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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, 2018
  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.     ¨



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Table of Contents


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


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Table of Contents


 Item 2.02.
Results of Operations and Financial Condition
On July 26, 2018, Lam Research Corporation (the “Company”) issued a press release announcing its financial results for the fiscal quarter ended June 24, 2018, the text of which is attached hereto as Exhibit 99.1.
The information in this item of this Current Report on Form 8-K, including Exhibit 99.1, 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 item of this Current Report on Form 8-K, including Exhibit 99.1, 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, 2018 announcing financial results for the fiscal quarter ended June 24, 2018
 
 


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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, 2018
 
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

Exhibit
Exhibit 99.1


FOR IMMEDIATE RELEASE        
Lam Research Corporation Contacts:
Ram Ganesh, Investor Relations, phone: 510-572-1615, e-mail: investor.relations@lamresearch.com
Lam Research Corporation Reports Financial Results for the Quarter Ended June 24, 2018
FREMONT, Calif., July 26, 2018 - Lam Research Corp. (Nasdaq: LRCX) today announced financial results for the quarter ended June 24, 2018 (the “June 2018 quarter”).
Highlights for the June 2018 quarter were as follows:
Shipments of $3.03 billion and revenue of $3.13 billion.
U.S. GAAP gross margin of 47.3%, U.S. GAAP operating margin of 30.6%, and U.S. GAAP diluted EPS of $5.82.
Non-GAAP gross margin of 48.0%, non-GAAP operating margin of 31.8%, and non-GAAP diluted EPS of $5.31.
Key Financial Data for the Quarters Ended June 24, 2018 and March 25, 2018
(in thousands, except per-share data, percentages, and basis points) 
U.S. GAAP
 
  
June 2018
 
March 2018
 
Change Q/Q
Shipments
  
$
3,028,390

 
$
3,134,677

 
- 3%
Revenue
  
$
3,125,928

 
$
2,892,115

 
 + 8%
Gross margin as percentage of revenue
  
47.3
%
 
46.0
%
 
 + 130 bps
Operating margin as percentage of revenue
  
30.6
%
 
28.6
%
 
+ 200 bps
Diluted EPS
  
$
5.82

 
$
4.33

 
+ 34%
 
Non-GAAP
 
  
June 2018
 
March 2018
 
Change Q/Q
Shipments
  
$
3,028,390

 
$
3,134,677

 
- 3%
Revenue
  
$
3,125,928

 
$
2,892,115

 
+ 8%
Gross margin as percentage of revenue
  
48.0
%
 
46.8
%
 
+ 120 bps
Operating margin as percentage of revenue
  
31.8
%
 
30.0
%
 
+ 180 bps
Diluted EPS
  
$
5.31

 
$
4.79

 
+ 11%
U.S. GAAP Financial Results
For the June 2018 quarter, revenue was $3,126 million, gross margin was $1,479 million, or 47.3% of revenue, operating expenses were $524 million, operating margin was 30.6% of revenue, and net income was $1,021 million, or $5.82 per diluted share on a U.S. GAAP basis. This compares to revenue of $2,892 million, gross margin of $1,331 million, or 46.0% of revenue, operating expenses of $503 million, operating margin of 28.6% of revenue, and net income of $779 million, or $4.33 per diluted share, for the quarter ended March 25, 2018 (the “March 2018 quarter”). Net income in the June 2018 quarter was positively impacted by a $116 million reversal of the provisional charge associated with the December 2017 U.S. tax reform.
Non-GAAP Financial Results
For the June 2018 quarter, non-GAAP gross margin was $1,502 million or 48.0% of revenue, non-GAAP operating expenses were $507 million, non-GAAP operating margin was 31.8% of revenue, and non-GAAP net income was $932 million, or $5.31 per diluted share. This compares to non-GAAP gross margin of $1,353 million or 46.8% of revenue, non-GAAP operating expenses of $486 million, non-GAAP operating margin of 30.0% of revenue, and non-GAAP net income of $852 million, or $4.79 per diluted share for the March 2018 quarter.
“Lam’s June quarter results confirmed 2018 as the strongest fiscal year in our history, with over 11 billion dollars in revenues, approximately 18 dollars in non-GAAP diluted earnings per share and 2.7 billion dollars of cash generated from operations,” said Martin Anstice, Lam Research’s chief executive officer. “Essentially unsurpassed in our industry, the multi-year growth at Lam has been enabled by the increased prominence of Etch and Deposition in the semiconductor device manufacturing process flow and the broadening of our product and services portfolio over many years. Our forward-looking optimism is reinforced by the fundamental opportunity of silicon technologies, enabling a new generation of cognitive computing applications and services,

