Company Quick10K Filing
Lam Research
Price230.08 EPS14
Shares151 P/E16
MCap34,669 P/FCF15
Net Debt-445 EBIT2,519
TEV34,224 TEV/EBIT14
TTM 2019-09-29, in MM, except price, ratios
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8-K 2018-01-02

LRCX 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Note 1 - Basis of Presentation
Note 2 - Recent Accounting Pronouncements
Note 3 - Revenue
Note 4 - Equity - Based Compensation Plans
Note 5 - Other Expense, Net
Note 6 - Income Tax Expense
Note 7 - Net Income per Share
Note 8 - Financial Instruments
Note 9 - Inventories
Note 10 - Goodwill and Intangible Assets
Note 11 - Accrued Expenses and Other Current Liabilities
Note 12 - Long - Term Debt and Other Borrowings
Note 13 - Leases
Note 14 - Commitments and Contingencies
Note 15 - Stock Repurchase Program
Note 16 - Accumulated Other Comprehensive Loss
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 lrcx1q2021exhibit311.htm
EX-31.2 lrcx1q2021exhibit312.htm
EX-32.1 lrcx1q2021exhibit321.htm
EX-32.2 lrcx1q2021exhibit322.htm

Lam Research Earnings 2020-09-27

Balance SheetIncome StatementCash Flow
151296302012201420172020
Assets, Equity
3.22.51.91.20.6-0.12012201420172020
Rev, G Profit, Net Income
2.11.20.4-0.5-1.3-2.22012201420172020
Ops, Inv, Fin

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 27, 2020
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)
Registrant’s telephone number, including area code: (510) 572-0200
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, Par Value $0.001 Per ShareLRCXThe Nasdaq Stock Market
(Nasdaq Global Select Market)
__________________________________________________
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      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      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer   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  
As of October 23, 2020, the Registrant had 144,009,220 shares of Common Stock outstanding.




LAM RESEARCH CORPORATION
TABLE OF CONTENTS
 
  Page No.
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
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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
September 27,
2020
September 29,
2019
Revenue$3,177,080 $2,165,746 
Cost of goods sold1,670,901 1,184,036 
Gross margin1,506,179 981,710 
Research and development355,367 286,827 
Selling, general, and administrative189,748 157,428 
Total operating expenses545,115 444,255 
Operating income961,064 537,455 
Other expense, net(38,792)(12,728)
Income before income taxes922,272 524,727 
Income tax expense(98,821)(58,938)
Net income$823,451 $465,789 
Net income per share:
Basic$5.67 $3.22 
Diluted$5.59 $3.09 
Number of shares used in per share calculations:
Basic145,267 144,673 
Diluted147,248 150,682 











See Notes to Condensed Consolidated Financial Statements

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LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)

 
Three Months Ended
September 27,
2020
September 29,
2019
Net income$823,451 $465,789 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment12,124 (8,698)
Cash flow hedges:
Net unrealized losses during the period(350)(691)
Net losses reclassified into earnings767 1,350 
417 659 
Available-for-sale investments:
Net unrealized losses during the period(1,400)(1,000)
Net losses reclassified into earnings402 390 
(998)(610)
Defined benefit plans, net change in unrealized component(4)119 
Other comprehensive income (loss), net of tax11,539 (8,530)
Comprehensive income $834,990 $457,259 
See Notes to Condensed Consolidated Financial Statements
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LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
 
September 27,
2020
June 28,
2020
(unaudited)(1)
ASSETS
Cash and cash equivalents$4,129,067 $4,915,172 
Investments2,528,841 1,795,080 
Accounts receivable, less allowance of $5,245 as of September 27, 2020, and $5,465 as of June 28, 2020
2,317,922 2,097,099 
Inventories2,138,050 1,900,024 
Prepaid expenses and other current assets161,003 146,160 
Total current assets11,274,883 10,853,535 
Property and equipment, net1,133,529 1,071,499 
Restricted cash and investments253,458 253,911 
Goodwill1,484,629 1,484,436 
Intangible assets, net161,714 168,532 
Other assets748,795 727,134 
Total assets$15,057,008 $14,559,047 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Trade accounts payable$662,674 $592,387 
Accrued expenses and other current liabilities1,333,568 1,272,655 
Deferred profit576,488 457,523 
Current portion of long-term debt and finance lease obligations834,138 839,877 
Total current liabilities3,406,868 3,162,442 
Long-term debt and finance lease obligations, less current portion4,993,495 4,970,848 
Income taxes payable879,870 909,709 
Other long-term liabilities351,283 332,559 
Total liabilities9,631,516 9,375,558 
Commitments and contingencies
Temporary equity, convertible notes6,307 10,995 
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 as of September 27, 2020 and June 28, 2020; issued and outstanding, 144,593 shares at September 27, 2020, and 145,331 shares at June 28, 2020
145 145 
Additional paid-in capital6,761,545 6,695,858 
Treasury stock, at cost; 146,791 shares at September 27, 2020, and 145,432 shares at June 28,
2020
(13,416,986)(12,949,889)
Accumulated other comprehensive loss(82,672)(94,211)
Retained earnings12,157,153 11,520,591 
Total stockholders’ equity5,419,185 5,172,494 
Total liabilities and stockholders’ equity$15,057,008 $14,559,047 
(1) Derived from audited financial statements

