EX-99.1 2 lrcx_exhibitx991xq2x2017.htm QUARTERLY EARNINGS RELEASE Exhibit


Exhibit 99.1
FOR IMMEDIATE RELEASE        
Lam Research Corporation Contacts:
Satya Kumar, Investor Relations, phone: 510-572-1615, e-mail: investor.relations@lamresearch.com
Lam Research Corporation Reports Financial Results for the Quarter Ended December 25, 2016
FREMONT, Calif., January 25, 2017 - Lam Research Corp. (Nasdaq: LRCX) today announced financial results for the quarter ended December 25, 2016 (the "December 2016 quarter").
Highlights for the December 2016 quarter were as follows:
•
Shipments of $1.92 billion and revenue of $1.88 billion.
•
GAAP gross margin of 45.0%, GAAP operating margin of 23.4%, and GAAP diluted EPS of $1.81.
•
Non-GAAP gross margin of 46.4%, non-GAAP operating margin of 26.0%, and non-GAAP diluted EPS of $2.24.
Key Financial Data for the Quarters Ended
December 25, 2016 and September 25, 2016
(in thousands, except per-share data, percentages, and basis points) 
U.S. GAAP
 
  
December 2016
 
September 2016
 
Change Q/Q
Shipments
  
$
1,922,549

 
$
1,708,483

 
+ 13%
Revenue
  
$
1,882,299

 
$
1,632,419

 
+ 15%
Gross margin as percentage of revenue
  
45.0
%
 
43.9
%
 
+ 110 bps
Operating margin as percentage of revenue
  
23.4
%
 
19.4
%
 
+ 400 bps
Diluted EPS
  
$
1.81

 
$
1.47

 
+ 23%
 
Non-GAAP
 
  
December 2016
 
September 2016
 
Change Q/Q
Shipments
  
$
1,922,549

 
$
1,708,483

 
+ 13%
Revenue
  
$
1,882,299

 
$
1,632,419

 
+ 15%
Gross margin as percentage of revenue
  
46.4
%
 
45.2
%
 
+ 120 bps
Operating margin as percentage of revenue
  
26.0
%
 
22.4
%
 
+ 360 bps
Diluted EPS
  
$
2.24

 
$
1.81

 
+ 24%
U.S. GAAP Financial Results
For the December 2016 quarter, revenue was $1,882 million, gross margin was $847 million, or 45.0% of revenue, operating expenses were $407 million, operating margin was 23.4% of revenue, and net income was $333 million, or $1.81 per diluted share on a GAAP basis. This compares to revenue of $1,632 million, gross margin of $716 million, or 43.9% of revenue, operating expenses of $400 million, operating margin of 19.4% of revenue, and net income of $264 million, or $1.47 per diluted share, for the quarter ended September 25, 2016 (the “September 2016 quarter”).
Non-GAAP Financial Results
For the December 2016 quarter, non-GAAP gross margin was $874 million or 46.4% of revenue, non-GAAP operating expenses were $384 million, non-GAAP operating margin was 26.0% of revenue, and non-GAAP net income was $405 million, or $2.24 per diluted share. This compares to non-GAAP gross margin of $737 million or 45.2% of revenue, non-GAAP operating expenses of $372 million, non-GAAP operating margin of 22.4% of revenue, and non-GAAP net income of $322 million, or $1.81 per diluted share for the September 2016 quarter.
“Lam delivered another record for shipments, revenue, and net income in December, concluding a fifth consecutive year of revenue growth and outperformance when compared against the overall wafer fab equipment industry,” said Martin Anstice, Lam Research’s President and Chief Executive Officer. “Lam’s results occur through the hard work and commitment of our employees worldwide and the increasing strategic relevance and partnership established with our customers. Looking ahead to 2017, the combination of healthy end-demand in established business segments and new application drivers are setting the course for another year of industry growth and outperformance for Lam. We are inspired by the opportunity to deliver innovation to a transforming technology industry and semiconductor ecosystem."
 ~more~
page 1 of 8





Balance Sheet and Cash Flow Results
Cash and cash equivalents, short-term investments, and restricted cash and investments balances decreased to $6.1 billion at the end of the December 2016 quarter compared to $7.5 billion at the end of the September 2016 quarter. This decrease was primarily the result of approximately $1.6 billion of cash payments for the settlement of debt, combined with approximately $37 million of capital expenditures; and approximately $48 million of dividends paid to stockholders, offset by $404 million in cash flows from operating activities during the December 2016 quarter.

