Lam Research Corporation 2023 Q1 10-Q 8

The following table presents the Company’s revenues disaggregated between system and its customer support-related revenue:

~~In October 2016,~~


	Three Months Ended
		September 25, 2022		September 26, 2021
		(In thousands)
System revenue		$	3,181,987	$	2,924,883
Customer support-related revenue and other		1,892,134		1,379,582
		$	5,074,121	$	4,304,465

System revenue includes sales of new leading-edge equipment in deposition, etch and clean markets.

Customer support-related revenue includes sales of customer service, spares, upgrades, and non-leading-edge equipment from the ~~FASB released ASU 2016-16, “Income Tax~~ – ~~Intra-Entity Transfers~~Company’s Reliant product line.

The following table presents the Company’s revenues disaggregated by geographic region:


	Three Months Ended
		September 25, 2022		September 26, 2021
		(In thousands)
China		$	1,530,475	$	1,607,710
Taiwan		1,120,946		638,066
Korea		855,378		918,137
Southeast Asia		541,064		365,248
Japan		458,693		468,731
United States		304,977		228,211
Europe		262,588		78,362
		$	5,074,121	$	4,304,465

The following table presents the percentages of ~~Assets Other than Inventory.” This standard update improves~~leading- and non-leading-edge equipment and upgrade revenue to each of the ~~accounting for~~primary markets the ~~income tax consequences of intra-entity transfers of assets other than inventory. Early adoption is permitted. The~~ Company is required to adopt the standard in the first quarter of fiscal year 2019 using a modified-retrospective approach through a cumulative-effect adjustment directly to retained earnings. The Company is currently in the process of evaluating the impact of adoption on its Condensed Consolidated Financial Statements.serves:

~~In November 2016, the FASB released ASU 2016-18, “Statement of Cash Flows~~ – Restricted Cash.” This standard update requires that restricted cash and restricted cash equivalents be included in cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown in the statement of cash flows. The Company is required to adopt this standard in the first quarter of fiscal year 2019, with a retrospective transition method required. Early adoption is permitted. The Company is currently in the process of evaluating the impact of adoption on its Condensed Consolidated Financial Statements.


	Three Months Ended
		September 25, 2022		September 26, 2021
Memory		52	%	64	%
Foundry		34	%	25	%
Logic/integrated device manufacturing		14	%	11	%

In August 2017, the FASB released ASU 2017-12, “Targeted Improvements to Accounting for Hedging Activities.” The new guidance is intended to: (1) more closely align hedge accounting with an entity’s risk management strategies, (2) simplify the application of hedge accounting by eliminating the requirement to separately measure and report hedge ineffectiveness, and (3) increase transparency around the scope and results of hedging programs. The Company is required to adopt the standard in the first quarter of fiscal year 2020, using a modified-retrospective approach for any cash flow or net investment hedges that exist on the date of adoption. The presentation and disclosure requirements as defined per the standard are to be applied prospectively. Early adoption is permitted. The Company is currently in the process of evaluating the impact of adoption on its Condensed Consolidated Financial Statements.

NOTE 34 — EQUITY-BASED COMPENSATION PLANS

The Lam Research Corporation 2015 Stock Incentive Plan, as amended, ~~(the “2015 Plan”),~~ provides for the grant of non-qualified equity-based awards of the Company’s Common Stock to eligible employees and non-employee directors, including stock options, restricted stock units (“RSUs”), and market-based performance RSUs (“market-based PRSUs”). An option is a right to purchase Common Stock at a set price. An RSU award is an agreement to issue a set number of shares of Common Stock at the time of vesting. The Company’s market-based PRSUs contain both a market condition and a service condition. The Company’s ~~options,~~option, RSU, and market-based PRSU awards typically vest over a period of three years. The Company also has an employee stock purchase plan that allows employees to purchase its Common Stock at a discount through payroll deductions.

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The Company recognized the following equity-based compensation expense (including expense related to the employee stock purchase plan) and related income tax benefit in the Condensed Consolidated Statements of Operations:


	Three Months Ended
		September 25, 2022		September 26, 2021
		(in thousands)
Equity-based compensation expense		$	71,110	$	58,099
Income tax benefit recognized related to equity-based compensation expense		$	11,528	$	8,208

Three Months Ended Six Months Ended
December 24,
2017 December 25,
2016 December 24,
2017 December 25,
2016
(in thousands)
Equity-based compensation expense $ 42,124
$ 32,255
$ 83,907
$ 70,850
Income tax benefit recognized related to equity-based compensation expense $ 18,089
$ 8,815
$ 31,477
$ 19,721

The estimated fair value of the Company’s stock-based awards, less expected forfeitures, is amortized over the awards’ vesting term on a straight-line basis. In the first quarter of fiscal year 2018, the Company adopted ASU 2016-9, “Compensation – ~~Stock Compensation,” as discussed further in Note 2.~~

~~ESPP~~

The 1999 Employee Stock Purchase Plan, as amended and restated (the “1999 ESPP”), allows employees to designate a portion of their base compensation to be withheld through payroll deductions and used to purchase Common Stock at a purchase price per share equal to the lower of 85% of the fair market value of Common Stock on the first or last day of the applicable purchase period. Typically, each offering period lasts up to twelve months and comprises two interim purchase dates.

~~During the three and six months ended December 24, 2017, a total of 412,469 shares of the Company’s Common Stock were sold to employees under the 1999 ESPP.~~

~~Table of Contents~~

Purchase rights under the 1999 ESPP were valued using the Black-Scholes option valuation model and the following weighted-average assumptions for the three and six months ended December 24, 2017 and December 25, 2016:

Three and Six Months Ended
December 24,
2017 December 25,
2016
Expected stock price volatility 29.13 % 33.02 %
Risk-free interest rate 0.82 % 0.43 %
Expected term (years) 0.77
0.77
Dividend yield 0.89 % 1.14 %

NOTE 45 — OTHER ~~EXPENSE,~~INCOME (EXPENSE), NET

The significant components of other ~~expense,~~income (expense), net, are as follows:


	Three Months Ended
		September 25, 2022		September 26, 2021
		(in thousands)
Interest income		$	15,056	$	4,678
Interest expense		(46,052)		(45,056)
(Losses) gains on deferred compensation plan-related assets, net		(12,726)		7,437


Foreign exchange gains (losses), net		6,821		(17)
Other, net		(6,194)		4,101
		$	(43,095)	$	(28,857)

Three Months Ended Six Months Ended
December 24,
2017 December 25,
2016 December 24,
2017 December 25,
2016
(in thousands)
Interest income $ 20,578
$ 10,945
$ 40,787
$ 23,708
Interest expense (23,317 ) (26,641 ) (47,222 ) (68,070 )
Gains on deferred compensation plan related assets, net 6,074
1,666
9,527
7,838
Loss on extinguishment of debt —
(36,325 ) —
(36,325 )
Foreign exchange (losses) gains, net 1,196
1,011
(1,804 ) 2,230
Other, net (7,683 ) (5,679 ) (9,942 ) (7,558 )
$ (3,152 ) $ (55,023 ) $ (8,654 ) $ (78,177 )

Interest income in the three and six months ended December 24, 2017, increased compared to same period in 2016 due to higher yield. Interest expense decreased in the six months ended December 24, 2017 compared to the same period in 2016 due to the termination of the Term Loan Agreement and mandatory redemption of the Senior Notes due 2023 and 2026 during the December 2016 quarter. Loss on extinguishment of debt realized in the three months ended December 25, 2016 is primarily a result of the mandatory redemption of the Senior Notes Due 2023 and 2026 as well as the termination of the Term Loan Agreement.

NOTE 56 — INCOME TAX EXPENSE

~~On December 22, 2017, the “Tax Cuts & Jobs Act” (hereafter referred to as “U.S. tax reform”) was signed into law and is effective~~The Company’s provision for the Company’s quarter which ended December 24, 2017. U.S. tax reform reduces the U.S. federal statutory tax rate from 35% to 21%, mandates payment of a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings. The impact on income taxes due to change in legislation is required under the authoritative guidance of Accounting Standards Codification (“ASC”) 740, Income Taxes, to be recognized in the period in which the law is enacted. In conjunction, the SEC issued Staff Accounting Bulletin (“SAB”) 118, which allows for the recording of provisional amounts related to U.S. tax reform and subsequent adjustments related to U.S. tax reform during a measurement period that is similar to the measurement period used when accounting for business combinations. As such, there is significant activity within the quarter which reflects the change in legislation. Most of that activity has provisionally been recorded in the Company’s Condensed Consolidated Financial Statements in the period ended December 24, 2017, as the Company has not yet completed the accounting for the tax effects of enactment. The Company has recorded what it believes to be a reasonable estimate and the provisional activity is subject to further adjustments under SAB 118. In addition, for significant items for which the Company could not make a reasonable estimate, no provisional activity was recorded. The activity will be recorded during the measurement period allowed under SAB 118 when a reasonable estimate can be made, or when the effect of the activity is known. The Company will continue to refine provisional balances and adjustments may be made under SAB 118 during the measurement period as a result of future changes in interpretation, information available, assumptions made by the Company and/or issuance of additional guidance; these adjustments could be material.

~~The Company recorded an income tax expense of $744.2 million and $841.2 million for the three and six months ended December 24, 2017, which yielded an~~ effective tax rate ~~of approximately 101.4% and 59.2%, respectively.~~are as follows:

As a result of U.S. tax reform, the Company revised its estimated annual effective tax rate to reflect the change in the U.S. federal statutory tax rate from 35% to 21%. As the Company has a fiscal year ending the last Sunday in June, it is subject to transitional tax rate rules. Therefore, a blended rate of 28.27% was computed as effective for the current fiscal year.


	Three Months Ended
		September 25, 2022			September 26, 2021
		(in thousands, except percentages)
Income tax expense		$	228,866		$	163,632
Effective tax rate		13.8		%	12.2		%

The difference between the U.S. federal statutory tax rate of ~~28.27%~~21% and the Company’s effective tax rate for the three ~~and six~~ months ended ~~December 24, 2017, is~~September 25, 2022 and September 26, 2021 was primarily due to ~~the impact of U.S. tax reform, outlined below, and~~ income in lower tax jurisdictions.

~~Revaluation of~~The Internal Revenue Service (“IRS”) has examined the Company’s ~~deferred tax balances to reflect the new~~ U.S. federal ~~statutory~~income tax ~~rate~~return for the fiscal year ended June 24, 2018. As of September 25, 2022, the IRS has proposed adjustments resulting in a tax liability increase of approximately $50.0 million, which was previously reserved. The Company has agreed to pay the amount and ~~computation of the one-time transition tax on accumulated unrepatriated foreign earnings, were recorded on~~has made a ~~provisional basis~~partial cash settlement in the ~~three and six months ended December 24, 2017 and are therefore subject~~September quarter with the remaining settlement expected to ~~potential measurement period adjustments under SAB 118. The Company revalued the deferred tax balances~~be paid based on the ~~tax rates at which the balance, or a portion of the balance, is expected~~

~~Table of Contents~~

to reverse at in the future. Generally, this is 21%, but for certain activity which is expected to reverse at the Company’s current fiscal year blended rate. The Company has not yet completed the revaluation of the deferred tax balances due to estimates which are being used during interim periods until finalization of the balances can occur at the Company’s fiscal year end. The provisional amount recorded related to the revaluation of the Company’s deferred tax balance was $42.7 million, and an associated tax liability was remeasured at $54.0 million, which is the tax effect of when the balance is expected to reverse. The one-time transition tax is based on the Company’s total post-1986 earnings and profits (“E&P”) that was previously deferred from U.S. income taxes. The Company had previously accrued deferred taxes on a portion of this E&P. The Company has not yet completed the calculation of total post-1986 E&P and related income tax pools for its foreign subsidiaries. The Company recorded a provisional amount for the one-time transition tax of $991.3 million, which was offset by the release of the associated previously accrued deferred taxes of $287.8 million. The net increase to tax expense was $703.5 million. The one-time transition tax may be elected to be paid over a period of eight years. The Company intends to make this election.

Other significant items which are being evaluated by the Company but for which no estimate can currently be made and for which no provisional amounts were recorded in the Company’s Condensed Consolidated Financial Statements, include the impact of the “Global Intangible Low-Taxed Income” (“GILTI”) provision of U.S. tax reform. The GILTI provision imposes taxes on foreign earnings in excess of a deemed return on tangible assets. This tax is effective for the Company after the end of the current fiscal year. However, the Company is evaluating whether deferred taxes should be recorded in relation to the GILTI provisions or if the tax should be recorded in the period in which it occurs. Based on current interpretation, the Company may choose either method as an accounting policy election. The Company has not yet decided on the accounting policy related to GILTI and will only do so after completion of the GILTI analysis. The provisions related to GILTI are subject to adjustment during the measurement period under SAB 118.IRS requirements.

The Company is in various stages of ~~examination~~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 ~~unrecognized~~uncertain tax ~~benefits~~positions as a result of tax examinations or lapses of ~~statute~~statutes of ~~limitations.~~limitation. The ~~estimated reduction~~change in ~~unrecognized~~uncertain tax ~~benefits~~positions as a result of lapses of statutes of limitation may range up to ~~$94~~$18.8 million.

Lam Research Corporation 2023 Q1 10-Q 10

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NOTE 67 — NET ~~(LOSS)~~ INCOME PER SHARE

Basic net ~~(loss)~~ income per share is computed by dividing net ~~(loss)~~ income by the weighted-average number of common shares outstanding during the period. Diluted net ~~(loss)~~ income per share is computed using the treasury stock method, for dilutive stock options, restricted stock units, ~~convertible notes,~~ and ~~warrants. Dilutive shares outstanding include the effect of the convertible notes. Refer to Note 11 for additional information regarding the Company’s~~ convertible notes. The following table reconciles the ~~numerators and denominators of~~inputs to the basic and diluted computations for net ~~(loss)~~ income per share.


	Three Months Ended					Six Months Ended					Three Months Ended
	December 24, 2017			December 25, 2016		December 24, 2017		December 25, 2016				September 25, 2022		September 26, 2021
	(in thousands, except per share data)											(in thousands, except per share data)
Numerator:										Numerator:
Net (loss) income	$	(9,955	)	$	332,791	$	580,735	$	596,626
Net income										Net income		$	1,425,879	$	1,179,744
Denominator:										Denominator:
Basic average shares outstanding	161,135			162,659		161,638		161,633		Basic average shares outstanding		136,891		141,743
Effect of potential dilutive securities:										Effect of potential dilutive securities:
Employee stock plans	—			2,243		2,636		2,193		Employee stock plans		317		869
Convertible notes	—			16,640		15,287		15,930
Warrants	—			2,001		4,397		2,024

Diluted average shares outstanding	161,135			183,543		183,958		181,780		Diluted average shares outstanding		137,208		142,612
Net (loss) income per share - basic	$	(0.06	)	$	2.05	$	3.59	$	3.69
Net (loss) income per share - diluted	$	(0.06	)	$	1.81	$	3.16	$	3.28
Net income per share - basic										Net income per share - basic		$	10.42	$	8.32
Net income per share - diluted										Net income per share - diluted		$	10.39	$	8.27

For purposes of computing diluted net income per share, weighted-average common shares do not include potentially dilutive securities that are anti-dilutive under the treasury stock method. The ~~following~~impact from potentially dilutive securities, ~~were excluded:~~including options and RSUs, was not material for the three months ended September 25, 2022 and September 26, 2021.

Three Months Ended Six Months Ended
December 24,
2017 December 25,
2016 December 24,
2017 December 25,
2016
(in thousands)
Options and RSUs 7
—
20
3
Employee stock plans 2,757
—
—
—
Convertible notes 15,423
—
—
—
Warrants 4,721
—
—
—

~~Diluted shares outstanding do not include any effect resulting from note hedges associated with the Company’s 2018 Notes as their impact would have been anti-dilutive.~~

NOTE 78 — FINANCIAL INSTRUMENTS

The Company maintains an investment portfolio of various holdings, types, and maturities. The Company’s mutual funds, which are related to the Company’s obligations under the deferred compensation plan, are classified as trading securities. Investments classified as trading securities are recorded at fair value based upon quoted market prices. Differences between the cost and fair value of trading securities are recognized as other income (expense), net in the Condensed Consolidated Statements of Operations. All of the Company’s ~~other investments~~debt securities are classified as available-for-sale and consequently are recorded in the Condensed Consolidated Balance Sheets at fair value with unrealized gains or losses associated with market valuation changes, unrelated to credit losses, reported as a separate component of accumulated other comprehensive income (loss), net of ~~tax.~~tax; and credit losses, if any, recognized as other income (expense), net in the Condensed Consolidated Statements of Operations.