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combined with the expectation of sustainable investment by our customers, who in turn are pursuing inspiring and enhanced value creation agendas.”
Balance Sheet and Cash Flow Results
Cash and cash equivalents, short-term investments, and restricted cash and investments balances decreased to $5.2 billion at the end of the June 2018 quarter compared to $6.7 billion at the end of the March 2018 quarter. This decrease was primarily the result of $1.3 billion of share repurchases, including net share settlement on employee stock-based compensation, combined with $817 million of debt reductions, partially offset by $718 million of cash generated in operating activities.

Deferred revenue at the end of the June 2018 quarter decreased to $994 million as compared to $1.1 billion at the end of the March 2018 quarter. Deferred profit at the end of the June 2018 quarter decreased to $720 million as compared to $749 million at the end of the March 2018 quarter. Lam’s deferred revenue balance does not include shipments to customers in Japan, to whom title does not transfer until customer acceptance. Shipments to customers in Japan are classified as inventory at cost until the time of acceptance. The estimated future revenue from shipments to customers in Japan was approximately $607 million as of June 24, 2018 and $526 million as of March 25, 2018.
Geographic Distribution
The geographic distribution of shipments and revenue during the June 2018 quarter is shown in the following table:
Region
Shipments
 
Revenue
Korea
29
%
 
35
%
China
25
%
 
21
%
Japan
21
%
 
18
%
Taiwan
11
%
 
10
%
Europe
5
%
 
6
%
United States
5
%
 
5
%
Southeast Asia
4
%
 
5
%
Outlook
For the September 2018 quarter, Lam is providing the following guidance:
 
U.S. GAAP
 
Reconciling Items
 
Non-GAAP
Revenue
$2.3 Billion
+/-
 $150 Million
 
 
$2.3 Billion
+/-
 $150 Million
Gross margin
45.0%
+/-
1%
 
$
22

Million
 
46.0%
+/-
1%
Operating margin
24.3%
+/-
1%
 
$
38

Million
 
26.0%
+/-
1%
Net income per diluted share
$2.98
+/-
$0.20
 
$
36

Million
 
$3.20
+/-
$0.20
Diluted share count
163 Million
 
 
163 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, measurement period adjustments associated with U.S. tax reform, or other significant arrangements 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 through business combinations, $22 million.
Operating margin - amortization related to intangible assets acquired through business combinations, $38 million.
Earnings per share - amortization related to intangible assets acquired through business combinations, $38 million; amortization of note discounts, $1 million; and associated tax benefit for non-GAAP items ($3) million; totaling $36 million.

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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 2018 and March 2018 quarters exclude amortization related to intangible assets acquired through business combinations, acquisition and integration costs associated with a business combination, amortization of note discounts, tax benefit of non-GAAP items, and income tax benefit on the conclusion of tax matters related to a prior business combination. Additionally, the June 2018 quarter non-GAAP results exclude estimated income tax benefit associated with U.S. tax reform and the March 2018 quarter non-GAAP results exclude realized loss on sale or impairment of investments associated with repatriation.
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 customers in Japan; our revenue, industry, performance and general outlooks, and their drivers; our future strategic relevance to customers; our vision of the Company’s future; 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, provisional tax estimate, and diluted share count. Some factors that may affect these forward-looking statements include: business, political and/or regulatory 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 25, 2017 and quarterly reports on Form 10-Q for the fiscal quarters ended September 24, 2017, December 24, 2017 and March 25, 2018. 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.
 ###

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LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data and percentages)
 
 
Three Months Ended
 
Twelve Months Ended
 
June 24,
2018
 
March 25,
2018
 
June 25,
2017
 
June 24,
2018
 
June 25,
2017
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
(1)
Revenue
$
3,125,928