Deferred revenue at the end of the December 2016 quarter decreased to $673 million as compared to $704 million at the end of the September 2016 quarter. Deferred profit at the end of the December 2016 quarter decreased to $408 million as compared to $418 million at the end of the September 2016 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 $129 million as of December 25, 2016 and $65 million as of September 25, 2016.
Geographic Distribution
The geographic distribution of shipments and revenue during the December 2016 quarter is shown in the following table:
Region
Shipments
 
Revenue
Taiwan
37
%
 
37
%
Korea
25
%
 
26
%
China
8
%
 
10
%
Japan
12
%
 
8
%
United States
8
%
 
7
%
Europe
6
%
 
7
%
Southeast Asia
4
%
 
5
%
Outlook
For the March 2017 quarter, Lam is providing the following guidance:
 
U.S. GAAP
 
Reconciling Items
 
Non-GAAP
Shipments
$2.350 Billion
+/-
 $75 Million
 
—
 
$2.350 Billion
+/-
 $75 Million
Revenue
$2.125 Billion
+/-
 $75 Million
 
—
 
$2.125 Billion
+/-
 $75 Million
Gross margin
44.5%
+/-
1%
 
$
21

Million
 
45.5%
+/-
1%
Operating margin
23.8%
+/-
1%
 
$
37

Million
 
25.5%
+/-
1%
Net income per diluted share
$2.31
+/-
$0.10
 
$
37

Million
 
$2.55
+/-
$0.10
Diluted share count
183 Million
 
3

Million
 
180 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 business combinations, asset acquisitions, divestitures, balance sheet valuation adjustments, financing arrangements, other investments, or other significant transactions that may be completed or determined 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, $6 million; and associated tax benefit for non-GAAP items ($6) million; totaling $37 million.
•
Diluted share count - impact of a note hedge issued contemporaneously with the convertible notes due 2018, 3 million shares.
~more~
page 2 of 8





Lam Announces Financial Results for the December 2016 Quarter
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 2016 and September 2016 quarters exclude amortization related to intangible assets acquired in the Novellus transaction, costs associated with campus consolidation, the amortization of note discounts, KLA-Tencor acquisition funding net interest expense and tax benefit of non-GAAP items. Additionally, the December 2016 quarter non-GAAP results exclude costs related to the early termination of the KLA-Tencor acquisition funding, product rationalization charges and litigation settlement and the September 2016 quarter non-GAAP results exclude KLA-Tencor acquisition-related charges.
Management uses non-GAAP gross margin, operating expense, operating income, 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 revenue and industry growth and performance outlooks and their drivers: our ability to transform atomic-scale engineering and enable our customers to shape the future of technology; the legal and business factors that may affect our future tax rate; and our guidance for shipments, revenue, gross margin, operating margin, net income or earnings per diluted share, and diluted share count. Some factors that may affect these forward-looking statements include: 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 26, 2016 and our quarterly report on Form 10-Q for the period ended September 25, 2016. 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, and clean 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, more powerful, 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 MarketSM under the symbol LRCX. For more information, please visit http://www.lamresearch.com. (LRCX-F).

