Lam Research Corporation Reports Financial Results for the Quarter Ended March 31, 2013

Marketwired

FREMONT, CA--(Marketwired - Apr 24, 2013) - Lam Research Corp. (NASDAQ: LRCX) today announced financial results for the quarter ended March 31, 2013. Highlights for the quarter were as follows:

  • Delivered shipments of $896 million during the March 2013 quarter, up 12% from the prior quarter
  • Reported revenue of $844.9 million for the March 2013 quarter, down 2% from the prior quarter
  • Reported GAAP gross margin of 40.2%, GAAP operating margin of 1.3% and GAAP diluted EPS of $0.11
  • Delivered non-GAAP gross margin of 43.9%, non-GAAP operating margin of 8.8%, and non-GAAP EPS of $0.44
  • Completed $1.6 billion stock buyback reducing share count by approximately 5 million shares this quarter
Lam Research Corporation  
Financial Highlights for the Quarter Ended March 31, 2013  
(in thousands, except per share data and percentages)  
                 
  U.S. GAAP  
  March 2013     December 2012     Change Q/Q  
                     
Revenue $ 844,928     $ 860,886     -2 %
Operating Margin   1.3 %     0.5 %   +80 bps  
Net Income $ 18,996     $ 6,408     +196.4 %
Diluted EPS $ 0.11     $ 0.04     +$0.07  
                     
  Non-GAAP  
  March 2013     December 2012     Change Q/Q  
                     
Revenue $ 844,928     $ 860,886     -2 %
Operating Margin   8.8 %     11.5 %   -270 bps  
Net Income $ 74,474     $ 77,278     -3.6 %
Diluted EPS $ 0.44     $ 0.45     -$0.01  
                     

GAAP Financial Results

Revenue for the period was $844.9 million, gross margin was $339.8 million, or 40.2% of revenue, operating expenses were $329.0 million, and net income was $19.0 million, or $0.11 per diluted share on a GAAP basis. This compares to revenue of $860.9 million, gross margin of $315.4 million, or 36.6% of revenue, operating expenses of $311.4 million, and net income of $6.4 million, or $0.04 per diluted share, for the December 2012 quarter.

Non-GAAP Financial Results

Non-GAAP gross margin was $370.7 million, or 43.9% of revenue, non-GAAP operating expenses were $296.0 million, and non-GAAP net income was $74.5 million, or $0.44 per diluted share. This compares to non-GAAP gross margin of $380.5 million, or 44.2% of revenue, non-GAAP operating expenses of $281.5 million, and non-GAAP net income of $77.3 million, or $0.45 per diluted share, for the December 2012 quarter. 

"Lam delivered solid March quarter results, which underscore our ability to execute well as a newly integrated company," stated Martin Anstice, Lam's president and chief executive officer. "We are off to a great start this year and continue to make progress against our multi-year growth strategic plan by building upon our technology leadership in key product areas and further strengthening our competitive differentiation."

Balance Sheet and Cash Flow Results

Cash and cash equivalents, short-term investments and restricted cash and investment balances decreased to $2.5 billion at the end of the March 2013 quarter, as planned, compared to $2.7 billion at the end of the December 2012 quarter. This decrease was primarily the result of approximately $243 million of stock repurchases, offset by approximately $102 million in cash flow from operating activities during the March 2013 quarter.

Deferred revenue and deferred profit balances at the end of the March 2013 quarter increased to $326.6 million and $193.3 million, respectively, as compared to $282.0 million and $169.0 million, respectively, at the end of the December 2012 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 $49.9 million as of March 31, 2013.

