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