Consolidated Financial Tables Follow.
 ###
page 3 of 8




Lam Announces Financial Results for the December 2016 Quarter
 
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data and percentages)
(unaudited) 
 
Three Months Ended
 
Six Months Ended
 
December 25,
2016
 
September 25,
2016
 
December 27,
2015
 
December 25,
2016
 
December 27,
2015
Revenue
$
1,882,299

 
$
1,632,419

 
$
1,425,534

 
$
3,514,718

 
$
3,025,577

Cost of goods sold
1,035,502

 
916,222

 
799,024

 
1,951,724

 
1,676,704

Gross margin
846,797

 
716,197

 
626,510

 
1,562,994

 
1,348,873

Gross margin as a percent of revenue
45.0
%
 
43.9
%
 
43.9
%
 
44.5
%
 
44.6
%
Research and development
246,804

 
235,240

 
220,754

 
482,044

 
454,963

Selling, general and administrative
160,165

 
165,010

 
166,922

 
325,175

 
319,648

Total operating expenses
406,969

 
400,250

 
387,676

 
807,219

 
774,611

Operating income
439,828

 
315,947

 
238,834

 
755,775

 
574,262

Operating income as a percent of revenue
23.4
%
 
19.4
%
 
16.8
%
 
21.5
%
 
19.0
%
Other expense, net
(55,023
)
 
(23,154
)
 
(29,935
)
 
(78,177
)
 
(57,056
)
Income before income taxes
384,805

 
292,793

 
208,899

 
677,598

 
517,206

Income tax (expense) benefit
(52,014
)
 
(28,958
)
 
14,081

 
(80,972
)
 
(5,547
)
Net income
$
332,791

 
$
263,835

 
$
222,980

 
$
596,626

 
$
511,659

Net income per share:
 
 
 
 
 
 
 
 
 
Basic
$
2.05

 
$
1.64

 
$
1.41

 
$
3.69

 
$
3.23

Diluted
$
1.81

 
$
1.47

 
$
1.28

 
$
3.28

 
$
2.94

Number of shares used in per share calculations:
 
 
 
 
 
 
 
 
 
Basic
162,659

 
160,607

 
158,424

 
161,633

 
158,388

Diluted
183,543

 
180,017

 
174,242

 
181,780

 
174,308

Cash dividend declared per common share
$
0.45

 
$
0.30

 
$
0.30

 
$
0.75

 
$
0.60


 
page 4 of 8






Lam Announces Financial Results for the December 2016 Quarter
 
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
 
 
December 25,
2016
 
September 25,
2016
 
June 26,
2016
 
 
(unaudited)
 
(unaudited)
 
(1)
 
ASSETS
 
 
 
 
 
 
Cash and cash equivalents
$
2,503,960

 
$
5,861,701

 
$
5,039,322

 
Investments
3,329,425

 
1,352,775

 
1,788,612

 
Accounts receivable, net
1,426,307

 
1,290,317

 
1,262,145

 
Inventories
1,018,891

 
931,581

 
971,911

 
Other current assets
225,291

 
162,628

 
151,160

(3) 
Total current assets
8,503,874

 
9,599,002

 
9,213,150

 
Property and equipment, net
672,553

 
649,587

 
639,608

 
Restricted cash and investments
255,175

 
255,640

 
250,421

 
Goodwill and intangible assets
1,873,581

 
1,912,431

 
1,951,197

 
Other assets
215,876

 
219,702

 
209,939

(3) 
Total assets
$
11,521,059

 
$
12,636,362

 
$
12,264,315

 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
Current portion of convertible notes and capital leases
$
957,895

 
$
952,999

 
$
947,733

(3) 
Other current liabilities
1,700,123

 
1,533,253

 
1,470,308

 
Total current liabilities
2,658,018

 
2,486,252

 
2,418,041

 
Long-term debt and capital leases
1,768,713

 
3,378,179

 
3,378,129

(3) 
Income taxes payable
238,968

 
241,671

 
231,514

 
Other long-term liabilities
262,351

 
142,910

 
134,562

 
Total liabilities
4,928,050

 
6,249,012

 
6,162,246

 
Temporary equity, convertible notes
197,313

 
202,467

 
207,552

 
Stockholders’ equity (2)
6,395,696

 
6,184,883

 
5,894,517

 
Total liabilities and stockholders’ equity
$
11,521,059

 
$
12,636,362

 
$
12,264,315

 
 
