Lam Research Corporation Reports Financial Results for the Quarter Ended September 23, 2012

Marketwired

FREMONT, CA--(Marketwire - Oct 17, 2012) - Lam Research Corporation (NASDAQ: LRCX)

  • Achieved revenue of $906.9 million, up 22.3% from prior quarter, in first full quarter of consolidated results with Novellus
  • Reported GAAP gross margin of 36.8%, GAAP operating margin of 1.8% and GAAP EPS of $0.02
  • Exceeded earnings guidance across multiple non-GAAP metrics: gross margin of 44.4%, operating margin of 13.0%, EPS of $0.53
  • Delivered targeted progress toward integration and synergies

Lam Research Corporation's (NASDAQ: LRCX) highlights for the September 2012 quarter were:

   
Lam Research Corporation  
Financial Highlights for the Quarter Ended September 23, 2012  
(in thousands, except per share data and percentages)  
             
    U.S. GAAP     Non-GAAP  
                 
Revenue:   $ 906,888     $ 906,888  
                 
Operating Margin:     1.8 %     13.0 %
                 
Net Income:   $ 2,768     $ 97,013  
                 
Diluted EPS:   $ 0.02     $ 0.53  
                 

Lam Research Corporation today announced financial results for the quarter ended September 23, 2012. Revenue for the period was $906.9 million, gross margin was $333.9 million, or 36.8%, operating expenses were $317.2 million, and net income was $2.8 million, or $0.02 per diluted share, compared to revenue of $741.8 million, gross margin of $298.2 million, or 40.2%, operating expenses of $265.5 million, and net income of $18.1 million, or $0.13 per diluted share, for the June 2012 quarter. Shipments for the September 2012 quarter were $935 million compared to $816 million during the June 2012 quarter.

In addition to U.S. Generally Accepted Accounting Principles (GAAP) results, this commentary contains non-GAAP financial measures. The Company's non-GAAP results for both the September 2012 and June 2012 quarters exclude costs associated with acquisition-related inventory fair value impact, amortization related to intangible assets acquired in the Novellus transaction, certain acquisition and integration-related costs, the amortization of convertible note discounts, and rationalization of certain product configurations. See "Use of Non-GAAP Financial Measures" below for additional information.

Non-GAAP net income was $97.0 million, or $0.53 per diluted share, in the September 2012 quarter compared to non-GAAP net income of $80.9 million, or $0.60 per diluted share, for the June 2012 quarter. Non-GAAP gross margin for the September 2012 quarter was $402.3 million, or 44.4%, compared to non-GAAP gross margin of $312.7 million, or 42.1%, for the June 2012 quarter. Gross margin performance reflected solid execution combined with more favorable customer and product mix. Non-GAAP operating expenses for the September 2012 quarter increased to $284.3 million compared with the June quarter of $214.8 million primarily reflecting a full quarter of post-acquisition activity as a combined company.

"Despite a more uncertain industry environment, Lam Research achieved strong financial performance in the September quarter, delivering gross margin and operating profits above the high end of our guidance," said Martin Anstice, Lam's president and chief executive officer. "Our results reflect strong operational execution and solid progress towards the synergy targets that we've outlined. While the near-term outlook for semiconductor equipment demand has softened, we are committed to achieving the appropriate balance between cost management and continued investment in next-generation solutions for our customers. We believe that these activities will drive profitable growth for Lam when industry conditions improve," Anstice concluded.

Cash and cash equivalents, short-term investments and restricted cash and investments balances decreased to $2.9 billion at the end of the September 2012 quarter, compared to $3.0 billion at the end of the June 2012 quarter. This decrease was primarily the result of stock repurchases during the quarter, offset by cash flows from operating activities, which were approximately $249 million during the September 2012 quarter. Deferred revenue and deferred profit balances at the end of the September 2012 quarter increased to $363.5 million and $208.1 million, respectively, as compared to $335.4 million and $164.8 million, respectively, at the end of the June 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 $20.7 million as of September 23, 2012.

