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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________________________________
FORM 10-Q
___________________________________________________________
(Mark One)
|
| |
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended December 23, 2018
or
|
| |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 0-12933
___________________________________________________________
LAM RESEARCH CORPORATION
(Exact name of registrant as specified in its charter)
___________________________________________________________
|
| | |
Delaware | | 94-2634797 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
|
| | |
4650 Cushing Parkway Fremont, California | | 94538 |
(Address of principal executive offices) | | (Zip Code) |
(510) 572-0200
(Registrant’s telephone number, including area code)
__________________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:
|
| | | | | | |
Large accelerated filer | | x | | Accelerated filer | | ¨ |
| | | |
Non-accelerated filer | | ¨ | | Smaller reporting company | | ¨ |
| | | | | | |
| | | | 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. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of January 28, 2019, the Registrant had 152,593,454 shares of Common Stock outstanding.
LAM RESEARCH CORPORATION
TABLE OF CONTENTS
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PART I. FINANCIAL INFORMATION
| |
ITEM 1. | Financial Statements |
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
|
| | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| December 23, 2018 | | December 24, 2017 | | December 23, 2018 | | December 24, 2017 |
Revenue | $ | 2,522,673 |
| | $ | 2,580,815 |
| | $ | 4,853,364 |
| | $ | 5,058,955 |
|
Cost of goods sold | 1,377,640 |
| | 1,375,248 |
| | 2,650,133 |
| | 2,704,045 |
|
Gross margin | 1,145,033 |
| | 1,205,567 |
| | 2,203,231 |
| | 2,354,910 |
|
Research and development | 285,556 |
| | 281,311 |
| | 577,228 |
| | 556,389 |
|
Selling, general, and administrative | 169,098 |
| | 186,885 |
| | 343,873 |
| | 367,928 |
|
Total operating expenses | 454,654 |
| | 468,196 |
| | 921,101 |
| | 924,317 |
|
Operating income | 690,379 |
| | 737,371 |
| | 1,282,130 |
| | 1,430,593 |
|
Other expense, net | (30,649 | ) | | (3,152 | ) | | (31,026 | ) | | (8,654 | ) |
Income before income taxes | 659,730 |
| | 734,219 |
| | 1,251,104 |
| | 1,421,939 |
|
Income tax expense | (90,875 | ) | | (744,174 | ) | | (148,889 | ) | | (841,204 | ) |
Net income (loss) | $ | 568,855 |
| | $ | (9,955 | ) | | $ | 1,102,215 |
| | $ | 580,735 |
|
Net income (loss) per share: | | | | | | | |
Basic | $ | 3.67 |
| | $ | (0.06 | ) | | $ | 7.10 |
| | $ | 3.59 |
|
Diluted | $ | 3.51 |
| | $ | (0.06 | ) | | $ | 6.73 |
| | $ | 3.16 |
|
Number of shares used in per share calculations: | | | | | | | |
Basic | 155,022 |
| | 161,135 |
| | 155,340 |
| | 161,638 |
|
Diluted | 162,170 |
| | 161,135 |
| | 163,749 |
| | 183,958 |
|
See Notes to Condensed Consolidated Financial Statements
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
|
| | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| December 23, 2018 | | December 24, 2017 | | December 23, 2018 | | December 24, 2017 |
Net income (loss) | $ | 568,855 |
| | $ | (9,955 | ) | | $ | 1,102,215 |
| | $ | 580,735 |
|
Other comprehensive income (loss), net of tax: | | | | | | | |
Foreign currency translation adjustment | (7,268 | ) | | 5,239 |
| | (13,529 | ) | | 13,108 |
|
Cash flow hedges: | | | | | | | |
Net unrealized gains during the period | 5,122 |
| | 6,930 |
| | 11,988 |
| | 9,992 |
|
