Document



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): October 16, 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.     ¨








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







 Item 2.02.
Results of Operations and Financial Condition
On October 16, 2018, Lam Research Corporation (the “Company”) issued a press release announcing its financial results for the fiscal quarter ended September 23, 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







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:
October 16, 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)
 



Exhibit


Exhibit 99.1
FOR IMMEDIATE RELEASE        
Lam Research Corporation Contacts:
Tina Correia, Investor Relations, phone: 510-572-1615, e-mail: investor.relations@lamresearch.com
Lam Research Corporation Reports Financial Results for the Quarter Ended September 23, 2018
FREMONT, Calif., October 16, 2018 - Lam Research Corp. (Nasdaq: LRCX) today announced financial results for the quarter ended September 23, 2018 (the “September 2018 quarter”).
Highlights for the September 2018 quarter were as follows:
Revenue of $2.33 billion.
U.S. GAAP gross margin of 45.4%, U.S. GAAP operating income as a percentage of revenue of 25.4%, and U.S. GAAP diluted EPS of $3.23.
Non-GAAP gross margin of 46.4%, non-GAAP operating income as a percentage of revenue of 27.0%, and non-GAAP diluted EPS of $3.36.
Key Financial Data for the Quarters Ended
September 23, 2018 and June 24, 2018
(in thousands, except per-share data, percentages, and basis points) 
U.S. GAAP(1)
 
  
September 2018
 
June 2018
 
Change Q/Q
Revenue
  
$
2,330,691

 
$
3,125,928

 
- 25%
Gross margin as percentage of revenue
  
45.4
%
 
47.3
%
 
- 190 bps
Operating margin as percentage of revenue
  
25.4
%
 
30.6
%
 
- 520 bps
Diluted EPS
  
$
3.23

 
$
5.82

 
- 45%
 
 
 
 
 
 
 
Non-GAAP(1)
 
  
September 2018
 
June 2018
 
Change Q/Q
Revenue
  
$
2,330,691

 
$
3,125,928

 
- 25%
Gross margin as percentage of revenue
  
46.4
%
 
48.0
%
 
- 160 bps
Operating margin as percentage of revenue
  
27.0
%
 
31.8
%
 
- 480 bps
Diluted EPS
  
$
3.36

 
$
5.31

 
- 37%
(1) Results for September 2018 are reported under FASB Accounting Standard Codification ("ASC") 606, results for June 2018 are reported under ASC 605.
U.S. GAAP Financial Results
For the September 2018 quarter, revenue was $2,331 million, gross margin was $1,058 million, or 45.4% of revenue, operating expenses were $466 million, operating income was 25.4% of revenue, and net income was $533 million, or $3.23 per diluted share on a U.S. GAAP basis. This compares to revenue of $3,126 million, gross margin of $1,479 million, or 47.3% of revenue, operating expenses of $524 million, operating income of 30.6% of revenue, and net income of $1,021 million, or $5.82 per diluted share, for the quarter ended June 24, 2018 (the “June 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 September 2018 quarter, non-GAAP gross margin was $1,081 million or 46.4% of revenue, non-GAAP operating expenses were $451 million, non-GAAP operating margin was 27.0% of revenue, and non-GAAP net income was $555 million, or $3.36 per diluted share. This compares to non-GAAP gross margin of $1,502 million or 48.0% of revenue, non-GAAP operating expenses of $507 million, non-GAAP operating margin of 31.8% of revenue, and non-GAAP net income of $932 million, or $5.31 per diluted share for the June 2018 quarter.
“We are pleased to report September quarter results that modestly exceed expectations and forecast a stronger December quarter sequentially,” said Martin Anstice, Lam Research’s Chief Executive Officer. “More importantly, central to the Lam outperformance aspiration is our commitment to investing in innovation and close collaboration with our customers to address the technical and economic challenges of device and systems performance scaling. We remain focused on creating and capturing value for our customers in the world of emerging data economy opportunity.”








Balance Sheet and Cash Flow Results
Cash and cash equivalents, short-term investments, and restricted cash and investments balances decreased to $3.9 billion at the end of the September 2018 quarter compared to $5.2 billion at the end of the June 2018 quarter. This decrease was primarily the result of $1.7 billion of share repurchases, including net share settlement on employee stock-based compensation.