(1)
Derived from audited financial statements.
(2)
Common shares issued and outstanding were 162,357 as of December 25, 2016, 161,706 as of September 25, 2016, and 160,201 as of June 26, 2016.
(3)
Adjusted for effects of retrospective implementation of ASU 2015-3, regarding the simplification of the presentation of bond issuance costs, which requires that bond issuance costs related to a recognized liability be presented on the balance sheet as a direct reduction from the carrying amount of that debt liability, consistent with debt discounts.
 
page 5 of 8




Lam Announces Financial Results for the December 2016 Quarter
 
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
 
Three Months Ended
 
Six Months Ended
 
December 25,
2016
 
September 25,
2016
 
December 27,
2015
 
December 25,
2016
 
December 27,
2015
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
 
 
 
 
Net income
$
332,791

 
$
263,835

 
$
222,980

 
$
596,626

 
$
511,659

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
 
 
 
 
Depreciation and amortization
77,065

 
74,562

 
71,798

 
151,627

 
142,388

Deferred income taxes
34,615

 
7,633

 
8,176

 
42,248

 
2,613

Equity-based compensation expense
32,255

 
38,595

 
32,570

 
70,850

 
68,344

Loss on extinguishment of debt
36,325

 
—

 
—

 
36,325

 
—

Amortization of note discounts and issuance costs
6,202

 
6,830

 
23,649

 
13,032

 
33,480

Other, net
(1,292
)
 
16,807

 
10,579

 
15,515

 
20,563

Changes in operating assets and liabilities
(113,863
)
 
64,962

 
(75,207
)
 
(48,901
)
 
(35,505
)
Net cash provided by operating activities
404,098

 
473,224

 
294,545

 
877,322

 
743,542

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
 
 
 
 
 
Capital expenditures and intangible assets
(36,513
)
 
(41,979
)
 
(28,143
)
 
(78,492
)
 
(77,597
)
Net (purchase) sale of available-for-sale securities
(1,990,928
)
 
431,750

 
39,202

 
(1,559,178
)
 
10,999

(Issuance) repayment of notes receivable
(500
)
 
—

 
8,082

 
(500
)
 
8,082

Transfers of restricted cash and investments
465

 
(5,219
)
 
—

 
(4,754
)
 
—

Other, net
259

 
(7,800
)
 
(4,746
)
 
(7,541
)
 
(6,246
)
Net cash (used for) provided by investing activities
(2,027,217
)
 
376,752

 
14,395

 
(1,650,465
)
 
(64,762
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
 
 
 
 
Principal payments on long-term debt and capital lease obligations and payments for debt issuance costs
(1,616,270
)
 
(371
)
 
(28,374
)
 
(1,616,641
)
 
(28,470
)
Treasury stock purchases
(67,668
)
 
(1,854
)
 
(12,798
)
 
(69,522
)
 
(111,183
)
Dividends paid
(48,397
)
 
(48,052
)
 
(47,896
)
 
(96,449
)
 
(95,555
)
Reissuance of treasury stock related to employee stock purchase plan
—

 
19,320

 
—

 
19,320

 
19,245

Proceeds from issuance of common stock
3,121

 
1,459

 
1,173

 
4,580

 
1,550

Other, net
(44
)
 
(10
)
 
2,159

 
(54
)
 
5,431

Net cash used for financing activities
(1,729,258
)
 
(29,508
)
 
(85,736
)
 
(1,758,766
)
 
(208,982
)
Effect of exchange rate changes on cash and cash equivalents
(5,364
)
 
1,911

 
344

 
(3,453
)
 
(3,464
)
Net (decrease) increase in cash and cash equivalents
(3,357,741
)
 
822,379

 
223,548

 
(2,535,362
)
 