Net gains reclassified into earnings | (5,726 | ) | | (5,459 | ) | | (4,578 | ) | | (3,271 | ) |
| (604 | ) | | 1,471 |
| | 7,410 |
| | 6,721 |
|
Available-for-sale investments: | | | | | | | |
Net unrealized gains (losses) during the period | 585 |
| | (18,339 | ) | | 298 |
| | (20,066 | ) |
Net (gains) losses reclassified into earnings | (51 | ) | | 84 |
| | (54 | ) | | (39 | ) |
| 534 |
| | (18,255 | ) | | 244 |
| | (20,105 | ) |
Defined benefit plans, net change in unrealized component | 375 |
| | 172 |
| | (1,368 | ) | | (2,184 | ) |
Other comprehensive loss, net of tax | (6,963 | ) | | (11,373 | ) | | (7,243 | ) | | (2,460 | ) |
Comprehensive income (loss) | $ | 561,892 |
| | $ | (21,328 | ) | | $ | 1,094,972 |
| | $ | 578,275 |
|
See Notes to Condensed Consolidated Financial Statements
4
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
|
| | | | | | | |
| December 23, 2018 | | June 24, 2018 |
| (unaudited) | | (1) |
ASSETS | | | |
Cash and cash equivalents | $ | 3,359,793 |
| | $ | 4,512,257 |
|
Investments | 275,670 |
| | 437,338 |
|
Accounts receivable, less allowance for doubtful accounts of $5,308 as of December 23, 2018, and $5,343 as of June 24, 2018 | 1,868,842 |
| | 2,176,936 |
|
Inventories | 1,703,307 |
| | 1,876,162 |
|
Prepaid expenses and other current assets | 148,233 |
| | 147,218 |
|
Total current assets | 7,355,845 |
| | 9,149,911 |
|
Property and equipment, net | 1,013,306 |
| | 902,547 |
|
Restricted cash and investments | 255,292 |
| | 256,301 |
|
Goodwill | 1,484,570 |
| | 1,484,904 |
|
Intangible assets, net | 251,898 |
| | 317,836 |
|
Other assets | 407,547 |
| | 367,979 |
|
Total assets | $ | 10,768,458 |
| | $ | 12,479,478 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
Trade accounts payable | $ | 343,942 |
| | $ | 510,983 |
|
Accrued expenses and other current liabilities | 1,203,577 |
| | 1,309,209 |
|
Deferred profit | 432,216 |
| | 720,086 |
|
Current portion of convertible notes, capital leases, and commercial paper | 187,102 |
| | 610,030 |
|
Total current liabilities | 2,166,837 |
| | 3,150,308 |
|
Long-term debt and capital leases, less current portion | 1,813,190 |
| | 1,806,562 |
|
Income taxes payable | 859,232 |
| | 851,936 |
|
Other long-term liabilities | 87,827 |
| | 90,629 |
|
Total liabilities | 4,927,086 |
| | 5,899,435 |
|
Commitments and contingencies |
| |
|
Temporary equity, convertible notes | 57,009 |
| | 78,192 |
|
Stockholders’ equity: | | | |
Preferred stock, at par value of $0.001 per share; authorized, 5,000 shares, none outstanding | — |
| | — |
|
Common stock, at par value of $0.001 per share; authorized, 400,000 shares; issued and outstanding, 153,961 shares at December 23, 2018, and 156,892 shares at June 24, 2018 | 154 |
| | 157 |
|
Additional paid-in capital | 6,256,942 |
| | 6,144,425 |
|
Treasury stock, at cost; 128,920 shares at December 23, 2018, and 119,679 shares at June 24, 2018 | (9,573,486 | ) | | (7,846,476 | ) |
Accumulated other comprehensive loss | (64,692 | ) | | (57,449 | ) |
Retained earnings | 9,165,445 |
| | 8,261,194 |
|
Total stockholders’ equity | 5,784,363 |
| | 6,501,851 |
|
Total liabilities and stockholders’ equity | $ | 10,768,458 |
| | $ | 12,479,478 |
|
(1)
See Notes to Condensed Consolidated Financial Statements
5
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) (unaudited)
|
| | | | | | | |
| Six Months Ended |
| December 23, 2018 | | December 24, 2017 |
CASH FLOWS FROM OPERATING ACTIVITIES: | | | |
Net income | $ | 1,102,215 |
| | $ | 580,735 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Depreciation and amortization | 161,599 |
