Lam Research Corporation
LAM RESEARCH CORP (Form: 8-K, Received: 07/26/2017 16:12:27)

Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K

  Current Report
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): July 26, 2017
    LAM RESEARCH CORPORATION
(Exact name of registrant as specified in its charter)
 
 
Delaware
 
0-12933
 
94-2634797
(State or Other Jurisdiction
of Incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification Number)
4650 Cushing Parkway
Fremont, California 94538
(Address of principal executive offices including zip code)
(510) 572-0200
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨

 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
 
¨

 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
 
¨

 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
 
¨

 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company      ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.      ¨



1



Table of Contents


Table of Contents
 
 
 
 
 
 
Item 2.02.
  
Results of Operations and Financial Condition
 
Item 9.01.
  
Financial Statements and Exhibits
 
SIGNATURES
 
EXHIBIT INDEX
 
EX-99.1
 
 


2



Table of Contents



 Item 2.02.
Results of Operations and Financial Condition
On July 26, 2017 , Lam Research Corporation (the “Company”) issued a press release announcing its financial results for the fiscal quarter ended June 25, 2017 , the text of which is attached hereto as Exhibit 99.1.
The information in this Current Report on Form 8-K, including the exhibit, is furnished pursuant to Item 2.02 and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities under that Section. Furthermore, the information in this Current Report on Form 8-K, including the exhibit, shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act of 1933, as amended, or the Exchange Act.
 
 Item 9.01.
Financial Statements and Exhibits
(d) Exhibits
99.1 Press Release dated July 26, 2017 announcing financial results for the fiscal quarter ended June 25, 2017
 
 


3



Table of Contents



SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date:
July 26, 2017
 
LAM RESEARCH CORPORATION
 
 
 
(Registrant)
 
 
 
/s/ Douglas R. Bettinger
 
 
 
Douglas R. Bettinger
 
 
 
Executive Vice President, Chief Financial Officer
 
 
 
(Principal Financial Officer and Principal Accounting Officer)
 


4



Table of Contents



EXHIBIT INDEX
99.1     Press Release dated July 26, 2017 announcing financial results for the fiscal quarter ended June 25, 2017
 


5

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 June 25, 2017
FREMONT, Calif., July 26, 2017 - Lam Research Corp. (Nasdaq: LRCX) today announced financial results for the quarter ended June 25, 2017 (the " June 2017 quarter").
Highlights for the June 2017 quarter were as follows:
Shipments of $2.54 billion and revenue of $2.34 billion .
GAAP gross margin of 45.6% , GAAP operating margin of 25.9% , and GAAP diluted EPS of $2.82 .
Non-GAAP gross margin of 46.5% , non-GAAP operating margin of 27.7% , and non-GAAP diluted EPS of $3.11 .
Key Financial Data for the Quarters Ended June 25, 2017 and March 26, 2017
(in thousands, except per-share data, percentages, and basis points)  
U.S. GAAP
 
