Lam Research Corporation Reports Financial Results for the Quarter Ended March 27, 2016
/EINPresswire.com/ -- FREMONT, CA--(Marketwired - April 20, 2016) - Lam Research Corp. (NASDAQ: LRCX) today announced financial results for the quarter ended March 27, 2016 (the "March 2016 quarter").
Highlights for the March 2016 quarter were as follows:
- Shipments of $1,446 million and revenue of $1,314 million.
- GAAP gross margin of 43.5%, GAAP operating margin of 14.5%, and GAAP diluted EPS of $0.82.
- Non-GAAP gross margin of 45.1%, non-GAAP operating margin of 18.4%, and non-GAAP diluted EPS of $1.18.
Key Financial Data for the Quarters Ended March 27, 2016 and December 27,
2015
(in thousands, except per-share data, percentages, and basis points)
U.S. GAAP
---------------------------------------------------------------------------
March 2016 December 2015 Change Q/Q
------------- -------------- -------------
Shipments $ 1,446,002 $ 1,287,893 + 12%
Revenue $ 1,314,055 $ 1,425,534 - 8%
Gross margin as percentage of
revenue 43.5% 43.9% - 40 bps
Operating margin as percentage of
revenue 14.5% 16.8% - 230 bps
Diluted EPS $ 0.82 $ 1.28 - 36%
Non-GAAP
---------------------------------------------------------------------------
March 2016 December 2015 Change Q/Q
------------- -------------- -------------
Shipments $ 1,446,002 $ 1,287,893 + 12%
Revenue $ 1,314,055 $ 1,425,534 - 8%
Gross margin as percentage of
revenue 45.1% 45.5% - 40 bps
Operating margin as percentage of
revenue 18.4% 20.8% - 240 bps
Diluted EPS $ 1.18 $ 1.57 - 25%
U.S. GAAP Financial Results
For the March 2016 quarter, revenue was $1,314 million, gross margin was $571 million, or 43.5% of revenue, operating expenses were $381 million, operating margin was 14.5% of revenue, and net income was $143 million, or $0.82 per diluted share on a GAAP basis. This compares to revenue of $1,426 million, gross margin of $627 million, or 43.9% of revenue, operating expenses of $388 million, operating margin of 16.8% of revenue, and net income of $223 million, or $1.28 per diluted share, for the quarter ended December 27, 2015 (the "December 2015 quarter").
Non-GAAP Financial Results
For the March 2016 quarter, non-GAAP gross margin was $593 million or 45.1% of revenue, non-GAAP operating expenses were $350 million, non-GAAP operating margin was 18.4% of revenue, and non-GAAP net income was $203 million, or $1.18 per diluted share. This compares to non-GAAP gross margin of $648 million or 45.5% of revenue, non-GAAP operating expenses of $352 million, non-GAAP operating margin of 20.8% of revenue, and non-GAAP net income of $270 million, or $1.57 per diluted share for the December 2015 quarter.
"Lam is off to a very solid 2016 beginning, with our customer trust priority and strong execution combining to deliver financial results that met or exceeded expectations across the board," said Martin Anstice, Lam Research's President and Chief Executive Officer. "By partnering closely with our customers we facilitate key technology inflections like 3D device architectures and multi-patterning process flows, we are increasing our strategic relevance and positioning the company to sustain multi-year outperformance within our industry. We expect to combine with KLA-Tencor mid-year and are focused on accelerating momentum to innovate beyond what is possible currently, for the benefit of all Lam stakeholders and the broad semiconductor eco-system. We are privileged to have this opportunity and are enthusiastic about our potential."
Balance Sheet and Cash Flow Results
Cash and cash equivalents, short-term investments, and restricted cash and investments balances increased to $4.8 billion at the end of the March 2016 quarter compared to $4.7 billion at the end of the December 2015 quarter. This increase was primarily the result of approximately $183 million in cash flows from operating activities which was partially offset by approximately $20 million of common stock repurchases related to net share settlement on employee stock-based compensation; approximately $46 million of capital expenditures; and approximately $48 million of dividends paid to stockholders during the March 2016 quarter.
