Lam Research Corp 10-K for FY2024
Lam Research Corp (LRCX)
10-K
2024-08-29
For: 2024-06-30
View Original
Added on
April 02, 2026
About this 10-K
Lam Research Corp filed this 10-K on August 29, 2024, covering the fiscal year ended June 30, 2024 (FY2024).
Headline figures
Fiscal year ended June 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $14.91B
- down 14.5% from $17.43B a year earlier
- Net income
- $3.83B
- down 15.1% from net income of $4.51B a year earlier
- Diluted EPS
- $29.00
- down 12.7% from $33.21 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
| FORM | |||||
(Mark One) | |||||
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the fiscal year ended June 30 , 2024
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
| (Exact name of registrant as specified in its charter) | ||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||||||||
| (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 class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
| (Nasdaq Global Select Market) | ||||||||
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
_______________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
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.
| ☒ | 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the Registrant’s Common Stock, $0.001 par value, held by non-affiliates of the Registrant, as of December 24, 2023, the last business day of the most recently completed second fiscal quarter, was $83,831,499,278 . Common Stock held by each officer and director and by each person who owns 5% or more of the outstanding Common Stock has been excluded from this computation based on the assumption that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination of such status for other purposes.
As of August 22, 2024, the Registrant had 129,876 thousand outstanding shares of Common Stock.
_________________________
Documents Incorporated by Reference
LAM RESEARCH CORPORATION
2024 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
| Page | ||||||||
| Item 1. | ||||||||
| Item 1A. | ||||||||
| Item 1B. | ||||||||
| Item 1C. | ||||||||
| Item 2. | ||||||||
| Item 3. | ||||||||
| Item 4. | ||||||||
| Item 5. | ||||||||
| Item 6. | ||||||||
| Item 7. | ||||||||
| Item 7A. | ||||||||
| Item 8. | ||||||||
| Item 9. | ||||||||
| Item 9A. | ||||||||
| Item 9B. | ||||||||
| Item 9C. | ||||||||
| Item 10. | ||||||||
| Item 11. | ||||||||
| Item 12. | ||||||||
| Item 13. | ||||||||
| Item 14. | ||||||||
| Item 15. | ||||||||
| Item 16. | ||||||||
Lam Research Corporation 2024 10-K 2
PART I
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
With the exception of historical facts, the statements contained in this discussion are forward-looking statements, which are subject to the safe harbor provisions created by the Private Securities Litigation Reform Act of 1995. Certain, but not all, of the forward-looking statements in this report are specifically identified as forward-looking, by use of phrases and words such as “believe,” “estimated,” “anticipate,” “expect,” “probable,” “intend,” “plan,” “aim,” “may,” “should,” “could,” “would,” “will,” “continue,” and other future-oriented terms. The identification of certain statements as “forward-looking” does not mean that other statements not specifically identified are not forward-looking. Forward-looking statements include, but are not limited to, statements that relate to: trends and opportunities in the global economic environment; trends and opportunities in the semiconductor industry, including in the end markets and applications for semiconductors, in device complexity, and in the complexity of device manufacturing; growth or decline in the industry and the market for, and spending on, wafer fabrication equipment; the anticipated levels of, and rates of change in, margins, market share, served available market, capital expenditures, research and development expenditures, international sales, revenue (actual and/or deferred), operating expenses and earnings generally; management’s plans and objectives for our current and future operations and business focus; restructuring activities; business process improvements and initiatives; volatility in our quarterly results; the makeup of our customer base; customer and end user requirements and our ability to satisfy those requirements; the performance and benefits of our products and services; customer spending and demand for our products and services, and the reliability of indicators of change in customer spending and demand; the effect of variability in our customers’ business plans or demand for our products and services; our competition, and our ability to defend our market share and to gain new market share; the success of joint development and collaboration relationships with customers, suppliers, or others; outsourced activities; our supply chain and the role of suppliers in our business, including the impacts of supply chain constraints and material costs; our leadership and competency, and our ability to facilitate innovation; our research and development programs; the opportunities in our industry for, and our ability to create, sustainable differentiation; technology inflections in the industry and our ability to identify those inflections and to invest in research and development programs to meet them; our ability to deliver multi-product solutions; the resources invested to comply with evolving standards and the impact of such efforts; changes in state, federal and international tax laws, our estimated annual tax rate and the factors that affect our tax rates; legal and regulatory compliance; the estimates we make, and the accruals we record, in order to implement our critical accounting policies (including, but not limited to, the adequacy of prior tax payments, future tax benefits or liabilities, and the adequacy of our accruals relating to them); hedging transactions; debt or financing arrangements; our investment portfolio; our access to capital markets; uses of, payments of, and impact of interest rate fluctuations on, our debt; our intention to pay quarterly dividends and the amounts thereof, if any; our ability and intention to repurchase our shares; credit risks; controls and procedures; recognition or amortization of expenses; our ability to manage and grow our cash position; our ability to scale our operations to respond to changes in our business; our goals and initiatives with respect to environmental, social and governance matters, including emissions, and human capital, including inclusion and diversity; the value of our patents; the materiality of potential losses arising from legal proceedings; the probability of making payments under our guarantees; and the sufficiency of our financial resources or liquidity to support future business activities (including, but not limited to, operations, investments, debt service requirements, dividends, and capital expenditures). Such statements are based on current expectations and are subject to risks, uncertainties, and changes in condition, significance, value, and effect, including without limitation those discussed below under the heading “Risk Factors” within Item 1A and elsewhere in this report and other documents we file from time to time with the Securities and Exchange Commission (“SEC”), such as our quarterly reports on Form 10-Q and our current reports on Form 8-K. Such risks, uncertainties, and changes in condition, significance, value, and effect could cause our actual results to differ materially from those expressed in this report and in ways not readily foreseeable. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof and are based on information currently and reasonably known to us. We do not undertake any obligation to release the results of any revisions to these forward-looking statements, which may be made to reflect events or circumstances that occur after the date of this report or to reflect the occurrence or effect of anticipated or unanticipated events.
Item 1. Business
Incorporated in 1980, Lam Research Corporation (“Lam Research,” “Lam,” “we,” “our,” “us,” or the “Company”) is a Delaware corporation, headquartered in Fremont, California. We maintain a network of facilities throughout Asia, Europe, and the United States in order to meet the needs of our dynamic customer base.
Additional information about Lam Research is available on our website at www.lamresearch.com. The content on any website referred to in this Form 10-K is not a part of or incorporated by reference in this Form 10-K unless expressly noted.
Our Annual Report on Form 10-K, Quarterly Reports on Forms 10-Q, Current Reports on Forms 8-K, Proxy Statements and all other filings we make with the SEC are available on our website, free of charge, as soon as reasonably practical after we file them with or furnish them to the SEC and are also available online at the SEC’s website at www.sec.gov.
Lam Research Corporation 2024 10-K 3
The Lam Research logo, Lam Research, and all product and service names used in this report are either registered trademarks or trademarks of Lam Research Corporation or its subsidiaries in the United States and/or other countries. All other marks mentioned herein are the property of their respective holders.
We are a global supplier of innovative wafer fabrication equipment and services to the semiconductor industry. We have built a strong global presence with core competencies in areas such as nanoscale applications enablement, chemistry, plasma and fluidics, advanced systems engineering, and a broad range of operational disciplines. Our products and services are designed to help our customers build smaller and better performing devices that are used in a variety of electronic products, including mobile phones, personal computers, servers, wearables, automotive vehicles, and data storage devices.
Our customer base includes leading semiconductor memory, foundry, and integrated device manufacturers (“IDMs”) that make products such as non-volatile memory (“NVM”), dynamic random-access memory (“DRAM”), and logic devices. Their continued success is part of our commitment to driving semiconductor breakthroughs that define the next generation. Our core technical competency is integrating hardware, process, materials, software, and process control enabling results on the wafer.
Semiconductor manufacturing, our customers’ business, involves the complete fabrication of multiple dies or integrated circuits (“ICs”) on a wafer. This involves the repetition of a set of core processes and can require hundreds of individual steps. Fabricating these devices requires highly sophisticated process technologies to integrate an increasing array of new materials with precise control at the atomic scale. Along with meeting technical requirements, wafer processing equipment must deliver high productivity and be cost-effective.
Demand from cloud computing (the “Cloud”), artificial intelligence, 5G, the Internet of Things (“IoT”), and other markets is driving the need for increasingly powerful and cost-efficient semiconductors. At the same time, there are growing technical challenges with traditional two-dimensional scaling. These trends are driving significant inflections in semiconductor manufacturing, such as the increasing importance of vertical scaling strategies like three-dimensional (“3D”) architecture as well as multiple patterning to enable shrinks.
We believe we are in a strong position with our leadership and expertise in deposition, etch, and clean markets to facilitate some of the most significant innovations in semiconductor device manufacturing. Several factors create opportunity for sustainable differentiation for us: (i) our focus on research and development, with several on-going programs relating to sustaining engineering, product and process development, and concept and feasibility; (ii) our ability to effectively leverage cycles of learning from our broad installed base; (iii) our collaborative focus with semi-ecosystem partners, including our close-to-customer focus; (iv) our ability to identify and invest in the breadth of our product portfolio to meet technology inflections; and (v) our focus on delivering our multi-product solutions with a goal to enhance the value of Lam’s solutions to our customers.
We also address processes for back-end wafer-level packaging (“WLP”), which is an alternative to traditional wire bonding and can offer a smaller form factor, increased interconnect speed and bandwidth, and lower power consumption, among other benefits. We offer advanced packaging solutions that support fan-out panel-level packaging, a process in which chips or chiplets are cut from a large format substrate sheet several times the size of a traditional silicon wafer, which increases yield and reduces waste and solutions that meet the need for 3D stacking of high bandwidth memory (“HBM”). In addition, our products are well-suited for related markets that rely on semiconductor processes and require production-proven manufacturing capability, such as complementary metal-oxide-semiconductor image sensors (“CIS”) and micro-electromechanical systems (“MEMS”).
Our Customer Support Business Group (“CSBG”) provides products and services to maximize installed equipment performance, predictability, and operational efficiency. We offer a broad range of services to deliver value throughout the lifecycle of our equipment, including customer service, spares, upgrades, and new and refurbished non-leading edge products in our deposition, etch, and clean markets. Many of the technical advances that we introduce in our newest products are also available as upgrades, which provide customers with a cost-effective strategy for extending the performance and capabilities of their existing wafer fabrication lines. Service offerings include fleet level Equipment Intelligence® solutions to maximize the productivity of our customers through system uptime or availability optimization, throughput improvements, and defect reduction. Our spares product line offers running cost optimization programs and focuses on product life extension to help customers increase the return on their capital purchases. Additionally, within CSBG, our Reliant® product line offers new and refurbished non-leading edge products in deposition, etch and clean markets for those applications that do not require the most advanced wafer processing capability.
Lam Research Corporation 2024 10-K 4
Products
| Market | Process/Application | Technology | Products | |||||||||||||||||
| Deposition | Metal Films | Electrochemical Deposition (“ECD”) (Copper & Other) | SABRE® family | |||||||||||||||||
| Chemical Vapor Deposition (“CVD”) Atomic Layer Deposition (“ALD”) (Tungsten & Molybdenum) | ALTUS® family | |||||||||||||||||||
| Dielectric Films | Plasma-enhanced CVD (“PECVD”) ALD Gapfill High-Density Plasma CVD (“HDP-CVD”) | VECTOR® family Striker® family SPEED® family | ||||||||||||||||||
| Etch | Conductor Etch | Reactive Ion Etch | Kiyo® family, Versys® Metal family | |||||||||||||||||
| Dielectric Etch | Reactive Ion Etch | Flex® family Vantex® family | ||||||||||||||||||
| Through-silicon Via (“TSV”) Etch | Deep Reactive Ion Etch | Syndion® family | ||||||||||||||||||
| Clean | Wafer Cleaning | Wet Clean | EOS®, DV-Prime®, Da Vinci®, SP Series | |||||||||||||||||
| Bevel Cleaning | Dry Plasma Clean | Coronus® family | ||||||||||||||||||
Deposition Processes and Product Families
Deposition processes create layers of dielectric (insulating) and metal (conducting) materials used to build a semiconductor device. Depending on the type of material and structure being made, different techniques are employed. Electrochemical deposition creates the copper wiring (interconnect) that links devices in an integrated circuit (“IC” or “chip”). Plating of copper and other metals is also used for TSV and WLP applications. Tiny molybdenum or tungsten connectors and thin barriers are made with the precision of chemical vapor deposition and atomic layer deposition, which adds only a few layers of atoms at a time. Plasma-enhanced CVD, high-density plasma CVD, and ALD are used to form the critical insulating layers that isolate and protect all of these electrical structures. Lastly, post-deposition treatments such as ultraviolet thermal processing are used to improve dielectric film properties.
ALTUS® Product Family
Tungsten and/or molybdenum deposition is used to form conductive features such as contacts, vias, and wordlines on a chip. These features are small, often narrow, and use only a small amount of metal, so minimizing resistance and achieving complete fill can be difficult. At these nanoscale dimensions, even slight imperfections can impact device performance or cause a chip to fail. Our ALTUS® systems combine CVD and ALD technologies to deposit the highly conformal or selective films as needed for advanced tungsten or molybdenum metallization applications in both logic and memory. The Multi-Station Sequential Deposition architecture enables nucleation layer formation and bulk CVD/ALD fill to be performed in the same chamber (“in situ”). Our ALD technologies are used in the deposition of barrier films to achieve high step coverage with reduced thickness at lower temperatures relative to a conventional process.
SABRE® Product Family
Copper deposition lays down the electrical wiring for most semiconductor devices. Even the smallest defect - say, a microscopic pinhole or dust particle - in these conductive structures can impact device performance, from loss of speed to complete failure. The SABRE® ECD product family, which helped pioneer the copper interconnect transition, offers the precision needed for copper damascene manufacturing in logic and memory. System capabilities include cobalt deposition for logic applications and copper deposition directly on various liner materials, which is important for next-generation metallization schemes. For advanced packaging applications, such as forming conductive bumps, redistribution layers, TSV filing, and wafer level bonding, the SABRE® 3D family combines Lam’s SABRE Electrofill® technology with additional innovation to deliver the high-quality films needed at high productivity. The modular architecture can be configured with multiple plating and pre/post-treatment cells, providing flexibility to address a variety of packaging applications, including HBM.
SPEED® Product Family
Dielectric gapfill processes deposit critical insulation layers between conductive and/or active areas by filling openings of various aspect ratios between conducting lines and between devices. With advanced devices, the structures being filled can be very tall and narrow. As a result, high-quality dielectric films are especially important due to the ever-increasing possibility of cross-talk and device failure. Our SPEED® HDP-CVD products provide a multiple dielectric film solution for high-quality gapfill with industry-leading throughput and reliability. SPEED® products have excellent particle performance, and their design allows large batch sizes between cleans and faster cleans.
Lam Research Corporation 2024 10-K 5
Striker® Product Family
The latest memory, logic, and imaging devices require extremely thin, highly conformal dielectric films for continued device performance improvement and scaling. For example, ALD films are critical for spacer-based multiple patterning schemes where the spacers help define critical dimensions, as well as for insulating liners and gapfill in high aspect ratio features, which have little tolerance for voids and even the smallest defect. The Striker® single-wafer ALD products provide dielectric film solutions for these challenging requirements through application-specific material, process and hardware options that deliver film technology and defect performance.
VECTOR® Product Family
Dielectric film deposition processes are used to form some of the most difficult-to-produce insulating layers in a semiconductor device, including those used in the latest transistors and 3D structures. In some applications, these films require dielectric films to be exceptionally uniform and defect free since slight imperfections are multiplied greatly in subsequent layers. Our VECTOR® PECVD products are designed to provide the performance and flexibility needed to create these enabling structures within a wide range of challenging device applications. As a result of its design, VECTOR® produces superior thin film quality, along with exceptional within-wafer and wafer-to-wafer uniformity.
Etch Processes and Product Families
Etch processes create chip features by selectively removing dielectric, metal, silicon and poly silicon materials, including films that have been added during deposition. Reactive ion etch processing enables device-critical formation steps to enable transistor performance, create storage capacitors, and memory cells. Low temperature, cryogenic etching enables the use of new, novel chemistries to deliver increased high aspect ratio etch capability.
Flex® Product Family
Dielectric etch carves patterns in insulating materials to create barriers between the electrically conductive parts of a semiconductor device. For advanced devices, these structures can be extremely tall and thin and involve complex, sensitive materials. Slight deviations from the target feature profile - even at the atomic level - can negatively affect electrical properties of the device. To precisely create these challenging structures, our Flex® product family offers differentiated technologies and application-focused capabilities for critical dielectric etch applications. Uniformity, repeatability, and tunability are enabled by a unique multi-frequency, small-volume, confined plasma design. Flex® offers in situ multi-step etch and continuous plasma capability that delivers high productivity with low defectivity.
Vantex® Product Family
Dielectric etch processes remove non-conductive materials during the manufacturing of a semiconductor device. Leading-edge memory devices have especially challenging structures, such as extremely deep holes and trenches, that must be manufactured with tight tolerances. Our latest dielectric etch system, Vantex® creates high aspect ratio device features while maintaining critical dimension (“CD”) uniformity and selectivity. Vantex® is part of our Sense.i® platform and offers advanced RF technology and repeatable wafer-to-wafer performance enabled by Equipment Intelligence® solutions to meet the needs of advanced memory manufacturing, primarily in 3D NAND high aspect ratio hole, trench, contact, and capacitor cell applications.
Kiyo® Product Family
Conductor etch helps shape the electrically active materials used in the parts of a semiconductor device. Even a slight variation in these miniature structures can degrade device performance. In fact, these structures are so tiny and sensitive that etch processes push the boundaries of the basic laws of physics and chemistry. Our Kiyo® product family delivers the high-performance capabilities needed to precisely and consistently form these features precisely and with high productivity. Proprietary Hydra technology in Kiyo® products improves CD uniformity by correcting for incoming pattern variability, and atomic-scale variability control with production-worthy throughput.
Syndion® Product Family
Plasma etch processes used to remove silicon and other materials deep into the wafer are collectively referred to as deep silicon etch. These may be deep trenches for CMOS image sensors, trenches for power and other devices, TSVs for HBM and advanced packaging, and other high aspect ratio features. These are created by etching through multiple materials sequentially, where each new material involves a change in the etch process. The Syndion® etch product family is optimized for deep silicon etch, providing the fast process switching with depth and cross-wafer uniformity control required to achieve precision etch results. The systems support both conventional single-step etch and rapidly alternating process, which minimizes damage and delivers precise depth uniformity.
Versys® Metal Product Family
Metal etch processes play a key role in connecting the individual components that form an IC, such as forming wires and electrical connections. These processes can also be used to drill through metal hardmasks that are used to form the wiring for advanced devices. To enable these critical etch steps, the Versys® Metal product family provides high-productivity capability on a flexible
Lam Research Corporation 2024 10-K 6
platform. Superior CD, profile uniformity, and uniformity control are enabled by a symmetrical chamber design with independent process tuning features.
Clean Processes and Product Families
Clean techniques are used between manufacturing steps to clear away particles, contaminants, residues and other unwanted material that could later lead to defects and to prepare the wafer surface for subsequent processing. Wet processing technologies can be used for wafer cleaning and etch applications. Plasma bevel cleaning is used to enhance die yield by removing unwanted materials from the wafer’s edge that could impact the device area.
Coronus® Product Family
Bevel cleaning removes unwanted masks, residues, and films from the edge of a wafer between manufacturing steps. If not cleaned, these materials become defect sources. For instance, they can flake off and re-deposit on the device area during subsequent processes. Even a single particle that lands on a critical part of a device can ruin the entire chip. By inserting bevel clean processes at strategic points, these potential defect sources can be eliminated and more functional chips produced. By combining the precise control and flexibility of plasma with technology that protects the active die area, the Coronus® bevel clean family cleans the wafer’s edge to enhance die yield. The systems provide active die area protection by using plasma processing with proprietary confinement technology. Applications include post-etch, pre- and post-deposition, pre-lithography, and metal film removal to prevent arcing during plasma etch or deposition steps.
DV-Prime®, Da Vinci®, EOS®, and SP Series Product Families
Wafer cleaning is performed repeatedly during semiconductor device manufacturing and is a critical process that affects product yield and reliability. Unwanted microscopic materials - some no bigger than the tiny structures themselves - need to be cleaned effectively. At the same time, these processes must selectively remove residues that are chemically similar to the device films. For advanced WLP, the wet clean steps used between processes that form the package and external wiring have surprisingly complex requirements. These processes are called on to completely remove specific materials and leave other fragile structures undisturbed. In IoT products that include power devices, MEMS and image sensors, there is a unique requirement for wafer backside wet etch to uniformly thin the silicon wafer while protecting the device side of the wafer.
Based on our pioneering single-wafer spin technology, the DV-Prime® and Da Vinci® products provide the process flexibility needed with high productivity to address a wide range of wafer cleaning steps throughout the manufacturing process flow. As the latest of Lam’s wet clean products, EOS® delivers exceptionally low on-wafer defectivity and high throughput to address progressively demanding wafer cleaning applications. With a broad range of process capability, our SP Series products deliver cost-efficient, production-proven wet clean and silicon wet etch solutions for challenging WLP and IoT applications.
Fiscal Periods Presented
All references to fiscal years apply to our fiscal years, which ended June 30, 2024, June 25, 2023, and June 26, 2022.
Research and Development
The market for semiconductor capital equipment is characterized by rapid technological change and product innovation. Our ability to achieve and maintain our competitive advantage depends in part on our continued and timely development of new products and enhancements to existing products. Accordingly, we devote a significant portion of our personnel and financial resources to research and development (“R&D”) programs and seek to maintain close and responsive relationships with our customers and suppliers.
We believe current challenges for customers at various points in the semiconductor manufacturing process present opportunities for us. We expect to continue to make substantial investments in R&D to meet our customers’ product needs, support our growth strategy, and enhance our competitive position.
Marketing, Sales, and Service
Our marketing, sales, and service efforts are focused on building long-term relationships with our customers and targeting product and service solutions designed to meet their needs. These efforts are supported by a team of product marketing and sales professionals as well as equipment and process engineers who work closely with individual customers to develop solutions for their wafer processing needs. We maintain ongoing service relationships with our customers and have an extensive network of service engineers in place throughout the United States, China, Europe, India, Japan, Korea, Southeast Asia, and Taiwan. We believe that comprehensive support programs and close working relationships with customers are essential to maintaining high customer satisfaction and our competitiveness in the marketplace.
We provide standard warranties for our systems. The warranty provides that systems will be free from defects in material and workmanship and will conform to agreed-upon specifications. The warranty is limited to repair of the defect or replacement with new or like-new equivalent goods and is valid when the buyer provides prompt notification within the warranty period of the claimed defect
Lam Research Corporation 2024 10-K 7
or non-conformity and also makes the items available for inspection and repair. We also offer extended warranty packages to our customers to purchase as desired.
International Sales
A significant portion of our sales and operations occur outside the United States (“U.S.”) and, therefore, may be subject to certain risks, including but not limited to compliance with U.S. and international laws and regulations, including U.S. export restrictions; tariffs and other barriers; difficulties in staffing and managing non-U.S. operations; adverse tax consequences; foreign currency exchange rate fluctuations; changes in currency controls; and economic and political conditions. Any of these factors may have a material adverse effect on our business, financial position, and results of operations and cash flows. For geographical reporting, revenue is attributed to the geographic location in which the customers’ facilities are located. Refer to Note 19 of our Consolidated Financial Statements, included in Part II, Item 8 of this 2024 Form 10-K, for the attribution of revenue by geographic region.
Long-lived Assets
Refer to Note 19 of our Consolidated Financial Statements, included in Part II, Item 8 of this 2024 Form 10-K, for information concerning the geographic locations of long-lived assets.
Customers
Our customers include many of the world’s leading semiconductor manufacturers. Customers continue to establish joint ventures, alliances, and licensing arrangements which have the potential to positively or negatively impact our competitive position and market opportunities. Refer to Note 9 of our Consolidated Financial Statements, included in Part II, Item 8 of this report, for information concerning customer concentrations. Our most significant customers during the fiscal years ending June 30, 2024, June 25, 2023, and June 26, 2022 included Micron Technology, Inc.; Samsung Electronics Company, Ltd.; SK hynix Inc.; and Taiwan Semiconductor Manufacturing Company.
A material reduction in orders from our customers could adversely affect our results of operations and projected financial condition. Our business depends upon the expenditures of semiconductor manufacturers. Semiconductor manufacturers’ businesses, in turn, depend on many factors, including their economic capability, the current and anticipated market demand for ICs, and the availability of equipment capacity to support that demand.
Manufacturing
Our manufacturing operations mainly consist of assembling and testing components, sub-assemblies, and modules that are then integrated into finished systems prior to shipment to or at the location of our customers. The assembly and testing of our products is conducted predominately in cleanroom environments.
We have agreements with third parties to outsource certain aspects of our manufacturing, production warehousing, and logistics functions. These outsourcing contracts may provide us more flexibility to scale our operations up or down in a timely and cost-effective manner. We believe that we have selected reputable providers and have secured their performance on terms documented in written contracts. However, it is possible that one or more of these providers could fail to perform as we expect, and such failure could have an adverse impact on our business and have a negative effect on our operating results and financial condition. Overall, we believe we have effective mechanisms to manage risks associated with our outsourcing relationships. Refer to Note 17 of our Consolidated Financial Statements, included in Part II, Item 8 of this report, for further information concerning our outsourcing commitments, reported as a component of purchase obligations.
Certain components and sub-assemblies that we include in our products may only be obtained from a single supplier. We are engaged in efforts to obtain and qualify alternative sources to supply these products and in some circumstances protect against potential supply challenges by carrying inventory in excess of current need. Any prolonged inability to obtain these components could have an adverse effect on our operating results and could unfavorably impact our customer relationships.
Compliance with Government Regulations
As a public company with global operations, we are subject to a variety of governmental regulations across multiple jurisdictions, including those related to export controls, financial and other disclosures, corporate governance, anti-trust, intellectual property, privacy, anti-bribery, anti-corruption, anti-boycott, tax, labor, health and safety, conflict minerals, human trafficking, the management of hazardous materials, and carbon emissions, among others. Each of these regulations imposes costs on our business and has the potential to divert our management’s time and attention from revenue-generating and other profit maximizing activities to those associated with compliance. Efforts to comply with new and changing regulations have resulted in, and are likely to continue to result in, decreased net income and increased capital expenditures. If we are alleged or found by a court or regulatory agency not to be in compliance with regulations, we may be subject to fines, restrictions on our actions, reputational damage, and harm to our competitive position, and our business, financial condition, and/or results of operations could be adversely affected. For additional details, please refer to “Legal, Regulatory and Tax Risks – We Are Exposed to Various Risks from Our Regulatory Environment” in Item 1A: Risk Factors.
Lam Research Corporation 2024 10-K 8
Regulations that impact trade, including tariffs, export controls, taxes, trade barriers, sanctions, the termination or modification of trade agreements, trade zones, and other duty mitigation initiatives, have the potential to increase our manufacturing costs, decrease margins, reduce the competitiveness of our products, or inhibit our ability to sell products or purchase necessary equipment and supplies, which could have a material adverse effect on our business, results of operations, or financial condition. For additional details regarding the impacts of compliance with trade laws and regulations, please refer to “Business and Operational Risks – Our Future Success Depends Heavily on International Sales and the Management of Global Operations” and “Legal, Regulatory and Tax Risks – Our Sales to Customers in China, a Significant Region for Us, Have Been Impacted, and are Likely to be Materially and Adversely Affected by Export License Requirements and Other Regulatory Changes, or Other Governmental Actions in the Course of the Trade Relationship Between the U.S. and China” in Item 1A: Risk Factors.
We are subject to income, transaction, and other taxes in the United States and various foreign jurisdictions that impact our tax rate and profitability. For additional details regarding the impacts of compliance with tax laws and regulations, please refer to “Legal, Regulatory and Tax Risks – Our Financial Results May Be Adversely Impacted by Higher than Expected Tax Rates or Exposure to Additional Tax Liabilities” in Item 1A: Risk Factors.
An important element of our management strategy is to review acquisition prospects that would complement our existing products, augment our market coverage and distribution ability, enhance our technological capabilities, or accomplish other strategic objectives. However, for regulatory or other reasons, we may not be successful in our attempts to acquire or dispose of businesses, products, or technologies. For additional details regarding the impacts of regulations on acquisitions or dispositions we may attempt, please refer to “Business and Operational Risks – If We Choose to Acquire or Dispose of Businesses, Product Lines, and Technologies, We May Encounter Unforeseen Costs and Difficulties That Could Impair Our Financial Performance” in Item 1A: Risk Factors.
We are subject to a variety of domestic and international governmental regulations related to the handling, discharge, and disposal of toxic, volatile, or otherwise hazardous chemicals. For additional details regarding the impacts of compliance with environmental laws and regulations, please refer to “Legal, Regulatory and Tax Risks – Increasing and Evolving Environmental Regulations May Adversely Affect Our Operating Results” in Item 1A: Risk Factors.
Environmental, Social, and Governance
We strive to incorporate environmental, social and governance ("ESG") considerations into everything we do – from our operations and workplace practices, to how we source our materials and design our products. Our ESG report for calendar year 2023 details, among other items, a number of ESG goals. One such goal is to achieve net zero emissions by 2050, which we are working to achieve in part by meeting a number of interim targets related to our environmental impact. There have been no material impacts to capital expenditures or our results of operations associated with this goal, and there are no material cash commitments associated with the goal as of the fiscal year ended June 30, 2024.
Information contained on our website or in our annual ESG Report is not incorporated by reference into this or any other report we file with the Securities and Exchange Commission, or the SEC. Refer to Item 1A: Risk Factors for a discussion of risks and uncertainties we face related to ESG.
Competition
The semiconductor capital equipment industry is characterized by rapid change and is highly competitive throughout the world. To compete effectively, we invest significant financial resources targeted to strengthen and enhance our product and services portfolio and to maintain customer service and support locations globally. Semiconductor manufacturers evaluate capital equipment suppliers in many areas, including but not limited to process performance, productivity, defect control, customer support, and overall cost of ownership, which can be affected by many factors such as equipment design, reliability, software advancements, and similar factors. Our ability to succeed in the marketplace depends upon our ability to manufacture and ship products on a timeline that meets our customers’ needs, maintain existing products, and introduce product enhancements and new products that meet customer requirements on a timely basis. In addition, semiconductor manufacturers must make a substantial investment to qualify and integrate new capital equipment into semiconductor production lines. As a result, once a semiconductor manufacturer has selected a particular supplier’s equipment and qualified it for production, the manufacturer generally maintains that selection for that specific production application and technology node as long as the supplier’s products demonstrate performance to specification in the installed base. Accordingly, we may experience difficulty in selling to a given customer if that customer has qualified a competitor’s equipment. We must also continue to meet the expectations of our installed base of customers through the delivery of high-quality and cost-efficient spare parts in the presence of competition from third-party spare parts providers.
We face significant competition with all of our products and services. Our primary competitor in the dielectric and metals deposition market is Applied Materials, Inc. For ALD and PECVD, we also compete against ASM International and Wonik IPS. In the etch market, our primary competitors are Applied Materials, Inc.; Hitachi, Ltd.; and Tokyo Electron, Ltd., and our primary competitors in the wet clean market are Screen Holding Co., Ltd.; Semes Co., Ltd.; and Tokyo Electron, Ltd.
We face competition from a number of established and emerging companies in the industry. We expect our competitors to continue to improve the design and performance of their current products and processes, to introduce new products and processes with enhanced price/performance characteristics, and to provide more comprehensive offerings of products. If our competitors make
Lam Research Corporation 2024 10-K 9
acquisitions or enter into strategic relationships with leading semiconductor manufacturers, or other entities, covering products similar to those we sell, our ability to sell our products to those customers could be adversely affected. Strategic investments to encourage local semiconductor manufacturing and supply chain in China could increase competition from domestic equipment manufacturers in China. Additionally, the U.S. Government has enacted a number of export controls regulating the sales of certain technologies to customers in China, which provides an advantage to our international competitors. There can be no assurance that we will continue to compete successfully in the future.
Patents and Licenses
Our policy is to seek patents on inventions relating to new or enhanced products and processes developed as part of our ongoing research, engineering, manufacturing, and support activities. We currently hold a number of U.S. and foreign patents and applications covering various aspects of our products and processes. Our patents, which cover material aspects of our past and present core products, have current durations ranging from approximately one to twenty years. We believe that, although the patents we own and may obtain in the future will be of value, they alone will not determine our success. Our success depends principally upon our research and development, engineering, marketing, support, and delivery skills. However, in the absence of patent protection, we may be vulnerable to competitors who attempt to imitate our products, manufacturing techniques, and processes and may be more limited in our ability to exclude competitors than would otherwise be the case. In addition, other companies and inventors may receive patents that contain claims applicable to our products and processes. The sale of products covered by patents of others could require licenses that may not be available on terms acceptable to us, or at all. For further discussion of legal matters, see Item 3, “Legal Proceedings,” of this report.
Human Capital
We endeavor to be a great place to work globally by investing in a multi-faceted strategy that is rooted in building an inclusive and diverse workplace. To support our employees, we tailor our programs to meet the unique cultural needs and priorities within different regions around the world.
As of August 22, 2024, we had approximately 17,450 regular full-time employees, of which over 29% were engaged in research and development. Approximately 44% of our regular full-time employees are located in the United States, 49% in Asia, and 7% in Europe.
Inclusion and Diversity
To achieve their full potential, we believe it is important for every employee to feel valued, included, and empowered. We embrace inclusion and diversity (“I&D”) and proactively create opportunities to attract, retain, develop, and reward our employees. I&D is one of our strategic focus areas for the company. The three core pillars of our strategy include fostering inclusion, increasing diversity, and sharing our progress. We employ an executive leader of I&D who is responsible for driving our I&D strategy, building partnerships, and aligning with best practices.
Employment, Recruitment and Development
Our talented people are what makes our success possible. Many of our recruitment efforts are carried out through partnerships with key universities. In fact, many of our senior executives began their careers with us right out of college, demonstrating that programs that recruit university students have the potential to contribute to our leadership pipeline. To tap into the best and brightest students, we prioritize core initiatives including an internship program, campus events, and thesis awards and scholarships. Through the spirit of continuous improvement, we accelerate skill building and development, create career opportunities, and expand professional networks for employees. We provide a wide range of opportunities globally to support our commitment to developing the best talent. Our mentorship, coaching, and professional development programs support this commitment along with our self-directed online learning platform that intelligently aligns content with skill building needs. Additionally, our leadership development programs are designed to scale leadership across our business, empowering leaders to motivate, inspire, and lead employees through change, ultimately accelerating business outcomes.
Employee Engagement
Employee engagement (i.e. satisfaction) and voice are critical to Lam’s culture. We conduct a global survey at a regular cadence to gather input from employees on culture, I&D, career opportunity, and manager effectiveness. We also solicit employee feedback through in-person and online employee forums, engagement sessions, all-employee meetings, conversations with
managers, and our Human Resource Support and Employee Relations programs.
Total Rewards
Our Total Rewards program incorporates a comprehensive compensation and benefits package aimed at supporting employees and their families with financial, physical, and mental well-being programs that meet their needs. We conduct an annual review of salaries and benefits packages using third-party benchmarking surveys to ensure that our offerings are aligned with the marketplace and attractive to top talent. We offer our employees a competitive 401(k) benefit, an employee stock purchase plan, tuition reimbursement, and annual cash bonuses. Stock awards are offered to executives and select employees.
Lam Research Corporation 2024 10-K 10
We recognize the importance of time away from work, so we offer annual paid holidays and time off to relax and recharge or take care of personal business. Additionally, we offer paid parental leave benefits for parents welcoming a new child to the family through birth, adoption, or foster care placement.
Employee Health and Safety
Prioritizing the health, safety, and well-being of our employees is critical to our ongoing success. We invest in education, awareness, monitoring, and prevention programs to help recognize and control safety hazards. Our goal is to apply our environmental health and safety (“EHS”) policies, programs, and response plans to anywhere we operate and to extend them to anyone who works on our sites with the intent to provide a safe environment during both routine and extraordinary circumstances. People managers in field support, manufacturing, R&D, warehouse, and logistics operations undergo formal safety leadership training biannually to enhance their skills in safety management and communication. We screen contractors’ safety performance and require contractor compliance with specified safety standards.
We monitor our safety performance at the enterprise, regional, and site levels. By using our global incident tracking system, our corporate EHS team can assess and monitor safety trends to report to business units and executive leadership as a part of quarterly reviews. We maintain multi-site certifications for ISO 45001, the globally recognized standard for occupational health and safety management systems.
Information about our Executive Officers
As of August 22, 2024, the executive officers of Lam Research were as follows:
| Name | Age | Position(s) | ||||||||||||
| Timothy M. Archer | 57 | President, Chief Executive Officer | ||||||||||||
| Douglas R. Bettinger | 57 | Executive Vice President, Chief Financial Officer | ||||||||||||
| Patrick J. Lord | 58 | Executive Vice President, Chief Operating Officer | ||||||||||||
| Neil J. Fernandes | 57 | Senior Vice President, Global Customer Operations | ||||||||||||
| Ava A. Harter | 54 | Senior Vice President, Chief Legal Officer and Secretary | ||||||||||||
| Vahid Vahedi | 58 | Senior Vice President, Chief Technology and Sustainability Officer | ||||||||||||
| Seshasayee (Sesha) Varadarajan | 49 | Senior Vice President, Global Products Group | ||||||||||||
Timothy M. Archer has been our president and chief executive officer since December 2018. Prior to this, he served as our president and chief operating officer, from January 2018 to November 2018. Mr. Archer joined us in June 2012 as our executive vice president, chief operating officer. Prior to joining us, he spent 18 years at Novellus Systems, Inc., (“Novellus”) in various technology development and business leadership roles, including most recently as chief operating officer from January 2011 to June 2012; executive vice president of Worldwide Sales, Marketing, and Customer Satisfaction from September 2009 to January 2011; and executive vice president of the PECVD and Electrofill Business Units from November 2008 to September 2009. His tenure at Novellus also included assignments as senior director of technology for Novellus Systems Japan from 1999 to 2001 and senior director of technology for the Electrofill Business Unit from April 2001 to April 2002. He started his career in 1989 at Tektronix, where he was responsible for process development for high-speed bipolar ICs. Mr. Archer has served as a member of the board of directors of Johnson Controls International public limited company, a global provider of building technology, software, and services, since March 2024, where he is a member of the compensation and talent development committee. He also serves on the International Board of Directors for SEMI, the global industry association representing the electronics manufacturing and design supply chain. From 2020 to 2022, Mr. Archer served as chairman of the board for the National GEM Consortium, a nonprofit organization that is dedicated to increasing the participation of underrepresented groups at the master’s and doctoral levels in engineering and science. Mr. Archer completed the Program for Management Development at the Harvard Graduate School of Business and earned a B.S. degree in applied physics from the California Institute of Technology.
Douglas R. Bettinger is our executive vice president and chief financial officer with responsibility for Finance, Tax, Treasury, and Investor Relations and Corporate Analytics. Prior to joining the Company in 2013, Mr. Bettinger served as senior vice president and chief financial officer of Avago Technologies from 2008 to 2013. From 2007 to 2008, he served as vice president of Finance and corporate controller at Xilinx, Inc., and from 2004 to 2007, he was chief financial officer at 24/7 Customer, a privately held company. Mr. Bettinger worked at Intel Corporation from 1993 to 2004, where he held several senior-level finance positions, including corporate planning and reporting controller and Malaysia site operations controller. Mr. Bettinger currently serves on the Board of Directors of Lattice Semiconductor Corporation, the SEMI Board of Industry Leaders, and the Industrial Advisory Board of the University of Wisconsin School of Engineering. Mr. Bettinger earned an M.B.A. degree in finance from the University of Michigan and a B.S. degree in economics from the University of Wisconsin in Madison.
Patrick J. Lord is our executive vice president and chief operating officer, a position he has held since March 2023. In this role, Dr. Lord is responsible for several functions including, Global Operations; Customer Support; Global Quality; Environmental Health and Safety; Information Technology; and Global Resilience, Security, and Transformation. Dr. Lord previously served as executive vice president of CSBG and Global Operations from September 2020 to February 2023; and senior vice president and general manager of CSBG from December 2016 to September 2020. Prior to that, Dr. Lord held the position of group vice president and deputy general
Lam Research Corporation 2024 10-K 11
manager of the Global Products Group from September 2013 to December 2016. He served as the head of the Direct Metals, GapFill, Surface Integrity Group, and Integrated Metals (“DGSI”) Business Units between June 2012 and September 2013. Prior to our acquisition of Novellus in June 2012, Dr. Lord was senior vice president and general manager of the DGSI Business Units at Novellus. Additionally, Dr. Lord held the position of senior vice president of Business Development and Strategic Planning. He joined Novellus in 2001 and held a number of other positions, including senior vice president and general manager of the CMP Business Unit, senior director of Business Development, senior director of Strategic Marketing, and acting vice president of Corporate Marketing. Before joining Novellus, Dr. Lord spent six years at KLA-Tencor in various product marketing and management roles. He earned his Ph.D., M.S., and B.S. degrees in mechanical engineering from the Massachusetts Institute of Technology.
Neil J. Fernandes is our senior vice president of Global Customer Operations, a position he has held since March 2023. Previously, he was group vice president of Business Development and Sales Operations and held other senior sales and customer-focused leadership positions at Lam. He joined the company in 2012 through the acquisition of Novellus, where he was the vice president of Sales Operations. Prior to that role, he held range of management positions in product marketing and process engineering at Novellus, Gasonics and Watkins-Johnson. Mr. Fernandes earned an M.S. degree in mechanical engineering from the University of Texas at Austin and a B.E. in mechanical engineering from the Manipal Institute of Technology.
Ava A. Harter is our senior vice president, chief legal officer and secretary. She joined us in July 2024 and is responsible for global legal matters, ethics and compliance, global trade, and government affairs. Prior to joining us, she served as executive vice president and chief legal officer at Whirlpool Corporation, a home appliance and consumer products company, from December 2020 to March 2024, and as senior vice president, general counsel, and corporate secretary at Owens Corning, a building and construction materials company, from May 2015 to November 2020. Prior to that, she held legal roles at General Electric and The Dow Chemical Company. She also worked at the law firms of Jones Day and Thompson Hine LLP and was an adjunct professor at the Case Western Reserve University Law School. Ms. Harter earned her J.D. from Northwestern University School of Law, an M.B.A. in sociology from the University of Nebraska, and a B.A. in political science from Northwestern University.
Vahid Vahedi is our senior vice president and chief technology and sustainability officer, a position he has held since March 2024. Dr. Vahedi previously served as senior vice president and chief technology officer beginning March 2023; senior vice president and general manager of the Etch business unit beginning February 2018; and group vice president of the Etch product group beginning March 2012. Previously, he served as vice president of Etch Business Product Management and Marketing, vice president of Dielectric Etch, vice president of Conductor and 3DIC Etch, and director of Conductor Etch Technology Development. He joined us in 1995. He earned his Ph.D., M.S., and B.S. degrees in electrical engineering and computer science from the University of California at Berkeley.
Sesha Varadarajan is our senior vice president of the Global Products Group, a position he has held since March 2023. Mr. Varadarajan previously served as senior vice president and general manager of the Deposition Business Unit beginning February 2018; and group vice president of the Deposition product group beginning September 2013. Previously, he served as the head of the PECVD/Electrofill Business Unit between June 2012 and September 2013. Prior to our acquisition of Novellus in June 2012, Mr. Varadarajan was senior vice president and general manager of Novellus’ PECVD and Electrofill Business Units. He joined Novellus in 1999 as a process engineer with the Electrofill Business Unit and held various roles in that business unit before being appointed director of technology in 2004. Between 2006 and 2008, he worked in the PECVD Business Unit, initially as director of technology, until being promoted to product general manager. In 2009, he returned to the Electrofill Business Unit as vice president and general manager. In mid-2011, he was promoted to senior vice president and general manager, where he was also responsible for the PECVD Business Unit. Mr. Varadarajan earned an M.S. degree in manufacturing engineering and material science from Boston University and a B.S. degree in mechanical engineering from the University of Mysore.
Item 1A. Risk Factors
In addition to the other information in this Annual Report on Form 10-K (“2024 Form 10-K”), the following risk factors should be carefully considered in evaluating us and our business because such factors may significantly impact our business, operating results, and financial condition. As a result of these risk factors, as well as other risks discussed in our other SEC filings, our actual results could differ materially from those projected in any forward-looking statements. No priority or significance is intended by, nor should be attached to, the order in which the risk factors appear.
INDUSTRY AND CUSTOMER RISKS
The Semiconductor Capital Equipment Industry Is Subject to Variability and Periods of Rapid Growth or Decline; We Therefore Face Risks Related to Our Strategic Resource Allocation Decisions
The semiconductor capital equipment industry has historically been characterized by rapid changes in demand. Variability in our customers’ business plans may lead to changes in demand for our equipment and services, which could negatively impact our results. The variability in our customers’ investments during any particular period is dependent on several factors, including, but not limited to, electronics demand, economic conditions (both general and in the semiconductor and electronics industries), industry supply and demand, prices for semiconductors, and our customers’ ability to develop and manufacture increasingly complex and costly semiconductor devices. The changes in demand may require our management to adjust spending and other resources allocated to operating activities.
Lam Research Corporation 2024 10-K 12
During periods of rapid growth or decline in demand for our products and services, we face significant challenges in maintaining adequate financial and business controls, management processes, information systems, and procedures for training, assimilating, and managing our workforce, and in appropriately sizing our supply chain infrastructure and facilities, work force, and other components of our business on a timely basis. If we do not adequately meet these challenges during periods of increasing or declining demand, our gross margins and earnings may be negatively impacted.
We continuously reassess our strategic resource allocation choices in response to the changing business environment. If we do not adequately adapt to the changing business environment, we may lack the infrastructure and resources to scale up our business to meet customer expectations and compete successfully during a period of growth, or we may expand our capacity and resources too rapidly and/or beyond what is appropriate for the actual demand environment, resulting in excess fixed costs.
Especially during transitional periods, resource allocation decisions can have a significant impact on our future performance, particularly if we have not accurately anticipated industry changes. Our success will depend, to a significant extent, on the ability of our executive officers and other members of our senior management to identify and respond to these challenges effectively.
Future Declines in the Semiconductor Industry, and the Overall World Economic Conditions on Which It Is Significantly Dependent, Could Have a Material Adverse Impact on Our Results of Operations and Financial Condition
Our business depends on the capital equipment expenditures of semiconductor manufacturers, which in turn depend on the current and anticipated market demand for integrated circuits. With the consolidation of customers within the industry, the semiconductor capital equipment market may experience rapid changes in demand driven both by changes in the market generally and the plans and requirements of particular customers. The economic, regulatory, political, and business conditions occurring nationally, globally, or in any of our key sales regions, which are often unpredictable, have historically impacted customer demand for our products and services and normal commercial relationships with our customers, suppliers, and creditors. Additionally, in times of economic uncertainty, our customers’ budgets for our products, or their ability to access credit to purchase them, could be adversely affected. This would limit their ability to purchase our products and services. As a result, changing economic, regulatory, political or business conditions can cause material adverse changes to our results of operations and financial condition, including, but not limited to:
•a decline in demand for our products or services;
•an increase in reserves on accounts receivable due to our customers’ inability to pay us;
•an increase in reserves on inventory balances due to excess or obsolete inventory as a result of our inability to sell such inventory;
•valuation allowances on deferred tax assets;
•restructuring charges;
•asset impairments including the potential impairment of goodwill and other intangible assets;
•a decline in the value of our investments;
•exposure to claims from our suppliers for payment on inventory that is ordered in anticipation of customer purchases that do not come to fruition; and
•challenges maintaining reliable and uninterrupted sources of supply.
Fluctuating levels of investment by semiconductor manufacturers may materially affect our aggregate shipments, revenues, operating results, and earnings. Where appropriate, we will attempt to respond to these fluctuations with cost management programs aimed at aligning our expenditures with anticipated revenue streams, which sometimes result in restructuring charges. Even during periods of reduced revenues, we must continue to invest in R&D and maintain extensive ongoing worldwide customer service and support capabilities to remain competitive, which may temporarily harm our profitability and other financial results.
We Have a Limited Number of Key Customers
Sales to a limited number of large customers constitute a significant portion of our overall shipments, revenue, cash flows and profitability. As a result, the actions of even one customer may subject us to variability in those areas that is difficult to predict. In addition, large customers may be able to negotiate requirements that result in decreased pricing, increased costs, and/or lower margins for us and limitations on our ability to share technology with others. Similarly, significant portions of our credit risk may, at any given time, be concentrated among a limited number of customers so that the failure of even one of these key customers to pay its obligations to us could significantly impact our financial results.
We Face a Challenging and Complex Competitive Environment
We face significant competition from multiple competitors, and our competitors may be able to develop products comparable or superior to those we offer or may adapt more quickly to new technologies or evolving customer requirements. In particular, while we continue to develop product enhancements that we believe will address future customer requirements, we may fail in a timely manner to identify those future customer requirements, to devote appropriate resources to developing products to address those requirements, or to complete the development or introduction of these additional product enhancements successfully, or these product enhancements may not achieve market acceptance or be competitive. Accordingly, competition may intensify, and we may be unable to continue to compete successfully in our markets, which could have a material adverse effect on our revenues, operating results, financial condition, and/or cash flows.
Lam Research Corporation 2024 10-K 13
With increased consolidation efforts in our industry, as well as the emergence and strengthening of new, regional competitors, we may face increasing competitive pressures. Other companies continue to develop systems and/or acquire businesses and products that are competitive to ours and may introduce new products and product capabilities that may affect our ability to sell and support our existing products. We face a greater risk if our competitors enter into strategic relationships with leading semiconductor manufacturers covering products similar to those we sell or may develop, as this could adversely affect our ability to sell products to those manufacturers.
