What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2022-08-24 compared with 2021-08-17 · 59 added, 153 removed, 242 unchanged (47% of the section changed)

12 unchanged sentences

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 vehicles, and data storage devices.

Our products and services are designed to help our customers build smaller, and better performing devices that are used in a variety of electronic products, including mobile phones, personal computers, servers, wearables, automotive vehicles, and data storage devices.

Our customer base includes leading semiconductor memory, foundry, and integrated device manufacturers that make products such as NVM, DRAM, and logic devices.

We aim to increase our strategic relevance with our customers by contributing more to their continued success.

Their continued success is part of our commitment to driving semiconductor breakthroughs that define the next generation.

Our core technical competency is integrating hardware, process, materials, software, and process control enabling results on the wafer.

3 unchanged sentences

Along with meeting technical requirements, wafer processing equipment must deliver high productivity and be cost-effective.

Demand from the Cloud , IoT, and other markets is driving the need for increasingly powerful and cost - efficient semiconductors.

At the same time, there are growing technical challenges with traditional scaling.

These trends are driving significant inflections in semiconductor manufacturing, such as the increasing importance of vertical 3D scaling strategies as well as multiple patterning to enable shrinks.

We believe we are in a strong position with our leadership and competency in deposition , etch, and clean to facilitate some of the most significant innovations in semiconductor device manufacturing.

We have a broad portfolio of products that provide complementary processing steps used throughout semiconductor manufacturing.

Our Customer Support Business Group focuses attention on delivering solutions that meet our customers’ technical requirements and productivity needs during the equipment lifecycle.

Demand from cloud computing, the IoT, and other markets is driving the need for increasingly powerful and cost - efficient semiconductors.

At the same time, there are growing technical challenges with traditional two-dimensional scaling.

These trends are driving significant inflections in semiconductor manufacturing, such as the increasing importance of vertical scaling strategies like three-dimensional architecture as well as multiple patterning to enable shrinks.

We believe we are in a strong position with our leadership and expertise in deposition , etch, and clean 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:

1 unchanged sentence

(ii) our ability to effectively leverage cycles of learning from our broad installed base;

(iii) our collaborative focus with ecosystem partners;

and (iv) our focus on delivering our multi-product solutions with a goal to enhance the value of Lam’s solutions to our customers.

Throughout the 2021 fiscal year, there was an increase in wafer fabrication equipment spending by semiconductor manufacturers, driven by the robust secular demand for semiconductors in a number of markets including high-performance computing, personal computers, and 5G networks.

Customer demand was strong, and we continued to increase our production output levels as we operated under COVID-19-related safety protocols.

While we have seen improvements in both our own operations and those of our

Lam Research Corporation 2021 10-K 27

suppliers, we experienced higher costs of goods sold related to freight and logistics during the year.

Risks and uncertainties related to the COVID-19 pandemic remain, which may continue to negatively impact our revenue and gross margin.

(iii) our collaborative focus with 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.

Wafer fabrication equipment spending was strong throughout the 2022 fiscal year driven by increasing device manufacturing complexity and the robust secular demand for semiconductors for NAND, DRAM, and foundry logic markets.

Over the longer term, we believe that secular demand for semiconductors will continue to drive sustainable growth for our products and services, and that technology inflections in our industry, including 3D device scaling, multiple patterning, process flow, and advanced packaging chip integration, will lead to an increase in the served addressable market for our products and services in the deposition, etch, and clean businesses.

During fiscal year 2022, customer demand remained solid;

however, ongoing supply chain constraints broadened during the period and impacted our ability to fulfill demand.

While we have seen improvements in both our operations and those of our suppliers, we expect supply shortages as well as inflationary cost pressures to persist in at least the near term.

Lam Research Corporation 2022 10-K 28

uncertainties related to the COVID-19 pandemic, broadening supply chain challenges, and inflationary pressures may continue to negatively impact our revenue and gross margin.

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

11 unchanged sentences

Net income per diluted share $ 32.75 $ 26.90 $ 15.10 $ 5.85 21.7 % $ 11.80 78.1 %

Fiscal year 2021 revenue increased 46% compared to fiscal year 2020, reflecting stronger customer demand for semiconductor equipment.

