Highlights for the December 2013 quarter were as follows:
- Shipments of $1,139 million, up 15% from the prior quarter
- Revenue of $1,116 million, up 10% from the prior quarter
- GAAP gross margin of 43.7%, GAAP operating margin of 14.7% and GAAP diluted EPS of $0.87
- Non-GAAP gross margin of 45.8%, non-GAAP operating margin of 18.7%, and non-GAAP diluted EPS of $1.10
Lam Research Corporation
Financial Highlights for the Quarters Ended December 29, 2013 and
September 29, 2013
(in thousands, except per share data and percentages)
U.S. GAAP
-------------------------------------------------------------------------
December 2013 September 2013 Change Q/Q
-------------- --------------- --------------
Revenue $ 1,116,061 $ 1,015,059 +10%
Gross margin as
percentage of revenue 43.7% 42.5% +120bps
Operating margin as
percentage of revenue 14.7% 10.4% +430bps
Diluted EPS $ 0.87 $ 0.50 +74%
Non-GAAP
-------------------------------------------------------------------------
December 2013 September 2013 Change Q/Q
-------------- --------------- --------------
Revenue $ 1,116,061 $ 1,015,059 +10%
Gross margin as
percentage of revenue 45.8% 45.0% +80bps
Operating margin as
percentage of revenue 18.7% 16.2% +250bps
Diluted EPS $ 1.10 $ 0.81 +36%
GAAP Financial Results
Revenue for the period was $1,116 million, gross margin was $487.8 million, or 43.7% of revenue, operating expenses were $323.3 million, and net income was $149.0 million, or $0.87 per diluted share on a GAAP basis. This compares to revenue of $1,015 million, gross margin of $431.9 million, or 42.5% of revenue, operating expenses of $326.5 million, and net income of $85.5 million, or $0.50 per diluted share, for the September 2013 quarter.
Non-GAAP Financial Results
Non-GAAP gross margin was $510.8 million, or 45.8% of revenue, non-GAAP operating expenses were $302.1 million, and non-GAAP net income was $188.7 million, or $1.10 per diluted share. This compares to non-GAAP gross margin of $456.7 million, or 45.0% of revenue, non-GAAP operating expenses of $291.9 million, and non-GAAP net income of $139.2 million, or $0.81 per diluted share, for the September 2013 quarter.
"Calendar 2013 was an extraordinary year for Lam Research, highlighted by strong operating and financial performance. Our December quarter results closed the year with record shipments, record revenues and earnings that exceeded our expectations," stated Martin Anstice, Lam Research's president and chief executive officer. "Our outlook for continued healthy levels of wafer fab equipment spending in 2014 reflects our customers' planned investments in key technology inflections tempered by their focus on maintaining balanced supply and demand. Against this industry back drop, we are further strengthening our emphasis on customer trust and improving competitiveness to reinforce the opportunities for future growth and enhanced financial performance of Lam."
Balance Sheet and Cash Flow Results
Cash and cash equivalents, short-term investments, and restricted cash and investment balances increased to $2.7 billion at the end of the December 2013 quarter compared to $2.6 billion at the end of the September 2013 quarter. This increase was primarily the result of approximately $129 million in cash flows from operating activities during the December 2013 quarter, partially offset by $48 million of stock repurchases.
Deferred revenue and deferred profit balances at the end of the December 2013 quarter increased to $405.0 million and $224.4 million, respectively, as compared to $334.0 million and $188.4 million, respectively, at the end of the September 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 $53.5 million as of December 29, 2013.
Geographic Distribution
The geographic distribution of shipments and revenue during the December 2013 quarter is shown in the following table:
Region Shipments Revenue
-------------------------------------------- --------------- ---------------
North America 9% 13%
Europe 7% 5%
Japan 13% 17%
Korea 24% 19%
Taiwan 22% 28%
Asia Pacific 25% 18%
Outlook
For the March 2014 quarter, Lam is providing the following guidance on a non-GAAP basis:
- Shipments of approximately $1.250 billion plus or minus $30 million
- Revenue of approximately $1.215 billion plus or minus $30 million
- Gross margin of approximately 45.0% plus or minus 1.0%
- Operating margin as a percent of revenue of approximately 19.5% plus or minus 1.0%
- Earnings per share of approximately $1.15 plus or minus $0.05, assuming a diluted share count of 173 million
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 December 2013 and September 2013 quarters exclude costs associated with the fair-value impact of acquisition-related inventory, amortization related to intangible assets acquired in the Novellus transaction, certain integration-related costs, rationalization of certain product configurations, the impairment of a long-lived asset, the amortization of convertible note discounts, and the tax benefit on successful resolution of certain tax matters. Additionally, the December 2013 quarter non-GAAP results exclude the gain on sale of an investment and the September 2013 quarter non-GAAP results excluded certain restructuring charges and the tax expense associated with legal-entity integration.
