Lam Research Corporation Reports Financial Results for the Quarter Ended September 29, 2013

Marketwired

FREMONT, CA--(Marketwired - Oct 23, 2013) - Lam Research Corp. (NASDAQ: LRCX) today announced financial results for the quarter ended September 29, 2013.

Highlights for the September 2013 quarter were as follows:

  • Shipments of $987 million, down 9% from the prior quarter

  • Revenue of $1,015 million, up 3% from the prior quarter

  • GAAP gross margin of 42.5%, GAAP operating margin of 10.4% and GAAP diluted EPS of $0.50

  • Non-GAAP gross margin of 45.0%, non-GAAP operating margin of 16.2%, and non-GAAP diluted EPS of $0.81
   
Lam Research Corporation  
Financial Highlights for the Quarters Ended September 29, 2013 and June 30, 2013  
(in thousands, except per share data and percentages)  
                   
U.S. GAAP  
    September
2013
    June
2013
    Change Q/Q  
                       
Revenue   $ 1,015,059     $ 986,214     +3 %
Gross margin as percentage of revenue     42.5 %     42.0 %   +50 bps  
Operating margin as percentage of revenue     10.4 %     8.8 %   +160 bps  
Diluted EPS   $ 0.50     $ 0.50     -  
                       
Non-GAAP  
    September
2013
    June
2013
    Change Q/Q  
                       
Revenue   $ 1,015,059     $ 986,214     +3 %
Gross margin as percentage of revenue     45.0 %     44.5 %   +50 bps  
Operating margin as percentage of revenue     16.2 %     14.4 %   +180 bps  
Diluted EPS   $ 0.81     $ 0.80     +1 %
                       
                       

GAAP Financial Results
Revenue for the period was $1,015 million, gross margin was $431.9 million, or 42.5% of revenue, operating expenses were $326.5 million, and net income was $85.5 million, or $0.50 per diluted share on a GAAP basis. This compares to revenue of $986.2 million, gross margin of $413.9 million, or 42.0% of revenue, operating expenses of $327.4 million, and net income of $85.7 million, or $0.50 per diluted share, for the June 2013 quarter.

Non-GAAP Financial Results
Non-GAAP gross margin was $456.7 million, or 45.0% of revenue, non-GAAP operating expenses were $291.9 million, and non-GAAP net income was $139.2 million, or $0.81 per diluted share. This compares to non-GAAP gross margin of $438.8 million, or 44.5% of revenue, non-GAAP operating expenses of $297.0 million, and non-GAAP net income of $136.4 million, or $0.80 per diluted share, for the June 2013 quarter.

"Lam Research posted financial results that met or exceeded our guidance ranges across all key metrics, including our second consecutive quarter of record revenue and solid profit growth," said Martin Anstice, Lam's president and chief executive officer. "Our performance reflects the substance of our vision and strong execution across the entire company. We continue to be excited about the opportunities for growth and remain confident in the depth of our strategies and support from our customers."

Balance Sheet and Cash Flow Results
Cash and cash equivalents, short-term investments, and restricted cash and investment balances decreased to $2.6 billion at the end of the September 2013 quarter compared to $2.7 billion at the end of the June 2013 quarter due to stock repurchases of approximately $100 million. Cash flows from operating activities were approximately $52 million during the September 2013 quarter, adding to our overall cash position.

Deferred revenue and deferred profit balances at the end of the September 2013 quarter decreased to $334.0 million and $188.4 million, respectively, as compared to $389.2 million and $225.0 million, respectively, at the end of the June 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 $84.2 million as of September 29, 2013.

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

             
Region   Shipments     Revenue  
North America   17 %   14 %
Europe   8 %   9 %
Japan   17 %   13 %
Korea   18 %   23 %
Taiwan   21 %   24 %
Asia Pacific   19 %   17 %
             
             

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

  • Shipments of approximately $1.125 billion plus or minus $30 million

  • Revenue of approximately $1.1 billion plus or minus $30 million

  • Gross margin of approximately 46.0% plus or minus 1.0%

  • Operating margin as a percent of revenue of approximately 18.5% plus or minus 1.0%

  • Earnings per share of approximately $1.02 plus or minus $0.05, assuming a diluted share count of 174 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 September 2013 and June 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, restructuring charges, rationalization of certain product configurations, the amortization of convertible note discounts, the tax benefit on successful resolution of certain tax matters, and tax expense associated with legal-entity integration. Additionally, the September 2013 quarter non-GAAP results excluded the impairment of a long-lived asset.