See Notes to Condensed Consolidated Financial Statements
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LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) (unaudited)
Three Months Ended
September 27,
2020
September 29,
2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income$823,451 $465,789 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization72,912 64,664 
Deferred income taxes(1,850)(2,992)
Equity-based compensation expense55,988 42,905 
Amortization of note discounts and issuance costs1,422 1,675 
Other, net2,917 4,026 
Changes in operating assets and liabilities(312,329)(112,020)
Net cash provided by operating activities642,511 464,047 
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures and intangible assets(62,806)(39,256)
Purchases of available-for-sale securities(1,750,188)(147,632)
Maturities of available-for-sales securities597,252 600,347 
Sales of available-for-sale securities415,862 337,763 
Other, net(1,786)(540)
Net cash (used for) provided by investing activities(801,666)750,682 
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on debt(19,173)(28,965)
Treasury stock purchases(448,581)(78,132)
Dividends paid(167,129)(158,868)
Proceeds from issuance of common stock5,538 3,869 
Other, net(2,140) 
Net cash used for financing activities(631,485)(262,096)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash4,082 (4,193)
Net (decrease) increase in cash, cash equivalents, and restricted cash(786,558)948,440 
Cash, cash equivalents, and restricted cash at beginning of period5,169,083 3,913,396 
Cash, cash equivalents, and restricted cash at end of period$4,382,525 $4,861,836 
Schedule of non-cash transactions:
Accrued payables for stock repurchases18,599 13 
Accrued payables for capital expenditures37,733 30,333 
Dividends payable188,046 166,721 
Transfers of inventory to property and equipment, net29,019 13,997 
Reconciliation of cash, cash equivalents, and restricted cashSeptember 27,
2020
September 29,
2019
Cash and cash equivalents$4,129,067 $4,607,182 
Restricted cash and investments253,458 254,654 
Total cash, cash equivalents, and restricted cash$4,382,525 $4,861,836 
See Notes to Condensed Consolidated Financial Statements
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LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)
Three Months Ended
September 27, 2020
Common
Stock
Shares
Common
Stock
Additional
Paid-in
Capital
Treasury
Stock
Accumulated
Other
Comprehensive
Loss
Retained
Earnings
Total
Balance at June 28, 2020145,331 $145 $6,695,858 $(12,949,889)$(94,211)$11,520,591 $5,172,494 
Sale of common stock105  5,538 — — — 5,538 
Purchase of treasury stock(1,360)(1)— (467,097)— — (467,098)
Equity-based compensation expense— — 55,988 — — — 55,988 
Effect of conversion of convertible notes517 1 (527)— — — (526)
Reclassification from temporary to permanent equity— — 4,688 — — — 4,688 
Adoption of ASU 2018-18
— — — — — 1,157 1,157 
Net income— — — — — 823,451 823,451 
Other comprehensive income— — — — 11,539 — 11,539 
Cash dividends declared ($1.30 per common share)
— — — — — (188,046)(188,046)
Balance at September 27, 2020144,593 $145 $6,761,545 $(13,416,986)$(82,672)$12,157,153 $5,419,185 
Three Months Ended
September 29, 2019
Common
Stock
Shares
Common
Stock
Additional
Paid-in
Capital
Treasury
Stock
Accumulated
Other
Comprehensive
Loss
Retained
Earnings
Total
Balance at June 30, 2019144,433 $144 $6,409,405 $(11,602,573)$(64,030)$9,930,919 $4,673,865 
Sale of common stock111 — 3,869 — — — 3,869 
Purchase of treasury stock(397)— — (78,116)— — (78,116)
Equity-based compensation expense— — 42,905 — — — 42,905 
Effect of conversion of convertible notes724 1 (6,573)— — — (6,572)
Reclassification from temporary to permanent equity— — 6,886 — — — 6,886 
Adoption of ASU 2016-02
— — — — — 3,018 3,018 
Net income— — — — — 465,789 465,789 
Other comprehensive loss— — — — (8,530)— (8,530)
Cash dividends declared ($1.15 per common share)
— — — — — (166,721)(166,721)
Balance at September 29, 2019144,871 $145 $6,456,492 $(11,680,689)$(72,560)$10,233,005 $4,936,393 
See Notes to Condensed Consolidated Financial Statements
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LAM RESEARCH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 27, 2020
(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 28, 2020, which are included in the Company’s Annual Report on Form 10-K as of and for the year ended June 28, 2020 (the “2020 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 27, 2021 and includes 52 weeks. The quarters ended September 27, 2020 (the “September 2020 quarter”) and September 29, 2019 (the “September 2019 quarter”) included 13 weeks.
NOTE 2 — RECENT ACCOUNTING PRONOUNCEMENTS
Recently Adopted
In June 2016, the Financial Accounting Standards Board (“FASB”) released Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments Credit Losses.” The amendment revises the impairment model to utilize an expected loss methodology in place of the previously used incurred loss methodology, which will result in more timely recognition of losses on financial instruments, including but not limited to, available for sale debt securities and accounts receivable. The FASB issued a subsequent amendment to the initial guidance in April 2019 and November 2019 within ASU 2019-04 and ASU 2019-11, respectively. The adoption of these standards in the first quarter of fiscal year 2021 did not have a material impact on the Company’s Condensed Consolidated Financial Statements.
In November 2018, the FASB issued ASU 2018-18, “Collaborative Arrangements (Topic 808).” The amendment clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under Topic 606 when the counterparty is a customer for a good or service that is a distinct unit of account. The amendment also precludes entities from presenting consideration from transactions with a collaborator that is not a customer together with revenue recognized from contracts with customers. The adoption of this standard in the first quarter of fiscal year 2021 did not have a material impact on the Company’s Condensed Consolidated Financial Statements.
Updates Not Yet Adopted or Effective
In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The ASU provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. ASU 2020-04 is currently effective and upon adoption may be applied prospectively to contract modifications made on or before December 31, 2022. The Company is currently assessing contracts that will require modification due to reference rate reform to which this ASU may be applied.