Management uses non-GAAP gross margin, operating income, operating expenses, operating margin, net income, and net income per diluted share to evaluate the Company's operating and financial results. The Company believes the presentation of non-GAAP results is useful to investors for analyzing business trends and comparing performance to prior periods, along with enhancing the investors' ability to view the Company's results from management's perspective. Tables presenting reconciliations of non-GAAP results to U.S. GAAP results are included at the end of this press release and on the Company's web site at http://investor.lamresearch.com.
Caution Regarding Forward-Looking Statements
Statements made in this press release that are not of historical fact are forward-looking statements and are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements relate to, but are not limited to, the anticipated revenue from shipments to Japanese customers, our opportunities for growth, our financial performance, our wafer fab equipment spending outlook, the expected rate of investment in key technology inflections, the success of our strategies for maintaining customer trust and improving competitiveness, the support from our customers, and our guidance for shipments, revenue, gross margin, operating margin, and earnings per share. Some factors that may affect these forward-looking statements include: business conditions in the consumer electronics industry, the semiconductor industry and the overall economy; the strength of the financial performance of our existing and prospective customers; the introduction of new and innovative technologies; the occurrence and pace of technology transitions and conversions; the actions of our competitors, consumers, semiconductor companies and key suppliers and subcontractors; and the success of research and development and sales and marketing programs. These forward-looking statements are based on current expectations and are subject to uncertainties and changes in condition, significance, value and effect as well as other risks detailed in documents filed by us with the Securities and Exchange Commission, including specifically our report on Form 10-K for the year ended June 30, 2013 and Form 10-Q for the three months ended September 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. (
Consolidated Financial Tables Follow.
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data and percentages)
(unaudited)
Three Months Ended Six Months Ended
---------------------------------- ----------------------
December September December December December
29, 29, 23, 29, 23,
2013 2013 2012 2013 2012
---------- ---------- ---------- ---------- ----------
Revenue $1,116,061 $1,015,059 $ 860,886 $2,131,120 $1,767,774
Cost of goods
sold 628,272 583,201 545,472 1,211,473 1,118,474
---------- ---------- ---------- ---------- ----------
Gross margin 487,789 431,858 315,414 919,647 649,300
Gross margin
as a
percent of
revenue 43.7% 42.5% 36.6% 43.2% 36.7%
Research and
development 174,477 170,567 165,951 345,044 329,262
Selling, general
and
administrative 148,838 155,883 145,421 304,721 299,284
---------- ---------- ---------- ---------- ----------
Total
operating
expenses 323,315 326,450 311,372 649,765 628,546
---------- ---------- ---------- ---------- ----------
Operating
income 164,474 105,408 4,042 269,882 20,754
Operating
margin as a
percent of
revenue 14.7% 10.4% 0.5% 12.7% 1.2%
Other expense,
net (3,837) (14,262) (13,390) (18,099) (23,328)
---------- ---------- ---------- ---------- ----------
Income before
income taxes 160,637 91,146 (9,348) 251,783 (2,574)
Income tax
expense
(benefit) 11,645 5,640 (15,756) 17,285 (11,750)
---------- ---------- ---------- ---------- ----------
Net income $ 148,992 $ 85,506 $ 6,408 $ 234,498 $ 9,176
========== ========== ========== ========== ==========
Net income per
share:
Basic net
income per
share $ 0.92 $ 0.52 $ 0.04 $ 1.44 $ 0.05
========== ========== ========== ========== ==========
Diluted net
income per
share $ 0.87 $ 0.50 $ 0.04 $ 1.37 $ 0.05
========== ========== ========== ========== ==========
Number of shares
used in per
share
calculations:
Basic 162,305 162,896 170,699 162,603 175,314