  
June 2017
 
March 2017
 
Change Q/Q
Shipments
  
$
2,542,664

 
$
2,412,656

 
+ 5%
Revenue
  
$
2,344,907

 
$
2,153,995

 
 + 9%
Gross margin as percentage of revenue
  
45.6
%
 
45.1
%
 
 + 50 bps
Operating margin as percentage of revenue
  
25.9
%
 
25.0
%
 
+ 90 bps
Diluted EPS
  
$
2.82

 
$
3.10

 
- 9%
 
Non-GAAP
 
  
June 2017
 
March 2017
 
Change Q/Q
Shipments
  
$
2,542,664

 
$
2,412,656

 
+ 5%
Revenue
  
$
2,344,907

 
$
2,153,995

 
+ 9%
Gross margin as percentage of revenue
  
46.5
%
 
46.1
%
 
+ 40 bps
Operating margin as percentage of revenue
  
27.7
%
 
26.9
%
 
+ 80 bps
Diluted EPS
  
$
3.11

 
$
2.80

 
+ 11%
U.S. GAAP Financial Results
For the June 2017 quarter, revenue was $2,345 million , gross margin was $1,069 million , or 45.6% of revenue, operating expenses were $461 million , operating margin was 25.9% of revenue, and net income was $526 million , or $2.82 per diluted share on a GAAP basis. This compares to revenue of $2,154 million , gross margin of $971 million , or 45.1% of revenue, operating expenses of $433 million , operating margin of 25.0% of revenue, and net income of $575 million , or $3.10 per diluted share, for the quarter ended March 26, 2017 (the “ March 2017 quarter”).
Non-GAAP Financial Results
For the June 2017 quarter, non-GAAP gross margin was $1,090 million or 46.5% of revenue, non-GAAP operating expenses were $440 million , non-GAAP operating margin was 27.7% of revenue, and non-GAAP net income was $566 million , or $3.11 per diluted share. This compares to non-GAAP gross margin of $993 million or 46.1% of revenue, non-GAAP operating expenses of $414 million , non-GAAP operating margin of 26.9% of revenue, and non-GAAP net income of $508 million , or $2.80 per diluted share for the March 2017 quarter.
“Lam delivered another record quarter for shipments, revenue and non-GAAP operating income in June, capping a record fiscal 2017 highlighted by over eight and a half billion dollars in shipments and nearly ten dollars in non-GAAP diluted earnings per share,” said Martin Anstice, Lam Research’s President and Chief Executive Officer. “Demand trends in our key end markets have improved, and we are on track once again to outperform overall industry growth in calendar 2017. Longer-term, our increased strategic relevance enabling a new generation of technology innovations, combined with broad competitive strength, deliver a compelling value creation opportunity for Lam.”

1

Lam Announces Financial Results for the June 2017 Quarter



Balance Sheet and Cash Flow Results
Cash and cash equivalents, short-term investments, and restricted cash and investments balances increased to $6.3 billion at the end of the June 2017 quarter compared to $6.1 billion at the end of the March 2017 quarter. This increase was primarily the result of approximately $729 million of cash generated in operating activities, partially offset by $526 million of share repurchases, including net share settlement on employee stock-based compensation.

Deferred revenue at the end of the June 2017 quarter increased to $966 million as compared to $842 million at the end of the March 2017 quarter. Deferred profit at the end of the June 2017 quarter increased to $608 million as compared to $527 million at the end of the March 2017 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 $397 million as of June 25, 2017 and $260 million as of March 26, 2017 .
Geographic Distribution
The geographic distribution of shipments and revenue during the June 2017 quarter is shown in the following table:
Region
Shipments
 
Revenue
Korea
36
%
 
38
%
Japan
21
%
 
17
%
China
16
%
 
16
%
Taiwan
14
%
 
16
%
United States
8
%
 
9
%
Europe
3
%
 
3
%
Southeast Asia
2
%
 
1
%
Outlook
For the September 2017 quarter, Lam is providing the following guidance:
 
U.S. GAAP
 
Reconciling Items
 
Non-GAAP
Shipments
$2.35 Billion
+/-
$100 Million
 
 
$2.35 Billion
+/-
 $100 Million
Revenue
$2.45 Billion
+/-
 $100 Million
 
 
$2.45 Billion
+/-
 $100 Million
Gross margin
45.6%
+/-
1%
 
$
21

Million
 
46.5%
+/-
1%
Operating margin
26.5%
+/-
1%
 
$
37

Million
 
28.0%
+/-
1%
Net income per diluted share
$2.98
+/-
$0.12
 
$
37

Million
 
$3.25
+/-
$0.12
Diluted share count
187 Million
 
4

Million
 
183 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 after the date of this release. U.S. 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, 4 million shares.