The geographic distribution of shipments and revenue during the September 2012 quarter is shown in the following table:

             
Region   Shipments     Revenue  
North America   18 %   18 %
Europe   7 %   7 %
Japan   8 %   8 %
Korea   16 %   24 %
Taiwan   29 %   28 %
Asia Pacific   22 %   15 %
             

Use of Non-GAAP Financial Measures

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 statements 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, but are not limited, to the anticipated revenue from shipments to Japanese customers, industry conditions, our ability to make progress towards our synergy targets for the Novellus transaction, our ability to achieve the appropriate balance between cost management and continued investment in next-generation solutions for our customers, and our ability to realize profitable growth for Lam. 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. 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.

Lam Research Corporation 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 and NASDAQ-100 ® 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  
    September 23,     June 24,     September 25,  
    2012     2012     2011  
Revenue   $ 906,888     $ 741,814     $ 680,436  
Cost of goods sold     573,002       443,601       396,553  
    Gross margin     333,886       298,213       283,883  
    Gross margin as a percent of revenue     36.8 %     40.2 %     41.7 %
Research and development     163,311       124,528       102,559  
Selling, general and administrative     153,863       141,015       80,200  
Restructuring and impairments     -       -       1,725  
    Total operating expenses     317,174       265,543       184,484  
    Operating income     16,712       32,670       99,399  
    Operating margin as a percent of revenue     1.8 %     4.4 %     14.6 %
Other income (expense), net     (9,938 )     (9,889 )     (12,073 )
    Income before income taxes     6,774       22,781       87,326  
Income tax expense     4,006       4,712       15,488  
    Net income   $ 2,768     $ 18,069     $ 71,838  
Net income per share:                        
  Basic net income per share   $ 0.02     $ 0.13     $ 0.58  
  Diluted net income per share   $ 0.02     $ 0.13     $ 0.58  
Number of shares used in per share calculations:                        
  Basic     179,928       133,997       123,130  
  Diluted     181,926       135,842       124,049  
                         
                         
 
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
         
    September 23,   June 24,
    2012   2012
    (unaudited)   (1)
ASSETS            
Cash and cash equivalents   $ 1,411,466   $ 1,564,752
Short-term investments     1,312,767     1,297,931
Accounts receivable, net     640,217     765,818
Inventories     567,920     632,853
Deferred income taxes     136,556     47,782
Other current assets     100,490     105,973
  Total current assets     4,169,416     4,415,109
Property and equipment, net     593,202     584,596
Restricted cash and investments     166,196     166,335
Goodwill and intangible assets     2,642,770     2,686,730
Other assets     152,762     151,882
  Total assets   $ 7,724,346   $ 8,004,652
             
LIABILITIES AND STOCKHOLDERS' EQUITY            
Current liabilities   $ 854,257   $ 1,426,928
             
Long-term debt, convertible notes, and capital leases   $ 1,278,792   $ 761,783
Income taxes payable     282,844     274,240
Other long-term liabilities     296,807     219,577
  Total liabilities     2,712,700     2,682,528
             
Senior convertible notes     -     190,343
Stockholders' equity     5,011,646     5,131,781
  Total liabilities and stockholders' equity   $ 7,724,346   $ 8,004,652
             
(1) Derived from audited financial statements            
             
 
   
LAM RESEARCH CORPORATION  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(in thousands)  
(unaudited)  
                   
    Three Months Ended  
    September 23,     June 24,     September 25,  
    2012     2012     2011  
CASH FLOWS FROM OPERATING ACTIVITIES:                        
Net income   $ 2,768     $ 18,069     $ 71,838  
Adjustments to reconcile net income to net cash provided by operating activities:                        
  Depreciation and amortization     74,816       34,576       21,360  
  Deferred income taxes     (12,017 )     39,356       -  
  Restructuring and impairment charges, net     -       -       1,725  
  Equity-based compensation expense     24,414       29,174       17,744  
  Income tax benefit on equity-based compensation plans     -       1,429       659  
  Excess tax benefit on equity-based compensation plans     -       (394 )     (1,951 )
  Amortization of convertible note discount     7,752       7,014       6,593  
  Impairment of investment     -       -       1,724  
  Other, net     8,406       7,206       1,423  
  Changes in operating assets and liabilities:     143,123       (39,715 )     (34,215 )
    Net cash provided by operating activities     249,262       96,715       86,900  
                         