Deferred revenue at the end of the March 2016 quarter increased to $511 million as compared to $395 million at the end of the December 2015 quarter. Deferred profit at the end of the March 2016 quarter increased to $334 million as compared to $261 million at the end of the December 2015 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 estimated future revenue from shipments to Japanese customers was approximately $121 million as of March 27, 2016.
Geographic Distribution
The geographic distribution of shipments and revenue during the March 2016 quarter is shown in the following table:
Region Shipments Revenue
-------------------------------------------- -------------- --------------
Taiwan 19% 27%
Korea 25% 27%
Japan 12% 13%
China 27% 15%
United States 6% 7%
Southeast Asia 8% 7%
Europe 3% 4%
Outlook
For the June 2016 quarter, Lam is providing the following guidance:
Reconciling
U.S. GAAP Items Non-GAAP
--------------------- ----------- ---------------------
1.575 75 1.575 75
Shipments $Billion +/- $Million - $Billion +/- $Million
1.525 75 1.525 75
Revenue $Billion +/- $Million - $Billion +/- $Million
Gross margin 44.6% +/- 1% $21 Million 46.0% +/- 1%
Operating margin 19.6% +/- 1% $37 Million 22.0% +/- 1%
Net income per
diluted share $ 1.37 +/- $ 0.10 $42 Million $ 1.63 +/- $ 0.10
Diluted share count 175 Million 2 Million 173 Million
The information provided above is only an estimate of what the Company believes is realizable as of the date of this release, and does not incorporate the potential impact of any KLA-Tencor related acquisition or integration expenses, business combinations, asset acquisitions, divestitures, financing arrangements, other investments, or other significant transactions that may be completed after the date of this release. GAAP to non-GAAP reconciling items provided include only those items that are known and can be estimated as of the date of this release. Actual results will vary from this model and the variations may be material. Reconciling items included above are as follows:
- Gross Margin -- amortization related to intangible assets acquired in the Novellus transaction, $21 million.
- Operating margin -- amortization related to intangible assets acquired in the Novellus transaction, $37 million.
- Earnings per share -- amortization related to intangible assets acquired in the Novellus transaction, $37 million; amortization of note discounts, $7 million; amortization of bridge loan issuance costs and related fees associated with the KLA-Tencor acquisition, $7 million; and associated tax benefit for non-GAAP items ($9) million; totaling $42 million.
- Diluted share count -- impact of a note hedge issued contemporaneously with the convertible notes due 2016 and 2018, 2 million shares.
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 2016 and December 2015 quarters exclude amortization related to intangible assets acquired in the Novellus transaction, restructuring impacts, costs associated with the KLA-Tencor acquisition, amortization of bridge loan issuance costs and other related fees associated with the KLA-Tencor acquisition, the amortization of notes discounts, and tax benefit of non-GAAP items. Additionally, the March 2016 quarter excludes income tax benefit on resolution of certain tax matters and the December 2015 quarter non-GAAP results exclude Novellus acquisition transaction related inventory fair value impact and income tax benefit from tax extenders, primarily the research and development credit.
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 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 website 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 created by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements relate to, but are not limited to; the estimated future revenue from shipments to Japanese customers, our ability to facilitate key technology inflections or increase the strategic relevance of the company, our ability to position the company to sustain multi-year outperformance within our industry, the legal and business factors that may affect our future tax rate, our ability to close our proposed acquisition of KLA-Tencor Corporation ("KLA-Tencor"), and our guidance for shipments, revenue, gross margin, operating margin, net income per diluted share, and diluted share count. Some factors that may affect these forward-looking statements include: the proposed transaction with KLA-Tencor may not close and if it does close we may not receive the expected benefits of the proposed transaction, such as the scale and breadth of critical technologies and better financial performance for our stockholders; business conditions in the consumer electronics industry, the semiconductor industry and the overall economy may deteriorate or change; and the actions of our customers and competitors may be inconsistent with our expectations, as well as the other risks and uncertainties that are described in the documents filed or furnished by us with the Securities and Exchange Commission, including specifically the Risk Factors described in our annual report on Form 10-K for the fiscal year ended June 28, 2015 and quarterly reports on Form 10-Q for the fiscal quarters ended September 27, 2015 and December 27, 2015. These uncertainties and changes could materially affect the forward looking statements and cause actual results to vary from expectations in a material way. The Company undertakes no obligation to update the information or statements made in this 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 deposition, etch, strip, and wafer cleaning solutions helps 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 its customers to shape the future of technology. Based in Fremont, Calif., Lam Research is a NASDAQ-100 Index ® and 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. (LRCX-F)
Consolidated Financial Tables Follow.