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 opportunities for growth, the depth of our strategies, the support from our customers, 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. 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.

   
LAM RESEARCH CORPORATION  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
(in thousands, except per share data and percentages)  
(unaudited)  
                   
    Three Months Ended  
    September 29,     June 30,     September 23,  
    2013     2013     2012  
Revenue   $ 1,015,059     $ 986,214     $ 906,888  
  Cost of goods sold     583,201       572,287       573,002  
    Gross margin     431,858       413,927       333,886  
    Gross margin as a percent of revenue     42.5 %     42.0 %     36.8 %
Research and development     170,567       180,220       163,311  
Selling, general and administrative     155,883       147,209       153,863  
    Total operating expenses     326,450       327,429       317,174  
    Operating income     105,408       86,498       16,712  
    Operating margin as a percent of revenue     10.4 %     8.8 %     1.8 %
Other expense, net     (14,262 )     (12,251 )     (9,938 )
    Income before income taxes     91,146       74,247       6,774  
Income tax expense (benefit)     5,640       (11,460 )     4,006  
    Net income   $ 85,506     $ 85,707     $ 2,768  
Net income per share:                        
  Basic net income per share   $ 0.52     $ 0.53     $ 0.02  
  Diluted net income per share   $ 0.50     $ 0.50     $ 0.02  
Number of shares used in per share calculations:                        
  Basic     162,896       162,520       179,928  
  Diluted     171,363       169,722       181,926  
                         
                         
 
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
         
    September 29,   June 30,
    2013   2013
    (unaudited)   (1)
ASSETS            
Cash and cash equivalents   $ 1,156,184   $ 1,162,473
Short-term investments     1,300,031     1,334,745
Accounts receivable, net     713,524     602,624
Inventories     614,790     559,317
Deferred income taxes     29,090     27,674
Other current assets     110,633     106,996
  Total current assets     3,924,252     3,793,829
Property and equipment, net     564,845     603,910
Restricted cash and investments     166,385     166,536
Goodwill and intangible assets     2,484,900     2,526,541
Other assets     149,963     159,499
  Total assets   $ 7,290,345   $ 7,250,315
             
LIABILITIES AND STOCKHOLDERS' EQUITY            
Current liabilities   $ 1,402,890   $ 1,404,475
             
Long-term debt, convertible notes, and capital leases   $ 796,373   $ 789,256
Income taxes payable     248,462     246,479
Other long-term liabilities     129,306     134,313
  Total liabilities     2,577,031     2,574,523
             
Senior convertible notes     186,042     186,920
Stockholders' equity (2)     4,527,272     4,488,872
  Total liabilities and stockholders' equity   $ 7,290,345   $ 7,250,315
             
(1) Derived from audited financial statements      
             
(2) Common shares issued and outstanding were 162,217 shares as of September 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  
    September 29,     June 30,     September 23,  
    2013     2013     2012  
CASH FLOWS FROM OPERATING ACTIVITIES:                        
Net income   $ 85,506     $ 85,707     $ 2,768  
Adjustments to reconcile net income to net cash provided by operating activities:                        
  Depreciation and amortization     74,331       76,051       74,816  
  Deferred income taxes     -       (22,884 )     (12,017 )
  Impairment of long-lived asset     7,004       -       -  
  Equity-based compensation expense     23,235       25,241       24,414  
  Income tax benefit on equity-based compensation plans     -       364       -  
  Excess tax benefit on equity-based compensation plans     -       (364 )     -  
  Amortization of convertible note discount     8,122       8,028       7,752  
  Other, net     4,115       5,342       8,406  
  Changes in operating assets and liabilities:     (150,388 )     (2,497 )     143,123  
    Net cash provided by operating activities     51,925       174,988       249,262  
                         
CASH FLOWS FROM INVESTING ACTIVITIES:                        
Capital expenditures and intangible assets     (23,778 )     (43,140 )     (43,965 )
Cash paid for business acquisition     -       (800 )     -  
Net sales/maturities (purchases) of available-for-sale securities     42,567       (6,442 )     (16,638 )
(Issuance) repayments of notes receivable     -       (10,000 )     -  
Transfer of restricted cash and investments     150       (328 )     146  
    Net cash provided by (used for) investing activities     18,939       (60,710 )     (60,457 )
                         