Fiscal year 2022 revenue increased over 17% compared to fiscal year 2021, reflecting continued strong customer demand for semiconductor equipment.

Gross margin as a percentage of revenue decreased due to inflationary cost pressures that led to higher spending on material costs, freight and logistics, and labor-related expenses, as well as unfavorable customer and product mix, partially offset by decreased variable compensation.

The increase in operating expenses in fiscal year 2022 compared to fiscal year 2021 was mainly driven by higher employee-related costs as a result of increased headcount, supplies expense, rent, repair and utilities expense, and outside services spending, partially offset by lower deferred compensation plan-related costs.

Fiscal year 2021 revenue increased approximately 46% compared to fiscal year 2020, reflecting stronger customer demand for semiconductor equipment.

Gross margin as a percentage of revenue increased primarily due to customer and product mix, partially offset by higher costs incurred in freight and logistics as well as start-up expenses for our new Malaysia manufacturing facility.

The increase in operating expenses in fiscal year 2021 compared to fiscal year 2020 was mainly driven by higher employee-related costs as a result of increased headcount, outsourcing services, deferred compensation plan-related costs, and supplies, partially offset by lower travel expenses and miscellaneous costs.

Fiscal year 2020 revenue increased 4% compared to fiscal year 2019, reflecting stronger customer demand for semiconductor equipment.

Gross margin as a percentage of revenue increased primarily due to customer and product mix as well as lower amortization expense related to intangibles acquired through business combinations, partially offset by lower factory and field utilization.

The increase in operating expenses in fiscal year 2020 compared to fiscal year 2019 was mainly driven by higher employee-related costs as a result of increased headcount and outsourcing services, partially offset by lower travel expense, miscellaneous costs and restructuring charges.

The increase in operating expenses in fiscal year 2021 compared to fiscal year 2020 was mainly driven by higher employee-related costs as a result of increased headcount and outsourcing services, deferred compensation plan-related costs, and supplies, partially offset by lower travel expenses and miscellaneous costs.

Our cash and cash equivalents, investments, and restricted cash and investments balances totaled approximately $3.9 billion as of June 26, 2022, compared to $6.0 billion as of June 27, 2021.

1 unchanged sentence

Cash flow provided from operating activities in fiscal year 2022 was primarily used for $3.9 billion in treasury stock purchases, including net share settlement on employee stock-based compensation;

$862 million of principal payments on debt instruments;

$815 million in dividends paid to our stockholders;

14 unchanged sentences

The overall Asia region continued to account for a majority of our revenues as a substantial amount of the worldwide capacity investments for semiconductor manufacturing continued to occur in this region.

The deferred revenue balance was $2.2 billion as of June 26, 2022 compared to $1.1 billion as of June 27, 2021, driven by additional deferrals related to tools pending full delivery and future servicing of our existing installed base.

Lam Research Corporation 2022 10-K 29

The deferred revenue balance was $1.1 billion as of June 27, 2021 compared to $537 million as of June 28, 2020, driven by increases in volume purchases for our systems, customer down payments for future tool deliveries, and additional deferrals related to tools pending full delivery and future servicing of our existing installed base.

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

6 unchanged sentences

Please refer to Note 4:

Reven ue of our Consolidated Financial Statements in Part II, Item 8 of this 2021 Form 10-K for additional information regarding the composition of the two categories into which revenue has been disaggregated.

The percentage of leading- and non-leading-edge equipment and upgrade revenue to each of the markets we serve was as follows:

Revenue of our Consolidated Financial Statements in Part II, Item 8 of this 2022 Form 10-K for additional information regarding the composition of the two categories into which revenue has been disaggregated.

The percentage of leading- and non-leading-edge equipment and upgrade revenue from each of the markets we serve was as follows:

2022 June 27,

11 unchanged sentences

Percent of revenue 45.7 % 46.5 % 45.9 % (0.8)% 0.6%

The decrease in gross margin as a percentage of revenue for fiscal year 2022 compared to fiscal year 2021 was due to inflationary cost pressures that led to higher spending on material costs, freight and logistics, and labor-related expenses, as well as unfavorable customer and product mix, partially offset by decreased variable compensation.