We believe that to remain competitive we must devote significant financial resources to offer products that meet our customers’ needs, to maintain customer service and support centers worldwide, and to invest in product and process R&D. Technological changes and developing technologies have required, and are expected to continue to require, new and costly investments. Certain of our competitors, including those that are created and financially backed by foreign governments, have substantially greater financial resources and more extensive engineering, manufacturing, marketing, and customer service and support resources than we do and therefore have the potential to offer customers a more comprehensive array of products and/or product capabilities and to therefore achieve additional relative success in the semiconductor equipment industry. These competitors may deeply discount or give away products similar to those that we sell, challenging or even exceeding our ability to make similar accommodations and threatening our ability to sell those products. We also face competition from our own customers, who in some instances have established affiliated entities that manufacture equipment similar to ours. In addition, we face competition from companies that exist in a more favorable legal or regulatory environment than we do, who are able to sell products for certain applications at certain customers that we are prohibited from selling to under applicable export controls, allowing the freedom of action in ways that we may be unable to match. In many cases speed to solution is necessary for customer satisfaction and our competitors may be better positioned to achieve these objectives. For these reasons, we may fail to continue to compete successfully worldwide.
Once a Semiconductor Manufacturer Commits to Purchase a Competitor’s Semiconductor Manufacturing Equipment, the Manufacturer Typically Continues to Purchase That Competitor’s Equipment, Making It More Difficult for Us to Sell Our Equipment to That Customer
Semiconductor manufacturers must make a substantial investment to qualify and integrate wafer processing equipment into a semiconductor production line. We believe that once a semiconductor manufacturer selects a particular supplier’s processing equipment, the manufacturer generally relies upon that equipment for that specific production line application for an extended period of time, especially for customers that are more focused on tool reuse. Accordingly, we expect it to be more difficult to sell our products to a given customer for a product line application if that customer initially selects a competitor’s equipment for the same product line application.
We Depend on Creating New Products and Processes and Enhancing Existing Products and Processes for Our Success; Consequently, We Are Subject to Risks Associated with Rapid Technological Change
Rapid technological changes in semiconductor manufacturing processes subject us to increased pressure to develop technological advances that enable those processes. We believe that our future success depends in part upon our ability to develop and offer new products with improved capabilities and to continue to enhance our existing products. If new products or existing products have reliability, quality, design, or safety problems, our performance may be impacted by reduced orders, higher manufacturing costs, delays in acceptance of and payment for new products, and additional service and warranty expenses. We may be unable to develop and manufacture products successfully, or products that we introduce may fail in the marketplace. For more than 25 years, the primary driver of technology advancement in the semiconductor industry has been to shrink the lithography that prints the circuit design on semiconductor chips. That driver could be approaching its technological limit, leading semiconductor manufacturers to investigate more complex changes in multiple technologies in an effort to continue technology development. In addition, the emergence of “big data” and new tools such as machine learning and artificial intelligence that capitalize on the availability of large data sets is leading semiconductor manufacturers and equipment manufacturers to pursue new products and approaches that exploit those tools to advance technology development. In the face of uncertainty on which technology solutions will become successful, we will need to focus our efforts on developing the technology changes that are ultimately successful in supporting our customers’ requirements. Our failure to develop and offer the correct technology solutions in a timely manner with productive and cost-effective products could adversely affect our business in a material way. Our failure to commercialize new products in a timely manner could result in loss of market share, unanticipated costs, and inventory obsolescence, which would adversely affect our financial results.
In order to develop new products and processes and enhance existing products and processes, we expect to continue to make significant investments in R&D, to investigate the acquisition of products and technologies, to invest in or acquire businesses or technologies, and to pursue joint development relationships with customers, suppliers, or other members of the industry. Our investments and acquisitions may not be as successful as we may expect, particularly in the event that we invest in or acquire product lines and technologies that are new to us. We may find that acquisitions are not available to us, for regulatory or other reasons, and that we must therefore limit ourselves to collaboration and joint venture development activities that do not have the same benefits as acquisitions. Pursuing development through collaboration and/or joint development activities rather than through an acquisition may pose substantial challenges for management, including those related to aligning business objectives; sharing confidential information, intellectual property and data; sharing value with third parties; and realizing synergies that might have been available in an acquisition but are not available through a joint development project. We must manage product transitions and joint development relationships successfully, as the introduction of new products could adversely affect our sales of existing products and certain jointly developed technologies may be subject to restrictions on our ability to share that technology, which could limit our market for products incorporating those technologies. Future technologies, processes, or product developments may render our
Lam Research Corporation 2024 10-K 14
current product offerings obsolete, leaving us with non-competitive products, obsolete inventory, or both. Moreover, customers may adopt new technologies or processes to address the complex challenges associated with next-generation devices. This shift may result in a reduction in the size of our addressable markets or could increase the relative size of markets in which we either do not compete or have relatively low market share.
Strategic Alliances and Customer Consolidation May Have Negative Effects on Our Business
Semiconductor manufacturing companies from time to time enter into strategic alliances or consolidate with one another to expedite the development of processes and other manufacturing technologies and/or achieve economies of scale. The outcomes of such an alliance can be the definition of a particular tool set for a certain function and/or the standardization of a series of process steps that use a specific set of manufacturing equipment, while the outcomes of consolidation can lead to an overall reduction in the market for semiconductor manufacturing equipment as customers’ operations achieve economies of scale and/or increased purchasing power based on their higher volumes. In certain instances, this could work to our disadvantage if a competitor’s tools or equipment become the standard equipment for such functions or processes. Additional outcomes of such consolidation may include our customers re-evaluating their future supplier relationships to consider our competitors’ products and/or gaining additional influence over the pricing of products and the control of intellectual property or data.
Similarly, our customers may partner with, or follow the lead of, educational or research institutions that establish processes for accomplishing various tasks or manufacturing steps. If those institutions utilize a competitor’s equipment when they establish those processes, it is likely that customers will tend to use the same equipment in setting up their own manufacturing lines. Even if they select our equipment, the institutions and the customers that follow their lead could impose conditions on acceptance of that equipment, such as adherence to standards and requirements or limitations on how we license our proprietary rights, that increase our costs or require us to take on greater risk. These actions could adversely impact our market share and financial results.
BUSINESS AND OPERATIONAL RISKS
Our Revenues and Operating Results Are Variable
Our revenues and operating results may fluctuate significantly from quarter to quarter or year to year due to a number of factors, not all of which are in our control. We manage our expense levels based in part on our expectations of future revenues. Because our operating expenses are based in part on anticipated future revenues, and a certain amount of those expenses are relatively fixed, a change in the timing of recognition of revenue and/or the level of gross profit from a small number of transactions can unfavorably affect operating results in a particular quarter or year. Factors that may cause our financial results to fluctuate unpredictably include, but are not limited to:
•legal, tax, accounting, or regulatory changes (including, but not limited to, changes in import/export regulations and tariffs, such as regulations imposed by the U.S. government restricting exports to China) or changes in the interpretation or enforcement of existing requirements;
•macroeconomic, industry and market conditions, including those caused by the Russian invasion of Ukraine, conflict in the Middle East, bank failures; and geopolitical issues;
•changes in average selling prices, customer mix, and product mix;
•foreign currency exchange rate fluctuations;
•economic conditions in the electronics and semiconductor industries in general and specifically the semiconductor equipment industry;
•the size and timing of orders from customers;
•changes in our deferred revenue balance, including as a result of factors such as volume purchase agreements, multi-year service contracts, back orders, and down payments toward purchases;
•consolidation of the customer base, which may result in the investment decisions of one customer or market having a significant effect on demand for our products or services;
•procurement shortages;
•the failure of our suppliers or outsource providers to perform their obligations in a manner consistent with our expectations;
•manufacturing difficulties;
•customer cancellations or delays in shipments, installations, customer payments, and/or customer acceptances;
•the extent that customers continue to purchase and use our products and services in their business;
•our customers’ reuse of existing and installed products, to the extent that such reuse decreases their need to purchase new products or services;
•our ability to develop, introduce, and market new, enhanced, and competitive products in a timely manner;
•our competitors’ introduction of new products;
•legal or technical challenges to our products and technologies;
•transportation, communication, demand, information technology, or supply disruptions based on factors outside our control, such as strikes, acts of God, wars, terrorist activities, widespread outbreak of illness, natural or man-made disasters, international conflict, or climate change;
•management of supply chain risks;
•rising inflation or interest rates; and
•changes in our estimated effective tax rate.
Lam Research Corporation 2024 10-K 15
Our Future Success Depends Heavily on International Sales and the Management of Global Operations
Non-U.S. sales, as reflected in Part II Item 7. Results of Operations of this 2024 Form 10-K, accounted for approximately 93%, 91%, and 92% of total revenue in fiscal years 2024, 2023, and 2022, respectively. We expect that international sales will continue to account for a substantial majority of our total revenue in future years.
We are subject to various challenges related to international sales and the management of global operations including, but not limited to:
•domestic and international trade regulations, policies, practices, relations, disputes and issues;
•domestic and international tariffs, export controls and other barriers;
•developing customers and/or suppliers, who may have limited access to capital resources;
•global or national economic and political conditions;
•changes in currency controls;
•differences in the enforcement of intellectual property and contract rights in varying jurisdictions;
•our ability to respond to customer and foreign government demands for locally sourced systems, spare parts, and services and develop the necessary relationships with local suppliers;
•changes in and compliance with U.S. and international laws and regulations affecting foreign operations, including U.S. and international trade restrictions and sanctions, international data privacy regulations, such as the General Data Protection Regulation, anti-bribery, anti-corruption, anti-boycott, environmental, tax, and labor laws;
•fluctuations in interest and foreign currency exchange rates;
•the need for technical support resources in different locations; and
•our ability to secure and retain qualified people, and effectively manage people, in all necessary locations for the successful operation of our business.
There is inherent risk, based on the complex relationships among the world’s major trading nations, that political, diplomatic and national security influences can lead to trade disputes, impacts and/or disruptions, in particular those affecting the semiconductor industry. This can adversely affect our business with China, Japan, Korea, and/or Taiwan and perhaps the entire Asia Pacific region or global economy. A significant trade dispute, impact and/or disruption in any area where we do business could have a materially adverse impact on our future revenue and profits.
Tariffs, export controls, additional taxes, trade barriers, sanctions, the termination or modification of trade agreements, trade zones, and other duty mitigation initiatives, and any reciprocal retaliatory actions, can increase our manufacturing costs, decrease margins, reduce the competitiveness of our products, disrupt our supply chain operations, or inhibit our ability to sell products or provide services, which has had and in the future could have a material adverse effect on our business, results of operations, or financial conditions. Certain of our international sales depend on our ability to obtain export licenses from the U.S. or foreign governments, and our inability to obtain such licenses, or an expansion of the number or kinds of sales for which export licenses are required, has limited and could in the future further limit the market for our products and has had and could in the future have an adverse impact on our revenues. As is discussed below under the heading “Our Sales to Customers in China, a Significant Region for Us, Have Been Impacted, and are Likely to Be Materially and Adversely Affected by Export License Requirements and Other Regulatory Changes, or Other Governmental Actions in the Course of the Trade Relationship Between the U.S. and China,” the U.S. government has in recent years imposed new controls, including expanded export license requirements and restrictions on sales to certain Chinese entities that significantly impact trade with China. In addition, the U.S. government has an ongoing process of assessing technologies that may be subject to new or additional export controls, and it is possible that such additional controls, if and when imposed, could further adversely impact our ability to sell our products outside the U.S. The implementation by the U.S. government of broad export controls restricting access to our technology (such as recent controls limiting exports to China) may cause customers with international operations to reconsider their use of and reliance on our products, which could adversely impact our future revenue and profits. Furthermore, there are risks that foreign governments may, among other things, take retaliatory actions; insist on the use of local suppliers; compel companies to partner with local companies to design and supply equipment on a local basis, requiring the transfer of intellectual property rights and/or local manufacturing; utilize their influence over their judicial systems to respond to intellectual property disputes or issues; and provide special incentives to government-backed local customers to buy from local competitors, even if their products are inferior to ours; all of which could adversely impact our revenues and margins.
We are exposed to potentially adverse movements in foreign currency exchange rates. The majority of our sales and expenses are denominated in U.S. dollars. However, we are exposed to foreign currency exchange rate fluctuations primarily related to revenues denominated in Japanese yen and expenses denominated in euro, Korean won, Malaysian ringgit, and Indian rupee. Further, in periods in which the U.S. dollar is strong relative to the local currencies of our international customers, this can potentially reduce demand for our products, which may compound the adverse effect of foreign exchange translation on our revenue. Currently, we hedge certain anticipated foreign currency cash flows, primarily anticipated revenues denominated in Japanese yen and expenses denominated in euro, Korean won, Malaysian ringgit, and Indian rupee. In addition, we enter into foreign currency hedge contracts to minimize the short-term impact of the foreign currency exchange rate fluctuations on certain foreign currency denominated monetary assets and liabilities, primarily third-party accounts receivables, accounts payables, and intercompany receivables and payables. We believe these are our primary exposures to currency rate fluctuation. We expect to continue to enter into hedging transactions, for the purposes outlined, for the foreseeable future. However, these hedging transactions may not achieve their desired effect because differences between the actual timing of the underlying exposures and our forecasts of those exposures may leave us either over or under hedged on any given transaction. Moreover, by hedging these foreign currency denominated revenues, expenses, monetary
Lam Research Corporation 2024 10-K 16
assets, and liabilities, we may miss favorable currency trends that would have been advantageous to us but for the hedges. Additionally, we are exposed to short-term foreign currency exchange rate fluctuations on non-U.S. dollar-denominated monetary assets and liabilities (other than those currency exposures previously discussed), and currently we do not enter into foreign currency hedge contracts against these exposures. In addition, our currency hedges do not necessarily mitigate the potential negative impact of a strong U.S. dollar on demand for our products. Therefore, we are subject to potential unfavorable foreign currency exchange rate fluctuations to the extent that we transact business (including intercompany transactions) in these currencies.
The magnitude of our overseas business also affects where our cash is generated. Certain uses of cash, such as share repurchases, payment of dividends, or the repayment of our notes, can usually only be made with onshore cash balances. Since the majority of our cash is generated outside of the United States, this may impact certain business decisions and outcomes.
Our Business Relies on Technology, Data, Intellectual Property and Other Sensitive Information That is Susceptible to Cybersecurity and Other Threats or Incidents
Our business is dependent upon the use and protection of technology, data, intellectual property and other sensitive information, which may be owned by, or licensed to, us or third parties, such as our customers and vendors. We maintain and rely upon certain critical information systems for the creation, transmission, use and storage of much of this information, and for the effective operation of our business. These information systems include, but are not limited to, telecommunications, the Internet, our corporate intranet, various computer hardware and software applications (some of which may be integrated into the products that we sell or be required in order to provide the services that we offer), network communications, and email. These information systems may be owned and maintained by us, our outsourced providers, or third parties such as vendors, contractors, customers and Cloud providers. In addition, we make use of Software-as-a-Service (SaaS) products for certain important business functions that are provided by third parties and hosted on their own networks and servers, or third-party networks and servers, all of which rely on networks, email and/or the Internet for their function.
The technology, data, intellectual property and other sensitive information we seek to protect are subject to loss, release, misappropriation or misuse, and the information systems containing or transmitting such technology, data, intellectual property and other sensitive information are subject to disruption, breach or failure, in each case as a result of various possible causes, any of which could have a material adverse effect on our business or operations. Such causes may include mistakes or unauthorized actions by our employees or contractors, phishing schemes and other third-party attacks, and degradation or loss of service or access to data due to viruses, malware, denial of service attacks, destructive or inadequate code, power failures, or physical damage to computers, hard drives, communication lines, or networking equipment, in each case with respect to us or the third-party product and service providers upon which we rely. Such causes may also include the use of techniques that change frequently or may be disguised or difficult to detect, or designed to remain dormant until a triggering event, or that may continue undetected for an extended period of time. In addition, to the extent artificial intelligence capabilities improve and are increasingly adopted, they may be used to identify vulnerabilities and to implement increasingly sophisticated cybersecurity attacks. Further, the use of artificial intelligence by us, our customers, suppliers, and third-party providers, among others, may also introduce unique vulnerabilities whose existence or exploitation could have a material adverse effect on our business or operations.
We experience cybersecurity and other threats and incidents in the course of our operations. Although past threats and incidents have not resulted in a material adverse effect, we may incur material losses related to cybersecurity and other threats or incidents in the future. Cybersecurity or other incidents could have a material adverse effect on our business. Such adverse effects might include:
•loss of (or inability to access, e.g. through ransomware) confidential and/or sensitive information stored on these critical information systems or transmitted to or from those systems;
•the disruption of the proper function of our products, services and/or operations;
•the failure of our or our customers’ manufacturing processes;
•errors in the output of our work or our customers’ work;
•the loss or public exposure of the personal or other confidential information of our employees, customers or other parties;
•the public release of customer financial and business plans, customer orders and operational results;
•exposure to claims from our employees or third parties who are adversely impacted by such incidents;
•misappropriation or theft of our or a customer’s, supplier’s or other party’s assets or resources, including technology, data, intellectual property or other sensitive information and costs associated therewith;
•reputational damage;
•diminution in the value of our investment in research, development and engineering; or
•our failure to meet, or violation of, regulatory or other legal obligations, such as the timely publication or filing of financial statements, tax information and other required communications.
Lam Research Corporation 2024 10-K 17
While we have implemented International Organization for Standardization (“ISO”) 27001 compliant security procedures and virus protection software, intrusion prevention systems, identity and access control, and emergency recovery processes, and we carefully select our third-party providers of information systems, to mitigate risks to the information systems that we rely on and to the technology, data, intellectual property and other sensitive information we seek to protect, those security procedures and mitigation and protection systems cannot be guaranteed to be fail-safe, and we may still suffer cybersecurity and other incidents, which could have a material adverse effect on our business or operations. It has been difficult and may continue to be difficult to hire and retain employees with substantial cybersecurity acumen. In addition, there have been and may continue to be instances of our policies and procedures not being effective in enabling us to identify risks, threats and incidents in a timely manner, or at all, or to respond expediently, appropriately and effectively when incidents occur and repair any damage caused by such incidents, and such occurrences could have a material adverse effect on our business.
We May Not Achieve the Expected Benefits of Our Restructuring Plans and Business Transformation Initiatives, and These Efforts Could Have a Material Adverse Effect on Our Business, Operations, Financial Condition, Results of Operations and Competitive Position
In January 2023, we announced that we were implementing a restructuring plan consisting of a workforce reduction, and that we anticipated undertaking, and may in the future undertake, additional business restructuring, realignment and transformation initiatives. While the restructuring plan was intended to better align our cost structure with the current economic environment and future business opportunities, and our anticipated transformation initiatives have the goal of strengthening our operations and achieving operational efficiencies, there can be no assurance that we will be successful in these plans and initiatives. Implementation of such plans and initiatives may be costly and disruptive to our business, we may not be able to complete them at the cost or within the time frame contemplated, and we may not be able to obtain the anticipated benefits within the projected timing or at all. Restructuring and transformation may adversely affect our internal programs and our ability to recruit and retain skilled and motivated personnel, may result in a loss of continuity, loss of accumulated knowledge and/or inefficiency during transitional periods, may require a significant amount of management and other employees' time and focus, and may be distracting to employees and management, which may divert attention from operating and growing our business. Additionally, reductions in our workforce may cause a reduction in our production output capabilities which could impact our ability to manufacture or ship products to customers within a mutually beneficial timeline. If we fail to achieve some or all of the expected benefits, it could have a material adverse effect on our business, operations, financial condition, results of operations and competitive position. For more information about our restructuring plan, see Note 21: Restructuring charges, net of our Consolidated Financial Statements in Part II, Item 8 of this 2024 Form 10-K.
Disruptions to Our Supply Chain and Outsource Providers Could Impact Our Ability to Meet Demand, Increase Our Costs, and Adversely Impact Our Revenue and Operating Results
Our supply chain has played and will continue to play a key role in our product development, manufacturing operations, field installation and support. Our business depends on our timely supply of products and services to meet the demand from our customers, which depends in significant part on the timely delivery of parts, materials and services, including components and subassemblies, from our direct suppliers to us, and to our direct suppliers by other companies. In addition, outsource providers have played and will continue to play a key role both in the manufacturing and customer-focused operations described above, and in many of our transactional and administrative functions, such as information technology, facilities management, and certain elements of our finance organization. These providers and suppliers might suffer financial setbacks, be acquired by third parties, become subject to exclusivity arrangements that preclude further business with us, or be unable to meet our requirements or expectation due to their independent business decisions or force majeure events that could interrupt or impair their continued ability to perform as we expect. We may also experience significant interruptions of our manufacturing operations, delays in our ability to deliver or install products or perform services or to recognize revenue, increased costs or customer order cancellations as a result of:
•the failure or inability to accurately forecast demand and obtain sufficient quantities of quality parts on a cost-effective basis;
•volatility in the availability and cost of parts, materials or services, including increased costs due to rising inflation or interest rates or other market conditions;
•difficulties or delays in obtaining required import or export approvals;
•shipment delays and increased costs of shipment due to transportation interruptions, capacity constraints, or fuel shortages;
•shortages of semiconductor or other components or materials as a result of increases in demand;
•information technology or infrastructure failures, including those of a third-party supplier or service provider; and
•transportation or supply disruptions based on factors outside our control, such as strikes, acts of God, wars, terrorist activities, widespread outbreak of illness, natural or man-made disasters, international conflict, or climate change.
Demand for electronic products and other factors, such as the COVID-19 pandemic, have resulted in, and may in the future result in, a shortage of parts, materials and services needed to manufacture, deliver and install our products, as well as delays in and unpredictability of shipments due to transportation interruptions. Such shortages, delays and unpredictability have adversely impacted, and may in the future impact, our suppliers’ ability to meet our demand requirements. Difficulties in obtaining sufficient and timely supply of parts, materials or services, and delays in and unpredictability of shipments due to transportation interruptions, have adversely impacted, and may in the future adversely impact, our manufacturing operations and our ability to meet customer demand. In addition, difficulties in obtaining parts, materials or services necessary to deliver or install products or perform services have adversely impacted, and may in the future adversely impact, our ability to recognize revenue, our gross margins on the revenue we
Lam Research Corporation 2024 10-K 18
recognize, and our other operating results. Although we are endeavoring to pass along some of the impact of increased costs to our customers to counteract adverse impacts to our gross margins and other operating results, such measures could be unsuccessful, or could have the effect of reducing demand, which would adversely impact our revenue.
Further, increased restrictions imposed on a class of chemicals known as per- and polyfluoroalkyl substances (“PFAS”), which are widely used in a large number of products, including parts and materials that are incorporated into our products, may negatively impact our supply chain due to the potentially decreased availability, or non-availability, of PFAS-containing products. Proposed regulations under consideration could require that we transition away from the usage of PFAS-containing products, which could adversely impact our business, operations, revenue, costs, and competitive position. There is no assurance that suitable replacements for PFAS-containing parts and materials will be available at similar costs, or at all.
Although we attempt to select reputable providers and suppliers and we attempt to secure their performance on terms documented in written contracts, it is possible that one or more of these providers or suppliers could fail to perform as we expect, or fail to secure or protect intellectual property rights, and such failure could have an adverse impact on our business. In some cases, the requirements of our business mandate that we obtain certain components and sub-assemblies included in our products from a single supplier or a limited group of suppliers. Where practical, we endeavor to establish alternative sources to mitigate the risk that the failure of any single provider or supplier will adversely affect our business, but this is not feasible in all circumstances. Some key parts are subject to long lead-times or available only from a single supplier or limited group of suppliers, and some sourcing or subassembly is provided by suppliers located in countries other than the countries where we conduct our manufacturing. There is therefore a risk that a prolonged inability to obtain certain components or secure key services could impair our ability to manage operations, ship products, and generate revenues, which could adversely affect our operating results and damage our customer relationships.
We Face Risks Related to the Disruption of Our Primary Manufacturing and R&D Facilities
While we maintain business continuity plans, our manufacturing and R&D facilities are concentrated in a limited number of locations. These locations are subject to disruption for a variety of reasons, such as natural or man-made disasters, widespread outbreaks of illness, war, terrorist activities, political or governmental unrest or instability, disruptions of our information technology resources, utility interruptions, international conflict, the effects of climate change, or other events beyond our control. Such disruptions may cause delays in developing or shipping our products, in engaging with customers on new product applications, or in supporting customers, which could result in the loss of business or customer trust, adversely affecting our business and operating results.
The COVID-19 Pandemic Adversely Impacted, and May in the Future Adversely Impact, Our Business, Operations, and Financial Results
The COVID-19 pandemic and efforts by national, state and local governments worldwide to control its spread resulted in measures aimed at containing the disease such as quarantines, travel bans, shutdowns, and shelter in place or “stay at home” orders, which collectively significantly restricted the movement of people and goods and the ability of businesses to operate. While the exceptional COVID-19 related challenges have mostly subsided, these restrictions and measures, incidents of confirmed or suspected infections within our workforce or those of our suppliers or other business partners, and our efforts to act in the best interests of our employees, customers, and suppliers, previously affected and in the future may affect our business and operations by, among other things, causing facility closures, production delays and capacity limitations; disrupting production by our supply chain; disrupting the transport of goods from our supply chain to us and from us to our customers; requiring modifications to our business processes; requiring the implementation of business continuity plans; requiring the development and qualification of alternative sources of supply; requiring the implementation of social distancing measures that impede manufacturing processes; disrupting business travel; disrupting our ability to staff our on-site manufacturing and research and development facilities; delaying capital expansion projects; and necessitating teleworking by portions of our workforce. These impacts caused and, in the future, may cause delays in product shipments and product development, increases in costs, and decreases in revenue, profitability and cash from operations, which caused and, in the future, may cause an adverse effect on our results of operations that may be material. The pandemic resulted at various times in significant disruption of global financial markets, increases in levels of unemployment, and economic uncertainty, which adversely impacted our business and may do so in the future, and may lead to significant negative impacts on customer spending, demand for our products, the ability of our customers to pay, our financial condition and the financial condition of our suppliers, and our access to external sources of financing to fund our operations and capital expenditures.
We Are Subject to Risks Relating to Product Concentration and Lack of Product Revenue Diversification
We derive a substantial percentage of our revenues from a limited number of products. Our products are priced up to the tens of millions of dollars per system. As a result, the inability to recognize revenue on even a few systems can cause a significantly adverse impact on our revenues for a given quarter, and, in the longer term, the continued market acceptance of these products is critical to our future success. Our business, operating results, financial condition, and cash flows could therefore be adversely affected by:
•a decline in demand for even a limited number of our products;
•a failure to achieve continued market acceptance of our key products;
•export restrictions or other regulatory or legislative actions that could limit our ability to sell those products to key customers or customers within certain markets;
•an improved version of products being offered by a competitor in the markets in which we participate;
•increased pressure from competitors that offer broader product lines;
•increased pressure from regional competitors;
Lam Research Corporation 2024 10-K 19
•technological changes that we are unable to address with our products; or
•a failure to release new or enhanced versions of our products on a timely basis.
In addition, the fact that we offer limited product lines creates the risk that our customers may view us as less important to their business than our competitors that offer additional products and/or product capabilities, including new products that take advantage of “big data” or other new technologies such as machine learning and artificial intelligence. This may impact our ability to maintain or expand our business with certain customers. Such product concentration may also subject us to additional risks associated with technology changes. Our business is affected by our customers’ use of our products in certain steps in their wafer fabrication processes. Should technologies change so that the manufacture of semiconductors requires fewer steps using our products, this could have a larger impact on our business than it would on the business of our less concentrated competitors.
We May Fail to Protect Our Critical Proprietary Technology Rights, Which Could Affect Our Business
Our success depends in part on our proprietary technology and our ability to protect key components of that technology through patents, copyrights, trade secrets and other forms of protection. Protecting our key proprietary technology helps us achieve our goals of developing technological expertise and new products and systems that give us a competitive advantage; increasing market penetration and growth of our installed base; and providing comprehensive support and service to our customers. As part of our strategy to protect our technology, we currently hold a number of U.S. and foreign patents and pending patent applications, and we keep certain information, processes, and techniques confidential and/or as trade secrets. However, we may fail to apply for or obtain sufficient patent protection for our technology, other parties may challenge or attempt to invalidate or circumvent any patents the U.S. or foreign governments issue to us; these governments may fail to issue patents for pending applications; or we may lose trade secret protection over valuable information due to our or third parties’ intentional or unintentional actions or omissions or even those of our own employees. Additionally, intellectual property litigation can be expensive and time-consuming and even when patents are issued, or trade secret processes are followed, the legal systems in certain of the countries in which we do business might not enforce patents and other intellectual property rights as rigorously or effectively as the United States or may favor local entities in their intellectual property enforcement. The rights granted or anticipated under any of our patents, pending patent applications, copyrights, or trade secrets may be narrower than we expect or, in fact, provide no competitive advantages. Moreover, because we selectively file for patent protection in different jurisdictions, we may not have adequate protection in all jurisdictions based on such filing decisions. Any of these circumstances could have a material adverse impact on our business.
Our Ability to Attract, Retain, and Motivate Key Employees Is Critical to Our Success
Our ability to compete successfully depends in large part on our ability to attract, retain, and motivate key employees with the appropriate skills, experiences and competencies. This is an ongoing challenge due to intense competition for top talent, fluctuations in industry or business economic conditions, as well as increasing geographic expansion, and these factors in combination may result in cycles of hiring activity and workforce reductions. Our success in hiring depends on a variety of factors, including the attractiveness of our compensation and benefit programs, global economic or political and industry conditions, our organizational structure, global competition for talent and the availability of qualified employees, the availability of career development opportunities, the ability to obtain necessary authorizations for workers to provide services outside their home countries, and our ability to offer a challenging and rewarding work environment. We periodically evaluate our overall compensation and benefit programs and make adjustments, as appropriate, to maintain or enhance their competitiveness. If we are not able to successfully attract, retain, and motivate key employees, we may be unable to capitalize on market opportunities and our operating results may be materially and adversely affected.
If We Choose to Acquire or Dispose of Businesses, Product Lines, and Technologies, We May Encounter Unforeseen Costs and Difficulties That Could Impair Our Financial Performance
An important element of our management strategy is to review acquisition prospects that would complement our existing products, augment our market coverage and distribution ability, enhance our technological capabilities, or accomplish other strategic objectives. As a result, we may seek to make acquisitions of complementary companies, products, or technologies, or we may reduce or dispose of certain product lines or technologies that no longer fit our long-term strategies. For regulatory or other reasons, we may not be successful in our attempts to acquire or dispose of businesses, products, or technologies, resulting in significant financial costs, reduced or lost opportunities, and diversion of management’s attention. Managing an acquired business, disposing of product technologies, or reducing personnel entails numerous operational and financial risks, including difficulties in assimilating acquired operations and new personnel or separating existing business or product groups, diversion of management’s attention away from other business concerns, amortization of acquired intangible assets, adverse customer reaction to our decision to cease support for a product, and potential loss of key employees or customers of acquired or disposed operations. There can be no assurance that we will be able to achieve and manage successfully any such integration of potential acquisitions, disposition of product lines or technologies, or reduction in personnel, or that our management, personnel, or systems will be adequate to support continued operations. Any such inabilities or inadequacies could have a material adverse effect on our business, operating results, financial condition, and/or cash flows.
In addition, any acquisition could result in changes such as potentially dilutive issuances of equity securities, the incurrence of debt and contingent liabilities, the amortization of related intangible assets, and goodwill impairment charges, any of which could materially adversely affect our business, financial condition, results of operations, cash flows, and/or the price of our Common Stock.
Lam Research Corporation 2024 10-K 20
LEGAL, REGULATORY AND TAX RISKS
Our Sales to Customers in China, a Significant Region for Us, Have Been Impacted, and are Likely to Be Materially and Adversely Affected by Export License Requirements and Other Regulatory Changes, or Other Governmental Actions in the Course of the Trade Relationship Between the U.S. and China
China represents a large and fast-developing market for the semiconductor equipment industry and therefore is important to our business. Revenue in China, which includes global customers and domestic Chinese customers with manufacturing facilities in China, represented approximately 42%, 26%, and 31% of our total revenue for fiscal years 2024, 2023, and 2022, respectively. The U.S. and China have historically had a complex relationship that has included actions that have impacted trade between the two countries. In recent years, these actions have included an expansion of export license requirements imposed by the U.S. government, which have limited the market for our products, adversely impacted our revenues, and increased our exposure to foreign competition, and could potentially do so to an even greater extent in the future. Additionally, the U.S. government has enacted new rules aimed at restricting China’s ability to manufacture advanced semiconductors, which include restrictions on exports, reexports or transfers to, or shipping, transmitting, transferring, or facilitating such movement to, or performing services at, customer facilities in China engaged in certain technology end-uses, without appropriate authorizations obtained from U.S. authorities. The U.S. Department of Commerce has also enacted rules that have expanded export license requirements for U.S. companies to sell certain items to companies and other end-users in China that are designated as military end-users or have operations that could support military end uses; has added additional Chinese companies to its restricted entity list and unverified list under suspicion of military-civil fusion, support of Russia, or other factors associated with a broadening scope of national security concerns; and has expanded an existing rule (referred to as the foreign direct product rule) in a manner that could cause foreign-made wafers, chipsets, and certain related items produced with many of our products to be subject to U.S. licensing requirements if Huawei Technologies Co. Ltd (“Huawei”) or its affiliates are parties to a transaction involving the items. These rules have required and may require us to apply for and obtain additional export licenses to supply certain of our products to customers in China, and there is no assurance that we will be issued licenses that we apply for on a timely basis or at all. In addition, our customers (including, but not limited to, Chinese customers) may require U.S. export licenses for the use of our products in order to manufacture products, including semiconductor wafers and integrated circuits, for those of their customers (i.e. Huawei and its affiliates) that are subject to the expanded foreign direct product rule, which may adversely impact the demand for our products. The U.S. Department of Commerce could in the future add additional Chinese companies to its restricted entity list or unverified list or take other actions that could expand licensing requirements or otherwise impact the market for our products and our revenue. The implementation, interpretation and impact on our business of these rules and other regulatory actions taken by the U.S. government is uncertain and evolving, and these rules, other regulatory actions or changes, and other actions taken by the governments of either the U.S. or China, or both, that have occurred and may occur in the future could materially and adversely affect our results of operations.
We Are Exposed to Various Risks from Our Regulatory Environment
We are subject to various risks related to (1) new, different, inconsistent, or even conflicting laws, rules, and regulations that may be enacted by legislative or executive bodies and/or regulatory agencies in the countries that we operate; (2) disagreements or disputes related to international trade; and (3) the interpretation and application of laws, rules, and regulations. As a public company with global operations, we are subject to the laws of multiple jurisdictions and the rules and regulations of various governing bodies, including those related to export controls, financial and other disclosures, corporate governance, privacy, anti-corruption, such as the Foreign Corrupt Practices Act and other local laws prohibiting corrupt payments to governmental officials, anti-boycott compliance, conflict minerals or other social responsibility legislation, immigration or travel regulations, antitrust regulations, and laws or regulations relating to carbon emissions, as well as other laws or regulations imposed in response to climate change concerns, among others. Each of these laws, rules, and regulations imposes costs on our business, including financial costs and potential diversion of our management’s attention associated with compliance, and may present risks to our business, including potential fines, restrictions on our actions, and reputational damage if we do not fully comply.
To maintain high standards of corporate governance and public disclosure, we intend to invest appropriate resources to comply with evolving standards. Changes in or ambiguous interpretations of laws, regulations, and standards may create uncertainty regarding compliance matters. Efforts to comply with new and changing regulations have resulted in, and are likely to continue to result in, reduced operating income, and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If we are found by a court or regulatory agency not to be in compliance with the laws and regulations, our business, financial condition, and/or results of operations could be adversely affected.
Intellectual Property, Indemnity, and Other Claims Against Us Can Be Costly and We Could Lose Significant Rights That Are Necessary to Our Continued Business and Profitability
Third parties may assert infringement, misappropriation, unfair competition, product liability, breach of contract, or other claims against us. From time to time, other persons send us notices alleging that our products infringe or misappropriate their patent or other intellectual property rights. In addition, law enforcement authorities may seek criminal charges relating to intellectual property or other issues. We also face risks of claims arising from commercial and other relationships. In addition, our bylaws and other indemnity obligations provide that we will indemnify officers and members of our Board of Directors against losses that they may incur in legal proceedings resulting from their service to us. From time to time, in the normal course of business, we indemnify third parties with whom we enter into contractual relationships, including customers and suppliers, with respect to certain matters. We have agreed, under certain conditions, to hold these third parties harmless against specified losses, such as those arising from a breach of representations or covenants, other third-party claims that our products when used for their intended purposes infringe the intellectual
Lam Research Corporation 2024 10-K 21
property rights of such other third parties, or other claims made against certain parties. In such cases, it is our policy either to defend the claims or to negotiate licenses or other settlements on commercially reasonable terms. However, we may be unable in the future to negotiate necessary licenses or reach agreement on other settlements on commercially reasonable terms, or at all, and any litigation resulting from these claims by other parties may materially and adversely affect our business and financial results, and we may be subject to substantial damage awards and penalties. Moreover, although we have insurance to protect us from certain claims and cover certain losses to our property, such insurance may not cover us for the full amount of any losses, or at all, and may be subject to substantial exclusions and deductibles.
Our Financial Results May Be Adversely Impacted by Higher than Expected Tax Rates or Exposure to Additional Tax Liabilities
We are subject to income, transaction, and other taxes in the United States and various foreign jurisdictions, and judgment is required to determine worldwide tax liabilities. The amount of taxes we pay is subject to ongoing audits in various jurisdictions, and a material assessment by a governing tax authority could affect our profitability. As a global company, our effective tax rate is highly dependent upon the geographic composition of worldwide earnings and tax regulations governing each region. Changes in the split of earnings between countries with differing statutory tax rates, in the valuation allowance of deferred tax assets, in tax laws, in material audit assessments, or in expirations of agreements with tax authorities could adversely affect our effective tax rate. In particular, the carrying value of deferred tax assets, which are predominantly in the United States, is dependent upon our ability to generate future taxable income in the United States.
On August 16, 2022, the Inflation Reduction Act (the “IRA”) was signed into law. In general, the provisions of the IRA are effective beginning with our fiscal year 2024, with certain exceptions. The IRA includes a new 15% corporate alternative minimum tax. We have evaluated the impacts of the IRA, including guidance issued by the Treasury Department, and do not expect it to have a material impact on our effective tax rate.
Recommendations made by the Organization for Economic Co-operation and Development’s Base Erosion and Profit Shifting 2.0 (“BEPS 2.0”) project have the potential to lead to changes in the tax laws in numerous countries, including the implementation of a global minimum tax. Several countries around the world have enacted or proposed changes to their existing tax laws based on these recommendations. As each country in which we operate evaluates their alignment with the recommendations and enacts minimum tax rules, the ultimate impact of any such changes on our effective tax rate remains uncertain. When fully enacted, such changes could have a material impact on our effective tax rate. We will continue to monitor the progress of the BEPS 2.0 implementation.
In addition, the U.S. has made several corporate income tax proposals, including changes in the taxation of non-U.S. income. If enacted, such changes could have a material impact on our effective tax rate.
Increasing and Evolving Environmental Regulations May Adversely Affect Our Operating Results
We are subject to a variety of domestic and international governmental regulations related to the handling, discharge, sale, and disposal of toxic, volatile, or otherwise hazardous or potentially hazardous substances, and the regulatory environment is dynamic. Failure to comply with present or future environmental regulations (such as future regulations imposed on the use or sale of PFAS or PFAS-containing products) could result in fines being imposed on us, require us to undertake remediation activities, suspend production, and/or cease operations, or cause our customers to not accept our products. These regulations could require us to alter or discontinue our current operations in certain jurisdictions, acquire significant additional equipment, incur substantial other expenses to comply with environmental regulations, or take other actions. Compliance obligations, as well as any failure to comply with current or future regulations governing the use, handling, sale, transport, or disposal of hazardous or potentially hazardous substances (including, but not limited to, PFAS) could subject us to future costs and liabilities that may adversely affect our operating results, financial condition, and ability to operate our business.
Our Bylaws Designate the Court of Chancery of the State of Delaware as the Sole and Exclusive Judicial Forum for Certain Legal Actions Between the Company and its Stockholders, Which May Discourage Lawsuits with Respect to Such Claims
Our bylaws provide that, unless we consent otherwise, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for lawsuits asserting certain stockholder claims (including claims asserted derivatively for our benefit), such as claims against directors and officers for breach of a fiduciary duty, claims arising under any provision of the General Corporation Law of Delaware or our certificate of incorporation or our bylaws, or claims governed by the internal affairs doctrine. This is a general summary of the bylaw provision; you should refer to the language of the bylaws for details. While the forum provision does not generally apply to direct claims arising under the Securities Exchange Act of 1934 or the Securities Act of 1933, derivative lawsuits that assert legal claims arising under these statutes could fall within the provision, as recent court decisions have held.
As a Delaware corporation, Delaware law controls issues of our internal affairs, including duties that our directors, officers, employees, and others owe to the Company and its stockholders. We believe that our exclusive forum provision benefits us, and our stockholders, by permitting relatively prompt resolution of lawsuits concerning our internal affairs, promoting consistent application of Delaware law in these lawsuits, and reducing the possibility of duplicative, costly, multi-jurisdictional litigation with the potential for inconsistent outcomes. However, the forum provision limits a stockholder’s ability to bring a claim in a judicial forum that it believes may be more favorable than Delaware, and this could discourage the filing of such lawsuits.
Lam Research Corporation 2024 10-K 22
FINANCIAL, ACCOUNTING AND CAPITAL MARKETS RISKS
The Market for Our Common Stock Is Volatile, Which May Affect Our Ability to Raise Capital or Make Acquisitions or May Subject Our Business to Additional Costs
The market price for our Common Stock is volatile and has fluctuated significantly over the past years. The trading price of our Common Stock could continue to be highly volatile and fluctuate widely in response to a variety of factors, many of which are not within our control or influence. These factors include, but are not limited to, the following:
•general market, semiconductor, or semiconductor equipment industry conditions;
•economic or political events, trends, and unexpected developments occurring nationally, globally, or in any of our key sales regions;
•macroeconomic, industry and market conditions, including those caused by the Russian invasion of Ukraine, conflict in the Middle East, or bank failures; and geopolitical issues;
•variations in our quarterly operating results and financial condition, including our liquidity;
•variations in our revenues, earnings, or other business and financial metrics from forecasts by us or securities analysts or from those experienced by other companies in our industry;
•announcements of restructurings, reductions in force, departure of key employees, and/or consolidations of operations;
•margin trading, short sales, hedging and derivative transactions involving our Common Stock;
•government regulations;
•developments in, or claims relating to, patent or other proprietary rights;
•technological innovations and the introduction of new products by us or our competitors;
•commercial success or failure of our new and existing products; or
•disruptions of relationships with key customers or suppliers.
In addition, the stock market experiences significant price and volume fluctuations. Historically, we have witnessed significant volatility in the price of our Common Stock due in part to the price of and markets for semiconductors. These and other factors have adversely affected and may again adversely affect the price of our Common Stock, regardless of our actual operating performance. In the past, following volatile periods in the price of their stock, many companies became the object of securities class action litigation. If we are sued in a securities class action, we could incur substantial costs, and it could divert management’s attention and resources and have an unfavorable impact on our financial performance and the price for our Common Stock.
We May Incur Impairments to Goodwill or Long-lived Assets
We review our goodwill identified in business combinations for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of these assets may exceed the fair value. We review all other long-lived assets, including finite-lived intangible assets, whenever events or changes in circumstance indicate that these assets may not be recoverable. The process of evaluating the potential impairment of goodwill and other long-lived assets requires judgment. Negative industry or economic trends, including reduced market prices of our Common Stock, reduced estimates of future cash flows, disruptions to our business, slower growth rates, or lack of growth in our relevant business units, could lead to impairment charges against our long-lived assets, including goodwill and other intangible assets.
When evaluating goodwill, if we conclude that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then a quantitative impairment test is performed and we may be required to record an impairment charge in that period, which could adversely affect our result of operations.
When evaluating other long-lived assets, if we conclude that the estimated undiscounted cash flows attributable to the assets are less than their carrying value, we recognize an impairment loss based on the excess of the carrying amount of the assets over their respective fair values, which could adversely affect our results of operations.
Our valuation methodology for assessing impairment requires management to make judgments and assumptions based on historical experience and to rely heavily on projections of future operating performance. We operate in a highly competitive environment and projections of future operating results and cash flows may vary significantly from actual results. Additionally, if our analysis indicates potential impairment, we may be required to record additional charges to earnings in our financial statements, which could negatively affect our results of operations.
Our Leverage and Debt Service Obligations May Adversely Affect Our Financial Condition, Results of Operations, and Earnings per Share
We have $5.0 billion in aggregate principal amount of senior unsecured notes outstanding (the “Senior Notes”). Additionally, we have funding available to us under our $1.5 billion commercial paper program and our $1.5 billion revolving credit facility, which serves as a backstop to our commercial paper program. Our revolving credit facility also includes an option to increase the amount up to an additional $600.0 million, for a potential total commitment of $2.1 billion. We may, in the future, decide to enter into additional debt arrangements.
Lam Research Corporation 2024 10-K 23
In addition, we have entered, and in the future may enter, into derivative instrument arrangements to hedge against the variability of cash flows due to changes in the benchmark interest rate of fixed rate debt. We could be exposed to losses in the event of nonperformance by the counterparties to our derivative instruments.
Our indebtedness could have adverse consequences, including:
•risk associated with any inability to satisfy our obligations;
•a portion of our cash flows that may have to be dedicated to interest and principal payments and may not be available for operations, working capital, capital expenditures, expansion, acquisitions, or general corporate or other purposes; and
•impairment of our ability to obtain additional financing in the future.
Our ability to meet our expenses and debt obligations will depend on our future performance, which will be affected by financial, business, economic, regulatory, and other factors. Furthermore, our operations may not generate sufficient cash flows to enable us to meet our expenses and service our debt. As a result, we may need to enter into new financing arrangements to obtain the necessary funds. If we determine it is necessary to seek additional funding for any reason, we may not be able to obtain such funding or, if funding is available, obtain it on acceptable terms. If we fail to make a payment on our debt, we could be in default on such debt, and this default could cause us to be in default on our other outstanding indebtedness.
Our Credit Agreements Contain Covenant Restrictions That May Limit Our Ability to Operate Our Business
We may be unable to respond to changes in business and economic conditions, engage in transactions that might otherwise be beneficial to us, or obtain additional financing because our debt agreements contain, and any of our other future similar agreements may contain, covenant restrictions that limit our ability to, among other things:
•incur additional debt, assume obligations in connection with letters of credit, or issue guarantees;
•create liens;
•enter into transactions with our affiliates;
•sell certain assets; and
•merge or consolidate with any person.
Our ability to comply with these covenants is dependent on our future performance, which will be subject to many factors, some of which are beyond our control, including prevailing economic conditions. In addition, our failure to comply with these covenants could result in a default under the Senior Notes, or our other debt, which could permit the holders to accelerate such debt. If any of our debt is accelerated, we may not have sufficient funds available to repay such debt, which could materially and negatively affect our financial condition and results of operation.
There Can Be No Assurance That We Will Continue to Declare Cash Dividends or Repurchase Our Shares at All or in Any Particular Amounts
Our Board of Directors has declared quarterly dividends since April 2014. Our intent to continue to pay quarterly dividends and to repurchase our shares is subject to capital availability and periodic determinations by our Board of Directors that cash dividends and share repurchases are in the best interest of our stockholders and are in compliance with all laws and agreements applicable to the declaration and payment of cash dividends or the repurchasing of shares by us. Future dividends and share repurchases may also be affected by, among other factors, our views on potential future capital requirements for investments in acquisitions and the funding of our research and development; legal risks; changes in federal, state, and international tax laws or corporate laws; contractual restrictions, such as financial or operating covenants in our debt arrangements; availability of onshore cash flow; and changes to our business model. Our dividend payments and share repurchases may change from time to time, and we cannot provide assurance that we will continue to declare dividends or repurchase shares at all or in any particular amounts. A reduction or suspension in our dividend payments or share repurchases could have a negative effect on the price of our Common Stock.
If One or More of Our Counterparty Financial Institutions Default on Their Obligations To Us or Fail, We May Incur Significant Losses
As part of our hedging activities, we enter into transactions involving derivative financial instruments, which may include forward contracts, option contracts, collars and swaps with various financial institutions. In addition, we have significant amounts of cash, cash equivalents and other investments on deposit or in accounts with banks or other financial institutions both in and out of the United States. As a result, we are exposed to the risk of default by or failure of counterparty financial institutions, which may be heightened during economic downturns and periods of uncertainty in the financial markets. If one of our counterparties were to become insolvent or file for bankruptcy, our ability to recover losses incurred as a result of default, or our assets deposited or held in accounts with such counterparty, may be limited by the counterparty's liquidity or the applicable laws governing the insolvency or bankruptcy proceedings. In the event of default or failure of one or more of our counterparties, we could incur significant losses, which could negatively impact our results of operations and financial condition.
Item 1B. Unresolved Staff Comments
None.
Lam Research Corporation 2024 10-K 24
Item 1C. Cybersecurity
We recognize the significant role of information security in safeguarding our valuable intellectual property along with the confidentiality, integrity and availability of the data of our customers, employees, and suppliers. We have implemented certain policies, procedures, and systems that are designed to identify and address material risks related to cybersecurity and cybersecurity incidents.
We have a comprehensive enterprise risk management (“ERM”) program, which is implemented by management and overseen by our Board of Directors (“Board”).
Our identification, assessment, and management of material risks from cybersecurity threats is integrated into the Company’s overall ERM system and processes. Our ERM program is designed to leverage existing management processes to (i) identify critical enterprise risks, including both information security and cybersecurity risks, (ii) design and implement appropriate risk mitigation strategies, and (iii) assess the status of risks and mitigation plans.
A key component within our ERM framework is a robust information security risk management program, which includes:
•risk assessments designed to help identify risks to our critical systems, information, services, and our broader global information systems environment;
•a security team principally responsible for managing (i) our cybersecurity risk assessment processes, (ii) our security controls, and (iii) our response to cybersecurity incidents;
•the use of external service providers, where appropriate, to aid in assessing specific risks, providing benchmarking data, providing information regarding trends or recent regulatory changes applicable to our risk profile, or to test or otherwise assist with aspects of our security processes;
•the periodic engagement of an independent third-party expert to evaluate our security capabilities;
•mandatory annual cybersecurity awareness training of our employees, including incident response personnel and senior management, as well as conducting periodic tests with our user population to reinforce good information security practices;
•a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents, including those impacting the Company’s manufacturing sites;
•processes to identify vulnerabilities, breach attempts and possible criminal activity by external parties; and
•processes to assess the practices of our suppliers and third-party service providers relative to protecting the security of our information.