 
$
2,892,115

 
$
2,344,907

 
$
11,076,998

 
$
8,013,620

Cost of goods sold
1,646,520

 
1,561,401

 
1,275,946

 
5,911,966

 
4,410,261

Gross margin
1,479,408

 
1,330,714

 
1,068,961

 
5,165,032

 
3,603,359

Gross margin as a percent of revenue
47.3
%
 
46.0
%
 
45.6
%
 
46.6
%
 
45.0
%
Research and development
327,713

 
305,412

 
285,712

 
1,189,514

 
1,033,742

Selling, general and administrative
196,500

 
197,791

 
175,310

 
762,219

 
667,485

Total operating expenses
524,213

 
503,203

 
461,022

 
1,951,733

 
1,701,227

Operating income
955,195

 
827,511

 
607,939

 
3,213,299

 
1,902,132

Operating income as a percent of revenue
30.6
%
 
28.6
%
 
25.9
%
 
29.0
%
 
23.7
%
Other income (expense), net
2,954

 
(55,810
)
 
(4,444
)
 
(61,510
)
 
(90,459
)
Income before income taxes
958,149

 
771,701

 
603,495

 
3,151,789

 
1,811,673

Income tax benefit (expense)
62,997

 
7,099

 
(77,071
)
 
(771,108
)
 
(113,910
)
Net income
$
1,021,146

 
$
778,800

 
$
526,424

 
$
2,380,681

 
$
1,697,763

Net income per share:
 
 
 
 
 
 
 
 
 
Basic
$
6.35

 
$
4.80

 
$
3.25

 
$
14.73

 
$
10.47

Diluted
$
5.82

 
$
4.33

 
$
2.82

 
$
13.17

 
$
9.24

Number of shares used in per share calculations:
 
 
 
 
 
 
 
 
 
Basic
160,916

 
162,378

 
162,213

 
161,643

 
162,222

Diluted
175,432

 
179,779

 
186,427

 
180,782

 
183,770

Cash dividend declared per common share
$
1.10

 
$
0.50

 
$
0.45

 
$
2.55

 
$
1.65

(1) Derived from audited financial statements.

 

 

4


LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
 
 
June 24,
2018
 
March 25,
2018
 
June 25,
2017
 
(unaudited)
 
(unaudited)
 
(1)
ASSETS
 
 
 
 
 
Cash and cash equivalents
$
4,512,257

 
$
4,698,995

 
$
2,377,534

Investments
437,338

 
1,785,976

 
3,663,628

Accounts receivable, net
2,176,936

 
2,082,632

 
1,673,398

Inventories
1,876,162

 
1,693,128

 
1,232,916

Other current assets
147,218

 
165,066

 
195,022

Total current assets
9,149,911

 
10,425,797

 
9,142,498

Property and equipment, net
902,547

 
826,500

 
685,595

Restricted cash and investments
256,301

 
256,587

 
256,205

Goodwill and intangible assets
1,802,740

 
1,825,891

 
1,796,668

Other assets
367,979

 
328,724

 
241,799

Total assets
$
12,479,478

 
$
13,663,499

 
$
12,122,765

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
Current portion of convertible debt and capital leases
$
610,030

 
$
1,423,265

 
$
908,439

Other current liabilities
2,540,278

 
2,525,155

 
2,041,676

Total current liabilities
3,150,308

 
3,948,420

 
2,950,115

Long-term debt and capital leases
1,806,562

 
1,781,731

 
1,784,974

Income taxes payable
851,936

 
818,700

 
120,178

Other long-term liabilities
90,629

 
230,620

 
280,186

Total liabilities
5,899,435

 
6,779,471

 
5,135,453

Temporary equity, convertible notes
78,192

 
80,973

 
169,861

Stockholders’ equity (2)
6,501,851

 
6,803,055

 
6,817,451

Total liabilities and stockholders’ equity
$
12,479,478

 
$
13,663,499

 
$
12,122,765

(1) Derived from audited financial statements.
 
 
 
 
 
(2) Common shares issued and outstanding were 156,892 as of June 24, 2018, 164,100 as of March 25, 2018 and 161,723 as of June 25, 2017.
     