CASH FLOWS FROM FINANCING ACTIVITIES:                        
Principal payments on long-term debt and capital lease obligations     (88 )     (698 )     (665 )
Excess tax benefit on equity-based compensation plans     -       364       -  
Treasury stock purchases     (104,285 )     (2,275 )     (355,079 )
Reissuances of treasury stock related to employee stock purchase plan     15,154       12,846       9,925  
Proceeds from issuance of common stock     12,574       16,713       951  
    Net cash provided by (used for) financing activities     (76,645 )     26,950       (344,868 )
Effect of exchange rate changes on cash     (508 )     2,136       2,777  
Net decrease in cash and cash equivalents     (6,289 )     143,364       (153,286 )
Cash and cash equivalents at beginning of period     1,162,473       1,019,109       1,564,752  
Cash and cash equivalents at end of period   $ 1,156,184     $ 1,162,473     $ 1,411,466  
                         
                         
   
Non-GAAP Financial Summary  
(in thousands, except percentages and per share data)  
(unaudited)  
             
    Three Months Ended     Three Months Ended  
    September 29,     June 30,  
    2013     2013  
                 
Revenue   $ 1,015,059     $ 986,214  
Gross margin   $ 456,709     $ 438,823  
Gross margin as percentage of revenue     45.0 %     44.5 %
Operating expenses   $ 291,887     $ 297,048  
Operating income   $ 164,822     $ 141,775  
Operating margin as a percentage of revenue     16.2 %     14.4 %
Net income   $ 139,227     $ 136,440  
Net income per diluted share   $ 0.81     $ 0.80  
Shares used in per share calculation - diluted     171,363       169,722  
                 
                 
   
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  
    September 29,     June 30,  
    2013     2013  
U.S. GAAP net income   $ 85,506     $ 85,707  
Pre-tax non-GAAP items:                
  Costs associated with rationalization of certain product configurations - cost of goods sold     -       (896 )
  Amortization related to intangible assets acquired in Novellus transaction - cost of goods sold     21,480       20,748  
  Acquisition-related inventory fair value impact - cost of goods sold     2,047       4,266  
  Integration costs - cost of goods sold     1,324       778  
  Integration costs - operating expenses     8,063       9,579  
  Amortization related to intangible assets acquired in Novellus transaction - operating expenses     16,947       18,888  
  Restructuring charges - operating expenses     1,705       792  
  Costs associated with rationalization of certain product configurations - operating expenses     844       1,122  
  Impairment of long lived asset     7,004       -  
  Amortization of convertible note discount, Lam notes - other expense, net     7,243       7,159  
  Amortization of convertible note discount, Novellus assumed notes - other expense, net     859       781  
Net tax benefit on non-GAAP items     (11,646 )     (10,252 )
Net tax benefit on successful resolution of certain tax matters     (2,286 )     (2,699 )
Tax expense associated with legal-entity integration     137       467  
Non-GAAP net income   $ 139,227     $ 136,440  
Non-GAAP net income per diluted share   $ 0.81     $ 0.80  
Number of shares used for diluted per share calculation     171,363       169,722  
                 
                 
                 
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  
    September 29,     June 30,  
    2013     2013  
U.S. GAAP gross margin   $ 431,858     $ 413,927  
Pre-tax non-GAAP items:                
  Costs associated with rationalization of certain product configurations - cost of goods sold     -       (896 )
  Amortization related to intangible assets acquired in Novellus transaction - cost of goods sold     21,480       20,748  
  Acquisition-related inventory fair value impact - cost of goods sold     2,047       4,266  
  Integration costs - cost of goods sold     1,324       778  
Non-GAAP gross margin   $ 456,709     $ 438,823  
U.S. GAAP gross margin as a percentage of revenue     42.5 %     42.0 %
Non-GAAP gross margin as a percentage of revenue     45.0 %     44.5 %
U.S. GAAP operating expenses   $ 326,450     $ 327,429  
Pre-tax non-GAAP items:                
  Integration costs - operating expenses     (8,063 )     (9,579 )
  Amortization related to intangible assets acquired in Novellus transaction - operating expenses     (16,947 )     (18,888 )
  Restructuring charges - operating expenses     (1,705 )     (792 )
  Costs associated with rationalization of certain product configurations - operating expenses     (844 )     (1,122 )
  Impairment of long lived asset     (7,004 )     -  
Non-GAAP operating expenses   $ 291,887     $ 297,048  
Non-GAAP operating income   $ 164,822     $ 141,775  
Non-GAAP operating margin as a percent of revenue     16.2 %     14.4 %
                 
                 
Contact:
Lam Research Corporation
Shanye Hudson
Investor Relations
phone: 510-572-4589
e-mail: shanye.hudson@lamresearch.com

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