The Company holds ISO 27001-2022 certification for information security at our corporate headquarters. Our Chief Information Security Officer (“CISO”), who has over 30 years of experience in information security and technology leadership, has primary responsibility for (i) leading our global information security program, (ii) managing the cybersecurity risks identified as part of the ERM program, and (iii) developing, implementing, and enforcing security policies and maintaining information security systems.
Our global information security program, led by our CISO, includes dedicated teams specialized in (i) identity access management, (ii) data protection, (iii) incident response, (iv) vulnerability governance, (v) security operations and engineering (vi) governance, risk, and compliance, and (vii) insider risk and intelligence. The members of the information security team are responsible for managing, maintaining, and monitoring the systems and processes that prevent, detect, mitigate and remediate cybersecurity incidents, and for informing our CISO of status of such systems and processes, as well as any significant incidents.
Our Board is responsible for overseeing our strategy and approach to addressing information security risks, including managing and assessing risks from cybersecurity threats, both directly and through the audit committee. The audit committee is responsible for reviewing and monitoring the Company’s cybersecurity and information security policies and its internal controls regarding cybersecurity and information security. In addition, the audit committee is responsible for regularly reporting to the Board on the substance of such reviews and, as necessary, recommending to the Board such actions as it deems appropriate. Our CISO reports on information security risks at least quarterly to the audit committee and at least annually to the Board.
We experience cybersecurity and other threats and incidents in the course of our operations. To date, we have not determined that such threats and incidents have materially and adversely affected the Company, including our business strategy, results of operations or financial condition. Furthermore, to date, we have not determined that such threats and incidents are reasonably likely to materially and adversely affect the Company, including our business strategy, results of operations or financial condition.
For additional information on certain risks associated with cybersecurity, please refer to “Our Business Relies on Technology, Data, Intellectual Property and Other Sensitive information That is Susceptible to Cybersecurity and Other Threats or Incidents” in Item 1A: Risk Factors.
Lam Research Corporation 2024 10-K 25
Item 2. Properties
Our executive offices and principal operating and R&D facilities are located in Fremont and Livermore, California; Tualatin, Oregon; Yongin, Gyeonggi Province, Korea; Bengaluru, India; Salzburg, Austria; and Villach, Austria. In addition, we lease or own properties for our service, technical support, and sales personnel throughout the United States, China, Europe, India, Japan, Korea, Southeast Asia, and Taiwan and lease or own manufacturing and warehouse facilities located in California, Ohio, Oregon, Austria, Korea, Malaysia, and Taiwan. The Company owns the majority of the Fremont, Livermore, and Tualatin facilities, as well as the manufacturing facilities in Ohio and Malaysia. Our Villach facility is leased; the lease includes an option to renew the lease or purchase the facilities. Our facilities lease obligations are subject to periodic increases. We believe that our existing facilities are well-maintained and in good operating condition.
Item 3. Legal Proceedings
Please refer to the subsection entities “Legal Proceedings” within Note 17: Commitments and Contingencies to our Consolidated Financial Statements included in Part II, Item 8 of this 2024 Form 10-K.
Item 4. Mine Safety Disclosures
Not applicable.
Lam Research Corporation 2024 10-K 26
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Stock Information
Our Common Stock is traded on the Nasdaq Global Select MarketSM under the symbol “LRCX.” As of August 22, 2024, we had 416 stockholders of record.
On May 21, 2024, we announced a 10-for-one stock split, which is expected to be effective after market close on October 2, 2024, for stockholders of record at that time. Share and per share information throughout this Annual Report on Form 10-K has not been adjusted for the effects of the stock split.
Dividends
Our Board of Directors has declared quarterly dividends since April 2014. Our intent to continue to pay quarterly dividends is subject to capital availability and periodic determinations by our Board of Directors that cash dividends are in the best interest of our stockholders and are in compliance with all laws and agreements applicable to the declaration and payment of cash dividends by us. During fiscal year 2024, our quarterly dividend declared was $2.00 per share.
Repurchases of Company Shares
In May 2024, the Board of Directors authorized management to repurchase up to an additional $10.0 billion of Common Stock; this authorization supplements the remaining balance from any prior authorization. These repurchases can be conducted on the open market or as private purchases and may include the use of derivative contracts with large financial institutions, in all cases subject to compliance with applicable law. This repurchase program has no termination date and may be suspended or discontinued at any time.
Accelerated Share Repurchase Agreements
On February 1, 2024, we entered into accelerated share repurchase agreements (the "February 2024 ASRs") with two financial institutions to repurchase a total of $700 million of Common Stock. We took an initial delivery of approximately 631 thousand shares, which represented 75% of the prepayment amount divided by our closing stock price on February 1, 2024. The total number of shares received under the February 2024 ASRs was based upon the average daily volume weighted average price of our Common Stock during the repurchase period, less an agreed upon discount. Final settlement of the February 2024 ASRs occurred during April 2024, resulting in the receipt of approximately 140 thousand additional shares, which yielded a weighted-average share price of $917.38 (net of applicable excise taxes) for the transaction period.
Share repurchases, including those under the repurchase program, were as follows:
| Period | Total Number of Shares Repurchased (1) | Average Price Paid per Share (2, 3) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Amount Available Under Repurchase Program | |||||||||||||||||||
| (in thousands, except per share data) | |||||||||||||||||||||||
| Available balance as of June 25, 2023 | $ | 3,537,217 | |||||||||||||||||||||
| Quarter ended September 24, 2023 | 1,266 | $ | 659.88 | 1,257 | 2,707,343 | ||||||||||||||||||
| Quarter ended December 24, 2023 | 976 | $ | 660.25 | 970 | 2,067,076 | ||||||||||||||||||
| Quarter ended March 31, 2024 | 951 | $ | 853.12 | 828 | (4) | 1,206,992 | |||||||||||||||||
| April 1, 2024 - April 28, 2024 | 142 | $ | 882.88 | 140 | (4) | 1,206,729 | |||||||||||||||||
| Board authorization, $10.0 billion, May 2024 | — | $ | — | — | 11,206,729 | ||||||||||||||||||
| April 29, 2024 - May 26, 2024 | 24 | $ | 974.07 | 21 | 11,186,612 | ||||||||||||||||||
| May 27, 2024 - June 30, 2024 | 365 | $ | 994.90 | 364 | 10,824,660 | ||||||||||||||||||
Total | 3,724 | $ | 993.29 | (5) | 3,580 | $ | 10,824,660 | ||||||||||||||||
(1)During the fiscal year ended June 30, 2024, we acquired 144 thousand shares at a total cost of $135.9 million which we withheld through net share settlements to cover minimum tax withholding obligations upon the vesting of restricted stock unit awards granted under our equity compensation plans. The shares retained by us through these net share settlements are not a part of the Board-authorized repurchase program but instead are authorized under our equity compensation plan.
(2)Average price paid per share excludes the effect of accelerated share repurchase activities. See additional disclosure above regarding our accelerated share repurchase activity during the fiscal year.
Lam Research Corporation 2024 10-K 27
(3)Our net share repurchases are subject to a 1% excise tax under the Inflation Reduction Act. Excise tax incurred reduces the amount available under repurchase programs, as applicable, and is included in the cost of shares repurchased in the Consolidated Statement of Stockholders’ Equity and the calculation of the average price paid per share.
(4)Includes shares received at initial or final settlement of accelerated share repurchase agreements; see additional disclosures above regarding our accelerated share repurchase activity during the fiscal year.
(5)Average price paid per share presented is for the quarter ended June 30, 2024.
Cumulative Five-Year Return
The graph below compares Lam Research Corporation’s cumulative five-year total shareholder return on Common Stock with the cumulative total returns of the Philadelphia Semiconductor Sector Total Return Index, the Nasdaq Composite Total Return index, and the Standard & Poor’s (“S&P”) 500 (TR) index. The graph tracks the performance of a $100 investment in our Common Stock and in each of the indices (with the reinvestment of all dividends) for the five years ended June 30, 2024.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN* | |||||||||||
Among Lam Research Corporation, the Philadelphia Semiconductor Sector Total Return Index, the Nasdaq Composite Total Return Index, and the S&P 500 (TR) Index. | |||||||||||
*$100 invested on June 30, 2019 in stock or index, including reinvestment of dividends.
Copyright © 2024 Standard & Poor’s, a division of S&P Global. All rights reserved.
| June 30, 2019 | June 28, 2020 | June 27, 2021 | June 26, 2022 | June 25, 2023 | June 30, 2024 | ||||||||||||||||||||||||||||||
| Lam Research Corporation | $ | 100.00 | $ | 163.97 | $ | 345.41 | $ | 249.39 | $ | 341.98 | $ | 604.09 | |||||||||||||||||||||||
| Philadelphia Semiconductor Sector Total Return Index | $ | 100.00 | $ | 134.13 | $ | 229.27 | $ | 194.74 | $ | 254.85 | $ | 402.02 | |||||||||||||||||||||||
| Nasdaq Composite Total Return Index | $ | 100.00 | $ | 123.12 | $ | 182.53 | $ | 148.57 | $ | 174.25 | $ | 230.80 | |||||||||||||||||||||||
| S&P 500 (TR) Index | $ | 100.00 | $ | 104.32 | $ | 150.75 | $ | 139.77 | $ | 158.06 | $ | 201.53 | |||||||||||||||||||||||
Lam Research Corporation 2024 10-K 28
Item 6. [Reserved]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of our financial condition and results of operations contains forward-looking statements, which are subject to risks, uncertainties, and changes in condition, significance, value, and effect. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of certain factors, including but not limited to those discussed in “Risk Factors” and elsewhere in this 2024 Form 10-K and other documents we file from time to time with the Securities and Exchange Commission. (See “Cautionary Statement Regarding Forward-Looking Statements” in Part I of this 2024 Form 10-K.)
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) provides a description of our results of operations and should be read in conjunction with our Consolidated Financial Statements and accompanying Notes to Consolidated Financial Statements included in Part II, Item 8 of this 2024 Form 10-K. MD&A consists of the following sections:
Executive Summary provides a summary of the key highlights of our results of operations and our management’s assessment of material trends and uncertainties relevant to our business.
Results of Operations provides an analysis of operating results.
Critical Accounting Policies and Estimates discusses accounting policies that reflect the more significant judgments and estimates used in the preparation of our Consolidated Financial Statements.
Liquidity and Capital Resources provides an analysis of cash flows, contractual obligations, and financial position.
Executive Summary
Lam Research Corporation is a global supplier of innovative wafer fabrication equipment and services to the semiconductor industry. We have built a strong global presence with core competencies in areas like nanoscale applications enablement, chemistry, plasma and fluidics, advanced systems engineering and a broad range of operational disciplines. Our products and services are designed to help our customers build smaller, and better performing devices that are used in a variety of electronic products, including mobile phones, personal computers, servers, wearables, automotive vehicles, and data storage devices.
Our customer base includes leading semiconductor memory, foundry, and integrated device manufacturers that make products such as NVM, DRAM, and logic devices. Their continued success is part of our commitment to driving semiconductor breakthroughs that define the next generation. Our core technical competency is integrating hardware, process, materials, software, and process control, enabling results on the wafer.
Semiconductor manufacturing, our customers’ business, involves the complete fabrication of multiple dies or integrated circuits on a wafer. This involves the repetition of a set of core processes and can require hundreds of individual steps. Fabricating these devices requires highly sophisticated process technologies to integrate an increasing array of new materials with precise control at the atomic scale. Along with meeting technical requirements, wafer processing equipment must deliver high productivity and be cost-effective.
Demand from cloud computing, artificial intelligence, 5G, the Internet of Things, and other markets is driving the need for increasingly powerful and cost-efficient semiconductors. At the same time, there are growing technical challenges with traditional two-dimensional scaling. These trends are driving significant inflections in semiconductor manufacturing, such as the increasing importance of vertical scaling strategies like three-dimensional architecture as well as multiple patterning to enable shrinks.
We believe we are in a strong position with our leadership and expertise in deposition, etch, and clean markets to facilitate some of the most significant innovations in semiconductor device manufacturing. Our Customer Support Business Group provides products and services to maximize installed equipment performance, predictability, and operational efficiency. Several factors create opportunities for sustainable differentiation for us: (i) our focus on research and development, with several on-going programs relating to sustaining engineering, product and process development, and concept and feasibility; (ii) our ability to effectively leverage cycles of learning from our broad installed base; (iii) our collaborative focus with semi-ecosystem partners, including our close-to-customer focus; (iv) our ability to identify and invest in the breadth of our product portfolio to meet technology inflections; and (v) our focus on delivering our multi-product solutions with a goal to enhance the value of Lam’s solutions to our customers.
During fiscal year 2024, wafer fabrication equipment spending was roughly flat on a year-on-year basis, with strength in the DRAM market, offset by declines in the non-volatile memory, Foundry, and Logic markets. In the quarter ended March 26, 2023, we initiated a restructuring plan designed to better align the Company’s cost structure with industry investment levels. We invested in a number of business process improvements and initiatives and incurred expenditures from these activities of approximately $315 million, inclusive of the restructuring activity during the second half of fiscal year 2023 and the 2024 fiscal year. In the short term, the uncertain semiconductor demand environment, as well as other risks and uncertainties, may continue to negatively impact our revenue and operating margin. Over the longer term, we believe that secular demand for semiconductors, combined with technology inflections in our industry, including 3D device scaling, multiple patterning, process flow, and advanced packaging chip integration, will
Lam Research Corporation 2024 10-K 29
drive sustainable growth and lead to an increase in the served available market for our products and services in the deposition, etch, and clean businesses.
The following table summarizes certain key financial information for the periods indicated below:
| Year Ended | Change | ||||||||||||||||||||||||||||||||||||||||
| June 30, 2024 | June 25, 2023 | June 26, 2022 | FY24 vs. FY23 | FY23 vs. FY22 | |||||||||||||||||||||||||||||||||||||
| (in thousands, except per share data, percentages and basis points) | |||||||||||||||||||||||||||||||||||||||||
| Revenue | $ | 14,905,386 | $ | 17,428,516 | $ | 17,227,039 | $ | (2,523,130) | (14.5) | % | $ | 201,477 | 1.2 | % | |||||||||||||||||||||||||||
| Gross margin | $ | 7,052,791 | $ | 7,776,925 | $ | 7,871,807 | $ | (724,134) | (9.3) | % | $ | (94,882) | (1.2) | % | |||||||||||||||||||||||||||
| Gross margin as a percent of total revenue | 47.3 | % | 44.6 | % | 45.7 | % | + 270 bps | - 110 bps | |||||||||||||||||||||||||||||||||
| Total operating expenses | $ | 2,788,878 | $ | 2,602,065 | $ | 2,489,985 | $ | 186,813 | 7.2 | % | $ | 112,080 | 4.5 | % | |||||||||||||||||||||||||||
| Net income | $ | 3,827,772 | $ | 4,510,931 | $ | 4,605,286 | $ | (683,159) | (15.1) | % | $ | (94,355) | (2.0) | % | |||||||||||||||||||||||||||
| Net income per diluted share | $ | 29.00 | $ | 33.21 | $ | 32.75 | $ | (4.21) | (12.7) | % | $ | 0.46 | 1.4 | % | |||||||||||||||||||||||||||
Fiscal year 2024 revenue decreased 14.5% compared to fiscal year 2023. Systems and customer-support related revenues declined in fiscal year 2024 primarily from weakness in the non-volatile memory market, partially offset by strength in DRAM as well as increased revenue generation from our China regional customers. Gross margin as a percentage of revenue increased in fiscal year 2024 compared to fiscal year 2023 largely due to a more favorable customer mix, lower spending on material costs, and higher field resource utilization, partially offset by lower factory efficiencies. The increase in operating expenses in fiscal year 2024 compared to fiscal year 2023 was driven by higher employee-related costs primarily as a result of increased research and development-related headcount, increased spending on transformational activities, higher deferred compensation plan-related costs, and increased spending on supplies.
Fiscal year 2023 revenue was slightly higher than fiscal year 2022. Customer support-related revenue increased in fiscal year 2023 due to continued strength in specialty node investments, which was offset by a decline in our systems revenue as a result of semiconductor demand weakness, largely in the memory market. Gross margin as a percentage of revenue decreased due to inflationary cost pressures that led to higher spending on material costs, as well as costs associated with restructuring related activities, partially offset by favorable customer and product mix. The increase in operating expenses in fiscal year 2023 compared to fiscal year 2022 was driven by higher deferred compensation plan-related costs, restructuring-related charges, employee-related costs as a result of increased headcount, depreciation and amortization, and supplies, partially offset by a decrease in amortization of intangible assets as the intangible assets associated with the acquisition of Novellus have fully amortized.
We aim to balance the requirements of our customers with the availability of resources, as well as performance to our operational and financial objectives. As a result, from time to time, we exercise discretion and judgment as to the timing and prioritization of manufacturing and deliveries of products, which has impacted, including in the current fiscal year, and may in the future impact, the timing of revenue recognition with respect to such products.
Our cash and cash equivalents and restricted cash balances totaled approximately $5.9 billion as of June 30, 2024, compared to $5.6 billion as of June 25, 2023. Cash flows provided from operating activities was $4.7 billion for fiscal year 2024 compared to $5.2 billion for fiscal year 2023. Cash flows provided from operating activities in fiscal year 2024 was primarily used for $2.8 billion in treasury stock purchases, including net share settlement on employee stock-based compensation; $1.0 billion in dividends paid to our stockholders; and $397 million of capital expenditures.
Results of Operations
Revenue
| Year Ended | |||||||||||||||||
| June 30, 2024 | June 25, 2023 | June 26, 2022 | |||||||||||||||
| Revenue (in millions) | $ | 14,905 | $ | 17,429 | $ | 17,227 | |||||||||||
| China | 42 | % | 26 | % | 31 | % | |||||||||||
| Korea | 19 | % | 20 | % | 23 | % | |||||||||||
| Taiwan | 11 | % | 20 | % | 17 | % | |||||||||||
| Japan | 10 | % | 10 | % | 9 | % | |||||||||||
| United States | 7 | % | 9 | % | 8 | % | |||||||||||
| Southeast Asia | 6 | % | 8 | % | 8 | % | |||||||||||
| Europe | 5 | % | 7 | % | 4 | % | |||||||||||
Lam Research Corporation 2024 10-K 30
Revenue decreased in fiscal year 2024 compared to fiscal year 2023 mainly due to decreases in non-volatile memory, partially offset by increases in DRAM spending by our customers. The China region had the largest geographic concentration with 42% of our revenues during this period. Revenue increased in fiscal year 2023 compared to fiscal year 2022 primarily due higher revenue from CSBG related to strength in mature node equipment, while the overall Asia region continued to account for a majority of our revenues.
The deferred revenue balance decreased to $1.6 billion as of June 30, 2024 compared to $1.8 billion as of June 25, 2023. primarily due to a decrease in advance deposits from newer customers.
The following table presents our revenue disaggregated between system and customer support-related revenue:
| Year Ended | |||||||||||||||||
| June 30, 2024 | June 25, 2023 | June 26, 2022 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Systems Revenue | $ | 8,921,643 | $ | 10,695,897 | $ | 11,322,271 | |||||||||||
| Customer support-related revenue and other | 5,983,743 | 6,732,619 | 5,904,768 | ||||||||||||||
| $ | 14,905,386 | $ | 17,428,516 | $ | 17,227,039 | ||||||||||||
Please refer to Note 4: Revenue of our Consolidated Financial Statements in Part II, Item 8 of this 2024 Form 10-K for additional information regarding the composition of the two categories into which revenue has been disaggregated.
The percentage of leading- and non-leading-edge equipment and upgrade revenue from each of the markets we serve was as follows:
| Year Ended | |||||||||||||||||
| June 30, 2024 | June 25, 2023 | June 26, 2022 | |||||||||||||||
| Memory | 42 | % | 42 | % | 60 | % | |||||||||||
| Foundry | 40 | % | 38 | % | 26 | % | |||||||||||
| Logic/integrated device manufacturing | 18 | % | 20 | % | 14 | % | |||||||||||
Gross Margin
| Year Ended | Change | ||||||||||||||||||||||||||||||||||||||||
| June 30, 2024 | June 25, 2023 | June 26, 2022 | FY24 vs. FY23 | FY23 vs. FY22 | |||||||||||||||||||||||||||||||||||||
| (in thousands, except percentages and basis points) | |||||||||||||||||||||||||||||||||||||||||
| Gross margin | $ | 7,052,791 | $ | 7,776,925 | $ | 7,871,807 | $ | (724,134) | (9.3) | % | $ | (94,882) | (1.2) | % | |||||||||||||||||||||||||||
| Percent of revenue | 47.3 | % | 44.6 | % | 45.7 | % | + 270 bps | - 110 bps | |||||||||||||||||||||||||||||||||
The increase in gross margin as a percentage of revenue for fiscal year 2024 compared to fiscal year 2023 was due to a more favorable customer mix, reduced spending on material costs, and higher field resource utilization, partially offset by lower factory efficiencies.
The decrease in gross margin as a percentage of revenue for fiscal year 2023 compared to fiscal year 2022 was due to inflationary cost pressures that led to higher spending on material costs, partially offset by favorable customer and product mix.
Research and Development
| Year Ended | Change | ||||||||||||||||||||||||||||||||||||||||
| June 30, 2024 | June 25, 2023 | June 26, 2022 | FY24 vs. FY23 | FY23 vs. FY22 | |||||||||||||||||||||||||||||||||||||
| (in thousands, except percentages and basis points) | |||||||||||||||||||||||||||||||||||||||||
| Research & development | $ | 1,902,444 | $ | 1,727,162 | $ | 1,604,248 | $ | 175,282 | 10.1 | % | $ | 122,914 | 7.7 | % | |||||||||||||||||||||||||||
| Percent of revenue | 12.8 | % | 9.9 | % | 9.3 | % | + 290 bps | + 60 bps | |||||||||||||||||||||||||||||||||
We continued to make significant R&D investments focused on leading-edge deposition, etch, clean, and other semiconductor manufacturing processes. The increase in R&D expense during fiscal year 2024 compared to fiscal year 2023 was primarily driven by an increase of $58 million in employee-related costs primarily as a result of increased headcount, $33 million in spending for supplies, $18 million in deferred compensation plan-related costs, and $13 million in spending for transformational activities.
Lam Research Corporation 2024 10-K 31
The increase in R&D expense during fiscal year 2023 compared to fiscal year 2022 was mainly driven by an increase of $43 million in employee-related costs as a result of increased headcount, $26 million in deferred compensation plan-related costs, $22 million in spending for supplies, and $14 million of depreciation and amortization.
Selling, General, and Administrative
| Year Ended | Change | ||||||||||||||||||||||||||||||||||||||||
| June 30, 2024 | June 25, 2023 | June 26, 2022 | FY24 vs. FY23 | FY23 vs. FY22 | |||||||||||||||||||||||||||||||||||||
| (in thousands, except percentages and basis points) | |||||||||||||||||||||||||||||||||||||||||
| Selling, general, and administrative ("SG&A") | $ | 868,247 | $ | 832,753 | $ | 885,737 | $ | 35,494 | 4.3 | % | $ | (52,984) | (6.0) | % | |||||||||||||||||||||||||||
| Percent of revenue | 5.8 | % | 4.8 | % | 5.1 | % | + 100 bps | - 30 bps | |||||||||||||||||||||||||||||||||
The increase in SG&A expense during fiscal year 2024 compared to fiscal year 2023 was primarily driven by an increase of $30 million in transformational activity spend.
The decrease in SG&A expense during fiscal year 2023 compared to fiscal year 2022 was primarily driven by a decrease of $44 million in amortization of intangible assets, as the intangible assets associated with the acquisition of Novellus have fully amortized, as well as from $12 million in lower employee-related costs, partially offset by $17 million in higher deferred compensation plan-related costs.
Restructuring Charges, Net
| Year Ended | Change | ||||||||||||||||||||||||||||||||||||||||
| June 30, 2024 | June 25, 2023 | June 26, 2022 | FY24 vs. FY23 | FY23 vs. FY22 | |||||||||||||||||||||||||||||||||||||
| (in thousands, except percentages and basis points) | |||||||||||||||||||||||||||||||||||||||||
| Restructuring charges, net | $ | 61,562 | $ | 120,316 | $ | — | $ | (58,754) | (48.8) | % | $ | 120,316 | 100.0 | % | |||||||||||||||||||||||||||
| Percent of revenue | 0.4 | % | 0.7 | % | — | % | - 30 bps | + 70 bps | |||||||||||||||||||||||||||||||||
In fiscal year 2023, we initiated a restructuring plan, that continued into fiscal year 2024, designed to better align our cost structure with our outlook for the economic environment and business opportunities. Under the plan, we terminated approximately 1,760 employees, incurring expenses related to employee severance and separation costs. Employee severance and separation costs are primarily related to severance, non-cash severance, including equity award compensation expense, pension and other termination benefits. Additionally, we made a strategic decision to relocate certain manufacturing activities to pre-existing facilities. The restructuring plan is substantially complete as of June 30, 2024.
Restructuring charges decreased during fiscal year 2024 compared to fiscal year 2023 primarily due to lower employee severance and separation costs. Please refer to Note 21: Restructuring charges, net of our Consolidated Financial Statements in Part II, Item 8 of this 2024 Form 10-K for additional information.
Other Income (Expense), Net
Other income (expense), net, consisted of the following:
| Year Ended | Change | ||||||||||||||||||||||||||||||||||||||||
| June 30, 2024 | June 25, 2023 | June 26, 2022 | FY24 vs. FY23 | FY23 vs. FY22 | |||||||||||||||||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||||||||||||||||||||
| Interest income | $ | 251,938 | $ | 138,984 | $ | 15,209 | $ | 112,954 | 81.3 | % | $ | 123,775 | 813.8 | % | |||||||||||||||||||||||||||
| Interest expense | (185,236) | (186,462) | (184,759) | $ | 1,226 | (0.7) | % | $ | (1,703) | 0.9 | % | ||||||||||||||||||||||||||||||
| Gains (losses) on deferred compensation plan related assets, net | 58,767 | 20,186 | (38,053) | $ | 38,581 | 191.1 | % | $ | 58,239 | (153.0) | % | ||||||||||||||||||||||||||||||
| Foreign exchange losses, net | (4,837) | (7,078) | (723) | $ | 2,241 | (31.7) | % | $ | (6,355) | 879.0 | % | ||||||||||||||||||||||||||||||
| Other, net | (24,323) | (31,280) | 19,618 | $ | 6,957 | (22.2) | % | $ | (50,898) | (259.4) | % | ||||||||||||||||||||||||||||||
| $ | 96,309 | $ | (65,650) | $ | (188,708) | $ | 161,959 | (246.7) | % | $ | 123,058 | (65.2) | % | ||||||||||||||||||||||||||||
Interest income increased in fiscal year 2024 compared to fiscal years 2023 and 2022 primarily because of higher yields and higher cash balances.
Lam Research Corporation 2024 10-K 32
Interest expense in fiscal year 2024 was flat compared to fiscal years 2023 and 2022.
The gains or losses on deferred compensation plan related assets, net were driven by fluctuations in the fair market value of the underlying funds for all periods presented.
Foreign exchange fluctuations were primarily due to currency movements against portions of our unhedged balance sheet exposures for all periods presented.
The variation in other, net for the fiscal year 2024 compared to fiscal years 2023 and 2022 was primarily driven by fluctuations in the fair market value of equity investments.
Income Tax Expense
Our provision for income taxes and effective tax rate for the periods indicated were as follows:
| Year Ended | Change | ||||||||||||||||||||||||||||||||||||||||
| June 30, 2024 | June 25, 2023 | June 26, 2022 | FY24 vs. FY23 | FY23 vs. FY22 | |||||||||||||||||||||||||||||||||||||
| (in thousands, except percentages and basis points) | |||||||||||||||||||||||||||||||||||||||||
| Income tax expense | $ | 532,450 | $ | 598,279 | $ | 587,828 | $ | (65,829) | (11.0) | % | $ | 10,451 | 1.8 | % | |||||||||||||||||||||||||||
| Effective tax rate | 12.2 | % | 11.7 | % | 11.3 | % | + 50 bps | + 40 bps | |||||||||||||||||||||||||||||||||
The increase in the effective tax rate in fiscal year 2024 as compared to fiscal year 2023 and the increase in the effective tax rate in fiscal year 2023 compared to fiscal year 2022 was primarily due to the change in level and proportion of income in higher and lower tax jurisdictions.
International revenues account for a significant portion of our total revenues, such that a material portion of our pre-tax income is earned and taxed outside the United States. International pre-tax income is taxable in the United States at a lower effective tax rate than the federal statutory tax rate. Please refer to Note 7 of our Consolidated Financial Statements in Part II, Item 8 of this 2024 Form 10-K.
Beginning in our fiscal year 2023, a provision enacted as part of the 2017 Tax Cuts & Jobs Act requires us to capitalize research and experimental expenditures for tax purposes. Due to this provision, we expect our cash tax payments to increase significantly in the near term and stabilize in future years as the capitalized expenditures continue to amortize.
On August 16, 2022, the IRA was signed into law. In general, the provisions of the IRA are effective beginning with our fiscal year 2024, with certain exceptions. The IRA includes a new 15% corporate alternative minimum tax. We have evaluated the impacts of the IRA, including guidance issued by the Treasury Department, and do not expect it to have a material impact on our effective tax rate.
Deferred Income Taxes
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as the tax effect of carryforwards. Our gross deferred tax assets were $1,516 million and $1,303 million at the end of fiscal years 2024 and 2023, respectively. These gross deferred tax assets were offset by gross deferred tax liabilities of $218 million and $238 million and a valuation allowance primarily representing our entire California deferred tax asset balance due to the single sales factor apportionment resulting in lower taxable income in California of $389 million and $352 million at the end of fiscal years 2024 and 2023, respectively. The change in gross deferred tax assets, gross deferred tax liabilities, and valuation allowance between fiscal year 2024 and 2023 is primarily due to increases in gross deferred tax assets for outside basis differences of foreign subsidiaries, tax credits, and capitalized research and experimental expenditures.
We evaluate if the deferred tax assets are realizable on a quarterly basis and will continue to assess the need for changes in valuation allowances, if any.
Uncertain Tax Positions
We re-evaluate uncertain tax positions on a quarterly basis. This evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit, and new audit activity. Any change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision.
Lam Research Corporation 2024 10-K 33
Critical Accounting Policies and Estimates
A critical accounting policy is defined as one that has both a material impact on our financial condition and results of operations and requires us to make difficult, complex and/or subjective judgments, often as a result of the need to make estimates about matters that are inherently uncertain. The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make certain judgments, estimates and assumptions that could affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. We base our estimates and assumptions on historical experience and on various other assumptions we believe to be applicable and evaluate them on an ongoing basis to ensure they remain reasonable under current conditions. Actual results could differ significantly from those estimates, which could have a material impact on our business, results of operations, and financial condition. Our critical accounting estimates include:
•the recognition and valuation of revenue;
•the valuation of inventory, which impacts gross margin; and
•the recognition and measurement of current and deferred income taxes, including the measurement of uncertain tax positions, which impact our provision for income tax expenses.
We believe that the following critical accounting policies reflect the more significant judgments and estimates used in the preparation of our consolidated financial statements regarding the critical accounting estimates indicated above. See Note 2: Summary of Significant Accounting Policies of our Consolidated Financial Statements in Part II, Item 8 of this 2024 Form 10-K for additional information regarding our accounting policies.
Revenue Recognition: We generally consider documentation of terms with an approved purchase order as a customer contract, provided that collection is considered probable, which is assessed based on the creditworthiness of the customer as determined by credit checks, payment histories, and/or other circumstances. The transaction price for our contracts with customers is allocated among the identified performance obligations and consists of both fixed and variable consideration provided it is probable that a significant reversal of revenue will not occur when the uncertainty related to variable consideration is resolved. Fixed consideration includes amounts to be contractually billed to the customer while variable consideration includes estimates for discounts and credits for future usage which are based on contractual terms outlined in volume purchase agreements and other factors known at the time. We generally invoice customers at shipment and for professional services either as provided or upon meeting certain milestones. Revenue for systems and spares are recognized at a point in time, which is generally upon shipment or delivery. Revenue from services is recognized over time as services are completed or ratably over the contractual period of generally one year or less. Revenue is recognized in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services.
Inventory Valuation: Inventories are stated at the lower of cost or net realizable value using standard costs that approximate actual cost on a first-in, first-out basis. Inventory in excess of management’s estimated usage requirement and obsolete inventory is written down to its estimated net realizable value if less than cost. Estimates of net realizable value include but are not limited to customer demand, management’s forecasts related to our future manufacturing schedules, technological and/or market obsolescence, general semiconductor market conditions, and possible alternative uses.
Income Taxes: Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as the tax effect of carryforwards. We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. The assessment of valuation allowances against our deferred tax assets includes estimation and judgement with respect to future operating results and market conditions.
We recognize the benefit from a tax position only if it is more likely than not that the position will be sustained upon audit based solely on the technical merits of the tax position.
Recent Accounting Pronouncements
For a description of recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on our consolidated financial statements, see Note 3: Recent Accounting Pronouncements of our Consolidated Financial Statements, included in Part II, Item 8 of this 2024 Form 10-K.
Liquidity and Capital Resources
Total gross cash, cash equivalents, and restricted cash balances were $5.9 billion at the end of fiscal year 2024 compared to $5.6 billion at the end of fiscal year 2023. This increase was primarily due to cash provided by operating activities, partially offset by Common Stock repurchases in connection with our stock repurchase program, dividends paid, and capital expenditures.
Lam Research Corporation 2024 10-K 34
Cash Flow from Operating Activities
Net cash provided by operating activities of $4.7 billion during fiscal year 2024 consisted of (in thousands):
| Net income | $ | 3,827,772 | |||
| Non-cash charges: | |||||
| Depreciation and amortization | 359,699 | ||||
| Deferred income taxes | (198,981) | ||||
| Equity-based compensation expense | 293,058 | ||||
| Changes in operating asset and liability accounts | 360,478 | ||||
| Other | 10,243 | ||||
| $ | 4,652,269 | ||||
Significant changes in operating asset and liability accounts, net of foreign exchange impact, included the following sources of cash: decreases in inventory of $529 million, and accounts receivable of $303 million, and increases in accounts payable of $126 million. These sources of cash are offset by the following uses of cash: decreases in accrued expenses and other liabilities of $305 million, a decrease in deferred gross profit of $277 million, and an increase in prepaid expenses and other current assets of $16 million.
Cash Flow from Investing Activities
Net cash used for investing activities during fiscal year 2024 was $371 million, primarily consisting of $397 million in capital expenditures, partially offset by proceeds from maturities and sales of available-for-sale securities of $38 million.
Cash Flow from Financing Activities
Net cash used for financing activities during fiscal year 2024 was $3,996 million, primarily consisting of $2,843 million in Common Stock repurchases, including net share settlement on employee stock-based compensation; $1,019 million of dividends paid; and $256 million of repayment of debt, largely associated with the purchase of certain properties under finance leases; partially offset by $136 million of stock issuance and treasury stock reissuances associated with our employee stock-based compensation plans.
Liquidity
Given that the semiconductor industry is highly competitive and has historically experienced rapid changes in demand, we believe that maintaining sufficient liquidity reserves is important to support sustaining levels of investment in R&D and capital infrastructure. Anticipated cash flows from operations based on our current business outlook, combined with our current levels of cash and cash equivalents as of June 30, 2024, are expected to be sufficient to support our anticipated levels of operations, investments, debt service requirements, capital expenditures, capital redistributions, and dividends through at least the next twelve months. However, factors outside of our control, including uncertainty in the global economy and the semiconductor industry, as well as disruptions in credit markets, have in the past, are currently, and could in the future, impact customer demand for our products, as well as our ability to manage normal commercial relationships with our customers, suppliers, and creditors.
In the longer term, liquidity will depend to a great extent on our future revenues and our ability to appropriately manage our costs based on demand for our products and services. While we have substantial cash balances, we may require additional funding and need or choose to raise the required funds through borrowings or public or private sales of debt or equity securities. We believe that, if necessary, we will be able to access the capital markets on terms and in amounts adequate to meet our objectives. However, domestic and global macroeconomic and political conditions could cause disruptions to the capital markets and otherwise make any financing more challenging, and there can be no assurance that we will be able to obtain such financing on commercially reasonable terms or at all.
Off-Balance Sheet Arrangements and Contractual Obligations
We have certain obligations to make future payments under various contracts, some of which are recorded on our balance sheet and some of which are not. Certain obligations that are recorded on our balance sheet in accordance with GAAP include our long-term debt, operating leases and finance leases; refer to Notes 14 and 15 of our Consolidated Financial Statements in Part II, Item 8 of this 2024 Form 10-K for further discussion. Our off-balance sheet arrangements and our transition tax liability are presented as purchase obligations, refer to Note 17 of our Consolidated Financial Statements in Part II, Item 8 of this 2024 Form 10-K for further discussion.
Lam Research Corporation 2024 10-K 35
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
Long-Term Debt
As of June 30, 2024, we had $5.0 billion in principal amount of fixed-rate long-term debt outstanding, with a fair value of $4.3 billion. The fair value of our Notes is subject to interest rate risk and market risk. Generally, the fair value of Notes will increase as interest rates fall and decrease as interest rates rise. The interest and market value changes affect the fair value of our Notes but do not impact our financial position, cash flows, or results of operations due to the fixed nature of the debt obligations. We do not carry the Notes at fair value but present the fair value of the principal amount of our Notes for disclosure purposes.
Foreign Currency Exchange (“FX”) Risk
We conduct business on a global basis in several major international currencies. As such, we are potentially exposed to adverse as well as beneficial movements in foreign currency exchange rates. The majority of our revenues and expenses are denominated in U.S. dollars. However, we are exposed to foreign currency exchange rate fluctuations on non-U.S. dollar transactions or cash flows.
We enter into foreign currency forward contracts to minimize the short-term impact of exchange rate fluctuations on certain foreign currency denominated monetary assets and liabilities, primarily cash, third-party accounts receivable, accounts payable, and intercompany receivables and payables. In addition, we hedge certain anticipated foreign currency cash flows.
To protect against adverse movements in value of anticipated non-U.S. dollar transactions or cash flows, we enter into foreign currency forward and option contracts that generally expire within 12 months and no later than 24 months. The option contracts include collars, an option strategy that is comprised of a combination of a purchased put option and a written call option with the same expiration dates and notional amounts but with different strike prices. These foreign currency hedge contracts are designated as cash flow hedges and are carried on our balance sheet at fair value, with the effective portion of the contracts’ gains or losses included in accumulated other comprehensive income (loss) and subsequently recognized in earnings in the same period the hedged revenue and/or expense is recognized. We also enter into foreign currency forward contracts to hedge the gains and losses generated by the remeasurement of certain non-U.S.-dollar denominated monetary assets and liabilities, primarily cash, third-party accounts receivable, accounts payable, and intercompany receivables and payables. The change in fair value of these balance sheet hedge contracts is recorded into earnings as a component of other income (expense), net, and offsets the change in fair value of the foreign currency denominated monetary assets and liabilities also recorded in other income (expense), net, assuming the hedge contract fully covers the hedged items. The unrealized gain of our outstanding forward and option contracts that are designated as cash flow hedges, as of June 30, 2024, and the change in fair value of these cash flow hedges assuming a hypothetical foreign currency exchange rate movement of plus or minus 10 percent and plus or minus 15 percent are not significant.
The unrealized loss of our outstanding foreign currency forward contracts that are designated as balance sheet hedges, as of June 30, 2024, and the change in fair value of these balance sheet hedges, assuming a hypothetical foreign currency exchange rate movement of plus or minus 10 percent and plus or minus 15 percent are not significant. These changes in fair values would be offset in other income (expense), net, by corresponding change in fair values of the foreign currency denominated monetary assets and liabilities, assuming the hedge contract fully covers the intercompany and trade receivable balances.
Lam Research Corporation 2024 10-K 36
Item 8. Financial Statements and Supplementary Data
There were no retrospective changes to the Consolidated Statements of Operation for any quarters in the two most recent fiscal years that would require disclosure under Item 302 of Regulation S-K.
Index to Consolidated Financial Statements
| Page | |||||
| Consolidated Statements of Operations — Years Ended June 30, 2024, June 25, 2023, and June 26, 2022 | |||||
| Consolidated Statements of Comprehensive Income — Years Ended June 30, 2024, June 25, 2023, and June 26, 2022 | |||||
| Consolidated Balance Sheets — June 30, 2024, and June 25, 2023 | |||||
| Consolidated Statements of Cash Flows — Years Ended June 30, 2024, June 25, 2023, and June 26, 2022 | |||||
| Consolidated Statements of Stockholders’ Equity — Years Ended June 30, 2024, June 25, 2023, and June 26, 2022 | |||||
| Notes to Consolidated Financial Statements | |||||
Reports of Independent Registered Public Accounting Firm (PCAOB ID: | |||||
Lam Research Corporation 2024 10-K 37
LAM RESEARCH CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
| Year Ended | |||||||||||||||||
| June 30, 2024 | June 25, 2023 | June 26, 2022 | |||||||||||||||
| Revenue | $ | $ | $ | ||||||||||||||
| Cost of goods sold | |||||||||||||||||
| Restructuring charges, net - cost of goods sold | |||||||||||||||||
| Total cost of goods sold | |||||||||||||||||
| Gross margin | |||||||||||||||||
| Research and development | |||||||||||||||||
| Selling, general, and administrative | |||||||||||||||||
| Restructuring charges, net - operating expenses | |||||||||||||||||
| Total operating expenses | |||||||||||||||||
| Operating income | |||||||||||||||||
| Other income (expense), net | ( | ( | |||||||||||||||
| Income before income taxes | |||||||||||||||||
| Income tax expense | ( | ( | ( | ||||||||||||||
| Net income | $ | $ | $ | ||||||||||||||
| Net income per share: | |||||||||||||||||
| Basic | $ | $ | $ | ||||||||||||||
| Diluted | $ | $ | $ | ||||||||||||||
| Number of shares used in per share calculations: | |||||||||||||||||
| Basic | |||||||||||||||||
| Diluted | |||||||||||||||||
See Notes to Consolidated Financial Statements
Lam Research Corporation 2024 10-K 38
LAM RESEARCH CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
| Year Ended | |||||||||||||||||
| June 30, 2024 | June 25, 2023 | June 26, 2022 | |||||||||||||||
| Net income | $ | $ | $ | ||||||||||||||
| Other comprehensive income (loss), net of tax: | |||||||||||||||||
| Foreign currency translation adjustment | ( | ( | |||||||||||||||
| Cash flow hedges: | |||||||||||||||||
| Net unrealized gains during the period | |||||||||||||||||
| Net gains reclassified into net income | ( | ( | ( | ||||||||||||||
| ( | |||||||||||||||||
| Available-for-sale investments: | |||||||||||||||||
| Net unrealized gains (losses) during the period | ( | ||||||||||||||||
| Net (gains) losses reclassified into net income | ( | ( | |||||||||||||||
| ( | |||||||||||||||||
| Defined benefit plans, net change in unrealized component | |||||||||||||||||
| Other comprehensive (loss) income, net of tax | ( | ( | |||||||||||||||
| Comprehensive income | $ | $ | $ | ||||||||||||||
See Notes to Consolidated Financial Statements
Lam Research Corporation 2024 10-K 39
LAM RESEARCH CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
| June 30, 2024 | June 25, 2023 | ||||||||||
| ASSETS: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
Accounts receivable, less allowance of $ | |||||||||||
| Inventories | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total current assets | |||||||||||
| Property and equipment, net | |||||||||||
| Goodwill | |||||||||||
| Intangible assets, net | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY: | |||||||||||
| Trade accounts payable | $ | $ | |||||||||
| Accrued expenses and other current liabilities | |||||||||||
| Deferred profit | |||||||||||
| Current portion of long-term debt and finance lease obligations | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt and finance lease obligations, less current portion | |||||||||||
| Income taxes payable | |||||||||||
| Other long-term liabilities | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies | |||||||||||
| Stockholders’ equity: | |||||||||||
Preferred stock, at par value of $ | |||||||||||
Common stock, at par value of $ | |||||||||||
| Additional paid-in capital | |||||||||||
Treasury stock, at cost, | ( | ( | |||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Retained earnings | |||||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||||
See Notes to Consolidated Financial Statements
Lam Research Corporation 2024 10-K 40
LAM RESEARCH CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| Year Ended | |||||||||||||||||
| June 30, 2024 | June 25, 2023 | June 26, 2022 | |||||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||||||||
| Net income | $ | $ | $ | ||||||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||||
| Depreciation and amortization | |||||||||||||||||
| Deferred income taxes | ( | ( | ( | ||||||||||||||
| Equity-based compensation expense | |||||||||||||||||
| Other, net | ( | ||||||||||||||||
| Changes in operating asset and liability accounts: | |||||||||||||||||
| Accounts receivable, net of allowance | ( | ||||||||||||||||
| Inventories | ( | ( | |||||||||||||||
| Prepaid expenses and other assets | ( | ( | |||||||||||||||
| Trade accounts payable | ( | ||||||||||||||||
| Deferred profit | ( | ||||||||||||||||
| Accrued expenses and other liabilities | ( | ( | |||||||||||||||
| Net cash provided by operating activities | |||||||||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||||||||
| Capital expenditures and intangible assets | ( | ( | ( | ||||||||||||||
| Business acquisitions, net of cash acquired | ( | ||||||||||||||||
| Purchases of available-for-sale securities | ( | ||||||||||||||||
| Proceeds from maturities of available-for-sale securities | |||||||||||||||||
| Proceeds from sales of available-for-sale securities | |||||||||||||||||
| Other, net | ( | ( | ( | ||||||||||||||
| Net cash (used for) provided by investing activities | ( | ( | |||||||||||||||
Lam Research Corporation 2024 10-K 41
| Year Ended | |||||||||||||||||
| June 30, 2024 | June 25, 2023 | June 26, 2022 | |||||||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||||||||
| Principal payments on long-term debt and finance lease obligations and payments for debt issuance costs | $ | ( | $ | ( | $ | ( | |||||||||||
| Treasury stock purchases | ( | ( | ( | ||||||||||||||
| Dividends paid | ( | ( | ( | ||||||||||||||
| Reissuances of treasury stock related to employee stock purchase plan | |||||||||||||||||
| Proceeds from issuance of common stock | |||||||||||||||||
| Other, net | ( | ( | |||||||||||||||
| Net cash used for financing activities | ( | ( | ( | ||||||||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | ( | ( | |||||||||||||||
| Net change in cash, cash equivalents and restricted cash | ( | ||||||||||||||||
| Cash, cash equivalents and restricted cash at beginning of year (1) | |||||||||||||||||
| Cash, cash equivalents and restricted cash at end of year (1) | $ | $ | $ | ||||||||||||||
| Schedule of non-cash transactions | |||||||||||||||||
| Accrued payables for stock repurchases, including applicable excise tax | $ | $ | $ | ||||||||||||||
| Accrued payables for capital expenditures | |||||||||||||||||
| Dividends payable | |||||||||||||||||
| Transfers of finished goods inventory to property and equipment | |||||||||||||||||
| Supplemental disclosures: | |||||||||||||||||
| Cash payments for interest | $ | $ | $ | ||||||||||||||
| Cash payments for income taxes, net | |||||||||||||||||
| Reconciliation of cash, cash equivalents, and restricted cash | June 30, 2024 | June 25, 2023 | June 26, 2022 | ||||||||||||||
| Cash and cash equivalents | $ | $ | $ | ||||||||||||||
| Restricted cash and cash equivalents (1) | |||||||||||||||||
| Total cash, cash equivalents, and restricted cash | $ | $ | $ | ||||||||||||||
(1) Restricted cash is reported within Other assets in the Consolidated Balance Sheets
See Notes to Consolidated Financial Statements
Lam Research Corporation 2024 10-K 42
LAM RESEARCH CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except per common share data)
| Common Stock Shares | Common Stock | Additional Paid-in Capital | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Total | |||||||||||||||||||||||||||||||||||
| Balance at June 27, 2021 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||
| Issuance of common stock | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Purchase of treasury stock | ( | ( | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
| Reissuance of treasury stock | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Equity-based compensation expense | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
Cash dividends declared ($ | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Balance at June 26, 2022 | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Issuance of common stock | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Purchase of treasury stock | ( | ( | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
| Reissuance of treasury stock | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Equity-based compensation expense | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Cash dividends declared ($ | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Balance at June 25, 2023 | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Issuance of common stock | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Purchase of treasury stock | ( | ( | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
| Reissuance of treasury stock | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Equity-based compensation expense | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
Cash dividends declared ($ | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Balance at June 30, 2024 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||
See Notes to Consolidated Financial Statements
Lam Research Corporation 2024 10-K 43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2024
Note 1: Company and Industry Information
The Company designs, manufactures, markets, refurbishes, and services semiconductor processing equipment used in the fabrication of integrated circuits. Semiconductor manufacturing, our customers’ business, involves the complete fabrication of multiple dies or integrated circuits on a wafer. This involves the repetition of a set of core processes and can require hundreds of individual steps. Fabricating these devices requires highly sophisticated process technologies to integrate an increasing array of new materials with precise control at the atomic scale. Along with meeting technical requirements, wafer processing equipment must deliver high productivity and be cost-effective.
The Company sells its products and services primarily to companies involved in the production of semiconductors in the United States, China, Europe, Japan, Korea, Southeast Asia, and Taiwan.
The semiconductor industry is cyclical in nature and has historically experienced periodic downturns and upturns. Today’s leading indicators of changes in customer investment patterns, such as electronics demand, memory pricing, and foundry utilization rates, may not be any more reliable than in prior years. Demand for the Company’s equipment can vary significantly from period to period as a result of various factors including, but not limited to, economic conditions; supply, demand, and prices for semiconductors; customer capacity requirements; and the Company’s ability to develop and market competitive products. For these and other reasons, the Company’s results of operations for fiscal years 2024, 2023, and 2022 may not necessarily be indicative of future operating results.
Reclassification: Certain amounts for the fiscal years 2023 and 2022 Consolidated Balance Sheets and notes to the financial statements have been reclassified to conform to the fiscal year 2024 presentation.
Note 2: Summary of Significant Accounting Policies
The preparation of financial statements in conformity with GAAP requires management to make judgments, estimates, and assumptions that could affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. The Company bases its estimates and assumptions on historical experience and on various other assumptions it believes to be applicable and evaluates them on an ongoing basis to ensure they remain reasonable under current conditions. Actual results could differ significantly from those estimates.