CASH FLOWS FROM INVESTING ACTIVITIES:                        
Capital expenditures and intangible assets     (43,965 )     (36,880 )     (15,732 )
Cash acquired in business acquisition     -       418,681       -  
Net sales/maturities (purchases) of available-for-sale securities     (16,638 )     329,689       (85,259 )
Transfer of restricted cash and investments     146       (29 )     17  
    Net cash provided by (used for) investing activities     (60,457 )     711,461       (100,974 )
                         
CASH FLOWS FROM FINANCING ACTIVITIES:                        
Principal payments on long-term debt and capital lease obligations     (665 )     (1,101 )     (1,564 )
Excess tax benefit on equity-based compensation plans     -       394       1,951  
Net cash received in settlement (paid in advance for) stock repurchase contracts     -       -       (75,000 )
Treasury stock purchases     (355,079 )     (661,059 )     (72,053 )
Reissuances of treasury stock related to employee stock purchase plan     9,925       8,765       8,858  
Proceeds from issuance of common stock     951       -       164  
    Net cash used for financing activities     (344,868 )     (653,001 )     (137,644 )
Effect of exchange rate changes on cash     2,777       (690 )     (1,096 )
Net increase (decrease) in cash and cash equivalents     (153,286 )     154,485       (152,814 )
Cash and cash equivalents at beginning of period     1,564,752       1,410,267       1,492,132  
Cash and cash equivalents at end of period   $ 1,411,466     $ 1,564,752     $ 1,339,318  
                         
                         
   
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 23,     June 24,  
    2012     2012  
U.S. GAAP net income   $ 2,768     $ 18,069  
Pre-tax non-GAAP items:                
  Costs associated with rationalization of certain product configurations - cost of goods sold     3,210       4,045  
  Amortization related to intangible assets acquired in Novellus transaction - cost of goods sold     20,715       4,540  
  Acquisition-related inventory fair value impact - cost of goods sold     43,842       5,864  
  Integration costs - cost of goods sold     694       -  
  Acquisition-related costs - operating expenses     -       37,374  
  Integration costs - operating expenses     13,500       7,293  
  Amortization related to intangible assets acquired in Novellus transaction - operating expenses     19,418       4,256  
  Costs associated with rationalization of certain product configurations - operating expenses     -       1,850  
  Amortization of convertible note discount, Lam notes - other income (expense), net     6,910       6,830  
  Amortization of convertible note discount, Novellus assumed notes - other income (expense), net     842       184  
  Acquisition-related costs - other income (expense), net     -       2,300  
Net tax benefit on non-GAAP items     (14,886 )     (11,732 )
Non-GAAP net income   $ 97,013     $ 80,873  
Non-GAAP net income per diluted share   $ 0.53     $ 0.60  
Number of shares used for diluted per share calculation     181,926       135,842  
                 
                 
             
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 23,     June 24,  
    2012     2012  
U.S. GAAP gross margin   $ 333,886     $ 298,213  
Pre-tax non-GAAP items:                
  Costs associated with rationalization of certain product configurations - cost of goods sold     3,210       4,045  
  Amortization related to intangible assets acquired in Novellus transaction - cost of goods sold     20,715       4,540  
  Acquisition-related inventory fair value impact - cost of goods sold     43,842       5,864  
  Integration costs - cost of goods sold     694       -  
Non-GAAP gross margin   $ 402,347     $ 312,662  
U.S. GAAP gross margin as a percentage of revenue     36.8 %     40.2 %
Non-GAAP gross margin as a percentage of revenue     44.4 %     42.1 %
U.S. GAAP operating expenses   $ 317,174     $ 265,543  
Pre-tax non-GAAP items:                
  Acquisition-related costs - operating expenses     -       (37,374 )
  Integration costs - operating expenses     (13,500 )     (7,293 )
  Amortization related to intangible assets acquired in Novellus transaction - operating expenses     (19,418 )     (4,256 )
  Costs associated with rationalization of certain product configurations - operating expenses     -       (1,850 )
Non-GAAP operating expenses   $ 284,256     $ 214,770  
Non-GAAP operating income   $ 118,091     $ 97,892  
Non-GAAP operating margin as a percent of revenue     13.0 %     13.2 %
                 
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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