The Company periodically invests in equity securities. For equity investments that do not have a readily determinable fair value, the Company records them using either 1) the measurement alternative which measures the equity investments at cost minus impairment, if any, plus or minus changes resulting from qualifying observable price changes; or 2) the equity method whereby the Company recognizes its proportional share of the income or loss from the equity method investment on a one-quarter lag. The equity method is utilized when the Company does not have the ability to control the investee but is deemed to have the ability to exercise significant influence over the investee’s operating or financial policies. For equity investments that have a readily determinable fair value, the Company records them at fair market value on a recurring basis based upon quoted market prices. Realized and unrealized gains and losses resulting from application of the measurement alternative, the impact of the application of the equity method to the Company’s equity investments, and recognition of changes in fair market value, as applicable, are recognized as other income (expense), net in the Condensed Consolidated Statements of Operations.

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.

Lam Research Corporation 2023 Q1 10-Q 11

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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, investments, restricted cash and investments, long-term investments, accounts receivable, accounts payable, long-term debt and ~~capital~~ 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 ~~capital~~ lease obligations approximate their carrying value as the ~~substantial~~ majority of these obligations have interest rates that adjust to market rates on a periodic basis. ~~Refer to Note 11 to~~The fair value of the ~~Condensed Consolidated Financial Statements for additional information regarding~~Company’s senior notes is based on the quoted price (level 2); the fair value of the Company's senior notes have not changed materially to that disclosed in Note 14, “Long Term Debt and Other Borrowings,” to our Consolidated Financial Statements in Part II, Item 8 of our 2022 Form 10-K.

Equity Investments measured at fair value on a non-recurring basis

As of September 25, 2022, and June 26, 2022, equity investments of $126.0 million and $125.2 million, respectively, were reported in other assets in the Condensed Consolidated Balance Sheets. Net gains resulting from the application of the measurement alternative to the Company’s ~~Senior Notes~~equity investments were immaterial for the three months ended September 25, 2022, and ~~Convertible Notes.~~September 26, 2021.

Debt and Equity Investments measured at fair value on a recurring basis

The following ~~table sets~~tables set forth the Company’s cash, cash equivalents, investments, restricted cash and investments, and other assets measured at fair value on a recurring basis as of ~~December 24, 2017,~~September 25, 2022, and June ~~25, 2017:~~26, 2022:


	September 25, 2022
									(Reported Within)
	Cost		Unrealized Gain		Unrealized (Loss)		Fair Value		Cash and Cash Equivalents		Investments		Restricted Cash & Investments		Other Assets
	(in thousands)
Level 1:
Money market funds	$	1,237,763	$	—	$	—	$	1,237,763	$	1,237,763	$	—	$	—	$	—


Mutual funds	82,051		9,915		(2,518)		89,448		—		—		—		89,448
Level 1 Total	1,319,814		9,915		(2,518)		1,327,211		1,237,763		—		—		89,448
Level 2:




Corporate notes and bonds	122,644		—		(2,093)		120,551		—		120,551		—		—


Level 2 Total	122,644		—		(2,093)		120,551		—		120,551		—		—
Total subject to fair value hierarchy	$	1,442,458	$	9,915	$	(4,611)	$	1,447,762
Cash							$	1,644,514	$	1,643,586	$	—	$	928	$	—
Time deposits							1,625,177		1,375,150		—		250,027		—
Total							$	4,717,453	$	4,256,499	$	120,551	$	250,955	$	89,448

Lam Research Corporation 2023 Q1 10-Q 12

December 24, 2017
(Reported Within)
Cost Unrealized
Gain Unrealized
(Loss) Fair Value Cash and
Cash
Equivalents Investments Restricted
Cash &
Investments Other
Assets
(in thousands)
Cash $ 594,353
$ —
$ —
$ 594,353
$ 588,396
$ —
$ 5,957
$ —
Level 1:
Time deposit 521,265
—
—
521,265
271,238
—
250,027
—
Money market funds 878,732
—
—
878,732
878,732
—
—
—
U.S. Treasury and agencies 835,112
—
(9,028 ) 826,084
2,199
823,885
—
—
Mutual funds 58,307
3,844
—
62,151
—
—
—
62,151
Level 1 Total 2,293,416
3,844
(9,028 ) 2,288,232
1,152,169
823,885
250,027
62,151
Level 2:
Municipal notes and bonds 179,475
10
(649 ) 178,836
—
178,836
—
—
Government-sponsored enterprises 47,925
—
(602 ) 47,323
—
47,323
—
—
Foreign government bonds 61,006
—
(490 ) 60,516
—
60,516
—
—
Corporate notes and bonds 2,686,080
849
(12,781 ) 2,674,148
4,608
2,669,540
—
—
Mortgage backed securities — residential 53,506
24
(325 ) 53,205
—
53,205
—
—
Mortgage backed securities — commercial 121,950
—
(729 ) 121,221
—
121,221
—
—
Level 2 Total 3,149,942
883
(15,576 ) 3,135,249
4,608
3,130,641
—
—
Total $ 6,037,711
$ 4,727
$ (24,604 ) $ 6,017,834
$ 1,745,173
$ 3,954,526
$ 255,984
$ 62,151

Table of Contents

June 25, 2017
(Reported Within)
Cost Unrealized
Gain Unrealized
(Loss) Fair Value Cash and
Cash
Equivalents Investments Restricted
Cash &
Investments Other
Assets
(in thousands)
Cash $ 551,308
$ —
$ —
$ 551,308
$ 545,130
$ —
$ 6,178
$ —
Level 1:
Time deposit 640,666
—
—
640,666
390,639
—
250,027
—
Money market funds 1,423,417
—
—
1,423,417
1,423,417
—
—
—
U.S. Treasury and agencies 783,848
684
(2,111 ) 782,421
8,297
774,124
—
—
Mutual funds 53,247
3,007
—
56,254
—
—
—
56,254
Level 1 Total 2,901,178
3,691
(2,111 ) 2,902,758
1,822,353
774,124
250,027
56,254
Level 2:
Municipal notes and bonds 194,575
308
(7 ) 194,876
—
194,876
—
—
U.S. Treasury and agencies 12,795
—
(167 ) 12,628
—
12,628
—
—
Government-sponsored enterprises 24,502
—
(6 ) 24,496
—
24,496
—
—
Foreign government bonds 62,917
219
(114 ) 63,022
—
63,022
—
—
Corporate notes and bonds 2,433,622
4,654
(1,840 ) 2,436,436
10,051
2,426,385
—
—
Mortgage backed securities — residential 102,760
87
(489 ) 102,358
—
102,358
—
—
Mortgage backed securities — commercial 65,828
9
(98 ) 65,739
—
65,739
—
—
Level 2 Total 2,896,999
5,277
(2,721 ) 2,899,555
10,051
2,889,504
—
—
Total $ 6,349,485
$ 8,968
$ (4,832 ) $ 6,353,621
$ 2,377,534
$ 3,663,628
$ 256,205
$ 56,254


	June 26, 2022
									(Reported Within)
	Cost		Unrealized Gain		Unrealized (Loss)		Fair Value		Cash and Cash Equivalents		Investments		Restricted Cash & Investments		Other Assets
	(in thousands)
Level 1:
Money market funds	$	712,076	$	—	$	—	$	712,076	$	712,076	$	—	$	—	$	—

Mutual funds	84,851		12,027		(1,659)		95,219		—		—		—		95,219
Level 1 Total	796,927		12,027		(1,659)		807,295		712,076		—		—		95,219
Level 2:




Corporate notes and bonds	137,859		—		(2,128)		135,731		—		135,731		—		—


Level 2 Total	137,859		—		(2,128)		135,731		—		135,731		—		—
Total subject to fair value hierarchy	$	934,786	$	12,027	$	(3,787)	$	943,026
Cash							$	1,017,253	$	1,015,747	$	—	$	1,506	$	—
Time deposits							2,044,206		1,794,178		—		250,028		—
Total							$	4,004,485	$	3,522,001	$	135,731	$	251,534	$	95,219

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 ~~also~~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 income statement. Where such sales are not likely to occur, the Company considers whether ~~changes~~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 ~~credit ratings of~~income statement. All other differences between fair value and amortized cost are recognized in other comprehensive income. No such losses were recognized through the ~~issuer could impact the assessment of fair value. The Company did not recognize any losses on investments due to other-than-temporary impairments~~income statement during the three and six months ended December 24, 2017 or December 25, 2016. Additionally, gross realized gains/(losses) from sales of investments were approximately $0.2 million and $(1.1) million, respectively, in the three months ended ~~December 24, 2017,~~September 25, 2022 and ~~$0.1 million and $(0.4) million, respectively, in the three months ended December 25, 2016.~~ September 26, 2021.

Gross realized gains/(losses) from sales of investments were ~~approximately $1.0 million and $(2.1) million, respectively,~~insignificant in the ~~six~~three months ended ~~December 24, 2017~~September 25, 2022 and ~~$2.7 million and $(0.6) million, respectively, in the six months ended December 25, 2016.~~September 26, 2021.

The following is an analysis of the Company’s ~~cash, cash equivalents,~~ investments ~~and restricted cash and investment~~ in unrealized loss positions:


	September 25, 2022
	Unrealized Losses Less than 12 Months				Unrealized Losses 12 Months or Greater				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
	(in thousands)


Mutual funds	$	35,363	$	(2,259)	$	1,488	$	(259)	$	36,851	$	(2,518)


Corporate notes and bonds	119,857		(2,093)		—		—		119,857		(2,093)


	$	155,220	$	(4,352)	$	1,488	$	(259)	$	156,708	$	(4,611)

December 24, 2017
Unrealized Losses
Less than 12 Months Unrealized Losses
12 Months or Greater Total
Fair Value Gross
Unrealized
Loss Fair Value Gross
Unrealized
Loss Fair Value Gross
Unrealized
Loss
(in thousands)
U.S. Treasury and agencies $ 659,453
$ (6,546 ) $ 161,386
$ (2,482 ) $ 820,839
$ (9,028 )
Municipal notes and bonds 168,189
(649 ) —
—
168,189
(649 )
Government-sponsored enterprises 27,681
(163 ) 19,533
(439 ) 47,214
(602 )
Foreign government bonds 51,879
(382 ) 8,425
(108 ) 60,304
(490 )
Corporate notes and bonds 2,160,923
(11,215 ) 152,403
(1,566 ) 2,313,326
(12,781 )
Mortgage backed securities — residential 46,771
(309 ) 1,789
(16 ) 48,560
(325 )
Mortgage backed securities — commercial 115,554
(674 ) 5,401
(55 ) 120,955
(729 )
$ 3,230,450
$ (19,938 ) $ 348,937
$ (4,666 ) $ 3,579,387
$ (24,604 )

~~Table of Contents~~

The amortized cost and fair value of cash equivalents, investments, and restricted investments with contractual maturities are as follows as of ~~December 24, 2017:~~September 25, 2022:


	Cost		Fair Value
	(in thousands)
Due in one year or less	$	2,937,758	$	2,936,838
Due after one year through five years	47,826		46,653

	$	2,985,584	$	2,983,491

Lam Research Corporation 2023 Q1 10-Q 13

Cost Estimated
Fair
Value
(in thousands)
Due in one year or less $ 1,995,451
$ 1,994,497
Due after one year through five years 3,217,096
3,195,218
Due in more than five years 172,504
171,615
$ 5,385,051
$ 5,361,330

Table of Contents

The Company has the ability, if necessary, to liquidate its investments in order to meet the Company’s liquidity needs in the next 12 months. Accordingly, those investments with contractual maturities greater than ~~twelve~~12 months from the date of purchase nonetheless are classified as short-term on the accompanying Condensed Consolidated Balance Sheets.

Derivative Instruments and Hedging

The ~~Company carries~~Company’s hedging strategies and policies are unchanged to those disclosed in Note 9, “Financial Instruments,” to our Consolidated Financial Statements in Part II, Item 8 of our 2022 Form 10-K. The financial statement impacts from derivative ~~financial~~ instruments ~~(“derivatives”) on its Condensed 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.

~~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, primarily from Japanese yen-denominated revenues and euro- denominated and Korean won-denominated expenses. 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 are recognized.

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 (loss) and is amortized into income as the hedged item impacts earnings.

At inception and at each quarter-end, hedges are tested prospectively and retrospectively for effectiveness using regression analysis. Changes in the fair value of the forward contracts due to changes in time value are excluded from the assessment of effectiveness and are recognized in revenue or expense in the current period. The change in time value related to these contracts wasactivities were not material ~~for all reported periods. Changes in the fair value~~as of ~~foreign exchange options due to changes in time value are included in the assessment of effectiveness. To qualify~~and 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. There were no material gains or losses during the three ~~or six~~ months ended ~~December 24, 2017~~September 25, 2022 and ~~December 25, 2016 associated with ineffectiveness or forecasted transactions that failed to occur.~~

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, with the exception of excluded time value associated with the forward contracts and hedge ineffectiveness recognized, 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

~~Table of Contents~~

instruments would be recognized in earnings. Additionally, related amounts previously recorded in other comprehensive income would be reclassified to income immediately. As of December 24, 2017, the Company had gains of $7.8 million accumulated in other comprehensive income, net of tax, related to foreign exchange cash flow hedges which it expects to reclassify from other comprehensive income into earnings over the next 12 months. Additionally, as of December 24, 2017, the Company had a net loss of $1.9 million accumulated in other comprehensive income, net of tax, related to interest rate contracts which it expects to reclassify from other comprehensive income into earnings over the next 7.2 years.

~~Fair Value Hedges~~

The Company has interest rate contracts whereby the Company receives fixed rates and pays variable rates based on certain benchmark interest rates, resulting in a net increase or decrease to interest expense, a component of other expense, net in our Condensed Consolidated Statement of Operations. These interest rate contracts are designated as fair value hedges and hedge against changes in the fair value of our debt portfolio. The Company concluded that these interest rate contracts meet the criteria necessary to qualify for the short-cut method of hedge accounting, and as such an assumption is made that the change in the fair value of the hedged debt, due to changes in the benchmark rate, exactly offsets the change in the fair value of the interest rate swap. Therefore, the derivative is considered to be effective at achieving offsetting changes in the fair value of the hedged liability, and no ineffectiveness is recognized.

~~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 fair value of these derivatives is recorded as a component of other income (expense) and offsets the change in fair value of the foreign currency denominated assets and liabilities, which are also recorded in other income (expense).

~~As of December 24, 2017, the Company had the following outstanding foreign currency contracts that were entered into under its cash flow and balance sheet hedge programs:~~

Notional Value
Derivatives Designated as
Hedging Instruments: Derivatives Not Designated
as Hedging Instruments:
(in thousands)
Foreign currency forward contracts
Buy Contracts Sell Contracts Buy Contracts Sell Contracts
Japanese yen $ —
$ 512,577
$ —
$ 141,737
Euro 69,649
—
33,044
—
Korean won 33,693
—
—
73,282
Taiwan dollar —
—
20,047
—
Swiss franc —
—
15,225
—
Chinese renminbi —
—
7,529
—
Singapore dollar —
—
7,410
—
British pound sterling —
—
4,019
—
$ 103,342
$ 512,577
$ 87,274
$ 215,019
Foreign currency option contracts
Buy Put Sell Put Buy Put Sell Put
Japanese yen $ 36,036
$ —
$ —
$ —

~~Table of Contents~~

~~The fair value of derivative instruments in the Company’s Condensed Consolidated Balance Sheets as of December 24, 2017, and June 25, 2017 were as follows:~~

December 24, 2017 June 25, 2017
Fair Value of Derivative Instruments (Level 2) Fair Value of Derivative Instruments (Level 2)
Asset Derivatives Liability Derivatives Asset Derivatives Liability Derivatives
Balance Sheet
Location Fair Value Balance Sheet
Location Fair Value Balance Sheet
Location Fair Value Balance Sheet
Location Fair Value
(in thousands)
Derivatives designated as hedging instruments:
Foreign exchange contracts Prepaid expense
and other assets $ 9,687
Accrued expenses and other current liabilities
$ 331
Prepaid expense
and other assets $ 8,061
Accrued expenses and other current liabilities $ 2,916
Interest rate contracts, short-term

Accrued expenses and other current liabilities 4,662

Accrued expenses and other current liabilities 2,833
Interest rate contracts, long-term

Other long-term liabilities 14,520

Other long-term liabilities 7,269
Derivatives not designated as hedging instruments:

Foreign exchange contracts Prepaid expense
and other assets 51
Accrued expenses and other current liabilities
118
Prepaid expense
and other assets 213
Accrued expenses and other current liabilities 342
Total Derivatives $ 9,738
$ 19,631
$ 8,274
$ 13,360

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 December 24, 2017, the potential effect of rights of offset associated with the above foreign exchange and interest rate contracts would be an offset to assets and liabilities by $4.1 million, resulting in a net derivative asset of $5.6 million and net derivative liability of $15.5 million. As of June 25, 2017, the potential effect of rights of offset associated with the above foreign exchange contracts would be an offset to both assets and liabilities by $5.9 million, resulting in a net derivative asset of $2.3 million and a net derivative liability of $7.4 million. The Company is not required to pledge, nor is the Company entitled to receive, cash collateral for these derivative transactions.