The increase in gross margin as a percentage of revenue for fiscal year 2021 compared to fiscal year 2020 was primarily related to customer and product mix, partially offset by increased spending on freight and logistics due in significant part to COVID-19 disruptions, start-up expenses for our Malaysia manufacturing facility, and deferred compensation plan-related costs.

The increase in gross margin as a percentage of revenue for fiscal year 2020 compared to fiscal year 2019 was primarily due to customer and product mix as well as lower amortization expense related to intangibles acquired through business combinations, partially offset by lower factory and field utilization.

Research and Development

8 unchanged sentences

We continued to make significant R&D investments focused on leading-edge deposition, etch, clean, and other semiconductor manufacturing processes.

The increase i n R&D expense during fiscal year 2022 compared to fiscal year 2021 was mainly driven by an increase of $89 million in employee-related costs due in part to increased headcount and $43 million in spending for supplies, partially offset by a decrease of $44 million in deferred compensation plan-related costs.

The increase in R&D expense during fiscal year 2021 compared to fiscal year 2020 was mainly driven by an increase of $137 million in employee-related costs due in part to increased headcount, $49 million in outside service costs, $32 million in deferred compensation plan-related costs, and $27 million in spending for supplies

The increase in R&D expense during fiscal year 2020 compared to fiscal year 2019 was mainly driven by an increase of $50 million in employee-related costs due to increased headcount, $19 million in outsourcing service costs, and $10 million in spending for supplies, partially offset by a decrease of $7 million in travel expense and $5 million in restructuring charges.

Lam Research Corporation 2022 10-K 30

8 unchanged sentences

Percent of revenue 5.1 % 5.7 % 6.8 % (0.6)% (1.1)%

The increase in SG&A expense during fiscal year 2022 compared to fiscal year 2021 was primarily driven by an increase of $28 million in outside service costs, $28 million in spending for rent, repair and utilities, and $26 million in employee-related costs due in part to increased headcount, partially offset by a decrease of $29 million in deferred compensation plan-related costs.

The increase in SG&A expense during fiscal year 2021 compared to fiscal year 2020 was primarily due to a $97 million increase in employee-related costs due in part to increased headcount, $37 million in outside service costs, and $21 million in deferred compensation plan-related costs, partially offset by a $9 million decrease in travel and entertainment costs.

The decrease in SG&A expense during fiscal year 2020 compared to fiscal year 2019 was primarily due to a $17 million decrease in spending for customer-related sales costs, a $9 million decrease in spending for supplies, a $9 million decrease in restructuring charges, and a $6 million decrease in spending for travel and entertainment, partially offset by an increase of $25 million in spending for rent, repair and utilities.

Other Expense, Net

Other expense, net, consisted of the following:

Other Income (Expense), Net

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

Year Ended Change

6 unchanged sentences

Interest expense (184,759) (208,597) (177,440) $ 23,838 (11.4) % $ (31,157) 17.6 %

Gains on deferred compensation plan related assets, net 61,838 5,999 10,464 $ 55,839 930.8 % $ (4,465) (42.7) %

(Losses) gains on deferred compensation plan related assets, net (38,053) 61,838 5,999 $ (99,891) (161.5) % $ 55,839 930.8 %

Foreign exchange (losses) gains, net (723) (6,962) (3,317) $ 6,239 (89.6) % $ (3,645) 109.9 %

1 unchanged sentence

$ (188,708) $ (111,219) $ (98,824) $ (77,489) 69.7 % $ (12,395) 12.5 %

Interest income decreased in fiscal year 2022 compared to fiscal year 2021 as a result of lower cash balances.

Interest income decreased in fiscal year 2021 compared to fiscal year 2020 as a result of lower yield.

Interest income decreased in fiscal year 2020 compared to fiscal year 2019 as a result of lower yield, offset by a higher cash balance.

Interest expense increased in fiscal year 2021 compared to fiscal year 2020 primarily due to the full-year impact of the issuance of the $2.0 billion senior notes in fiscal year 2020.