2

Lam Announces Financial Results for the June 2017 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 June 2017 and March 2017 quarters exclude amortization related to intangible assets acquired in the Novellus transaction, costs associated with business process reengineering, the amortization of notes discounts, tax benefit of non-GAAP items, and income tax benefit on the conclusion of tax matters related to a prior business combination.
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, industry, performance and general outlooks, and their drivers; our future strategic relevance to customers; the potential for value creation; technology demand trends; 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 quarterly reports on Form 10-Q for the fiscal quarters ended September 25, 2016 , December 25, 2016 and March 26, 2017 . 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. is a global supplier of innovative wafer fabrication equipment and services to the semiconductor industry. As a trusted, collaborative partner to the world’s leading semiconductor companies, we combine superior systems engineering capability, technology leadership, and unwavering commitment to customer success to accelerate innovation through enhanced device performance. In fact, today, nearly every advanced chip is built with Lam technology. Lam Research (Nasdaq: LRCX) is a FORTUNE 500® company headquartered in Fremont, Calif., with operations around the globe. Learn more at www.lamresearch.com. (LRCX-F)
Consolidated Financial Tables Follow.
  ###

3

Lam Announces Financial Results for the June 2017 Quarter



LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data and percentages)
 
 
Three Months Ended
 
Twelve Months Ended
 
June 25,
2017
 
March 26,
2017
 
June 26,
2016
 
June 25,
2017
 
June 26,
2016
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
(1)
Revenue
$
2,344,907

 
$
2,153,995

 
$
1,546,261

 
$
8,013,620

 
$
5,885,893

Cost of goods sold
1,275,946

 
1,182,591

 
847,477

 
4,410,261

 
3,266,971

Gross margin
1,068,961

 
971,404

 
698,784

 
3,603,359

 
2,618,922

Gross margin as a percent of revenue
45.6
%
 
45.1
%
 
45.2
%
 
45.0
%
 
44.5
%
Research and development
285,712

 
265,986

 
237,255

 
1,033,742

 
913,712

Selling, general and administrative
175,310

 
167,000

 
152,288

 
667,485

 
630,954

Total operating expenses
461,022

 
432,986

 
389,543

 
1,701,227

 
1,544,666

Operating income
607,939

 
538,418

 
309,241

 
1,902,132

 
1,074,256

Operating income as a percent of revenue
25.9
%
 
25.0
%
 
20.0
%
 
23.7
%
 
18.3
%
Other expense, net
(4,444
)
 
(7,838
)
 
(27,249
)
 
(90,459
)
 
(114,139
)
Income before income taxes
603,495

 
530,580

 
281,992

 
1,811,673

 
960,117

Income tax (expense) benefit
(77,071
)
 
44,133

 
(23,053
)
 
(113,910
)
 
(46,068
)
Net income
$
526,424

 
$
574,713

 
$
258,939

 
$
1,697,763

 
$
914,049

Net income per share:
 
 
 
 
 
 
 
 
 
Basic
$
3.25

 
$
3.52

 
$
1.62

 
$
10.47

 
$
5.75

Diluted
$
2.82

 
$
3.10

 
$
1.46

 
$
9.24

 
$
5.22

Number of shares used in per share calculations:
 
 
 
 
 
 
 
 
 
Basic
162,213

 
163,408

 
159,862

 
162,222

 
158,919

Diluted
186,427

 
185,094

 
177,649

 
183,770

 
175,159

Cash dividend declared per common share
$
0.45

 
$
0.45

 
$
0.30

 
$
1.65

 
$
1.20

(1) Derived from audited financial statements.