 

5


LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
Three Months Ended
 
Twelve Months Ended
 
June 24,
2018
 
March 25,
2018
 
June 25,
2017
 
June 24,
2018
 
June 25,
2017
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
(1)
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
 
 
 
 
Net income
$
1,021,146

 
$
778,800

 
$
526,424

 
$
2,380,681

 
$
1,697,763

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
 
 
 
 
Depreciation and amortization
85,119

 
82,236

 
79,036

 
326,395

 
306,905

Deferred income taxes
212,260

 
19,060

 
35,069

 
3,046

 
104,936

Equity-based compensation expense
47,214

 
41,095

 
43,802

 
172,216

 
149,975

Impairment of investment

 
42,456

 

 
42,456

 

(Gain) Loss on early extinguishment of debt

 

 
(73
)
 

 
36,252

Amortization of note discounts and issuance costs
959

 
4,342

 
6,114

 
14,428

 
25,282

Other, net
10,391

 
17,866

 
8,224

 
33,718

 
19,001

Changes in operating assets and liabilities
(658,731
)
 
64,524

 
30,676

 
(317,193
)
 
(310,832
)
Net cash provided by operating activities
718,358

 
1,050,379

 
729,272

 
2,655,747

 
2,029,282

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
 
 
 
 
 
Capital expenditures and intangible assets
(79,655
)
 
(49,057
)
 
(34,811
)
 
(273,469
)
 
(157,419
)
Business acquisitions, net of cash acquired

 

 

 
(115,697
)
 

Net sale (purchase) of available-for-sale securities
1,341,475

 
2,134,886

 
93,858

 
3,152,886

 
(1,883,886
)
Transfers of restricted cash and investments
286

 
(603
)
 
(48
)
 
(96
)
 
(5,784
)
Other, net
(826
)
 
638

 
103

 
(15,184
)
 
(11,524
)
Net cash provided by (used for) investing activities
1,261,280

 
2,085,864

 
59,102

 
2,748,440

 
(2,058,613
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
 
 
 
 
Principal payments on long-term debt and capital lease obligations and payments for debt issuance costs
(178,279
)
 
(228,166
)
 
(2,445
)
 
(755,694
)
 
(1,688,313
)
Net (repayment) proceeds from commercial paper
(638,367
)
 
199,024

 

 
359,604

 

Proceeds from borrowings on revolving credit facility

 

 

 
750,000

 

Repayments of borrowings on revolving credit facility

 

 

 
(750,000
)
 

Excess tax benefit on equity-based compensation plans

 

 
38,635

 

 
38,635

Treasury stock purchases
(1,306,309
)
 
(80,105
)
 
(525,778
)
 
(2,653,249
)
 
(811,672
)
Dividends paid
(82,005
)
 
(79,739
)
 
(73,709
)
 
(307,609
)
 
(243,495
)
Re-issuance of treasury stock related to employee stock purchase plan
41,567

 

 
23,120

 
75,624

 
59,663

Proceeds from issuance of common stock
2,626

 
2,517

 
369

 
9,258

 
12,913

Other, net
(2
)
 
7

 
(1
)
 
9

 
(125
)
Net cash used for financing activities
(2,160,769
)
 
(186,462
)
 
(539,809
)
 
(3,272,057
)
 
(2,632,394
)
Effect of exchange rate changes on cash and cash equivalents
(5,607
)
 
4,041

 
399

 
2,593

 
(63
)
Net (decrease) increase in cash and cash equivalents
(186,738
)
 
2,953,822

 
248,964

 
2,134,723

 
(2,661,788
)
Cash and cash equivalents at beginning of period
4,698,995

 
1,745,173

 
2,128,570

 
2,377,534

 
5,039,322

Cash and cash equivalents at end of period
$
4,512,257

 
$
4,698,995

 
$
2,377,534

 
$
4,512,257

 
$
2,377,534

(1) Derived from audited financial statements.
 