Interest expense increased in fiscal year 2020 compared to fiscal year 2019 primarily due to the full-year impact of the issuance of the $2.5 billion of senior notes in fiscal year 2019 and the issuance of $2.0 billion senior notes in fiscal year 2020.

Gains on deferred compensation plan related assets in the periods presented were driven by an improvement in the fair market value of the underlying funds.

The gains in other, net for the fiscal year 2021 compared to fiscal years 2020 and 2019 were primarily driven by private equity investments.

Interest expense decreased in fiscal year 2022 compared to fiscal year 2021 primarily due to the payoff of $800 million of our notes in June 2021.

Interest expense increased in fiscal year 2021 compared to fiscal year 2020 primarily due to the full-year impact of the issuance of $2.0 billion senior notes in fiscal year 2020.

The gains or losses on deferred compensation plan related assets, net in fiscal years 2022, 2021 and 2020 were driven by fluctuations in the fair market value of the underlying funds.

The variation in other, net for the fiscal year 2022 compared to fiscal years 2021 and 2020 was primarily driven by fluctuations in the fair market value of equity investments.

Income Tax Expense

8 unchanged sentences

Effective tax rate 11.3 % 10.6 % 12.6 % 0.7% (2.0)%

The decrease in the effective tax rate in fiscal year 2021 as compared to fiscal year 2020 was primarily due to a cumulative income tax benefit reversal due to a court ruling in fiscal year 2020, as outlined below.

The increase in the effective tax rate in fiscal year 2022 as compared to fiscal year 2021 was primarily due to the change in level and proportion of income in higher and lower tax jurisdictions.

Lam Research Corporation 2022 10-K 31

The increase in the effective tax rate in fiscal year 2020 as compared to fiscal year 2019 was primarily due to a cumulative income tax benefit reversal due to a court ruling in fiscal year 2020, as outlined below.

In November 2019, the U.S.

7 unchanged sentences

Please refer to Note 7 of our Consolidated Financial Statements in Part II, Item 8 of this 2022 Form 10-K.

A provision enacted as part of the 2017 Tax Cuts & Jobs Act requires companies to capitalize research and experimental expenditures for tax purposes in tax years beginning after December 31, 2021 (our fiscal year 2023).

If this provision is not repealed or deferred, we expect our fiscal year 2023 cash tax payments to increase significantly compared to our fiscal year 2022.

On August 16, 2022, the Inflation Reduction Act was signed into law.

In general, the provisions of the IRA will be effective beginning with our fiscal year 2024, with certain exceptions.

The IRA includes a new 15% corporate minimum tax.

We are in the process of evaluating the potential impacts of the IRA.

The impact on income taxes due to changes in legislation is required under the authoritative guidance of Accounting Standard Codification (“ASC”) 740, Income Taxes, to be recognized in the period in which the law is enacted.

While we do not currently expect the IRA to have a material impact on our effective tax rate, our analysis is ongoing and incomplete, and it is possible that the IRA could have a material adverse effect on our tax liability.

We will continue to monitor issuance of additional guidance.

Deferred Income Taxes

1 unchanged sentence

Our gross deferred tax assets were $1,103 million and $772 million at the end of fiscal years 2022 and 2021, respectively.

These gross deferred tax assets were offset by gross deferred tax liabilities of $152 million and $196 million and a valuation allowance of $277 million and $245 million at the end of fiscal years 2021 and 2020, respectively.

The change in gross deferred tax assets, gross deferred tax liabilities, and valuation allowance between fiscal year 2021 and 2020 is primarily due to increases in gross deferred tax assets for outside basis differences of foreign subsidiaries, allowances and reserves, and tax credits, and decreases in gross deferred tax liabilities for convertible debt.

As of our fiscal year ended June 27, 2021, we continue to record a valuation allowance to offset the entire California deferred tax asset balance due to the single sales factor apportionment resulting in lower taxable income in California.

The valuation allowances were $277 million and $245 million at the end of fiscal years 2021 and 2020, respectively.