The effect of derivative instruments designated as cash flow hedges on the Company’s Condensed Consolidated Statements of Operations, including accumulated other comprehensive income (“AOCI”) was as follows:

Three Months Ended December 24, 2017 Six Months Ended December 24, 2017
Effective Portion Ineffective
Portion
and Amount
Excluded from
Effectiveness Effective Portion Ineffective
Portion
and Amount
Excluded from
Effectiveness
Derivatives Designated as Hedging Instruments Location of
Gain (Loss)
Recognized
in or
Reclassified
into Income Gain (Loss)
Recognized
in AOCI Gain (Loss)
Reclassified
from AOCI
into Income Gain (Loss)
Recognized
in Income Gain
Recognized
in AOCI (Loss) Gain
Reclassified
from AOCI
into Income Gain (Loss)
Recognized
in Income
(in thousands)
Foreign Exchange Contracts Revenue $ 8,194
$ 3,771
$ 1,225
$ 8,185
$ (35 ) $ 3,772
Foreign Exchange Contracts Cost of goods sold (250 ) 1,648
(139 ) 2,193

2,472

(347 )
Foreign Exchange Contracts Selling, general, and
administrative (206 ) 1,012
(49 ) 1,150

1,726

(166 )
Foreign Exchange Contracts Other expense, net —
—
(35 ) —

—

(52 )
Interest Rate Contracts Other expense, net —
(31 ) —
—

(62 )
—
$ 7,738
$ 6,400
$ 1,002
$ 11,528
$ 4,101
$ 3,207

~~Table of Contents~~

Three Months Ended December 25, 2016 Six Months Ended December 25, 2016
Effective Portion Ineffective
Portion
and Amount
Excluded from
Effectiveness Effective Portion Ineffective
Portion
and Amount
Excluded from
Effectiveness
Derivatives Designated as Hedging Instruments Location of
Gain (Loss)
Recognized
in or
Reclassified
into Income Gain (Loss)
Recognized
in AOCI (Loss) Gain
Reclassified
from AOCI
into Income Gain (Loss)
Recognized
in Income Gain (Loss)
Recognized
in AOCI (Loss) Gain
Reclassified
from AOCI
into Income Gain (Loss)
Recognized
in Income
(in thousands)
Foreign Exchange Contracts Revenue $ 18,138
$ (420 ) $ 708
$ 15,225
$ (14,025 ) $ 1,413
Foreign Exchange Contracts Cost of goods sold (786 ) (180 ) (28 ) (551 ) (7 ) (95 )
Foreign Exchange Contracts Selling, general, and
administrative (348 ) (146 ) (15 ) (372 ) (155 ) (36 )
Foreign Exchange Contracts Other expense, net —
—
3
—
—
3
Interest Rate Contracts Other expense, net —
1,778
—
—
1,787
—
$ 17,004
$ 1,032
$ 668
$ 14,302
$ (12,400 ) $ 1,285

~~The effect of derivative instruments not designated as cash flow hedges on the Company’s Condensed Consolidated Statements of Operations was as follows:~~

Three Months Ended Six Months Ended
December 24,
2017 December 25,
2016 December 24,
2017 December 25,
2016
Derivatives Not Designated as Hedging Instruments: Location
of Gain Recognized
in Income Gain
Recognized
in Income Gain
Recognized
in Income Gain
Recognized
in Income Gain
Recognized
in Income
(in thousands)
Foreign Exchange Contracts Other
income $ 2,612
$ 4,343
$ 5,284
$ 3,960
September 26, 2021.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, investments, restricted cash and investments, 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.

NOTE 89 — INVENTORIES

Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value. System shipments to ~~Japanese~~ customers in Japan, for which title does not transfer until customer acceptance, are classified as finished goods inventory and carried at cost until title transfers. Inventories consist of the following:


	September 25, 2022		June 26, 2022
	(in thousands)
Raw materials	$	2,680,368	$	2,401,490
Work-in-process	515,938		471,348
Finished goods	1,164,019		1,093,456
	$	4,360,325	$	3,966,294

December 24,
2017 June 25,
2017
(in thousands)
Raw materials $ 820,157
$ 625,600
Work-in-process 263,910
213,066
Finished goods 423,368
394,250
$ 1,507,435
$ 1,232,916

NOTE 910 — GOODWILL AND INTANGIBLE ASSETS

Goodwill

The balance of goodwill is approximately $1.5 billion ~~and $1.4 billion~~ as of ~~December 24, 2017,~~September 25, 2022 and June ~~25, 2017, respectively.~~26, 2022. As of ~~December 24, 2017, $61.1~~September 25, 2022 and June 26, 2022, $62.0 million of the goodwill balance is tax deductible and the remaining balance is not tax deductible due to purchase accounting and applicable foreign law.

Lam Research Corporation 2023 Q1 10-Q 14

Table of Contents

Intangible Assets

The following table provides the Company’s intangible ~~assets:~~assets, other than goodwill:


	December 24, 2017							June 25, 2017								September 25, 2022						June 26, 2022
	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net			Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net
	(in thousands)															(in thousands)
Customer relationships	$	630,237	$	(400,189	)	$	230,048	$	615,164	$	(366,439	)	$	248,725	Customer relationships	$	633,152	$	(628,075)	$	5,077	$	633,252	$	(627,376)	$	5,876
Existing technology	669,559		(531,632		)	137,927		643,196		(487,056		)	156,140		Existing technology	676,701		(665,506)		11,195		676,924		(664,278)		12,646
Patents	37,953		(32,507		)	5,446		36,553		(31,238		)	5,315
Other intangible assets	43,814		(36,306		)	7,508		36,514		(35,699		)	815
Patents and other intangible assets															Patents and other intangible assets	188,277		(94,164)		94,113		167,821		(84,493)		83,328

Total intangible assets	$	1,381,563	$	(1,000,634	)	$	380,929	$	1,331,427	$	(920,432	)	$	410,995	Total intangible assets	$	1,498,130	$	(1,387,745)	$	110,385	$	1,477,997	$	(1,376,147)	$	101,850

The Company recognized ~~$40.8~~$11.6 million and ~~$38.6~~$19.1 million in intangible asset amortization expense during the three months ended ~~December 24, 2017,~~September 25, 2022 and ~~December 25, 2016,~~September 26, 2021, respectively. During the six months ended December 24, 2017 and December 25, 2016, the company recognized $80.1 million and $77.3 million, respectively, in intangible asset amortization expense. Refer to Note 15 - Business Combinations for additional information regarding intangible assets acquired during the six months ended December 24, 2017.

The estimated future amortization expense of intangible assets as of ~~December 24, 2017, was as follows:~~September 25, 2022, is reflected in the table below. The table excludes $28.9 million of capitalized costs for internal-use software that have not been placed into service.


Fiscal Year	Amount
	(in thousands)
2023 (remaining 9 months)	$	28,451
2024	25,452
2025	14,626
2026	6,429
2027	4,103
Thereafter	2,469
	$	81,530

Fiscal Year Amount
(in thousands)
2018 (remaining 6 months) $ 80,490
2019 123,610
2020 58,478
2021 55,792
2022 52,001
Thereafter 10,558
$ 380,929

NOTE 1011 — ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consist of the following:


	September 25, 2022		June 26, 2022
	(in thousands)
Accrued compensation	$	487,304	$	481,070
Warranty reserves	257,082		232,248
Income and other taxes payable	373,227		465,601
Dividend payable	235,980		205,615
Other	595,183		589,738
	$	1,948,776	$	1,974,272

December 24,
2017 June 25,
2017
(in thousands)
Accrued compensation $ 556,110
$ 447,363
Warranty reserves 179,680
161,981
Income and other taxes payable 310,810
95,127
Dividend payable 79,743
72,738
Other 213,269
192,152
$ 1,339,612
$ 969,361

~~NOTE 11 — LONG-TERM DEBT AND OTHER BORROWINGS~~

~~As of December 24, 2017, and June 25, 2017, the Company’s outstanding debt consisted of the following:~~

December 24, 2017 June 25, 2017

Amount
(in thousands)
Effective Interest Rate
Amount
(in thousands)
Effective Interest Rate
Fixed-rate 1.25% Convertible Notes Due May 15, 2018 ("2018 Notes") $ 206,124
⁽¹⁾
5.27 % $ 447,436
⁽²⁾
5.27 %
Fixed-rate 2.75% Senior Notes Due March 15, 2020 ("2020 Notes") 500,000
2.88 % 500,000
2.88 %
Fixed-rate 2.80% Senior Notes Due June 15, 2021 ("2021 Notes") 800,000
2.95 % 800,000
2.95 %
Fixed-rate 3.80% Senior Notes Due March 15, 2025 ("2025 Notes") 500,000
3.87 % 500,000
3.87 %
Fixed-rate 2.625% Convertible Notes Due May 15, 2041 ("2041 Notes") 526,136
⁽¹⁾
4.28 % 631,074
⁽²⁾
4.28 %
Commercial paper 800,000
1.64 %
⁽³⁾
—
—
Total debt outstanding, at par 3,332,260
2,878,510

Unamortized discount (138,651 ) (178,589 )
Fair value adjustment - interest rate contracts (19,182 ) (10,102 )
Unamortized bond issuance costs (2,434 ) (3,161 )
Total debt outstanding, at carrying value $ 3,171,993
$ 2,686,658

Reported as:
Current portion of long-term debt, and commercial paper $ 1,401,015
⁽⁴⁾
$ 907,827
⁽⁴⁾

Long-term debt 1,770,978
1,778,831

Total debt outstanding, at carrying value $ 3,171,993
$ 2,686,658

~~____________________________~~

⁽¹⁾ As of December 24, 2017, these notes were convertible at the option of the bondholder, as a result of the condition described in (4) below. Upon closure of the conversion period, the 2041 Notes not converted will be reclassified back into noncurrent liabilities and the temporary equity will be reclassified into permanent equity.

⁽²⁾ ~~As of June 25, 2017, these notes were convertible at the option of the bond holder, as a result of the condition described in (4) below.~~

⁽³⁾ ~~Represents the weighted average effective interest rate for all outstanding balances as of December 24, 2017.~~

⁽⁴⁾As of the report date, the market value of the Company’s Common Stock was greater than 130% of the convertible notes conversion price for 20 or more of the 30 consecutive trading days preceding the quarter-end. As a result, the 2041 Notes were classified in current liabilities and a portion of the equity component, associated with the convertible notes representing the unamortized discount, was classified in temporary equity on the Company’s Consolidated Balance Sheets.

~~Convertible Senior Notes~~

In May 2011, the Company issued and sold $450 million in aggregate principal amount of 1.25% Convertible Senior Notes due May 2018 (the “2018 Notes”) at par. The Company pays cash interest at an annual rate of 1.25%, on a semi-annual basis on May 15 and November 15 of each year.

In June 2012, with the acquisition of Novellus Systems, Inc. (“Novellus”), the Company assumed $700 million in aggregate principal amount of 2.625% Convertible Senior Notes due May 2041 (the “2041 Notes,” and collectively with the 2018 Notes,

~~Table of Contents~~

the “Convertible Notes”). The Company pays cash interest at an annual rate of 2.625%, on a semi-annual basis on May 15 and November 15 of each year on the 2041 Notes. The 2041 Notes also have a contingent interest payment provision that may require the Company to pay additional interest, up to 0.60% per year, based on certain thresholds, beginning with the semi-annual interest payment on May 15, 2021, and upon the occurrence of certain events, as outlined in the indenture governing the 2041 Notes.

The Company separately accounts for the liability and equity components of the Convertible Notes. The initial debt components of the Convertible Notes were valued based on the present value of the future cash flows using the Company’s borrowing rate at the date of the issuance or assumption for similar debt instruments without the conversion feature, which equals the effective interest rate on the liability component disclosed in the table below, respectively. The equity component was initially valued equal to the principle value of the notes, less the present value of the future cash flows using the Company’s borrowing rate at the date of the issuance or assumption for similar debt instruments without a conversion feature, which equated to the initial debt discount.

Under certain circumstances, the Convertible Notes may be converted into shares of the Company’s Common Stock. The number of shares each debenture is convertible into is based on conversion rates, disclosed in the table below. The principal value of Convertible Note conversions in the three and six months ended December 24, 2017, was approximately $44.6 million and $346.3 million, respectively. During the quarter ended December 24, 2017, and in the subsequent period through January 26, 2018, the Company received notice of conversion of an additional $227.8 million principal value of Convertible Notes, which will settle in the quarter ending March 25, 2018.

~~Selected additional information regarding the Convertible Notes outstanding as of December 24, 2017, and June 25, 2017, is as follows:~~

December 24, 2017 June 25, 2017
2018 Notes 2041 Notes 2018 Notes 2041 Notes
(in thousands, except years, percentages, conversion rate, and conversion price)
Carrying amount of permanent equity component, net of tax $ 94,516
$ 158,007
$ 89,604
$ 156,374
Carrying amount of temporary equity component, net of tax $ 3,037
$ 127,387
$ 15,186
$ 154,675
Remaining amortization period (years) 0.3
23.3
0.8
23.8
Fair Value of Notes (Level 2) $ 642,049
$ 2,943,299

Conversion rate (shares of common stock per $1,000 principal amount of notes) 16.6603
29.8987

Conversion price (per share of common stock) $ 60.02
$ 33.45

If-converted value in excess of par value $ 434,986
$ 2,410,644

Estimated share dilution using average quarterly stock price $195.72 per share 2,381
13,042

~~Convertible Note Hedges and Warrants~~

Concurrent with the issuance of the 2018 Notes the Company purchased a convertible note hedge and sold warrants. The warrants settlement is contractually defined as net share settlement. The exercise price is adjusted for certain corporate events, including dividends on the Company’s Common Stock. As of December 24, 2017, the warrants associated with the 2018 Notes had not been exercised and remained outstanding.

In conjunction with the convertible note hedge, counterparties agreed to sell to the Company shares of Common Stock equal to the number of shares issuable upon conversion of the 2018 Notes in full. The convertible note hedge transactions will be settled in net shares and will terminate upon the earlier of the maturity date or the first day none of the respective notes remain outstanding due to conversion or otherwise. Settlement of the convertible note hedge in net shares, based on the number of shares issued upon conversion of the 2018 Notes, on the expiration date would result in the Company receiving net shares equivalent to the number of shares issuable by the Company upon conversion of the 2018 Notes. The exercise price is adjusted for certain corporate events, including dividends on the Company’s Common Stock. During the three and six months ended December 24, 2017 the note hedge was partially settled, resulting in the receipt of approximately 367,000 and 2,459,000 shares, respectively.

~~Table of Contents~~

~~The following table presents the details of the warrants and convertible note hedge arrangements as of December 24, 2017:~~



	~~2018 Notes~~
	~~(shares in thousands)~~
~~Warrants:~~
~~Underlying shares~~	~~7,497~~
~~Estimated share dilution using average quarterly stock price $195.72 per share~~	~~4,721~~
~~Exercise price~~	~~$72.48~~
~~Expiration date range~~	~~August 15 - October 24, 2018~~
~~Convertible Note Hedge:~~
~~Number of shares available from counterparties~~	~~3,434~~
~~Exercise price~~	~~$60.02~~

~~Senior Notes~~

On March 12, 2015, the Company completed a public offering of $500 million aggregate principal amount of the Company’s Senior Notes due March, 2020 (the “2020 Notes”) and $500 million aggregate principal amount of the Company’s Senior Notes due March, 2025 (the “2025 Notes”, together with the 2020 Notes, the “Senior Notes”). The Company pays interest at an annual rate of 2.75% and 3.80%, on the 2020 Notes and 2025 Notes, respectively, on a semi-annual basis on March 15 and September 15 of each year. During the year ended June 26, 2016, the Company entered into a series of interest rate contracts hedging the fair value of a portion of the 2025 Notes par value, whereby the Company receives a fixed rate and pays a variable rate based on a certain benchmark interest rate. Refer to Note 7 for additional information regarding these interest rate contracts.

