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

Companies mentioned in this article: Lam Research Corporation

FREMONT, CA -- (Marketwired) -- 04/23/14 -- 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
---------------------------------------------------------------------------
                                                      December      Change
                                        March 2014      2013         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
---------------------------------------------------------------------------
                                                      December      Change
                                        March 2014      2013         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:


                                      Reconciling
                       GAAP              Items             Non-GAAP
           -----------------------------------------------------------------
              $1.15                                 $1.15
Shipments    Billion   +/- $50 Million     -       Billion   +/- $50 Million
              $1.24                                 $1.24
Revenue      Billion   +/- $50 Million     -       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   Three Months
                                                   Ended          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   Three Months
                                                   Ended          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   Three Months
                                                   Ended          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%


Contact:

Lam Research Corporation Contacts:
Shanye Hudson
Investor Relations
phone: 510-572-4589
e-mail: shanye.hudson@lamresearch.com