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data and percentages)
Three Months Ended Nine Months Ended
------------------------------------ ----------------------
March 27, December 27, March 29, March 27, March 29,
2016 2015 2015 2016 2015
---------- ------------ ---------- ---------- ----------
(unaudited)
Revenue $1,314,055 $ 1,425,534 $1,393,333 $4,339,632 $3,777,942
Cost of goods
sold 742,790 799,024 792,731 2,419,494 2,135,144
---------- ------------ ---------- ---------- ----------
Gross
margin 571,265 626,510 600,602 1,920,138 1,642,798
Gross
margin as
a percent
of
revenue 43.5% 43.9% 43.1% 44.2% 43.5%
Research and
development 221,494 220,754 217,865 676,457 603,567
Selling,
general and
administrative 159,018 166,922 142,772 478,666 442,227
---------- ------------ ---------- ---------- ----------
Total
operating
expenses 380,512 387,676 360,637 1,155,123 1,045,794
---------- ------------ ---------- ---------- ----------
Operating
income 190,753 238,834 239,965 765,015 597,004
Operating
income as
a percent
of
revenue 14.5% 16.8% 17.2% 17.6% 15.8%
Other expense,
net (29,834) (29,935) (11,389) (86,890) (26,836)
---------- ------------ ---------- ---------- ----------
Income
before
income
taxes 160,919 208,899 228,576 678,125 570,168
Income tax
(expense)
benefit (17,468) 14,081 (22,291) (23,015) (45,862)
---------- ------------ ---------- ---------- ----------
Net income $ 143,451 $ 222,980 $ 206,285 $ 655,110 $ 524,306
========== ============ ========== ========== ==========
Net income per
share:
Basic $ 0.90 $ 1.41 $ 1.30 $ 4.13 $ 3.28
========== ============ ========== ========== ==========
Diluted $ 0.82 $ 1.28 $ 1.16 $ 3.76 $ 2.96
========== ============ ========== ========== ==========
Number of
shares used
in per share
calculations:
Basic 159,039 158,424 158,992 158,605 159,975
========== ============ ========== ========== ==========
Diluted 174,373 174,242 177,531 174,329 177,231
========== ============ ========== ========== ==========
Cash dividend
declared per
common share $ 0.30 $ 0.30 $ 0.18 $ 0.90 $ 0.54
========== ============ ========== ========== ==========
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
March 27, December 27, June 28,
2016 2015 2015
------------ ------------ ------------
(unaudited) (unaudited) (1)
ASSETS
Cash and cash equivalents $ 2,232,021 $ 1,967,873 $ 1,501,539
Investments 2,306,718 2,507,607 2,574,947
Accounts receivable, net 1,236,617 1,089,850 1,093,582
Inventories 934,932 879,821 943,346
Other current assets 231,277 225,046 157,435
------------ ------------ ------------
Total current assets 6,941,565 6,670,197 6,270,849
Property and equipment, net 664,424 643,746 621,418
Restricted cash and investments 227,838 207,568 170,969
Goodwill and intangible assets 1,999,338 2,039,213 2,115,649
Other assets 191,097 189,697 185,763
------------ ------------ ------------
Total assets $ 10,024,262 $ 9,750,421 $ 9,364,648
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of convertible notes
and capital leases $ 978,982 $ 973,697 $ 1,359,650
Other current liabilities 1,363,204 1,249,283 1,271,711
------------ ------------ ------------
Total current liabilities 2,342,186 2,222,980 2,631,361
Long-term debt and capital leases 1,407,250 1,404,683 1,001,382
Income taxes payable 266,681 257,502 202,930
Other long-term liabilities 137,017 135,303 184,023
------------ ------------ ------------
Total liabilities 4,153,134 4,020,468 4,019,696
Temporary equity, convertible notes 178,789 177,662 241,808
Stockholders' equity (2) 5,692,339 5,552,291 5,103,144
------------ ------------ ------------
Total liabilities and
stockholders' equity $ 10,024,262 $ 9,750,421 $ 9,364,648
============ ============ ============
(1) Derived from audited financial statements
(2) Common shares issued and outstanding were 159,319 as of March 27, 2016,
158,568 as of December 27, 2015, and 158,531 as of June 28, 2015.