Geographic Distribution

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

         
Region   Shipments   Revenue
North America   21%   26%
Europe   9%   10%
Japan   11%   11%
Korea   12%   14%
Taiwan   33%   26%
Asia Pacific   14%   13%
         

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 March 2013 and December 2012 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, and rationalization of certain product configurations. Additionally, the March 2013 quarter non-GAAP results exclude the impairment of an investment, tax benefit on reinstatement of R&D tax credit, and tax expense associated with legal entity integration, and the December 2012 quarter non-GAAP results exclude restructuring charges and tax benefits from the 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 expectations for growth and future demand for semiconductor equipment, our ability to execute as an integrated company, our ability to build on our technology leadership, our ability to strengthen our competitive differentiation, our ability to make progress against multi-year goals, and our plans pertaining to expense management, funding technology investments and positioning our products with customers as well as our ability to execute those plans. 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 and December 23, 2012. 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. is a major supplier of innovative wafer fabrication equipment and services to the worldwide semiconductor industry. For more than 30 years, the Company has driven continuous improvements in chip performance, power consumption, and cost, contributing to the global proliferation of smartphones, computers, tablets, and other electronic products. Lam Research has been the leading supplier of high-throughput plasma etch equipment for more than a decade and expanded its product offerings in 2008 to include single-wafer clean systems. The Company added thin-film deposition and wafer surface preparation technologies to its product portfolio in 2012 with the acquisition of Novellus Systems, Inc. Headquartered in Fremont, Calif., Lam Research maintains a global network of service facilities throughout North America, Asia, and Europe to rapidly meet the needs of its global customer base. It is an S&P 500® company whose common stock trades on the NASDAQ Global Select Market(SM) 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 31,   December 23,   March 25,   March 31,   March 25,  
  2013   2012   2012   2013   2012  
Revenue $ 844,928   $ 860,886   $ 658,961   $ 2,612,702   $ 1,923,378  
  Cost of goods sold   505,096     545,472     391,814     1,623,570     1,138,381  
  Cost of goods sold - restructuring and impairments   -     -     -           (859 )
    Total cost of goods sold   505,096     545,472     391,814     1,623,570     1,137,522  
    Gross margin   339,832     315,414     267,147     989,132     785,856  
    Gross margin as a percent of revenue   40.2 %   36.6 %   40.5 %   37.9 %   40.9 %
Research and development   174,206     165,951     113,448     503,468     320,031  
Selling, general and administrative   154,807     144,400     95,581     453,070     259,037  
Restructuring and impairments   -     1,021     -     1,021     1,725  
    Total operating expenses   329,013     311,372     209,029     957,559     580,793  
    Operating income   10,819     4,042     58,118     31,573     205,063  
    Operating margin as a percent of revenue   1.3 %   0.5 %   8.8 %   1.2 %   10.7 %
Other expense, net   (15,834 )   (13,390 )   (3,568 )   (39,162 )   (23,426 )
    Income (loss) before income taxes   (5,015 )   (9,348 )   54,550     (7,589 )   181,637  
Income tax expense (benefit)   (24,011 )   (15,756 )   8,946     (35,761 )   30,983  
    Net income $ 18,996   $ 6,408   $ 45,604   $ 28,172   $ 150,654  
Net income per share:                              
  Basic net income per share $ 0.12   $ 0.04   $ 0.38   $ 0.16   $ 1.25  
  Diluted net income per share $ 0.11   $ 0.04   $ 0.38   $ 0.16   $ 1.24  
Number of shares used in per share calculations:                              
  Basic   163,034     170,699     119,841     171,016     120,904  
  Diluted   168,504     173,027     120,956     174,306     121,830  
                               
 
 
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
           
  March 31,   December 23,   June 24,
  2013   2012   2012
  (unaudited)   (unaudited)   (1)
ASSETS                
Cash and cash equivalents $ 1,019,109   $ 1,190,189   $ 1,564,752
Short-term investments   1,337,819     1,330,498     1,297,931
Accounts receivable, net   544,070     590,925     765,818
Inventories   545,036     530,272     632,853
Deferred income taxes   137,729     139,300     47,782
Other current assets   86,156     65,224     105,973
  Total current assets   3,669,919     3,846,408     4,415,109
Property and equipment, net   594,916     590,547     584,596
Restricted cash and investments   166,196     166,166     166,335
Goodwill and intangible assets   2,562,986     2,608,221     2,686,730
Other assets   152,285     151,822     151,882
  Total assets $ 7,146,302   $ 7,363,164   $ 8,004,652
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
                 