The Company may redeem the Senior Notes at a redemption price equal to 100% of the principal amount of such series (“par”), plus a “make whole” premium as described in the indenture in respect of the Senior Notes and accrued and unpaid interest before February 15, 2020, for the 2020 Notes and before December 15, 2024, for the 2025 Notes. The Company may redeem the Senior Notes at par, plus accrued and unpaid interest at any time on or after February 15, 2020, for the 2020 Notes and on or after December 24, 2024, for the 2025 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 Senior Notes, plus accrued and unpaid interest.

On June 7, 2016, The Company completed a public offering of $800 million aggregate principal amount of Senior Notes due June 2021 (the “2021 Notes”, together with the 2020 and 2025 Notes, the “Senior Notes”). The Company pays interest at an annual rate of 2.80% on the 2021 Notes on a semi-annual basis on June 15 and December 15 of each year.

The Company may redeem the 2021 Notes at a redemption price equal to 100% of the principal amount of such series (“par”), plus a “make whole” premium as described in the indenture in respect to the 2021 Notes and accrued and unpaid interest before May 15, 2021. The Company may redeem the 2021 Notes at par, plus accrued and unpaid interest at any time on or after May 15, 2021. 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 2021 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 December 24, 2017, is as follows:~~

Remaining Amortization period Fair Value of Notes (Level 2)
(years) (in thousands)
2020 Notes 2.2 $ 503,330
2021 Notes 3.5 $ 804,120
2025 Notes 7.2 $ 518,060

~~Commercial Paper Program~~

On November 13, 2017, the Company established a new 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. The net proceeds from the commercial paper program will be used for general corporate purposes, including repurchases of the Company’s Common Stock from time to time and under the Company’s stock repurchase

~~Table of Contents~~

program. As of December 24, 2017, borrowings under the CP Program had a weighted-average interest rate of 1.64% with maturities of 30 days or less. Amounts available under the CP Program may be re-borrowed.

~~Revolving Credit Facility~~

On October 13, 2017, the Company entered into Amendment No. 2 to Amended and Restated Credit Agreement (the “2nd Amendment”), which amends the Company’s prior unsecured Credit Agreement (as amended by the 2nd Amendment, the “Amended Credit Agreement”). Among other things, the Amended Credit Agreement provides for a $500 million increase to the Company’s revolving credit facility, from $750 million to $1.25 billion with a syndicate of lenders. The Amended Credit Agreement provides for 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 million, for a potential total commitment of $1.85 billion. The facility matures on October 13, 2022.

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) one-month LIBOR plus 1.0%, plus a spread of 0.0% to 0.5%, or (2) LIBOR multiplied by the statutory rate, plus a spread of 0.9% to 1.5% in each case as the applicable spread is determined based on the rating of the Company’s non-credit enhanced, senior unsecured long-term debt. Principal and any accrued and unpaid interest is 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. The Amended and Restated Credit Agreement contains affirmative covenants, negative covenants, financial covenants and events of default. As of December 24, 2017, the Company had no borrowings outstanding under the credit facility and was in compliance with all financial covenants.

~~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 Convertible Notes, the Senior Notes, the term loan agreement, commercial paper, and the revolving credit facility during the three and six months ended December 24, 2017, and December 25, 2016.

Three Months Ended Six Months Ended
December 24,
2017 December 25,
2016 December 24,
2017 December 25,
2016
(in thousands)
Contractual interest coupon $ 18,627
$ 22,622
$ 36,583
$ 57,334
Amortization of interest discount 3,410
5,673
7,514
11,587
Amortization of issuance costs 544
531
1,029
1,449
Effect of interest rate contracts, net (254 ) (2,566 ) (603 ) (3,624 )
Total interest cost recognized $ 22,327
$ 26,260
$ 44,523
$ 66,746

NOTE 12 — ~~COMMITMENTS AND CONTINGENCIES~~LEASES

~~Operating~~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.

Selected Leases and Related Guarantees

The Company leases the majority of its administrative, research and development ~~(“R&D”)~~ and manufacturing facilities, regional sales/service offices, and certain equipment under non-cancelable ~~operating~~ leases. Certain of the Company’s facility leases for buildings located at its Fremont, California headquarters, 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.

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The Company has ~~operating~~finance leases ~~regarding~~for certain improved properties in Fremont and Livermore, California (the ~~“Operating~~“California Facility Leases”). The Company ~~was~~is required to maintain cash collateral in an aggregate of approximately $250.0 million in separate interest-bearing accounts as security for the Company’s obligations. These amounts are recorded with other restricted cash and investments in the Company’s Condensed Consolidated Balance Sheet as of ~~December 24, 2017.~~September 25, 2022.

During the seven-year term of the ~~Operating~~California Facility Leases and when the terms of the ~~Operating~~California Facility Leases expire, the property subject to ~~those Operating~~the California Facility Leases may be ~~remarketed.~~re-marketed. The Company has guaranteed to the lessor that each property will have a certain minimum residual value. The aggregate maximum guarantee made by the Company under the ~~Operating~~California Facility Leases is ~~generally no more than approximately $220.4 million; however, under certain default circumstances, the guarantee with regard~~$298.4 million.

NOTE 13 — COMMITMENTS AND CONTINGENCIES

Refer to ~~an Operating Lease may be 100% of the lessor’s aggregate investment in the applicable property, which in no case will exceed $250.0 million, in the aggregate.~~

~~Table of Contents~~Note 1

2 - Leases for details regarding guarantees surrounding selected leases.

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 ~~certain~~ insurance contracts that are intended to limit its exposure to such indemnifications. As of ~~December 24, 2017,~~September 25, 2022, the Company had not recorded any liability on its Condensed 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~~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 ~~December 24, 2017,~~September 25, 2022, the maximum potential amount of future payments that itthe Company could be required to make under these arrangements and letters of credit was ~~$20.6~~$97.4 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.

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 September 25, 2022, warranty reserves totaling $26.4 million were recognized in other long-term liabilities, the remainder were included in accrued expenses and other current liabilities in the Company’s Condensed Consolidated Balance Sheets.

Changes in the Company’s product warranty reserves were as follows:


	Three Months Ended
		September 25, 2022		September 26, 2021
		(in thousands)
Balance at beginning of period		$	256,258	$	191,758
Warranties issued during the period		88,213		70,672
Settlements made during the period		(64,896)		(60,292)
Changes in liability for warranties issued during the period		(1,269)		—
Changes in liability for pre-existing warranties		5,208		12,106
Balance at end of period		$	283,514	$	214,244

Lam Research Corporation 2023 Q1 10-Q 16

Three Months Ended Six Months Ended
December 24,
2017 December 25,
2016 December 24,
2017 December 25,
2016
(in thousands)
Balance at beginning of period $ 168,337
$ 103,226
$ 161,981
$ 100,321
Warranties issued during the period 57,698
41,544
106,488
76,399
Settlements made during the period (44,347 ) (32,747 ) (88,400 ) (64,975 )
Changes in liability for pre-existing warranties (2,008 ) 7,311
(389 ) 7,589
Balance at end of period $ 179,680
$ 119,334
$ 179,680
$ 119,334

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Legal ~~proceedings~~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. Significant 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 1314 — STOCK REPURCHASE PROGRAM

In ~~November 2017,~~May 2022, the Board of Directors authorized the Company to repurchase up to an additional ~~$2.0~~$5.0 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. ~~Repurchases are funded using the Company’s on-shore cash, on-shore cash generation, and available credit facilities.~~ 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
Average Price
Paid Per Share ⁽¹⁾
Amount
Available Under
Repurchase
Program
(in thousands, except per share data)
Available balance as of June 25, 2017 $ 282,141
Quarter ended September 24, 2017 1,779
$ 157,938
$ 158.40
$ 124,203
Board authorization $2.0 billion increase, November 2017 $ 2,124,203
Quarter ended December 24, 2017 3,709
$ 1,089,744
$ 196.28
$ 1,034,459


Period	Total Number of Shares Repurchased		Total Cost of Repurchase		Average Price Paid Per Share (1)		Amount Available Under Repurchase Program
	(in thousands, except per share data)
Available balance as of June 26, 2022							$	5,514,636
Quarter ended September 25, 2022	675	(2)	$	104,982	$	432.74	$	5,409,654

(1) Average price paid per share excludes the effect of accelerated share ~~repurchases; see~~repurchase activities. See additional disclosure below regarding ~~our~~the Company’s accelerated share repurchase activity during the ~~fiscal year.~~three months ended September 25, 2022.

(2) Includes shares received at final settlement of accelerated share repurchase agreements; see additional disclosures below regarding the Company’s accelerated share repurchase activity during the three months ended September 25, 2022.

In addition to the shares repurchased under the Board-authorized repurchase program shown above, during the three ~~and six~~ months ended ~~December 24, 2017,~~September 25, 2022, the Company acquired 9811 thousand shares at a total cost of ~~$18.4~~$4.8 million, ~~and 109 thousand shares at a total cost of $20.2 million, respectively,~~ 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 ~~Executed in December Quarter~~

On ~~November 20, 2017,~~June 2, 2022, the Company entered into ~~four separate~~an accelerated share repurchase ~~agreements (collectively, the "November 2017~~agreement (the "June 2022 ASR") with two financial institutions to repurchase a total of ~~$1.0 billion~~$500 million of Common Stock. The Company took an initial delivery of ~~3,254,300~~approximately 717 thousand shares, which represented ~~70%~~75% of the prepayment amount divided by ~~the Company’s~~our closing stock price on ~~November 20, 2017.~~June 2, 2022. The total number of shares ~~to be~~ received under the ~~November 2017~~June 2022 ASR ~~will be~~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 ~~two of~~ the ~~transactions is expected to be completed no later than February 22, 2018, and final settlement for~~June 2022 ASR occurred in September 2022, resulting in the ~~remaining transactions is expected to be completed no sooner than March 26, 2018 or no later than May 24, 2018.~~

~~Accelerated Share Repurchase Agreements Settled in Fiscal Year~~

On April 19, 2017, the Company entered into two separate accelerated share repurchase agreements (collectively, the “April 2017 ASR”) with two financial institutions to repurchase a total of $500 million of Common Stock. The Company took an initial deliveryreceipt of approximately ~~2,570,000~~433 thousand additional shares, which represented 70% of the prepayment amount divided by the Company’s closing stock price on April 19, 2017. The total number of shares received under the April 2017 ASR was based upon the average daily volume weighted average price of our Common Stock during the repurchase period, less an agreed upon discount. The April 2017 ASR settled on June 30, 2017. Approximately 780,000 shares were received at final settlement, which resulted inyielded a weighted-average share price of ~~approximately $149.16~~$435.20 for the transaction period.

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NOTE 1415 — ACCUMULATED OTHER COMPREHENSIVE LOSS

The components of accumulated other comprehensive ~~income (loss) (“AOCI”),~~loss, net of tax at ~~the end of the period,~~September 25, 2022, as well as the activity ~~during~~for the ~~period,~~three months ending September 25, 2022, were as follows:

Accumulated Foreign Currency Translation Adjustment Accumulated
Unrealized
Holding
Gain (Loss) on
Cash flow hedges Accumulated
Unrealized
Holding
Gain (Loss) on
Available-For-Sale Investments Accumulated
Unrealized
Components
of Defined
Benefit Plans Total
(in thousands)
Balance as of June 25, 2017 $ (42,371 ) $ (811 ) $ 1,106
$ (19,624 ) $ (61,700 )
Other comprehensive income (loss) before reclassifications 9,174
9,992
(20,066 ) (2,184 ) (3,084 )
Losses (income) reclassified from accumulated other comprehensive income (loss) to net (loss) income 3,934
₍₁₎
(3,271 )
₍₂₎
(39 )
₍₁₎
—
624
Net current-period other comprehensive income (loss) $ 13,108
$ 6,721
$ (20,105 ) $ (2,184 ) $ (2,460 )
Balance as of December 24, 2017 $ (29,263 ) $ 5,910
$ (18,999 ) $ (21,808 ) $ (64,160 )


	Accumulated Foreign Currency Translation Adjustment		Accumulated Unrealized Gain or Loss on Cash flow hedges		Accumulated Unrealized Holding Gain or Loss on Available-For-Sale Investments		Accumulated Unrealized Components of Defined Benefit Plans		Total
	(in thousands)
Balance at June 26, 2022	$	(81,755)	$	(12,330)	$	(1,637)	$	(14,260)	$	(109,982)
Other comprehensive (loss) income before reclassifications	(33,609)		18,803		80		293		(14,433)
Gains reclassified from accumulated other comprehensive loss to net income (1)	—		(9,297)		(53)		—		(9,350)
Net current-period other comprehensive loss	(33,609)		9,506		27		293		(23,783)
Balance at September 25, 2022	$	(115,364)	$	(2,824)	$	(1,610)	$	(13,967)	$	(133,765)

(1) Amount of ~~after tax gain reclassified from accumulated other comprehensive income into net (loss) income located in other expense, net.~~

~~(2)Amount of after tax gain~~after-tax gains reclassified from AOCI into net ~~(loss)~~ income ~~located~~is not material in ~~revenue: $31 loss; cost of goods sold:$2,047 gain; selling, general, and administrative expenses: $1,296 gain; and other income and expense: $41 loss.~~

~~NOTE 15 – BUSINESS COMBINATIONS~~

On August 28, 2017, the Company completed the acquisition of the outstanding shares of Coventor, Inc. (“Coventor”), a privately-held company that is a provider of simulation and modeling solutions for semiconductor process technology, micro-electromechanical systems (MEMS), and the Internet of Things, for a total purchase consideration of $137.6 million.

~~The following table represents the preliminary purchase price allocation and summarizes~~ the aggregate, ~~estimated fair value of the net assets acquired on the closing date of the acquisition:~~

Preliminary Purchase Price Allocation
(In thousands)
Intangible assets $ 48,500
Assets acquired (including cash of $8.7 million) 11,484
Goodwill 99,144
Liabilities assumed (21,517 )
Fair value of net assets acquired $ 137,611

~~The preliminary fair values of net tangible and intangible assets acquired were based on preliminary valuations, and management’s estimates and assumptions are subject~~or to change within the measurement period (up to one year from the acquisition date). The primary area that remains open relates to the fair value of intangible assets, certain tangible assets and liabilities assumed and income taxes. The Company expects to continue to obtain information to assist usany individual location in ~~determining the fair value of the net assets acquired during the measurement period.~~

~~The operating results of the acquired entity, from the date of acquisition, have been included in the Company’s~~our Condensed Consolidated ~~Financial~~ Statements ~~for the three and six months ended December 24, 2017. Goodwill represents the excess~~ of ~~the purchase price over the net tangible and identifiable intangible assets acquired. None of the goodwill recognized is deductible for income tax purposes.~~

~~The identified intangible assets assumed in the acquisition of Coventor were recognized as follows based upon their fair values as of August 28, 2017:~~Operations.

Lam Research Corporation 2023 Q1 10-Q 18

Fair Value Weighted-Average Estimated Useful Life
(In thousands) (In years)
Existing technology $ 26,200
6.0
Customer relationships 15,000
6.0
Trade names and other intangible assets 7,300
6.4
Total identified intangible assets $ 48,500
6.0

Acquired existing technology represents the fair value of products that have reached technological feasibility and are a part of Coventor’s product offerings and customer relationships represent the fair values of the underlying relationships and agreements with Coventor’s customers.

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~~ITEM 2.~~	~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

CAUTIONARY STATEMENT REGARDING ~~FORWARD LOOKING~~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~~environment; trends and opportunities in the semiconductor industry, including in the end markets and applications for semiconductors, and in device complexity; growth or decline in the industry and the ~~semiconductor industry;~~market for, and spending on, wafer fabrication equipment; the anticipated levels of, and rates of change in, ~~future shipments,~~ margins, market share, served addressable market, capital expenditures, research and development expenditures, international sales, revenue ~~and~~(actual and/or deferred), operating expenses and earnings generally; management’s plans and objectives for our current and future operations and business focus; volatility in our quarterly results; the makeup of our customer base; customer and end user requirements and our ability to satisfy those requirements; customer ~~capital~~ spending and ~~their~~ 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 ~~on demand for our equipment and services; changes in~~or demand for our products and inservices; our ~~market share resulting from, among other things, increases in our customers’ proportion of capital expenditure (with respect to certain technology inflections); hedging transactions;~~competition, and our ability to defend our market share and to gain new market share; our ability to obtain and qualify alternative sources of supply; the impact of U.S. tax reform, our estimated annual tax rate and the factors that affect our tax rates; anticipated growth in the industry and the total market for wafer fabrication equipment and our growth relative to such growth; the success of joint development and collaboration relationships with customers, suppliers, or others; outsourced activities; our supply chain and the role of ~~component~~ suppliers in our ~~business;~~business, including the impacts of supply chain constraints and material costs; our leadership and competency, and ~~their~~our ability to facilitate innovation; our research and development programs; our ability to ~~continue to, including the underlying factors that,~~ 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 strategic relevance with our customers; our ability to scale our operations to respond to changes in our business; the value of our patents; the materiality of potential losses arising from legal proceedings; the probability of making payments under our guarantees; the impact of the COVID-19 pandemic; 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 Part II 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 annual report on Form 10-K for the year ended June ~~25, 2017~~26, 2022 (our ~~“2017~~“2022 Form 10-K”), ~~our quarterly report on Form 10-Q for the fiscal quarter ended September 24, 2017,~~ 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.