| | 159,040 |
|
Deferred income taxes | (62,704 | ) | | (228,274 | ) |
Equity-based compensation expense | 89,149 |
| | 83,907 |
|
Amortization of note discounts and issuance costs | 2,276 |
| | 9,127 |
|
Other, net | 848 |
| | 5,461 |
|
Changes in operating assets and liabilities | 69,322 |
| | 277,014 |
|
Net cash provided by operating activities | 1,362,705 |
| | 887,010 |
|
CASH FLOWS FROM INVESTING ACTIVITIES: | | | |
Capital expenditures and intangible assets | (162,021 | ) | | (144,757 | ) |
Business acquisition, net of cash acquired | — |
| | (115,697 | ) |
Purchases of available-for-sale securities | (785,188 | ) | | (2,251,486 | ) |
Sales and maturities of available-for-sale securities | 945,828 |
| | 1,928,011 |
|
Other, net | (4,019 | ) | | (14,996 | ) |
Net cash used for investing activities | (5,400 | ) | | (598,925 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | |
Principal payments on debt | (86,271 | ) | | (349,249 | ) |
Net (repayments) proceeds from issuance of commercial paper | (359,604 | ) | | 798,947 |
|
Proceeds from borrowings on revolving credit facility | — |
| | 750,000 |
|
Repayments of borrowings on revolving credit facility | — |
| | (750,000 | ) |
Treasury stock purchases | (1,737,414 | ) | | (1,266,835 | ) |
Dividends paid | (342,279 | ) | | (145,865 | ) |
Reissuance of treasury stock related to employee stock purchase plan | 32,920 |
| | 34,057 |
|
Proceeds from issuance of common stock | 109 |
| | 4,115 |
|
Other, net | (13,207 | ) | | 4 |
|
Net cash used for financing activities | (2,505,746 | ) | | (924,826 | ) |
Effect of exchange rate changes on cash, cash equivalents, and restricted cash | (5,032 | ) | | 4,159 |
|
Net decrease in cash, cash equivalents, and restricted cash | (1,153,473 | ) | | (632,582 | ) |
Cash, cash equivalents, and restricted cash at beginning of period | 4,768,558 |
| | 2,633,739 |
|
Cash, cash equivalents, and restricted cash at end of period | $ | 3,615,085 |
| | $ | 2,001,157 |
|
Schedule of non-cash transactions: | | | |
Accrued payables for stock repurchases | 4 |
| | 1,073 |
|
Accrued payables for capital expenditures | 36,582 |
| | 29,031 |
|
Dividends payable | 171,196 |
| | 79,743 |
|
Transfers of inventory to property and equipment, net | 33,723 |
| | 29,977 |
|
| | | |
Reconciliation of cash, cash equivalents, and restricted cash | December 23, 2018 | | December 24, 2017 |
Cash and cash equivalents | $ | 3,359,793 |
| | $ | 1,745,173 |
|
Restricted cash and investments | 255,292 |
| | 255,984 |
|
Total Cash, cash equivalents, and restricted cash | $ | 3,615,085 |
| | $ | 2,001,157 |
|
See Notes to Condensed Consolidated Financial Statements
6
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
| December 23, 2018 |
| Common Stock Shares | | Common Stock | | Additional Paid-in Capital | | Treasury Stock | | Accumulated Other Comprehensive Loss | | Retained Earnings | | Total |
Balance at September 23, 2018 | 153,384 |
| | $ | 153 |
| | $ | 6,195,024 |
| | $ | (9,582,409 | ) | | $ | (57,729 | ) | | $ | 8,767,786 |
| | $ | 5,322,825 |
|
Sale of common stock | 47 |
| | — |
| | 109 |
| | — |
| | — |
| | — |
| | 109 |
|
Purchase of treasury stock | (1,683 | ) | | (1 | ) | | — |
| | (1,360 | ) | | — |
| | — |
| | (1,361 | ) |
Reissuance of treasury stock | 273 |
| | — |
| | 22,637 |
| | 10,283 |
| | — |
| | — |
| | 32,920 |
|
Equity-based compensation expense | — |
| | — |
| | 38,806 |
| | — |
| | — |
| | — |
| | 38,806 |
|
Effect of conversion of convertible notes | 141 |
| | — |
| | (1,435 | ) | | — |
| | — |
| | — |
| | (1,435 | ) |
Exercise of warrants | 1,799 |