Deferred revenue and deferred profit at the end of the September 2018 quarter decreased to $626 million and $542 million, respectively, as compared to $994 million and $720 million, respectively, at the end of the June 2018 quarter. The deferred revenue and deferred profit at the end of September 2018 are recognized under ASC 606, while the same values as of June 2018 are recognized under ASC 605, which contributes to the change in value period over period. 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 $454 million as of September 23, 2018 and $607 million as of June 24, 2018.
Geographic Distribution
The geographic distribution of revenue during the September 2018 quarter is shown in the following table:
Region
Revenue
Japan
29%
China
25%
Korea
16%
Taiwan
12%
Southeast Asia
9%
United States
5%
Europe
4%
Outlook
For the December 2018 quarter, Lam is providing the following guidance:
 
U.S. GAAP
 
Reconciling Items
 
Non-GAAP
Revenue
$2.5 Billion
+/-
$150 Million
 
 
$2.5 Billion
+/-
$150 Million
Gross margin as a percentage of revenue
45.1%
+/-
1%
 
$
22

Million
 
46.0%
+/-
1%
Operating income as a percentage of revenue
26.1%
+/-
1%
 
$
34

Million
 
27.5%
+/-
1%
Net income per diluted share
$3.47
+/-
$0.20
 
$
30

Million
 
$3.65
+/-
$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 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 as a percentage of revenue - amortization related to intangible assets acquired through business combinations, $22 million.
Operating income as a percentage of revenue - amortization related to intangible assets acquired through business combinations, $34 million.
Earnings per share - amortization related to intangible assets acquired though business combinations, $34 million; amortization of note discounts, $1 million; and associated tax benefit for non-GAAP items ($5 million); totaling $30 million.





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 September 2018 and June 2018 quarters exclude amortization related to intangible assets acquired through business combinations, amortization of note discounts, tax benefit of non-GAAP items, and estimated income tax benefits associated with U.S. tax reform. Additionally, the September 2018 quarter non-GAAP results exclude costs associated with restructuring charges. The June 2018 quarter non-GAAP results exclude acquisition and integration costs associated with a business combination 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 customers in Japan; our revenue, industry, performance and general outlooks, and their drivers; our future strategic relevance to customers; our aspirations, commitments and 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 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 24, 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.
 ###







 
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data and percentages)
(unaudited) 
 
Three Months Ended
 
September 23,
2018
 
June 24,
2018
 
September 24,
2017
Revenue
$
2,330,691

 
$
3,125,928

 
$
2,478,140

Cost of goods sold
1,272,493

 
1,646,520

 
1,328,797

Gross margin
1,058,198

 
1,479,408

 
1,149,343

Gross margin as a percent of revenue
45.4
%
 
47.3
%
 
46.4
%
Research and development
291,672

 
327,713

 
275,078

Selling, general and administrative
174,775

 
196,500

 
181,043

Total operating expenses
466,447

 
524,213

 
456,121

Operating income
591,751

 
955,195

 
693,222

Operating income as a percent of revenue
25.4
%
 
30.6
%
 
28.0
%
Other (expense) income, net
(377
)
 
2,954

 
(5,502
)
Income before income taxes
591,374

 
958,149

 
687,720

Income tax (expense) benefit
(58,014
)
 
62,997

 
(97,030
)
Net income
$
533,360

 
$
1,021,146

 
$
590,690

Net income per share:
 
 
 
 
 
Basic
$
3.43

 
$
6.35

 
$
3.64

Diluted
$
3.23

 
$
5.82

 
$
3.21

Number of shares used in per share calculations:
 
 
 
 
 
Basic
155,658

 
160,916

 
162,141

Diluted
165,327

 
175,432

 
183,880

Cash dividend declared per common share
$
1.10

 
$
1.10

 
$
0.45


 












 





LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
 
 
September 23,
2018
 
June 24,
2018
 
September 24,
2017
 
(unaudited)
 
(1)
 
(unaudited)
ASSETS
 
 
 
 
 
Cash and cash equivalents
$
2,568,085

 
$
4,512,257

 
$
2,406,462

Investments
1,050,863

 
437,338

 
3,775,925

Accounts receivable, net
1,846,845

 
2,176,936

 
1,530,762

Inventories
1,874,194

 
1,876,162

 
1,328,297

Other current assets
175,886

 
147,218

 
187,334

Total current assets
7,515,873

 
9,149,911

 
9,228,780

Property and equipment, net
951,376

 
902,547

 
745,600

Restricted cash and investments
255,924

 
256,301

 
256,045

Goodwill and intangible assets
1,767,562

 
1,802,740

 
1,904,389

Other assets
466,842

 
367,979

 
263,812

Total assets
$
10,957,577

 
$
12,479,478

 
$
12,398,626

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
Current portion of convertible notes and capital leases
$
550,369

 
$
610,030

 
$
639,907

Other current liabilities
2,274,596

 
2,540,278

 
2,148,724

Total current liabilities
2,824,965

 
3,150,308

 
2,788,631

Long-term debt and capital leases
1,805,091

 
1,806,562

 
1,793,477

Income taxes payable
845,740

 
851,936

 
129,611

Other long-term liabilities
100,144

 
90,629

 
278,733

Total liabilities
5,575,940

 
5,899,435

 
4,990,452

Temporary equity, convertible notes
58,812

 
78,192

 
136,996

Stockholders’ equity (2)
5,322,825

 
6,501,851

 
7,271,178

Total liabilities and stockholders’ equity
$
10,957,577

 
$
12,479,478

 
$
12,398,626

 
(1)
Derived from audited financial statements.
(2)
Common shares issued and outstanding were 153,384 as of September 23, 2018, 156,892 as of June 24, 2018, and 162,144 as of September 24, 2017.
 