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended Nine Months Ended
---------------------------------- ----------------------
March 27, December March 29, March 27, March 29,
2016 27, 2015 2015 2016 2015
---------- ---------- ---------- ---------- ----------
(unaudited)
CASH FLOWS FROM
OPERATING
ACTIVITIES:
Net income $ 143,451 $ 222,980 $ 206,285 $ 655,110 $ 524,306
Adjustments to
reconcile net
income to net
cash provided
by operating
activities:
Depreciation
and
amortization 73,664 71,798 70,322 216,052 207,743
Deferred
income taxes (4,908) 8,176 1,739 (2,295) 8,245
Equity-based
compensation
expense 34,716 32,570 32,948 103,060 95,620
Income tax
benefit on
equity-based
compensation
plans 1,312 2,168 2,438 7,025 13,440
Excess tax
benefit on
equity-based
compensation
plans (2,262) (2,181) (2,204) (8,015) (13,207)
Amortization
of note
discounts and
issuance
costs 22,458 23,649 9,352 55,938 27,651
Gain on sale
of business — — — — (7,431)
Other, net 10,256 10,592 1,902 30,859 9,035
Changes in
operating
assets and
liabilities (95,776) (75,207) (131,745) (131,281) (371,965)
---------- ---------- ---------- ---------- ----------
Net cash
provided by
operating
activities 182,911 294,545 191,037 926,453 493,437
---------- ---------- ---------- ---------- ----------
CASH FLOWS FROM
INVESTING
ACTIVITIES:
Capital
expenditures
and intangible
assets (46,007) (28,143) (31,898) (123,604) (135,132)
Business
acquisitions,
net of cash
acquired — — — — (1,137)
Net sale
(purchase) of
available-for-
sale securities 181,938 39,202 (359,416) 192,937 (671,361)
(Issuance)
repayment of
notes
receivable (200) 8,082 — 7,882 3,978
Proceeds from
sale of
business — — — — 41,212
Other, net — (4,746) (3,322) (6,246) (3,200)
---------- ---------- ---------- ---------- ----------
Net cash
provided by
(used for)
investing
activities 135,731 14,395 (394,636) 70,969 (765,640)
---------- ---------- ---------- ---------- ----------
CASH FLOWS FROM
FINANCING
ACTIVITIES:
Principal
payments on
long-term debt
and capital
lease
obligations and
payments for
debt issuance
costs (8,479) (28,374) (119) (36,949) (900)
Proceeds from
issuance of
long-term debt,
net of issuance
costs — — 991,880 — 991,880
Excess tax
benefit on
equity-based
compensation
plans 2,262 2,181 2,204 8,015 13,207
Treasury stock
purchases (20,092) (12,798) (124,943) (131,275) (498,901)
Dividends paid (47,539) (47,896) (28,724) (143,094) (87,345)
Re-issuance of
treasury stock
related to
employee stock
purchase plan 16,387 — 14,934 35,632 31,853
Proceeds from
issuance of
common stock 308 1,173 7,403 1,858 16,235
Other, net (7) (22) — (329) —
---------- ---------- ---------- ---------- ----------
Net cash
(used for)
provided by
financing
activities (57,160) (85,736) 862,635 (266,142) 466,029
---------- ---------- ---------- ---------- ----------
Effect of
exchange rate
changes on cash
and cash
equivalents 2,666 344 (4,675) (798) (10,867)
Net increase in
cash and cash
equivalents 264,148 223,548 654,361 730,482 182,959
Cash and cash
equivalents at
beginning of
period 1,967,873 1,744,325 981,275 1,501,539 1,452,677
---------- ---------- ---------- ---------- ----------
Cash and cash
equivalents at
end of period $2,232,021 $1,967,873 $1,635,636 $2,232,021 $1,635,636
========== ========== ========== ========== ==========
Non-GAAP Financial Summary
---------------------------------------------------------------------------
(in thousands, except percentages and per share data)
(unaudited)
Three Months Ended
----------------------------
March 27, December 27
2016 2015
------------- -------------
Revenue $ 1,314,055 $ 1,425,534
Gross margin $ 592,515 $ 648,409
Gross margin as percentage of revenue 45.1% 45.5%