Current liabilities $ 801,013   $ 825,482   $ 1,426,928
                 
Long-term debt, convertible notes, and capital leases $ 1,294,599   $ 1,286,729   $ 761,783
Income taxes payable   250,339     260,063     274,240
Other long-term liabilities   258,151     294,300     219,577
  Total liabilities   2,604,102     2,666,574     2,682,528
                 
Senior convertible notes   -     -     190,343
Stockholders' equity (2)   4,542,200     4,696,590     5,131,781
  Total liabilities and stockholders' equity $ 7,146,302   $ 7,363,164   $ 8,004,652
                   
(1) Derived from audited financial statements
   
(2) Common shares issued and outstanding were 161,802 shares as of March 31, 2013, 165,846 shares as of December 23, 2012, and 186,656 shares as of June 24, 2012.
   
   
   
LAM RESEARCH CORPORATION  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(in thousands)  
(unaudited)  
                     
  Three Months Ended   Nine Months Ended  
  March 31,   December 23,   March 25,   March 31,   March 25,  
  2013   2012   2012   2013   2012  
CASH FLOWS FROM OPERATING ACTIVITIES:                              
Net income $ 18,996   $ 6,408   $ 45,604   $ 28,172   $ 150,654  
Adjustments to reconcile net income to net cash provided by operating activities:                              
  Depreciation and amortization   74,861     78,388     22,517     228,065     66,249  
  Deferred income taxes   (27,934 )   (7,320 )   3,723     (47,271 )   3,090  
  Restructuring and impairment charges, net   -     1,021     -     1,021     866  
  Equity-based compensation expense   25,648     24,027     16,417     74,089     52,385  
  Income tax benefit on equity-based compensation plans   (847 )   -     (1,048 )   (847 )   81  
  Excess tax benefit on equity-based compensation plans   903     -     (137 )   903     (2,292 )
  Amortization of convertible note discount   7,935     7,843     6,750     23,530     20,014  
  Impairment of investment, net of foreign exchange effect   3,711     -     -     3,711     1,724  
  Other, net   6,115     13,673     1,165     30,838     3,671  
  Changes in operating assets and liabilities:   (6,931 )   69,186     51,406     202,734     105,871  
    Net cash provided by operating activities   102,457     193,226     146,397     544,945     402,313  
                               
CASH FLOWS FROM INVESTING ACTIVITIES:                              
Capital expenditures and intangible assets   (34,766 )   (38,924 )   (27,978 )   (117,655 )   (70,392 )
Cash paid for business acquisition   (400 )   (8,716 )   -     (9,116 )   -  
Net purchases of available-for-sale securities   (12,075 )   (23,250 )   (282,225 )   (51,963 )   (371,678 )
Purchase of equity method investment   -     -     -     -     (10,740 )
Receipt of loan payment   -     -     -     -     8,375  
Proceeds from sale of assets   -     660     -     660     2,677  
Transfer of restricted cash and investments   (32 )   33     3     147     23  
    Net cash used for investing activities   (47,273 )   (70,197 )   (310,200 )   (177,927 )   (441,735 )
                               
CASH FLOWS FROM FINANCING ACTIVITIES:                              
Principal payments on long-term debt and capital lease obligations   (756 )   (115 )   (1,024 )   (1,536 )   (4,164 )
Excess tax benefit on equity-based compensation plans   (903 )   -     137     (903 )   2,292  
Net cash received in settlement (paid in advance for) stock repurchase contracts   -     -     79,189     -     55,194  
Treasury stock purchases   (243,297 )   (355,010 )   (18,909 )   (953,386 )   (111,604 )
Reissuances of treasury stock related to employee stock purchase plan   8,494     -     7,902     18,419     16,760  
Proceeds from issuance of common stock   15,132     6,583     301     22,666     1,776  
    Net cash provided by (used for) financing activities   (221,330 )   (348,542 )   67,596     (914,740 )   (39,746 )
Effect of exchange rate changes on cash   (4,934 )   4,236     (454 )   2,079     (2,697 )
Net decrease in cash and cash equivalents   (171,080 )   (221,277 )   (96,661 )   (545,643 )   (81,865 )
Cash and cash equivalents at beginning of period   1,190,189     1,411,466     1,506,928     1,564,752     1,492,132  
Cash and cash equivalents at end of period $ 1,019,109   $ 1,190,189   $ 1,410,267   $ 1,019,109   $ 1,410,267  
                               