 
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
 
Three Months Ended
 
September 23, 2018
 
June 24,
2018
 
September 24, 2017
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
Net income
$
533,360

 
$
1,021,146

 
$
590,690

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
Depreciation and amortization
79,805

 
85,119

 
79,142

Deferred income taxes
(83,501
)
 
212,260

 
43,204

Equity-based compensation expense
50,343

 
47,214

 
41,783

Amortization of note discounts and issuance costs
1,245

 
959

 
4,588

Other, net
2,191

 
10,391

 
6,569

Changes in operating assets and liabilities
136,843

 
(658,731
)
 
92,330

Net cash provided by operating activities
720,286

 
718,358

 
858,306

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
 
Capital expenditures and intangible assets
(56,098
)
 
(79,655
)
 
(60,064
)
Business acquisition, net of cash acquired

 

 
(115,613
)
Net (purchase) sale of available-for-sale securities
(612,583
)
 
1,341,475

 
(117,774
)
Other, net
(3,650
)
 
(826
)
 
(10,600
)
Net cash (used for) provided by investing activities
(672,331
)
 
1,260,994

 
(304,051
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
Principal payments on debt
(79,831
)
 
(178,279
)
 
(301,727
)
Net repayments from issuance of commercial paper
(86
)
 
(638,367
)
 

Treasury stock purchases
(1,735,895
)
 
(1,306,309
)
 
(155,385
)
Dividends paid
(174,372
)
 
(82,005
)
 
(72,738
)
Reissuance of treasury stock related to employee stock purchase plan

 
41,567

 

Proceeds from issuance of common stock

 
2,626

 
1,042

Other, net
(9
)
 
(2
)
 
4

Net cash used for financing activities
(1,990,193
)
 
(2,160,769
)
 
(528,804
)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
(2,311
)
 
(5,607
)
 
3,317

Net (decrease) increase in cash, cash equivalents, and restricted cash
(1,944,549
)
 
(187,024
)
 
28,768

Cash, cash equivalents, and restricted cash at beginning of period
4,768,558

 
4,955,582

 
2,633,739

Cash, cash equivalents, and restricted cash at end of period
$
2,824,009

 
$
4,768,558

 
$
2,662,507








 
Non-GAAP Financial Summary
(in thousands, except percentages and per share data)
(unaudited)
 
Three Months Ended
 
September 23,
2018
 
June 24,
2018
Revenue
$
2,330,691

 
$
3,125,928

Gross margin
$
1,080,540

 
$
1,501,750

Gross margin as percentage of revenue
46.4
%
 
48.0
%
Operating expenses
$
450,540

 
$
507,416

Operating income
$
630,000

 
$
994,334

Operating income as a percentage of revenue
27.0
%
 
31.8
%
Net income
$
555,460

 
$
931,956

Net income per diluted share
$
3.36

 
$
5.31

Shares used in per share calculation - diluted
165,327

 
175,432

Reconciliation of U.S. GAAP Net Income to Non-GAAP Net Income
(in thousands, except per share data)
(unaudited) 
 
Three Months Ended
 
September 23,
2018
 
June 24, 2018
U.S. GAAP net income
$
533,360

 
$
1,021,146

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
12,490

 
16,069

Restructuring charges - selling, general and administrative
3,417

 

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

 
728

Amortization of note discounts - other expense, net
900

 
1,851

Net income tax benefit on non-GAAP items
(5,838
)
 
(4,686
)
Income tax benefit on the conclusion of certain tax matters

 
(9,656
)
Income tax benefit associated with U.S. tax reform
(11,211
)
 
(115,838
)
Non-GAAP net income
$
555,460

 
$
931,956

Non-GAAP net income per diluted share
$
3.36

 
$
5.31

GAAP net income per diluted share
$
3.23

 
$
5.82

U.S. GAAP number of shares used for per diluted share calculation
165,327

 
175,432







 
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
 
September 23,
2018
 
June 24, 2018
U.S. GAAP gross margin
$
1,058,198

 
$
1,479,408

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

 
22,342

Non-GAAP gross margin
$
1,080,540

 
$
1,501,750

U.S. GAAP gross margin as a percentage of revenue
45.4
%
 
47.3
%
Non-GAAP gross margin as a percentage of revenue
46.4
%
 
48.0
%
U.S. GAAP operating expenses
$
466,447

 
$
524,213

Pre-tax non-GAAP items:
 
 
 
Amortization related to intangible assets acquired through certain business combinations
(12,490
)
 
(16,069
)
Restructuring charges
(3,417
)
 

Business combination acquisition and integration related costs

 
(728
)
Non-GAAP operating expenses
$
450,540

 
$
507,416

Non-GAAP operating income
$
630,000

 
$
994,334

U.S. GAAP operating income as percent of revenue
25.4
%
 
30.6
%
Non-GAAP operating income as a percent of revenue
27.0
%
 
31.8
%