Inventory Valuation: Inventories are stated at the lower of cost or net realizable value using standard costs that approximate actual costs on a first-in, first-out basis. Management evaluates the need to record adjustments for impairment of inventory at least quarterly. The Company’s policy is to assess the valuation of all inventories including manufacturing raw materials, work-in-process, finished goods, and spare parts in each reporting period. Inventory in excess of management’s estimated usage requirement and obsolete inventory is written down to its estimated net realizable value if less than cost. Estimates of net realizable value include but are not limited to management’s forecasts related to customer demand, the Company’s future manufacturing schedules, technological and/or market obsolescence, general semiconductor market conditions, and possible alternative uses. If future customer demand or market conditions are less favorable than the Company’s projections, additional inventory write-downs may be required and would be reflected in cost of goods sold in the period in which the revision is made.
Warranty: Typically, the sale of semiconductor capital equipment includes providing parts and service warranties to customers as part of the overall price of the system. The Company provides standard warranties for its systems. The Company records a provision for estimated warranty expenses to cost of sales for each system when it recognizes revenue. The Company does not maintain general or unspecified reserves; all warranty reserves are related to specific systems. All actual or estimated parts and labor costs incurred in subsequent periods are charged to those established reserves on a system-by-system basis.
Lam Research Corporation 2024 10-K 44
Equity-based Compensation — Employee Stock Plans: The Company recognizes the fair value of equity-based compensation expense. The Company determines the fair value of its RSUs, excluding market-based performance RSUs, based upon the fair market value of Company’s Common Stock at the date of grant, discounted for dividends. The Company estimates the fair value of its market-based performance RSUs using a Monte Carlo simulation model at the date of the grant. The Company estimates the fair value of its stock options using a Black-Scholes option valuation model. This model requires the input of subjective assumptions, including expected stock price volatility and the estimated life of each award. The Company amortizes the fair value of equity-based awards over the vesting periods of the award, and the Company has elected to use the straight-line method of amortization.
Income Taxes: Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as the tax effect of carryforwards. The Company records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. Realization of its net deferred tax assets is dependent on future taxable income. The Company believes it is more likely than not that such assets will be realized; however, ultimate realization could be negatively impacted by market conditions and other variables not known or anticipated at this time. In the event that the Company determines that it will not be able to realize all or part of its net deferred tax assets, an adjustment will be charged to earnings in the period such determination is made. Likewise, if the Company later determines that it is more likely than not that the deferred tax assets will be realized, then the previously provided valuation allowance will be reversed.
The Company recognizes the benefit from a tax position only if it is more likely than not that the position will be sustained upon audit based solely on the technical merits of the tax position. The Company’s policy is to include interest and penalties related to uncertain tax positions as a component of income tax expense.
Goodwill and Intangible Assets: The valuation of intangible assets acquired in a business combination requires the use of management estimates including but not limited to estimating future expected cash flows from assets acquired and determining discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable, and as a result, actual results may differ from estimates. Estimates associated with the accounting for acquisitions may change as additional information becomes available. The Company amortizes intangible assets with estimable useful lives over their respective estimated useful lives.
Goodwill represents the amount by which the purchase price in each business combination exceeds the fair value of the net tangible and identifiable intangible assets acquired. Each component of the Company for which discrete financial information is available and for which management regularly reviews the results of operations is considered a reporting unit. All goodwill acquired in a business combination is assigned to one or more reporting units as of the acquisition date. Goodwill is assigned to the Company’s reporting units that are expected to benefit from the synergies of the combination. The goodwill assigned to a reporting unit is the difference between the acquisition consideration assigned to the reporting unit on a relative fair value basis and the fair value of acquired assets and liabilities that can be specifically attributed to the reporting unit.
Lam Research Corporation 2024 10-K 45
Fiscal Year: The Company follows a 52/53-week fiscal reporting calendar, and its fiscal year ends on the last Sunday of June each year. The Company’s most recent fiscal year ended on June 30, 2024 and included 53 weeks, and the fiscal years ended June 25, 2023 and June 26, 2022 each included 52 weeks.
Principles of Consolidation: The Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Property and Equipment: Property and equipment is stated at cost, less recognized impairments, if any. Equipment is depreciated by the straight-line method over the estimated useful lives of the assets, generally to five years . Furniture and fixtures are depreciated by the straight-line method over the estimated useful lives of the assets, generally five years . Software is amortized by the straight-line method over the estimated useful lives of the assets, generally to five years . Buildings are depreciated by the straight-line method over the estimated useful lives of the assets, generally twenty-five years . Leasehold improvements are generally amortized by the straight-line method over the shorter of the life of the related asset or the term of the underlying lease. Amortization of finance leases is included with depreciation expense.
Derivative Financial Instruments: In the normal course of business, the Company’s financial position is routinely subjected to market risk associated with interest rate and foreign currency exchange rate fluctuations. The Company’s policy is to mitigate the effect of interest rate fluctuations on certain proposed debt instruments and exchange rate fluctuations on certain foreign currency denominated business exposures. The Company has a policy that allows the use of derivative financial instruments to hedge foreign currency exchange rate fluctuations on forecasted revenue and expenses and net monetary assets or liabilities denominated in various foreign currencies. The Company carries derivative financial instruments (derivatives) on the balance sheet at their fair values. The Company does not use derivatives for trading or speculative purposes. The Company does not believe that it is exposed to more than a nominal amount of credit risk in its interest rate and foreign currency hedges, as counterparties are large, global and well-capitalized financial institutions. The Company maintains an active currency hedging program and believes there is minimal risk that appropriate derivatives to maintain the Company’s hedging program would not be available in the future.
To hedge foreign currency risks, the Company uses foreign currency exchange forward and option contracts, where possible and prudent. These hedge contracts are valued using standard valuation formulas with assumptions about future foreign currency exchange rates derived from existing exchange rates, interest rates, and other market factors.
The Company considers its most current forecast in determining the level of foreign currency denominated revenue and expenses to hedge as cash flow hedges. The Company combines these forecasts with historical trends to establish the portion of its expected volume to be hedged. The revenue and expenses are hedged and designated as cash flow hedges to protect the Company from exposures to fluctuations in foreign currency exchange rates. If the underlying forecasted transaction does not occur, or it becomes probable that it will not occur, the related hedge gains and losses on the cash flow hedge are reclassified from Accumulated other comprehensive income (loss) to Other income (expense), net on the Consolidated Statement of Operations at that time.
Leases: Lease expense for operating leases is recognized on a straight-line basis over the lease term. The Company includes renewals and terminations in the calculation of the right-of-use asset and liability when the provision is reasonably certain to be exercised. The Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of future lease payments when the rate implicit in the lease is unknown.
Lam Research Corporation 2024 10-K 46
The Company has elected the following practical expedients and accounting policy elections for accounting under ASC 842: (i) leases with an initial lease term of 12 months or less are not recorded on the balance sheet; and (ii) lease and non-lease components of a contract are accounted for as a single lease component.
Guarantees: The Company’s guarantees generally include certain indemnifications to its lessors for environmental matters, potential overdraft protection obligations to financial institutions related to one of the Company’s subsidiaries, indemnifications to the Company’s customers for certain infringement of third-party intellectual property rights by its products and services, indemnifications for its officers and directors, and the Company’s warranty obligations under sales of its products.
Government Assistance: For government grants, the Company recognizes a benefit in the Consolidated Statement of Operations, as a reduction to the expense for which the individual government grant (“Grant” or “Grants”) is designed to compensate, over the duration of the program when the Company has reasonable assurance that it will comply with the conditions under the Grant and that the Grant will be received. Grants related to investments in property and equipment are recognized as a reduction to the cost basis of the underlying assets with an ongoing reduction to depreciation expense over the assets’ estimated useful life. Operating-related grants are recorded as a reduction to expense in the same line item on the Consolidated Statements of Operation as the expenditure for which the incentive is intended to compensate.
Foreign Currency Translation: The Company’s non-U.S. subsidiaries that operate in a local currency environment, where that local currency is the functional currency, primarily generate and expend cash in their local currency. Accordingly, all balance sheet accounts of these local functional currency subsidiaries are translated into U.S. dollars at the fiscal period-end exchange rate, and income and expense accounts are translated into U.S. dollars using average rates in effect for the period, except for costs related to those balance sheet items that are translated using historical exchange rates. The resulting translation adjustments are recorded as cumulative translation adjustments and are a component of Accumulated other comprehensive income (loss). Remeasurement adjustments are recorded in Other income (expense), net, where the U.S. dollar is the functional currency.
Note 3: Recent Accounting Pronouncements
Recently Adopted or Effective
The Company did not adopt any new accounting standards during fiscal year 2024 that had a material impact on the Company’s Consolidated Financial Statements.
Updates Not Yet Effective
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which expands disclosures about a public entity’s reportable segments and requires more enhanced information about a reportable segment’s expenses, interim segment profit or loss, and how a public entity’s chief operating decision maker uses reported segment profit or loss information in assessing segment performance and allocating resources. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is required to adopt this standard in the fiscal year 2025 for the annual reporting period ending June 29, 2025, with retrospective disclosure of prior periods presented. The Company is currently in the process of evaluating the impact of adoption on its Consolidated Financial Statements.
Note 4: Revenue
Disaggregation of Revenue
The following table presents the Company’s revenue disaggregated between systems and customer-support related revenue:
| Year Ended | |||||||||||||||||
| June 30, 2024 | June 25, 2023 | June 26, 2022 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Systems Revenue | $ | $ | $ | ||||||||||||||
| Customer support-related revenue and other | |||||||||||||||||
| $ | $ | $ | |||||||||||||||
Lam Research Corporation 2024 10-K 47
Systems 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.
The Company operates in one reportable business segment: manufacturing and servicing of wafer processing semiconductor manufacturing equipment. Refer to Note 19: Segment, Geographic Information, and Major Customers; for additional information regarding the Company’s evaluation of reportable business segments and the disaggregation of revenue by the geographic regions in which the Company operates.
Additionally, the Company serves three primary markets: memory, foundry, and logic/integrated device manufacturing. 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:
| Year Ended | |||||||||||||||||
| June 30, 2024 | June 25, 2023 | June 26, 2022 | |||||||||||||||
| Memory | % | % | % | ||||||||||||||
| Foundry | % | % | % | ||||||||||||||
| Logic/integrated device manufacturing | % | % | % | ||||||||||||||
Deferred Revenue
Revenue of $1,506.6 million included in deferred profit at June 25, 2023 was recognized during fiscal year 2024, representing 82 % of the $1,837.9 million of deferred revenue as of June 25, 2023.
The following table summarizes the transaction price for contracts that have not yet been recognized as revenue as of June 30, 2024 and when the Company expects to recognize the amounts as revenue:
| Less than 1 Year | 1-3 Years | More than 3 Years | Total | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Deferred revenue | $ | $ | (1) | $ | (1) | $ | |||||||||||||||||
(1) This amount is reported in Deferred profit on the Company's Consolidated Balance Sheets as the customers can demand the performance to be satisfied at any time.
Note 5: Equity-based Compensation Plan
The Company has stock plans that provide for grants 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 also has an employee stock purchase plan that allows eligible employees to purchase its Common Stock at a discount through payroll deductions.
The Lam Research Corporation 2015 Stock Incentive Plan (the “Plan”) was approved by the stockholders and provides for the grant of non-qualified equity-based awards to eligible employees, consultants, advisors, and non-employee directors of the Company and its subsidiaries. As of the date of stockholder approval 19,232,068 authorized shares were available for issuance under the Plan; as of June 30, 2024, 6,891,996 shares remain available for future issuance to satisfy stock option exercises and vesting of awards.
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 Consolidated Statements of Operations:
| Year Ended | |||||||||||||||||
| June 30, 2024 | June 25, 2023 | June 26, 2022 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Equity-based compensation expense | $ | $ | $ | ||||||||||||||
| Income tax benefit recognized related to equity-based compensation | $ | $ | $ | ||||||||||||||
| Income tax benefit realized from the exercise and vesting of options and RSUs | $ | $ | $ | ||||||||||||||
The estimated fair value of the Company’s equity-based awards, less expected forfeitures, is amortized over the awards’ vesting terms on a straight-line basis.
Lam Research Corporation 2024 10-K 48
Restricted Stock Units
During the fiscal years 2024, 2023, and 2022, the Company issued both service-based RSUs and market-based PRSUs. Service-based RSUs typically vest annually over a period of 3 years or less. Market-based PRSUs generally vest three years from the grant date if certain performance criteria are achieved and require continued employment. Based upon the terms of such awards, the number of shares that can be earned over the performance periods is based on the Company’s Common Stock price performance compared to the market price performance of a designated benchmark index, ranging from 0 % to 150 % of target. The designated benchmark index was the Philadelphia Semiconductor Total Return Index (“XSOX”). The stock price performance or market price performance is measured using the average closing price for the 50 -trading days prior to the dates the performance period begins and ends. The target number of shares represented by the market-based PRSUs is increased by 2 % of target for each 1 % that Common Stock price performance exceeds the market price performance of the designated benchmark index. Market-based PRSUs utilize the XSOX, which index gives effect to the reinvestment of dividends paid on its constituent holdings, as the benchmark; and accordingly, the Company's Common Stock price performance was adjusted for the reinvestment of dividends on Common Stock on the ex-dividend date. The result of the vesting formula is rounded down to the nearest whole number. Total stockholder return is a measure of stock price appreciation in this performance period.
The following table summarizes the Company’s combined service-based RSUs and market-based PRSUs:
| Number of Shares (in thousands) | Weighted-Average Grant Date Fair Value | ||||||||||
| Outstanding, June 25, 2023 | $ | ||||||||||
| Granted | |||||||||||
| Vested | ( | ||||||||||
| Forfeited or canceled | ( | ||||||||||
| Outstanding, June 30, 2024 | $ | ||||||||||
Of the 923 thousand shares outstanding at June 30, 2024, 749 thousand are service-based RSUs and 174 thousand are market-based PRSUs. The fair value of the Company’s service-based RSUs was calculated based on the fair market value of the Company’s stock at the date of grant, discounted for dividends. The fair value of the Company’s market-based PRSUs granted during fiscal years 2024, 2023, and 2022 was calculated using a Monte Carlo simulation model at the date of the grant, resulting in a weighted average grant-date fair value per share of $1,027.74 , $466.19 , and $488.68 , respectively. The total fair value of service-based RSUs and market-based RSUs that vested during fiscal years 2024, 2023, and 2022 was $242.8 million, $224.4 million, and $195.1 million, respectively.
As of June 30, 2024, the Company had $480.5 million of total unrecognized compensation expense which is expected to be recognized over a weighted-average remaining period of approximately 2.2 years.
Stock Options
The Company granted stock options with a 7 three years or less. The Company had 139 thousand options outstanding at June 30, 2024 with a weighted-average exercise price of $541.10 per share, of which 75 thousand were exercisable with a weighted-average exercise price of $382.13 per share. As of June 30, 2024, the Company had $16.3 million of total unrecognized compensation expense related to unvested stock options granted and outstanding which is expected to be recognized over a weighted-average remaining period of 2.3 years.
ESPP
The Company has an employee stock purchase plan (the “ESPP”) which allows employees to designate a portion of their base compensation to be deducted and used to purchase the Company’s Common Stock at a purchase price per share of the lower of 85 % of the fair market value of the Company’s Common Stock on the first or last day of the applicable purchase period. Typically, each offering period lasts 12 months and contains one interim purchase date.
Lam Research Corporation 2024 10-K 49
Note 6: Other Income (Expense), Net
The significant components of Other income (expense), net, were as follows:
| Year Ended | |||||||||||||||||
| June 30, 2024 | June 25, 2023 | June 26, 2022 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Interest income | $ | $ | $ | ||||||||||||||
| Interest expense | ( | ( | ( | ||||||||||||||
| Gains (losses) on deferred compensation plan related assets, net | ( | ||||||||||||||||
| Foreign exchange losses, net | ( | ( | ( | ||||||||||||||
| Other, net | ( | ( | |||||||||||||||
| $ | $ | ( | $ | ( | |||||||||||||
Interest income in the year ended June 30, 2024, increased compared to the years ended June 25, 2023 and June 26, 2022, primarily as a result of higher yields and higher cash balances.
Interest expense in the year ended June 30, 2024, was flat compared to the years ended June 25, 2023 and June 26, 2022.
The gains or losses on deferred compensation plan related assets, net in fiscal years 2024, 2023 and 2022 were driven by fluctuations in the fair market value of the underlying funds.
Note 7: Income Taxes
The components of income before income taxes were as follows:
| Year Ended | |||||||||||||||||
| June 30, 2024 | June 25, 2023 | June 26, 2022 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| United States | $ | $ | $ | ||||||||||||||
| Foreign | |||||||||||||||||
| $ | $ | $ | |||||||||||||||
Lam Research Corporation 2024 10-K 50
Significant components of the provision (benefit) for income taxes attributable to income before income taxes were as follows:
| Year Ended | |||||||||||||||||
| June 30, 2024 | June 25, 2023 | June 26, 2022 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Federal: | |||||||||||||||||
| Current | $ | $ | $ | ||||||||||||||
| Deferred | ( | ( | ( | ||||||||||||||
| State: | |||||||||||||||||
| Current | |||||||||||||||||
| Deferred | ( | ( | ( | ||||||||||||||
| Foreign: | |||||||||||||||||
| Current | |||||||||||||||||
| Deferred | ( | ( | |||||||||||||||
| Total provision for income taxes | $ | $ | $ | ||||||||||||||
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as the tax effect of carryforwards. Significant components of the Company’s net deferred tax assets and liabilities were as follows:
| June 30, 2024 | June 25, 2023 | ||||||||||
| (in thousands) | |||||||||||
| Deferred tax assets: | |||||||||||
| Tax carryforwards | $ | $ | |||||||||
| Allowances and reserves | |||||||||||
| Equity-based compensation | |||||||||||
| Inventory valuation differences | |||||||||||
| Outside basis differences of foreign subsidiaries | |||||||||||
| R&D capitalization | |||||||||||
| Operating lease liabilities | |||||||||||
| Finance lease assets | |||||||||||
| Intangible assets | |||||||||||
| Other | |||||||||||
| Gross deferred tax assets | |||||||||||
| Valuation allowance | ( | ( | |||||||||
| Net deferred tax assets | |||||||||||
| Deferred tax liabilities: | |||||||||||
| Capital assets | ( | ( | |||||||||
| Amortization of goodwill | ( | ( | |||||||||
| Right-of-use assets | ( | ( | |||||||||
| Finance lease liabilities | ( | ||||||||||
| Other | ( | ( | |||||||||
| Gross deferred tax liabilities | ( | ( | |||||||||
| Net deferred tax assets | $ | $ | |||||||||
Lam Research Corporation 2024 10-K 51
The change in gross deferred tax assets, gross deferred tax liabilities, and valuation allowance between fiscal year 2024 and 2023 is primarily due to increases in gross deferred tax assets for outside basis differences of foreign subsidiaries, tax credits, and capitalized research and experimental expenditures.
The Company has an accounting policy election to record deferred taxes related to Global Intangible Low-Taxed Income (“GILTI”).
Realization of the Company’s net deferred tax assets is based upon the weighting of available evidence, including such factors as the recent earnings history and expected future taxable income. The Company believes it is more likely than not that such deferred tax assets will be realized with the exception of $389.3 million primarily related to California deferred tax assets. At June 30, 2024, the Company continued to record a valuation allowance to offset the entire California deferred tax asset balance due to the single sales factor apportionment resulting in lower taxable income in California.
At June 30, 2024, the Company had federal net operating loss carryforwards of $7.5 million. If not utilized, these losses will begin to expire in fiscal year 2026, and are subject to limitation on their utilization.
At June 30, 2024, the Company had state net operating loss carryforwards of $119.1 million. If not utilized, these losses will begin to expire in fiscal year 2025, and are subject to limitation on their utilization.
At June 30, 2024, the Company had foreign net operating loss carryforwards of $23.2 million. All of these losses can be carried forward indefinitely, and are subject to limitation on their utilization.
At June 30, 2024, the Company had state tax credit carryforwards of $587.5 million. Substantially all of these credits can be carried forward indefinitely.
A reconciliation of income tax expense provided at the federal statutory rate (21
| Year Ended | |||||||||||||||||
| June 30, 2024 | June 25, 2023 | June 26, 2022 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Income tax expense computed at federal statutory rate | $ | $ | $ | ||||||||||||||
| State income taxes, net of federal tax benefit | ( | ( | ( | ||||||||||||||
| Foreign income taxed at different rates | ( | ( | ( | ||||||||||||||
| Settlements and reductions in uncertain tax positions | ( | ( | ( | ||||||||||||||
| Tax credits | ( | ( | ( | ||||||||||||||
| State valuation allowance, net of federal tax benefit | |||||||||||||||||
| Equity-based compensation | ( | ( | |||||||||||||||
| Increases in uncertain tax positions | |||||||||||||||||
| Other permanent differences and miscellaneous items | |||||||||||||||||
| $ | $ | $ | |||||||||||||||
Effective from fiscal year 2022, the Company has a 15-year tax incentive ruling in Malaysia for one of its foreign subsidiaries. The impact of the tax incentive decreased worldwide taxes by approximately $416.3 million, $576.0 million, and $574.7 million for fiscal years 2024, 2023, and 2022, respectively. The benefit of the tax incentive on diluted earnings per share was approximately $3.15 , $4.24 , and $4.09 in fiscal years 2024, 2023, and 2022, respectively.
Earnings of the Company’s foreign subsidiaries included in consolidated retained earnings that are indefinitely reinvested in foreign operations aggregated to approximately $1.1 billion at June 30, 2024. If these earnings were remitted to the United States, they would be subject to foreign withholding taxes of approximately $130.8 million at the current statutory rates. The potential tax expense associated with these foreign withholding taxes would be offset by $104.7 million of foreign tax credits that would be generated in the United States upon remittance.
On August 16, 2022, the IRA was signed into law. In general, the provisions of the IRA are effective beginning with the Company’s fiscal year 2024, with certain exceptions. The IRA includes a new 15% corporate alternative minimum tax. The Company has evaluated the impacts of the IRA, including guidance issued by the Treasury Department, and does not expect it to have a material impact on the effective tax rate.
The Company’s gross uncertain tax positions were $723.8 million, $640.2 million, and $617.4 million as of June 30, 2024, June 25, 2023, and June 26, 2022, respectively. During fiscal year 2024, gross uncertain tax positions increased by $83.6 million. The amount
Lam Research Corporation 2024 10-K 52
of uncertain tax positions that, if recognized, would impact the effective tax rate was $622.6 million, $550.1 million, and $539.6 million, as of June 30, 2024, June 25, 2023, and June 26, 2022, respectively.
The aggregate changes in the balance of gross uncertain tax positions were as follows:
| (in thousands) | |||||
| Balance as of June 27, 2021 | $ | ||||
| Settlements and effective settlements with tax authorities | ( | ||||
| Lapse of statute of limitations | ( | ||||
| Increases in balances related to tax positions taken during prior periods | |||||
| Decreases in balances related to tax positions taken during prior periods | ( | ||||
| Increases in balances related to tax positions taken during current period | |||||
| Balance as of June 26, 2022 | |||||
| Settlements and effective settlements with tax authorities | ( | ||||
| Lapse of statute of limitations | ( | ||||
| Increases in balances related to tax positions taken during prior periods | |||||
| Decreases in balances related to tax positions taken during prior periods | ( | ||||
| Increases in balances related to tax positions taken during current period | |||||
| Balance as of June 25, 2023 | |||||
| Settlements and effective settlements with tax authorities | ( | ||||
| Lapse of statute of limitations | ( | ||||
| Decreases in balances related to tax positions taken during prior periods | ( | ||||
| Increases in balances related to tax positions taken during current period | |||||
| Balance as of June 30, 2024 | $ | ||||
The Company recognizes interest expense and penalties related to the above uncertain tax positions within income tax expense. The Company had accrued $105.7 million, $74.4 million, and $61.2 million cumulatively for gross interest and penalties as of June 30, 2024, June 25, 2023, and June 26, 2022, respectively.
The Company is subject to audits by state and foreign tax authorities. The Company is unable to make a reasonable estimate as to when cash settlements, if any, with the relevant taxing authorities will occur.
The Company files U.S. federal, U.S. state, and foreign income tax returns. As of June 30, 2024, tax years 2006-2024 remain subject to examination in the jurisdictions where the Company operates.
The IRS is examining the Company’s U.S. federal income tax returns for the fiscal years ended June 30, 2019, June 28, 2020, and June 27, 2021. To date, 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 limitation. The change in uncertain tax positions as a result of lapses of statutes of limitation may range up to $212.2 million.
Lam Research Corporation 2024 10-K 53
Note 8: 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, and restricted stock units.
The following table reconciles the inputs to the basic and diluted computations for net income per share.
| Year Ended | ||||||||||||||||||||
| June 30, 2024 | June 25, 2023 | June 26, 2022 | ||||||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||||||
| Numerator: | ||||||||||||||||||||
| Net income | $ | $ | $ | |||||||||||||||||
| Denominator: | ||||||||||||||||||||
| Basic average shares outstanding | ||||||||||||||||||||
| Effect of potential dilutive securities: | ||||||||||||||||||||
| Employee stock plans | ||||||||||||||||||||
| Diluted average shares outstanding | ||||||||||||||||||||
| Net income per share - basic | $ | $ | $ | |||||||||||||||||
| Net income per share - diluted | $ | $ | $ | |||||||||||||||||
Note 9: Financial Instruments
Fair Value
The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact, and it considers assumptions that market participants would use when pricing the asset or liability.
A fair value hierarchy has been established that prioritizes the inputs to valuation techniques used to measure fair value. The level of an asset or liability in the hierarchy is based on the lowest level of input that is significant to the fair value measurement. Assets and liabilities carried at fair value are classified and disclosed in one of the following three categories:
Level 1: Valuations based on quoted prices in active markets for identical assets or liabilities with sufficient volume and frequency of transactions.
Level 2: Valuations based on observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active for identical assets or liabilities, or model-derived valuations techniques for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3: Valuations based on unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities and based on non-binding, broker-provided price quotes and may not have been corroborated by observable market data.
The Company engages with pricing vendors to provide fair values for a majority of its Level 1 and Level 2 investments. The vendors provide either a quoted market price or use observable inputs without applying significant adjustments in their pricing. Significant observable inputs include interest rates and yield curves observable at commonly quoted intervals, volatility and credit risks. The fair value of derivative contracts is determined using observable market inputs such as the foreign currency rates, forward rate curves, currency volatility and interest rates and considers nonperformance risk of the Company and its counterparties.
The Company’s primary financial instruments include its cash, cash equivalents, long-term investments, accounts receivable, accounts payable, long-term debt and leases, and foreign currency related derivative instruments. The estimated fair value of cash, time deposits, accounts receivable, and accounts payable approximates their carrying value due to the short period of time to their maturities. The estimated fair values of lease obligations approximate their carrying value as the majority of these obligations are generally short-term in nature and have interest rates that reset upon renewal or modification. Refer to Note 14: Long Term Debt and Other Borrowings for additional information regarding the fair value of the Company’s senior notes.
Lam Research Corporation 2024 10-K 54
The Company accounts for its investment portfolio at fair value. Realized gains (losses) for investment sales are specifically identified. Management assesses the fair value of investments in debt securities that are not actively traded through consideration of interest rates and their impact on the present value of the cash flows to be received from the investments.
The Company evaluates its investments with fair value less than amortized cost by first considering whether the Company has the intent to sell the security or whether it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis. In either such situation, the difference between fair value and amortized cost is recognized as a loss in the Consolidated Statement of Operations. Where such sales are not likely to occur, the Company considers whether a portion of the loss is the result of a credit loss. To the extent such losses are the result of credit losses, those amounts are recognized in the Consolidated Statement of Operations. All other differences between fair value and amortized cost are recognized in other comprehensive income. No such losses were recognized through the Consolidated Statement of Operations during the twelve months ended June 30, 2024, June 25, 2023, and June 26, 2022.
Investments
Investments are recorded within Prepaid expenses and other current assets in the Company’s Consolidated Balance Sheets. As of June 30, 2024 and June 25, 2023, the fair value; and associated unrealized loss positions, if any, of mutual funds and debt and equity investments were not material. Gross realized gains/(losses) from sales of investments were insignificant in the fiscal years 2024, 2023, and 2022.
The financial instruments reported within Cash and cash equivalents in the Company’s Consolidated Balance Sheets as of June 30, 2024, and June 25, 2023 consisted of the following:
| June 30, 2024 | June 25, 2023 | ||||||||||
| (in thousands) | |||||||||||
| Money market funds (fair value measured on a recurring basis, level 1) | $ | $ | |||||||||
| Cash | |||||||||||
| Time deposits | |||||||||||
| Total | $ | $ | |||||||||
In addition, as of June 25, 2023 the Company had restricted cash in the form of time deposits of $250.0 million reported within Other assets in the Consolidated Balance Sheets that was subsequently released in the three months ended September 24, 2023. Refer to Note 15: Leases for more information.
Derivative Instruments and Hedging
The Company carries derivative financial instruments (“derivatives”) on its Consolidated Balance Sheets at their fair values. The Company enters into foreign currency forward contracts and foreign currency options with financial institutions with the primary objective of reducing volatility of earnings and cash flows related to foreign currency exchange rate fluctuations. In addition, the Company enters into interest rate swap arrangements to manage interest rate risk. The counterparties to these derivatives are large, global financial institutions that the Company believes are creditworthy, and therefore, it does not consider the risk of counterparty nonperformance to be material.
Under the master netting agreements with the respective counterparties to the Company’s derivative contracts, subject to applicable requirements, the Company is allowed to net settle transactions of the same currency with a single net amount payable by one party to the other. However, the Company has elected to present the derivative assets and derivative liabilities on a gross basis on its balance sheet. As of June 30, 2024 and June 25, 2023, the potential effect of rights of offset associated with the above foreign exchange and interest rate contracts would be immaterial to the Consolidated Balance Sheets.
Cash Flow Hedges
The Company’s financial position is routinely subjected to market risk associated with foreign currency exchange rate fluctuations on non-U.S. dollar transactions or cash flows. The Company’s policy is to mitigate the foreign exchange risk arising from the fluctuations in the value of these non-U.S. dollar denominated transactions or cash flows through a foreign currency cash flow hedging program, using forward contracts and foreign currency options that generally expire within 12 months and no later than 24 months. These hedge contracts are designated as cash flow hedges and are carried on the Company’s balance sheet at fair value with the effective portion of the contracts’ gains or losses included in accumulated other comprehensive income (loss) and subsequently recognized in revenue/expense in the same period the hedged items affect earnings.
In addition, the Company has entered into interest rate swap agreements to hedge against the variability of cash flows due to changes in certain benchmark interest rates on fixed rate debt. These instruments are designated as cash flow hedges at inception and are settled in conjunction with the issuance of debt. The effective portion of the contracts’ gains or losses is included in accumulated other comprehensive income (loss) and is amortized into income as the hedged item affects earnings.
Lam Research Corporation 2024 10-K 55
At inception and at each quarter-end, hedges are tested prospectively and retrospectively for effectiveness using regression analysis. Changes in the fair value of foreign exchange contracts due to changes in time value are included in the assessment of effectiveness. To qualify for hedge accounting, the hedge relationship must meet criteria relating to both the derivative instrument and the hedged item. These criteria include identification of the hedging instrument, the hedged item, the nature of the risk being hedged, and how the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair value or cash flows will be measured.
To receive hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedge, and the hedges must be tested to demonstrate an expectation of providing highly effective offsetting changes to future cash flows on hedged transactions. When derivative instruments are designated and qualify as effective cash flow hedges, the Company recognizes effective changes in the fair value of the hedging instrument within accumulated other comprehensive income (loss) until the hedged exposure is realized. Consequently, the Company’s results of operations are not subject to fluctuation as a result of changes in the fair value of the derivative instruments. If hedges are not highly effective or if the Company does not believe that the underlying hedged forecasted transactions will occur, the Company may not be able to account for its derivative instruments as cash flow hedges. If this were to occur, future changes in the fair values of the Company’s derivative instruments would be recognized in earnings. Additionally, related amounts previously recorded in other comprehensive income would be reclassified to earnings immediately. There were no material gains or losses during the fiscal years ended June 30, 2024, June 25, 2023, or June 26, 2022 associated with forecasted transactions that did not occur, nor any ineffectiveness recognized in the same periods.
As of June 30, 2024 and June 25, 2023, the fair value of outstanding cash flow hedges was not material. The effect of derivative instruments designated as cash flow hedges on the Company’s Consolidated Statements of Operations, including accumulated other comprehensive income, was not material as of and for the twelve months ended June 30, 2024 and June 25, 2023. As of June 30, 2024, the Company had an immaterial net gain or loss accumulated in other comprehensive income, net of tax, related to foreign exchange cash flow hedges and interest rate contracts which it expects to reclassify from other comprehensive income into earnings over the next 12 months. The total notional value of cash flow hedge instruments outstanding as of June 30, 2024 included $307.3 million of buy contracts and $136.5 million of sell contracts.
Balance Sheet Hedges
The Company also enters into foreign currency forward contracts to hedge fluctuations associated with foreign currency denominated monetary assets and liabilities, primarily cash, third-party accounts receivable, accounts payable, and intercompany receivables and payables. These forward contracts are not designated for hedge accounting treatment. Therefore, the change in the carrying value of these derivatives is recorded as a component of other income (expense), net and offsets the change in fair value of the foreign currency denominated assets and liabilities related to remeasurement, which are also recorded in other income (expense), net. As of June 30, 2024 and June 25, 2023, the fair value of outstanding balance sheet hedges was not material. The effect of the Company’s balance sheet hedge derivative instruments on the Company’s Consolidated Statements of Operations were not material as of and for the twelve months ended June 30, 2024. The total notional value of balance sheet hedge instruments outstanding as of June 30, 2024 included $366.9 million of buy contracts and $238.2 million of sell contracts.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, trade accounts receivable, and derivative financial instruments used in hedging activities. Cash is placed on deposit at large, global financial institutions. Such deposits may be in excess of insured limits. Management believes that the financial institutions that hold the Company’s cash are creditworthy and, accordingly, minimal credit risk exists with respect to these balances.
The Company’s overall portfolio of available-for-sale securities must maintain an average minimum rating of “AA-” or “Aa3” as rated by Standard and Poor’s, Fitch Ratings, or Moody’s Investor Services. To ensure diversification and minimize concentration, the Company’s policy limits the amount of credit exposure with any one financial institution or commercial issuer.
The Company is exposed to credit losses in the event of nonperformance by counterparties on foreign currency and interest rate hedge contracts that are used to mitigate the effect of exchange rate and interest rate fluctuations and on contracts related to structured share repurchase arrangements. These counterparties are large, global financial institutions and, to date, no such counterparty has failed to meet its financial obligations to the Company.
Credit risk evaluations, including trade references, bank references, and Dun & Bradstreet ratings, are performed on all new customers, and the Company monitors its customers’ financial condition and payment performance. In general, the Company does not require collateral on sales.
As of June 30, 2024, three customers accounted for approximately 16 %, 13 % and 13 % of accounts receivable, respectively. As of June 25, 2023, three customers accounted for approximately 32 %, 13 %, and 10 % of accounts receivable, respectively. No other customers accounted for 10% or more of accounts receivable. The Company’s balance and transactional activity for its allowance for doubtful accounts is not material as of and for the years ended June 30, 2024, June 25, 2023, and June 26, 2022. Refer to Note 19: Segment, Geographic Information, and Major Customers for additional information regarding customer concentrations.
Lam Research Corporation 2024 10-K 56
Note 10: Inventories
Inventories are stated at the lower of cost or net realizable value using standard costs that approximate actual costs on a first-in, first-out basis. Inventories consist of the following:
| June 30, 2024 | June 25, 2023 | ||||||||||
| (in thousands) | |||||||||||
| Raw materials | $ | $ | |||||||||
| Work-in-process | |||||||||||
| Finished goods | |||||||||||
| $ | $ | ||||||||||
Note 11: Property and Equipment
Property and equipment, net, is presented in the table below.
| June 30, 2024 | June 25, 2023 | ||||||||||
| (in thousands) | |||||||||||
| Manufacturing and engineering equipment | $ | $ | |||||||||
| Buildings and improvements | |||||||||||
| Computer and computer-related equipment | |||||||||||
| Land | |||||||||||
| Office equipment, furniture and fixtures | |||||||||||
| Less: accumulated depreciation and amortization | ( | ( | |||||||||
| $ | $ | ||||||||||
Note 12: Goodwill and Intangible Assets
Goodwill
The balance of goodwill was $1.6 65.4 No
Intangible Assets
The following table provides details of the Company’s intangible assets, other than goodwill:
| June 30, 2024 | June 25, 2023 | ||||||||||||||||||||||||||||||||||
| Gross | Accumulated Amortization | Net | Gross | Accumulated Amortization | Net | ||||||||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||||||||
| Customer relationships | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
| Existing technology | ( | ( | |||||||||||||||||||||||||||||||||
| Patents and other intangible assets | ( | ( | |||||||||||||||||||||||||||||||||
| Intangible assets subject to amortization | ( | ( | |||||||||||||||||||||||||||||||||
| In process research and development | — | — | |||||||||||||||||||||||||||||||||
| Total intangible assets | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
Lam Research Corporation 2024 10-K 57
The Company recognized $56.3 million, $51.5 million, and $78.0 million in intangible asset amortization expense during fiscal years 2024, 2023, and 2022, respectively. Intangible asset impairments in fiscal year 2024 were insignificant. No
The estimated future amortization expense of intangible assets as of June 30, 2024, is reflected in the table below. The table excludes $13.2 million of capitalized costs for intangible assets that have not yet been placed into service.
| Fiscal Year | Amount | ||||
| (in thousands) | |||||
| 2025 | $ | ||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| Thereafter | |||||
| $ | |||||
Refer to Note 20: Business Combinations for additional information regarding the Company’s intangible assets.
Note 13: Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following:
| June 30, 2024 | June 25, 2023 | ||||||||||
| (in thousands) | |||||||||||
| Accrued compensation | $ | $ | |||||||||
| Warranty reserves | |||||||||||
| Income and other taxes payable | |||||||||||
| Dividend payable | |||||||||||
| Restructuring | |||||||||||
| Other | |||||||||||
| $ | $ | ||||||||||
Lam Research Corporation 2024 10-K 58
Note 14: Long Term Debt and Other Borrowings
As of June 30, 2024, and June 25, 2023, the Company’s outstanding debt consisted of the following:
| June 30, 2024 | June 25, 2023 | |||||||||||||||||||||||||
| Amount (in thousands) | Effective Interest Rate | Amount (in thousands) | Effective Interest Rate | |||||||||||||||||||||||
Fixed-rate | $ | % | $ | % | ||||||||||||||||||||||
Fixed-rate | % | % | ||||||||||||||||||||||||
Fixed-rate | % | % | ||||||||||||||||||||||||
Fixed-rate | % | % | ||||||||||||||||||||||||
Fixed-rate | % | % | ||||||||||||||||||||||||
Fixed-rate | % | % | ||||||||||||||||||||||||
Fixed-rate | % | % | ||||||||||||||||||||||||
| Total Senior Notes outstanding, at par | ||||||||||||||||||||||||||
| Unamortized discount | ( | ( | ||||||||||||||||||||||||
| Fair value adjustment - interest rate contracts | (1) | |||||||||||||||||||||||||
| Unamortized bond issuance costs | ( | ( | ||||||||||||||||||||||||
| Other financing arrangements | ||||||||||||||||||||||||||
| Total debt outstanding, at carrying value | $ | $ | ||||||||||||||||||||||||
| Reported as: | ||||||||||||||||||||||||||
| Current portion of long-term debt | $ | $ | ||||||||||||||||||||||||
| Long-term debt | $ | $ | ||||||||||||||||||||||||
(1)This amount represents a cumulative fair value gain for discontinued hedging relationships, net of an immaterial amount of amortization as of the periods presented.
The Company’s contractual cash obligations relating to its outstanding debt as of June 30, 2024, were as follows:
| Payments Due by Fiscal Year: | Principal | Interest | |||||||||
| (in thousands) | |||||||||||
| 2025 | $ | $ | |||||||||
| 2026 | |||||||||||
| 2027 | |||||||||||
| 2028 | |||||||||||
| 2029 | |||||||||||
| Thereafter | |||||||||||
| Total | $ | $ | |||||||||
Senior Notes
On May 5, 2020, the Company completed a public offering of $750 million aggregate principal amount of the Company’s Senior Notes due June 15, 2030 (the “2030 Notes”), $750 million aggregate principal amount of the Company’s Senior Notes due June 15, 2050 (the “2050 Notes”), and $500 million aggregate principal amount of the Company’s Senior Notes due June 15, 2060 (the “2060 Notes”). The Company pays interest at an annual rate of 1.90 %, 2.875 %, and 3.125 %, on the 2030, 2050, and 2060 Notes, respectively, on a semi-annual basis on June 15 and December 15 of each year.
On March 4, 2019, the Company completed a public offering of $750 million aggregate principal amount of the Company’s Senior Notes due March 15, 2026 (the “2026 Notes”), $1.0 billion aggregate principal amount of the Company’s Senior Notes due March 15, 2029 (the “2029 Notes”), and $750 million aggregate principal amount of the Company’s Senior Notes due March 15, 2049 (the “2049 Notes”). The Company pays interest at an annual rate of 3.75 %, 4.00 %, and 4.875 %, on the 2026, 2029, and 2049 Notes, respectively, on a semi-annual basis on March 15 and September 15 of each year.
On March 12, 2015, the Company completed a public offering of $500 million aggregate principal amount of the Company’s Senior Notes due March 15, 2025 (the “2025 Notes”). The Company pays interest at an annual rate of 3.80 % on the 2025 Notes on a semi-annual basis on March 15 and September 15 of each year.
The Company may redeem the 2025, 2026, 2029, 2030, 2049, 2050, and 2060 Notes (collectively the “Senior Notes”) at a redemption price equal to 100
Lam Research Corporation 2024 10-K 59
January 15, 2026 for the 2026 Notes, before December 15, 2028 for the 2029 Notes, before March 15, 2030 for the 2030 Notes, before September 15, 2048 for the 2049 Notes, before December 15, 2049 for the 2050 Notes, and before December 15, 2059 for the 2060 Notes. The Company may redeem the Senior Notes at par, plus accrued and unpaid interest at any time on or after December 24, 2024 for the 2025 Notes, on or after January 15, 2026 for the 2026 Notes, on or after December 15, 2028 for the 2029 Notes, on or after March 15, 2030 for the 2030 Notes, on or after September 15, 2048 for the 2049 Notes, on or after December 15, 2049 for the 2050 Notes, and on or after December 15, 2059 for the 2060 Notes. In addition, upon the occurrence of certain events, as described in the indenture, the Company will be required to make an offer to repurchase the Senior Notes at a price equal to 101 % of the principal amount of the respective note, plus accrued and unpaid interest.
Selected additional information regarding the Senior Notes outstanding as of June 30, 2024, is as follows:
| Remaining Amortization period | Fair Value of Notes (Level 2) | ||||||||||
| (years) | (in thousands) | ||||||||||
| 2025 Notes | $ | ||||||||||
| 2026 Notes | $ | ||||||||||
| 2029 Notes | $ | ||||||||||
| 2030 Notes | $ | ||||||||||
| 2049 Notes | $ | ||||||||||
| 2050 Notes | $ | ||||||||||
| 2060 Notes | $ | ||||||||||
Revolving Credit Facility
On March 12, 2014, the Company established an unsecured Credit Agreement. This agreement was amended on November 10, 2015 (the “Amended and Restated Credit Agreement”), October 13, 2017 (the “2nd Amendment”), February 25, 2019 (the “3rd Amendment”), June 17, 2021 (the “Second Amended and Restated Credit Agreement”), and December 7, 2022 (“Amendment No.1 to Second Amended and Restated Credit Agreement”). The Second Amended and Restated Credit Agreement provides for a $1.50 billion revolving credit facility with a syndicate of lenders, along with an expansion option that will allow the Company, subject to certain requirements, to request an increase in the facility of up to an additional $600.0 million, for a potential total commitment of $2.10 billion. The facility matures on June 17, 2026. The Amendment No.1 To Second Amended and Restated Credit Agreement replaces the benchmark reference rate, London inter-bank offered rate, with term secured overnight financing rate (“SOFR”) equal to the term rate determined by the Chicago Mercantile Exchange term SOFR administrator plus 0.10 % (“adjusted term SOFR”), with no change to the amount or timing of contractual cash flows.
Interest on amounts borrowed under the credit facility is, at the Company’s option, based on (1) a base rate, defined as the greatest of (a) prime rate, (b) Federal Funds rate plus 0.5 %, or (c) adjusted term SOFR plus 1.0 %, plus a spread of 0.00 % to 0.30 %, or (2) adjusted term SOFR, plus a spread of 0.805 % to 1.30 %, in each case plus a facility fee, with such spread and facility fee determined based on the rating of the Company’s non-credit enhanced, senior unsecured long-term debt. Such spreads and such facility fees are further subject to sustainability adjustments as described in the Amendment No. 1 to Second Amended and Restated Credit Agreement, in each case based on the Company’s performance of certain energy savings and health and safety standards metrics. Principal and any accrued and unpaid interest are due and payable upon maturity. Additionally, the Company will pay the lenders a quarterly commitment fee that varies based on the Company’s credit rating. As of June 30, 2024, the Company had no borrowings outstanding under the credit facility and was in compliance with all financial covenants.
Commercial Paper Program
On November 13, 2017, the Company established a commercial paper program (the “CP Program”) under which the Company may issue unsecured commercial paper notes on a private placement basis up to a maximum aggregate principal amount of $1.25 billion. In July 2021, the Company amended the CP Program size to a maximum aggregate amount outstanding at any time of $1.50 billion. The net proceeds from the CP Program may be used for general corporate purposes, including repurchases of the Company’s Common Stock from time to time under the Company’s stock repurchase program. Amounts available under the CP Program may be re-borrowed. The CP Program is backstopped by the Company’s Revolving Credit Arrangement. As of June 30, 2024, the Company had no outstanding borrowings under the CP Program.
Interest Cost
The following table presents the amount of interest cost recognized relating to both the contractual interest coupon and amortization of the debt discount, issuance costs, and effective portion of interest rate contracts with respect to the Senior Notes, and the revolving credit facility during the fiscal years ended June 30, 2024, June 25, 2023, and June 26, 2022.
Lam Research Corporation 2024 10-K 60
| Year Ended | |||||||||||||||||
| June 30, 2024 | June 25, 2023 | June 26, 2022 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Contractual interest coupon | $ | $ | $ | ||||||||||||||
| Amortization of interest discount | |||||||||||||||||
| Amortization of issuance costs | |||||||||||||||||
| Effect of interest rate contracts, net | |||||||||||||||||
| Total interest cost recognized | $ | $ | $ | ||||||||||||||
Note 15: Leases
The Company leases certain office spaces, manufacturing and warehouse spaces, equipment, and vehicles. While the majority of the Company’s lease arrangements are operating leases, the Company has certain leases that qualify as finance leases.
The components of lease expense were as follows for the years ended June 30, 2024, June 25, 2023, and June 26, 2022:
| Year Ended | |||||||||||||||||
| June 30, 2024 | June 25, 2023 | June 26, 2022 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Financing lease cost: | |||||||||||||||||
| Amortization of right-of-use assets | $ | $ | $ | ||||||||||||||
| Interest on lease liabilities | |||||||||||||||||
| Total finance lease cost | $ | $ | $ | ||||||||||||||
| Operating lease cost | $ | $ | $ | ||||||||||||||
| Variable lease cost | |||||||||||||||||
Variable lease payments are expensed as incurred and are not included within the right of use asset and lease liability calculation. Variable lease payments primarily include costs associated with the Company’s third-party logistics arrangements that contain one or more embedded leases. Variable lease costs will fluctuate based on factory output and material receipt volumes. Short-term rental expense, for agreements less than one year in duration, were immaterial for the twelve months ended June 30, 2024, June 25, 2023, and June 26, 2022, respectively.
Supplemental cash flow information related to leases was as follows as of June 30, 2024, June 25, 2023, and June 26, 2022:
| Year Ended | |||||||||||||||||
| June 30, 2024 | June 25, 2023 | June 26, 2022 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | |||||||||||||||||
| Operating cash flows paid for operating leases | $ | $ | $ | ||||||||||||||
| Financing cash flows paid for principal portion of finance leases | |||||||||||||||||
| Right-of-use assets obtained in exchange for lease obligations: | |||||||||||||||||
| Operating leases | $ | $ | $ | ||||||||||||||
| Finance leases | |||||||||||||||||
Lam Research Corporation 2024 10-K 61
Supplemental balance sheet information related to leases was as follows as of June 30, 2024 and June 25, 2023:
| June 30, 2024 | June 25, 2023 | ||||||||||
| (in thousands) | |||||||||||
| Operating leases | |||||||||||
| $ | $ | ||||||||||
| $ | $ | ||||||||||
| Total operating lease liabilities | $ | $ | |||||||||
| Finance Leases | |||||||||||
| $ | $ | ||||||||||
| $ | $ | ||||||||||
| Total finance lease liabilities | $ | $ | |||||||||
| June 30, 2024 | June 25, 2023 | ||||||||||||||||||||||
| Weighted-Average Remaining Lease Term | Weighted-Average Discount Rate | Weighted-Average Remaining Lease Term | Weighted-Average Discount Rate | ||||||||||||||||||||
| (in years) | (in years) | ||||||||||||||||||||||
| Operating leases | % | % | |||||||||||||||||||||
| Finance leases | % | % | |||||||||||||||||||||
As of June 30, 2024, the maturities of lease liabilities are as follows:
| Operating Leases | Finance Leases | ||||||||||
| (in thousands) | |||||||||||
| 2025 | $ | $ | |||||||||
| 2026 | |||||||||||
| 2027 | |||||||||||
| 2028 | |||||||||||
| 2029 | |||||||||||
| Thereafter | |||||||||||
| Total lease payments | $ | $ | |||||||||
| Less imputed interest | ( | ( | |||||||||
| Total | $ | $ | |||||||||
Selected Leases and Related Guarantees
The Company leases some of its administrative, research and development and manufacturing facilities, regional sales/service offices, and certain equipment under non-cancelable leases. Certain of the Company’s facility leases for buildings located at its Tualatin, Oregon campus; and certain other facility leases provide the Company with options to extend the leases for additional periods or to purchase the facilities. Certain of the Company’s facility leases provide for periodic rent increases based on the general rate of inflation.