Documents To Review In Connection With Management’s Discussion and Analysis Of Financial Condition and Results Of Operations

For a full understanding of our financial position and results of operations for the three ~~and six~~ months ended ~~December 24, 2017,~~September 25, 2022, and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations below, you should also read the Condensed Consolidated Financial Statements and notes presented in this Form 10-Q and the financial statements and notes in our ~~2017~~2022 Form 10-K.

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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 ~~faster,~~ and better performing devices that are used in a variety of electronic products, including mobile phones, personal computers, servers, wearables, automotive ~~devices,~~vehicles, and data storage ~~devices, and networking equipment. Our vision is to realize full value from natural technology extensions of our company.~~

~~Table of Contents~~

devices.

Our customer base includes leading semiconductor memory, foundry, and integrated device manufacturers that make products such as non-volatile memory, ~~(“NVM”), DRAM~~dynamic random-access memory, and logic devices. ~~We aim~~Their continued success is part of our commitment to ~~increase our strategic relevance with our customers by contributing more to their continued success.~~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, 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 ~~3D architectures~~three-dimensional architecture as well as multiple patterning to enable shrinks.

We believe we are in a strong position with our leadership and ~~competency~~expertise in deposition, etch, and ~~single-wafer~~ clean 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 opportunity for sustainable differentiation for us: (i) our focus on research and development, with ~~a breadth of~~several on-going programs ~~across~~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; ~~and~~(iii) our collaborative focus with ~~ecosystem partners.~~semi-ecosystem partners; (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 the most recent quarter,~~Overall calendar year 2022 continues to be a solid investment year in wafer fabrication equipment spending driven by robust secular demand for semiconductors and increasing complexity in manufacturing NAND, DRAM, and foundry logic devices. However, the demand environment, particularly in memory, has been weakening recently, and as a result, we expect a reduction in wafer fabrication equipment spending in calendar year 2023. Additionally, the United States government has recently imposed new controls, including expanded export license requirements that significantly impact trade with China for the shipment of wafer fabrication equipment and related parts and services. We expect these regulatory conditions, on top of the slowing economic environment, to negatively impact our ~~products increased primarily due to increased investments from~~financial results in the December 2022 quarter and in calendar year 2023. We also estimate that our ~~memory customers. Technology~~deferred revenue balances will trend down in the December quarter. Over the longer term, we believe that secular demand for semiconductors combined with technology inflections in our industry, including ~~NVM,~~3D device scaling, multiple patterning, ~~FinFET~~process flow, and advanced packaging ~~have led~~chip integration, will drive sustainable growth and lead to an increase in the served addressable market for our products and services in the deposition, etch, ~~single-wafer~~and clean businesses.

During the quarter-ended September 25, 2022, customer demand remained strong, and ~~customer service business. We believe that demand for~~we further increased our ~~products~~production output levels from the June quarter as a result of improving supply chain conditions. Although we have seen improvements in both our operations and ~~services should increase faster than overall spending on wafer fabrication equipment, as the proportion~~those of ~~customers’ capital expenditures rises in these technology inflection areas and~~our suppliers, we continue to ~~gain market share.~~expect supply shortages as well as inflationary cost pressures to persist in at least the near term. Risks and uncertainties related to the COVID-19 pandemic, supply chain challenges, and inflationary pressures may continue to negatively impact our revenue and gross margin.

~~We acquired the outstanding shares~~

Lam Research Corporation 2023 Q1 10-Q 20

Table of Coventor, Inc., a privately-held company, on August 28, 2017, as further discussed in Note 15 of our Condensed Consolidated Financial Statements. The results of the acquired business are included in our Condensed Consolidated Financial Statements.Contents

The following table summarizes certain key financial information for the periods indicated below:


	Three Months Ended
	September 25, 2022			June 26, 2022
	(in thousands, except per share data and percentages)
Revenue	$	5,074,121		$	4,635,554
Gross margin	$	2,336,835		$	2,100,512
Gross margin as a percent of total revenue	46.1		%	45.3		%
Total operating expenses	$	638,995		$	621,159
Net income	$	1,425,879		$	1,208,934
Diluted net income per share	$	10.39		$	8.74

Three Months Ended
December 24,
2017 September 24,
2017 December 25,
2016
(in thousands, except per share data and percentages)
Revenue $ 2,580,815
$ 2,478,140
$ 1,882,299
Gross margin $ 1,205,567
$ 1,149,343
$ 846,797
Gross margin as a percent of total revenue 46.7 % 46.4 % 45.0 %
Total operating expenses $ 468,196
$ 456,121
$ 406,969
Net (loss) income $ (9,955 ) $ 590,690
$ 332,791
Diluted net (loss) income per share $ (0.06 ) $ 3.21
$ 1.81

In the ~~December 2017~~September 2022 quarter, revenue increased 9.5% compared to the June 2022 quarter, driven by increases in both systems revenue and customer support-related revenue partnered with increased factory output, reflective of the improving supply chain environment. Deferred revenue at the end of the September ~~2017~~2022 quarter ~~primarily~~increased to $2,755 million compared to $2,198 million as of the end of the June 2022 quarter. 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 ~~increased investments from our memory customers. Gross~~manufacturing and deliveries of products, which has impacted, including in the current quarter, and may in the future impact, the timing of revenue recognition with respect to such products.

The increase in gross margin as a percentage of revenue in the ~~December 2017~~September 2022 quarter ~~increased as~~ compared to the ~~September 2017~~ June 2022quarter was primarily ~~due to~~a result of increased factory output and favorable customer and product ~~mix. Operating~~mix, partially offset by higher levels of manufacturing-related spending as a result of continued inflationary pressures. The increase in operating expenses in the ~~December 2017~~September 2022 quarter ~~increased~~ compared to the ~~September 2017~~June 2022 quarter ~~mainly due to an increase~~was primarily driven by increases in ~~employee headcount and outside services. The December 2017 quarter results were negatively impacted by a one-time provisional charge associated with the recently enacted U.S. tax reform legislation.~~employee-related expenses.

Our cash and cash equivalents, investments, and restricted cash and investments balances ~~decreased~~increased to ~~$6.0~~$4.6 billion asat the end of ~~December 24, 2017,~~the September 2022 quarter compared to ~~$6.4~~$3.9 billion asat the end of ~~September 24, 2017. Cash~~the June 2022 quarter. This increase was primarily the result of $1,189.6 million of cash generated from operating activities, partially offset by ~~operations was approximately $29~~$205.6 million ~~during the December 2017 quarter. We used cash during the December 2017 quarter for approximately $1.1 billion~~of dividends paid to stockholders; $140.1 million of capital expenditures, and $109.8 million of share repurchases, including net share settlement on employee stock-based ~~compensation, $206 million of purchases of available-for-sale securities, $85 million of capital expenditures, and $73 million of dividends paid to our stockholders; offset~~

~~Table of Contents~~

~~by approximately $799 million of net proceeds on short-term borrowings.~~compensation. Employee headcount as of ~~December 24, 2017,~~September 25, 2022 was approximately ~~10,200.~~18,700.

RESULTS OF OPERATIONS

~~Shipments~~Revenue


	Three Months Ended
	September 25, 2022			June 26, 2022			September 26, 2021
Revenue (in millions)	$	5,074		$	4,636		$	4,304
China	30		%	31		%	37		%
Taiwan	22		%	19		%	15		%
Korea	17		%	24		%	21		%
Southeast Asia	11		%	5		%	8		%
Japan	9		%	6		%	11		%
United States	6		%	8		%	6		%
Europe	5		%	7		%	2		%

Three Months Ended
December 24,
2017 September 24,
2017 December 25,
2016
Shipments (in millions) $ 2,632
$ 2,382
$ 1,923
Korea 32 % 38 % 25 %
Japan 14 % 19 % 12 %
Taiwan 15 % 15 % 37 %
China 14 % 10 % 8 %
United States 10 % 8 % 8 %
Southeast Asia 10 % 5 % 4 %
Europe 5 % 5 % 6 %

~~Shipments~~Revenue for the ~~December 2017 quarter~~September 2022 quarter increased ~~11%~~9.5% from the ~~September 2017~~June 2022 quarter reflecting increased customer spending on capital equipment and ~~increased 37% from the December 2016 quarter levels, reflecting timing~~increasing factory output levels.

Lam Research Corporation 2023 Q1 10-Q 21

Table of ~~customer demand for semiconductor equipment. The increase in the December 2017 quarter from the December 2016 quarter was mainly driven by investments from our memory customers.~~Contents

The following table presents our revenue disaggregated between system and customer support-related revenue:


	Three Months Ended
	September 25, 2022		June 26, 2022		September 26, 2021
	(In thousands)
System revenue	$	3,181,987	$	3,006,374	$	2,924,883
Customer support-related revenue and other	1,892,134		1,629,180		1,379,582
	$	5,074,121	$	4,635,554	$	4,304,465

Please refer to Note 3, “Revenue,” to the Condensed Consolidated Financial Statements of this Form 10-Q for additional information regarding the composition of the two categories into which revenue has been disaggregated.

The following table presents the percentages of ~~system shipments~~leading- and non-leading-edge equipment and upgrade revenue to each of the primary markets we ~~serve were as follows for the periods presented:~~serve:

Three Months Ended
December 24,
2017 September 24,
2017 December 25,
2016
Memory 77 % 66 % 61 %
Foundry 15 % 21 % 31 %
Logic/integrated device manufacturing 8 % 13 % 8 %

~~Revenue~~

Three Months Ended Six Months Ended
December 24,
2017 September 24,
2017 December 25,
2016 December 24,
2017 December 25,
2016
Revenue (in millions) $ 2,581
$ 2,478
$ 1,882
$ 5,059
$ 3,515
Korea 30 % 38 % 26 % 34 % 25 %
Japan 16 % 20 % 8 % 18 % 11 %
Taiwan 15 % 14 % 37 % 15 % 32 %
China 11 % 14 % 10 % 12 % 12 %
United States 11 % 6 % 7 % 9 % 7 %
Southeast Asia 11 % 5 % 5 % 7 % 8 %
Europe 6 % 3 % 7 % 5 % 5 %

Revenue for the December 2017 quarter increased 4% from the September 2017 quarter, increased 37% compared to the December 2016 quarter, and increased 44% in the six months ended December 24, 2017 compared to the same period in 2016, reflecting stronger customer demand for semiconductor equipment in 2017. Our deferred revenue balance increased to $1.1 billion as of December 24, 2017, compared to $938 million as of September 24, 2017, as a result of timing of shipments and revenue recognition. Our deferred revenue balance does not include system shipments to Japanese customers, for which title does not transfer until customer acceptance. Shipments to Japanese customers are classified as inventory at cost until the time of acceptance. The estimated future revenue value from shipments to Japanese customers was approximately $289 million as of December 24, 2017, and $344 million as of September 24, 2017.

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	Three Months Ended
	September 25, 2022		June 26, 2022		September 26, 2021
Memory	52	%	54	%	64	%
Foundry	34	%	26	%	25	%
Logic/integrated device manufacturing	14	%	20	%	11	%

Gross Margin


	Three Months Ended
	September 25, 2022			June 26, 2022			September 26, 2021
	(in thousands, except percentages)
Gross margin	$	2,336,835		$	2,100,512		$	1,976,754
Percent of revenue	46.1		%	45.3		%	45.9		%

Three Months Ended Six Months Ended
December 24,
2017 September 24,
2017 December 25,
2016 December 24,
2017 December 25,
2016
(in thousands, except percentages)
Gross margin $ 1,205,567
$ 1,149,343
$ 846,797
$ 2,354,910
$ 1,562,994
Percent of total revenue 46.7 % 46.4 % 45.0 % 46.5 % 44.5 %

Gross margin as a percentage of revenue ~~increased~~ was higherin the ~~December 2017~~September 2022 quarter compared to the ~~September 2017~~June 2022 quarter primarily as a result of increased factory output and ~~the December 2016 quarter, as well as, in the six months ended December 24, 2017 compared to the same period in 2016 primarily due to~~ favorable ~~changes in~~ customer and product ~~mix.~~mix, partially offset by increased manufacturing-related spending as a result of ongoing inflationary pressures.

~~Research and Development~~

Three Months Ended Six Months Ended
December 24,
2017 September 24,
2017 December 25,
2016 December 24,
2017 December 25,
2016
(in thousands, except percentages)
Research & development (“R&D”) $ 281,311
$ 275,078
$ 246,804
$ 556,389
$ 482,044
Percent of total revenue 10.9 % 11.1 % 13.1 % 11.0 % 13.7 %

~~We continued to make significant R&D investments focused on leading-edge deposition, plasma etch, single-wafer clean and other semiconductor manufacturing requirements.~~ The ~~spending~~ increase in gross margin as a percentage of revenue in the ~~December 2017 quarter is relatively flat in comparison to the~~three months ended September 2017 quarter. The increase in R&D expenses during the December 2017 quarter compared to the same period in the prior year was mainly due to increases of $28 million in employee compensation from higher headcount. The increase in R&D expense for the six months ended December 24, 2017 compared to the same period in 2016 is primarily due to increases of $52 million in employee compensation from higher headcount, and $12 million in supplies.

~~Selling, General, and Administrative~~

Three Months Ended Six Months Ended
December 24,
2017 September 24,
2017 December 25,
2016 December 24,
2017 December 25,
2016
(in thousands, except percentages)
Selling, general, and administrative $ 186,885
$ 181,043
$ 160,165
$ 367,928
$ 325,175
Percent of total revenue 7.2 % 7.3 % 8.5 % 7.3 % 9.3 %

Selling, general, and administrative (“SG&A”) expenses during the December 2017 quarter are relatively flat in comparison to the September 2017 quarter. The increase in SG&A expenses during the December 2017 quarter2022 compared to the same period in the prior year was primarily ~~due~~driven by favorable customer and product mix and improved factory utilization, offset by higher levels of manufacturing-related spending as a result of increased inflationary pressures.

Research and Development


	Three Months Ended
	September 25, 2022			June 26, 2022			September 26, 2021
	(in thousands, except percentages)
Research & development (“R&D”)	$	433,375		$	411,157		$	382,327
Percent of revenue	8.5		%	8.9		%	8.9		%

We continued to ~~increases of $12 million~~make significant R&D investments in ~~employee compensation from higher headcount, $4 million in outside services,~~the September 2022 quarter focused on leading-edge deposition, etch, clean and ~~$4 million in facility cost.~~other semiconductor manufacturing processes. The increase in ~~SG&A~~R&D expense ~~for~~in the ~~six~~September 2022 quarter compared to the June 2022 quarter was primarily driven by increases in employee-related costs.

The increase in R&D expense in the three months ended ~~December 24, 2017~~September 2022 compared to the same period in ~~2016 is~~the prior year was primarily driven by increases in employee-related expenses mainly ~~due to~~as a result of increased headcount and increases ~~of $20 million~~ in ~~employee compensation from higher headcount, $9 million in outside services, $6 million in facility cost, and $3 million in depreciation and amortization.~~

spending for supplies.

Lam Research Corporation 2023 Q1 10-Q 22

Table of Contents

Selling, General, and Administrative


	Three Months Ended
	September 25, 2022			June 26, 2022			September 26, 2021
	(in thousands, except percentages)
Selling, general, and administrative (“SG&A”)	$	205,620		$	210,002		$	222,194
Percent of revenue	4.1		%	4.5		%	5.2		%

SG&A expense during the September 2022 quarter decreased in comparison to the June 2022 quarter, primarily driven by a decrease in amortization for acquired intangible assets as the intangible assets associated with our Novellus Systems, Inc. transaction have fully amortized, partially offset by increases in employee-related costs.

SG&A expense during the three months ended September 2022 decreased compared to the same period in the prior year, primarily driven by a decrease in amortization for acquired intangible assets as the intangible assets associated with our Novellus Systems, Inc. transaction have fully amortized.