   
   
Non-GAAP Financial Summary  
(in thousands, except percentages and per share data)  
(unaudited)  
         
  Three Months
Ended
  Three Months
Ended
 
  March 31,   December 23,  
  2013   2012  
             
Revenue $ 844,928   $ 860,886  
Gross margin $ 370,658   $ 380,475  
Gross margin as percentage of revenue   43.9 %   44.2 %
Operating expenses $ 296,002   $ 281,499  
Operating income $ 74,656   $ 98,976  
Operating margin as a percentage of revenue   8.8 %   11.5 %
Net income $ 74,474   $ 77,278  
Net income per diluted share $ 0.44   $ 0.45  
Shares used in per share calculation - diluted   168,504     173,027  
             
   
   
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 31,   December 23,  
  2013   2012  
U.S. GAAP net income $ 18,996   $ 6,408  
Pre-tax non-GAAP items:            
  Costs associated with rationalization of certain product configurations - cost of goods sold   207     17,434  
  Amortization related to intangible assets acquired in Novellus transaction - cost of goods sold   20,763     20,745  
  Acquisition-related inventory fair value impact - cost of goods sold   7,448     26,882  
  Integration costs - cost of goods sold   2,408     -  
  Integration costs - operating expenses   13,123     8,971  
  Amortization related to intangible assets acquired in Novellus transaction - operating expenses   19,445     19,438  
  Restructuring charges - operating expenses   -     1,021  
  Costs associated with rationalization of certain product configurations - operating expenses   443     443  
  Amortization of convertible note discount, Lam notes - other expense, net   7,075     6,992  
  Amortization of convertible note discount, Novellus assumed notes - other expense, net   893     821  
  Impairment of investment - other expense, net   3,711     -  
Net tax benefit on non-GAAP items   (11,700 )   (14,883 )
Tax benefit on reinstatement of R&D tax credit   (11,493 )   -  
Tax expense associated with legal entity integration   3,155     -  
Net tax benefit on successful resolution of certain tax matters   -     (16,994 )
Non-GAAP net income $ 74,474   $ 77,278  
Non-GAAP net income per diluted share $ 0.44   $ 0.45  
Number of shares used for diluted per share calculation   168,504     173,027  
             
             
             
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 31,     December 23,  
    2013     2012  
U.S. GAAP gross margin $ 339,832   $ 315,414  
Pre-tax non-GAAP items:            
  Costs associated with rationalization of certain product configurations - cost of goods sold   207     17,434  
  Amortization related to intangible assets acquired in Novellus transaction - cost of goods sold   20,763     20,745  
  Acquisition-related inventory fair value impact - cost of goods sold   7,448     26,882  
  Integration costs - cost of goods sold   2,408     -  
Non-GAAP gross margin $ 370,658   $ 380,475  
U.S. GAAP gross margin as a percentage of revenue   40.2 %   36.6 %
Non-GAAP gross margin as a percentage of revenue   43.9 %   44.2 %
U.S. GAAP operating expenses $ 329,013   $ 311,372  
Pre-tax non-GAAP items:            
  Integration costs - operating expenses   (13,123 )   (8,971 )
  Amortization related to intangible assets acquired in Novellus transaction - operating expenses   (19,445 )   (19,438 )
  Restructuring charges - operating expenses   -     (1,021 )
  Costs associated with rationalization of certain product configurations - operating expenses   (443 )   (443 )
Non-GAAP operating expenses $ 296,002   $ 281,499  
Non-GAAP operating income $ 74,656   $ 98,976  
Non-GAAP operating margin as a percent of revenue   8.8 %   11.5 %
             
Contact:
Lam Research Corporation
Shanye Hudson
Investor Relations
phone: 510-572-4589
e-mail: shanye.hudson@lamresearch.com

Ed Rebello
Corporate Communications
phone: 510-572-6603
e-mail: edward.rebello@lamresearch.com
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