Lam Research (LRCX) 10-K risk factor changes: FY2017 vs FY2016

In addition to the other information in this Annual Report on Form 10-K [removed: (“2016] [added: (“2017] Form 10-K”), the following risk factors should be carefully considered in evaluating the Company and its business because such factors may significantly impact our business, operating results, and financial condition.

The Semiconductor Capital Equipment Industry [removed: is] [added: Is] Subject to Variability [removed: and, as a Result,] [added: and Periods of Rapid Growth or Decline;] We [added: Therefore] Face Risks Related to Our Strategic Resource Allocation Decisions

The industry environment has moved toward [removed: an environment] [added: being] more characterized by variability across segments and customers accentuated by consolidation within the industry.

The variability in our customers’ investments during any particular period is dependent on several [removed: factors] [added: factors,] including but not limited to electronics demand, economic conditions (both general and in the semiconductor and electronics industries), industry supply and demand, prices for semiconductors, and our customers’ ability to develop and manufacture increasingly complex and costly semiconductor devices.

During periods of rapid growth or decline in demand for our products and services, we face significant challenges in maintaining adequate financial and business controls, management processes, information systems, [added: and] procedures for training and managing our [removed: work force,] [added: workforce,] and in appropriately sizing our supply chain [removed: infrastructure,] [added: infrastructure and facilities,] work force, and other components of our business on a timely basis.

If we do not adequately meet these challenges during periods of [removed: demand decline,] [added: increasing or declining demand,] our gross margins and earnings may be negatively impacted.

If we do not adequately adapt to the changing business environment, we may lack the infrastructure and resources to scale up our business to meet customer expectations and compete successfully during a period of growth, or we may expand our capacity too rapidly and/or beyond what is appropriate for the actual demand [removed: environment.][added: environment, resulting in excess fixed costs.]

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Lam Research Corporation [removed: 2016] [added: 2017] 10-K [removed: 13][added: 14]

[removed: ][added: ]

[removed: Global economic] [added: The economic, political,] and business [removed: conditions,] [added: conditions occurring nationally, globally, or in any of our key sales regions,] which are often unpredictable, have historically impacted customer demand for our products and normal commercial relationships with our customers, suppliers, and creditors.

Additionally, in times of economic [removed: uncertainty] [added: uncertainty,] our customers’ budgets for our products, or their ability to access credit to purchase them, could be adversely affected.

As a result, [added: changing business or] economic [removed: downturns] [added: conditions] can cause material adverse changes to our results of operations and financial [removed: condition including,] [added: condition, including] but not limited to:

Factors that may cause our financial results to fluctuate unpredictably [removed: include,] [added: include] but are not limited to:

Lam Research Corporation [removed: 2016] [added: 2017] 10-K [removed: 14][added: 15]

| • | our ability [removed: in a timely manner] to develop, [removed: introduce] [added: introduce,] and market new, enhanced, and competitive [removed: products;] [added: products in a timely manner;] |

| • | legal or technical challenges to our products and [removed: technology;] [added: technologies;] |

| • | transportation, communication, demand, information [removed: technology] [added: technology,] or supply disruptions based on factors outside our [removed: control] [added: control,] such as strikes, acts of God, wars, terrorist activities, and natural or man-made disasters; |

Our Leverage and Debt Service Obligations and Potential Note Conversion or Related Hedging Activities May Adversely Affect Our Financial Condition, Results of [removed: Operations] [added: Operations,] and Earnings [removed: Per] [added: per] Share

We have [removed: $4.55] [added: $2.9] billion in aggregate principal amount of senior unsecured notes and convertible note instruments outstanding.

Additionally, we have $750 million available to us in revolving credit arrangements, with an option for us to request an increase in the facility of up to an additional $250 million, for a potential total commitment of [removed: $1] [added: $1.0] billion.