These gross deferred tax assets were offset by gross deferred tax liabilities of $234 million and $187 million and a valuation allowance representing our entire California deferred tax asset balance due to the single sales factor apportionment resulting in lower taxable income in California of $309 million and $277 million at the end of fiscal years 2022 and 2021, respectively.

The change in gross deferred tax assets, gross deferred tax liabilities, and valuation allowance between fiscal year 2022 and 2021 is primarily due to increases in gross deferred tax assets for outside basis differences of foreign subsidiaries and tax credits and increases in gross deferred tax liabilities for capital assets.

We evaluate if the deferred tax assets are realizable on a quarterly basis and will continue to assess the need for changes in valuation allowances, if any.

14 unchanged sentences

• 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;

Lam Research Corporation 2022 10-K 32

• 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.

1 unchanged sentence

See Note 2, “Summary of Significant Accounting Policies,” of our Consolidated Financial Statements in Part II, Item 8 of this 2022 Form 10-K for additional information regarding our accounting policies.

Lam Research Corporation 2021 10-K 31

Revenue Recognition:

36 unchanged sentences

Our policy is to include interest and penalties related to uncertain tax positions as a component of income tax expense.

Lam Research Corporation 2022 10-K 33

Long-lived Assets :

3 unchanged sentences

In performing a qualitative assessment, we consider business conditions and other factors including, but not limited to (i) adverse industry or economic trends, (ii) restructuring actions and lower projections that may impact future operating results, (iii) sustained decline in share price, and (iv) overall financial performance and other events affecting the reporting units.

If we conclude that it is more likely

Lam Research Corporation 2021 10-K 32

than not that the fair value of a reporting unit is less than its carrying amount, then a quantitative impairment test is performed by estimating the fair value of the reporting unit and comparing it to its carrying value, including goodwill allocated to that reporting unit.

If we conclude that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then a quantitative impairment test is performed by estimating the fair value of the reporting unit and comparing it to its carrying value, including goodwill allocated to that reporting unit.

We determine the fair value of our reporting units by using an income approach.

17 unchanged sentences

Total gross cash, cash equivalents, investments, and restricted cash and investments balances were $3.9 billion at the end of fiscal year 2022 compared to $6.0 billion at the end of fiscal year 2021.

This decrease was primarily due to Common Stock repurchases in connection with our stock repurchase program, dividends paid, and principal payments on long-term debt, partially offset by cash provided by operating activities.

This decrease was primarily due to Common Stock repurchases in connection with our stock repurchase program, dividends paid, and capital expenditures, partially offset by cash provided by operating activities.

Cash Flow from Operating Activities

8 unchanged sentences

Significant changes in operating asset and liability accounts, net of foreign exchange impact, included the following uses of cash:

increases in accounts receivable of $929 million, inventories of $793 million, and prepaid expenses and other assets of $59 million;

increases in accounts receivable of $1.3 billion, inventories of $1.4 billion, and prepaid expenses and other assets of $53 million;

partially offset by the following sources of cash:

increases in deferred profit of $508 million, accrued expenses and other liabilities of $409 million, and accounts payable of $185 million.

Cash Flow from Investing Activities

Net cash provided by investing activities during fiscal year 2021 was $73 million, primarily consisting of net sales/maturities of available for sale securities of $465 million, partially offset by capital expenditures of $349 million.

increases in deferred profit of $605 million, accounts payable of $168 million, and accrued expenses and other liabilities of $123 million.

Lam Research Corporation 2022 10-K 34

Cash Flow from Investing Activities

Net cash provided by investing activities during fiscal year 2022 was $612 million, primarily consisting of net sales/maturities of available for sale securities of $1.2 billion, partially offset by capital expenditures of $546 million.

Cash Flow from Financing Activities

Net cash used for financing activities during fiscal year 2022 was $4.6 billion, primarily consisting of $3.9 billion in Common Stock repurchases, including net share settlement on employee stock-based compensation;

$862 million of principal payments on debt instruments;

and $815 million of dividends paid;

9 unchanged sentences

We have certain obligations to make future payments under various contracts, some of which are recorded on our balance sheet and some of which are not.