Other ~~Expense,~~Income (Expense), Net

Other ~~expense,~~income (expense), net consisted of the following:


	Three Months Ended									Six Months Ended							Three Months Ended
	December 24, 2017			September 24, 2017			December 25, 2016			December 24, 2017			December 25, 2016				September 25, 2022		June 26, 2022		September 26, 2021
	(in thousands)																(in thousands)
Interest income	$	20,578		$	20,209		$	10,945		$	40,787		$	23,708		Interest income	$	15,056	$	6,221	$	4,678
Interest expense	(23,317		)	(23,905		)	(26,641		)	(47,222		)	(68,070		)	Interest expense	(46,052)		(46,228)		(45,056)
Gains on deferred compensation plan related assets, net	6,074			3,453			1,666			9,527			7,838
Loss on extinguishment of debt	—			—			(36,325		)	—			(36,325		)
(Losses) gains on deferred compensation plan-related assets, net																(Losses) gains on deferred compensation plan-related assets, net	(12,726)		(32,316)		7,437

Foreign exchange gains (losses), net	1,196			(3,000		)	1,011			(1,804		)	2,230			Foreign exchange gains (losses), net	6,821		(2,380)		(17)
Other, net	(7,683		)	(2,259		)	(5,679		)	(9,942		)	(7,558		)	Other, net	(6,194)		(45,745)		4,101
	$	(3,152	)	$	(5,502	)	$	(55,023	)	$	(8,654	)	$	(78,177	)		$	(43,095)	$	(120,448)	$	(28,857)

Interest income increased in the ~~December 2017~~September 2022 quarter as compared to the ~~December 2016~~June 2022 quarter due to higher average yields and higher cash balances. Interest income increased for the three months ended September 25, 2022, compared to the same period in 2021, primarily as a result of higher ~~yield. Interest income increased in the six months ended December 2017 compared to the six months ended December 2016 as a result of an increase in yield and longer portfolio duration.~~yields.

Interest expense ~~decreased~~remained relatively flat in the ~~six months ended December 2017 compared to~~periods presented as our debt balances remained flat.

The gains and losses on deferred compensation plan-related assets in the ~~six months ended December 2016 due to~~periods presented were driven by fluctuations in the ~~termination of the Term Loan Agreement and mandatory redemption of the Senior Notes due 2023 and 2026 during the December 2016 quarter.~~

~~Changes in the~~fair market value of ~~securities in~~ the ~~portfolio drove the noted variability in the gains/losses on assets related to obligations under our deferred compensation plan.~~underlying funds.

Foreign exchange was a net gain in the December 2017 quarter as compared to a net loss in the September 2017 quarter and a net loss in the six months ended December 2017 compared to a net gain in the six months ended December 2016fluctuations were primarily due to currency movements against portions of our unhedged balance sheet exposures.

~~Loss on extinguishment of debt~~The losses in other, net for the three ~~and six~~ months ended ~~December~~September 25, 2016 related to the special mandatory redemption of our 2023 and 2026 Notes, as well as, the termination of the Amended and Restated Term Loan Agreement following the Termination of the Agreement and Plan of Merger and Reorganization with KLA-Tencor.

~~Other, net was higher during the December 2017 quarter,~~2022, were lower compared to ~~the September 2017 quarter,~~three months ended June 26, 2022, primarily ~~due to losses associated with the release of accumulated currency translation adjustments resulting from legal entity dissolutions during the period.~~

~~Income Tax Expense~~

As discussed in Note 5 of our Condensed Consolidated Financial Statements, the “Tax Cuts & Jobs Act” was signed into law on December 22, 2017 and is effective for our quarter which ended December 24, 2017. U.S. tax reform reduces the U.S. federal statutory tax rate from 35% to 21%, mandates payment of a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings. The impact on income taxes due to change in legislation is required under the authoritative guidance of Accounting Standards Codification 740, Income Taxes, to be recognized in the period in which the law is enacted. In conjunction, the SEC issued Staff Accounting Bulletin 118, which allows for the recording of provisional amounts related to U.S. tax reform and subsequent adjustments related to U.S. tax reform during a measurement period that is similar to the measurement period used when accounting for business combinations. As such, there is significant activity within the quarter which reflects the change in legislation. Most of that activity has provisionally been recorded in our Condensed Consolidated Financial Statements in the period ended December 24, 2017, as we have not yet completed the accounting for the tax effects of enactment. We recorded what we believe to be a reasonable estimate and the provisional activity is subject to further adjustments under SAB 118. In addition, for significant items for which we could not make a reasonable estimate, no provisional activity was recorded. The activity will be recorded during the measurement period allowed under SAB 118 when a reasonable estimate can be made, or when the effect of the activity is known. We will continue to refine provisional balances and adjustments may be made under SAB 118 during the measurement period as a result of ~~future changes~~an individually significant equity investment that was disposed of during the three months ended June 26, 2022. The gain and losses (net) compared to the same period in ~~interpretation, information available, assumptions made~~2021 were driven by fluctuations in the ~~Company and/or issuance~~fair market value of ~~additional guidance; these adjustments could be material.~~equity investments.

~~Table of Contents~~

~~The below discussion around the provision for income taxes and effective tax rate are significantly impacted by U.S. tax reform.~~Income Tax Expense

Our provision for income taxes and effective tax rate for the periods indicated were as follows:


	Three Months Ended
	September 25, 2022			June 26, 2022			September 26, 2021
	(in thousands, except percentages)
Income tax expense	$	228,866		$	149,971		$	163,632
Effective tax rate	13.8		%	11.0		%	12.2		%

Lam Research Corporation 2023 Q1 10-Q 23

Three Months Ended Six Months Ended
December 24,
2017 September 24,
2017 December 25,
2016 December 24,
2017 December 25,
2016
(in thousands, except percentages)
Income tax expense $ 744,174
$ 97,030
$ 52,014
$ 841,204
$ 80,972
Effective tax rate 101.4 % 14.1 % 13.5 % 59.2 % 11.9 %

Table of Contents

The increase in the effective tax rate for the ~~three months ended December 24, 2017~~September 2022 quarter compared to the ~~three months ended September 24, 2017~~June 2022 quarter and compared to the ~~three months ended December 25, 2016~~same period in the prior year was primarily due to the ~~impact~~change in level and proportion of ~~U.S.~~income in higher and lower tax reform to the federal statutory tax rate, one-time transition tax on accumulated unrepatriated foreign earnings, and reversal of the deferred tax accrual set up in prior periods related to accumulated foreign earnings to be repatriated.

The increase in the effective tax rate for the six months ended December 24, 2017 compared to the six months ended December 25, 2016 was primarily due to the impact of U.S. tax reform to the federal statutory tax rate, one-time transition tax on accumulated unrepatriated foreign earnings, and reversal of the deferred tax accrual set up in prior periods related to accumulated foreign earnings to be repatriated.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 at rates that are generally lower than~~States. International pre-tax income is taxable in the United ~~States. Additionally,~~States at a lower effective tax rate than the ~~impact of U.S.~~federal statutory tax reform is being evaluated for how it will affect future years’ tax expense due to tax reform provisions that we will potentially be subject to beginning in fiscal year 2019. Tax reform provisions being evaluated impacting future years include GILTI and other provisions.rate. Please refer to Note ~~6 of the notes~~7, “Income Taxes,” to our Consolidated Financial Statements in Part II, Item 8 of our ~~2017~~2022 Form 10-K for additional information.

~~Uncertain Tax Positions~~

We ~~reevaluate~~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.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

~~A critical accounting policy is defined as one that has both~~Refer to our “Critical Accounting Policies and Estimates” included in Part II, Item 7 of our 2022 Form 10-K for a ~~material impact on~~discussion of 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 from multiple-element arrangements, which impacts revenue;~~

~~the valuation of inventory, which impacts gross margin;~~

~~the valuation of warranty reserves, which impacts gross margin;~~

~~the valuation of equity-based compensation expense, including forfeiture estimates, which impacts both gross margin and operating expenses;~~

~~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; and~~

~~the valuation and recoverability of long-lived assets, which impacts gross margin and operating expenses when we record asset impairments or accelerate their depreciation or amortization.~~

~~We believe that the following~~ critical accounting policies ~~reflect the more significant judgments~~ and ~~estimates used in the preparation of our condensed consolidated financial statements regarding the critical accounting estimates indicated above.~~

~~Table of Contents~~

~~Revenue Recognition:~~ We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred and title has passed or services have been rendered, the selling price is fixed or determinable, collection of the receivable is reasonably assured, and we have received customer acceptance or are otherwise released from our customer acceptance obligations. If terms of the sale provide for a lapsing customer acceptance period, we recognize revenue upon the expiration of the lapsing acceptance period or customer acceptance, whichever occurs first. If the practices of a customer do not provide for a written acceptance or the terms of sale do not include a lapsing acceptance provision, we recognize revenue when it can be reliably demonstrated that the delivered system meets all of the agreed-to customer specifications. In situations with multiple deliverables, we recognize revenue upon the delivery of the separate elements to the customer and when we receive customer acceptance or are otherwise released from our customer acceptance obligations. We allocate revenue from multiple-element arrangements among the separate elements using their relative selling prices, based on our best estimate of selling price. Our sales arrangements do not include a general right of return. The maximum revenue recognized on a delivered element is limited to the amount that is not contingent upon the delivery of additional items. We generally recognize revenue related to sales of spare parts and system upgrade kits upon shipment. We generally recognize revenue related to services upon completion of the services requested by a customer order. We recognize revenue for extended maintenance service contracts with a fixed payment amount on a straight-line basis over the term of the contract. When goods or services have been delivered to the customer, but all conditions for revenue recognition have not been met, deferred revenue and deferred costs are recorded in deferred profit on our Consolidated Balance Sheet.

~~Inventory Valuation:~~ Our 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. Obsolete inventory or inventory in excess of management’s estimated usage requirement is written down to its estimated net realizable value if less than cost. Estimates of market value include but are not limited to management’s forecasts related to our future manufacturing schedules, customer demand, technological and/or market obsolescence, general semiconductor market conditions, and possible alternative uses. If future customer demand or market conditions are less favorable than our projections, additional inventory write-downs may be required and would be reflected in cost of goods sold in the period in which we make the revision.

~~Warranty:~~ We record a provision for estimated warranty expenses to cost of sales for each system when we recognize revenue. We periodically monitor the performance and cost of warranty activities, if actual costs incurred are different than our estimates, we may recognize adjustments to provisions in the period in which those differences arise or are identified. We do not maintain general or unspecified reserves; all warranty reserves are related to specific systems.

~~Equity-based Compensation: Employee Stock Purchase Plan (“ESPP”) and Employee Stock Plans:~~ We determine the fair value of our restricted stock units (“RSUs”), excluding market-based performance RSUs, based upon the fair market value of our Common Stock at the date of grant, discounted for dividends. We estimate the fair value of our market-based performance RSUs using a Monte Carlo simulation model at the date of the grant. We estimate the fair value of our stock options and ESPP awards using a Black-Scholes option valuation model. This model requires the input of highly subjective assumptions, including expected stock price volatility and the estimated life of each award. We amortize the fair value of equity-based awards over the vesting periods of the award and we have elected to use the straight-line method of amortization. We estimate expected equity award forfeitures based on historical forfeiture rate activity and expected future employee turnover. We recognize the effect of adjustments made to the forfeiture rate, if any in the period that we change the forfeiture estimate.

~~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. Realization of our net deferred tax assets is dependent on future taxable income. We believe 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 we determine that we would not be able to realize all or part of our net deferred tax assets, an adjustment would be charged to earnings in the period such determination is made. Likewise, if we later determine that it is more likely than not that the deferred tax assets would be realized, then the previously provided valuation allowance would be reversed.

We recognize the benefit from a tax position only if it is more likely than not that the position would be sustained upon audit based solely on the technical merits of the tax position. Our policy is to include interest and penalties related to unrecognized tax benefits as a component of income tax expense.

~~Table of Contents~~

~~Long-lived assets:~~ We review goodwill at least annually for impairment. If certain events or indicators of impairment occur between annual impairment tests, we will perform an impairment test at that date. In testing for a potential impairment of goodwill, we: (1) allocate goodwill to the reporting units to which the acquired goodwill relates; (2) estimate the fair value of our reporting units; and (3) determine the carrying value (book value) of those reporting units. Prior to this allocation of the assets to the reporting units, we assess long-lived assets for impairment. Furthermore, if the estimated fair value of a reporting unit is less than the carrying value, we must estimate the fair value of all identifiable assets and liabilities of that reporting unit, in a manner similar to a purchase price allocation for an acquired business. This can require independent valuations of certain internally generated and unrecognized intangible assets such as in-process R&D and developed technology. Only after this process is completed can the amount of goodwill impairment, if any, be determined. In our goodwill impairment process we first assess qualitative factors to determine whether it is necessary to perform a quantitative analysis. We do not calculate the fair value of a reporting unit unless we determine, based on a qualitative assessment, that it is more likely than not that the reporting unit’s fair value is less than its carrying amount.

The process of evaluating the potential impairment of goodwill is subjective and requires significant judgment at many points during the analysis. We determine the fair value of our reporting units by using an income approach. Under the income approach, we determine fair value based on estimated future cash flows of each reporting unit, discounted by an estimated weighted-average cost of capital, which reflects the overall level of inherent risk of a reporting unit and the rate of return an outside investor would expect to earn.

In estimating the fair value of a reporting unit, we make estimates and judgments about the future cash flows of our reporting units, including estimated growth rates and assumptions about the economic environment. Although our cash flow forecasts are based on assumptions that are consistent with the plans and estimates we are using to manage the underlying businesses, there is significant judgment involved in determining the cash flows attributable to a reporting unit. In addition, we make certain judgments about allocating shared assets to the estimated balance sheets of our reporting units. Changes in judgment on these assumptions and estimates could result in a goodwill impairment charge.

As a result, several factors could result in an impairment of a material amount of our goodwill balance in future periods, including but not limited to: (1) weakening of the global economy, weakness in the semiconductor equipment industry, or our failure to reach internal forecasts, which could impact our ability to achieve our forecasted levels of cash flows and reduce the estimated discounted cash flow value of our reporting units; and (2) a decline in our Common Stock price and resulting market capitalization, to the extent we determine that the decline is sustained and indicates a reduction in the fair value of our reporting units below their carrying value. Further, the value assigned to intangible assets, other than goodwill, is based on estimates and judgments regarding expectations such as the success and lifecycle of products and technology acquired. If actual product acceptance differs significantly from the estimates, we may be required to record an impairment charge to write down the asset to its realizable value.

For other long-lived assets, we routinely consider whether indicators of impairment are present. If such indicators are present, we determine whether the sum of the estimated undiscounted cash flows attributable to the assets is less than their carrying value. If the sum is less, we recognize an impairment loss based on the excess of the carrying amount of the assets over their respective fair values. Fair value is determined by discounted future cash flows, appraisals or other methods. We recognize an impairment charge to the extent the present value of anticipated net cash flows attributable to the asset are less than the asset’s carrying value. The fair value of the asset then becomes the asset’s new carrying value, which we depreciate over the remaining estimated useful life of the asset. Assets to be disposed of are reported at the lower of the carrying amount or fair value.estimates.

Recent Accounting Pronouncements

For a description of recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on our ~~condensed consolidated financial statements,~~Condensed Consolidated Financial Statements, see Note 2 ~~“Recent~~- Recent Accounting Pronouncements,” of our Condensed Consolidated Financial Statements, included in Part 1 of this ~~report.~~Form 10-Q.

LIQUIDITY AND CAPITAL RESOURCES

Total gross cash, ~~and~~ cash equivalents, investments, and restricted cash and investments ~~(together comprising total cash and investments)~~balances were ~~$6.0~~$4.6 billion at ~~December 24, 2017~~September 25, 2022 compared to ~~$6.3~~$3.9 billion as of June ~~25, 2017. Approximately $5.0 billion~~26, 2022. This increase was primarily driven by $1,189.6 million of cash generated from operating activities, partially offset by $205.6 million in dividends paid, $140.1 million of capital expenditures, and ~~$4.8 billion~~$109.8 million of our total cash and investments as of December 24, 2017, and June 25, 2017, respectively, was held outside the United States in our foreign subsidiaries, the majority of which is held in U.S. dollars. U.S. taxes have already been provided for due to U.S. tax reform as discussed in Note 5 of our Condensed Consolidated Financial Statements.

~~Table of Contents~~

~~Cash Flows from Operating Activities~~share repurchases, including net share settlement on employee stock-based compensation.