Our [removed: maintenance of higher levels of] indebtedness could have adverse [removed: consequences] [added: consequences,] including:

| • | [removed: increased] risk associated with any inability to satisfy our obligations; |

Lam Research Corporation [removed: 2016] [added: 2017] 10-K [removed: 15][added: 16]

| • | [removed: increasing the] [added: a] portion of our cash flows that may have to be dedicated to interest and principal payments and may not be available for operations, working capital, capital expenditures, expansion, [removed: acquisitions] [added: acquisitions,] or general corporate or other purposes; and |

[removed: If we] determine it is necessary to seek additional funding for any reason, we may not be able to obtain such funding or, if funding is available, obtain it on acceptable terms.

Conversion of our Convertible Notes and [removed: resulting] [added: the] exercise of the related warrants may cause dilution to our stockholders and to our earnings per share.

The number of shares of our Common Stock into which the Convertible Notes are convertible [removed: for] and [removed: the] [added: for which] related warrants are exercisable for may be adjusted from time to time, including increases in such rates as a result of dividends that we pay to our stockholders.

We may be unable to respond to changes in business and economic conditions, engage in transactions that might otherwise be beneficial to us, or obtain additional [removed: financing,] [added: financing] because our debt agreements contain, and any of our other future similar agreements may contain, covenant restrictions that limit our ability to, among other things:

In addition, our failure to comply with these covenants could result in a default under the Senior Notes, the Convertible [removed: Notes] [added: Notes,] or our other debt, which could permit the holders to accelerate such debt.

As a result, the actions of even one customer may subject us to variability in those areas that [removed: are] [added: is] difficult to predict.

In addition, large customers may be able to negotiate requirements that result in decreased pricing, increased [removed: costs] [added: costs,] and/or lower margins for us; compliance with specific environmental, [removed: social] [added: social,] and corporate governance standards; and [added: limitations on our ability to share jointly developed technology with others.]

Lam Research Corporation [removed: 2016] [added: 2017] 10-K [removed: 16][added: 17]

Similarly, significant portions of our credit risk may, at any given time, be concentrated among a limited number of [removed: customers,] [added: customers] so that the failure of even one of these key customers to pay its obligations to us could significantly impact our financial results.

Consequently, We [removed: are] [added: Are] Subject to Risks Associated with Rapid Technological [removed: Change.][added: Change]

For [removed: over] [added: more than] 25 [removed: years] [added: years,] the primary driver of technology advancement in the semiconductor industry has been to shrink the lithography that prints the circuit design on semiconductor chips.

In order to develop new products and processes and enhance existing products and processes, we expect to continue to make significant investments in [removed: R&D] [added: R&D, to investigate the acquisition of new products] and [added: technologies,] to [added: invest in or acquire such business or technologies, and to] pursue joint development relationships with customers, suppliers, or other members of the industry.

Future technologies, [removed: processes] [added: processes,] or product developments may render our current product offerings obsolete, leaving us with non-competitive products, [removed: or] obsolete inventory, or both.

Moreover, customers may adopt new technologies or processes to address the complex challenges associated with [removed: next generation] [added: next-generation] devices.

| • | a decline in demand for even a limited number of our [removed: products;] [added: products,] |

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If we

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Our investments and acquisitions may not be as successful as we may expect, particularly as we seek to invest or acquire product lines and technologies that are new to us.

We may find that acquisitions are not available to us, for regulatory or other reasons, and that we must therefore limit ourselves to collaboration and joint venture development activities, which do not have the same benefits as acquisitions.

Pursuing development through collaboration and/or joint development activities rather than through an acquisition poses substantial challenges for management, including those related to aligning business objectives, sharing confidential information and intellectual property, sharing value with third parties, and realizing synergies that might have been available in an acquisition but are not available through a joint development project.

Our products are priced up to approximately $10 million per system.

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Such disruptions may cause delays in shipping our products,

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In addition, we face competition from companies that exist in a more favorable legal or regulatory environment than we do, allowing the freedom of action in ways that we may be unable to match.

In many cases speed to solution is necessary for customer satisfaction and our competitors may be better positioned to achieve these objectives.

Non-U.S. sales, as reflected in Part 1 Item 1.