========== ========== ========== ========== ==========
Diluted 171,757 171,363 173,027 171,592 177,490
========== ========== ========== ========== ==========
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
December 29, September 29, June 30,
2013 2013 2013
------------- ------------- -----------
(unaudited) (unaudited) (1)
ASSETS
Cash and cash equivalents $ 1,132,555 $ 1,156,184 $ 1,162,473
Short-term investments 1,389,735 1,300,031 1,334,745
Accounts receivable, net 909,720 713,524 602,624
Inventories 661,572 614,790 559,317
Deferred income taxes 17,095 29,090 27,674
Other current assets 138,359 110,633 106,996
------------- ------------- -----------
Total current assets 4,249,036 3,924,252 3,793,829
Property and equipment, net 546,193 564,845 603,910
Restricted cash and investments 166,395 166,385 166,536
Goodwill and intangible assets 2,453,066 2,484,900 2,526,541
Other assets 141,108 149,963 159,499
------------- ------------- -----------
Total assets $ 7,555,798 $ 7,290,345 $ 7,250,315
============= ============= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 1,522,572 $ 1,402,890 $ 1,404,475
------------- ------------- -----------
Long-term debt, convertible notes,
and capital leases $ 803,276 $ 796,373 $ 789,256
Income taxes payable 248,996 248,462 246,479
Other long-term liabilities 129,710 129,306 134,313
------------- ------------- -----------
Total liabilities 2,704,554 2,577,031 2,574,523
============= ============= ===========
Senior convertible notes 185,154 186,042 186,920
Stockholders' equity (2) 4,666,090 4,527,272 4,488,872
------------- ------------- -----------
Total liabilities and
stockholders' equity $ 7,555,798 $ 7,290,345 $ 7,250,315
============= ============= ===========
(1) Derived from audited financial statements
(2) Common shares issued and outstanding were 162,169 shares as of December
29, 2013, 162,217 shares as of September 29, 2013 and 162,873 shares as of
June 30, 2013.
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended Six Months Ended
---------------------------------- ----------------------
December September December December December
29, 29, 23, 29, 23,
2013 2013 2012 2013 2012
---------- ---------- ---------- ---------- ----------
CASH FLOWS FROM
OPERATING
ACTIVITIES:
Net income $ 148,992 $ 85,506 $ 6,408 $ 234,498 $ 9,176
Adjustments to
reconcile net
income to net
cash provided by
operating
activities:
Depreciation
and
amortization 73,552 74,331 78,388 147,883 153,204
Deferred income
taxes 12,457 - (7,320) 12,457 (19,337)
Impairment of
long-lived
asset 628 7,004 - 7,632 -
Equity-based
compensation
expense 23,046 23,235 24,027 46,281 48,441
Amortization of
convertible
note discount 8,217 8,122 7,843 16,339 15,595
Other, net (2,428) 4,115 14,694 1,687 25,744
Changes in
operating
assets and
liabilities: (135,441) (150,388) 69,186 (285,829) 209,665
---------- ---------- ---------- ---------- ----------
Net cash
provided by
operating
activities 129,023 51,925 193,226 180,948 442,488
---------- ---------- ---------- ---------- ----------
CASH FLOWS FROM
INVESTING
ACTIVITIES:
Capital
expenditures and
intangible
assets (38,323) (23,778) (38,924) (62,101) (82,889)
Cash paid for
business
acquisition (18,388) - (8,716) (18,388) (8,716)
Net
sales/maturities
(purchases) of
available-for-
sale securities (88,754) 42,567 (23,250) (46,187) (39,888)
(Issuance)
repayments of
notes receivable 10,000 - - 10,000 -
Proceeds from
sale of assets 21,635 - 660 21,635 660
Transfer of
restricted cash
and investments - 150 33 150 179
---------- ---------- ---------- ---------- ----------
Net cash
provided by
(used for)
investing
activities (113,830) 18,939 (70,197) (94,891) (130,654)
---------- ---------- ---------- ---------- ----------
CASH FLOWS FROM
FINANCING
ACTIVITIES:
Principal
payments on
long-term debt
and capital
lease
obligations (719) (88) (115) (807) (780)
Treasury stock
purchases (47,910) (104,285) (355,010) (152,195) (710,089)
Reissuances of
treasury stock
related to
employee stock
purchase plan (35) 15,154 - 15,119 9,925
Proceeds from
issuance of
common stock 8,449 12,574 6,583 21,023 7,534
---------- ---------- ---------- ---------- ----------
Net cash used
for
financing