The Company elected to exercise purchase options available under its finance leases for certain improved properties in Fremont and Livermore, California (the “California Facility Leases”) in the three months ended September 24, 2023. As a result, the Company released cash collateral in an aggregate of approximately $250 298.4 million as of June 25, 2023 in the aggregate were eliminated with the extinguishment of the California Facility Leases. As a result of the purchase of the improved properties, $250.5 million of additions were made to Property and equipment, net in the Company’s Consolidated Balance Sheets primarily comprised of land ($40.5 million) and buildings and improvements ($210.0 million).
Lam Research Corporation 2024 10-K 62
Note 16: Retirement and Deferred Compensation Plans
Employee Savings and Retirement Plan
The Company maintains a 401(k) retirement savings plan for its eligible employees in the United States. Each participant in the plan may elect to contribute from 1 % to 75 % of annual eligible earnings to the plan, subject to statutory limitations. The Company makes matching employee contributions in cash to the plan at the rate of 50 % of the first 6 % of earnings contributed. Employees participating in the 401(k) retirement savings plan are fully vested in the Company matching contributions, and investments are directed by participants. The Company made matching contributions of $34.3 million, $34.7 million, and $32.6 million, in fiscal years 2024, 2023, and 2022, respectively.
Deferred Compensation Arrangements
The Company has an unfunded, non-qualified deferred compensation plan whereby executives may defer a portion of their compensation. Participants earn a return on their deferred compensation based on their allocation of their account balance among various mutual funds. The Company controls the investment of these funds, and the participants remain general creditors of the Company. Participants are able to elect the payment of benefits on a specified date at least three years after the opening of a deferral sub-account or upon retirement. Distributions are made in the form of lump sum or annual installments over a period of up to 20 years as elected by the participant. If no alternate election has been made, a lump sum payment will be made upon termination of a participant’s employment with the Company. As of June 30, 2024, and June 25, 2023, the liability of the Company to the plan participants was $385.5 million and $318.0 million, respectively, which was recorded in Accrued expenses and other current liabilities and Other long-term liabilities on the Consolidated Balance Sheets. As of June 30, 2024, and June 25, 2023, the Company had investments in the aggregate amount of $393.5 million and $318.1 million, respectively, which correlate to the deferred compensation obligations, which were recorded in Other assets on the Consolidated Balance Sheets.
Post-Retirement Healthcare Plan
The Company maintains a post-retirement healthcare plan for certain executive and director retirees. Coverage continues through the duration of the lifetime of the retiree or the retiree’s spouse, whichever is longer. The benefit obligation was $31.2 million and $33.2 million as of June 30, 2024, and June 25, 2023, respectively.
Note 17: Commitments and Contingencies
The Company has certain obligations to make future payments under various contracts; some of these are recorded on its balance sheet and some are not. Obligations that are recorded on the Company’s balance sheet include the Company’s operating and finance lease obligations. Obligations that are not recorded on the Company’s balance sheet include contractual relationships for purchase obligations and certain guarantees. The Company’s commitments relating to off-balance sheet agreements are included in the tables below. These amounts exclude $679.0 million of liabilities related to uncertain tax positions (see Note 7: Income Taxes for further discussion) as of the end of the fiscal year because the Company is unable to reasonably estimate the ultimate amount or time of settlement.
Other Guarantees
The Company has issued certain indemnifications to its lessors for taxes and general liability under some of its agreements. The Company has entered into insurance contracts that are intended to limit its exposure to such indemnifications. As of June 30, 2024, the Company had not recorded any liability on its Consolidated Financial Statements in connection with these indemnifications, as it does not believe that it is probable that any material amounts will be paid under these guarantees.
Generally, the Company indemnifies, under pre-determined conditions and limitations, its customers for infringement of third-party intellectual property rights by the Company’s products or services. The Company seeks to limit its liability for such indemnity to an amount not to exceed the sales price of the products or services subject to its indemnification obligations. The Company does not believe that it is probable that any material amounts will be paid under these guarantees.
The Company provides guarantees and standby letters of credit to certain parties as required for certain transactions initiated during the ordinary course of business. As of June 30, 2024, the maximum potential amount of future payments that the Company could be required to make under these arrangements and letters of credit was $207.9 million. The Company does not believe, based on historical experience and information currently available, that it is probable that any material amounts will be required to be paid.
In addition, the Company has entered into indemnification agreements with its directors, officers, and certain other employees, consistent with its Bylaws and Certificate of Incorporation; and under local law, the Company may be required to provide indemnification to its employees for actions within the scope of their employment. Although the Company maintains insurance contracts that cover some of the potential liability associated with these indemnification agreements, there is no guarantee that all such liabilities will be covered. The Company does not believe, based on historical experience and information currently available, that it is probable that any material amounts will be required to be paid under such indemnification agreements or statutory obligations.
Lam Research Corporation 2024 10-K 63
Purchase Obligations
Purchase obligations consist of non-cancelable significant contractual obligations either on an annual basis or over multi-year periods. The contractual cash obligations and commitments table presented below contains the Company’s minimum obligations at June 30, 2024, under these arrangements and others. For obligations with cancellation provisions, the amounts included in the following table were limited to the non-cancelable portion of the agreement terms or the minimum cancellation fee. Actual expenditures will vary based on the volume of transactions and length of contractual service provided.
The Company’s commitments related to these agreements as of June 30, 2024, were as follows:
| Payments Due by Fiscal Year: | Purchase Obligations | ||||
| (in thousands) | |||||
| 2025 | $ | ||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| Thereafter | |||||
| Purchase obligations for which timing of payment is indeterminable | |||||
| Total | $ | ||||
Transition Tax Liability
On December 22, 2017, the “Tax Cuts & Jobs Act” was signed into law. Among other items, this U.S. tax reform assessed a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred. As a result, the Company recognized a total transition tax of $868.4 million and elected to pay the one-time tax over a period of 8 years, commencing in the twelve months ended June 30, 2019. During fiscal year 2023, this one-time tax was adjusted, resulting in a total tax liability increase of approximately $50.0 million, which was spread over the same 8-year period.
The Company’s remaining obligation related to this arrangement as of June 30, 2024, were as follows:
Payments Due by Fiscal Year (1): | Transition Tax | ||||
| (in thousands) | |||||
| 2025 | $ | ||||
| 2026 | |||||
| Total | $ | ||||
(1) The Company may choose to apply existing tax credits, thereby reducing the actual cash payment.
Warranties
The Company provides standard warranties on its systems. The liability amount is based on actual historical warranty spending activity by type of system, customer, and geographic region, modified for any known differences such as the impact of system reliability improvements. As of June 30, 2024, warranty reserves totaling $22.3 million were reported in Other long-term liabilities, the remainder were included in Accrued expenses and other current liabilities in the Company’s Consolidated Balance Sheets.
Lam Research Corporation 2024 10-K 64
Changes in the Company’s product warranty reserves were as follows:
| Year Ended | ||||||||||||||
| June 30, 2024 | June 25, 2023 | |||||||||||||
| (in thousands) | ||||||||||||||
| Balance at beginning of period | $ | $ | ||||||||||||
| Warranties issued during the period | ||||||||||||||
| Settlements made during the period | ( | ( | ||||||||||||
| Changes in liability for warranties issued during the period | ( | ( | ||||||||||||
| Changes in liability for pre-existing warranties | ( | |||||||||||||
| Balance at end of period | $ | $ | ||||||||||||
Government Assistance
In the fiscal years ended June 30, 2024 and June 25, 2023, the Company received government assistance from various domestic and international governments in the form of cash grants or refundable tax credits. The Grants typically specify conditions that must be met in order for the Grants to be earned, such as employment or employee retention targets; completion of employee training; or the construction or acquisition of property and equipment and are often time-bound. If conditions are not satisfied or if the duration period for the arrangement is not met, the Grants are often subject to reduction, repayment, or termination.
During the fiscal years ended June 30, 2024 and June 25, 2023, the Company’s cash Grants were insignificant. During the fiscal years ended June 30, 2024 and June 25, 2023, the Company recognized immaterial reductions to the cost basis of acquired property and equipment related to refundable tax credits earned. This reduction in the cost basis of acquired property and equipment is recorded with a corresponding reduction to taxes payable and classified under Accrued expense and other current liabilities, or Other long-term liabilities, as appropriate, in the Consolidated Balance Sheets.
Legal Proceedings
While the Company is not currently a party to any legal proceedings that it believes material, the Company is either a defendant or plaintiff in various actions that have arisen from time to time in the normal course of business, including intellectual property claims. The Company accrues for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Judgment is required in both the determination of probability and the determination as to whether a loss is reasonably estimable. Based on current information, the Company does not believe that a material loss from known matters is probable and therefore has not recorded an accrual of any material amount for litigation or other contingencies related to existing legal proceedings.
Note 18: Stock Repurchase Program
In May 2024, the Board of Directors authorized the Company to repurchase up to an additional $10.0 billion of Common Stock; this authorization supplements the remaining balances from any prior authorizations. These repurchases can be conducted on the open market or as private purchases and may include the use of derivative contracts with large financial institutions, in all cases subject to compliance with applicable law. This repurchase program has no termination date and may be suspended or discontinued at any time.
Repurchases under the repurchase program were as follows during the periods indicated:
| Period | Total Number of Shares Repurchased | Total Cost of Repurchase (3) | Average Price Paid Per Share (1,3) | Amount Available Under Repurchase Program | |||||||||||||||||||
| (in thousands, except per share data) | |||||||||||||||||||||||
| Available balance as of June 25, 2023 | $ | ||||||||||||||||||||||
| Quarter ended September 24, 2023 | $ | $ | $ | ||||||||||||||||||||
| Quarter ended December 24, 2023 | $ | $ | $ | ||||||||||||||||||||
| Quarter ended March 31, 2024 | (2) | $ | $ | $ | |||||||||||||||||||
Board authorization, $ | $ | ||||||||||||||||||||||
| Quarter ended June 30, 2024 | (2) | $ | $ | $ | |||||||||||||||||||
(1) Average price paid per share excludes the effect of accelerated share repurchase activities. See additional disclosure below regarding the Company’s accelerated share repurchase activity during the fiscal year.
(2) Includes shares received at initial or final settlement of accelerated share repurchase agreements; see additional disclosures below regarding the Company’s accelerated share repurchase activity during the fiscal year.
Lam Research Corporation 2024 10-K 65
(3) The Company’s net share repurchases are subject to a 1% excise tax under the Inflation Reduction Act. Excise tax incurred reduces the amount available under the repurchase program, as applicable, and is included in the cost of shares repurchased in the Consolidated Statement of Stockholders’ Equity and the calculation of the average price paid per share.
In addition to the shares repurchased under the Board-authorized repurchase program shown above, the Company acquired 144 thousand shares at a total cost of $135.9 million during the 12 months ended June 30, 2024, which the Company withheld through net settlements to cover minimum tax withholding obligations upon the vesting of restricted stock unit awards granted under the Company’s equity compensation plans. The shares retained by the Company through these net share settlements are not a part of the Board-authorized repurchase program but instead are authorized under the Company’s equity compensation plan.
Accelerated Share Repurchase Agreements
On February 1, 2024, the Company entered into accelerated share repurchase agreements (the "February 2024 ASRs") with two financial institutions to repurchase a total of $700 million of Common Stock. The Company took an initial delivery of approximately 631 thousand shares, which represented 75 % of the prepayment amount divided by our closing stock price on February 1, 2024. The total number of shares received under the February 2024 ASRs was based upon the average daily volume weighted average price of the Company’s Common Stock during the repurchase period, less an agreed upon discount. Final settlement of the February 2024 ASRs occurred during April 2024, resulting in the receipt of approximately 140 thousand additional shares, which yielded a weighted-average share price of $917.38 (net of applicable excise taxes) for the transaction period.
The Company recorded the February 2024 ASRs as equity transactions; as such, at the time of receipt, shares were included in treasury stock at fair market value as of the corresponding trade date. The Company reflects shares received as a repurchase of common stock in the weighted average common shares outstanding calculation for basic and diluted earnings per share.
Note 19: Segment, Geographic Information, and Major Customers
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, while long-lived assets; which includes property and equipment, net, and recognized right of use assets reported in Other assets in the Consolidated Balance Sheets as of June 30, 2024 and June 25, 2023; are attributed to the geographic locations in which the assets are located.
Revenues and long-lived assets by geographic region were as follows:
| Year Ended | |||||||||||||||||
| June 30, 2024 | June 25, 2023 | June 26, 2022 | |||||||||||||||
| Revenue: | (in thousands) | ||||||||||||||||
| China | $ | $ | $ | ||||||||||||||
| Korea | |||||||||||||||||
| Taiwan | |||||||||||||||||
| Japan | |||||||||||||||||
| United States | |||||||||||||||||
| Southeast Asia | |||||||||||||||||
| Europe | |||||||||||||||||
| Total revenue | $ | $ | $ | ||||||||||||||
Lam Research Corporation 2024 10-K 66
| June 30, 2024 | June 25, 2023 | June 26, 2022 | |||||||||||||||
| Long-lived assets: | (in thousands) | ||||||||||||||||
| United States | $ | $ | $ | ||||||||||||||
| Southeast Asia | |||||||||||||||||
| Korea | |||||||||||||||||
| Europe | |||||||||||||||||
| Taiwan | |||||||||||||||||
| Japan | |||||||||||||||||
| China | |||||||||||||||||
| $ | $ | $ | |||||||||||||||
In fiscal year 2024, one customer accounted for approximately 17 % of total revenues. In fiscal year 2023, two customers accounted for approximately 22 % and 16 % of total revenues, respectively. In fiscal year 2022, four customers accounted for approximately 21 %, 12 %, 12 %, and 11 % of total revenues, respectively. No other customers accounted for 10% or more of total revenues.
Note 20: Business Combinations
In November 2022, the Company completed two business combination transactions acquiring the outstanding shares of two separate private companies in cash transactions collectively valued at $153.8 million as of the respective purchase dates. The Company’s assessment of acquisition date fair value of the assets acquired and liabilities assumed resulted in the recognition of $102.2 million of goodwill and $81.2 million of intangible assets; all other assets acquired and all liabilities assumed were immaterial
The following table is a summary of the fair value estimates of the identifiable intangible assets and their useful lives:
| Weighted-Average Useful Life | Estimated Purchase Date Fair Value | ||||||||||
| (in thousands) | |||||||||||
| Existing technology | $ | ||||||||||
| Customer relationships | |||||||||||
| In process research and development | Indefinite | ||||||||||
| $ | |||||||||||
Lam Research Corporation 2024 10-K 67
Note 21: Restructuring Charges, Net
The Company records employee severance and separation costs that meet the requirements for recognition in accordance with the relevant guidance of ASC 420, Exit or Disposal Cost Obligations, or ASC 712, Compensation - Non-retirement Post-employment Benefits, as applicable. For involuntary termination benefits that are not provided under the terms of an ongoing benefit arrangement, the liability for the current fair value of expected future costs associated with a management-approved restructuring plan is recognized in the period in which the plan is communicated to the employees and the plan is not expected to change significantly. For ongoing benefit arrangements, inclusive of statutory requirements, employee termination costs are accrued when the existing situation or set of circumstances indicates that an obligation has been incurred, it is probable the benefits will be paid, and the amount can be reasonably estimated. Termination benefits associated with employees that elected to voluntarily terminate as part of the restructuring plan are recorded when the employee irrevocably accepts the offer and the amount can be reasonably estimated. If applicable, the Company records such costs into operating expense over the terminated employees’ future service period beyond any minimum or legally required retention period. The majority of restructuring charges that have been incurred but not yet paid are recorded in Accrued expenses and other current liabilities in the Consolidated Balance Sheets.
During the fiscal year ended June 25, 2023, the Company initiated a restructuring plan designed to better align the Company’s cost structure with its outlook for the economic environment and business opportunities. Under the plan, through June 30, 2024, the Company terminated approximately 1,760 employees, incurring expenses related to employee severance and separation costs. Employee severance and separation costs are primarily related to severance, non-cash severance, including equity award compensation expense, pension and other termination benefits. Additionally, the Company made a strategic decision to relocate certain manufacturing activities to pre-existing facilities and incurred charges to move inventory and equipment and exit selected supplier arrangements.
During the fiscal year ended June 30, 2024, net restructuring costs of $43.4 million and $18.2 million were recorded in Restructuring charges, net - cost of goods sold, and Restructuring charges, net - operating expenses, respectively in the Consolidated Statements of Operations. During the fiscal year ended June 25, 2023, net restructuring costs of $78.2 million and $42.2 million were recorded in Restructuring charges, net - cost of goods sold, and Restructuring charges, net - operating expenses, respectively in the Consolidated Statements of Operations.
The restructuring plan is substantially complete as of June 30, 2024, and cumulative costs as of June 30, 2024 total $181.9 million.
The following table is a summary of the activity related to the restructuring plan:
| Severance and Benefits | Other | Total | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Restructuring liability as of June 26, 2022 | $ | $ | $ | ||||||||||||||
| Cash payments | ( | ( | ( | ||||||||||||||
| Non-cash activities | ( | ( | ( | ||||||||||||||
| Restructuring liability as of June 25, 2023 | $ | $ | $ | ||||||||||||||
| Cash payments | ( | ( | ( | ||||||||||||||
| Non-cash activities | ( | ( | ( | ||||||||||||||
| Restructuring liability as of June 30, 2024 | $ | $ | $ | ||||||||||||||
Lam Research Corporation 2024 10-K 68
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Lam Research Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Lam Research Corporation (the Company) as of June 30, 2024 and June 25, 2023, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended June 30, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at June 30, 2024 and June 25, 2023, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2024, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of June 30, 2024, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated August 29, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.
Lam Research Corporation 2024 10-K 69
| Inventory - Valuation | ||||||||
| Description of the Matter | The Company’s inventories totaled $4.2 billion as of June 30, 2024, representing 23% of total assets. As explained in Note 2 to the consolidated financial statements, the Company assesses the valuation of all inventories including manufacturing raw materials, work-in-process, finished goods, and spare parts in each reporting period. Inventory in excess of management’s estimated usage requirement and obsolete inventory is written down to its estimated net realizable value if less than cost. Auditing management’s estimates for excess and obsolete inventory involved subjective auditor judgment because management’s assessment of whether a write down is required and the measurement of any excess of cost over net realizable value is judgmental and considers a number of qualitative factors that are affected by market and economic conditions outside the Company’s control. | |||||||
| How We Addressed the Matter in Our Audit | We evaluated and tested the Company’s processes and the design and operating effectiveness of internal controls addressing the identified audit risks. This included controls over management’s assessment of inventory valuation, including the development of forecasted usage of inventories and consideration of how factors outside of the Company’s control might affect management’s judgment related to the valuation of excess and obsolete inventory. Our audit procedures included, among others, evaluating the significant assumptions (e.g., forecasts related to the Company’s future manufacturing schedules, customer demand, technological obsolescence, and possible alternative uses) and the underlying data used in management’s excess and obsolete inventory valuation assessment. We evaluated inventory levels compared to forecasted demand, historical sales and specific product considerations. We also assessed the historical accuracy of management’s estimates. | |||||||
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 1981.
San Jose, California
August 29, 2024
Lam Research Corporation 2024 10-K 70
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Lam Research Corporation
Opinion on Internal Control Over Financial Reporting
We have audited Lam Research Corporation’s internal control over financial reporting as of June 30, 2024, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Lam Research Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of June 30, 2024, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of June 30, 2024 and June 25, 2023, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended June 30, 2024, and the related notes and our report dated August 29, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
August 29, 2024
Lam Research Corporation 2024 10-K 71
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Design of Disclosure Controls and Procedures and Internal Control over Financial Reporting
We maintain disclosure controls and procedures and internal control over financial reporting that are designed to comply with Rule 13a-15 of the Exchange Act. In designing and evaluating the controls and procedures associated with each, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and that the effectiveness of controls cannot be absolute because the cost to design and implement a control to identify errors or mitigate the risk of errors occurring should not outweigh the potential loss caused by the errors that would likely be detected by the control. Moreover, we believe that a control system cannot be guaranteed to be 100% effective all of the time. Accordingly, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met.
Disclosure Controls and Procedures
As required by Exchange Act Rule 13a-15(b), as of June 30, 2024, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rule 13a-15(e). Based upon that evaluation, our Chief Executive Officer, along with our Chief Financial Officer, concluded that our disclosure controls and procedures are effective, as of June 30, 2024, at the reasonable assurance level.
We intend to review and evaluate the design and effectiveness of our disclosure controls and procedures on an ongoing basis and to correct any material deficiencies that we may discover. Our goal is to ensure that our senior management has timely access to material information that could affect our business.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate “internal control over financial reporting”, as that term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Management conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal Control — Integrated Framework used by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework). Based on that evaluation, management has concluded that the Company’s internal control over financial reporting was effective as of June 30, 2024, at providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.
Ernst & Young LLP, an independent registered public accounting firm, independently assessed the effectiveness of the Company’s internal control over financial reporting, as stated in their attestation report, which is included in Part II, Item 8 of this 2024 Form 10-K.
Effectiveness of Controls
While we believe the present design of our disclosure controls and procedures and internal control over financial reporting is effective at the reasonable assurance level, future events affecting our business may cause us to modify our disclosure controls and procedures or internal control over financial reporting.
Item 9B. Other Information
Rule 10b5-1 and Non-Rule 10b5-1 Trading Arrangements
During the Company’s fiscal quarter ended June 30, 2024, except for the following arrangements, none of the Company’s directors or officers adopted terminated
•On May 29, 2024 , Seshasayee (Sesha) Varadarajan , Senior Vice President , Global Products Group of the Company, adopted a Rule 10b5-1 Trading Arrangement. Mr. Varadarajan’s Rule 10b5-1 Trading Arrangement provides for: (i) the potential exercise of 3,576 stock options expiring on March 1, 2025, and the associated sale of up to 3,576 shares of the Company’s common stock resulting from such exercise, (ii) the potential exercise of 7,432 stock options expiring on March 1, 2026, and the associated sale of up to 7,432 shares of the Company’s common stock resulting from such exercise, and (iii) a gift of shares totaling approximately $150,000 on the date of execution. Mr. Varadarajan’s Rule 10b5-1 Trading Arrangement has a termination date of May 30, 2025 .
Lam Research Corporation 2024 10-K 72
The Rule 10b5-1 Trading Arrangement contains pricing conditions that preclude or limit the sale of shares below predetermined minimum prices. The Rule 10b5-1 Trading Arrangement will terminate on the earlier of: (a) its respective termination date indicated above; (b) execution of all trades or expiration of all the orders relating to such trades under the Rule 10b5-1 Trading Arrangement; or (c) such date as the Rule 10b5-1 Trading Arrangement is otherwise terminated according to its terms.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
Lam Research Corporation 2024 10-K 73
PART III
We have omitted from this 2024 Form 10-K certain information required by Part III because we, as the Registrant, will file a definitive proxy statement with the SEC within 120 days after the end of our fiscal year, pursuant to Regulation 14A, as promulgated by the SEC, for our Annual Meeting of Stockholders expected to be held on or about November 5, 2024, (the “Proxy Statement”), and certain information included in the Proxy Statement is incorporated into this report by reference.
Item 10. Directors, Executive Officers and Corporate Governance
For information regarding our executive officers, see Part I, Item 1 of this 2024 Form 10-K under the caption “Information about our Executive Officers,” which information is incorporated into Part III by reference.
The information concerning our directors required by this Item is incorporated by reference to our Proxy Statement under the heading “Voting Proposals — Proposal No. 1: Election of Directors — 2024 Nominees for Director.”
The information concerning our audit committee and audit committee financial experts required by this Item is incorporated by reference to our Proxy Statement under the headings “Governance Matters — Corporate Governance — Board Committees” and “Governance Matters — Corporate Governance — Board Committees — Audit Committee.”
The Company has adopted a Corporate Code of Ethics that applies to all employees, officers, and directors of the Company. Our Code of Ethics is publicly available on the Investor Relations page of our website at http://investor.lamresearch.com. To the extent required by law, any amendments to, or waivers from, any provision of the Code of Ethics will promptly be disclosed to the public. To the extent permitted by applicable legal requirements, we intend to make any required public disclosure by posting the relevant material on our website in accordance with SEC rules.
Item 11. Executive Compensation
The information required by this Item is incorporated by reference to our Proxy Statement under the headings “Compensation Matters — Executive Compensation and Other Information,” “Compensation Matters — CEO Pay Ratio,” and “Governance Matters — Director Compensation.”
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item is incorporated by reference to our Proxy Statement under the headings “Stock Ownership — Security Ownership of Certain Beneficial Owners and Management” and “Compensation Matters — Securities Authorized for Issuance Under Equity Compensation Plans.”
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item is incorporated by reference to our Proxy Statement under the headings “Audit Matters — Certain Relationships and Related Party Transactions” and “Governance Matters — Corporate Governance — Director Independence Policies.”
Item 14. Principal Accountant Fees and Services
The information required by this Item is incorporated by reference to our Proxy Statement under the headings “Audit Matters — Relationship with Independent Registered Public Accounting Firm –– Fees Billed by Ernst & Young LLP” and “Audit Matters –– Relationship with Independent Registered Public Accounting Firm –– Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services.”
Lam Research Corporation 2024 10-K 74
PART IV
Item 15. Exhibit and Financial Statement Schedules
(a)The following documents are filed as part of this Annual Report on Form 10-K.
| Page | |||||
1. Index to Financial Statements | |||||
| Consolidated Statements of Operations — Years Ended June 30, 2024, June 25, 2023, and June 26, 2022 | |||||
| Consolidated Statements of Comprehensive Income — Years Ended June 30, 2024, June 25, 2023, and June 26, 2022 | |||||
| Consolidated Balance Sheets — June 30, 2024, and June 25, 2023 | |||||
| Consolidated Statements of Cash Flows — Years Ended June 30, 2024, June 25, 2023, and June 26, 2022 | |||||
| Consolidated Statements of Stockholders’ Equity — Years Ended June 30, 2024, June 25, 2023, and June 26, 2022 | |||||
| Notes to Consolidated Financial Statements | |||||
| Reports of Independent Registered Public Accounting Firm | |||||
| 2. Index to Financial Statement Schedules | |||||
| Schedules have been omitted since they are not applicable, not required, not material, or the information is included elsewhere herein. | |||||
Item 16. Form 10-K Summary
None
Lam Research Corporation 2024 10-K 75
LAM RESEARCH CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED JUNE 30, 2024
EXHIBIT INDEX
| Exhibit | Description | |||||||
| 3.1 | ||||||||
| 3.2 | ||||||||
| 4.1 | ||||||||
| 4.2 | ||||||||
| 4.3 | ||||||||
| 4.4 | ||||||||
| 4.5 | ||||||||
| 4.6 | ||||||||
| 10.1* | Form of Indemnification Agreement which is incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended April 3, 1988 (SEC File No. 000-12933). | |||||||
| 10.2* | ||||||||
| 10.3* | ||||||||
| 10.4* | ||||||||
| 10.5* | ||||||||
| 10.6* | ||||||||
| 10.7* | ||||||||
| 10.8* | ||||||||
| 10.9* | ||||||||
| 10.10 | ||||||||
| 10.11* | ||||||||
| 10.12* | ||||||||
| 10.13* | ||||||||
| 10.14 | ||||||||
Lam Research Corporation 2024 10-K 76
| Exhibit | Description | |||||||
| 10.15* | ||||||||
| 10.16* | ||||||||
| 10.17* | ||||||||
| 10.18 | ||||||||
| 10.19* | ||||||||
| 10.20 | ||||||||
| 10.21* | ||||||||
| 10.22* | ||||||||
| 10.23* | ||||||||
| 10.24* | ||||||||
| 10.25* | ||||||||
| 10.26* | ||||||||
| 10.27* | ||||||||
| 10.28 | Amendment No. 1 to Second Amended and Restated Credit Agreement dated December 7, 2022, among Lam Research Corporation, as borrower, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent, which is incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed on January 30, 2023 (SEC File No. 000-12933). | |||||||
| 10.29* | ||||||||
| 10.30* | ||||||||
| 10.31* | ||||||||
| 10.32* | ||||||||
| 10.33* | ||||||||
| 10.34* | ||||||||
| 10.35* | ||||||||
| 10.36* | ||||||||
| 10.37* | ||||||||
| 10.38* | ||||||||
| 10.39* | ||||||||
Lam Research Corporation 2024 10-K 77
| Exhibit | Description | |||||||
| 10.40* | ||||||||
| 10.41* | ||||||||
| 10.42* | ||||||||
| 10.43* | ||||||||
| 10.44* | ||||||||
| 10.45* | ||||||||
| 19.1 | ||||||||
| 21 | ||||||||
| 23 | ||||||||
| 24 | Power of Attorney (See Signature page) | |||||||
| 31.1 | ||||||||
| 31.2 | ||||||||
| 32.1 | ||||||||
| 32.2 | ||||||||
| 97.1 | ||||||||
| 101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | |||||||
__________________________________
*Indicates management contract or compensatory plan or arrangement.
Lam Research Corporation 2024 10-K 78
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: | August 29, 2024 | LAM RESEARCH CORPORATION (Registrant) | |||||||||
| By: | /s/ Timothy M. Archer | ||||||||||
| Timothy M. Archer | |||||||||||
| President and Chief Executive Officer | |||||||||||
Lam Research Corporation 2024 10-K 79
POWER OF ATTORNEY AND SIGNATURES
By signing this Annual Report on Form 10-K below, I hereby appoint each of Timothy M. Archer and Douglas R. Bettinger, jointly and severally, as my attorney-in-fact to sign all amendments to this Form 10-K on my behalf and to file this Form 10-K (including all exhibits and other related documents) with the Securities and Exchange Commission. I authorize each of my attorneys-in-fact to (1) appoint a substitute attorney-in-fact for himself and (2) perform any actions that he believes are necessary or appropriate to carry out the intention and purpose of this Power of Attorney. I ratify and confirm all lawful actions taken directly or indirectly by my attorneys-in-fact and by any properly appointed substitute attorneys-in-fact.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| Signatures | Title | Date | ||||||||||||
| Principal Executive Officer | ||||||||||||||
| /s/ Timothy M. Archer | President, Chief Executive Officer and Director | August 29, 2024 | ||||||||||||
| Timothy M. Archer | ||||||||||||||
| Principal Financial Officer | ||||||||||||||
| /s/ Douglas R. Bettinger | Executive Vice President and Chief Financial Officer | August 29, 2024 | ||||||||||||
| Douglas R. Bettinger | ||||||||||||||
| Principal Accounting Officer | ||||||||||||||
| /s/ Christina C. Correia | Group Vice President and Chief Accounting Officer | August 29, 2024 | ||||||||||||
| Christina C. Correia | ||||||||||||||
| Other Directors | |||||||||||||||||
| Signatures | Title | Date | Signatures | Title | Date | ||||||||||||
| /s/ Abhijit Y. Talwalkar | Chairman | August 29, 2024 | /s/ Ho Kyu Kang | Director | August 29, 2024 | ||||||||||||
| Abhijit Y. Talwalkar | Ho Kyu Kang | ||||||||||||||||
| /s/ Sohail U. Ahmed | Director | August 29, 2024 | /s/ Bethany J. Mayer | Director | August 29, 2024 | ||||||||||||
| Sohail U. Ahmed | Bethany J. Mayer | ||||||||||||||||
| /s/ Eric K. Brandt | Director | August 29, 2024 | /s/ Jyoti K. Mehra | Director | August 29, 2024 | ||||||||||||
| Eric K. Brandt | Jyoti K. Mehra | ||||||||||||||||
| /s/ Michael R. Cannon | Director | August 29, 2024 | /s/ Lih Shyng Tsai | Director | August 29, 2024 | ||||||||||||
| Michael R. Cannon | Lih Shyng (Rick L.) Tsai | ||||||||||||||||
| /s/ John M. Dineen | Director | August 29, 2024 | /s/ Leslie F. Varon | Director | August 29, 2024 | ||||||||||||
| John M. Dineen | Leslie F. Varon | ||||||||||||||||
Lam Research Corporation 2024 10-K 80
Exhibit 10.26
Executive Severance Policy
EXECUTIVE SEVERANCE POLICY
Amended and Restated Effective May 15, 2024
This Executive Severance Policy (this “Policy”) is adopted by the Board of Directors (the “Board”) of Lam Research Corporation, a Delaware corporation (the “Company”) and is amended and restated with an effective date of May 15, 2024. It is intended to comply with ERISA and with all other applicable laws.
I.DEFINITIONS
The following terms referred to in this Policy shall have the following meanings:
Cause. “Cause” shall mean: (1) an Executive’s willful and continued failure to perform the duties and responsibilities of his or her position after there has been delivered to the Executive a written demand for performance from the Board which describes the basis for the Board’s belief that the Executive has not substantially performed his or her duties and responsibilities and provides the Executive with thirty (30) days to take corrective action; (2) any act of personal dishonesty knowingly taken by an Executive in connection with his or her responsibilities as an employee of the Company with the intention or reasonable expectation that such action may result in substantial financial enrichment of the Executive; (3) an Executive’s conviction of, or plea of guilty or nolo contendere to, any felony; (4) a willful and knowing act by an Executive which constitutes gross misconduct, including any act by the Executive for which the U.S. Securities & Exchange Commission has precluded the Executive from performing his or her duties; (5) a willful breach of a material confidentiality or non-compete obligation of the Executive to the Company; or (6) a willful breach by an Executive of a material provision of a Company policy or procedure (including, without limitation, any of the Company’s policies and procedures prohibiting harassment). Termination for Cause shall not be deemed to have occurred unless, by the affirmative vote of all of the members of the Board (excluding the Executive and any person who reports to the Executive, if applicable), at a meeting called and held for that purpose (after reasonable notice to the Executive and his or her counsel and after allowing the Executive and his or her counsel to be heard before the Board), a resolution is adopted finding that in the good faith opinion of such Board members the Executive was guilty of conduct set forth in (1), (2), (3), (4), (5) or (6) of this definition, specifying the particulars thereof.
Change in Control. “Change in Control” shall mean the occurrence of any of the following events:
(1) Any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended, but excluding any person or group as such terms are used in Rule 13d-1(b) under the Exchange Act) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing forty percent (40%) or more of the total voting power represented by the Company’s then outstanding voting securities;
(2) A change in the composition of the Board occurring within a two-year period, as a result of which sixty percent (60%) or fewer of the directors are Incumbent
Executive Severance Policy
Directors. “Incumbent Directors” shall mean directors who either (A) are directors of the Company as of the effective date of this Policy, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company);
(3) The consummation of a merger or consolidation of the Company with any other corporation, other than through a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or the stockholders of the Company approve a plan of complete liquidation of the Company; or the consummation of a sale or disposition by the Company of all or substantially all the Company’s assets (other than to a subsidiary or subsidiaries); or
(4) Any other event as determined by the independent members of the Board, in the discretion of the independent members of the Board.
Combined Programs. “Combined Programs” means any short-term or long-term variable compensation program offered by the Company to its executive officers generally (and which are currently the Annual Incentive Program and the Long-Term Incentive Program). “Combined Programs” does not include any other one-time equity or cash award. “Combined Programs” does include any guaranteed payment that is part of an annual compensation program for the Executive.
Disability. “Disability” shall mean that an Executive is unable to engage in any substantial gainful activity by reasons of any readily determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuing period of not less than twelve (12) months. A Disability must be certified by a physician approved by the Company. The date of Disability is the date on which the Disability is incurred.
ERISA. The Employee Retirement Income Security Act of 1974, as amended.
Executive. An “Executive” for the purpose of this Policy shall include any position defined by this Policy as a Tier 1 Executive or Tier 2 Executive.
Involuntary Termination. “Involuntary Termination” shall mean:
(1) a material reduction in the scope of an Executive’s duties or responsibilities (other than for Cause or as a result of death or Disability) combined with (i) in the case of the CEO, the Executive’s ceasing to report directly to the board of directors of a public company, or (ii) in the case of all other Executives other than the CEO, the Executive’s ceasing to report directly to the chief executive officer of a public company;
(2) a material reduction in an Executive’s base salary and benefits package, other than (A) a reduction in base salary which is part of, and generally consistent with, a general
- 2 -
Executive Severance Policy
reduction of salaries of all executive officers of the Company and of any party acquiring control of the Company in a Change in Control, or (B) a change in the Executive's benefits package that continues to provide the Executive with comparable benefits to those enjoyed prior to the change;
(3) a material reduction by the Company in an Executive’s current Target Total Direct Compensation, other than: (A) any such reduction applicable to all executive officers of the Company and any party acquiring control of the Company in a Change in Control generally or (B) any such reduction resulting from a drop in the Company’s stock price. For purposes of the foregoing, Target Total Direct Compensation means current annual base salary plus current annual benefits plus current annual target amounts under the Combined Programs, and to the extent that Target Total Direct Compensation includes equity awards, the value of such equity shall be determined at the time of grant;
(4) the relocation of the Company’s principal executive office to a location more than fifty (50) miles from its present location but only if the Executive is required to change his or her principal place of employment to such new location;
(5) any termination of an Executive’s employment by or at the request of the Company other than for Cause, Disability or death;
(6) the failure of the Company to obtain the assumption of this Policy by any successors contemplated in this Policy; or
(7) any material breach by the Company of any material provision of this Policy;
provided, however, that:
(i)none of the foregoing actions shall constitute Involuntary Termination if the Executive has agreed thereto; and
(ii)except with respect to an event described in paragraph (5) above, the foregoing actions shall constitute Involuntary Termination only if and to the extent that (x) within 90 days of the occurrence of the events giving rise to an Involuntary Termination, the Executive provides written notice to the Company setting forth in reasonable detail such facts which the Executive believes constitute Involuntary Termination, and (y) any circumstances constituting Involuntary Termination remain uncured for a period of thirty (30) days following the Company’s receipt of such written notice (the “Company Cure Period”), and (z) the Termination Date occurs within one hundred and eighty (180) days following the initial existence of the event giving rise to an Involuntary Termination.
Policy Administrator. “Policy Administrator” means the Compensation and Human Resources Committee of the Board, except with respect to any provisions of the Policy pertaining to the Chief Executive Officer, in which case the independent members of the Board shall have the powers of the Policy Administrator.
- 3 -
Executive Severance Policy
Termination Date. Except as may otherwise be provided for in the event of a Change in Control, “Termination Date” shall mean:
(1) In the case of a termination for Cause, the last day of the thirty (30) day notice period, unless the reason for such termination is curable pursuant to the cure provision set forth in the definition of Cause (the “Cure Provision”) and is cured by the Executive prior to the end of the thirty (30) day period;
(2) In the case of a Company-initiated Involuntary Termination, the last day of the notice period required under section II.2(A)(ii), or such earlier date at which the Company waives notice and pays the Executive in lieu of such notice;
(3) In the case of an Executive’s Voluntary Resignation or of an Involuntary Termination initiated by an Executive, the last day of the applicable notice period required under section II.2(B)(ii) or section II.2(B)(i), as applicable, or such earlier date at which the Company waives notice and pays the Executive in lieu of such notice;
(4) In the case of an Executive’s death, the date of such death; and
(5) In the case of an Executive’s Disability, the date of such Disability.
Notwithstanding the foregoing, in the event of an Involuntary Termination that would provide benefits in connection with an Acquisition as set forth in Section V.2 of this Policy, if the Termination Date would otherwise have occurred prior to the Acquisition, the Termination Date shall take place on the date of the Acquisition so that the benefits will not accrue unless the Acquisition occurs. If more than one Termination Date may apply, then the priority provisions of Section II.3 of this Policy shall determine which Termination Date controls. All payments under this Policy will be calculated as of the applicable Termination Date unless otherwise agreed to in writing by the Company. The Company and the Executive shall take all steps necessary to ensure that any termination described in this Policy constitutes a “separation from service” within the meaning of Section 409A of the Internal Revenue Code (the “Code”), and notwithstanding anything to the contrary, the date on which such separation from service takes place shall be the Termination Date.
Tier 1 Executive. A “Tier 1 Executive” for the purpose of this Policy shall include only the following positions:
(1)the CEO;
(2)the President; or
(3)any Executive Vice President.
For avoidance of doubt, these refer only to corporate titles, not to any regional titles.
Tier 2 Executive. A “Tier 2 Executive” for the purpose of this Policy shall include only the following positions:
- 4 -
Executive Severance Policy
(1)any Senior Vice President; and
(2)such other individuals as are identified by the Policy Administrator.
Voluntary Resignation. “Voluntary Resignation” shall mean an Executive’s termination of his or her employment at any time, for any reason, by the Executive, other than by reason of Involuntary Termination, death or Disability.
II.NATURE AND TERMINATION OF EXECUTIVE’S EMPLOYMENT
1. At will employment. Executives are “at will” employees of the Company and either the Company or an Executive may terminate such Executive’s employment at any time, for any reason, or for no reason, with or without Cause. This Policy does not guarantee employment to the Executive, it only specifies what compensation will be paid to the Company’s Executives in certain circumstances.
2. Termination of employment. An Executive’s employment with the Company may be terminated as follows:
(A) By the Company.
(i) The Company may terminate the Executive’s employment for Cause by giving the Executive thirty (30) days’ advance written notice, subject, however, to the Cure Provision.
(ii) The Company may terminate the Executive’s employment with the Company for any reason other than Cause, death or Disability, by giving the Executive ninety (90) days’ advance notice in writing. The Company may choose to pay the Executive the compensation the Executive would have otherwise received during such ninety (90) day period in lieu of providing such notice. Such a termination shall be regarded as an Involuntary Termination of the Executive. Any waiver of notice shall be valid only if it is made in writing and expressly refers to the applicable notice requirement of this Section.
(B) By the Executive.
(i) Involuntary Termination. The Executive may terminate his or her employment with the Company by reason of Involuntary Termination by giving the Company thirty (30) days’ advance written notice, subject, however, to the Company’s ability to cure any Involuntary Termination event during the Company Cure Period defined in this Policy.
(ii) Voluntary Resignation. The Executive may tender his or her Voluntary Resignation by giving the Company ninety (90) days’ advance written notice, which period may be waived or reduced at the Company’s option. The Executive’s Employment shall terminate at the end of the notice period or such shorter period as reduced by the Company. Any waiver or reduction of notice shall be valid only if it is made in writing or by electronic mail.
(C) By Death. The Executive’s employment shall terminate immediately in the event of his or her death.
- 5 -
Executive Severance Policy
(D) By Disability. The Executive’s employment shall terminate immediately in the event of his or her Disability.
3. Priority of Rights and Obligations upon Termination. If any event leading to or permitting termination of an Executive’s employment, or providing notice thereof, occurs at approximately the same time as any other termination event or during any termination notice period, and those events invoke different notice periods or different severance or other benefit arrangements, the deadlines, obligations, rights and benefits applicable to the termination event having the highest priority shall control. The priority of termination events (from highest to lowest priority) is as follows: (1) termination for Cause; (2) Voluntary Resignation; (3) Involuntary Termination; (4) Disability; and (5) death. For example, if an Executive gives notice of his or her Voluntary Resignation and, before the 90 day notice period has expired, he or she is subject to an Involuntary Termination, only the rights and benefits available to him or her for Voluntary Resignation apply since the provisions governing Voluntary Resignation have a higher priority than those applicable to Involuntary Termination. Similarly, if the Executive has been subject to an Involuntary Termination and dies during the notice period, he or she shall have the rights and benefits available to his or her estate as one subject to an Involuntary Termination.
III.EXPENSES AND COMPANY PAYMENTS
1.Reimbursement of Business Expenses. Upon Termination for any reason, the Company shall reimburse an Executive for all reasonable and necessary business expenses incurred by the Executive in the performance of his or her duties to the Company upon proper submission of expense reports in accordance with Company policies regarding such reimbursement. Such reimbursement obligation applies regardless of any reason for terminating the Executive’s employment.
2. Compensation Recovery. Except for the reimbursement of business expenses, any amount that is paid to an Executive by the Company under this Policy shall be subject to any applicable Company compensation recovery policy, as existing at the time of Termination of the Executive’s employment.
IV. BENEFITS UPON A CHANGE IN CONTROL
If a Change in Control (as defined in this Policy) occurs, and an Involuntary Termination of an Executive’s employment occurs during the Change in Control Protection Period (as defined in the Company’s Executive Change in Control Policy), the Executive shall be entitled to receive only the benefits described in the Company’s Executive Change in Control Policy. To the extent the Company’s Executive Change in Control Policy provides for benefits to an Executive in the event of a Change in Control, such Executive is entitled to receive such benefits pursuant to the Executive Change in Control Policy only and is not entitled to any such benefits pursuant to this Policy.
V. SEVERANCE BENEFITS OTHER THAN IN A CHANGE IN CONTROL
1. Benefits; Miscellaneous. In the event of any termination of an Executive’s employment at any time, (a) the Company shall pay the Executive any unpaid base salary due for
- 6 -
Executive Severance Policy
periods through the Termination Date; and (b) any amounts due to the Executive under Section III.1 of this Policy. These payments shall be made promptly at the Company’s next scheduled payroll date or such earlier time as may be required by law.
2. Benefits in Connection with an Acquisition. If, during the term of this Policy, the Company acquires any other corporation, whether by merger, purchase of a majority of shares, purchase of substantially all of the assets, or other reorganization (an “Acquisition”), and an Involuntary Termination of an Executive’s employment occurs during the period starting on the date of the initial public announcement of the Acquisition and ending on the date that is twenty-four (24) months following the consummation of the Acquisition, then:
(A) Within sixty (60) days following the Termination Date, the Company shall pay the Executive a lump sum equal to the sum of:
(i) A multiple of base salary (without giving effect to any salary reduction program then in effect) equal to
(a) two (2) times annual base salary for the CEO and
(b) one and one-half (1 ½) times annual base salary for other Executives, plus
(ii) Any unpaid reasonable and necessary business expenses incurred by the Executive in the performance of his or her duties to the Company upon proper submission of expense reports in accordance with Company policies regarding such reimbursement, plus
(iii) the product of (x) 2.0 for the CEO and 1.5 for other Executives, times (y) an amount equal to the average of the annual short-term variable compensation program (currently the Annual Incentive Program and together with any future short-term variable compensation program, collectively hereinafter referred to as the “Short-Term Program”) payments earned by the Executive from the Company over the last five (5) years in which the Executive was employed with the Company on December 31st of such year (the “Five-Year Average Amount”)1, plus
(iv) a pro-rata amount (based on the number of full calendar months worked during the calendar year during which the Termination Date occurs) of the Five-Year Average Amount.
(B) If at the Termination Date, payment has not been made under the Short-Term Program that was in effect during the calendar year prior to the year in which the Termination Date occurs, the Company shall pay to the Executive, not later than March 15th of
1 If there are fewer than five years in which the Executive was employed with the Company on December 31st of such year, then the average shall be computed based on such fewer number of years. If the Executive received a partial year Short-Term Program payment in any year included in the Five-Year Average Amount due to being a new hire, such partial year payment shall be annualized for purposes of the calculation of the Five-Year Average Amount. Any guaranteed bonus payment paid to the Executive shall be included in the calculation of the Five-Year Average Amount, unless such payment was a one-time event (such as a sign-on bonus for a new hire).
- 7 -
Executive Severance Policy
the year in which the Termination Date occurs, the full amount he or she would have earned under such prior-year program (based on the corporate performance results achieved under such program but assuming individual performance at the lesser of (i) the target level and (ii) the average of the individual performance results for the other Executives under the prior-year program), as if his or her employment had not been terminated.
(C) If the Executive qualifies for participation in the Company’s Retiree Health Plan prior to the Termination Date, then the Executive will receive the benefits he or she qualifies for under the Retiree Health Plan or, if such plan has been terminated prior to the Termination Date, within sixty (60) days following the Termination Date, the Company shall pay the Executive a lump sum amount (the “Medical Plan Payment”) equal to the present value of the benefits for which the Executive qualified prior to the termination of such plan. The present value of such benefits shall be determined actuarially based on the actual cost of replacing the benefits as of the Termination Date. If the Executive does not qualify for participation in the Retiree Health Plan prior to the Termination Date, within sixty (60) days following the Termination Date, the Company shall pay in a lump sum any COBRA premiums the Executive would be required to pay for the COBRA benefits selected by the Executive for twelve (12) months after the Executive’s Termination Date if the Executive has provided less than twenty (20) years of service to the Company and for eighteen (18) months after the Executive’s Termination Date if the Executive has provided twenty (20) or more years of service to the Company. All Company 401(k) Plan benefits, Elective Deferred Compensation Plan benefits and other benefits not specifically addressed in this Policy shall be treated in accordance with the terms of such plans and benefits.
(D) The unvested portion(s) of any stock options or Restricted Stock Units (“RSUs”) that are solely service-based, and which were granted to the Executive prior to the Acquisition, shall automatically be accelerated in full so as to become completely vested as of the Termination Date.
(i) The Company will issue the shares underlying the RSUs within sixty (60) days of the Termination Date.
(ii) The stock options vested under this paragraph (D) shall remain exercisable for two years following the Termination Date unless they are earlier exercised or expire pursuant to their original terms.
(E) For any Market-Based Performance RSU (which is a type of RSU provided by the Company to the Executive with the number of shares paid based on the relative performance of the total stockholder return of the Company’s common stock compared to that of a designated comparison group )(“mPRSU”) or performance-based RSU (which is a performance-based RSU other than a mPRSU)(“PRSU”) awards outstanding at the time of the Acquisition, the mPRSU and/or PRSU shall be converted into a cash payment (the “Acquisition Cash Payment”). The number of mPRSUs that convert into the Acquisition Cash Payment shall be the sum of the “performance pro rata” number of shares and the “target pro rata” number of shares, each determined as specified below. This sum shall be multiplied by the closing price of the Company’s common stock as of the closing date of the Acquisition to determine the dollar
- 8 -
Executive Severance Policy
amount of the Acquisition Cash Payment. The Acquisition Cash Payment shall be paid out to the Executive within sixty (60) days following the Termination Date. Any remaining portion of the mPRSUs that are not converted into an Acquisition Cash Payment shall be cancelled. For the avoidance of doubt, mPRSUs and PRSUs shall not receive the treatment outlined in subsection (D), which applies to stock options and RSUs that are solely service-based.
(i) Performance Pro Rata. The Target Number of mPRSUs/PRSUs (as set forth in the mPRSU/PRSU Award Agreement) shall be multiplied by the total number of days from the first day of the Performance Period (as defined in the mPRSU/PRSU Award Agreement) until the earlier of the closing date of the Acquisition or the last day of the Performance Period divided by the number of days in the Performance Period (“Elapsed Target Shares”). The Company’s performance under the Vesting Formula (as set forth in the mPRSU/PRSU Award Agreement) from the first day of the Performance Period until the closing date of the Acquisition shall be applied to the Elapsed Target Shares to determine the “performance pro rata” number of shares.