 
 
 
 
 
 
 
 
    

6


Non-GAAP Financial Summary
(in thousands, except percentages and per share data)
(unaudited)
 
Three Months Ended
 
June 24,
2018
 
March 25,
2018
Revenue
$
3,125,928

 
$
2,892,115

Gross margin
$
1,501,750

 
$
1,353,056

Gross margin as percentage of revenue
48.0
%
 
46.8
%
Operating expenses
$
507,416

 
$
486,022

Operating income
$
994,334

 
$
867,034

Operating margin as a percentage of revenue
31.8
%
 
30.0
%
Net income
$
931,956

 
$
851,795

Net income per diluted share
$
5.31

 
$
4.79

Shares used in per share calculation - diluted
175,432

 
177,786

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 24,
2018
 
March 25,
2018
U.S. GAAP net income
$
1,021,146

 
$
778,800

Pre-tax non-GAAP items:
 
 
 
Amortization related to intangible assets acquired through certain business combinations - cost of goods sold
22,342

 
22,342

Amortization related to intangible assets acquired through certain business combinations -selling, general and administrative
16,069

 
17,074

Business combination acquisition and integration related costs - selling, general and administrative
728

 
107

Amortization of note discounts - other expense, net
1,851

 
2,860

Realized loss on sale or impairment of investments - other expense, net

 
46,641

Net income tax benefit on non-GAAP items
(4,686
)
 
(11,518
)
Income tax benefit on conclusion of certain tax matters
(9,656
)
 
(4,511
)
Income tax benefit associated with U.S. tax reform
(115,838
)
 

Non-GAAP net income
$
931,956

 
$
851,795

Non-GAAP net income per diluted share
$
5.31

 
$
4.79

GAAP net income per diluted share
$
5.82

 
$
4.33

U.S. GAAP number of shares used for per diluted share calculation
175,432

 
179,779

Effect of convertible note hedge

 
(1,993
)
Non-GAAP number of shares used for per diluted share calculation
175,432

 
177,786



 

7


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 24,
 2018
 
June 25,
2017
U.S. GAAP net income
$
2,380,681

 
$
1,697,763

Pre-tax non-GAAP items:
 
 
 
Amortization related to intangible assets acquired through certain business combinations - cost of goods sold
88,640

 
85,000

Product rationalization - cost of goods sold

 
6,127

Product rationalization - research and development

 
1,650

Cost associated with campus consolidation - research and development

 
3,556

Amortization related to intangible assets acquired through certain business combinations - selling, general and administrative
66,630

 
64,332

Costs associated with business process reengineering - selling, general and administrative
2,078

 
7,487

Business combination acquisition and integration related costs - selling, general and administrative
2,864

 
9,972

Litigation settlement - selling, general and administrative

 
4,000

Amortization of note discounts - other expense, net
12,225

 
22,869

Realized loss on sale or impairment of investments - other expense, net
46,641

 

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

 
34,518

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

 
20,391

Net income tax benefit on non-GAAP items
(26,722
)
 
(47,941
)
Income tax benefit on conclusion of certain tax matters
(14,720
)
 
(109,191
)
Income tax expense associated with U.S. tax reform
641,051

 

Non-GAAP net income
$
3,199,368

 
$
1,800,533

U.S. GAAP net income per diluted share
$
13.17

 
$
9.24

Non-GAAP net income per diluted share
$
17.87

 
$
9.98

U.S. GAAP number of shares used for per diluted share calculation
180,782

 
183,770

Effect of convertible note hedge
(1,711
)
 
(3,302
)
Non-GAAP number of shares used for per diluted share calculation
179,071

 
180,468




8


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 24,
2018
 
March 25,
2018
U.S. GAAP gross margin
$
1,479,408

 
$
1,330,714

Pre-tax non-GAAP items:
 
 
 
Amortization related to intangible assets acquired through certain business combinations
22,342

 
22,342

Non-GAAP gross margin
$
1,501,750

 
$
1,353,056

U.S. GAAP gross margin as a percentage of revenue
47.3
%
 
46.0
%
Non-GAAP gross margin as a percentage of revenue
48.0
%
 
46.8
%
U.S. GAAP operating expenses
$
524,213

 
$
503,203

Pre-tax non-GAAP items:
 
 
 
Amortization related to intangible assets acquired through certain business combinations
(16,069
)
 
(17,074
)
Costs associated with business process reengineering

 

Business combination acquisition and integration related costs
(728
)
 
(107
)
Non-GAAP operating expenses
$
507,416

 
$
486,022

Non-GAAP operating income
$
994,334

 
$
867,034

GAAP operating margin as percent of revenue
30.6
%
 
28.6
%
Non-GAAP operating margin as a percent of revenue
31.8
%
 
30.0
%
 


9