $ 0.11     $ 2.33     $ 0.16  
Number of shares used in per share calculations:                                      
  Basic   162,238       162,305       163,034       161,904       171,016  
  Diluted   171,636       171,757       168,504       171,051       174,306  
                                       
                                       
                                       
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
             
    March 30,   December 29,   June 30,
    2014   2013   2013
    (unaudited)   (unaudited)   (1)
ASSETS                  
Cash and cash equivalents   $ 1,292,301   $ 1,132,555   $ 1,162,473
Short-term investments     1,462,171     1,389,735     1,334,745
Accounts receivable, net     818,390     909,720     602,624
Inventories     717,356     661,572     559,317
Other current assets     157,131     155,454     134,670
  Total current assets     4,447,349     4,249,036     3,793,829
Property and equipment, net     552,591     546,193     603,910
Restricted cash and investments     143,914     166,395     166,536
Goodwill and intangible assets     2,408,913     2,453,066     2,526,541
Other assets     154,600     141,108     159,499
  Total assets   $ 7,707,367   $ 7,555,798   $ 7,250,315
                   
LIABILITIES AND STOCKHOLDERS' EQUITY                  
Current liabilities   $ 1,542,705   $ 1,522,572   $ 1,404,475
                   
Long-term debt, convertible notes, and capital leases   $ 810,688   $ 803,276   $ 789,256
Income taxes payable     251,080     248,996     246,479
Other long-term liabilities     111,346     129,710     134,313
  Total liabilities     2,715,819     2,704,554     2,574,523
                   
Senior convertible notes     184,256     185,154     186,920
Stockholders' equity (2)     4,807,292     4,666,090     4,488,872
  Total liabilities and stockholders' equity   $ 7,707,367   $ 7,555,798   $ 7,250,315
   
(1) Derived from audited financial statements
(2) Common shares issued and outstanding were 161,988 shares as of March 30, 2014, 162,169 shares as of December 29, 2013 and 162,873 shares as of June 30, 2013.
   
   
   
LAM RESEARCH CORPORATION  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(in thousands)  
(unaudited)  
                             
  Three Months Ended     Nine Months Ended  
  March 30,     December     March 31,     March 30,     March 31,  
  2014     29, 2013     2013     2014     2013  
CASH FLOWS FROM OPERATING ACTIVITIES:                                      
Net income $ 164,396     $ 148,992     $ 18,996     $ 398,894     $ 28,172  
Adjustments to reconcile net income to net cash provided by operating activities:                                      
  Depreciation and amortization   73,256       73,552       74,861       221,139       228,065  
  Deferred income taxes   (816 )     12,457       (27,934 )     11,641       (47,271 )
  Impairment of long-lived asset   4,000       628       -       11,632       -  
  Equity-based compensation expense   24,334       23,046       25,648       70,615       74,089  
  Amortization of convertible note discount   8,313       8,217       7,935       24,652       23,530  
  Impairment of investment, net of foreign exchange effect   -       -       3,711       -       3,711  
  Other, net   2,741       (2,428 )     6,171       4,428       31,915  
  Changes in operating assets and liabilities:   13,986       (135,441 )     (6,931 )     (271,843 )     202,734  
    Net cash provided by operating activities   290,210       129,023       102,457       471,158       544,945  
                                       
CASH FLOWS FROM INVESTING ACTIVITIES:                                      
Capital expenditures and intangible assets   (41,638 )     (38,323 )     (34,766 )     (103,739 )     (117,655 )
Cash paid for business acquisition   -       (18,388 )     (400 )     (18,388 )     (9,116 )
Net purchases of available-for-sale securities   (82,744 )     (88,754 )     (12,075 )     (128,931 )     (51,963 )
Repayments of notes receivable   -       10,000       -       10,000       -  
Proceeds from sale of assets   -       21,635       -       21,635       660  
Transfer of restricted cash and investments   28,572       -       (32 )     28,722       147  
    Net cash used for investing activities   (95,810 )     (113,830 )     (47,273 )     (190,701 )     (177,927 )
                                       