In August 2020, the FASB issued ASU No. 2020-06, “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”, which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. Among other changes, ASU 2020-06 removes from U.S. GAAP the liability and equity separation model for convertible instruments with a cash conversion feature, and as a result, after adoption, entities will no longer separately present in equity an embedded conversion feature for such debt. ASU 2020-06 also enhances transparency and improves disclosures for convertible instruments and earnings per share guidance. The
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provisions of ASU 2020-06 are applicable for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The Company is required to adopt this standard in the first quarter of fiscal year 2023. The update permits the use of either the modified retrospective or fully retrospective method of transition. The Company does not expect adoption of this standard to have a material impact on its Consolidated Financial Statements related to the Company’s existing 2041 Notes (as defined in Note 12 - Long-Term Debt and Other Borrowings ).
NOTE 3 — REVENUE
Deferred Revenue
Revenue of $274.3 million included in deferred revenue at June 28, 2020 was recognized during the three months ended September 27, 2020.
The following table summarizes the transaction price for contracts that have not yet been recognized as revenue as of September 27, 2020 and when the Company expects to recognize the amounts as revenue:
Less than 1 Year1-3 YearsMore than 3 YearsTotal
(In thousands)
Deferred revenue$581,580 $98,520 
(1)
$ $680,100 
(1) This amount is reported in Deferred profit on the Company's Condensed Consolidated Balance Sheets as the customers can demand the liability to be performed at any time.
Disaggregation of Revenue
The Company operates in one reportable business segment: manufacturing and servicing of wafer processing semiconductor manufacturing equipment. The Company’s material operating segments qualify for aggregation due to their customer base and similarities in economic characteristics, nature of products and services, and processes for procurement, manufacturing, and distribution.
The Company operates in seven geographic regions: United States, China, Europe, Japan, Korea, Southeast Asia, and Taiwan. For geographical reporting, revenue is attributed to the geographic location in which the customers’ facilities are located. The Company serves three primary markets: memory, foundry, and logic/integrated device manufacturing.
The following table presents the Company’s revenues disaggregated between system and its customer support-related revenue:
Three Months Ended
September 27,
2020
September 29,
2019
(In thousands)
System revenue$2,148,241 $1,365,228 
Customer support-related revenue and other1,028,839 800,518 
$3,177,080 $2,165,746 
System revenue includes sales of new leading-edge equipment in deposition, etch and clean markets.
Customer support-related revenue includes sales of customer service, spares, upgrades, and non-leading-edge equipment from the Company’s Reliant product line.
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The following table presents the Company’s revenues disaggregated by geographic region:
Three Months Ended
September 27,
2020
September 29,
2019
(In thousands)
China$1,174,669 $591,668 
Korea756,257 451,483 
Taiwan446,091 391,492 
Japan392,526 273,673 
Southeast Asia203,339 213,755 
United States137,892 183,659 
Europe66,306 60,016 
$3,177,080 $2,165,746 
The following table presents the percentages of leading- and non-leading-edge equipment and upgrade revenue to each of the primary markets the Company serves:
Three Months Ended
September 27,
2020
September 29,
2019
Memory58 %64 %
Foundry36 %25 %
Logic/integrated device manufacturing6 %11 %
NOTE 4 — EQUITY-BASED COMPENSATION PLANS
The Lam Research Corporation 2015 Stock Incentive Plan, as amended (the “2015 Plan”), provides for the grant of non-qualified equity-based awards of the Company’s Common Stock to eligible employees and non-employee directors, including stock options, restricted stock units (“RSUs”), and market-based performance RSUs (“market-based PRSUs”). An option is a right to purchase Common Stock at a set price. An RSU award is an agreement to issue a set number of shares of Common Stock at the time of vesting. The Company’s market-based PRSUs contain both a market condition and a service condition. The Company’s option, RSU, and market-based PRSU awards typically vest over a period of three years. The Company also has an employee stock purchase plan that allows employees to purchase its Common Stock at a discount through payroll deductions.
The Company recognized the following equity-based compensation expense (including expense related to the employee stock purchase plan) and related income tax benefit in the Condensed Consolidated Statements of Operations:
Three Months Ended
September 27,
2020
September 29,
2019
(in thousands)
Equity-based compensation expense$55,988 $42,905 
Income tax benefit recognized related to equity-based compensation expense$9,877 $9,818 