Operating expenses $ 350,235 $ 352,135
Operating income $ 242,280 $ 296,274
Operating margin as a percentage of revenue 18.4% 20.8%
Net income $ 202,821 $ 270,313
Net income per diluted share $ 1.18 $ 1.57
Shares used in per share calculation - diluted 172,153 171,796
Reconciliation of U.S. GAAP Net Income to Non-GAAP Net Income and U.S. GAAP
number of dilutive shares to Non-GAAP number of dilutive shares
(in thousands, except per share data)
(unaudited)
Three Months ended
----------------------------
March 27, December 27,
2016 2015
------------- -------------
U.S. GAAP net income $ 143,451 $ 222,980
Pre-tax non-GAAP items:
Amortization related to intangible assets
acquired in Novellus transaction - cost of
goods sold 21,250 21,250
Novellus acquisition-related inventory fair
value impact - cost of goods sold — 649
Restructuring charges - research and
development 72 34
KLA-Tencor acquisition-related costs -
selling, general and administrative 14,323 17,392
Amortization related to intangible assets
acquired in Novellus transaction - selling,
general and administrative 16,084 16,083
Restructuring (benefit) charges - selling,
general and administrative (202) 2,032
Amortization of note discounts - other
expense, net 9,333 9,258
Amortization of bridge loan issuance costs
and other related fees - other expense, net 13,332 13,573
Net income tax benefit on non-GAAP items (14,320) (19,335)
Income tax benefit on resolution of certain
tax matters (502) —
Income tax benefit from tax extenders,
primarily the research and development credit — (13,603)
------------- -------------
Non-GAAP net income $ 202,821 $ 270,313
============= =============
Non-GAAP net income per diluted share $ 1.18 $ 1.57
============= =============
U.S. GAAP number of shares used for per
diluted share calculation 174,373 174,242
Effect of convertible note hedge (2,220) (2,446)
------------- -------------
Non-GAAP number of shares used for per diluted
share calculation 172,153 171,796
============= =============
Reconciliation of U.S. GAAP Gross Margin, Operating Expenses and Operating
Income to Non-GAAP Gross Margin, Operating Expenses and Operating Income
(unaudited)
Three Months Ended
----------------------------
March 27, December 27,
2016 2015
------------- -------------
U.S. GAAP gross margin $ 571,265 $ 626,510
Pre-tax non-GAAP items:
Amortization related to intangible assets
acquired in Novellus transaction - cost of
goods sold 21,250 21,250
Novellus acquisition-related inventory fair
value impact - cost of goods sold — 649
------------- -------------
Non-GAAP gross margin $ 592,515 $ 648,409
============= =============
U.S. GAAP gross margin as a percentage of
revenue 43.5% 43.9%
Non-GAAP gross margin as a percentage of
revenue 45.1% 45.5%
U.S. GAAP operating expenses $ 380,512 $ 387,676
Pre-tax non-GAAP items:
Restructuring charges - research and
development (72) (34)
KLA-Tencor acquisition-related costs -
selling, general and administrative (14,323) (17,392)
Amortization related to intangible assets
acquired in Novellus transaction - selling,
general and administrative (16,084) (16,083)
Restructuring benefit (charges) - selling,
general and administrative 202 (2,032)
------------- -------------
Non-GAAP operating expenses $ 350,235 $ 352,135
============= =============
Non-GAAP operating income $ 242,280 $ 296,274
============= =============
GAAP operating margin as percent of revenue 14.5% 16.8%
Non-GAAP operating margin as a percent of
revenue 18.4% 20.8%
Lam Research Corporation Contacts:
Satya Kumar
Investor Relations
phone: 510-572-3232
e-mail: satya.kumar@lamresearch.com
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