activities (40,215) (76,645) (348,542) (116,860) (693,410)
---------- ---------- ---------- ---------- ----------
Effect of
exchange rate
changes on cash 1,393 (508) 4,236 885 7,013
Net decrease in
cash and cash
equivalents (23,629) (6,289) (221,277) (29,918) (374,563)
Cash and cash
equivalents at
beginning of
period 1,156,184 1,162,473 1,411,466 1,162,473 1,564,752
---------- ---------- ---------- ---------- ----------
Cash and cash
equivalents at
end of period $1,132,555 $1,156,184 $1,190,189 $1,132,555 $1,190,189
========== ========== ========== ========== ==========
Non-GAAP Financial Summary
(in thousands, except percentages and per share data)
(unaudited)
Three Months Three Months
Ended Ended
--------------- ---------------
December 29, September 29,
2013 2013
--------------- ---------------
Revenue $ 1,116,061 $ 1,015,059
Gross margin $ 510,769 $ 456,709
Gross margin as percentage of revenue 45.8% 45.0%
Operating expenses $ 302,103 $ 291,887
Operating income $ 208,666 $ 164,882
Operating margin as a percentage of
revenue 18.7% 16.2%
Net income $ 188,745 $ 139,227
Net income per diluted share $ 1.10 $ 0.81
Shares used in per share calculation -
diluted 171,757 171,363
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
--------------- ---------------
December 29, September 29,
2013 2013
--------------- ---------------
U.S. GAAP net income $ 148,992 $ 85,506
Pre-tax non-GAAP items:
Amortization related to intangible
assets acquired in Novellus transaction
- cost of goods sold 21,491 21,480
Acquisition-related inventory fair value
impact - cost of goods sold 1,225 2,047
Integration costs - cost of goods sold 264 1,324
Integration costs - operating expenses 2,785 8,063
Amortization related to intangible
assets acquired in Novellus transaction
- operating expenses 16,953 16,947
Restructuring charges - operating
expenses - 1,705
Costs associated with rationalization of
certain product configurations -
operating expenses 846 844
Impairment of long lived asset -
operating expenses 628 7,004
Amortization of convertible note
discount, Lam notes - other expense,
net 7,329 7,243
Amortization of convertible note
discount, Novellus assumed notes -
other expense, net 762 859
Gain on sale of investment - other
expense, net (4,813) -
Net tax benefit on non-GAAP items (6,404) (11,646)
Net tax benefit on successful resolution
of certain tax matters (1,313) (2,286)
Tax expense associated with legal-entity
integration - 137
--------------- ---------------
Non-GAAP net income $ 188,745 $ 139,227
=============== ===============
Non-GAAP net income per diluted share $ 1.10 $ 0.81
=============== ===============
Number of shares used for diluted per
share calculation 171,757 171,363
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
--------------- ---------------
December 29, September 29,
2013 2013
--------------- ---------------
U.S. GAAP gross margin $ 487,789 $ 431,858
Pre-tax non-GAAP items:
Amortization related to intangible
assets acquired in Novellus transaction
- cost of goods sold 21,491 21,480
Acquisition-related inventory fair value
impact - cost of goods sold 1,225 2,047
Integration costs - cost of goods sold 264 1,324
--------------- ---------------
Non-GAAP gross margin $ 510,769 $ 456,709
=============== ===============
U.S. GAAP gross margin as a percentage of
revenue 43.7% 42.5%
Non-GAAP gross margin as a percentage of
revenue 45.8% 45.0%
U.S. GAAP operating expenses $ 323,315 $ 326,450
Pre-tax non-GAAP items:
Integration costs - operating expenses (2,785) (8,063)
Amortization related to intangible
assets acquired in Novellus transaction
- operating expenses (16,953) (16,947)
Restructuring charges - operating
expenses - (1,705)
Costs associated with rationalization of
certain product configurations -
operating expenses (846) (844)
Impairment of long lived asset -
operating expenses (628) (7,004)
--------------- ---------------
Non-GAAP operating expenses $ 302,103 $ 291,887
=============== ===============
Non-GAAP operating income $ 208,666 $ 164,822
=============== ===============
Non-GAAP operating margin as a percent of
revenue 18.7% 16.2%
Lam Research Corporation Contacts: Shanye Hudson Investor Relations phone: 510-572-4589 e-mail: shanye.hudson@lamresearch.com