(ii) Target Pro Rata. The Target Number of mPRSUs/PRSUs (as set forth in the mPRSU/PRSU Award Agreement) shall be multiplied by the total number of days from the day following the closing date of the Acquisition until the last day of the Performance Period (but not less than zero) divided by the number of days in the Performance Period to determine the “target pro rata” number of Shares.
3. Benefits Other Than in Connection with a Change in Control or Acquisition. In the event of a termination other than one covered by the Company’s Executive Change in Control Policy or one covered by Section V.2 above, an Executive shall be entitled to severance benefits that vary depending upon the reason for termination; provided that the Executive signs the Company’s then current settlement and release agreement and abides by all of its contractual obligations. Such benefits shall be as follows (and no other benefits shall be provided):
(A) Voluntary Resignation Severance Benefits. If an Executive’s employment terminates due to his or her Voluntary Resignation, he or she shall receive the following benefits under this Policy, subject to its terms and conditions.
(i) Base salary shall cease on the Termination Date.
(ii) The Executive shall not be entitled to any payment following termination under the Short-Term Program that is in effect during the calendar year in which the Termination Date occurs.
(iii) If, at the Termination Date, payment has not been made under the Short-Term Program that was in effect during the calendar year prior to the year in which the Termination Date occurs, the Policy Administrator shall have discretion to approve the Company’s payment to the Executive of any or all of the amount the Executive would have earned under such prior-year program had the Executive’s employment not been terminated, if recommended by the CEO (or, in the case that the terminating executive is the CEO, by the Compensation and Human Resources Committee of the Board). Any such payment shall be made not later than March 15th of the year in which the Termination Date occurs. In the absence
- 9 -
Executive Severance Policy
of such approval by the Policy Administrator, the Executive shall not be entitled to any payment following termination under the Short-Term Program that was in effect during the calendar year prior to the year in which the Termination Date occurs.
(iv) All medical and health benefits shall cease on the Termination Date, except as specified in any then existing Retiree Health Plan for which the Executive qualifies or as required under applicable law. All Company 401(k) Plan benefits, Elective Deferred Compensation Plan benefits, COBRA benefits and other benefits not specifically addressed in this Policy shall be treated in accordance with the terms of such plans and benefits.
(v) Stock options will cease to vest on the Termination Date and will be cancelled ninety (90) days after the Termination Date (unless they are exercised or expire pursuant to their terms before cancellation, or unless the award agreement for such stock options provides for a longer post-termination exercise period). RSUs (whether service-based, mPRSUs, PRSUs or otherwise) will be cancelled on the Termination Date.
(B) Involuntary Termination Severance Benefits. If a Tier 1 Executive’s employment terminates due to his or her Involuntary Termination, he or she shall receive the following benefits under this Policy, subject to any terms and conditions set forth herein. For the avoidance of doubt, if a Tier 2 Executive’s employment terminates due to his or her Involuntary Termination, he or she shall not receive any benefits under this Section V.3(B).
(i) Within sixty (60) days following the Termination Date, the Company shall pay (x) to the CEO, a lump sum equal to one and one-half (1 ½) times his or her current base salary (without giving effect to any salary reduction program then in effect) or, to any other Executive governed by this Policy, one (1) year of his or her current base salary (without giving effect to any salary reduction program then in effect), plus (y) an amount equal to the Five-Year Average Amount for the CEO or one-half of the Five-Year Average Amount to any other Executive.
(ii) At the time that the Company makes payments to other executive officers under the Short-Term Program that is in effect during the calendar year in which the Termination Date occurs (or if none, then no later than March 15th in the year following the Termination Date), the Company shall pay the Executive a pro-rata portion of the amount he or she would have earned under such program had his or her employment continued until the end of such calendar year, such pro-rata portion to be calculated based on the corporate performance results achieved under such program for the full calendar year (but assuming individual performance at the lesser of (1) the target level and (2) the average of the individual performance results for the other Executives under such program for the full calendar year) and the number of full calendar months elapsed prior to the Termination Date.
(iii) If, at the Termination Date, payment has not been made under the Short-Term Program that was in effect during the calendar year prior to the year in which the Termination Date occurs, the Company shall pay to the Executive, not later than March 15th of the year in which the Termination Date occurs, the full amount he or she would have earned under such prior-year program (based on the corporate performance results achieved under such program but assuming individual performance at the lesser of (1) the target level and (2) the
- 10 -
Executive Severance Policy
average of the individual performance results for the other Executives under the prior-year program), as if his or her employment had not been terminated.
(iv) If the Executive qualifies for participation in the Company’s Retiree Health Plan prior to the Termination Date, then the Executive will receive the benefits he or she qualifies for under the Retiree Health Plan or, if such plan has been terminated prior to the Termination Date, within sixty (60) days following the Termination Date, the Company shall pay the Executive the Medical Plan Payment. The present value of such benefits shall be determined actuarially based on the actual cost of replacing the benefits as of the Termination Date. If the Executive does not qualify for participation in the Retiree Health Plan prior to the Termination Date, within sixty (60) days following the Termination Date, the Company shall pay in a lump sum any COBRA premiums the Executive would be required to pay for the COBRA benefits selected by Executive for twelve (12) months after the Executive’s Termination Date if Executive has provided less than twenty (20) years of service to the Company and for eighteen (18) months after the Executive’s Termination Date if the Executive has provided twenty (20) or more years of service to the Company. All Company 401(k) Plan benefits, Elective Deferred Compensation Plan benefits and other benefits not specifically addressed in this Policy shall be treated in accordance with the terms of such plans and benefits.
(v) For any stock options/RSUs that are solely service-based, and which were granted to the Executive twelve (12) months or more before the Termination Date, a number of shares shall vest (and for stock options, become exercisable as of the Termination Date) such that the total number of shares vested on the Termination Date shall equal a pro-rata percentage of the total number of shares subject to such grant (based on the number of full months of service during the vesting schedule)2. The stock options shall remain exercisable for two years following the Termination Date unless they are earlier exercised or expire pursuant to their original terms or unless they are exchanged for cash in connection with any Change in Control. The Company will issue the shares underlying the RSUs to the Executive within sixty (60) days following the Termination Date. In addition, the Policy Administrator may, in its discretion, accelerate the vesting of additional stock options or RSUs held by the Executive.
(vi) In the event of an Involuntary Termination prior to the Performance Vesting Date (as defined in the mPRSU/PRSU Award Agreement), a portion of the mPRSUs/PRSUs shall convert into a cash payment (the “Involuntary Termination Cash Payment”). The Involuntary Termination Cash Payment shall be determined by multiplying the Target Number of mPRSUs/PRSUs (as set forth in the mPRSU/PRSU Award Agreement) by the total number of days from the first day of the Performance Period (as defined in the mPRSU/PRSU Award Agreement) until the earlier of (i) the Termination Date or (ii) the last day of the Performance Period, divided by the number of days in the Performance Period (as defined in the mPRSU/PRSU Award Agreement) (the “Termination Target Shares”). The Company’s
2 For example, if a stock option has a four (4) year vesting schedule where 25% of the options vest on each anniversary of the grant date, an Executive whose Termination Date is twenty-seven (27) months and a day after grant will already have vested in 50% of the total option, and will vest in an additional 6.25% (3/48) of the total option by virtue of this section. No additional vesting shall occur beyond this additional amount. For the avoidance of doubt, a “full month worked” for a date of grant occurring on the 15th day of a month will occur when service is provided through the 14th day of the following month. Any fractional shares will be rounded down to the nearest whole share.
- 11 -
Executive Severance Policy
performance under the Vesting Formula (as set forth in the mPRSU/PRSU Award Agreement) from the first day of the Performance Period until the earlier of (i) the Termination Date or (ii) the last day of the Performance Period shall be determined using the Termination Target Shares in lieu of the Target Number of mPRSUs/PRSUs to determine the number of shares to convert into the Involuntary Termination Cash Payment. This number of shares shall be multiplied by the closing price of the Company’s common stock as of the Termination Date to determine the dollar amount of the Involuntary Termination Cash Payment. The Involuntary Termination Cash Payment will be paid to the Executive within sixty (60) days following the Termination Date. Any remaining portion of the mPRSUs/PRSUs that are not converted into an Involuntary Termination Cash Payment shall be cancelled.
For the avoidance of doubt, mPRSUs/PRSUs shall not receive the treatment outlined in subpart (B)(v) for stock options and RSUs that are solely service-based.
(C) Severance Benefits following a termination for Cause. If an Executive’s employment is terminated for Cause, he or she shall receive the following benefits under this Policy, subject to its terms and conditions.
(i) If the Executive is terminated for Cause, base salary shall cease on the Termination Date.
(ii) The Executive shall not be entitled to any payment following termination under the Short-Term Program that is in effect during the calendar year in which the Termination Date occurs.
(iii) The Executive shall not be entitled to any payment following termination under the Short-Term Program that was in effect during the calendar year prior to the year in which the Termination Date occurs.
(iv) All medical and health benefits shall cease on the Termination Date, except as specified in any then existing Retiree Health Plan for which the Executive qualifies or as required by applicable law. All Company 401(k) Plan benefits, Elective Deferred Compensation Plan benefits and other benefits not specifically addressed in this Policy shall be treated in accordance with the terms of such plans and benefits.
(v) Stock options will cease to vest on the Termination Date and any vested options will be cancelled thirty (30) days after the Termination Date (unless they are exercised or expire pursuant to their terms before cancellation). RSUs, mPRSUs, PRSUs will be cancelled on the Termination Date.
(D) Death Severance Benefits. If an Executive’s employment terminates due to his or her death, the following benefits shall be payable under this Policy, subject to its terms and conditions.
(i) The Executive’s base salary shall terminate immediately on the date of his or her death.
- 12 -
Executive Severance Policy
(ii) At the time that the Company makes payments to other executive officers under the Short-Term Program that is in effect during the calendar year in which the Termination Date occurs, the Company shall pay the Executive’s estate a pro-rata portion of the amount he or she would have earned under such program had his or her employment continued until the end of such calendar year, such pro-rata portion to be calculated based on the corporate performance results achieved under such program for the full calendar year (but assuming individual performance at the lesser of (1) the target level and (2) the average of the individual performance results for the other Executives under such program for the full calendar year) and the number of full calendar months elapsed prior to the Termination Date.
(iii) If, at the Termination Date, payments have not been made under the Short-Term Program that was in effect during the calendar year prior to the year in which the Termination Date occurs, the Company shall pay to the Executive’s estate, not later than March 15th of the year in which the Termination Date occurs, the full amount he or she would have earned under such prior-year program (based on the corporate and individual performance results achieved under such program), as if his or her employment had not been terminated.
(iv) If the Executive is a Tier 1 Executive and the Tier 1 Executive qualifies for participation in the Company’s Retiree Health Plan prior to the Termination Date, then the Tier 1 Executive’s eligible dependents will receive the benefits they qualify for under the Retiree Health Plan, or if such plan has been terminated prior to the Termination Date, within sixty (60) days following the Termination Date, the Company shall pay the eligible dependents the Medical Plan Payment. If the Tier 1 Executive does not qualify for participation in the Retiree Health Plan prior to the Termination Date, within sixty (60) days following the Termination Date, the Company shall pay in a lump sum any COBRA premiums the Tier 1 Executive’s estate would be required to pay for the COBRA benefits selected by the Tier 1 Executive’s estate for the Tier 1 Executive’s eligible dependents for twelve (12) months after the Tier 1 Executive’s Termination Date if the Tier 1 Executive has provided less than twenty (20) years of service to the Company and for eighteen (18) months after the Tier 1 Executive’s Termination Date if the Tier 1 Executive has provided twenty (20) or more years of service to the Company. All Company 401(k) Plan benefits, Elective Deferred Compensation Plan benefits and other benefits not specifically addressed in this Policy (including, without limitation, life insurance provided by the Company) shall be treated in accordance with the terms of such plans and benefits.
(v) Any stock options/RSUs that are solely service-based, and which are granted to the Executive before the Termination Date, shall be accelerated in full so as to become completely vested as of the Termination Date. The stock options shall remain exercisable for two years following the Termination Date unless they are earlier exercised or expire pursuant to their original terms, or unless they are exchanged for cash in connection with any Change in Control. The Company will issue the shares underlying the RSUs to the Executive’s estate within sixty (60) days following the Termination Date. In addition, the Policy Administrator may, in its discretion, accelerate the vesting of additional stock options or RSUs held by the Executive.
(vi) A portion of the mPRSUs/PRSUs shall vest on the Termination Date. To determine the applicable vesting, the Company’s performance under the Vesting
- 13 -
Executive Severance Policy
Formula (as set forth in the mPRSU/PRSU Award Agreement) from the first day of the Performance Period until the earlier of (i) the Termination Date or (ii) the last day of the Performance Period shall be determined using the original Target Number of mPRSUs/PRSUs (as set forth in the mPRSU/PRSU Award Agreement), to determine the number of shares (rounded down to the nearest whole share) which shall be paid to the Executive’s estate within sixty (60) days of the Termination Date. Any remaining unvested portion of the mPRSUs/PRSUs shall be cancelled.
(E) Disability Severance Benefits. If an Executive’s employment terminates due to his or her Disability, he or she shall receive the following benefits under this Policy, subject to its terms and conditions.
(i) An Executive’s base salary shall cease when his or her employment terminates based on his or her Disability.
(ii) At the time that the Company makes payments to other executive officers under the Short-Term Program that is in effect during the calendar year in which the Termination Date occurs, the Company shall pay the Executive a pro-rata portion of the amount he or she would have earned under such program had his or her employment continued until the end of such calendar year, such pro-rata portion to be calculated based on the corporate performance results achieved under such program for the full calendar year (but assuming individual performance at the lesser of (1) the target level and (2) the average of the individual performance results for the other Executives under such program for the full calendar year) and the number of full calendar months elapsed prior to the Termination Date.
(iii) If, at the Termination Date, payments have not been made under the Short-Term Program that was in effect during the calendar year prior to the year in which the Termination Date occurs, the Company shall pay the Executive, not later than March 15th of the year in which the Termination Date occurs, the full amount he or she would have earned under such prior-year program (based on the corporate and individual performance results achieved under such program), as if his or her employment had not been terminated.
(iv) If the Executive is a Tier 1 Executive and the Tier 1 Executive qualifies for participation in the Company’s Retiree Health Plan prior to the Termination Date, then the Tier 1 Executive will receive the benefits he or she qualifies for under the Retiree Health Plan or, if such plan has been terminated prior to the Termination Date, within sixty (60) days following the Termination Date, the Company shall pay the Tier 1 Executive the Medical Plan Payment. If the Tier 1 Executive does not qualify for participation in the Retiree Health Plan prior to the Termination Date, within sixty (60) days following the Termination Date, the Company shall pay in a lump sum any COBRA premiums the Tier 1 Executive would be required to pay for the COBRA benefits selected by the Tier 1 Executive for twelve (12) months after the Executive’s Termination Date if the Tier 1 Executive has provided less than twenty (20) years of service to the Company and for eighteen (18) months after the Tier 1 Executive’s Termination Date if the Tier 1 Executive has provided twenty (20) or more years of service to the Company. All Company 401(k) Plan benefits, Elective Deferred Compensation Plan benefits and other benefits not specifically addressed in this Policy (including, without limitation any
- 14 -
Executive Severance Policy
disability insurance benefits provided by the Company) shall be treated in accordance with the terms of such plans and benefits.
(v) Any stock options/RSUs that are solely service-based, and which are granted to the Executive before the Termination Date, shall be accelerated in full so as to become completely vested as of the Termination Date. The stock options shall remain exercisable for two years following the Termination Date unless they are earlier exercised or expire pursuant to their original terms, or unless they are exchanged for cash in connection with any Change in Control. The Company will issue the shares underlying such RSUs to the Executive within sixty (60) days following the Termination Date. In addition, the Policy Administrator may, in its discretion, accelerate the vesting of additional stock options or RSUs held by the Executive.
(vi) A portion of the mPRSUs/PRSUs shall vest on the Termination Date. To determine the applicable vesting, the Company’s performance under the Vesting Formula (as set forth in the mPRSU/PRSU Award Agreement) from the first day of the Performance Period until the earlier of (i) the Termination Date or (ii) the last day of the Performance Period shall be determined using the original Target Number of mPRSUs/PRSUs (as set forth in the mPRSU/PRSU Award Agreement), to determine the number of shares (rounded down to the nearest whole share) which shall be paid to the Executive within sixty (60) days of the Termination Date. Any remaining unvested portion of the mPRSUs/PRSUs shall be cancelled.
VI. SUCCESSORS
1.Company’s Successors. The Company shall require a successor to the Company (whether direct or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) or to all or substantially all of the Company’s business and/or assets (each a “Successor Company”) to assume the Company’s obligations under this Policy and agree expressly to perform such obligations in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession, and provide a copy of such agreement to each Executive. For all purposes under this Policy, the term “Company” shall include any Successor Company which executes and delivers the assumption agreement described in this subsection 1, or which becomes bound by the terms of this Policy by operation of law.
2.Executive’s Successors. The terms of this Policy and all rights of an Executive hereunder shall inure to the benefit of, and be enforceable by, the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.
VII. NOTICE
1. General. Notices and all other communications contemplated by this Policy shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by Federal Express or a comparable air courier company. In the case of an Executive, notices sent by courier shall be addressed to him or her at the home address that he or she most recently communicated to the Company in writing. In the case of the Company, notices sent by
- 15 -
Executive Severance Policy
courier shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its Chief Legal Officer.
2. Notice of Termination. Any termination of an Executive by the Company for Cause, and any notice of Involuntary Termination of an Executive by the Company pursuant to section II.2(A)(ii), shall be communicated by a notice to the Executive as provided above, and any termination by an Executive as a result of a Voluntary Resignation or any Involuntary Termination shall be communicated by a notice to the Company as provided above. Such notice shall (i) indicate the specific termination provision in this Policy relied upon, (ii) set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and (iii) specify the Termination Date.
VIII. CONFIDENTIALITY AND NON-COMPETE AGREEMENTS
All payments and benefits under this Policy are conditional upon an Executive’s performance in all material respects of any and all confidentiality and non-compete obligations that he or she may have with the Company, including those provided for in the Company’s standard settlement and release agreement.
IX.CLAIMS AND APPEALS PROCEDURES
1. Claim for Benefits. An Executive who believes he or she is entitled to benefits under this Policy in an amount greater than the amount received may file, or have his or her duly authorized representative file, a claim with the Policy Administrator. Any such claim shall be filed in writing stating (i) the nature of the claim, (ii) the facts supporting the claim, (iii) the amount claimed and (iv) the name and address of the claimant. The Policy Administrator shall consider the claim and answer in writing stating whether the claim is granted or denied. The written decision shall be within 90 days of receipt of the claim by the Policy Administrator (or 180 days if additional time is needed and the claimant is notified of the extension, the reason therefor and the expected date of determination prior to commencement of the extension). If the claim is denied in whole or in part, the Executive shall be furnished with a written notice of such denial containing (i) the specific reasons for the denial, (ii) a specific reference to the Policy provisions on which the denial is based, (iii) an explanation of the Policy’s appeal procedures set forth in subsection 2 below, (iv) a description of any additional material or information which is necessary for the Executive to submit or perfect an appeal of his or her claim, and (v) an explanation of the Executive’s right to submit his or her claim to arbitration or to bring suit under ERISA following receipt of an adverse decision issued by the arbitrator.
2. Appeal. If an Executive wishes to appeal the denial of his or her claim, the Executive or his or her duly authorized representative shall file a written notice of appeal to the Policy Administrator within 90 days of receiving notice of the claim denial. In order that the Policy Administrator may expeditiously decide such appeal, the written notice of appeal should contain (i) a statement of the ground(s) for the appeal, (ii) a specific reference to the Policy provisions on which the appeal is based, (iii) a statement of the arguments and authority (if any) supporting each ground for appeal, and (iv) any other pertinent documents or comments which the appellant desires to submit in support of the appeal. The Policy Administrator shall decide the appellant’s appeal within 60 days of its receipt of the appeal (or 120 days if additional time is
- 16 -
Executive Severance Policy
needed and the claimant is notified of the extension, the reason therefore and the expected date of determination prior to commencement of the extension). The Policy Administrator’s written decision shall contain the reasons for the decision and reference to the Policy provisions on which the decision is based. If the claim is denied in whole or in part, such written decision shall also include notification of the Executive’s right to submit his or her claim to arbitration or to bring suit for benefits under Section 502(a) of ERISA following receipt of an adverse decision issued by the arbitrator, and the Executive’s right to obtain, upon request and free of charge, reasonable access to and copies of all documents, records or other information relevant to the claim for benefits.
X. ARBITRATION
Upon exhaustion of the claims and appeals procedures set forth in Section IX, at the option of the Company or an Executive, any and all disputes or controversies whether of law or fact and of any nature whatsoever arising from or respecting this Policy shall be decided by arbitration under the rules of the American Arbitration Association in accordance with the rules and regulations of that Association with the exception of any claim for temporary, preliminary or permanent injunctive relief arising from or respecting the Executive’s invention assignment, confidentiality or non-compete obligations to Company which may be brought by the Company in any court of competent jurisdiction irrespective of the Executive’s desire to arbitrate such a claim.
The arbitrator shall be selected as follows. In the event the Company and the Executive agree on one arbitrator, the arbitration shall be conducted by such arbitrator. If the parties cannot agree on an arbitrator, the Company and the Executive shall each select one independent, qualified arbitrator and the two arbitrators so selected shall select the third arbitrator. The Company reserves the right to object to any individual arbitrator who shall be employed by or affiliated with a competing organization.
Arbitration shall take place in San Jose, California, or any other location mutually agreeable to the parties. At the request of either party, arbitration proceedings will be conducted in the utmost secrecy; in such case all documents, testimony and records shall be received, heard and maintained by the arbitrators in secrecy under seal, available for the inspection only by the Company and the Executive and their respective attorneys and their respective experts who shall agree in advance and in writing to receive all such information confidentially and to maintain such information in secrecy unless and until such information shall become generally known. The arbitrator, who, if more than one, shall act by majority vote, shall have the power and authority to decree any and all relief of an equitable nature including, but not limited to, such relief as a temporary restraining order, a temporary and/or permanent injunction, and shall also have the power and authority to award damages, with or without an accounting and costs, provided, that punitive damages shall not be awarded, and provided, further, that the Executive shall be entitled to reimbursement for his or her reasonable attorney’s fees to the extent he or she prevails as to the material issues in such dispute. The reimbursement of attorney’s fees shall be made promptly following delivery of an invoice therefor. The decree or judgment of an award rendered by the arbitrators may be entered in any court having jurisdiction thereof.
- 17 -
Executive Severance Policy
In any such arbitration, the arbitrator(s) may authorize subpoenas to be issued to the parties or to third parties for the production of evidence that the arbitrator(s) deem relevant and appropriate to the scope of the arbitration.
Reasonable notice of the time and place of arbitration shall be given to all persons, other than the parties, as shall be required by law, in which case such persons or those authorized representatives shall have the right to attend and/or participate in all the arbitration hearings in such a manner as the law shall require.
XI.EXCISE TAX ON PAYMENTS
Notwithstanding anything to the contrary contained herein, in the event that any payment by the Company to or for the benefit of an Executive, whether paid or payable, would be subject to the excise tax imposed by Section 4999 of the Code or any comparable federal, state, or local excise tax (such excise tax, together with any interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then the Executive shall receive either the full severance amount or a lesser amount that does not trigger an excise tax, whichever produces a greater after-tax benefit to the Executive, as determined by the Company.
XII.MISCELLANEOUS PROVISIONS
1. Duty to Mitigate. An Executive shall not be required to mitigate the amount of any payment contemplated by this Policy, nor shall any such payment be reduced by any earnings that the Executive may receive from any other source.
2. Amendment. This Policy and the documents expressly referred to herein may be altered, modified, or amended by formal action of the Policy Administrator and/or the Board, or the Policy Administrator may determine at any time that an Executive is no longer eligible to receive benefits under this Policy; provided however, that any such amendment or determination of eligibility that would adversely affect an individual who is receiving or entitled to receive benefits under this Policy at the time of such amendment or determination due to such individual’s service as an Executive will not be applicable without such individual’s consent until the later of (i) eighteen months following the date of such amendment or determination, or (ii) the end of the Change In Control Protection Period (as defined in the Company’s Executive Change in Control Policy) during which such amendment or determination occurs. No course of conduct or action shall amend the written terms of this Policy. Nothing herein affects the continued enforceability of either the Company’s Employment, Confidential Information and Invention Assignment Agreement previously executed by an Executive, or an Executive’s Indemnification Agreement with the Company. Any benefit amounts referenced as payable to an Executive pursuant to this Policy are the sole and exclusive amounts payable to the Executive for the category of benefit addressed by such amounts; provided, however, that this Policy shall not limit any right of an Executive to receive any payments or benefits under an employee benefit or employee compensation plan of the Company, initially adopted prior to or after the date hereof, which are expressly contingent thereunder upon the occurrence of a Change in Control (including, but not limited to, the acceleration of any rights or benefits thereunder).
- 18 -
Executive Severance Policy
3. Choice of Law. The validity, interpretation, construction and performance of this Policy shall be governed by the laws of the state of California, without regard to conflicts of law provisions thereof.
4. Severability. If any provision of this Policy is determined to be invalid or unenforceable, the Policy shall remain in full force and effect as to the remaining provisions, and the Policy Administrator shall, in its discretion, replace the invalid or unenforceable provision with one which reflects the parties’ original intent in agreeing to the invalid/unenforceable one.
5. No Assignment of Benefits. Except as otherwise provided herein, the rights of any person to payments or benefits under this Policy shall not be made subject to option or assignment, either by voluntary or involuntary assignment or by operation of law, including (without limitation) bankruptcy, garnishment, attachment or other creditor’s process, and any action in violation of this provision shall be void.
6. Withholding Taxes. The Company may withhold from any amounts payable under this Policy such Federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation.
7. Section 409A of the Code. Notwithstanding anything herein to the contrary, if at the time of an Executive’s termination of employment with the Company, the Company has determined that the Executive is a “specified employee” as defined in Section 409A of the Code and any severance payments and benefits to the Executive under this Policy are considered a “deferral of compensation” under Section 409A of the Code (the “Deferred Payments”), such Deferred Payments that are otherwise payable within the first six months following the Termination Date will become payable on the first business day of the seventh month following the Executive’s Termination Date, or if earlier the date of the Executive’s death. In the event that payments under this Policy are deferred pursuant to this Section XII.7, then such payments shall be paid at the time specified in this Section XII.7 without interest. The Company shall consult with the Executive in good faith regarding the implementation of the provisions of this Section XII.7; provided, however that neither the Company nor any of its employees or representatives shall have any liability to the Executive with respect thereto. Any amount under this Policy that satisfies the requirements of the “short-term deferral” rule set forth in Section 1.409A-1(b)(4) of the Treasury Regulations will not constitute Deferred Payments for purposes of this Policy. Any amounts scheduled for payment hereunder when they are ordinarily paid out or when they are made to other executive officers, will nonetheless be paid to the Executive on or before March 15th of the year following the year when the payment is no longer subject to a substantial risk of forfeiture. For purposes of Section 409A of the Code, the right to a series of installment payments under this Policy shall be treated as a right to a series of separate payments, and references herein to the Executive’s termination of employment shall refer to the Executive’s separation from services with the Company within the meaning of Section 409A of the Code. Notwithstanding anything to the contrary herein, except to the extent any expense, reimbursement or in-kind benefit provided pursuant to this Policy does not constitute a “deferral of compensation” within the meaning of Section 409A of the Code: (x) the amount of expenses eligible for reimbursement or in-kind benefits provided to the Executive during any calendar year will not affect the amount of expenses eligible for reimbursement or in-kind benefits provided to
- 19 -
Executive Severance Policy
the Executive in any other calendar year, (y) the reimbursements for expenses for which the Executive is entitled to be reimbursed shall be made on or before the last day of the calendar year following the calendar year in which the applicable expense is incurred, and (z) the right to payment or reimbursement or in-kind benefits hereunder may not be liquidated or exchanged for any other benefit.
8. Company Release. As a condition to the Company’s obligations pursuant to this Policy, each Executive agrees to execute a release of claims against the Company (the “Release”), substantially in the form attached hereto as Exhibit A, by the fifty-third (53rd) day following the Executive’s Termination Date. Except in the case of an Executive’s death or incapacity due to a Disability, if the Company has not received an irrevocable Release by the sixtieth (60th) day following the Termination Date, the Company shall be under no obligation to make payments or provide benefits under this Policy; provided such sixty (60) day period shall be tolled during the pendency of any arbitration proceeding under this Policy. In the event of an Executive’s death or incapacity due to a Disability, the Company may withhold benefits until the Executive’s estate or legal representative signs an Agreement acceptable to the Policy Administrator which waives claims for additional compensation from the Company. In the event one or more of the provisions of the Release should, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of the Release, and the Release shall be construed as if such invalid, illegal or unenforceable provision had never been contained therein.
9. Whistleblower Laws and Governmental Investigations. Nothing in this Policy prevents the Executive from providing, without prior notice to the Company, information to governmental authorities regarding possible legal violations or otherwise testifying or participating in any investigation or proceeding by any governmental authorities regarding possible legal violations.
10. Foreign Laws. The Policy Administrator shall administer the Policy with respect to all Non-US Participants in a manner designed to comply with applicable law while preserving the benefits provided under the Policy and avoiding duplication of benefits.
- 20 -
EXHIBIT A
COMPANY RELEASE
LAM RESEARCH CORPORATION RELEASE
This Release (“Release”) constitutes a binding agreement between you, ______[EMP NAME]______, Lam Employee No. ___[EE I.D.]___, and Lam Research Corporation (“Lam” or “the Company”). Please review the terms carefully. We advise you to consult with an attorney concerning its terms.
1.This Release is provided to Lam pursuant to Lam’s Executive Severance Policy (the “Policy”). You understand that if you choose not to sign this Release, as provided in the Policy, Lam has no obligation to make any payments or provide any benefits provided in the Policy.
2.You understand that your obligations under the Confidential Information and Invention Assignment Agreement, or similarly titled agreement, you signed at the beginning of or during your employment with Lam are ongoing and binding and survive the termination of your employment with Lam, regardless of whether you sign this Release.
3.If you agree to this Release, you will be eligible to receive the payments and benefits provided in the Policy. You must sign and return this Release within fifty-three (53) days, and it must become irrevocable (as discussed in Sections 4.E. and 8 below), within sixty (60) days of your Termination Date (as defined in the Policy). You may, at your discretion, sign and return the Release sooner. You are hereby advised to consider the terms of this Release and consult with an attorney of your choice prior to executing this Release. Lam is under no obligation to pay any amounts or provide any benefits under the Policy until such release is irrevocable. Lam will make such payments and provide such benefits under the Policy as soon as practicable, in accordance with the terms of the Policy and in accordance with IRC Section 409A and accompanying Treasury Regulations (although Lam makes no representation about any specific tax treatment applicable to you). Neither Lam nor you shall have the right to accelerate or defer the delivery of any payments or provision of any benefits except as specifically permitted or required by Section 409A.
4.In exchange for and in consideration of the payments and benefits provided for in the Policy, you agree to, and agree to abide by, the following terms:
A.Release. You hereby waive and release, and promise never to assert, any and all claims, except workers compensation or unemployment compensation claims, that you have, or may have at any time, against Lam and its predecessors, successors, past, present or future affiliated corporations or other legal entities, including, without limitation, any past, present, or future corporate parents, subsidiaries, commonly-controlled entities, or merger-related affiliates, and their respective officers, directors, shareholders, agents, attorneys, employees, benefit plans, successors, or assigns (collectively “Released Parties”) at all or, specifically, arising from or related to your employment with Lam and/or the termination of your employment with Lam, from the first date of your employment with Lam through your separation date. These claims include, but are not limited to, all claims arising under federal, state, and/or local statutory or common law, including, but not limited to, claims of wrongful or constructive discharge or demotion, breach of contract (written, oral or implied), breach of the covenant of good faith and fair dealing, violation of public policy, wages, bonuses, or any other claims of compensation, defamation, personal injury, emotional distress, claims under Title VII of the 1964 Civil Rights Act, as amended, the California Fair Employment and Housing Act (or comparable provision under any other state’s law), Oregon Revised Statutes §§ 174.100, 652.140, 652.355, and 659A.030 (or comparable provisions under any other state’s law), the Arizona Civil Rights Act, the Arizona Equal Pay Acts, California Labor Code Section 1197.5 (or comparable provision under any other state’s law), the Texas Civil Rights laws including, without limitation, Texas Labor Code Ch. 21 et al., Texas Administrative Code Ch. 821 et al., and the City of Austin, TX Employment Ordinance; the New York Human Rights Law and other New York civil rights laws including (but not limited to) N.Y. Exec. Law Secs. 292, 296 (including subparts); New York Labor Laws including N.Y. Labor Law Secs. 161, 162, 191-194, 704, 860 (including subparts), N.Y. Compensation Codes, the Equal Pay Act of 1963,the Age Discrimination in Employment Act of 1967, as amended, the Older Workers Benefit Protection Act (OWBPA), the Americans with Disabilities Act (ADA), the Civil Rights Act of 1866, the Family and Medical Leave Act (FMLA), the federal Worker Adjustment and Retraining Notification (WARN) Act and any WARN act under applicable state law, California Labor Code
Section 1400 et seq., and any other laws, regulations, or ordinances relating to employment or employment discrimination, and the laws of contract and tort, to the full extent permitted by law. You are, through this Release, releasing the Company and the Released Parties from any and all claims you may have against the Company or the Released Parties, including claims under the Age Discrimination in Employment Act of 1967, 29 U.S.C. §621, et seq. (ADEA) with the exception of (i) your right to receive the payments provided for in, or to enforce, the Policy and (ii) any claims you may have pursuant to any written agreement, the Company’s certificate of incorporation or bylaws, or as mandated by statute, to indemnification as a director or officer of the Company; further, rights or claims under the Age Discrimination in Employment Act that may arise after the date this Release is executed are not waived.
You understand and agrees that you are waiving the right to any monetary recovery in connection with any complaint or charge that you may file with an administrative agency, except with respect to any monetary recovery under the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Sarbanes-Oxley Act of 2002.
B.Release of Unknown Claims. You agree to waive and release and promise never to assert any claims or potential claims that you might have against the Released Parties, whether or not you know or might have reason to know of such claims or potential claims or of the facts potentially giving rise to any such claims or potential claims. Specifically, you agree to waive, and by executing this Release do waive, your rights under section 1542 of the Civil Code of California, or comparable provision of another state’s law as may be applicable to you, which states:
A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known by him or her, would have materially affected his or her settlement with the debtor or released party.
C.Acknowledgment of 21-Day Consideration Period: If you are 40 years of age or older, you acknowledge and agree that you have been given at least 21 days to consider the terms of this Release before signing it1. You knowingly and voluntarily waive the remainder of the 21-day consideration period, if any, following the date (as indicated below) you sign this Release. You affirm that you have not been asked by the Company to shorten your time period for consideration of whether to sign this Release. You affirm that the Company has not proposed to withdraw or alter the payments or benefits due to you prior to the expiration of the 21-day period nor has the Company offered different terms to you in exchange for an agreement that you will sign this Release prior to the expiration of the 21-day consideration period. You understand that by your having waived some portion of the 21-day consideration period, the Company may expedite the processing of some of the payments or benefits provided to you in reliance upon your signing this Release.
D.No Re-Start of Consideration Period: You agree that any changes to this Release or to the payments or benefits and terms offered or that may be offered to you after your initial receipt of this Release, whether any such changes (individually or collectively) are material or immaterial, do not and shall not restart the running of the consideration period.
E.Right to Revoke: You understand that if you sign this Release, you can change your mind and revoke it within seven days after signing it by returning it with written revocation notice to the Company in the manner described in the notice provision of the Policy. You understand that the release and waiver set forth above will not be effective until after this seven-day period has expired.
F.Binding Agreement: You understand that following the seven-day revocation period, this Release will be final and binding. You promise that you will not pursue any claim that you have settled by this
1 Insert 45 day Consideration Period in circumstances required by law.
Release. If you break this promise, you agree to pay all of the Company’s and Released Parties’ costs and expenses (including reasonable attorneys’ fees) related to the defense of any claims. This promise not to sue does not apply to claims that you may have under the OWBPA and the ADEA. Although you are releasing claims that you may have under the OWBPA and the ADEA, you understand that you may challenge the knowing and voluntary nature of this release under the OWBPA and the ADEA before a court, the Equal Employment Opportunity Commission (EEOC), the National Labor Relations Board (NLRB), or any other federal, state or local agency charged with the enforcement of any employment laws. You understand, however, that if you pursue a claim against the Company or a Released Party under the OWBPA and/or the ADEA, a court has the discretion to determine whether the Company or a Released Party is entitled to restitution, recoupment, or set off (hereinafter “reduction”) against a monetary award obtained by you in the court proceeding. A reduction never can exceed the amount you recover, or the consideration you received for signing this Release, whichever is less. You also recognize that the Company and the Released Parties may be entitled to recover costs and attorney’s fees incurred by the Company and the Released Parties as specifically authorized under this Section F and applicable law. You agree to pay all of the Company’s and Released Parties’ costs and expenses (including reasonable attorneys’ fees) related to the defense of any OWBPA or ADEA claims in the event that you do not recover more in damages than was offered pursuant to the Policy, to the extent permitted by applicable law. You further understand that nothing in this Release generally prevents you from filing a charge or complaint with or from participating in an investigation or proceeding conducted by the EEOC, NLRB, or any other federal, state or local agency charged with the enforcement of any employment laws, although by signing this Release you are waiving your right to individual relief based on claims asserted in such a charge or complaint. Nothing in this Release shall be construed to waive any right that is not subject to waiver by private agreement under federal, state or local laws, such as claims for workers compensation, unemployment benefits or indemnity as required by applicable law, including California Labor Code section 2802 for California employees.
G.Authorization for Deductions from Paychecks and Other Payments. As permitted by law, you hereby authorize Lam to deduct and withhold from your paychecks and from any other payments of cash compensation due to you (excluding any amounts that qualify as “deferral compensation” within the meaning of Section 409A of the Internal Revenue Code), from the date of this Release forward, any and all amounts you may, from time to time, owe to Lam for any reason, including (without limitation) loans or advances to you, reimbursement of contractually due signing bonus or relocation benefit repayments, amounts due under a promissory note, taxes or tax withholding paid or to be paid by Lam on your behalf. If you owe Lam monies as documented in a promissory note or other written agreement, any repayment via authorized deduction under this paragraph G will be applied to the outstanding balance due pursuant to the repayment terms of that document.
H.Confidentiality of Terms of this Release. You agree not to disclose to any other person or entity any information regarding the terms of this Release, or the amounts of any payments or benefits being made to or provided under it, or the fact that they are being made or provided, except that you may disclose such information to your immediate family (spouse, children, or parents), attorney, accountant, or other professional advisor to whom you must make the disclosure in order for such person to render professional services to you, or as you otherwise may be compelled by law or permitted by the terms of this Release. You will instruct any such persons to whom you make such disclosures, however, to maintain the confidentiality of such information, consistent with your obligations to maintain its confidentiality hereunder. To the extent provided by law, nothing herein prohibits you from disclosing facts relating to any claim or potential claim that you are releasing by this Release regarding the Released Parties. In addition, nothing in this Paragraph prevents you from engaging in conduct protected by Section 7 of the National Labor Relations Act, such as lawful discussions about wages, hours, or working conditions, nor does it prevent you from discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination or any other conduct that you have reason to believe is unlawful.
I.Payment is Contingent on Your Return of Lam Property. You are required to timely return all Lam property in your possession or custody to Lam on or about your last day of active work, including,
without limitation, your: Lam laptop(s) and computer(s); cell phone(s); data storage devices (such as thumb drives, zip drives, or other memory devices); any other Lam devices or equipment; badge(s); corporate credit card(s); hard-copy or physical materials such as notebooks, project and work files, meeting materials, training materials, and any other printed or electronic information that is Lam property. Your receipt of the payments and benefits provided in the Policy is expressly contingent on your compliance with this obligation. If you delay or fail to comply, Lam will withhold and will not deliver to you any of the payments and benefits provided in the Policy, unless and until you return all Lam property to Lam.
J.Non-Solicitation. You agree, for the period extending six (6) months after your Termination Date (as defined in the Policy), that you will not directly induce or attempt to influence any employee of the Company to leave its employ and join any company, business, agency, partnership or entity engaged in a business competitive with the Company in or within 50 miles of Fremont, California. You agree that the Company would suffer an irreparable injury if you were to breach the covenant contained in this section and that the Company would by reason of such breach or threatened breach be entitled to injunctive relief in a court of appropriate jurisdiction, and you hereby stipulate to the entering of such injunctive relief prohibiting you from engaging in such breach. If any of the restrictions contained in this section shall be deemed to be unenforceable by reason of the extent, duration or geographical scope or other provisions thereof, then the parties hereto contemplate that the court shall reduce such extent, duration, geographical scope or other provisions hereof (but only to the extent necessary to render such restrictions enforceable) and then enforce this section in its reduced form for all purposes in the manner contemplated hereby.
K.Non-Disparagement. You hereby agree that you will not disparage, criticize, slander, or libel Lam or any of the Released Parties or any of their products, technologies, policies, actions, employees, officers, or agents, to any third party or person, including, without limitation, any supplier, customer, or prospective customer or business partner of Lam. Nothing in this Paragraph prevents you from engaging in conduct protected by Section 7 of the National Labor Relations Act, such as lawful discussions about wages, hours, or working conditions, nor does it prevent you from discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination or any other conduct that you have reason to believe is unlawful.
L.Excise Tax on Payments. To the extent the Company determines that any payment by the Company to or for your benefit would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code or any comparable federal, state, or local excise tax (such excise tax, together with any interest and penalties, are hereinafter collectively referred to as the “Excise Tax”) and that you would receive a greater after-tax benefit by receiving, in lieu of the full severance amount, a lesser amount that does not trigger the Excise Tax, you hereby agree that you will not challenge the Company’s determination as described above, and you further agree that you will not challenge the amount so determined by the Company as providing the greater after-tax benefit to you.
5.To accept this Release, please sign and date it below and provide it to the Company in the manner described in the notice provision of the Policy. If your Release is not executed and returned within 53 days and irrevocable within 60 days from the Termination Date (as defined in the Policy), the offer of the payments and benefits described in the Policy shall automatically expire and this offer shall be deemed revoked.
6.In the event that you breach any of your obligations under this Release or as otherwise imposed by law, Lam will be entitled to recover the payments and benefits paid under the Policy and to obtain all other relief provided by law or equity. Lam’s rights and remedies arising hereunder are cumulative of any and all other rights or remedies Lam may have in the event of a breach of this Release by you.
7.By signing this Release, you acknowledge that you have had the opportunity to review this Release carefully with an attorney of your choice concerning its terms and effect, and that the waivers, settlement, and releases made herein are knowing, voluntary, informed, and consensual.
8.You understand that once you have signed this Release, you have an additional seven (7) days to revoke your acceptance by submitting a written notice of your revocation to the Company in the manner described in the notice provision of the Policy. If you do not revoke your acceptance within seven (7) days of your acceptance, the Release will be deemed effective, binding and enforceable. Please note that this means your executed Release must be received by the Chief Legal Officer of the Company, within 53 days of Termination Date (as defined in the Policy) or the Company shall be under no obligation to make the payments or provide the benefits under the Policy.
9.This Release shall be construed and enforceable in all respects pursuant to California law, notwithstanding conflict of laws considerations or the preference, policy or law of any other jurisdiction or forum; provided, however, that if your employment with the Company is located on a regular basis in a State other than California, then this Agreement and Release shall be construed and enforceable pursuant to the law of the State where you were employed. For example, if your place of employment is in Oregon, then Oregon law governs this Agreement and Release. Any dispute or action arising from or related to this Release shall be brought in federal or California state court located in the County of Santa Clara, California, and in no other jurisdiction or venue. The invalidity or unenforceability of any provision(s) of this Release shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect.
I, THE UNDERSIGNED, HAVE BEEN ADVISED IN WRITING THAT I HAVE HAD AT LEAST TWENTY-ONE (21) DAYS TO CONSIDER THIS RELEASE AND TO CONSULT WITH AN ATTORNEY CONCERNING ITS TERMS AND EFFECT PRIOR TO EXECUTING THIS RELEASE.
I, THE UNDERSIGNED, HAVE READ THIS RELEASE, UNDERSTAND ITS TERMS, AND UNDERSTAND THAT I ENTER THIS RELEASE INTENDING TO AND DO WAIVE, SETTLE AND RELEASE ALL CLAIMS I HAVE OR MIGHT HAVE AGAINST THE COMPANY AND/OR THE RELEASED PARTIES TO THE FULL EXTENT PERMITTED BY LAW. I SIGN THIS RELEASE VOLUNTARILY AND KNOWINGLY.
ACKNOWLEDGED, UNDERSTOOD AND AGREED ON BEHALF OF LAM RESEARCH CORPORATION:
___________________________________ ___________________________________________
[EMP NAME] Mary Hassett
Senior Vice President, Global Human Resources
Date: ______________________________ Date: ______________________________
Exhibit 10.27
Executive Change in Control Policy
EXECUTIVE CHANGE IN CONTROL POLICY
Amended and Restated Effective May 15, 2024
This Executive Change in Control Policy (this “Policy”) is adopted by the Board of Directors (the “Board”) of Lam Research Corporation, a Delaware corporation (the “Company”) and is amended and restated with an effective date of May 15, 2024. It is intended to comply with ERISA and with all other applicable laws.
I.DEFINITIONS
The following terms referred to in this Policy shall have the following meanings:
Cause. “Cause” shall mean: (1) an Executive’s willful and continued failure to perform the duties and responsibilities of his or her position after there has been delivered to the Executive a written demand for performance from the Board which describes the basis for the Board’s belief that the Executive has not substantially performed his or her duties and responsibilities and provides the Executive with thirty (30) days to take corrective action; (2) any act of personal dishonesty knowingly taken by an Executive in connection with his or her responsibilities as an employee of the Company with the intention or reasonable expectation that such action may result in substantial financial enrichment of the Executive; (3) an Executive’s conviction of, or plea of guilty or nolo contendere to, any felony; (4) a willful and knowing act by an Executive which constitutes gross misconduct, including any act by the Executive for which the U.S. Securities & Exchange Commission has precluded the Executive from performing his or her duties; (5) a willful breach of a material confidentiality or non-compete obligation of the Executive to the Company; or (6) a willful breach by an Executive of a material provision of a Company policy or procedure (including, without limitation, any of the Company’s policies and procedures prohibiting harassment). Termination for Cause shall not be deemed to have occurred unless, by the affirmative vote of all of the members of the Board (excluding the Executive and any person who reports to the Executive, if applicable), at a meeting called and held for that purpose (after reasonable notice to the Executive and his or her counsel and after allowing the Executive and his or her counsel to be heard before the Board), a resolution is adopted finding that in the good faith opinion of such Board members the Executive was guilty of conduct set forth in (1), (2), (3), (4), (5) or (6) of this definition, specifying the particulars thereof.
Change in Control. “Change in Control” shall mean the occurrence of any of the following events:
(1) Any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended, but excluding any person or group as such terms are used in Rule 13d-1(b) under the Exchange Act) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing forty percent (40%) or more of the total voting power represented by the Company’s then outstanding voting securities;
(2) A change in the composition of the Board occurring within a two-year period, as a result of which sixty percent (60%) or fewer of the directors are Incumbent
Executive Change in Control Policy
Directors. “Incumbent Directors” shall mean directors who either (A) are directors of the Company as of the effective date of this Policy, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company);
(3) The consummation of a merger or consolidation of the Company with any other corporation, other than through a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or the stockholders of the Company approve a plan of complete liquidation of the Company; or the consummation of a sale or disposition by the Company of all or substantially all the Company’s assets (other than to a subsidiary or subsidiaries); or
(4) Any other event as determined by the independent members of the Board, in the discretion of the independent members of the Board.
Change in Control Protection Period. “Change in Control Protection Period” shall mean the period starting on the date of the initial public announcement of a Change in Control and ending on the date of the earlier of (a) the initial public announcement that the Change in Control will not occur and (b) the date that is twenty-four (24) months following the Change in Control. For purposes of clarity, the Change in Control Protection Period prior to a Change in Control applies to a Termination Date (as defined for an Involuntary Termination) that is scheduled to occur on or after the date of the initial public announcement of a Change in Control but prior to the date of such Change in Control. In addition, the Change in Control Protection Period following a Change in Control applies to a notice of the Involuntary Termination (in accordance with Section VII.2) that is given or received by the Company, as applicable, within twenty-four (24) months following the Change in Control.
Combined Programs. “Combined Programs” means any short-term or long-term variable compensation program offered by the Company to its executive officers generally (and which are currently the Annual Incentive Program and the Long-Term Incentive Program). “Combined Programs” does not include any other one-time equity or cash award. “Combined Programs” does include any guaranteed payment that is part of an annual compensation program for the Executive.
Disability. “Disability” shall mean that an Executive is unable to engage in any substantial gainful activity by reasons of any readily determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuing period of not less than twelve (12) months. A Disability must be certified by a physician approved by the Company. The date of Disability is the date on which the Disability is incurred.
ERISA. The Employee Retirement Income Security Act of 1974, as amended.
- 2 -
Executive Change in Control Policy
Executive. An “Executive” for the purpose of this Policy shall include only the following positions:
(1)the Chief Executive Officer (“CEO”);
(2)the President;
(3)any Executive Vice President;
(1)any Senior Vice President; and
(2)such other individuals as are identified by the Policy Administrator.