Obligations that are recorded on our balance sheet in accordance with GAAP include our long-term debt, operating leases and finance leases which are outlined in the following table.

Our off-balance sheet arrangements are presented as purchase obligations in the table.

Our contractual obligations and commitments as of June 27, 2021, relating to these agreements and our guarantees are included in the following table based on their contractual maturity date.

The amounts in the table below exclude $527 million of net liabilities related to uncertain tax positions as we are unable to reasonably estimate the ultimate amount or time of settlement.

See Note 7 of our Consolidated Financial Statements in Part II, Item 8 of this 2021 Form 10-K for further discussion.

Total Less than

1 Year 1-3 Years 3-5 Years More than

(in thousands)

Operating leases $ 173,150 $ 48,487 $ 55,530 $ 30,505 $ 38,628

Financing leases 42,648 11,870 12,320 10,214 8,244

Purchase obligations 818,186 660,201 114,046 40,724 3,215

Long-term debt and interest expense 7,903,936 175,125 350,250 1,586,347 5,792,214

One-time transition tax on accumulated unrepatriated foreign earnings (1) 659,954 69,469 199,723 390,762 —

Other long-term liabilities (2) 280,342 11,704 42,079 9,453 217,106

Total $ 9,878,216 $ 976,856 $ 773,948 $ 2,068,005 $ 6,059,407

(1) We may choose to apply existing tax credits, thereby reducing the actual cash payment.

(2) Certain tax-related liabilities and post-retirement benefits classified as other non-current liabilities on the Consolidated Balance Sheet are included in the “More than 5 Years” category due to the uncertainty in the timing and amount of future payments.

Additionally, the balance excludes contractual obligations recorded in our Consolidated Balance Sheet as current liabilities and the long-term portion of operating leases.

Operating Leases

We lease most of our administrative and regional sales/service offices as well as certain equipment under non-cancelable operating leases.

Certain of our facility leases for buildings located in Fremont, California;

Tualatin, Oregon;

and certain other facility leases provide us with an option to extend the leases for additional periods or to purchase the facilities.

Certain of our facility leases provide for periodic rent increases based on the general rate of inflation.

Lam Research Corporation 2021 10-K 34

Financing Leases

Financing leases reflect building and office equipment lease obligations.

The amounts in the table above include the interest portion of payment obligations.

Certain of our facility leases for buildings located in Fremont and Livermore, California provide us with an option to extend the leases for additional periods or to purchase the facilities.

Certain of our facility leases provide for periodic rent increases based on the general rate of inflation.

In addition to amounts included in the table above, we have guaranteed residual values for certain of our Fremont and Livermore facility leases of up to $298 million.

See Note 15 to our Consolidated Financial Statements in Part II, Item 8 of this 2021 Form 10-K for further discussion.

Purchase Obligations

Purchase obligations consist of significant contractual obligations either on an annual basis or over multi-year periods related to our outsourcing activities or other material commitments, including vendor-consigned inventories.

The contractual cash obligations and commitments table presented above contains our minimum obligations at June 27, 2021, under these arrangements and others.

For obligations with cancellation provisions, the amounts included in the preceding table were limited to the non-cancelable portion of the agreement terms or the minimum cancellation fee.

Actual expenditures will vary based on the volume of transactions and length of contractual service provided.

On April 1, 2021 we entered into a $1.4 billion five-year electrostatic chuck supply contract (the “Supplier Contract”), under which we are obligated, in certain circumstances, to a minimum purchase penalty obligation not to exceed $180 million.

Due to the uncertainty in the timing and amount of future payments, the cash obligations and commitments table presented above excludes the minimum purchase obligation under the Supplier Contract.

Capital Expenditure Requirements

We are in the process of expanding our global production footprint, with expansion of our Ohio manufacturing facility as well as construction of a manufacturing facility in Malaysia and a technology center in Korea.

Anticipated capital expenditures associated with these projects for buildings and equipment for fiscal year 2022 are expected to be approximately $201 million.

These capital expenditures will be funded through existing cash and cash equivalents, investments, and cash generated from operations.