Net cash provided by operating activities of ~~$887.0~~$1,189.6 million during the ~~six~~three months ended ~~December 24, 2017,~~September 25, 2022, consisted of (in ~~millions)~~thousands):

Net income $ 580.7
Non-cash charges:
Depreciation and amortization 159.0
Equity-based compensation 83.9
Deferred income taxes (228.3 )
Amortization of note discounts and issuance costs 9.1
Changes in operating asset and liability accounts 277.0
Other 5.6
$ 887.0


Net income	$	1,425,879
Non-cash charges:
Depreciation and amortization	75,751
Equity-based compensation expense	71,110

Deferred income taxes	(133,616)


Changes in operating asset and liability accounts	(246,785)
Other	(2,751)
	$	1,189,588

Significant changes in operating asset and liability accounts, net of foreign exchange impact, included the following ~~sources~~uses of cash: increases in inventory of $415.1 million, accounts receivable of $261.2 million, along with a decrease in accrued expenses and other liabilities of ~~$1.2 billion and~~$176.2 million. The uses of cash are offset by the following sources of cash: increases in deferred profit of ~~$141.0 million. The sources~~$379.3 million and trade accounts payable of ~~cash are offset by uses of cash from the following: increases~~$132.9 million, along with a decrease in ~~accounts receivable of $603.4 million, inventories of $304.4 million, and~~ prepaid expense and other assets of ~~$74.3 million and decreases in trade accounts payable of $48.3~~$93.6 million.

Cash ~~Flows~~Flow from Investing Activities

Net cash used for investing activities during the ~~six~~three months ended ~~December 24, 2017,~~September 25, 2022, was ~~$598.7~~$127.8 million, primarily consisting of $140.1 million in capital expenditures, partially offset by net ~~purchases~~proceeds from maturities of available-for-sale securities of ~~$323.5 million, capital expenditures of $144.8 million, and business acquisition of $115.7~~$14.7 million.

Cash ~~Flows~~Flow from Financing Activities

Net cash used for financing activities during the ~~six~~three months ended ~~December 24, 2017,~~September 25, 2022, was ~~$924.8~~$310.9 million, primarily consisting of ~~$1.3 billion~~$205.6 million in dividends paid, and $109.8 million in treasury stock repurchases, ~~$349.2 million of cash paid for debt extinguishment, and $145.9 million of dividends paid,~~including net share settlement on employee stock-based compensation, partially offset by ~~$798.9~~$6.8 million combined proceeds from issuance of ~~net short-term borrowings and $38.2 million~~common stock.

Lam Research Corporation 2023 Q1 10-Q 24

Table of ~~stock issuance and treasury stock reissuances associated with our employee stock-based compensation plans.~~Contents

Liquidity

Given that the semiconductor ~~equipment~~ 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, cash equivalents, and short-term investments as of ~~December 24, 2017,~~September 25, 2022, 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 12twelve months. However, uncertainty in the global economy and the semiconductor industry, as well as disruptions in credit markets, have in the past, 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.

Under certain circumstances, our Convertible Notes may be converted into shares of our Common Stock. During the six months ended December 24, 2017, approximately $346.3 million principle value of Convertible Notes were converted and in the subsequent period through January 26, 2018, we received notice of conversion of an additional $228 million principal value of Convertible Notes, which will settle in the quarter ending March 25, 2018. We anticipate that conversions may continue in the coming quarter as the 2018 Notes approach maturity. We expect to have sufficient levels of cash, cash equivalents, and short term investments to fund the near-term settlement of these Convertible Notes.

On October 13, 2017, we entered into Amendment No. 2 to Amended and Restated Credit Agreement (the “2nd Amendment”), among the Company, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent, which amends the Company’s Credit Agreement (as amended by the 2nd Amendment, the “Amended Credit Agreement”).

Among other things, the Amended Credit Agreement provides for a $500 million increase to the Company’s revolving credit facility, from $750 million under the Credit Agreement to $1.25 billion under the Amended Credit Agreement. The Amended Credit Agreement also modifies the date of maturity of the revolving credit facility from November 10, 2020 to October 13, 2022. The Amended Credit Agreement provides for 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 million, for a potential total commitment of $1.85

~~Table of Contents~~

~~billion. Other than as disclosed in this paragraph, the material terms of the Amended Credit Agreement are substantially the same as the Credit Agreement.~~

On November 13, 2017, we established a commercial paper program under which we may issue unsecured commercial paper notes on a private placement basis up to a maximum aggregate amount outstanding at any time of $1.25 billion. Individual maturities may vary, but cannot not exceed 397 days from the date of issue. The net proceeds from the CP Program will be used for general corporate purposes, including repurchases of our Common Stock from time to time and under our stock repurchase program. If at any time, funds are not available under favorable terms under CP Program, we may utilize the Amended Credit Agreement for funding. Amounts available under the CP Program may be re-borrowed.

During the December 2017 quarter, a one-time transition tax on accumulated unrepatriated foreign earnings, estimated at $991.3 million has been recognized associated with the recent U.S. tax reform. This value is identified as provisional in our Condensed Consolidated Financial Statements for the period ended December 24, 2017, and is subject to future measurement period adjustments under SAB 118. We have elected to pay this tax over a period of eight years, with 8% of the transition tax paid to be paid each September 15, for years 2018 through 2022, and 15%, 20%, and 25%, respectively, to be paid in on September 15, 2023, 2024, and 2025.

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, ~~in the United States and offshore,~~ 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, ~~given~~ the ~~possibility of changes~~ongoing COVID-19 pandemic has in ~~market conditions or other occurrences,~~the past caused disruption in the capital markets and were it to do the same in the future, that could make any financing more challenging, and there can be no ~~certainty~~assurance that ~~such funding~~we will be ~~available in needed quantities~~able to obtain such financing on commercially reasonable terms or ~~on terms favorable to us.~~at all.


~~ITEM 3.~~	~~Quantitative and Qualitative Disclosures about Market Risk~~

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

For financial market risks related to changes in interest rates, marketable equity security prices, and foreign currency exchange rates, refer to Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk”, in our ~~2017~~2022 Form 10-K. ~~Other than noted below, our~~Our exposure related to market risk has not changed materially since June ~~25, 2017. All of the potential changes noted below are based on sensitivity analysis performed on our financial position as of December 24, 2017. Actual results may differ materially.~~26, 2022.

~~Fixed Income Securities~~

Our investments in various interest earning securities carry a degree of market risk for changes in interest rates. At any time, a sharp rise in interest rates could have a material adverse impact on the fair value of our fixed income investment portfolio. Conversely, declines in interest rates could have a material adverse impact on interest income for our investment portfolio. We target to maintain a conservative investment policy, which focuses on the safety and preservation of our capital by limiting default risk, market risk, reinvestment risk, and concentration risk.

~~Table of Contents~~

The following table presents the hypothetical fair values of fixed income securities that would result from selected potential decreases and increases in interest rates. Market changes reflect immediate hypothetical parallel shifts in the yield curve of plus or minus 50 basis points (“BPS”), 100 BPS, and 150 BPS. The hypothetical fair values as of December 24, 2017, were as follows:

Valuation of Securities
Given an Interest Rate
Decrease of X Basis Points

Fair Value as of
December 24, 2017

Valuation of Securities
Given an Interest Rate
Increase of X Basis Points
(150 BPS) (100 BPS) (50 BPS) 0.00% 50 BPS 100 BPS 150 BPS
(in thousands)
Time deposit $ 521,265
$ 521,265
$ 521,265
$ 521,265
$ 521,265
$ 521,265
$ 521,265
U.S. Treasury and agencies 855,503
845,703
835,893
826,084
816,277
806,471
796,668
Municipal notes and bonds 181,905
180,891
179,863
178,836
177,808
176,781
175,754
Government-sponsored enterprises 48,840
48,334
47,828
47,323
46,817
46,312
45,807
Foreign government bonds 62,333
61,727
61,122
60,516
59,910
59,305
58,699
Bank and corporate notes 2,743,690
2,720,516
2,697,341
2,674,148
2,650,943
2,627,741
2,604,542
Mortgage backed securities - residential 55,161
54,511
53,858
53,205
52,551
51,898
51,244
Mortgage backed securities - commercial 123,691
122,868
122,045
121,221
120,399
119,576
118,753
Total $ 4,592,388
$ 4,555,815
$ 4,519,215
$ 4,482,598
$ 4,445,970
$ 4,409,349
$ 4,372,732

We mitigate default risk by investing in high credit quality securities and by positioning our portfolio to respond appropriately to a significant reduction in a credit rating of any investment issuer or guarantor. The portfolio includes only marketable securities with active secondary or resale markets to achieve portfolio liquidity and maintain a prudent amount of diversification.


~~ITEM 4.~~	~~Controls and Procedures~~

ITEM 4. 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 final 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 ~~December 24, 2017,~~September 25, 2022, 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 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.

~~Table of Contents~~

Effectiveness of Controls

While we believe the present design of our disclosure controls and procedures and internal control over financial reporting is effective, future events affecting our business may cause us to modify our disclosure controls and procedures or internal control over financial reporting.


~~PART II.~~	~~OTHER INFORMATION~~

Lam Research Corporation 2023 Q1 10-Q 25



Delaware						94-2634797
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, Par Value $0.001 Per Share	LRCX	The Nasdaq Stock Market
		(Nasdaq Global Select Market)


					Page No.
			PART I. Financial Information

				~~Page No.~~
Item 1.	~~PART I. Financial Information~~

~~Item 1.~~	Financial Statements (Unaudited):
			Condensed Consolidated Statements of Operations for the three ~~and six~~ months ended ~~December 24, 2017,~~September 25, 2022 and ~~December 25, 2016~~September 26, 2021		3
			Condensed Consolidated Statements of Comprehensive Income for the three ~~and six~~ months ended ~~December 24, 2017,~~September 25, 2022, and ~~December 25, 2016~~September 26, 2021		4
			Condensed Consolidated Balance Sheets as of ~~December 24, 2017,~~September 25, 2022, and June ~~25, 2017~~26, 2022		5
			Condensed Consolidated Statements of Cash Flows for the ~~six~~three months ended ~~December 24, 2017,~~September 25, 2022, and ~~December 25, 2016~~September 26, 2021		6
			Condensed Consolidated Statements of Stockholders’ Equity for the three months ended September 25, 2022, and September 26, 2021		7
			Notes to Condensed Consolidated Financial Statements		78
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations		2319
Item 3.			Quantitative and Qualitative Disclosures about Market Risk		3225
Item 4.			Controls and Procedures		3325

			PART II. Other Information

Item 1.			Legal Proceedings		3426
Item 1A.			Risk Factors		3426
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds		4438
Item 3.			Defaults Upon Senior Securities		4539
Item 4.			Mine Safety Disclosures		4539
Item 5.			Other Information		4539
Item 6.			Exhibits		4540
Signatures					4641
~~Exhibit Index~~		47


	Three Months Ended
		September 25, 2022		September 26, 2021
Net income		$	1,425,879	$	1,179,744
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment		(33,609)		(4,032)
Cash flow hedges:
Net unrealized gains (losses) during the period		18,803		(9,005)
Net gains reclassified into net income		(9,297)		(3,542)
		9,506		(12,547)
Available-for-sale investments:
Net unrealized gains (losses) during the period		80		(2,405)
Net (gains) losses reclassified into net income		(53)		1,145
		27		(1,260)
Defined benefit plans, net change in unrealized component		293		199
Other comprehensive (loss) income, net of tax		(23,783)		(17,640)
Comprehensive income		$	1,402,096	$	1,162,104



	Three Months Ended						Six Months Ended
	December 24, 2017			December 25, 2016			December 24, 2017			December 25, 2016
Net (loss) income	$	(9,955	)	$	332,791		$	580,735		$	596,626
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment	5,239			(14,428		)	13,108			(9,927		)
Cash flow hedges:
Net unrealized gains during the period	6,930			15,225			9,992			12,804
Net (gains) losses reclassified into earnings	(5,459		)	(502		)	(3,271		)	11,448
	1,471			14,723			6,721			24,252
Available-for-sale investments:
Net unrealized losses during the period	(18,339		)	(13,585		)	(20,066		)	(16,308		)
Net losses (gains) reclassified into earnings	84			91			(39		)	994
	(18,255		)	(13,494		)	(20,105		)	(15,314		)
Defined benefit plans, net change in unrealized component	172			122			(2,184		)	245
Other comprehensive loss, net of tax	(11,373		)	(13,077		)	(2,460		)	(744		)
Comprehensive (loss) income	$	(21,328	)	$	319,714		$	578,275		$	595,882



x☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



¨☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	September 25, 2022		June 26, 2022
	(unaudited)		(1)
ASSETS
Cash and cash equivalents	$	4,256,499	$	3,522,001
Investments	120,551		135,731
Accounts receivable, less allowance of $5,536 as of September 25, 2022, and $5,606 as of June 26, 2022	4,569,735		4,313,818
Inventories	4,360,325		3,966,294
Prepaid expenses and other current assets	305,554		347,391
Total current assets	13,612,664		12,285,235
Property and equipment, net	1,718,791		1,647,587
Restricted cash and investments	250,955		251,534
Goodwill	1,514,547		1,515,113
Intangible assets, net	110,385		101,850
Other assets	1,513,940		1,394,313
Total assets	$	18,721,282	$	17,195,632
LIABILITIES AND STOCKHOLDERS’ EQUITY
Trade accounts payable	$	1,146,286	$	1,011,208
Accrued expenses and other current liabilities	1,948,776		1,974,272
Deferred profit	1,951,210		1,571,898
Current portion of long-term debt and finance lease obligations	7,110		7,381
Total current liabilities	5,053,382		4,564,759
Long-term debt and finance lease obligations, less current portion	4,996,363		4,998,449
Income taxes payable	840,214		931,117
Other long-term liabilities	418,756		422,941
Total liabilities	11,308,715		10,917,266
Commitments and contingencies

Stockholders’ equity:
Preferred stock, at par value of $0.001 per share; authorized, 5,000 shares, none outstanding	—		—
Common stock, at par value of $0.001 per share; authorized, 400,000 shares as of September 25, 2022 and June 26, 2022; issued and outstanding, 136,374 shares as of September 25, 2022, and 136,975 shares as of June 26, 2022	136		137
Additional paid-in capital	7,492,822		7,414,916
Treasury stock, at cost; 157,773 shares as of September 25, 2022, and 157,087 shares as of June 26, 2022	(19,591,249)		(19,481,429)
Accumulated other comprehensive loss	(133,765)		(109,982)
Retained earnings	19,644,623		18,454,724
Total stockholders’ equity	7,412,567		6,278,366
Total liabilities and stockholders’ equity	$	18,721,282	$	17,195,632



	December 24, 2017			June 25, 2017
	(unaudited)			(1)
ASSETS
Cash and cash equivalents	$	1,745,173		$	2,377,534
Investments	3,954,526			3,663,628
Accounts receivable, less allowance for doubtful accounts of $5,262 as of December 24, 2017, and $5,103 as of June 25, 2017	2,279,044			1,673,398
Inventories	1,507,435			1,232,916
Prepaid expenses and other current assets	179,944			195,022
Total current assets	9,666,122			9,142,498
Property and equipment, net	807,340			685,595
Restricted cash and investments	255,984			256,205
Goodwill	1,485,230			1,385,673
Intangible assets, net	380,929			410,995
Other assets	316,660			241,799
Total assets	$	12,912,265		$	12,122,765
LIABILITIES AND STOCKHOLDERS’ EQUITY
Trade accounts payable	$	421,788		$	464,643
Accrued expenses and other current liabilities	1,339,612			969,361
Deferred profit	748,635			607,672
Current portion of convertible notes, and capital leases; and commercial paper	1,401,660			908,439
Total current liabilities	3,911,695			2,950,115
Long-term debt and capital leases, less current portion	1,789,958			1,784,974
Income taxes payable	818,880			120,178
Other long-term liabilities	118,177			280,186
Total liabilities	6,638,710			5,135,453
Commitments and contingencies
Temporary equity, convertible notes	130,424			169,861
Stockholders’ equity:
Preferred stock, at par value of $0.001 per share; authorized - 5,000 shares, none outstanding	—			—
Common stock, at par value of $0.001 per share; authorized, 400,000 shares; issued and outstanding, 159,451 shares at December 24, 2017, and 161,723 shares at June 25, 2017	159			162
Additional paid-in capital	5,959,945			5,845,485
Treasury stock, at cost; 110,754 shares at December 24, 2017, and 105,569 shares at June 25, 2017	(6,470,434		)	(5,216,187		)
Accumulated other comprehensive loss	(64,160		)	(61,700		)
Retained earnings	6,717,621			6,249,691
Total stockholders’ equity	6,143,131			6,817,451
Total liabilities and stockholders’ equity	$	12,912,265		$	12,122,765