| | 2 |
| | (2 | ) | | — |
| | — |
| | — |
| | — |
|
Reclassification from temporary to permanent equity | — |
| | — |
| | 1,803 |
| | — |
| | — |
| | — |
| | 1,803 |
|
Net income | — |
| | — |
| | — |
| | — |
| | — |
| | 568,855 |
| | 568,855 |
|
Other comprehensive loss | — |
| | — |
| | — |
| | — |
| | (6,963 | ) | | — |
| | (6,963 | ) |
Cash dividends declared ($1.10 per common share) | — |
| | — |
| | — |
| | — |
| | — |
| | (171,196 | ) | | (171,196 | ) |
Balance at December 23, 2018 | 153,961 |
| | $ | 154 |
| | $ | 6,256,942 |
| | $ | (9,573,486 | ) | | $ | (64,692 | ) | | $ | 9,165,445 |
| | $ | 5,784,363 |
|
| | | | | | | | | | | | | |
| Six Months Ended |
| December 23, 2018 |
| Common Stock Shares | | Common Stock | | Additional Paid-in Capital | | Treasury Stock | | Accumulated Other Comprehensive Loss | | Retained Earnings | | Total |
Balance at June 24, 2018 | 156,892 |
| | $ | 157 |
| | $ | 6,144,425 |
| | $ | (7,846,476 | ) | | $ | (57,449 | ) | | $ | 8,261,194 |
| | $ | 6,501,851 |
|
Sale of common stock | 79 |
| | — |
| | 109 |
| | — |
| | — |
| | — |
| | 109 |
|
Purchase of treasury stock | (9,491 | ) | | (9 | ) | | — |
| | (1,737,293 | ) | | — |
| | — |
| | (1,737,302 | ) |
Reissuance of treasury stock | 273 |
| | — |
| | 22,637 |
| | 10,283 |
| | — |
| | — |
| | 32,920 |
|
Equity-based compensation expense | — |
| | — |
| | 89,149 |
| | — |
| | — |
| | — |
| | 89,149 |
|
Effect of conversion of convertible notes | 2,103 |
| | 2 |
| | (20,549 | ) | | — |
| | — |
| | — |
| | (20,547 | ) |
Exercise of warrants | 4,105 |
| | 4 |
| | (12 | ) | | — |
| | — |
| | — |
| | (8 | ) |
Reclassification from temporary to permanent equity | — |
| | — |
| | 21,183 |
| | — |
| | — |
| | — |
| | 21,183 |
|
Adoption of ASU 2014-09(1) | — |
| | — |
| | — |
| | — |
| | — |
| | 139,355 |
| | 139,355 |
|
Adoption of ASU 2016-16(1) | — |
| | — |
| | — |
| | — |
| | — |
| | (443 | ) | | (443 | ) |
Adoption of ASU 2018-02(1) | — |
| | — |
| | — |
| | — |
| | (2,227 | ) | | 2,227 |
| | — |
|
Net income | — |
| | — |
| | — |
| | — |
| | — |
| | 1,102,215 |
| | 1,102,215 |
|
Other comprehensive loss | — |
| | — |
| | — |
| | — |
| | (5,016 | ) | | — |
| | (5,016 | ) |
Cash dividends declared ($2.20 per common share) | — |
| | — |
| | — |
| | — |
| | — |
| | (339,103 | ) | | (339,103 | ) |
Balance at December 23, 2018 | 153,961 |
| | $ | 154 |
| | $ | 6,256,942 |
| | $ | (9,573,486 | ) | | $ | (64,692 | ) | | $ | 9,165,445 |
| | $ | 5,784,363 |
|
| | | | | | | | | | | | | |
(1) Refer to Note 2 - Recent Accounting Pronouncements for more information regarding these FASB Accounting Standard Updates. |
| |
See Notes to Condensed Consolidated Financial Statements
7
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
| December 24, 2017 |
| Common Stock Shares | | Common Stock | | Additional Paid-in Capital | | Treasury Stock | | Accumulated Other Comprehensive Loss | | Retained Earnings | | Total |
Balance at September 24, 2017 | 162,144 |
| | $ | 162 |
| | $ | 5,891,549 |
| | $ | (5,375,920 | ) | | $ | (52,787 | ) | | $ | 6,808,174 |
| | $ | 7,271,178 |
|
Sale of common stock | 398 |
| | — |
| | 3,073 |
| | — |
| | — |
| | — |
| | 3,073 |
|
Purchase of treasury stock | (3,807 | ) | | (4 | ) | | — |
| | (1,108,169 | ) | | — |
| | — |
| | (1,108,173 | ) |
Reissuance of treasury stock | 413 |
| | — |
| | 20,402 |
| | 13,655 |
| | — |
| | — |
| | 34,057 |
|
Equity-based compensation expense | — |
| | — |
| | 42,124 |
| | — |
| | — |
| | — |
| | 42,124 |
|
Effect of conversion of convertible notes | 670 |
| | 1 |
| | (3,774 | ) | | — |