466,334

Cash and cash equivalents at beginning of period
5,861,701

 
5,039,322

 
1,744,325

 
5,039,322

 
1,501,539

Cash and cash equivalents at end of period
$
2,503,960

 
$
5,861,701

 
$
1,967,873

 
$
2,503,960

 
$
1,967,873

 page 6 of 8




Lam Announces Financial Results for the December 2016 Quarter
 
Non-GAAP Financial Summary
(in thousands, except percentages and per share data)
(unaudited)
 
Three Months Ended
 
December 25,
2016
 
September 25,
2016
Revenue
$
1,882,299

 
$
1,632,419

Gross margin
$
874,174

 
$
737,447

Gross margin as percentage of revenue
46.4
%
 
45.2
%
Operating expenses
$
384,241

 
$
371,634

Operating income
$
489,933

 
$
365,813

Operating margin as a percentage of revenue
26.0
%
 
22.4
%
Net income
$
405,190

 
$
322,074

Net income per diluted share
$
2.24

 
$
1.81

Shares used in per share calculation - diluted
180,613

 
177,628

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
 
December 25,
2016
 
September 25,
2016
U.S. GAAP net income
$
332,791

 
$
263,835

Pre-tax non-GAAP items:
 
 
 
Amortization related to intangible assets acquired in Novellus transaction - cost of goods sold
21,250

 
21,250

Product rationalization - cost of goods sold
6,127

 
—

Costs associated with campus consolidation - research and development
995

 
2,561

Product rationalization - research and development
1,650

 
—

Amortization related to intangible assets acquired in Novellus transaction - selling, general and administrative
16,083

 
16,083

KLA-Tencor acquisition-related costs - selling, general and administrative
—

 
9,972

Litigation settlement - selling general and administrative
4,000

 
—

KLA-Tencor acquisition funding interest expense, net - other expense, net
2,682

 
17,709

Amortization of note discounts - other expense, net
5,671

 
5,913

Costs related to early termination of KLA-Tencor acquisition funding - other expense, net
34,518

 
—

Net income tax benefit on non-GAAP items
(20,577
)
 
(15,249
)
Non-GAAP net income
$
405,190

 
$
322,074

Non-GAAP net income per diluted share
$
2.24

 
$
1.81

U.S. GAAP number of shares used for per diluted share calculation
183,543

 
180,017

Effect of convertible note hedge
(2,930
)
 
(2,389
)
Non-GAAP number of shares used for per diluted share calculation
180,613

 
177,628

page 7 of 8





Lam Announces Financial Results for the December 2016 Quarter
 
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 Ended
 
December 25,
2016
 
September 25,
2016
U.S. GAAP gross margin
$
846,797

 
$
716,197

Pre-tax non-GAAP items:
 
 
 
Amortization related to intangible assets acquired in Novellus transaction
21,250

 
21,250

Product rationalization
$
6,127

 
$
—

Non-GAAP gross margin
$
874,174

 
$
737,447

U.S. GAAP gross margin as a percentage of revenue
45.0
%
 
43.9
%
Non-GAAP gross margin as a percentage of revenue
46.4
%
 
45.2
%
U.S. GAAP operating expenses
$
406,969

 
$
400,250

Pre-tax non-GAAP items:
 
 
 
Amortization related to intangible assets acquired in Novellus transaction
(16,083
)
 
(16,083
)
KLA-Tencor acquisition-related costs
—

 
(9,972
)
Costs associated with campus consolidation
(995
)
 
(2,561
)
Product rationalization
(1,650
)
 
—

Litigation settlement
(4,000
)
 
—

Non-GAAP operating expenses
$
384,241

 
$
371,634

Non-GAAP operating income
$
489,933

 
$
365,813

GAAP operating margin as percent of revenue
23.4
%
 
19.4
%
Non-GAAP operating margin as a percent of revenue
26.0
%
 
22.4
%
 
page 8 of 8