	Three Months Ended
	September 25, 2022
	Common Stock Shares	Common Stock		Additional Paid-in Capital		Treasury Stock		Accumulated Other Comprehensive Loss		Retained Earnings		Total
Balance at June 26, 2022	136,975	$	137	$	7,414,916	$	(19,481,429)	$	(109,982)	$	18,454,724	$	6,278,366
Issuance of common stock	85	—		6,796		—		—		—		6,796
Purchase of treasury stock	(686)	(1)		—		(109,820)		—		—		(109,821)

Equity-based compensation expense	—	—		71,110		—		—		—		71,110









Net income	—	—		—		—		—		1,425,879		1,425,879
Other comprehensive loss	—	—		—		—		(23,783)		—		(23,783)
Cash dividends declared ($1.725 per common share)	—	—		—		—		—		(235,980)		(235,980)
Balance at September 25, 2022	136,374	$	136	$	7,492,822	$	(19,591,249)	$	(133,765)	$	19,644,623	$	7,412,567

























	Three Months Ended
	September 26, 2021
	Common Stock Shares	Common Stock		Additional Paid-in Capital		Treasury Stock		Accumulated Other Comprehensive Loss		Retained Earnings		Total
Balance at June 27, 2021	142,501	$	143	$	7,052,962	$	(15,646,701)	$	(64,128)	$	14,684,912	$	6,027,188
Issuance of common stock	47	—		742		—		—		—		742
Purchase of treasury stock	(1,737)	(2)		—		(1,216,872)		—		—		(1,216,874)

Equity-based compensation expense	—	—		58,099		—		—		—		58,099








Net income	—	—		—		—		—		1,179,744		1,179,744
Other comprehensive loss	—	—		—		—		(17,640)		—		(17,640)
Cash dividends declared ($1.50 per common share)	—	—		—		—		—		(211,216)		(211,216)
Balance at September 26, 2021	140,811	$	141	$	7,111,803	$	(16,863,573)	$	(81,768)	$	15,653,440	$	5,820,043


	Less than 1 Year		1-3 Years			More than 3 Years			Total
	(In thousands)
Deferred revenue	$	2,540,799	$	200,655	(1)	$	13,330	(1)	$	2,754,784



	Three and Six Months Ended
	December 24, 2017		December 25, 2016
Expected stock price volatility	29.13	%	33.02	%
Risk-free interest rate	0.82	%	0.43	%
Expected term (years)	0.77		0.77
Dividend yield	0.89	%	1.14	%



	Cost		Estimated Fair Value
	(in thousands)
Due in one year or less	$	1,995,451	$	1,994,497
Due after one year through five years	3,217,096		3,195,218
Due in more than five years	172,504		171,615
	$	5,385,051	$	5,361,330



	Notional Value
	Derivatives Designated as Hedging Instruments:				Derivatives Not Designated as Hedging Instruments:
	(in thousands)
Foreign currency forward contracts
	Buy Contracts		Sell Contracts		Buy Contracts		Sell Contracts
Japanese yen	$	—	$	512,577	$	—	$	141,737
Euro	69,649		—		33,044		—
Korean won	33,693		—		—		73,282
Taiwan dollar	—		—		20,047		—
Swiss franc	—		—		15,225		—
Chinese renminbi	—		—		7,529		—
Singapore dollar	—		—		7,410		—
British pound sterling	—		—		4,019		—
	$	103,342	$	512,577	$	87,274	$	215,019
Foreign currency option contracts
	Buy Put		Sell Put		Buy Put		Sell Put
Japanese yen	$	36,036	$	—	$	—	$	—



	December 24, 2017						June 25, 2017
	Fair Value of Derivative Instruments (Level 2)						Fair Value of Derivative Instruments (Level 2)
	Asset Derivatives			Liability Derivatives			Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
	(in thousands)
Derivatives designated as hedging instruments:
Foreign exchange contracts	Prepaid expense and other assets	$	9,687	Accrued expenses and other current liabilities	$	331	Prepaid expense and other assets	$	8,061	Accrued expenses and other current liabilities	$	2,916
Interest rate contracts, short-term				Accrued expenses and other current liabilities	4,662					Accrued expenses and other current liabilities	2,833
Interest rate contracts, long-term				Other long-term liabilities	14,520					Other long-term liabilities	7,269
Derivatives not designated as hedging instruments:
Foreign exchange contracts	Prepaid expense and other assets	51		Accrued expenses and other current liabilities	118		Prepaid expense and other assets	213		Accrued expenses and other current liabilities	342
Total Derivatives		$	9,738		$	19,631		$	8,274		$	13,360

		~~94538~~
(Address of principal executive offices)						(Zip Code)


~~ITEM 1.~~	~~Financial Statements~~



		Three Months Ended December 24, 2017									Six Months Ended December 24, 2017
		Effective Portion						Ineffective Portion and Amount Excluded from Effectiveness			Effective Portion					Ineffective Portion and Amount Excluded from Effectiveness
Derivatives Designated as Hedging Instruments	Location of Gain (Loss) Recognized in or Reclassified into Income	Gain (Loss) Recognized in AOCI			Gain (Loss) Reclassified from AOCI into Income			Gain (Loss) Recognized in Income			Gain Recognized in AOCI		(Loss) Gain Reclassified from AOCI into Income			Gain (Loss) Recognized in Income
		(in thousands)
Foreign Exchange Contracts	Revenue	$	8,194		$	3,771		$	1,225		$	8,185	$	(35	)	$	3,772
Foreign Exchange Contracts	Cost of goods sold	(250		)	1,648			(139		)	2,193		2,472			(347		)
Foreign Exchange Contracts	Selling, general, and administrative	(206		)	1,012			(49		)	1,150		1,726			(166		)
Foreign Exchange Contracts	Other expense, net	—			—			(35		)	—		—			(52		)
Interest Rate Contracts	Other expense, net	—			(31		)	—			—		(62		)	—
		$	7,738		$	6,400		$	1,002		$	11,528	$	4,101		$	3,207



		Three Months Ended December 25, 2016									Six Months Ended December 25, 2016
		Effective Portion						Ineffective Portion and Amount Excluded from Effectiveness			Effective Portion						Ineffective Portion and Amount Excluded from Effectiveness
Derivatives Designated as Hedging Instruments	Location of Gain (Loss) Recognized in or Reclassified into Income	Gain (Loss) Recognized in AOCI			(Loss) Gain Reclassified from AOCI into Income			Gain (Loss) Recognized in Income			Gain (Loss) Recognized in AOCI			(Loss) Gain Reclassified from AOCI into Income			Gain (Loss) Recognized in Income
		(in thousands)
Foreign Exchange Contracts	Revenue	$	18,138		$	(420	)	$	708		$	15,225		$	(14,025	)	$	1,413
Foreign Exchange Contracts	Cost of goods sold	(786		)	(180		)	(28		)	(551		)	(7		)	(95		)
Foreign Exchange Contracts	Selling, general, and administrative	(348		)	(146		)	(15		)	(372		)	(155		)	(36		)
Foreign Exchange Contracts	Other expense, net	—			—			3			—			—			3
Interest Rate Contracts	Other expense, net	—			1,778			—			—			1,787			—
		$	17,004		$	1,032		$	668		$	14,302		$	(12,400	)	$	1,285



	December 24, 2017							June 25, 2017
	Amount (in thousands)				Effective Interest Rate			Amount (in thousands)				Effective Interest Rate
Fixed-rate 1.25% Convertible Notes Due May 15, 2018 ("2018 Notes")	$	206,124		⁽¹⁾	5.27	%		$	447,436		⁽²⁾	5.27	%
Fixed-rate 2.75% Senior Notes Due March 15, 2020 ("2020 Notes")	500,000				2.88	%		500,000				2.88	%
Fixed-rate 2.80% Senior Notes Due June 15, 2021 ("2021 Notes")	800,000				2.95	%		800,000				2.95	%
Fixed-rate 3.80% Senior Notes Due March 15, 2025 ("2025 Notes")	500,000				3.87	%		500,000				3.87	%
Fixed-rate 2.625% Convertible Notes Due May 15, 2041 ("2041 Notes")	526,136			⁽¹⁾	4.28	%		631,074			⁽²⁾	4.28	%
Commercial paper	800,000				1.64	%	⁽³⁾	—				—
Total debt outstanding, at par	3,332,260							2,878,510
Unamortized discount	(138,651		)					(178,589		)
Fair value adjustment - interest rate contracts	(19,182		)					(10,102		)
Unamortized bond issuance costs	(2,434		)					(3,161		)
Total debt outstanding, at carrying value	$	3,171,993						$	2,686,658
Reported as:
Current portion of long-term debt, and commercial paper	$	1,401,015		⁽⁴⁾				$	907,827		⁽⁴⁾
Long-term debt	1,770,978							1,778,831
Total debt outstanding, at carrying value	$	3,171,993						$	2,686,658



	December 24, 2017				June 25, 2017
	2018 Notes		2041 Notes		2018 Notes		2041 Notes
	(in thousands, except years, percentages, conversion rate, and conversion price)
Carrying amount of permanent equity component, net of tax	$	94,516	$	158,007	$	89,604	$	156,374
Carrying amount of temporary equity component, net of tax	$	3,037	$	127,387	$	15,186	$	154,675
Remaining amortization period (years)	0.3		23.3		0.8		23.8
Fair Value of Notes (Level 2)	$	642,049	$	2,943,299
Conversion rate (shares of common stock per $1,000 principal amount of notes)	16.6603		29.8987
Conversion price (per share of common stock)	$	60.02	$	33.45
If-converted value in excess of par value	$	434,986	$	2,410,644
Estimated share dilution using average quarterly stock price $195.72 per share	2,381		13,042



	Remaining Amortization period	Fair Value of Notes (Level 2)
	(years)	(in thousands)
2020 Notes	2.2	$	503,330
2021 Notes	3.5	$	804,120
2025 Notes	7.2	$	518,060



	Accumulated Foreign Currency Translation Adjustment				Accumulated Unrealized Holding Gain (Loss) on Cash flow hedges				Accumulated Unrealized Holding Gain (Loss) on Available-For-Sale Investments				Accumulated Unrealized Components of Defined Benefit Plans			Total
	(in thousands)
Balance as of June 25, 2017	$	(42,371	)		$	(811	)		$	1,106			$	(19,624	)	$	(61,700	)
Other comprehensive income (loss) before reclassifications	9,174				9,992				(20,066		)		(2,184		)	(3,084		)
Losses (income) reclassified from accumulated other comprehensive income (loss) to net (loss) income	3,934			₍₁₎	(3,271		)	₍₂₎	(39		)	₍₁₎	—			624
Net current-period other comprehensive income (loss)	$	13,108			$	6,721			$	(20,105	)		$	(2,184	)	$	(2,460	)
Balance as of December 24, 2017	$	(29,263	)		$	5,910			$	(18,999	)		$	(21,808	)	$	(64,160	)



	Preliminary Purchase Price Allocation
	(In thousands)
Intangible assets	$	48,500
Assets acquired (including cash of $8.7 million)	11,484
Goodwill	99,144
Liabilities assumed	(21,517		)
Fair value of net assets acquired	$	137,611



	Fair Value		Weighted-Average Estimated Useful Life
	(In thousands)		(In years)
Existing technology	$	26,200	6.0
Customer relationships	15,000		6.0
Trade names and other intangible assets	7,300		6.4
Total identified intangible assets	$	48,500	6.0



Net income	$	580.7
Non-cash charges:
Depreciation and amortization	159.0
Equity-based compensation	83.9
Deferred income taxes	(228.3		)
Amortization of note discounts and issuance costs	9.1
Changes in operating asset and liability accounts	277.0
Other	5.6
	$	887.0



	Valuation of Securities Given an Interest Rate Decrease of X Basis Points						Fair Value as of December 24, 2017		Valuation of Securities Given an Interest Rate Increase of X Basis Points
	(150 BPS)		(100 BPS)		(50 BPS)		0.00%		50 BPS		100 BPS		150 BPS
	(in thousands)
Time deposit	$	521,265	$	521,265	$	521,265	$	521,265	$	521,265	$	521,265	$	521,265
U.S. Treasury and agencies	855,503		845,703		835,893		826,084		816,277		806,471		796,668
Municipal notes and bonds	181,905		180,891		179,863		178,836		177,808		176,781		175,754
Government-sponsored enterprises	48,840		48,334		47,828		47,323		46,817		46,312		45,807
Foreign government bonds	62,333		61,727		61,122		60,516		59,910		59,305		58,699
Bank and corporate notes	2,743,690		2,720,516		2,697,341		2,674,148		2,650,943		2,627,741		2,604,542
Mortgage backed securities - residential	55,161		54,511		53,858		53,205		52,551		51,898		51,244
Mortgage backed securities - commercial	123,691		122,868		122,045		121,221		120,399		119,576		118,753
Total	$	4,592,388	$	4,555,815	$	4,519,215	$	4,482,598	$	4,445,970	$	4,409,349	$	4,372,732


~~ITEM 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~


	Total Number of Shares Repurchased (1)	Average Price Paid Per Share (2)			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 26, 2022						$	5,514,636
June 27, 2022 - July 24, 2022	3	$	424.68		—	5,514,636
July 25, 2022 - August 21, 2022	3	$	502.11		—	5,514,636
August 22, 2022 - September 25, 2022	680	$	432.63		675	5,409,654
Quarter ended September 25, 2022	686	$	433.47	(3)	675	$	5,409,654



	Total Number of Shares Repurchased ⁽¹⁾	Average Price Paid Per Share ⁽²⁾		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Amount Available Under Repurchase Program
	(in thousands, except share and per share data)
Amount available at June 25, 2017					$	282,141
Quarter ended September 24, 2017	1,790	$	158.40	1,779	124,203
September 25, 2017 - October 22, 2017	241	$	185.85	235	80,633
Board authorization, $2.0 billion increase, November 2017					2,080,633
October 23, 2017 - November 19, 2017	213	$	207.16	210	2,037,104
November 20, 2017 - December 24, 2017	3,352	$	190.97	3,264	1,034,459
Quarter ended December 24, 2017	3,806	$	194.99	3,709	$	1,034,459


~~(2)~~	~~Average price paid per share excludes effect accelerated share repurchases; see additional disclosure below regarding our accelerated share repurchase activity during the fiscal year~~.


Exhibit Number			Description

~~ITEM 6.~~			~~Exhibits~~

31.1			Rule 13a-14(a)/15d-14(a) Certification (Principal Executive Officer)

31.2			Rule 13a-14(a)/15d-14(a) Certification (Principal Financial Officer)

32.1			Section 1350 Certification (Principal Executive Officer)

32.2			Section 1350 Certification (Principal Financial Officer)

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)



Date:	~~January 30, 2018~~October 24, 2022	LAM RESEARCH CORPORATION (Registrant)

		/s/ Douglas R. Bettinger
		Douglas R. Bettinger
		Executive Vice President, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)



~~Exhibit~~ ~~Number~~	~~Description~~

~~10.1(1)~~	~~Employment Agreement with Martin B. Anstice, dated January 2, 2018~~*

~~10.2(1)~~	~~Employment Agreement with Timothy M. Archer, dated January 2, 2018~~*

~~10.3(1)~~	~~Employment Agreement with Douglas R. Bettinger, dated January 2, 2018~~*

~~10.4(1)~~	~~Employment Agreement with Richard A. Gottscho, dated January 2, 2018~~*

~~10.5(1)~~	~~Form of Change in Control Agreement~~*

~~31.1~~	~~Rule 13a-14(a)/15d-14(a) Certification (Principal Executive Officer)~~

~~31.2~~	~~Rule 13a-14(a)/15d-14(a) Certification (Principal Financial Officer)~~

~~32.1~~	~~Section 1350 Certification (Principal Executive Officer)~~

~~32.2~~	~~Section 1350 Certification (Principal Financial Officer)~~

~~101.INS~~	~~XBRL Instance Document~~

~~101.SCH~~	~~XBRL Taxonomy Extension Schema Document~~

~~101.CAL~~	~~XBRL Taxonomy Extension Calculation Linkbase Document~~

~~101.DEF~~	~~XBRL Taxonomy Extension Definition Linkbase Document~~

~~101.LAB~~	~~XBRL Taxonomy Extension Label Linkbase Document~~

~~101.PRE~~	~~XBRL Taxonomy Extension Presentation Linkbase Document~~

*	~~Indicates management contract or compensatory plan or arrangement in which executive officers of the Company are eligible to participate.~~