| | — |
| | — |
| | (3,773 | ) |
Effect of bond hedge, cash in lieu of shares | (367 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Reclassification from temporary to permanent equity | — |
| | — |
| | 6,571 |
| | — |
| | — |
| | — |
| | 6,571 |
|
Adoption of ASU 2016-09 | — |
| | — |
| | — |
| | — |
| | — |
| | (855 | ) | | (855 | ) |
Net income | — |
| | — |
| | — |
| | — |
| | — |
| | (9,955 | ) | | (9,955 | ) |
Other comprehensive loss | — |
| | — |
| | — |
| | — |
| | (11,373 | ) | | — |
| | (11,373 | ) |
Cash dividends declared ($0.50 per common share) | — |
| | — |
| | — |
| | — |
| | — |
| | (79,743 | ) | | (79,743 | ) |
Balance at December 24, 2017 | 159,451 |
| | $ | 159 |
| | $ | 5,959,945 |
| | $ | (6,470,434 | ) | | $ | (64,160 | ) | | $ | 6,717,621 |
| | $ | 6,143,131 |
|
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Six Months Ended |
| December 24, 2017 |
| Common Stock Shares | | Common Stock | | Additional Paid-in Capital | | Treasury Stock | | Accumulated Other Comprehensive Loss | | Retained Earnings | | Total |
Balance at June 25, 2017 | 161,723 |
| | $ | 162 |
| | $ | 5,845,485 |
| | $ | (5,216,187 | ) | | $ | (61,700 | ) | | $ | 6,249,691 |
| | $ | 6,817,451 |
|
Sale of common stock | 466 |
| | — |
| | 4,115 |
| | — |
| | — |
| | — |
| | 4,115 |
|
Purchase of treasury stock | (5,597 | ) | | (6 | ) | | — |
| | (1,267,902 | ) | | — |
| | — |
| | (1,267,908 | ) |
Reissuance of treasury stock | 413 |
| | — |
| | 20,402 |
| | 13,655 |
| | — |
| | — |
| | 34,057 |
|
Equity-based compensation expense | — |
| | — |
| | 83,907 |
| | — |
| | — |
| | — |
| | 83,907 |
|
Effect of conversion of convertible notes | 4,906 |
| | 5 |
| | (33,406 | ) | | — |
| | — |
| | — |
| | (33,401 | ) |
Effect of bond hedge, cash in lieu of shares | (2,460 | ) | | (2 | ) | | 6 |
| | — |
| | — |
| | — |
| | 4 |
|
Reclassification from temporary to permanent equity | — |
| | — |
| | 39,436 |
| | — |
| | — |
| | — |
| | 39,436 |
|
Adoption of ASU 2016-09 | — |
| | — |
| | — |
| | — |
| | — |
| | 40,065 |
| | 40,065 |
|
Net income | — |
| | — |
| | — |
| | — |
| | — |
| | 580,735 |
| | 580,735 |
|
Other comprehensive loss | — |
| | — |
| | — |
| | — |
| | (2,460 | ) | | — |
| | (2,460 | ) |
Cash dividends declared ($0.95 per common share) | — |
| | — |
| | — |
| | — |
| | — |
| | (152,870 | ) | | (152,870 | ) |
Balance at December 24, 2017 | 159,451 |
| | $ | 159 |
| | $ | 5,959,945 |
| | $ | (6,470,434 | ) | | $ | (64,160 | ) | | $ | 6,717,621 |
| | $ | 6,143,131 |
|
See Notes to Condensed Consolidated Financial Statements
8
LAM RESEARCH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 23, 2018
(Unaudited)
NOTE 1 — BASIS OF PRESENTATION
The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the instructions to Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. The accompanying unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements of Lam Research Corporation (“Lam Research” or the “Company”) for the fiscal year ended June 24, 2018, which are included in the Company’s Annual Report on Form 10-K as of and for the year ended June 24, 2018 (the “2018 Form 10-K”). The Company’s reports on Form 10-K, Form 10-Q and Form 8-K are available online at the Securities and Exchange Commission website on the Internet. The address of that site is www.sec.gov. The Company also posts its reports on Form 10-K, Form 10-Q and Form 8-K on its corporate website at http://investor.lamresearch.com. The content on any website referred to in this Form 10-Q is not a part of or incorporated by reference in this Form 10-Q unless expressly noted.