During the December 2017 quarter, a one-time transition tax on accumulated unrepatriated foreign earnings, estimated at $991 million, was recognized associated with the December 2017 U.S.

In accordance with SAB 118, we finalized the amount of the transition tax during the period ended December 23, 2018.

The final amount was $868 million.

We elected to pay the one-time transition tax over a period of eight years with 8% of the transition tax to be paid each September 15 for years 2018 through 2022, and 15%, 20%, and 25%, respectively, to be paid each September 15 for years 2023 through 2025.

Long-Term Debt

On May 5, 2020, we completed a public offering of $750 million aggregate principal amount of the Company’s Senior Notes due June 15, 2030 (the “2030 Notes”), $750 million aggregate principal amount of the Company’s Senior Notes due June 15, 2050 (the “2050 Notes”), and $500 million aggregate principal amount of the Company’s Senior Notes due June 15, 2060 (the “2060 Notes”).

We pay interest at an annual rate of 1.90%, 2.875%, and 3.125%, on the 2030, 2050, and 2060 Notes, respectively, on a semi-annual basis on June 15 and December 15 of each year.

On March 4, 2019, we completed a public offering of $750 million aggregate principal amount of the Company’s Senior Notes due March 15, 2026 (the “2026 Notes”), $1 billion aggregate principal amount of the Company’s Senior Notes due March 15, 2029 (the “2029 Notes”), and $750 million aggregate principal amount of the Company’s Senior Notes due March 15, 2049 (the “2049 Notes”).

We pay interest at an annual rate of 3.75%, 4.00%, and 4.875%, respectively on the 2026, 2029 and 2049 Notes, on a semi-annual basis on March 15 and September 15 of each year.

On June 7, 2016, we completed a public offering of $800 million aggregate principal amount of Senior Notes due June 15, 2021, (the “2021 Notes”).

During the year ended June 27, 2021, $800 million principal value of 2021 Notes were settled upon maturity.

On March 12, 2015, we completed a public offering of $500 million aggregate principal amount of Senior Notes due March 15, 2025 (the “2025 Notes”).

We pay interest at an annual rate of 3.80% on the 2025 Notes, on a semi-annual basis on March 15 and September 15 of each year.

We may redeem the 2025, 2026, 2029, 2030, 2049, 2050, and 2060 Notes (collectively 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 to the Senior Notes and accrued and unpaid interest before December 15, 2024 for the 2025 Notes, before January 15, 2026 for the 2026 Notes, before December 15, 2028 for the 2029 Notes, before March 15, 2030 for the 2030 Notes, before September 15, 2048 for the 2049 Notes, before December 15, 2049 for the 2050 Notes, and before December 15, 2059 for the 2060 Notes.

We may redeem the Senior Notes at par, plus accrued and unpaid interest at any time on or after December 24, 2024 for the 2025 Notes, on or after January 15, 2026 for the 2026 Notes, on or after December 15, 2028 for the 2029 Notes, on or after March 15, 2030 for the 2030 Notes, on or after September 15, 2048 for the 2049 Notes, on or after December 15, 2049 for the 2050 Notes, and on or after December 15, 2059 for the 2060 Notes.

In addition, upon the occurrence of certain events, as described in the indenture, we will be

Lam Research Corporation 2021 10-K 35

required to make an offer to repurchase the Senior Notes at a price equal to 101% of the principal amount of the respective note, plus accrued and unpaid interest.

In June 2012, with the acquisition of Novellus, we assumed $700 million in aggregate principal amount of 2.625% Convertible Senior Notes due May 2041.

On May 21, 2021, the 2041 Notes then outstanding were redeemed pursuant to Section 6.01 of the underlying indenture at a price equal to outstanding principal plus accrued and unpaid interest.

During fiscal year 2021, 2020, and 2019, we made $859 million, $668 million, and $117 million, respectively, in principal payments on long-term debt and finance/capital leases.

Revolving Credit Arrangements

On March 12, 2014, the Company established an unsecured Credit Agreement.

This agreement was amended on November 10, 2015 (the “Amended and Restated Credit Agreement”), October 13, 2017 (the “2nd Amendment”), February 25, 2019 (the “3rd Amendment”), and June 17, 2021 (the “Second Amended and Restated Credit Agreement).