 

 

4

Lam Announces Financial Results for the June 2017 Quarter



LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
 
 
June 25,
2017
 
March 26,
2017
 
June 26,
2016
 
 
(unaudited)
 
(unaudited)
 
(1)
 
ASSETS
 
 
 
 
 
 
Cash and cash equivalents
$
2,377,534

 
$
2,128,570

 
$
5,039,322

 
Investments
3,663,628

 
3,755,036

 
1,788,612

 
Accounts receivable, net
1,673,398

 
1,636,090

 
1,262,145

 
Inventories
1,232,916

 
1,133,196

 
971,911

 
Other current assets
195,022

 
223,056

 
151,160

(2
)
Total current assets
9,142,498

 
8,875,948

 
9,213,150

 
Property and equipment, net
685,595

 
675,707

 
639,608

 
Restricted cash and investments
256,205

 
256,157

 
250,421

 
Goodwill and intangible assets
1,796,668

 
1,835,150

 
1,951,197

 
Other assets
241,799

 
232,224

 
209,939

(2
)
Total assets
$
12,122,765

 
$
11,875,186

 
$
12,264,315

 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
Current portion of convertible notes and capital leases
$
908,439

 
$
905,288

 
$
947,733

(2
)
Other current liabilities
2,041,676

 
1,851,451

 
1,470,308

 
Total current liabilities
2,950,115

 
2,756,739

 
2,418,041

 
Long-term debt and capital leases
1,784,974

 
1,777,297

 
3,378,129

(2
)
Income taxes payable
120,178

 
137,173

 
231,514

 
Other long-term liabilities
280,186

 
282,615

 
134,562

 
Total liabilities
5,135,453

 
4,953,824

 
6,162,246

 
Temporary equity, convertible notes
169,861

 
175,108

 
207,552

 
Stockholders’ equity (3)
6,817,451

 
6,746,254

 
5,894,517

 
Total liabilities and stockholders’ equity
$
12,122,765

 
$
11,875,186

 
$
12,264,315

 
(1) Derived from audited financial statements.
 
 
 
 
 
 
(2) 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.
 
(3) Common shares issued and outstanding were 161,723 as of June 25, 2017, 163,969 as of March 26, 2017 and 160,201 as of June 26, 2016.
 
     

 

5

Lam Announces Financial Results for the June 2017 Quarter



LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
Three Months Ended
 
Twelve Months Ended
 
June 25,
2017
 
March 26,
2017
 
June 26,
2016
 
June 25,
2017
 
June 26,
2016
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
(1)
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
 
 
 
 
Net income
$
526,424

 
$
574,713

 
$
258,939

 
$
1,697,763

 
$
914,049

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
 
 
 
 
Depreciation and amortization
79,036

 
76,242

 
74,976

 
306,905

 
291,028

Deferred income taxes
35,069

 
27,619

 
(46,708
)
 
104,936

 
(49,003
)
Equity-based compensation expense
43,802

 
35,323

 
39,288

 
149,975

 
142,348

(Gain) Loss on early extinguishment of debt
(73
)
 

 

 
36,252

 

Income tax benefit (expense) on equity-based compensation plans
38,747

 

 
(8,048
)
 
38,747

 
(1,023
)
Excess tax (benefit) expense on equity-based compensation plans
(38,635
)
 

 
9,035

 
(38,635
)
 
1,020

Amortization of note discounts and issuance costs
6,114

 
6,136

 
14,584

 
25,282

 
70,522

Gain on sale of assets, net
(163
)
 

 
(15,223
)
 
(163
)
 
(15,223
)
Other, net
8,275

 
(4,738
)
 
17,929

 
19,052

 
48,788

Changes in operating assets and liabilities
30,676

 
(292,607
)
 
79,052

 
(310,832
)
 
(52,229
)
Net cash provided by operating activities
729,272

 
422,688

 
423,824

 
2,029,282

 
1,350,277

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
 
 
 
 
 
Capital expenditures and intangible assets
(34,811
)
 
(44,116
)
 
(51,726
)
 
(157,419
)
 
(175,330
)
Net sale (purchase) of available-for-sale securities
93,858

 
(418,566
)
 
605,891

 
(1,883,886
)
 
798,828

Proceeds from sale of assets
290

 

 
79,730

 
1,291

 
79,730

Transfers of restricted cash and investments
(48
)
 