The condensed consolidated financial statements include the accounts of Lam Research and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The Company’s reporting period is a 52/53-week fiscal year. The Company’s current fiscal year will end June 30, 2019 and includes 53 weeks. The quarters ended December 23, 2018 (the “December 2018 quarter”) and December 24, 2017 (the “December 2017 quarter”) included 13 weeks.
NOTE 2 — RECENT ACCOUNTING PRONOUNCEMENTS
Recently Adopted
In May 2014, the FASB released ASU 2014-09, “Revenue from Contracts with Customers,” to supersede nearly all existing revenue recognition guidance under GAAP. The FASB issued subsequent amendments to the initial guidance in August 2015, March 2016, April 2016, May 2016 and December 2016 within ASU 2015–14, ASU 2016–08, ASU 2016–10, ASU 2016–12 and ASU 2016–20, respectively; all of which in combination with ASU 2014-09 were codified as Accounting Standard Codification Topic 606 (“ASC 606”). The core principle of the standard is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. The Company adopted ASC 606 on the first day of the current fiscal year, June 25, 2018, under the modified retrospective approach, applying the amendments to prospective reporting periods. Results for reporting periods beginning on or after June 25, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with the historic accounting under ASC 605. In conjunction with the adoption of ASC 606, the Company’s revenue recognition policy has been amended, refer to Note 3 - Revenue for a description of the amendments.
The cumulative effect of the changes made to the Company’s Condensed Consolidated Balance Sheet as of June 25, 2018 for the adoption of ASC 606 to all contracts with customers that were not completed as of June 24, 2018 was recorded as an adjustment to retained earnings as of the adoption date as follows:
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| | | | | | | | | | | |
| June 24, 2018 | | | | June 25, 2018 |
| As reported | | Adjustments | | As Adjusted |
| (In thousands) |
Total assets | $ | 12,479,478 |
| | $ | 12,955 |
| | $ | 12,492,433 |
|
Deferred profit | $ | 720,086 |
| | $ | (160,695 | ) | | $ | 559,391 |
|
Total liabilities | $ | 5,899,435 |
| | $ | (126,400 | ) | | $ | 5,773,035 |
|
Stockholders' equity | $ | 6,501,851 |
| | $ | 139,355 |
| | $ | 6,641,206 |
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Upon adoption, the Company recorded a cumulative effect adjustment of $139.4 million, net of tax adjustment of $21.0 million, which increased the June 25, 2018 opening retained earnings balance on the Condensed Consolidated Balance Sheet, primarily as a result of changes in the timing of recognition of system sales. Under ASC 606, the Company recognizes revenue from sales of systems when the Company determines that control has passed to the customer which is generally (1) for products that have been demonstrated to meet product specifications prior to shipment upon shipment or delivery; (2) for products that have not been demonstrated to meet product specifications prior to shipment, revenue is recognized upon completion of installation and receipt of customer acceptance; (3) for transactions where legal title does not pass upon shipment or delivery and the Company does not have a right to payment, revenue is recognized when legal title passes to the customer and the Company has a right to payment, which is generally at customer acceptance.
The impact of adoption of ASC 606 on the Company's Condensed Consolidated Statement of Operations and Condensed Consolidated Balance Sheet was as follows:
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| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended | | Six Months Ended |
| December 23, 2018 | | December 23, 2018 |
| As Reported | | Without adoption of ASC 606 | | Effect of Change Higher/(Lower) | | As Reported | | Without adoption of ASC 606 | | Effect of Change Higher/(Lower) |
| (In thousands) |
Revenue | $ | 2,522,673 |
| | $ | 2,405,781 |
| | $ | 116,892 |
| | $ | 4,853,364 |
| | $ | 4,488,178 |
| | $ | 365,186 |
|
Cost of goods sold | $ | 1,377,640 |
| | $ | 1,324,493 |
| | $ | 53,147 |
| | $ | 2,650,133 |
| | $ | 2,491,351 |
| | $ | 158,782 |
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