Among other things, the Second Amended and Restated Credit Agreement provides for a $250 million increase in the Company’s revolving credit facility, from $1.25 billion to $1.50 billion with a syndicate of lenders, along with an expansion option that will allow the Company, subject to certain requirements, to request an increase in the facility of up to an additional $600 million, for a potential total commitment of $2.10 billion.

The facility matures on June 17, 2026.

Interest on amounts borrowed under the credit facility is, at our 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 London Interbank Offered Rate (“LIBOR”) plus 1.0%, plus a spread of 0.00% to 0.30%, or (2) a LIBOR rate plus a spread of 0.805% to 1.30%, in each case plus a facility fee, with such spread and facility fee determined based on the rating of our non-credit enhanced, senior unsecured long-term debt.

Such spreads and such facility fees are further subject to sustainability adjustments as described in the Second Amended and Restated Credit Agreement, in each case based on the Company’s performance of certain energy savings and health and safety standards metrics.

Principal and any accrued and unpaid interest is due and payable upon maturity.

Additionally, we will pay the lenders a quarterly commitment fee that varies based on our credit rating.

The Second Amended and Restated Credit Agreement incorporates provisions for the replacement of LIBOR or other reference rates with alternative reference rates under certain circumstances, including when, or if, such reference rates cease to be available.

The Second Amended and Restated Credit Agreement contains affirmative covenants, negative covenants, financial covenants, and events of default.

As of June 27, 2021, we had no borrowings outstanding under the Second Amended and Restated Credit Agreement and were in compliance with all financial covenants.

Commercial Paper Program

On November 13, 2017, we established a commercial paper program (the “CP 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.

In July 2021, we amended the CP Program size to a maximum aggregate amount outstanding at any time of $1.5 billion.

The net proceeds from the CP Program will be used for general corporate purposes, including repurchases of our Common Stock from time to time under our stock repurchase program.

If at any time, funds are not available under favorable terms under the CP Program, we may utilize the Amended Credit Agreement for funding.

Amounts available under the CP Program may be re-borrowed.

The CP Program is backstopped by our Revolving Credit Arrangement.

As of June 27, 2021, we had no outstanding borrowings under the CP Program.

Other Guarantees

We have issued certain indemnifications to our lessors for taxes and general liability under some of our agreements.

We have entered into certain insurance contracts that may limit our exposure to such indemnifications.

As of June 27, 2021, we had not recorded any liability on our Consolidated Financial Statements in connection with these indemnifications, as we do not believe, based on information available, that it is probable that we will pay any material amounts under these guarantees.

Generally, we indemnify, under pre-determined conditions and limitations, our customers for infringement of third-party intellectual property rights by our products or services.

We seek to limit our liability for such indemnity to an amount not to exceed the sales price of the products or services subject to our indemnification obligations.

We do not believe, based on information available, that it is probable that we will pay any material amounts under these guarantees.

We provide guarantees and standby letters of credit to certain parties as required for certain transactions initiated during the ordinary course of business.

As of June 27, 2021, the maximum potential amount of future payments that we could be required to make under these arrangements and letters of credit was $74 million.

We do not believe, based on historical experience and information currently available, that it is probable that any material amounts will be required to be paid.

We have entered into indemnification agreements with our officers and directors, consistent with our Bylaws and Certificate of Incorporation;

and under local law, we may be required to provide indemnification to our employees for actions within the scope of their employment.

Although we maintain 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.

We do not believe, based on historical

Lam Research Corporation 2021 10-K 36

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.

Certain obligations that are recorded on our balance sheet in accordance with GAAP include our long-term debt, operating leases and finance leases;

refer to Notes 14 and 15 of our Consolidated Financial Statements in Part II, Item 8 of this 2022 Form 10-K for further discussion.

Our off-balance sheet arrangements and our transition tax liability are presented as purchase obligations, refer to Note 17 of our Consolidated Financial Statements in Part II, Item 8 of this 2022 Form 10-K for further discussion.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis