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

Companies mentioned in this article: Lam Research Corporation

FREMONT, CA -- (Marketwire) -- 10/17/12 -- 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   Three Months
                                                   Ended          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   Three Months
                                                   Ended          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 Contact:
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