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NOTE 5 — OTHER EXPENSE, NET
The significant components of other expense, net, are as follows:
Three Months Ended
September 27,
2020
September 29,
2019
(in thousands)
Interest income$6,959 $31,784 
Interest expense(52,115)(43,995)
Gains (losses) on deferred compensation plan-related assets, net12,927 (436)
Foreign exchange losses, net(1,375)(529)
Other, net(5,188)448 
$(38,792)$(12,728)
NOTE 6 — INCOME TAX EXPENSE
The Company recorded an income tax expense of $98.8 million and $58.9 million for the three months ended September 27, 2020 and September 29, 2019, respectively, which yielded an effective tax rate of approximately 10.7% and 11.2%, respectively.
The difference between the U.S. federal statutory tax rate of 21% and the Company’s effective tax rate for the three months ended September 27, 2020 and September 29, 2019 was primarily due to income in lower tax jurisdictions.
The Internal Revenue Service (“IRS”) is examining the Company’s U.S. federal income tax return for the fiscal year ended June 24, 2018. As of September 27, 2020, no significant adjustments have been proposed by the IRS. The Company is unable to make a reasonable estimate as to when cash settlements, if any, with the IRS will occur.
The Company is in various stages of examinations in connection with all of its tax audits worldwide, and it is difficult to determine when these examinations will be settled. It is reasonably possible that over the next 12-month period the Company may experience an increase or decrease in its uncertain tax positions as a result of tax examinations or lapses of statutes of limitations. The change in uncertain tax positions as a result of lapses of statutes of limitations may range up to $8.4 million.
NOTE 7 — NET INCOME PER SHARE
Basic net income per share is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted net income per share is computed using the treasury stock method, for dilutive stock options, restricted stock units, convertible notes, and warrants. Refer to Note 12 - Long-term Debt and Other Borrowings for additional information regarding the Company’s convertible notes. The following table reconciles the numerators and denominators of the basic and diluted computations for net income per share. 
Three Months Ended
September 27,
2020
September 29,
2019
(in thousands, except per share data)
Numerator:
Net income$823,451 $