(982
)
 
(112,381
)
 
(5,784
)
 
(112,381
)
Other, net
(187
)
 
(3,586
)
 

 
(12,815
)
 
1,636

Net cash provided by (used for) investing activities
59,102

 
(467,250
)
 
521,514

 
(2,058,613
)
 
592,483

CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
 
 
 
 
Principal payments on long-term debt and capital lease obligations
(2,445
)
 
(69,227
)
 
(450,624
)
 
(1,688,313
)
 
(451,497
)
Proceeds from issuance of long-term debt, net of issuance costs

 

 
2,374,220

 

 
2,338,144

Excess tax benefit (expense) on equity-based compensation plans
38,635

 

 
(9,035
)
 
38,635

 
(1,020
)
Treasury stock purchases
(525,778
)
 
(216,373
)
 
(27,114
)
 
(811,672
)
 
(158,389
)
Dividends paid
(73,709
)
 
(73,337
)
 
(47,308
)
 
(243,495
)
 
(190,402
)
Re-issuance of treasury stock related to employee stock purchase plan
23,120

 
17,223

 
20,360

 
59,663

 
55,992

Proceeds from issuance of common stock
369

 
7,964

 
1,547

 
12,913

 
3,405

Other, net
(1
)
 
(70
)
 
(159
)
 
(125
)
 
(488
)
Net cash (used for) provided by financing activities
(539,809
)
 
(333,820
)
 
1,861,887

 
(2,632,394
)
 
1,595,745

Effect of exchange rate changes on cash and cash equivalents
399

 
2,992

 
76

 
(63
)
 
(722
)
Net increase (decrease) in cash and cash equivalents
248,964

 
(375,390
)
 
2,807,301

 
(2,661,788
)
 
3,537,783

Cash and cash equivalents at beginning of period
2,128,570

 
2,503,960

 
2,232,021

 
5,039,322

 
1,501,539

Cash and cash equivalents at end of period
$
2,377,534

 
$
2,128,570

 
$
5,039,322

 
$
2,377,534

 
$
5,039,322

(1) Derived from audited financial statements.
 
 
 
 
 
 
 
 
 
    

6

Lam Announces Financial Results for the June 2017 Quarter



Non-GAAP Financial Summary
(in thousands, except percentages and per share data)
(unaudited)
 
Three Months Ended
 
June 25,
2017
 
March 26,
2017
Revenue
$
2,344,907

 
$
2,153,995

Gross margin
$
1,090,211

 
$
992,654

Gross margin as percentage of revenue
46.5
%
 
46.1
%
Operating expenses
$
440,126

 
$
414,229

Operating income
$
650,085

 
$
578,425

Operating margin as a percentage of revenue
27.7
%
 
26.9
%
Net income
$
565,518

 
$
507,751

Net income per diluted share
$
3.11

 
$
2.80

Shares used in per share calculation - diluted
182,093

 
181,539

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
 
June 25,
2017
 
March 26,
2017
U.S. GAAP net income
$
526,424

 
$
574,713

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

 
21,250

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

 
16,083

Cost associated with business process reengineering- selling, general and administrative
4,813

 
2,674

Amortization of note discounts - other expense, net
5,631

 
5,654

Net income tax benefit on non-GAAP items
(5,697
)
 
(6,418
)
Income tax benefit on conclusion of certain tax matters
(2,986
)
 
(106,205
)
Non-GAAP net income
$
565,518

 
$
507,751

Non-GAAP net income per diluted share
$
3.11

 
$
2.80

U.S. GAAP number of shares used for per diluted share calculation
186,427

 
185,094

Effect of convertible note hedge
(4,334
)
 
(3,555
)
Non-GAAP number of shares used for per diluted share calculation
182,093

 
181,539



 

7

Lam Announces Financial Results for the June 2017 Quarter



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)  
 
Twelve Months Ended
 
June 25,
 2017
 
June 26,
 2016
U.S. GAAP net income
$
1,697,763

 
$
914,049

Pre-tax non-GAAP items:
 
 
 
Amortization related to intangible assets acquired in Novellus transaction - cost of goods sold
85,000

 
85,000

Product rationalization - cost of goods sold
6,127

 

Novellus acquisition-related inventory fair value impact - cost of goods sold

 
777

Restructuring charges - cost of goods sold

 
371

Restructuring charges - research and development

 
4,355

Product rationalization - research and development
1,650

 

Cost associated with campus consolidation - research and development
3,556

 
7,763

KLA-Tencor acquisition-related costs - selling, general and administrative
9,972

 
50,985

Gain on sale of assets, net associated exit costs - selling, general and administrative

 
(15,223
)
Amortization related to intangible assets acquired in Novellus transaction -selling, general and administrative
64,332

 
64,333

Restructuring charges - selling, general and administrative

 
4,997

Costs associated with business process reengineering - selling, general and administrative
7,487

 

Litigation settlement - selling, general and administrative
4,000

 

Amortization of note discounts - other expense, net
22,869

 
35,205

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

 

Amortization of bridge loan issuance costs and other related fees - other expense, net

 
33,843

KLA-Tencor pre-acquisition funding interest expense, net - other expense, net
20,391

 
3,821

Net income tax benefit on non-GAAP items
(47,941
)
 
(49,859
)
Income tax benefit on conclusion of certain tax matters
(109,191
)
 
(3,017
)
Change to income tax benefit due to a court ruling

 
(22,812
)
Income tax benefit related to tax extenders, primarily the research and development credit

 
(13,603
)
Non-GAAP net income
$
1,800,533

 
$
1,100,985

Non-GAAP net income per diluted share
$
9.98

 
$
6.37

U.S. GAAP number of shares used for per diluted share calculation
183,770

 
175,159

Effect of convertible note hedge
(3,302
)
 
(2,398
)
Non-GAAP number of shares used for per diluted share calculation
180,468

 
172,761




8

Lam Announces Financial Results for the June 2017 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
 
June 25,
2017
 
March 26,
2017
 
December 25,
2016
 
September 25,
2016
U.S. GAAP gross margin
$
1,068,961

 
$
971,404

 
$
846,797

 
$
716,197

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

 
21,250

 
21,250

 
21,250

Product rationalization

 

 
6,127

 

Non-GAAP gross margin
$
1,090,211

 
$
992,654

 
$
874,174

 
$
737,447

U.S. GAAP gross margin as a percentage of revenue
45.6
%
 
45.1
%
 
45.0
%
 
43.9
%
Non-GAAP gross margin as a percentage of revenue
46.5
%
 
46.1
%
 
46.4
%
 
45.2
%
U.S. GAAP operating expenses
$
461,022

 
$
432,986

 
$
406,969

 
$
400,250

Pre-tax non-GAAP items:
 
 
 
 
 
 
 
Amortization related to intangible assets acquired in Novellus transaction
(16,083
)
 
(16,083
)
 
(16,083
)
 
(16,083
)
Costs associated with business process reengineering
(4,813
)
 
(2,674
)
 

 

KLA-Tencor acquisition-related costs

 

 

 
(9,972
)
Product rationalization

 

 
(1,650
)
 

Cost associated with campus consolidation

 

 
(995
)
 
(2,561
)
Litigation settlement

 

 
(4,000
)
 

Non-GAAP operating expenses
$
440,126

 
$
414,229

 
$
384,241

 
$
371,634

Non-GAAP operating income
$
650,085

 
$
578,425

 
$
489,933


$
365,813

GAAP operating margin as percent of revenue
25.9
%
 
25.0
%
 
23.4
%
 
19.4
%
Non-GAAP operating margin as a percent of revenue
27.7
%
 
26.9
%
 
26.0
%
 
22.4
%
 


9