CASH FLOWS FROM FINANCING ACTIVITIES:                                      
Principal payments on long-term debt and capital lease obligations   (112 )     (719 )     (756 )     (919 )     (1,536 )
Excess tax benefit on equity-based compensation plans   (296 )     -       (903 )     (296 )     (903 )
Treasury stock purchases   (52,415 )     (47,910 )     (243,297 )     (204,610 )     (953,386 )
Reissuances of treasury stock related to employee stock purchase plan   13,210       (35 )     8,494       28,329       18,419  
Proceeds from issuance of common stock   5,111       8,449       15,132       26,134       22,666  
    Net cash used for financing activities   (34,502 )     (40,215 )     (221,330 )     (151,362 )     (914,740 )
Effect of exchange rate changes on cash   (152 )     1,393       (4,934 )     733       2,079  
Net increase (decrease) in cash and cash equivalents   159,746       (23,629 )     (171,080 )     129,828       (545,643 )
Cash and cash equivalents at beginning of period   1,132,555       1,156,184       1,190,189       1,162,473       1,564,752  
Cash and cash equivalents at end of period $ 1,292,301     $ 1,132,555     $ 1,019,109     $ 1,292,301     $ 1,019,109  
                                       
                                       
                                       
Non-GAAP Financial Summary  
(in thousands, except percentages and per share data)  
(unaudited)  
             
    Three Months Ended     Three Months Ended  
    March 30,     December 29,  
    2014     2013  
                 
Revenue   $ 1,227,392     $ 1,116,061  
Gross margin   $ 558,881     $ 510,769  
Gross margin as percentage of revenue     45.5 %     45.8 %
Operating expenses   $ 311,046     $ 302,103  
Operating income   $ 247,835     $ 208,666  
Operating margin as a percentage of revenue     20.2 %     18.7 %
Net income   $ 216,384     $ 188,745  
Net income per diluted share   $ 1.26     $ 1.10  
Shares used in per share calculation - diluted     171,636       171,757  
                 
                 
                 
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  
    March 30,     December 29,  
    2014     2013  
U.S. GAAP net income   $ 164,396     $ 148,992  
Pre-tax non-GAAP items:                
  Amortization related to intangible assets acquired in Novellus transaction - cost of goods sold     21,670       21,491  
  Costs associated with rationalization of certain product configurations - cost of goods sold     4,855       -  
  Acquisition-related inventory fair value impact - cost of goods sold     -       1,225  
  Integration costs - cost of goods sold     -       264  
  Synthetic lease impairment - cost of good sold     1,558       -  
  Integration costs - operating expenses     -       2,785  
  Amortization related to intangible assets acquired in Novellus transaction - operating expenses     16,537       16,953  
  Costs associated with rationalization of certain product configurations - operating expenses     1,922       846  
  Impairment of long lived asset - operating expenses     4,000       628  
  Synthetic lease impairment - operating expenses     5,356       -  
  Amortization of convertible note discount, Lam notes - other expense, net     7,416       7,329  
  Amortization of convertible note discount, Novellus assumed notes - other expense, net     999       762  
  Gain on sale of investment - other expense, net     -       (4,813 )
Net tax benefit on non-GAAP items     (12,325 )     (6,404 )
Net tax benefit on successful resolution of certain tax matters     -       (1,313 )
Non-GAAP net income   $ 216,384     $ 188,745  
Non-GAAP net income per diluted share   $ 1.26     $ 1.10  
Number of shares used for diluted per share calculation     171,636       171,757  
                 
                 
                 
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  
    March 30,     December 29,  
    2014     2013  
U.S. GAAP gross margin   $ 530,798     $ 487,789  
Pre-tax non-GAAP items:                
  Amortization related to intangible assets acquired in Novellus transaction - cost of goods sold     21,670       21,491  
  Costs associated with rationalization of certain product configurations - cost of goods sold     4,855       -  
  Acquisition-related inventory fair value impact - cost of goods sold     -       1,225  
  Integration costs - cost of goods sold     -       264  
  Synthetic lease impairment - cost of good sold     1,558       -  
Non-GAAP gross margin   $ 558,881     $ 510,769  
U.S. GAAP gross margin as a percentage of revenue     43.2 %     43.7 %
Non-GAAP gross margin as a percentage of revenue     45.5 %     45.8 %
U.S. GAAP operating expenses   $ 338,861     $ 323,315  
Pre-tax non-GAAP items:                
  Integration costs - operating expenses     -       (2,785 )
  Amortization related to intangible assets acquired in Novellus transaction - operating expenses     (16,537 )     (16,953 )
  Costs associated with rationalization of certain product configurations - operating expenses     (1,922 )     (846 )
  Impairment of long lived asset - operating expenses     (4,000 )     (628 )
  Synthetic lease impairment - operating expenses     (5,356 )     -  
Non-GAAP operating expenses   $ 311,046     $ 302,103  
Non-GAAP operating income   $ 247,835     $ 208,666  
Non-GAAP operating margin as a percent of revenue     20.2 %     18.7 %

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