Involuntary Termination. “Involuntary Termination” shall mean:
(1) a material reduction in the scope of an Executive’s duties or responsibilities (other than for Cause or as a result of death or Disability) combined with (i) in the case of the CEO, the Executive’s ceasing to report directly to the board of directors of a public company, or (ii) in the case of all other Executives other than the CEO, the Executive’s ceasing to report directly to the chief executive officer of a public company;
(2) a material reduction in an Executive’s base salary and benefits package, other than (A) a reduction in base salary which is part of, and generally consistent with, a general reduction of salaries of all executive officers of the Company and of any party acquiring control of the Company in a Change in Control, or (B) a change in the Executive's benefits package that continues to provide the Executive with comparable benefits to those enjoyed prior to the change;
(3) a material reduction by the Company in an Executive’s current Target Total Direct Compensation, other than: (A) any such reduction applicable to all executive officers of the Company and any party acquiring control of the Company in a Change in Control generally or (B) any such reduction resulting from a drop in the Company’s stock price. For purposes of the foregoing, Target Total Direct Compensation means current annual base salary plus current annual benefits plus current annual target amounts under the Combined Programs, and to the extent that Target Total Direct Compensation includes equity awards, the value of such equity shall be determined at the time of grant;
(4) the relocation of the Company’s principal executive office to a location more than fifty (50) miles from its present location but only if the Executive is required to change his or her principal place of employment to such new location;
(5) any termination of an Executive’s employment by or at the request of the Company other than for Cause, Disability or death;
(6) the failure of the Company to obtain the assumption of this Policy by any successors contemplated in this Policy; or
- 3 -
Executive Change in Control Policy
(7) any material breach by the Company of any material provision of this Policy;
provided, however, that:
(i)none of the foregoing actions shall constitute Involuntary Termination if the Executive has agreed thereto; and
(ii)except with respect to an event described in paragraph (5) above, the foregoing actions shall constitute Involuntary Termination only if and to the extent that (x) within 90 days of the occurrence of the events giving rise to an Involuntary Termination, the Executive provides written notice to the Company setting forth in reasonable detail such facts which the Executive believes constitute Involuntary Termination, and (y) any circumstances constituting Involuntary Termination remain uncured for a period of thirty (30) days following the Company’s receipt of such written notice (the “Company Cure Period”), and (z) the Termination Date occurs within one hundred and eighty (180) days following the initial existence of the event giving rise to an Involuntary Termination.
Policy Administrator. “Policy Administrator” means the Compensation and Human Resources Committee of the Board, except with respect to any provisions of the Policy pertaining to the Chief Executive Officer, in which case the independent members of the Board shall have the powers of the Policy Administrator.
Termination Date. “Termination Date” shall mean:
(1) In the case of a Company-initiated Involuntary Termination, the last day of the notice period required under section II.2(A)(ii), or such earlier date at which the Company waives notice and pays the Executive in lieu of such notice; and
(2) In the case of an Involuntary Termination initiated by an Executive, the last day of the notice period required under section II.2(B)(i), or such earlier date at which the Company waives notice and pays the Executive in lieu of such notice.
Notwithstanding the foregoing, in the event of an Involuntary Termination that would provide benefits as set forth in this Policy, if the Termination Date would otherwise have occurred prior to the Change in Control, the Termination Date shall take place on the date of the Change in Control so that the benefits will not accrue unless the Change in Control occurs. If more than one Termination Date may apply, then the priority provisions of Section II.3 of this Policy shall determine which Termination Date controls. All payments under this Policy will be calculated as of the applicable Termination Date unless otherwise agreed to in writing by the Company. The Company and the Executive shall take all steps necessary to ensure that any termination described in this Policy constitutes a “separation from service” within the meaning of Section 409A of the Internal Revenue Code (the “Code”), and notwithstanding anything to the contrary, the date on which such separation from service takes place shall be the Termination Date.
- 4 -
Executive Change in Control Policy
Voluntary Resignation. “Voluntary Resignation” shall mean an Executive’s termination of his or her employment at any time, for any reason, by the Executive, other than by reason of Involuntary Termination, death or Disability.
II.NATURE AND TERMINATION OF EXECUTIVE’S EMPLOYMENT
1. At will employment. Executives are “at will” employees of the Company and either the Company or an Executive may terminate such Executive’s employment at any time, for any reason, or for no reason, with or without Cause. This Policy does not guarantee employment to the Executive, it only specifies what compensation will be paid to the Company’s Executives in certain circumstances.
2. Termination of employment. During the Change in Control Protection Period, an Executive’s employment with the Company may be terminated as follows:
(A) By the Company.
(i) The Company may terminate the Executive’s employment for Cause by giving the Executive thirty (30) days’ advance written notice, subject, however, to the cure provision set forth in the definition of Cause.
(ii) The Company may terminate the Executive’s employment with the Company for any reason other than Cause, death or Disability, by giving the Executive ninety (90) days’ advance notice in writing. The Company may choose to pay the Executive the compensation the Executive would have otherwise received during such ninety (90) day period in lieu of providing such notice. Such a termination shall be regarded as an Involuntary Termination of the Executive. Any waiver of notice shall be valid only if it is made in writing and expressly refers to the applicable notice requirement of this Section.
(B) By the Executive.
(i) Involuntary Termination. The Executive may terminate his or her employment with the Company by reason of Involuntary Termination by giving the Company thirty (30) days’ advance written notice, subject, however, to the Company’s ability to cure any Involuntary Termination event during the Company Cure Period defined in this Policy.
(ii) Voluntary Resignation. The Executive may tender his or her Voluntary Resignation by giving the Company ninety (90) days’ advance written notice, which period may be waived or reduced at the Company’s option. The Executive’s Employment shall terminate at the end of the notice period or such shorter period as reduced by the Company. Any waiver or reduction of notice shall be valid only if it is made in writing or by electronic mail.
(C) By Death. The Executive’s employment shall terminate immediately in the event of his or her death.
(D) By Disability. The Executive’s employment shall terminate immediately in the event of his or her Disability.
- 5 -
Executive Change in Control Policy
3. Priority of Rights and Obligations upon Termination. If any event leading to or permitting termination of an Executive’s employment, or providing notice thereof, occurs at approximately the same time as any other termination event or during any termination notice period, and those events invoke different notice periods or different severance or other benefit arrangements, the deadlines, obligations, rights and benefits applicable to the termination event having the highest priority shall control. The priority of termination events (from highest to lowest priority) is as follows: (1) termination for Cause; (2) Voluntary Resignation; (3) Involuntary Termination; (4) Disability; and (5) death. For example, if an Executive gives notice of his or her Voluntary Resignation and, before the 90 day notice period has expired, he or she is subject to an Involuntary Termination, only the rights and benefits available to him or her for Voluntary Resignation apply since the provisions governing Voluntary Resignation have a higher priority than those applicable to Involuntary Termination. Similarly, if the Executive has been subject to an Involuntary Termination and dies during the notice period, he or she shall have the rights and benefits available to his or her estate as one subject to an Involuntary Termination.
III.EXPENSES AND COMPANY PAYMENTS
1.Reimbursement of Business Expenses. Upon Termination for any reason, the Company shall reimburse an Executive for all reasonable and necessary business expenses incurred by the Executive in the performance of his or her duties to the Company upon proper submission of expense reports in accordance with Company policies regarding such reimbursement. Such reimbursement obligation applies regardless of any reason for terminating the Executive’s employment.
2. Compensation Recovery. Except for the reimbursement of business expenses, any amount that is paid to an Executive by the Company under this Policy shall be subject to any applicable Company compensation recovery policy, as existing at the time of Termination of the Executive’s employment.
IV. BENEFITS UPON A CHANGE IN CONTROL
1. Except as provided in Section IV.2 below, if the Company is acquired by another entity in connection with a Change in Control and there is or will be no market for the Common Stock of the Company, the vesting of all of an Executive’s stock options or RSUs, that are solely service based, and which are granted prior to the Change in Control, will accelerate immediately prior to the Change in Control (and, for stock options, be immediately exercisable) if the acquiring company does not provide the Executive with stock options or RSUs (as applicable) comparable to the unvested stock options and/or RSUs granted to the Executive by the Company, regardless of whether the Executive’s employment is terminated.
2. In the event of a Change in Control, for any Market-Based Performance RSU (which is a type of RSU provided by the Company to the Executive with the number of shares paid based on the relative performance of the total stockholder return of the Company’s common stock compared to that of a designated comparison group )(“mPRSU”) or performance-based RSU (which is a performance-based RSU other than a mPRSU)(“PRSU”), awards outstanding at the time of the Change in Control, the mPRSU and/or PRSU shall be converted into a Cash
- 6 -
Executive Change in Control Policy
Award as determined under the terms of the mPRSU or PRSU Award Agreement1. For the avoidance of doubt, mPRSUs and PRSUs shall not receive the treatment outlined in Sections IV.1 or V.1.d of this Policy, which applies to stock options and RSUs that are solely service-based. The time of payment of the Cash Award shall be as follows:
(A) Change in Control, Involuntary Termination. In the case of a Change in Control where an Executive’s employment terminates due to an Involuntary Termination during the Change in Control Protection Period, the Cash Award (as defined in the mPRSU/PRSU Award Agreement), shall be paid out to the Executive within sixty (60) days following the Termination Date.
(B) Change in Control, No Termination. In the case of a Change in Control where the Executive’s employment does not terminate during the Change in Control Protection Period, the Executive shall receive the Cash Award when ordinarily paid out (under the mPRSU/PRSU Award Agreement).
3. If a Change in Control occurs during the term of this Policy, and an Involuntary Termination of an Executive’s employment occurs during the Change in Control Protection Period, then:
(A) Within sixty (60) days following the Termination Date, the Company shall pay the Executive a lump sum equal to the sum of:
(i) A multiple of base salary (without giving effect to any salary reduction program then in effect) equal to
(a) two (2) times annual base salary for the CEO and
(b) one and one-half (1 ½) times annual base salary for other Executives, plus
(ii) Any unpaid reasonable and necessary business expenses incurred by the Executive in the performance of his or her duties to the Company upon proper submission of expense reports in accordance with Company policies regarding such reimbursement, plus
(iii) the product of (x) 2.0 for the CEO and 1.5 for other Executives, times (y) an amount equal to the average of the annual short-term variable compensation program (currently the Annual Incentive Program and together with any future short-term variable compensation program, collectively hereinafter referred to as the “Short-Term Program”) payments earned by the Executive from the Company over the last five (5) years in
1 To the extent any outstanding mPRSU or PRSU Award Agreement makes reference to “any applicable Employment or Change in Control Agreement”, such reference shall be deemed to include this Policy.
- 7 -
Executive Change in Control Policy
which the Executive was employed with the Company on December 31st of such year (the “Five-Year Average Amount”)2, plus
(iv) a pro-rata amount (based on the number of full calendar months worked during the calendar year during which the Termination Date occurs) of the Five-Year Average Amount.
(B) If at the Termination Date, payment has not been made under the Short-Term Program that was in effect during the calendar year prior to the year in which the Termination Date occurs, the Company shall pay to the Executive, not later than March 15th of the year in which the Termination Date occurs, the full amount he or she would have earned under such prior-year program (based on the corporate performance results achieved under such program but assuming individual performance at the lesser of (i) the target level and (ii) the average of the individual performance results for the other Executives under the prior-year program), as if his or her employment had not been terminated.
(C) If the Executive qualifies for participation in the Company’s Retiree Health Plan prior to the Termination Date, then the Executive will receive the benefits he or she qualifies for under the Retiree Health Plan or, if such plan has been terminated prior to the Termination Date, within sixty (60) days following the Termination Date, the Company shall pay the Executive a lump sum amount (the “Medical Plan Payment”) equal to the present value of the benefits for which the Executive qualified prior to the termination of such plan. The present value of such benefits shall be determined actuarially based on the actual cost of replacing the benefits as of the Termination Date. If the Executive does not qualify for participation in the Retiree Health Plan prior to the Termination Date, within sixty (60) days following the Termination Date, the Company shall pay in a lump sum any COBRA premiums the Executive would be required to pay for the COBRA benefits selected by the Executive for twelve (12) months after the Executive’s Termination Date if the Executive has provided less than twenty (20) years of service to the Company and for eighteen (18) months after the Executive’s Termination Date if the Executive has provided twenty (20) or more years of service to the Company. All Company 401(k) Plan benefits, Elective Deferred Compensation Plan benefits and other benefits not specifically addressed in this Policy shall be treated in accordance with the terms of such plans and benefits.
(D) The unvested portion(s) of any stock options or Restricted Stock Units (“RSUs”) that are solely service-based, and which were granted to the Executive prior to the Change in Control, shall automatically be accelerated in full so as to become completely vested as of the Termination Date.
2 If there are fewer than five years in which the Executive was employed with the Company on December 31st of such year, then the average shall be computed based on such fewer number of years. If the Executive received a partial year Short-Term Program payment in any year included in the Five-Year Average Amount due to being a new hire, such partial year payment shall be annualized for purposes of the calculation of the Five-Year Average Amount. Any guaranteed bonus payment paid to the Executive shall be included in the calculation of the Five-Year Average Amount, unless such payment was a one-time event (such as a sign-on bonus for a new hire).
- 8 -
Executive Change in Control Policy
(i) The Company will issue the shares underlying the RSUs within sixty (60) days of the Termination Date.
(ii) The stock options vested under this paragraph (D) shall remain exercisable for two years following the Termination Date unless they are earlier exercised or expire pursuant to their original terms or unless they are exchanged for cash in connection with any Change in Control.
4. In no other circumstances (such as termination due to death, Voluntary Resignation, Disability or Cause or any termination that occurs outside the Change In Control Protection Period) shall an Executive be entitled to any benefits under this Policy.
V. SUCCESSORS
1.Company’s Successors. The Company shall require a successor to the Company (whether direct or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) or to all or substantially all of the Company’s business and/or assets (each a “Successor Company”) to assume the Company’s obligations under this Policy and agree expressly to perform such obligations in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession, and provide a copy of such agreement to each Executive. For all purposes under this Policy, the term “Company” shall include any Successor Company which executes and delivers the assumption agreement described in this subsection 1, or which becomes bound by the terms of this Policy by operation of law.
2.Executive’s Successors. The terms of this Policy and all rights of an Executive hereunder shall inure to the benefit of, and be enforceable by, the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.
VI. NOTICE
1. General. Notices and all other communications contemplated by this Policy shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by Federal Express or a comparable air courier company. In the case of an Executive, notices sent by courier shall be addressed to him or her at the home address that he or she most recently communicated to the Company in writing. In the case of the Company, notices sent by courier shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its Chief Legal Officer.
2. Notice of Termination. Any termination of an Executive by the Company for Cause, and any notice of Involuntary Termination of an Executive by the Company pursuant to section II.2(A)(ii), shall be communicated by a notice to the Executive as provided above, and any termination by an Executive as a result of a Voluntary Resignation or any Involuntary Termination shall be communicated by a notice to the Company as provided above. Such notice shall (i) indicate the specific termination provision in this Policy relied upon, (ii) set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and (iii) specify the Termination Date.
- 9 -
Executive Change in Control Policy
VII. CONFIDENTIALITY AND NON-COMPETE AGREEMENTS
All payments and benefits under this Policy are conditional upon an Executive’s performance in all material respects of any and all confidentiality and non-compete obligations that he or she may have with the Company, including those provided for in the Company’s standard settlement and release agreement.
IX.CLAIMS AND APPEALS PROCEDURES
1. Claim for Benefits. An Executive who believes he or she is entitled to benefits under this Policy in an amount greater than the amount received may file, or have his or her duly authorized representative file, a claim with the Policy Administrator. Any such claim shall be filed in writing stating (i) the nature of the claim, (ii) the facts supporting the claim, (iii) the amount claimed and (iv) the name and address of the claimant. The Policy Administrator shall consider the claim and answer in writing stating whether the claim is granted or denied. The written decision shall be within 90 days of receipt of the claim by the Policy Administrator (or 180 days if additional time is needed and the claimant is notified of the extension, the reason therefor and the expected date of determination prior to commencement of the extension). If the claim is denied in whole or in part, the Executive shall be furnished with a written notice of such denial containing (i) the specific reasons for the denial, (ii) a specific reference to the Policy provisions on which the denial is based, (iii) an explanation of the Policy’s appeal procedures set forth in subsection 2 below, (iv) a description of any additional material or information which is necessary for the Executive to submit or perfect an appeal of his or her claim, and (v) an explanation of the Executive’s right to submit his or her claim to arbitration or to bring suit under ERISA following receipt of an adverse decision issued by the arbitrator.
2. Appeal. If an Executive wishes to appeal the denial of his or her claim, the Executive or his or her duly authorized representative shall file a written notice of appeal to the Policy Administrator within 90 days of receiving notice of the claim denial. In order that the Policy Administrator may expeditiously decide such appeal, the written notice of appeal should contain (i) a statement of the ground(s) for the appeal, (ii) a specific reference to the Policy provisions on which the appeal is based, (iii) a statement of the arguments and authority (if any) supporting each ground for appeal, and (iv) any other pertinent documents or comments which the appellant desires to submit in support of the appeal. The Policy Administrator shall decide the appellant’s appeal within 60 days of its receipt of the appeal (or 120 days if additional time is needed and the claimant is notified of the extension, the reason therefore and the expected date of determination prior to commencement of the extension). The Policy Administrator’s written decision shall contain the reasons for the decision and reference to the Policy provisions on which the decision is based. If the claim is denied in whole or in part, such written decision shall also include notification of the Executive’s right to submit his or her claim to arbitration or to bring suit for benefits under Section 502(a) of ERISA following receipt of an adverse decision issued by the arbitrator, and the Executive’s right to obtain, upon request and free of charge, reasonable access to and copies of all documents, records or other information relevant to the claim for benefits.
- 10 -
Executive Change in Control Policy
X.ARBITRATION
Upon exhaustion of the claims and appeals procedures set forth in Section VIII, at the option of the Company or an Executive, any and all disputes or controversies whether of law or fact and of any nature whatsoever arising from or respecting this Policy shall be decided by arbitration under the rules of the American Arbitration Association in accordance with the rules and regulations of that Association with the exception of any claim for temporary, preliminary or permanent injunctive relief arising from or respecting the Executive’s invention assignment, confidentiality or non-compete obligations to Company which may be brought by the Company in any court of competent jurisdiction irrespective of the Executive’s desire to arbitrate such a claim.
The arbitrator shall be selected as follows. In the event the Company and the Executive agree on one arbitrator, the arbitration shall be conducted by such arbitrator. If the parties cannot agree on an arbitrator, the Company and the Executive shall each select one independent, qualified arbitrator and the two arbitrators so selected shall select the third arbitrator. The Company reserves the right to object to any individual arbitrator who shall be employed by or affiliated with a competing organization.
Arbitration shall take place in San Jose, California, or any other location mutually agreeable to the parties. At the request of either party, arbitration proceedings will be conducted in the utmost secrecy; in such case all documents, testimony and records shall be received, heard and maintained by the arbitrators in secrecy under seal, available for the inspection only by the Company and the Executive and their respective attorneys and their respective experts who shall agree in advance and in writing to receive all such information confidentially and to maintain such information in secrecy unless and until such information shall become generally known. The arbitrator, who, if more than one, shall act by majority vote, shall have the power and authority to decree any and all relief of an equitable nature including, but not limited to, such relief as a temporary restraining order, a temporary and/or permanent injunction, and shall also have the power and authority to award damages, with or without an accounting and costs, provided, that punitive damages shall not be awarded, and provided, further, that the Executive shall be entitled to reimbursement for his or her reasonable attorney’s fees to the extent he or she prevails as to the material issues in such dispute. The reimbursement of attorney’s fees shall be made promptly following delivery of an invoice therefor. The decree or judgment of an award rendered by the arbitrators may be entered in any court having jurisdiction thereof.
In any such arbitration, the arbitrator(s) may authorize subpoenas to be issued to the parties or to third parties for the production of evidence that the arbitrator(s) deem relevant and appropriate to the scope of the arbitration.
Reasonable notice of the time and place of arbitration shall be given to all persons, other than the parties, as shall be required by law, in which case such persons or those authorized representatives shall have the right to attend and/or participate in all the arbitration hearings in such a manner as the law shall require.
- 11 -
Executive Change in Control Policy
XI.EXCISE TAX ON PAYMENTS
Notwithstanding anything to the contrary contained herein, in the event that any payment by the Company to or for the benefit of an Executive, whether paid or payable, would be subject to the excise tax imposed by Section 4999 of the Code or any comparable federal, state, or local excise tax (such excise tax, together with any interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then the Executive shall receive either the full severance amount or a lesser amount that does not trigger an excise tax, whichever produces a greater after-tax benefit to the Executive, as determined by the Company.
XII.MISCELLANEOUS PROVISIONS
1. Duty to Mitigate. An Executive shall not be required to mitigate the amount of any payment contemplated by this Policy, nor shall any such payment be reduced by any earnings that the Executive may receive from any other source.
2. Amendment. This Policy and the documents expressly referred to herein may be altered, modified, or amended by formal action of the Policy Administrator and/or the Board, or the Policy Administrator may determine at any time that an Executive is no longer eligible to receive benefits under this Policy; provided however, that any such amendment or determination of eligibility that would adversely affect an individual who is receiving or entitled to receive benefits under this Policy at the time of such amendment or determination due to such individual’s service as an Executive will not be applicable without such individual’s consent until the later of (i) eighteen months following the date of such amendment or determination, or (ii) the end of the Change In Control Protection Period during which such amendment or determination occurs. No course of conduct or action shall amend the written terms of this Policy. Nothing herein affects the continued enforceability of either the Company’s Employment, Confidential Information and Invention Assignment Agreement previously executed by an Executive, or an Executive’s Indemnification Agreement with the Company. Any benefit amounts referenced as payable to an Executive pursuant to this Policy are the sole and exclusive amounts payable to the Executive for the category of benefit addressed by such amounts; provided, however, that this Policy shall not limit any right of an Executive to receive any payments or benefits under an employee benefit or employee compensation plan of the Company, initially adopted prior to or after the date hereof, which are expressly contingent thereunder upon the occurrence of a Change in Control (including, but not limited to, the acceleration of any rights or benefits thereunder).
3. Choice of Law. The validity, interpretation, construction and performance of this Policy shall be governed by the laws of the state of California, without regard to conflicts of law provisions thereof.
4. Severability. If any provision of this Policy is determined to be invalid or unenforceable, the Policy shall remain in full force and effect as to the remaining provisions, and the Policy Administrator shall, in its discretion, replace the invalid or unenforceable provision with one which reflects the parties’ original intent in agreeing to the invalid/unenforceable one.
- 12 -
Executive Change in Control Policy
5. No Assignment of Benefits. Except as otherwise provided herein, the rights of any person to payments or benefits under this Policy shall not be made subject to option or assignment, either by voluntary or involuntary assignment or by operation of law, including (without limitation) bankruptcy, garnishment, attachment or other creditor’s process, and any action in violation of this provision shall be void.
6. Withholding Taxes. The Company may withhold from any amounts payable under this Policy such Federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation.
7. Section 409A of the Code. Notwithstanding anything herein to the contrary, if at the time of an Executive’s termination of employment with the Company, the Company has determined that the Executive is a “specified employee” as defined in Section 409A of the Code and any severance payments and benefits to the Executive under this Policy are considered a “deferral of compensation” under Section 409A of the Code (the “Deferred Payments”), such Deferred Payments that are otherwise payable within the first six months following the Termination Date will become payable on the first business day of the seventh month following the Executive’s Termination Date, or if earlier the date of the Executive’s death. In the event that payments under this Policy are deferred pursuant to this Section XI.7, then such payments shall be paid at the time specified in this Section XI.7 without interest. The Company shall consult with the Executive in good faith regarding the implementation of the provisions of this Section XI.7; provided, however that neither the Company nor any of its employees or representatives shall have any liability to the Executive with respect thereto. Any amount under this Policy that satisfies the requirements of the “short-term deferral” rule set forth in Section 1.409A-1(b)(4) of the Treasury Regulations will not constitute Deferred Payments for purposes of this Policy. Any amounts scheduled for payment hereunder when they are ordinarily paid out or when they are made to other executive officers, will nonetheless be paid to the Executive on or before March 15th of the year following the year when the payment is no longer subject to a substantial risk of forfeiture. For purposes of Section 409A of the Code, the right to a series of installment payments under this Policy shall be treated as a right to a series of separate payments, and references herein to the Executive’s termination of employment shall refer to the Executive’s separation from services with the Company within the meaning of Section 409A of the Code. Notwithstanding anything to the contrary herein, except to the extent any expense, reimbursement or in-kind benefit provided pursuant to this Policy does not constitute a “deferral of compensation” within the meaning of Section 409A of the Code: (x) the amount of expenses eligible for reimbursement or in-kind benefits provided to the Executive during any calendar year will not affect the amount of expenses eligible for reimbursement or in-kind benefits provided to the Executive in any other calendar year, (y) the reimbursements for expenses for which the Executive is entitled to be reimbursed shall be made on or before the last day of the calendar year following the calendar year in which the applicable expense is incurred, and (z) the right to payment or reimbursement or in-kind benefits hereunder may not be liquidated or exchanged for any other benefit.
8. Company Release. As a condition to the Company’s obligations pursuant to this Policy, each Executive agrees to execute a release of claims against the Company (the “Release”), substantially in the form attached hereto as Exhibit A, by the fifty-third (53rd) day
- 13 -
Executive Change in Control Policy
following the Executive’s Termination Date. Except in the case of an Executive’s death or incapacity due to a Disability, if the Company has not received an irrevocable Release by the sixtieth (60th) day following the Termination Date, the Company shall be under no obligation to make payments or provide benefits under this Policy; provided such sixty (60) day period shall be tolled during the pendency of any arbitration proceeding under this Policy. In the event of an Executive’s death or incapacity due to a Disability, the Company may withhold benefits until the Executive’s estate or legal representative signs an Agreement acceptable to the Policy Administrator which waives claims for additional compensation from the Company. In the event one or more of the provisions of the Release should, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of the Release, and the Release shall be construed as if such invalid, illegal or unenforceable provision had never been contained therein.
9. Whistleblower Laws and Governmental Investigations. Nothing in this Policy prevents the Executive from providing, without prior notice to the Company, information to governmental authorities regarding possible legal violations or otherwise testifying or participating in any investigation or proceeding by any governmental authorities regarding possible legal violations.
10. Foreign Laws. The Policy Administrator shall administer the Policy with respect to all Non-US Participants in a manner designed to comply with applicable law while preserving the benefits provided under the Policy and avoiding duplication of benefits.
- 14 -
EXHIBIT A
COMPANY RELEASE
LAM RESEARCH CORPORATION RELEASE
This Release (“Release”) constitutes a binding agreement between you, ______[EMP NAME]______, Lam Employee No. ___[EE I.D.]___, and Lam Research Corporation (“Lam” or “the Company”). Please review the terms carefully. We advise you to consult with an attorney concerning its terms.
1.This Release is provided to Lam pursuant to Lam’s Executive Change in Control Policy (the “Policy”). You understand that if you choose not to sign this Release, as provided in the Policy, Lam has no obligation to make any payments or provide any benefits provided in the Policy.
2.You understand that your obligations under the Confidential Information and Invention Assignment Agreement, or similarly titled agreement, you signed at the beginning of or during your employment with Lam are ongoing and binding and survive the termination of your employment with Lam, regardless of whether you sign this Release.
3.If you agree to this Release, you will be eligible to receive the payments and benefits provided in the Policy. You must sign and return this Release within fifty-three (53) days, and it must become irrevocable (as discussed in Sections 4.E. and 8 below), within sixty (60) days of your Termination Date (as defined in the Policy). You may, at your discretion, sign and return the Release sooner. You are hereby advised to consider the terms of this Release and consult with an attorney of your choice prior to executing this Release. Lam is under no obligation to pay any amounts or provide any benefits under the Policy until such release is irrevocable. Lam will make such payments and provide such benefits under the Policy as soon as practicable, in accordance with the terms of the Policy and in accordance with IRC Section 409A and accompanying Treasury Regulations (although Lam makes no representation about any specific tax treatment applicable to you). Neither Lam nor you shall have the right to accelerate or defer the delivery of any payments or provision of any benefits except as specifically permitted or required by Section 409A.
4.In exchange for and in consideration of the payments and benefits provided for in the Policy, you agree to, and agree to abide by, the following terms:
A.Release. You hereby waive and release, and promise never to assert, any and all claims, except workers compensation or unemployment compensation claims, that you have, or may have at any time, against Lam and its predecessors, successors, past, present or future affiliated corporations or other legal entities, including, without limitation, any past, present, or future corporate parents, subsidiaries, commonly-controlled entities, or merger-related affiliates, and their respective officers, directors, shareholders, agents, attorneys, employees, benefit plans, successors, or assigns (collectively “Released Parties”) at all or, specifically, arising from or related to your employment with Lam and/or the termination of your employment with Lam, from the first date of your employment with Lam through your separation date. These claims include, but are not limited to, all claims arising under federal, state, and/or local statutory or common law, including, but not limited to, claims of wrongful or constructive discharge or demotion, breach of contract (written, oral or implied), breach of the covenant of good faith and fair dealing, violation of public policy, wages, bonuses, or any other claims of compensation, defamation, personal injury, emotional distress, claims under Title VII of the 1964 Civil Rights Act, as amended, the California Fair Employment and Housing Act (or comparable provision under any other state’s law), Oregon Revised Statutes §§ 174.100, 652.140, 652.355, and 659A.030 (or comparable provisions under any other state’s law), the Arizona Civil Rights Act, the Arizona Equal Pay Acts, California Labor Code Section 1197.5 (or comparable provision under any other state’s law), the Texas Civil Rights laws including, without limitation, Texas Labor Code Ch. 21 et al., Texas Administrative Code Ch. 821 et al., and the City of Austin, TX Employment Ordinance; the New York Human Rights Law and other New York civil rights laws including, without limitation, N.Y. Exec. Law Secs. 292, 296 (including subparts); New York Labor Laws including N.Y. Labor Law Secs. 161, 162, 191-194, 704, 860 (including subparts), N.Y. Compensation Codes, the Equal Pay Act of 1963,the Age Discrimination in Employment Act of 1967, as amended, the Older Workers Benefit Protection Act (OWBPA), the Americans with Disabilities Act (ADA), the Civil Rights Act of 1866, the Family and Medical Leave Act (FMLA), the federal Worker Adjustment and Retraining
Notification (WARN) Act and any WARN act under applicable state law, California Labor Code Section 1400 et seq., and any other laws, regulations, or ordinances relating to employment or employment discrimination, and the laws of contract and tort, to the full extent permitted by law. You are, through this Release, releasing the Company and the Released Parties from any and all claims you may have against the Company or the Released Parties, including claims under the Age Discrimination in Employment Act of 1967, 29 U.S.C. §621, et seq. (ADEA) with the exception of (i) your right to receive the payments provided for in, or to enforce, the Policy and (ii) any claims you may have pursuant to any written agreement, the Company’s certificate of incorporation or bylaws, or as mandated by statute, to indemnification as a director or officer of the Company; further, rights or claims under the Age Discrimination in Employment Act that may arise after the date this Release is executed are not waived.
You understand and agrees that you are waiving the right to any monetary recovery in connection with any complaint or charge that you may file with an administrative agency, except with respect to any monetary recovery under the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Sarbanes-Oxley Act of 2002.
B.Release of Unknown Claims. You agree to waive and release and promise never to assert any claims or potential claims that you might have against the Released Parties, whether or not you know or might have reason to know of such claims or potential claims or of the facts potentially giving rise to any such claims or potential claims. Specifically, you agree to waive, and by executing this Release do waive, your rights under section 1542 of the Civil Code of California, or comparable provision of another state’s law as may be applicable to you, which states:
A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known by him or her, would have materially affected his or her settlement with the debtor or released party.
C.Acknowledgment of 21-Day Consideration Period: If you are 40 years of age or older, you acknowledge and agree that you have been given at least 21 days to consider the terms of this Release before signing it1. You knowingly and voluntarily waive the remainder of the 21-day consideration period, if any, following the date (as indicated below) you sign this Release. You affirm that you have not been asked by the Company to shorten your time period for consideration of whether to sign this Release. You affirm that the Company has not proposed to withdraw or alter the payments or benefits due to you prior to the expiration of the 21-day period nor has the Company offered different terms to you in exchange for an agreement that you will sign this Release prior to the expiration of the 21-day consideration period. You understand that by your having waived some portion of the 21-day consideration period, the Company may expedite the processing of some of the payments or benefits provided to you in reliance upon your signing this Release.
D.No Re-Start of Consideration Period: You agree that any changes to this Release or to the payments or benefits and terms offered or that may be offered to you after your initial receipt of this Release, whether any such changes (individually or collectively) are material or immaterial, do not and shall not restart the running of the consideration period.
E.Right to Revoke: You understand that if you sign this Release, you can change your mind and revoke it within seven days after signing it by returning it with written revocation notice to the Company in the manner described in the notice provision of the Policy. You understand that the release and waiver set forth above will not be effective until after this seven-day period has expired.
F.Binding Agreement: You understand that following the seven-day revocation period, this Release will be final and binding. You promise that you will not pursue any claim that you have settled by this
1 Insert 45 day Consideration Period in circumstances required by law.
Release. If you break this promise, you agree to pay all of the Company’s and Released Parties’ costs and expenses (including reasonable attorneys’ fees) related to the defense of any claims. This promise not to sue does not apply to claims that you may have under the OWBPA and the ADEA. Although you are releasing claims that you may have under the OWBPA and the ADEA, you understand that you may challenge the knowing and voluntary nature of this release under the OWBPA and the ADEA before a court, the Equal Employment Opportunity Commission (EEOC), the National Labor Relations Board (NLRB), or any other federal, state or local agency charged with the enforcement of any employment laws. You understand, however, that if you pursue a claim against the Company or a Released Party under the OWBPA and/or the ADEA, a court has the discretion to determine whether the Company or a Released Party is entitled to restitution, recoupment, or set off (hereinafter “reduction”) against a monetary award obtained by you in the court proceeding. A reduction never can exceed the amount you recover, or the consideration you received for signing this Release, whichever is less. You also recognize that the Company and the Released Parties may be entitled to recover costs and attorney’s fees incurred by the Company and the Released Parties as specifically authorized under this Section F and applicable law. You agree to pay all of the Company’s and Released Parties’ costs and expenses (including reasonable attorneys’ fees) related to the defense of any OWBPA or ADEA claims in the event that you do not recover more in damages than was offered pursuant to the Policy, to the extent permitted by applicable law. You further understand that nothing in this Release generally prevents you from filing a charge or complaint with or from participating in an investigation or proceeding conducted by the EEOC, NLRB, or any other federal, state or local agency charged with the enforcement of any employment laws, although by signing this Release you are waiving your right to individual relief based on claims asserted in such a charge or complaint. Nothing in this Release shall be construed to waive any right that is not subject to waiver by private agreement under federal, state or local laws, such as claims for workers compensation, unemployment benefits or indemnity as required by applicable law, including California Labor Code section 2802 for California employees.
G.Authorization for Deductions from Paychecks and Other Payments. As permitted by law, you hereby authorize Lam to deduct and withhold from your paychecks and from any other payments of cash compensation due to you (excluding any amounts that qualify as “deferral compensation” within the meaning of Section 409A of the Internal Revenue Code), from the date of this Release forward, any and all amounts you may, from time to time, owe to Lam for any reason, including (without limitation) loans or advances to you, reimbursement of contractually due signing bonus or relocation benefit repayments, amounts due under a promissory note, taxes or tax withholding paid or to be paid by Lam on your behalf. If you owe Lam monies as documented in a promissory note or other written agreement, any repayment via authorized deduction under this paragraph G will be applied to the outstanding balance due pursuant to the repayment terms of that document.
H.Confidentiality of Terms of this Release. You agree not to disclose to any other person or entity any information regarding the terms of this Release, or the amounts of any payments or benefits being made to or provided under it, or the fact that they are being made or provided, except that you may disclose such information to your immediate family (spouse, children, or parents), attorney, accountant, or other professional advisor to whom you must make the disclosure in order for such person to render professional services to you, or as you otherwise may be compelled by law or permitted by the terms of this Release. You will instruct any such persons to whom you make such disclosures, however, to maintain the confidentiality of such information, consistent with your obligations to maintain its confidentiality hereunder. To the extent provided by law, nothing herein prohibits you from disclosing facts relating to any claim or potential claim that you are releasing by this Release regarding the Released Parties. In addition, nothing in this Paragraph prevents you from engaging in conduct protected by Section 7 of the National Labor Relations Act, such as lawful discussions about wages, hours, or working conditions, nor does it prevent you from discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination or any other conduct that you have reason to believe is unlawful.
I.Payment is Contingent on Your Return of Lam Property. You are required to timely return all Lam property in your possession or custody to Lam on or about your last day of active work, including,
without limitation, your: Lam laptop(s) and computer(s); cell phone(s); data storage devices (such as thumb drives, zip drives, or other memory devices); any other Lam devices or equipment; badge(s); corporate credit card(s); hard-copy or physical materials such as notebooks, project and work files, meeting materials, training materials, and any other printed or electronic information that is Lam property. Your receipt of the payments and benefits provided in the Policy is expressly contingent on your compliance with this obligation. If you delay or fail to comply, Lam will withhold and will not deliver to you any of the payments and benefits provided in the Policy, unless and until you return all Lam property to Lam.
J.Non-Solicitation. You agree, for the period extending six (6) months after your Termination Date (as defined in the Policy), that you will not directly induce or attempt to influence any employee of the Company to leave its employ and join any company, business, agency, partnership or entity engaged in a business competitive with the Company in or within 50 miles of Fremont, California. You agree that the Company would suffer an irreparable injury if you were to breach the covenant contained in this section and that the Company would by reason of such breach or threatened breach be entitled to injunctive relief in a court of appropriate jurisdiction, and you hereby stipulate to the entering of such injunctive relief prohibiting you from engaging in such breach. If any of the restrictions contained in this section shall be deemed to be unenforceable by reason of the extent, duration or geographical scope or other provisions thereof, then the parties hereto contemplate that the court shall reduce such extent, duration, geographical scope or other provisions hereof (but only to the extent necessary to render such restrictions enforceable) and then enforce this section in its reduced form for all purposes in the manner contemplated hereby.
K.Non-Disparagement. You hereby agree that you will not disparage, criticize, slander, or libel Lam or any of the Released Parties or any of their products, technologies, policies, actions, employees, officers, or agents, to any third party or person, including without limitation any supplier, customer, or prospective customer or business partner of Lam. Nothing in this Paragraph prevents you from engaging in conduct protected by Section 7 of the National Labor Relations Act, such as lawful discussions about wages, hours, or working conditions, nor does it prevent you from discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination or any other conduct that you have reason to believe is unlawful.
L.Excise Tax on Payments. To the extent the Company determines that any payment by the Company to or for your benefit would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code or any comparable federal, state, or local excise tax (such excise tax, together with any interest and penalties, are hereinafter collectively referred to as the “Excise Tax”) and that you would receive a greater after-tax benefit by receiving, in lieu of the full severance amount, a lesser amount that does not trigger the Excise Tax, you hereby agree that you will not challenge the Company’s determination as described above, and you further agree that you will not challenge the amount so determined by the Company as providing the greater after-tax benefit to you.
5.To accept this Release, please sign and date it below and provide it to the Company in the manner described in the notice provision of the Policy. If your Release is not executed and returned within 53 days and irrevocable within 60 days from the Termination Date (as defined in the Policy), the offer of the payments and benefits described in the Policy shall automatically expire and this offer shall be deemed revoked.
6.In the event that you breach any of your obligations under this Release or as otherwise imposed by law, Lam will be entitled to recover the payments and benefits paid under the Policy and to obtain all other relief provided by law or equity. Lam’s rights and remedies arising hereunder are cumulative of any and all other rights or remedies Lam may have in the event of a breach of this Release by you.
7.By signing this Release, you acknowledge that you have had the opportunity to review this Release carefully with an attorney of your choice concerning its terms and effect, and that the waivers, settlement, and releases made herein are knowing, voluntary, informed, and consensual.
8.You understand that once you have signed this Release, you have an additional seven (7) days to revoke your acceptance by submitting a written notice of your revocation to the Company in the manner described in the notice provision of the Policy. If you do not revoke your acceptance within seven (7) days of your acceptance, the Release will be deemed effective, binding and enforceable. Please note that this means your executed Release must be received by the Chief Legal Officer of the Company, within 53 days of Termination Date (as defined in the Policy) or the Company shall be under no obligation to make the payments or provide the benefits under the Policy.
9.This Release shall be construed and enforceable in all respects pursuant to California law, notwithstanding conflict of laws considerations or the preference, policy or law of any other jurisdiction or forum; provided, however, that if your employment with the Company is located on a regular basis in a State other than California, then this Agreement and Release shall be construed and enforceable pursuant to the law of the State where you were employed. For example, if your place of employment is in Oregon, then Oregon law governs this Agreement and Release. Any dispute or action arising from or related to this Release shall be brought in federal or California state court located in the County of Santa Clara, California, and in no other jurisdiction or venue. The invalidity or unenforceability of any provision(s) of this Release shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect.
I, THE UNDERSIGNED, HAVE BEEN ADVISED IN WRITING THAT I HAVE HAD AT LEAST TWENTY-ONE (21) DAYS TO CONSIDER THIS RELEASE AND TO CONSULT WITH AN ATTORNEY CONCERNING ITS TERMS AND EFFECT PRIOR TO EXECUTING THIS RELEASE.
I, THE UNDERSIGNED, HAVE READ THIS RELEASE, UNDERSTAND ITS TERMS, AND UNDERSTAND THAT I ENTER THIS RELEASE INTENDING TO AND DO WAIVE, SETTLE AND RELEASE ALL CLAIMS I HAVE OR MIGHT HAVE AGAINST THE COMPANY AND/OR THE RELEASED PARTIES TO THE FULL EXTENT PERMITTED BY LAW. I SIGN THIS RELEASE VOLUNTARILY AND KNOWINGLY.
ACKNOWLEDGED, UNDERSTOOD AND AGREED ON BEHALF OF LAM RESEARCH CORPORATION:
___________________________________ ___________________________________________
[EMP NAME] Mary Hassett
Senior Vice President, Global Human Resources
Date: ______________________________ Date: ______________________________
Exhibit 10.38
Lam Research Corporation
Non-Employee Director Compensation Program
Amended effective as of May 15, 2024
| Objective | To target and pay the non-employee members of the board of directors (the “Board”) of Lam Research Corporation (the “Company”) at the median of the Company’s peer group, as measured every other year. | ||||
| Annual Cash Retainers | For service as a director beginning with calendar year 2024, directors shall receive the following annual cash retainers, as applicable, subject to revisions for future years as described herein: •Board Member: $100,000 •Non-Executive Board Chair: $152,500 (supplemental cash) •Committee Chair: ◦Audit: $35,000 ◦Compensation and Human Resources: $30,000 ◦Nominating and Governance: $20,000 ◦Innovation and Technology: $20,000 •Committee Member: ◦Audit: $15,000 ◦Compensation and Human Resources: $10,000 ◦Nominating and Governance: $10,000 ◦Innovation and Technology: $10,000 •The annual retainers for a director’s service during a calendar year shall be paid in a lump sum in February of the calendar year following the director’s election at the annual meeting of stockholders (the “Annual Meeting”). | ||||
| Annual Equity Award | For service as a director beginning with calendar year 2024, directors shall receive the following annual equity award, subject to revision for future years as described herein: •Target Award Value: Restricted stock units (“RSUs”) with a target award value of $230,000. | ||||
| Program Adjustments | •Non-employee director compensation shall be compared to the Company’s peer group annually and the results of such comparison shall be provided to the Compensation and Human Resources Committee (the “Committee”) in connection with its regular August meeting. •Every other year, beginning in 2025, if such comparison shows any element of non-employee director compensation to be below the 50th percentile when compared to the Company’s peer group, such element shall be automatically increased, effective on the date of the next annual meeting of stockholders for service in the following calendar year (e.g. if an adjustment is made in connection with the August 2025 Committee meeting, then such adjustment shall be effective on the date of the annual stockholder meeting in November 2025 for service in calendar 2026) and without the necessity of any further action on the part of the Committee or the Board, to a value equal, as nearly as practicable, to the 50th percentile. •The Committee will have the option at any time to recommend that the Board exercise, and the Board will have the right at any time to exercise, negative discretion to reduce any element of non-employee director compensation. •This non-executive director compensation program may be modified, replaced, superseded or cancelled at any time by the Board. | ||||
| Equity Award Terms | •Annual equity awards are subject to the terms and conditions of the Company’s 2015 Stock Incentive Plan, as amended, or other equity plan (the “Equity Plan”), and the applicable award agreements. •The grant date shall be the first Friday following the annual meeting of stockholders. •Target award value will be converted to a number of RSUs by dividing the award value by the 30-day average of the closing price of the Company’s common stock prior to the grant date, rounded down to the nearest whole share. •Equity awards shall vest Oct 31st in the year following the grant date; provided, however, that awards shall immediately vest in full: (1) if a non-employee director dies or becomes subject to a “disability” (as determined pursuant to the Equity Plan), (2) upon the occurrence of a “Corporate Transaction” (as defined in the Equity Plan), or (3) on the date of the annual meeting, if the annual meeting during the year in which the award was expected to vest occurs prior to the vest date and the non-employee director is not re-elected or retires or resigns effective immediately prior to the annual meeting. | ||||
| Proration Rules | •Non-employee directors who join the Board or a committee mid-year shall receive pro-rated cash retainers, as applicable, based on the number of regularly scheduled quarterly Board meetings remaining in the year as of the effective date and time of the director’s appointment; provided, however, that a director who changes committees mid-year will be entitled to additional pro-rated cash compensation only if the new committee assignment carries a higher retainer. Pro-rated cash payments will be made as soon as administratively practical after the first regularly scheduled quarterly Board meeting attended. •Non-employee directors who join the Board after the annual RSU award has been granted shall receive, on the first Friday following the first regularly scheduled quarterly Board meeting attended, a pro-rated award based on the number of regularly scheduled quarterly Board meetings remaining in the year as of the effective date and time of the director’s appointment. The pro-rated awards shall be subject to the same vesting schedule, terms and conditions as the annual equity awards, except that if the award is granted on the first Friday following the regularly scheduled quarterly November Board meeting, the award vests immediately. | ||||
Exhibit 19.1
 | Document Name: LGL-70983 Insider Trading [LGL-1001] Policy | Revision: 13.0 Page 1 of 16 | ||||||
Authorized By Title: VP Legal, Corporate Legal Services | ||||||||
1.0Statement of Policy
Except as expressly permitted by this Insider Trading Policy (inclusive of Appendix A, referred to herein as the “Policy”), Lam Research Corporation prohibits any transaction in its securities by a person possessing material non-public information or any other transaction in its securities that violates state, Federal or international laws.
The purpose of this Policy is to deter inappropriate transactions in the Company’s securities, including transactions conducted by individuals who are in possession of Material Non-Public Information or are subject to Company-declared Blackouts.
This Policy defines:
1. Who is on the Company’s regular, quarter end Blackout List;
2. The duration of the quarter end Blackout Period;
3. The process for approving other Blackouts; and
4. Other guidelines, procedures and interpretations relating to compliance with this Policy
2.0Scope
This Policy applies to the Company itself and to all of the Company’s and its subsidiaries’ officers, employees, non-employee members of the board of directors, temporary employees, consultants, agents and contractors. It applies to the family members and other persons living in the household of any persons subject to this Policy, and any family members who do not live in the household of any persons subject to this Policy but whose transactions in Company securities may be directed by such persons or subject to their influence or control, such as parents or children who may seek to consult with such persons before they trade in Company securities. It also applies to family trusts (or similar entities) controlled by or benefitting persons subject to this Policy, and to any other persons who receive material information or tips related to transactions in the Company’s securities from the persons who are subject to this Policy.
Each individual is responsible for making sure that they comply with this Policy, and that any family member, household member or family trust (or similar entity) whose transactions are subject to this Policy under the preceding paragraph also complies with this Policy. Individuals subject to this Policy should make all such persons aware of the need to confer with them before they trade in Company securities.
3.0Administration
3.1Decision Authority
The Chief Legal Officer (or his or her appointed delegate) is the Administrator of this Policy. The Administrator may propound, revise, and distribute procedures, requirements or guidelines for complying with this Policy and may amend and permit exceptions to this Policy. Employees may consult with the Company’s legal department with questions about this Policy.
| LGL-70983 Insider Trading [LGL-1001] Policy | Rev: 13.0 | Page 2 of 16 | ||||||
3.2Enforcement
Any violation of this Policy may result in discipline from the Company, including termination of employment, benefits or other relationship with the Company. In addition, conduct that violates this Policy may result in legal proceedings, damage claims, fees, fines and sanctions (civil, administration or criminal) being brought against the person who engages in such conduct under state, Federal or international insider trading laws. Individuals found to have violated insider trading laws face civil penalties of up to three times the profit gained or loss avoided by reason of their violation. A criminal fine of up to $5 million, and a term of up to 20 years in jail, may be imposed in the event of a willful violation. The Company, its officers and members of the Board could also face significant penalties for failing to take steps to prevent violations by the Company’s personnel.
3.3Training and Local Language Translation
The Chief Legal Officer (or his or her appointed delegate) is responsible for providing training regarding this Policy. This policy should only be translated into local language if required by local law or to ensure local compliance if there are material concerns about English comprehension at all affected levels of the organization. If translated, the Chief Legal Officer (or his or her appointed delegate) must approve the translation.
3.4External Sharing
The Policy may not be shared externally without written approval of the Chief Legal Officer (or his or her appointed delegate).
4.0Definitions / Acronyms
| Term | Definition | ||||
| Blackout and Blackout Period | A Blackout or Blackout Period refers to a time period set by the Company during which an Insider is not permitted, directly or indirectly, to engage in Transactions. Blackouts are of two types: (a) the quarter end Blackout, and (b) Ad Hoc or special Blackouts. | ||||
| Blackout Committee | The Blackout Committee is appointed by the Company’s Chief Legal Officer. It is typically composed of representatives from Stock Plan Administration, legal and finance. | ||||
| Blackout List | A list of persons subject to a Blackout. | ||||
| Business Control Officer | The Business Control Officers are the Chief Executive Officer (CEO) and (if different than the CEO) the President of the Company. However, because persons serving as Control Officers may not clear their own transactions, in the case of transactions by the CEO or President, if the other Business Control Officer is unavailable (or is the same person), the Chief Financial Officer (CFO) may approve the transaction as the Business Control Officer. | ||||
| Designated Broker | The Designated Broker is the brokerage firm contracted by the Company that assists the Company in administering employee stock plans. Employees who participate in these plans have brokerage accounts with the Designated Broker | ||||
| Exchange Act | The Securities Exchange Act of 1934, as amended. | ||||
| Finance Control Officer | The Finance Control Officer is the Chief Financial Officer (CFO) of the Company or such member(s) of the Finance team of the Company as are appointed by the CFO to exercise the powers of the Finance Control Officer. | ||||
| Insider | An Insider is a person that either (a) has knowledge of or access to MNPI, or (b) is subject to a Blackout declared by the Company. The Company itself is a person that is an Insider under this Policy at such time as either condition in the preceding sentence is satisfied. | ||||
| Legal Control Officer | The Legal Control Officers are the Chief Legal Officer (CLO) or a vice president (VP) in the Corporate Legal or Global Legal department. If there is no such VP available, a senior attorney in the Corporate Legal department (Senior Director level or higher) can serve as the Legal Control Officer. | ||||
| LGL-70983 Insider Trading [LGL-1001] Policy | Rev: 13.0 | Page 3 of 16 | ||||||
| Material Non-Public Information (MNPI) | Material Non-Public Information (MNPI) includes all information not publicly disclosed that a reasonable investor would consider important in deciding whether or not to engage in a Transaction. This is an objective test, not one based on the Insider’s personal judgment. Although the Insider may not know how important a “reasonable” investor would consider any information that becomes known to them, if their decision to engage in a securities Transaction, or the timing of the Transaction, is in any way motivated or influenced by their knowledge of non-public information, it is likely that such information would be considered material in an objective sense. This information may be either positive or negative. It need not be so specific as to indicate an exact result, so long as it indicates the probable impact (such as, for example, the direction of the Company’s financial results) based on information that is not known to the public. So long as it is not known to the public and a reasonable investor would consider it important in deciding whether or not to engage in a Transaction, subject to the exceptions in this Policy, an Insider may not engage in a Transaction until the information is announced publicly and the news has had a reasonable time to be disseminated to the public. While it may be difficult under this standard to determine whether certain information is material, there are various categories of information that are particularly sensitive and, as a general rule, should always be considered material. Examples of such information include expected financial results or the major components of those financial results (such as revenues, profits or shipments), deviations from previously announced guidance, significant product defects, the cancellation or receipt of significant orders, stock splits, a change in the Company’s dividend plans or new stock repurchase plans, new equity or debt offerings, significant acquisitions, offers to be acquired, significant litigation exposure via actual or threatened litigation, anticipated restructuring plans and similar matters. | ||||
| Preclearance Insider | Section 16 Insiders, and any member of the CEO Staff or CEO Extended Staff are all Preclearance Insiders. In addition, the Company itself is considered to be a Preclearance Insider under this Policy. | ||||
| Section 16 Insiders | Section 16 Insiders are the members of Lam’s board of directors and those Insiders that have been designated as Section 16 officers by Lam’s board of directors. | ||||
| Transaction | The term Transaction as used in this Policy includes a purchase, sale, gift, donation, reinvestment of dividends or other transfer of Company securities (which would include stock, bonds or other debt), as well as transactions in derivatives (such as options), margin account transactions where the margin account contains Company securities, contributions of Company securities to or distributions from an exchange fund, and changes in actual or beneficial ownership, such as adding another owner to an account or transferring assets to a trust. The adoption of or entry into a contract, instruction or written plan for the purchase, sale, donation or other trade of Company securities (including, without limitation, a Rule 10b5-1 plan (see section 1.7 in Appendix A) or Exchange Fund transaction (see Section 1.9 in Appendix A) would also be considered a Transaction. A transfer of shares from one brokerage account to another brokerage account that has identical ownership would not be considered a Transaction. In certain cases, the Company may be in a relationship with another company or entity such that Insiders are prevented from trading in the securities of that other company or entity. In those cases, a Transaction may also include the purchase, sale, donation or other trade of securities in the other company or entity, as determined by the Company. | ||||
| LGL-70983 Insider Trading [LGL-1001] Policy | Rev: 13.0 | Page 4 of 16 | ||||||
5.0Reference Documents
| Reference | Title | ||||
| Not Applicable | |||||
6.0Appendix
Appendix A
1.1Prohibited Transactions
Except as permitted by this Policy, no Insider may, directly or indirectly, engage in any Transaction in the Company’s securities during (a) any period commencing with the date on which any MNPI is known to the Insider, but has not been disclosed to the public, and ending on the close of business on the second trading day following the day of the public disclosure of such information (or at such time as the information in question ceases to be material, if not publicly disclosed) or (b) any Blackout Period applicable to that Insider. Except as permitted by section 1.5, 1.6.2 or 1.7 of this Appendix A, an Insider must forego a prohibited Transaction even though the Transaction was planned before they learned of the undisclosed MNPI or subject to the Blackout and even though they believe they may suffer an economic loss or forego anticipated profit by waiting for the Blackout Period to end. Furthermore, no Insider may recommend that any other person engage in a Transaction in the Company’s securities.
In addition, except as permitted by this Policy, no one subject to the Company’s Insider Trading Policy may, directly or indirectly, engage in or recommend a transaction in the securities of any other company or entity that has a relationship with the Company or any of its subsidiaries if that transaction is based on MNPI received by a person in confidence as a result of their position or relationship with the Company.
CAUTION REGARDING OTHER, NON-COVERED TRADING
In certain cases, individuals may also have access to non-public information regarding or affecting another company or entity (other than the Company, any of its subsidiaries, or any other company with which the Company or any of its subsidiaries has a relationship) because of their role with the Company. Although outside of this scope of this Policy, individuals should be mindful that the Securities and Exchange Commission has brought charges against individuals based on trading on information of this kind and should exercise caution before engaging or recommending a transaction based on such information.
1.2Procedures for the Quarter End Blackout
The Company routinely declares a regular quarter end Blackout Period during which certain individuals identified by the Blackout Committee are restricted from engaging in Transactions in Company securities for a period commencing prior to the end of each fiscal quarter and ending after the earnings for that quarter have been announced. The Blackout Committee creates the Blackout List that determines who is prevented from engaging in Transactions in Company securities during the quarter end Blackout Period. Additionally, the Company itself is considered to be subject to the regular quarter end Blackout Period.
1.2.1Determination of Individuals Subject to the Quarter End Blackout
1.2.1.1The Blackout Committee is responsible for designating individuals subject to the quarter end Blackout. Appendix B attached to this Policy, which may be amended by the Chief Legal Officer at any time, describes the process and provides guidelines for the Blackout Committee to use in determining which individuals to designate as being subject to the quarter end Blackout.
1.2.1.2Appendix C attached to this Policy, which may be amended by the Chief Legal Officer at any time, contains a non-exclusive list of the categories of persons
| LGL-70983 Insider Trading [LGL-1001] Policy | Rev: 13.0 | Page 5 of 16 | ||||||
that are subject to the quarter end Blackout. Appendix C is not a comprehensive list and additional individuals can be added by the Blackout Committee. The Blackout Committee will inform Stock Plan Administration if any individuals are added.
1.2.1.3Employees who have one-time access to the kinds of information described in Appendix C are not typically included on the quarter end Blackout List. However, they are subject to this Policy, and should refrain from engaging in a Transaction in the Company’s securities while in possession of MNPI until the close of business two full trading days after the day on which the information is announced publicly (or until such time as the information in question ceases to be material, if not publicly disclosed). Not being included on the quarter end Blackout List does not mean that an individual is free to engage in or recommend Transactions.
1.2.2Duration of Quarter End Blackouts
1.2.2.1Typically, quarter end Blackouts will commence on the close of business on the business day before the QFR (Quarterly Forecast Review) meeting starts for the applicable quarter.
1.2.2.2Unless otherwise determined by the Chief Legal Officer or a Vice President of the Legal Department who regularly supports the Finance department (CLO/VP Legal), quarter end Blackouts will continue until the close of business two full trading days after the day on which earnings are announced for that quarter. The CLO/VP Legal can set a different period if they deem appropriate.
1.2.2.3Although the Company’s announcement of its quarterly or annual financial results will typically include an announcement of all material previously non-public financial information, an Insider would still be prohibited from engaging in Transactions if they are aware of MNPI that has not been disclosed to the public.
1.3Procedures for other (“Ad Hoc”) Blackouts
There may be occasions when a Blackout is deemed advisable by the CEO, CFO or CLO which does not coincide with the quarter end Blackout Period. Such an “Ad Hoc” or special purpose Blackout may be established as described below.
1.3.1Ad Hoc Blackout Determination
The Chief Executive Officer, Chief Financial Officer, or Chief Legal Officer can declare an “Ad Hoc” (or special purpose) Blackout at appropriate times and can designate which individuals are subject to that Blackout. Any Ad Hoc Blackout would generally apply to the Company itself, unless otherwise determined by the officer declaring the Ad Hoc Blackout. The determining officer shall also determine what notice will be provided to those affected by the Blackout. Ad Hoc Blackouts may prohibit Transactions in companies or entities other than the Company.
1.3.2When Ad Hoc Blackouts Begin and End
The officer declaring the Ad Hoc Blackout shall take steps that they deem appropriate to let persons affected by an Ad Hoc Blackout know that it is in place. The Blackout shall then continue until one of the officers named in Section 1.3.1 of this Appendix A declares that it has been terminated, although the criteria described in Section 1.2.1.3 of this Appendix A will typically be used as a guide in determining when a Blackout will be terminated. The officer that terminates the Ad Hoc Blackout will take measures to let those affected know that the Blackout has been lifted.
1.3.3Administration of Ad Hoc Blackouts
| LGL-70983 Insider Trading [LGL-1001] Policy | Rev: 13.0 | Page 6 of 16 | ||||||
Generally, the individuals subject to an Ad Hoc Blackout will be responsible for ensuring their own compliance. However, the officer declaring the Blackout may determine that additional procedures are appropriate for such Blackouts. Although individuals are responsible for ensuring their own compliance with such Blackouts, a failure to adhere to the Ad Hoc Blackout may still result in discipline or other penalties.
1.3.4Informing Stock Plan Administration
In most cases, Stock Plan Administration will not be “in the know” about the underlying events leading to an Ad Hoc Blackout, and therefore may be unaware that the Ad Hoc Blackout is in place. The officer declaring an Ad Hoc Blackout shall determine if Stock Plan Administration should be informed of the Ad Hoc Blackout for the purpose of requiring the Designated Broker to implement systemic controls that will restrict those subject to the Ad Hoc Blackout from engaging in prohibited Transactions in those accounts.
1.3.5Confidentiality of Ad Hoc Blackouts
Except for the general fact that Insiders are subject to Ad Hoc Blackouts from time to time, Insiders should not disclose the fact that there are circumstances affecting the Company that subject them or others at the Company to an Ad Hoc Blackout, or that they are subject to a particular Ad Hoc Blackout. Insiders should not discuss such matters with friends or relatives or even unnecessarily with other Company employees, other than to the extent necessary to ensure that any family member, household member or entity whose transactions are subject to this Policy is able to comply with this Policy.
1.4.RESTRICTIONS ON TRANSACTIONS BY PRECLEARANCE INSIDERS
1.4.1Preclearance Requirements
Prior to any Transaction in the Company’s securities (including the adoption of or entry into a contract, instruction or written plan for the purchase, sale, donation or other trade of Company securities, such as a Rule 10b5-1 plan or Exchange Fund transaction), a Preclearance Insider must obtain clearance for that Transaction from:
a)A Business Control Officer;
b)A Finance Control Officer; and
c)A Legal Control Officer.
1.4.1.1In most cases, a Preclearance Insider that is seeking clearance for a Transaction need only communicate with Stock Plan Administration of their intent to engage in a Transaction, and Stock Plan Administration will (a) seek the required approvals and (b) inform the Preclearance Insider if the Transaction has been approved. This process, however, might take some time, so the Preclearance Insider should plan for preclearance delays.
1.4.1.2A Preclearance Insider should not have their broker or other agent contact a Control Officer or Stock Plan Administration to inquire about whether a trading window is open. The Company will not communicate with a third party that the trading window is closed (or open), as this might signal that there is (or is not) MNPI about the Company that restricts the Preclearance Insider from engaging in the Transaction. Accordingly, Preclearance Insiders must seek preclearance for their Transactions themselves, not through anyone else.
1.4.1.3The duration of a preclearance approval may vary. Preclearance approval may be revoked at any time.
1.4.1.4A Control Officer should not approve preclearance of a Transaction by a Preclearance Insider to occur at a time that, to the knowledge of the Control
| LGL-70983 Insider Trading [LGL-1001] Policy | Rev: 13.0 | Page 7 of 16 | ||||||
Officer after due consideration, the Company is in possession of MNPI. Control Officers shall refer to and follow any guidelines published by the CLO.
1.4.2Prompt Notice of Transactions
A Section 16 Insider that works with a broker other than the Designated Broker for a Transaction or on a Rule 10b5-1 plan (as described below), or who transfers shares out of their account with the Designated Broker (e.g. through a gift, transfer to a different account, or transfer to another broker, but excluding a transfer of shares from a brokerage account of which the Section 16 Insider is the sole owner to another brokerage account of which the Section 16 Insider is the sole owner), must make arrangements for the Company’s Stock Plan Administration organization to receive prompt (no later than the same day) notice of such Transaction if the Section 16 Insider expects Stock Plan Administration to file the Form 4 associated with the Transaction. It is not enough to provide Stock Plan Administration with a document evidencing the proposed Transaction or with a copy of the Rule 10b5-1 plan and expect that Stock Plan Administration will be tracking stock prices to see if a Transaction has occurred. Stock Plan Administration must be notified immediately after a Transaction has occurred for the Form 4 filings to be made in a timely manner.
The adoption, modification or termination of a Rule 10b5-1 plan, or of a “non-Rule 10b5-1 trading arrangement” (as defined below), by a Section 16 Insider is required to be disclosed by the Company in its public filings with the Securities and Exchange Commission, including the name and title of the Section 16 Insider; the date of adoption, modification or termination of the plan; and the material terms of the plan (other than price), including duration and the aggregate number of securities to be purchased or sold. Accordingly, any Section 16 Insider who adopts, modifies or terminates a Rule 10b5-1 plan or a “non-Rule 10b5-1 trading arrangement” must notify the Company’s Stock Plan Administration organization promptly (no later than the same day) of such event.
A “non-Rule 10b5-1 trading arrangement” is defined by the Securities and Exchange Commission as any arrangement where:
(1)The Section 16 Insider asserts that, at a time when they were not aware of material nonpublic information about the Company or its securities, they had adopted a written arrangement for trading the securities; and
(2)The trading arrangement:
(i)Specified the amount of securities to be purchased or sold and the price at which and the date on which the securities were to be purchased or sold;
(ii)Included a written formula or algorithm, or computer program, for determining the amount of securities to be purchased or sold and the price at which and the date on which the securities were to be purchased or sold; or
(iii)Did not permit the Section 16 Insider to exercise any subsequent influence over how, when, or whether to effect purchases or sales; provided, in addition, that any other person who, pursuant to the trading arrangement, did exercise such influence must not have been aware of MNPI when doing so.
Please note that while Section 1.7 of this Appendix A provides an exception to this Policy for a Transaction in Company securities made pursuant to a valid Rule 10b5-1 plan that complies with the requirements of this Policy, even if the Transaction occurs during a Blackout or when the person making the Transaction otherwise is in possession of MNPI, this exception does not extend to Transactions made pursuant to “non-Rule
| LGL-70983 Insider Trading [LGL-1001] Policy | Rev: 13.0 | Page 8 of 16 | ||||||
10b5-1 trading arrangements”. Accordingly, a Transaction made pursuant to “non-Rule 10b5-1 trading arrangement” that does not satisfy the requirements for a valid Rule 10b5-1 plan, and which occurs during a Blackout or when the person making the Transaction otherwise is in possession of MNPI, would be a violation of this Policy.
1.4.3Additional Obligations
1.4.3.1Obligation to clarify. IN EVERY CASE WHERE A PRECLEARANCE INSIDER KNOWS OF NON-PUBLIC INFORMATION THAT COULD POSSIBLY BE MATERIAL, THE PRECLEARANCE INSIDER MUST DISCLOSE THE FACT THAT THE PRECLEARANCE INSIDER HAS SUCH KNOWLEDGE TO A BUSINESS CONTROL OFFICER, A FINANCE CONTROL OFFICER AND A LEGAL CONTROL OFFICER OR THEIR DESIGNEE SO THAT SUCH OFFICERS CAN DETERMINE WHETHER SUCH INFORMATION IS MNPI, BEFORE ENGAGING IN ANY TRANSACTION IN COMPANY SECURITIES.
1.4.3.2Binding Effect of Company-Announced Blackout Periods. If the Company announces a Blackout, that Blackout is binding on the specified employees, directors, consultants, agents and contractors as well as persons that are deemed to be subject to this Policy under Section 2.0 of this Policy due to their relationship with such specified employees, directors, consultants, agents and contractors (such as family members living in the household), regardless of whether or not they actually possess MNPI.
1.5Exceptions
The prohibition on engaging in Transactions set forth in Section 1.1 of this Appendix A, and the preclearance requirements of Section 1.4.1 of this Appendix A, do not apply to certain Transactions between an Insider and the Company itself. Such cases include:
(a)The acquisition of Company securities acquired through the exercise of stock options for cash or through a “net exercise” (note that the “cashless exercise” of such options, or the sale of the stock issued upon exercise of such options, are subject to the prohibitions on Transactions set forth in Section 1.1 of this Appendix A and the preclearance requirement of Subsection 1.4.1 of this Appendix A; it is only the exercise of an option for cash or through a net exercise that is an exception);
(b)Company stock acquired through automatic purchases pursuant to the Company's Employee Stock Purchase Plan based on elections made outside of a Blackout Period; and
(c)The receipt of restricted stock units (RSUs), performance stock units (PRSUs), or other equity grants from the Company during a Blackout Period.
1.6Application to the Company’s 401(k) Plan
1.6.1This Policy applies to transactions within the Company’s 401(k) Plan. During a Blackout, this Policy prohibits an Insider from engaging in discretionary transactions that may result in the purchase or sale of Company stock in the Company’s 401(k) plan, including:
(a)transferring a balance out of the 401(k) Company stock fund,
(b)borrowing money against a 401(k) plan account if the account holds Company stock; or
(c)pre-paying a 401(k) plan loan, if the 401(k) account holds Company stock.
| LGL-70983 Insider Trading [LGL-1001] Policy | Rev: 13.0 | Page 9 of 16 | ||||||
1.6.2If the transactions set forth in subsections (a) – (c) of Section 1.6.1 of this Appendix A are made by a Preclearance Insider outside of a Blackout Period, they must be precleared in accordance with the requirements for preclearance of Preclearance Insider Transactions described in this Policy.
1.7Rule 10b5-1 Plans
Rule 10b5-1 under the Exchange Act provides that a Transaction is not made “on the basis of” MNPI if the person making the purchase or sale can demonstrate that, before they became aware of the nonpublic information, they had entered into a binding contract or written plan for trading securities, subject to the additional requirements of Rule 10b5-1(c). The Company permits those persons subject to its Insider Trading Policy to create and utilize plans that comply with the requirements of Rule 10b5-1(c) and with certain additional requirements, as described below.
1.7.1Company Requirements for Rule 10b5-1 Plans. This Policy is not violated by a Transaction in Company securities occurring during a Blackout or when the person making the Transaction otherwise is in possession of MNPI if it was made pursuant to a Rule 10b5-1 plan, as long as all the following conditions are met:
(a)the plan must (a) specify the amount of securities to be purchased or sold and the date on which the securities are to be purchased or sold, (b) include a written formula or algorithm, or computer program, for determining the amount of securities to be sold and the price at which and the date on which the securities are to be purchased or sold, or (c) not permit the creator of the plan to exercise any subsequent influence over how, when, or whether to effect purchases or sales; provided, that any other person who, pursuant to the contract, instruction, or plan, does exercise such influence must not have been aware of MNPI when doing so;
(b)the written plan was entered into at a time when the creator of the plan was not subject to a Blackout or in possession of MNPI about the Company;
(c)if the creator of the plan is a Preclearance Insider, the Preclearance Insider obtained clearance pursuant to Section 1.4.1 of this Appendix A prior to entering into the plan;
(d)if the creator of the plan is a Section 16 Insider, the first Transaction under the written plan does not occur until the expiration of a cooling-off period consisting of the later of:
(i)Ninety days after the adoption or modification of the plan; or
(ii)Two business days following the disclosure of the Company’s financial results in a Form 10-Q or Form 10-K for the completed fiscal quarter in which the plan was adopted (but, in any event, this required cooling-off period will not exceed a maximum of 120 days after adoption of the plan), provided that any modification of a plan with respect to such plan’s price or price ranges for sales or purchases, amount of securities to be sold or purchased, or the timing of the transactions (or formulae, algorithms, or programs that affect such terms) shall restart such period;
(e)if the creator of the plan is not a Section 16 Insider (and is not the Company itself), the first Transaction under the written plan does not occur until the expiration of a cooling-off period of thirty days after the plan is adopted or modified;
(f)if the creator of the plan is a Section 16 Insider, the plan includes a representation by the Section 16 Insider certifying that, on the date of adoption of the plan: (1) the individual Section 16 Insider is not aware of any MNPI about the security or issuer; and (2) the individual Section 16 Insider is adopting the plan in good faith and not as
| LGL-70983 Insider Trading [LGL-1001] Policy | Rev: 13.0 | Page 10 of 16 | ||||||
part of a plan or scheme to evade the prohibitions of Section 10(b) of the Exchange Act or Rule 10b5 thereunder;
(g)if the creator of the plan is not the Company itself:
(i)the creator of the plan has no other outstanding Rule 10b5-1 plan, except as expressly permitted under paragraph (c)(1)(ii)(D) of Rule 10b5-1;
(ii)if the plan is designed to effect a single Transaction, the creator of the plan has not, during the prior 12-month period, adopted another single Transaction Rule 10b5-1 plan;
(iii)the Rule 10b5-1 plan was provided to the Company’s Stock Plan Administration group before it takes effect; and
(iv)the creator of the plan notifies the Company’s Stock Plan Administration group within one business day following the adoption, modification or termination of the plan.
(h)the plan must be entered into in good faith and not as part of a plan or scheme to evade the prohibitions of Section 10(b) of the Exchange Act or Rule 10b-5 thereunder, and once the plan has been entered into, the creator must act in good faith with respect to the plan.
Please refer to Section 1.4.2 of this Appendix A for a discussion of the disclosure obligations applicable to Rule 10b5-1 plans adopted by Section 16 Insiders.
1.7.2Limits on Rule 10b5-1 plans. Rule 10b5-1 has numerous requirements, and it is up to the creator of the plan to determine if their plan meets all the requirements and is the proper vehicle for their investment strategy. Moreover, a Rule 10b5-1 plan only creates an affirmative defense against insider trading claims. That means that the creator of the plan still has the burden of proving that their Transaction was not based on inside information because, at the time the trade was planned and the plan entered into, they were not aware of MNPI. So despite the availability of such plans, persons should still carefully consider the benefits of trading under Rule 10b5-1 plans as opposed to executing their Transactions outside of any Blackout Periods.
1.7.3Additional rules for establishing Rule 10b5-1 plans. A Preclearance Insider must obtain clearance pursuant to Section 1.4.1 of this Appendix A prior to setting up a Rule 10b5-1 plan. Employees who set up Rule 10b5-1 plans are expected to utilize the Designated Broker as their broker for such plans, subject to an exception allowed by Stock Plan Administration.
1.7.4Modifying or terminating Rule 10b5-1 plans; Obligation to act in good faith. Under Rule 10b5-1, any modification or change to the amount, price, or timing of a Transaction under a Rule 10b5-1 plan is deemed to be a termination of such plan, and the adoption of a new plan. This could include the substitution or removal of a broker that is executing trades pursuant to a Rule 10b5-1 plan on behalf of a person, if it changes the price or date on which Transactions are to be executed. As was noted in Section 1.4.2 of this Appendix A, any such modification or termination of a plan by a Section 16 Insider will need to be disclosed by the Company in its SEC filings.
Generally, persons should exercise caution when modifying or terminating a Rule 10b5-1 plan. One condition to the availability of the affirmative defense created by Rule 10b5-1 is that a person who creates a Rule 10b5-1 plan must act “in good faith” with respect to
| LGL-70983 Insider Trading [LGL-1001] Policy | Rev: 13.0 | Page 11 of 16 | ||||||
that plan. The modification or termination of a Rule 10b5-1 plan prior to completion may be subject to scrutiny if there is any indication that the person who adopted and later modified or terminated it was not acting in good faith with respect to the prohibitions of Rule 10b-5.
1.7.5Procedures for establishing a Rule 10b5-1 plan. Appendix D contains information on how to work with the Designated Broker and the Company’s Stock Plan Administration group to establish a Rule 10b5-1 plan.
1.7.6Additional requirements for brokers other than the Designated Broker. For any broker or entity other than the Designated Broker that is involved with a Rule 10b5-1 plan, the person, broker or other entity (if any) involved in the Rule 10b5-1 plan must agree to provide the Company with information regarding Transactions occurring under such plan which the Company deems sufficient for compliance with disclosure and reporting requirements applicable to the Company and its employees pursuant to applicable federal and state statutes, rules and regulations.
1.8NO HEDGING, PLEDGING, MARGIN ACCOUNTS OR OPTIONS TRADING INVOLVING COMPANY SECURITIES. All employees and non-employee members of the board of directors are prohibited from holding Company securities in certain types of accounts or from engaging in certain transactions, as described below, whether or not they are Insiders.
1.8.1Prohibition on Pledging and Margin Accounts. Employees and non-employee members of the board of directors must not pledge Company securities as collateral for a loan, including by holding Company securities in a margin account.
1.8.2Prohibition on Hedging. The Company prohibits employees and non-employee members of the board of directors from engaging in hedging transactions, such as “cashless” collars, forward sales, equity swaps and other similar arrangements. Investments in Exchange Funds are permitted if they are broadly diversified and comprise less than 2% Company stock; exceptions to the 2% threshold may be permitted on a case-by-case basis in unusual cases. Entry into an Exchange Fund transaction will be subject to the requirements described in Section 1.9 of this Appendix A.
1.8.3Prohibition on Short Sales, Puts and Calls. Employees and non-employee members of the board of directors may not engage in “short sales” of Company securities nor purchase or sell either “put” or “call” options for Company securities. This prohibition does not apply to the receipt of compensatory stock options or other rights to receive or purchase stock through the Company’s equity incentive plans or employee stock purchase plans.
1.8.4Prohibition on Certain Managed Accounts. Employees and non-employee members of the board of directors must not keep Company securities in any account where Company securities may be subject to sale at the direction of a broker or other third party, unless the securities are the subject of a plan that meets all of the requirements for a Rule 10b5-1 plan, as described in Rule 10b5-1 and Section 1.7 of this Appendix A (including the requirement that any other person who, pursuant to plan, exercises influence over how, when, or whether to effect purchases or sales must not be aware of MNPI when doing so).
1.9Requirements for Exchange Fund transactions
1.9.1Entry into an Exchange Fund transaction will be subject to the following requirements:
(a)If the Exchange Fund entry window is or may be within a period when the person would be subject to a Blackout, then the person subject to this Policy must submit a
| LGL-70983 Insider Trading [LGL-1001] Policy | Rev: 13.0 | Page 12 of 16 | ||||||
Letter of Intent to enter into the Exchange Fund that complies with all of the requirements for a Rule 10b5-1 plan, as described in Rule 10b5-1 and Section 1.7 of this Appendix A, including the requirement that the Letter of Intent is entered into at a time when the person was not subject to a Blackout or in possession of MNPI about the Company;
(b)If the person entering into the Exchange Fund is a Preclearance Insider, the Preclearance Insider must have obtained clearance pursuant to Section 1.4.1 of this Appendix A prior to entering into the Letter of Intent; and
(c)Any proposed Letter of Intent must be provided to Stock Plan Administration for review sufficiently in advance of entry into the Letter of Intent.
1.9.2A Section 16 Insider who enters into an Exchange Fund must make arrangements for the Company’s Stock Plan Administration organization to receive prompt (no later than the same day) notice of: (i) entry into, amendment or termination of a Letter of Intent to enter into the Exchange Fund, (ii) entry into the Exchange Fund, (iii) the Section 16 Insider’s delivery to the manager of the Exchange Fund of a notice of redemption of the Section 16 Insider’s interests in the Exchange Fund, and (iv) the Exchange Fund’s liquidation. It is not enough to provide Stock Plan Administration with the Letter of Intent. Stock Plan Administration must be notified immediately after a Transaction has occurred for Form 4 filings to be made in a timely manner.
1.9.3Section 16 Insiders are cautioned that a redemption from or liquidation of an Exchange Fund may, depending on the circumstances, be deemed to include a “purchase” of Company securities, so it is recommended that any Section 16 Insider who participates in an Exchange Fund avoid non-exempt sales of Company securities within six months before or after a redemption transaction or the liquidation of the Exchange Fund, to avoid the potential for “short swing” liability.
1.10PROHIBITION ON DISCLOSING INSIDE INFORMATION
1.10.1Avoiding disclosures. Insiders must be careful to maintain the confidentiality of all information prior to its public disclosure. Even inadvertent actions may violate this Policy. The securities laws that prohibit Insiders from trading on nonpublic information apply equally to a person who receives information from the Insider (the person an Insider “tips”). If the person trades on an Insider’s “tip,” both the Insider and the person that received the tip can be held liable for damages and subject to sanction by the government regulatory authorities.
1.11Other
1.11.1Short swing profits and Section 16 Insider Transactions. All Transactions by Section 16 Insiders are subject to the short swing profits rule of the Exchange Act, unless the Transactions are exempt. The short swing profits rule applies to any sale that occurs within six months before or after any purchase, and requires any profits earned from a sale that occurs in such period to be paid directly to the Company. Transactions that are exempt from the short swing profits rule include, by way of example only, stock that the Section 16 Insider receives from the Company under properly authorized grants, and stock purchased through the Company’s ESPP. Transactions that are not exempt from the short swing profits rule include, for example, Company stock purchased with the Section 16 Insider’s own money and Company stock purchased through the reinvestment of dividends paid on Company stock owned by the Section 16 Insider. This summary is not a complete explanation of the application of the short swing profits rule, and the Company recommends that all Section 16 Insiders seek professional, legal and tax advice on how the short swing profits rule may affect them.
1.11.2Effect of State and Federal Law. Note that adherence to this Policy does not guarantee that an individual’s actions will not violate federal, state or local securities laws. The
| LGL-70983 Insider Trading [LGL-1001] Policy | Rev: 13.0 | Page 13 of 16 | ||||||
Company does not discourage employees from investing in shares of the Company’s stock. However, it is extremely important that all persons subject to this Policy be aware of the serious consequences (including personal liability, termination of employment and even criminal penalties) that can result from improper trading in the Company’s stock.
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT*
SUBSIDIARY (as of August 29, 2024) | STATE OR OTHER JURISDICTION OF OPERATION | ||||
| Lam Research AG | Austria | ||||
| Lam Research Management GmbH | Austria | ||||
| Semsysco GmbH | Austria | ||||
| Lam Research Belgium BV | Belgium | ||||
| Novellus Systems, Inc. | California, United States | ||||
| Novellus Systems International, LLC | California, United States | ||||
| Lam Research Capital Ltd. | Cayman Islands | ||||
| Lam Research Semiconductor (Shanghai) Co. Ltd. | China | ||||
| Lam Research (Shanghai) Co., Ltd. | China | ||||
| Lam Research Service Co., Ltd. | China | ||||
| Coventor, Inc. | Delaware, United States | ||||
| Lam Research Capital LLC | Delaware, United States | ||||
| Lam Research International Holding Company | Delaware, United States | ||||
| Silfex, Inc. | Delaware, United States | ||||
| SpeedFam-IPEC International Services, LLC | Delaware, United States | ||||
| Coventor Sàrl | France | ||||
| Lam Research SAS | France | ||||
| Lam Research GmbH | Germany | ||||
| Lam Research (H.K.) Limited | Hong Kong | ||||
| Lam Research (India) Private Limited | India | ||||
| Lam Research (Ireland) Limited | Ireland | ||||
| Lam Research (Israel) Ltd. | Israel | ||||
| Lam Research Services Ltd. | Israel | ||||
| Lam Research S.r.l. | Italy | ||||
| Lam Research GK | Japan | ||||
| Lam Research Malaysia Sdn. Bhd. | Malaysia | ||||
| Lam Research International Sdn. Bhd. | Malaysia | ||||
| Lam Research Holdings B.V. | Netherlands | ||||
| Lam Research International B.V. | Netherlands | ||||
| SolMateS B.V. | Netherlands | ||||
| Lam Research Korea Limited | Republic of Korea | ||||
| Lam Research Korea LLC YH | Republic of Korea | ||||
| Lam Research Korea Technology LLC YH | Republic of Korea | ||||
| Lam Research Manufacturing Korea LLC | Republic of Korea | ||||
| Lam Research Singapore Pte Ltd | Singapore | ||||
| Lam Research Holding GmbH | Switzerland | ||||
| Lam Research International Sàrl | Switzerland | ||||
| Lam Research Co., Ltd. | Taiwan | ||||
| Talus Manufacturing, Ltd. | Taiwan | ||||
| Lam Research Ltd. | United Kingdom | ||||
| Metryx, Ltd. | United Kingdom | ||||
*In accordance with Item 601(b)(21) of Regulation S-K, the Company has omitted from this Exhibit the names of some of its subsidiaries which, considered in the aggregate as a single subsidiary, do not constitute a significant subsidiary as defined in Rule 1-02(w) of Regulation S-X.
Exhibit 23
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
1.Registration Statement (Form S-3 No. 333-229762) of Lam Research Corporation,
2.Registration Statements (Form S-8 No. 333-66833, 333-127936, 333-156335, and 333-231138) pertaining to the Lam Research Corporation 1999 Employee Stock Purchase Plan, as amended and restated,
3.Registration Statements (Form S-8 No. 333-84638, 333-185641, and 333-233961) pertaining to the Savings Plus Plan, Lam Research 401(k),
4.Registration Statement (Form S-8 No. 333-138545) pertaining to the 2007 Stock Incentive Plan, as amended,
5.Registration Statement (Form S-8 No. 333-181878) pertaining to the Novellus Systems, Inc. 2011 Stock Incentive Plan, Novellus Systems, Inc. Retirement Plan, and Lam Research Corporation 1999 Employee Stock Purchase Plan, as amended, and
6.Registration Statement (Form S-8 No. 333-207844) pertaining to the 2015 Stock Incentive Plan of Lam Research Corporation;
of our reports dated August 29, 2024, with respect to the consolidated financial statements of Lam Research Corporation and the effectiveness of internal control over financial reporting of Lam Research Corporation included in this Annual Report (Form 10-K) of Lam Research Corporation for the year ended June 30, 2024.
/s/ Ernst & Young LLP
San Jose, California
August 29, 2024
Exhibit 31.1
RULE 13a-14(a)/15d-14(a) CERTIFICATION (PRINCIPAL EXECUTIVE OFFICER)
I, Timothy M. Archer, certify that:
1.I have reviewed this Annual Report on Form 10-K of Lam Research Corporation;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| August 29, 2024 | /s/ Timothy M. Archer | ||||
| Timothy M. Archer | |||||
| President and Chief Executive Officer | |||||
Exhibit 31.2
RULE 13a-14(a)/15d-14(a) CERTIFICATION (PRINCIPAL FINANCIAL OFFICER)
I, Douglas R. Bettinger, certify that:
1.I have reviewed this Annual Report on Form 10-K of Lam Research Corporation;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| August 29, 2024 | /s/ Douglas R. Bettinger | ||||
| Douglas R. Bettinger | |||||
| Executive Vice President and Chief Financial Officer | |||||
Exhibit 32.1
SECTION 1350 CERTIFICATION (PRINCIPAL EXECUTIVE OFFICER)
In connection with the Annual Report of Lam Research Corporation (the “Company”) on Form 10-K for the fiscal period ending June 30, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Timothy M. Archer, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| August 29, 2024 | /s/ Timothy M. Archer | ||||
| Timothy M. Archer | |||||
| President and Chief Executive Officer | |||||
The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that Lam Research Corporation specifically incorporates it by reference.
Exhibit 32.2
SECTION 1350 CERTIFICATION (PRINCIPAL FINANCIAL OFFICER)
In connection with the Annual Report of Lam Research Corporation (the “Company”) on Form 10-K for the fiscal period ending June 30, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Douglas R. Bettinger, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| August 29, 2024 | /s/ Douglas R. Bettinger | ||||
| Douglas R. Bettinger | |||||
| Executive Vice President and Chief Financial Officer | |||||
The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that Lam Research Corporation specifically incorporates it by reference.
Exhibit 97.1
LAM RESEARCH CORPORATION
Policy for the Recovery of Erroneously Awarded Compensation
Effective December 1, 2023
Purpose
As required pursuant to the listing standards of the Nasdaq Stock Market LLC (the “Stock Exchange”), Section 10D of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 10D-1 under the Exchange Act, the Board of Directors (the “Board”) of Lam Research Corporation (the “Company”) has adopted this Policy for the Recovery of Erroneously Awarded Compensation (the “Policy”) to require and enable the Company, as directed by the Board or the Compensation Committee of the Board (the “Committee”), to recover Covered Compensation (as defined below) Received (as defined below) by a Covered Officer (as defined below) in the event of an Accounting Restatement (as defined below).
Notwithstanding anything in this Policy to the contrary, at all times, this Policy remains subject to interpretation and operation in accordance with the final rules and regulations promulgated by the U.S. Securities and Exchange Commission (the “SEC”), the final listing standards adopted by the Stock Exchange, and any applicable SEC or Stock Exchange guidance or interpretations issued from time to time regarding such Covered Compensation recovery requirements (collectively, the “Final Guidance”). Questions regarding this Policy should be directed to the Chief Legal Officer.
Policy Statement
Unless and to the extent a Clawback Exception (as defined below) applies, in the event that the Company is required to prepare an Accounting Restatement (as defined below), the Company will recover reasonably promptly from each Covered Officer, and each such Covered Officer shall be obligated to return to the Company, the Covered Compensation Received by such Covered Officer. The independent members of the Board shall have broad discretion to determine the appropriate means of recovering the Covered Compensation based on the particular facts and circumstances. If a Clawback Exception applies with respect to one or more Covered Officers, the Company may forgo such recovery under this Policy from any such Covered Officer(s); provided, however, that any such Covered Officer(s) shall be obligated to return to the Company the Covered Compensation Received by such Covered Officer, unless and until the Committee shall determine that the Company will forgo such recovery.
To the extent that the Covered Officer has already reimbursed the Company for any Covered Compensation Received under any duplicative recovery obligations established by the Company or applicable law, it shall be appropriate for any such reimbursed amount to be credited to the amount of the Covered Compensation that is subject to recovery under this Policy.
Accounting Restatement
For purposes of this Policy, “Accounting Restatement” is defined as an accounting restatement due to the material noncompliance of the Company with any financial reporting requirement under the securities laws, including any required accounting restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements, or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period.
For purposes of this Policy, the Company shall be deemed to be required to prepare an Accounting Restatement if: (a) the Board, applicable Board committee, or officers authorized to take action if Board action is not required, concludes, or reasonably should have concluded, that the Company is required to prepare the Accounting Restatement or (b) a court, regulator, or other legally authorized body directs the Company to prepare the Accounting Restatement. The date of the earlier to occur of (a) or (b) shall be referred to herein as the “Trigger Date”. The Company’s obligation to recover Covered Compensation pursuant to this Policy is not dependent on if or when restated financial statements are filed.
Covered Officers
For purposes of this Policy, “Covered Officer” is defined as any current or former “Section 16 officer” of the Company within the meaning of Rule 16a-1(f) under the Exchange Act, as determined by the Board. Covered Officers include, at a minimum, current or former “executive officers” as defined in Rule 3b-7 under the Exchange Act and identified under Item 401(b) of Regulation S-K.
Covered Compensation
For purposes of this Policy:
•“Covered Compensation” is defined as the amount of Incentive-Based Compensation (as defined below) Received during the applicable Recovery Period (as defined below) that exceeds the amount of Incentive-Based Compensation that otherwise would have been Received during such Recovery Period had it been determined based on the relevant restated amounts, and computed without regard to any taxes paid.
Incentive-Based Compensation Received by a Covered Officer will only qualify as Covered Compensation if: (i) it is Received on or after October 2, 2023; (ii) it is Received after such Covered Officer begins service as a Covered Officer; (iii) such Covered Officer served as a Covered Officer at any time during the performance period for such Incentive-Based Compensation (whether or not such Covered Officer is serving at the time the Covered Compensation is required to be repaid to the Company); and (iv) it is Received while the Company has a class of securities listed on a national securities exchange or a national securities association.
For Incentive-Based Compensation based on stock price or total shareholder return, where the amount of Covered Compensation is not subject to mathematical recalculation directly from the information in an Accounting Restatement, the amount of such Incentive-Based Compensation that is deemed to be Covered Compensation will be based on a reasonable estimate of the effect of the Accounting Restatement on the stock price or total shareholder return upon which the Incentive-Based Compensation was Received, and the Company will maintain and provide to the Stock Exchange documentation of the determination of such reasonable estimate.
•“Incentive-Based Compensation” is defined as any compensation that is granted, earned, or vested based wholly or in part upon the attainment of a Financial Reporting Measure (as defined below). For purposes of clarity, Incentive-Based Compensation includes any such compensation that would otherwise qualify as Incentive-Based Compensation, even if it is in any plan (other than tax-qualified retirement plans), including long-term disability, life insurance, elective deferred compensation, and supplemental executive retirement plans, and any other compensation that is based on such Incentive-Based Compensation, such as earnings accrued on notional amounts of Incentive-Based Compensation contributed to such plans.
•“Financial Reporting Measure” is defined as a measure that is determined and presented in accordance with the accounting principles used in preparing the Company’s financial statements, and any measures that are derived wholly or in part from such measures. Stock price and total shareholder return (and any measures that are derived wholly or in part from stock price or total shareholder return) shall for purposes of this Policy also be considered Financial Reporting Measures. For the avoidance of doubt, a Financial Reporting Measure need not be presented within the Company’s financial statements or included in a filing with the SEC.
•Incentive-Based Compensation is deemed “Received” in the Company’s fiscal period during which the Financial Reporting Measure specified in the Incentive-Based Compensation award is attained, even if the payment or grant of the Incentive-Based Compensation occurs after the end of that period.
Recovery Period
For purposes of this Policy, the applicable “Recovery Period” is defined as the three completed fiscal years immediately preceding the Trigger Date and, if applicable, any transition period resulting from a change in the Company’s fiscal year within or immediately following those three completed fiscal years (provided, however, that if a transition period between the last day of the Company’s previous fiscal year end and the first day of its new fiscal year comprises a period of nine to 12 months, such period would be deemed to be a completed fiscal year).
2
Clawback Exceptions
The Company is required to recover all Covered Compensation Received by a Covered Officer in the event of an Accounting Restatement unless (i) one of the following conditions are met and (ii) the Committee has determined that recovery would be impracticable in accordance with Rule 10D-1 under the Exchange Act (under such circumstances, a “Clawback Exception” applies):
•the direct expense paid to a third party to assist in enforcing this Policy, such as reasonable legal expenses and consulting fees, would exceed the amount to be recovered (and the Company has already made a reasonable attempt to recover such Covered Compensation from such Covered Officer, has documented such reasonable attempt(s) to recover, and has provided such documentation to the Stock Exchange);
•recovery would violate home country law, where that law was adopted prior to November 28, 2022 (and the Company has already obtained an opinion of home country counsel, acceptable to the Stock Exchange, that recovery would result in such a violation, and provided such opinion to the Stock Exchange); or
•recovery would likely cause an otherwise tax-qualified retirement plan, under which benefits are broadly available to employees of the Company, to fail to meet the requirements of Section 401(a)(13) or Section 411(a) of the Internal Revenue Code and regulations thereunder. For purposes of clarity, this Clawback Exception only applies to tax-qualified retirement plans and does not apply to other plans, including long-term disability, life insurance, elective deferred compensation, and supplemental executive retirement plans, or any other compensation that is based on Incentive-Based Compensation in such plans, such as earnings accrued on notional amounts of Incentive-Based Compensation contributed to such plans.
Indemnification and Insurance
The Company is prohibited from paying or reimbursing for insurance for, or indemnifying, any Covered Officer against the loss of Covered Compensation, and no Covered Officer shall be entitled to indemnification against any such loss. In addition, notwithstanding anything in the Amended and Restated Bylaws of the Company or in any indemnity agreement between a Covered Officer and the Company to the contrary, no Covered Officer shall be entitled to indemnification or advancement of expenses in connection with a proceeding (a) by the Covered Officer or (b) by or in the right of the Company, in each case that is related to the recovery by the Company of any Covered Compensation Received by the Covered Officer. Further, the Company shall not enter into any agreement that exempts any Incentive-Based Compensation that is granted, paid or awarded to a Covered Officer from the application of this Policy or that waives the Company’s right to recovery of any Covered Compensation, and this Policy shall supersede any such agreement (whether entered into before, on or after the effective date of this Policy).
Administration and Interpretation
The Board intends that this Policy shall be applied to the fullest extent permitted by law. The independent members of the Board will administer this Policy in accordance with the Final Guidance, except to the extent that the Committee is required to administer the Policy by Nasdaq Rule 5608, and will have full and exclusive authority and discretion to supplement, amend, repeal, interpret, terminate, construe, modify, replace and/or enforce (in whole or in part) this Policy, including the authority to correct any defect, supply any omission or reconcile any ambiguity, inconsistency or conflict in the Policy, subject to the Final Guidance. In making such determinations, the independent members of the Board will consider any recommendations of the Committee. This Policy is in addition to and is not intended to change or interpret any federal or state law or regulation, including the Delaware General Corporation Law, the Restated Certificate of Incorporation of the Company, or, except as expressly stated in this Policy, the Amended and Restated Bylaws of the Company. The independent members of the Board will review the Policy from time to time and will have full and exclusive authority to take any action they deem appropriate, except to the extent such authority must be vested in the Committee under Nasdaq Rule 5608.
The independent members of the Board shall have broad discretion to determine the appropriate means of recovering the Covered Compensation based on the particular facts and circumstances. In addition, the independent
3
members of the Board will have the authority to offset any compensation or benefit amounts that become due to the applicable Covered Officers to the extent permissible under Section 409A of the Internal Revenue Code of 1986, as amended, and as they deem necessary or desirable to recover any Covered Compensation, except to the extent such authority must be vested in the Committee under Nasdaq Rule 5608. Without limiting the foregoing, if the Company is required to recover Covered Compensation in the event of an Accounting Restatement that involves period shifting (i.e., an Accounting Restatement that involves both a negative adjustment to the Company’s financial statements in one or more periods as well as a positive adjustment to the Company’s financial statements in one or more other periods), then the independent members of the Board will consider offsetting any Positive Compensation Adjustment (as defined below) that would otherwise become due to the applicable Covered Officers as a result of the Accounting Restatement against the Covered Compensation required to be recovered, to the extent permissible under Section 409A of the Internal Revenue Code of 1986, as amended, and as they deem necessary or desirable. For purposes of this Policy, “Positive Compensation Adjustment” is defined as the amount by which the Incentive-Based Compensation Received during the applicable period was less than the amount of Incentive-Based Compensation that otherwise would have been Received during such period had it been determined based on the relevant restated amounts and computed without regard to any taxes paid or to be paid.
Other Recovery Rights; Acknowledgement
Any employment agreement, equity award agreement, compensatory plan or any other agreement or arrangement with a Covered Officer shall be deemed to include, as a condition to the grant of any benefit thereunder, an agreement by the Covered Officer to abide by the terms of this Policy and an acknowledgement by the Covered Officer that such benefit is provided subject to the terms of this Policy. In addition, each Covered Officer shall sign and deliver to the Chief Legal Officer, within 10 calendar days following the later of (i) the effective date of this Policy first set forth above or (ii) the date the individual becomes a Covered Officer, an acknowledgment of and consent to this Policy, in substantially the form attached hereto as Exhibit A, (i) acknowledging and consenting to be bound by the terms of this Policy, (ii) agreeing to fully cooperate with the Company in connection with any of such Covered Officer’s obligations to the Company pursuant to this Policy, and (iii) agreeing that the Company may enforce its rights under this Policy through any and all reasonable means permitted under applicable law as it deems necessary or desirable under this Policy.
Successors
This Policy shall be binding and enforceable against all Covered Officers and their beneficiaries, heirs, executors, administrators or other legal representatives.
Relationship to Prior Policy
This Policy supersedes the Lam Research Compensation Recovery, or Clawback, Policy, as adopted and approved by the Board on August 27, 2014 (the “Prior Policy”) with respect to any and all Incentive-Based Compensation Received on or after October 2, 2023. To the extent an event occurs that would be a “Triggering Event” (as defined in the Prior Policy) for the recovery of “Excessive Incentive-Based Compensation” (as defined in the Prior Policy) and such compensation was not Received on or after October 2, 2023, the Prior Policy shall govern the recovery of such compensation. For the avoidance of doubt, in no event shall any compensation be subject to recovery under both this Policy and the Prior Policy, and in the event of a conflict, this Policy shall prevail.
Disclosure
This Policy, and any recovery of Covered Compensation by the Company pursuant to this Policy that is required to be disclosed in the Company’s filings with the SEC, will be disclosed as required by the Securities Act of 1933, as amended, the Exchange Act, and related rules and regulations, including the Final Guidance.
4
EXHIBIT A
LAM RESEARCH CORPORATION
Policy for the Recovery of Erroneously Awarded Compensation
ACKNOWLEDGEMENT FORM
By signing below, the undersigned acknowledges and confirms that the undersigned has received and reviewed a copy of the Lam Research Corporation Policy for the Recovery of Erroneously Awarded Compensation, as adopted and approved by the Board on [_____] [__], 2023 (the “Policy”). Capitalized terms used but not otherwise defined in this Acknowledgement Form (this “Acknowledgement Form”) shall have the meanings ascribed to such terms in the Policy.
By signing this Acknowledgement Form, the undersigned acknowledges and agrees that the undersigned is and will continue to be subject to the Policy and that the Policy will apply both during and after the undersigned’s employment with the Company. Further, by signing below, the undersigned agrees to abide by the terms of the Policy, including, without limitation, by returning any Covered Compensation (as defined in the Policy) to the Company to the extent required by, and in a manner permitted by, the Policy. The undersigned also agrees, by signing below, that any and all Covered Compensation Received by the Covered Officer shall be subject to the terms of the Policy. In addition, the undersigned agrees that the Company may enforce its rights under the Policy through any and all reasonable means permitted under applicable law as it deems necessary or desirable under the Policy.
COVERED OFFICER
Signature: __________________________
Print Name: _______________________
Date: ______________________________
5