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Our success in hiring

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depends on a variety of factors, including the attractiveness of our compensation and benefit programs, global economic or political and industry conditions, our organizational structure, global competition for talent and the availability of qualified employees, the availability of career development opportunities, the ability to obtain necessary authorizations for workers to provide services outside their home countries, and our ability to offer a challenging and rewarding work environment.

Our inability to use or access these information systems at critical points in time, or unauthorized releases of proprietary or confidential information, could unfavorably impact the timely and efficient operation of our business, including our results of operations, and our reputation.

We have experienced cyber attacks.

Although past attacks have not resulted in a material adverse effect, we may incur material losses related to cyber attacks in the future.

The insurance we carry may not fully compensate us for the effects of potential losses arising from a cyber-related incident.

Cyber-related incidents could result in:

| • | disruptions to our operations; |

| • | misappropriation or theft of Company, customer, supplier, or other’s assets or resources, including intellectual property and confidential information, and costs associated therewith; |

| • | litigation with, or claims of damages arising from, our employees, customers, suppliers, or other third parties which whom we collaborate; or |

| • | adverse impact to our results of operations, as a result of associated remediation costs such as those related to responding to potential regulatory inquiries, to rebuild the effected information systems, and those associated with improving our security and internal control environment. |

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on our ability to generate future taxable income in the United States.

For regulatory or other reasons, we may not be successful in our attempts to acquire or dispose of businesses, products, or technologies, resulting in significant financial costs, reduced or lost opportunities, and diversion of management’s attention.

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| | |

| --- | --- |

During the 2015 fiscal year, our goodwill and long-lived asset impairment assessments resulted in an impairment charge of $79.4 million associated with the single-wafer clean reporting unit and $9.8 million related to an intangible asset.

If the anticipated acquisition of KLA-Tencor is not completed on or prior to December 30, 2016, or the related merger agreement is terminated on or at any time prior to that date, the indenture governing the senior unsecured notes issued in June 2016 requires us to redeem $1.6 billion of those senior unsecured notes at a redemption price equal to 101% of the principal amount, plus accrued interest.

In addition, in connection with the acquisition of KLA-Tencor, we have also entered into a term loan agreement with certain term lenders pursuant to which the term lenders have agreed to provide a senior unsecured term loan facility in an aggregate amount of up to $1.53 billion, subject to certain terms and conditions.

If the anticipated acquisition of KLA-Tencor is not completed on or prior to October 20, 2016, we will need to obtain consent from all of the lenders under the term loan agreement to extend their commitments past this date.

For the years ended June 26, 2016, June 28, 2015 and June 29, 2014, three customers collectively accounted for 45%, 51%, and 52% of total revenue, respectively.

limitations on our ability to share jointly developed technology with others.

Our products are priced up to approximately $9.7 million per system, and our revenues in any given quarter are dependent upon customer acceptance of a limited number of systems.

additional risks associated with technology changes.

Our success in hiring depends on a variety of factors, including the attractiveness of our compensation and benefit programs and our ability to offer a challenging and rewarding work environment.

If

Managing an acquired business, disposing of product

| • | our ability to complete the contemplated acquisition of KLA-Tencor, or any delays thereto; |

Efforts to comply with new and

We currently are restricted from repurchasing our common stock and increasing our quarterly dividend pursuant to the KLA-Tencor merger agreement.

If We are Unable to Complete Our Contemplated Acquisition of KLA-Tencor Corporation, Our Expected Financial Results and the Market Value of our Common Stock Could Be Adversely Affected

On October 20, 2015, we entered into an Agreement and Plan of Merger and Reorganization (the “merger agreement”) with KLA-Tencor to acquire all of KLA-Tencor’s issued and outstanding stock through a merger of KLA-Tencor with our subsidiaries, Topeka Merger Sub 1, Inc. and Topeka Merger Sub 3, Inc. (as assignee of Topeka Merger Sub 2, Inc.) (the “merger”).

Consummation of the merger is subject to customary conditions to closing, including the receipt of required regulatory approvals.

If any condition to the merger is not satisfied or waived, the merger will not be completed.

We and KLA-Tencor also may terminate the merger agreement under certain circumstances.

Any or all of the preceding could jeopardize our ability to consummate the merger on the already negotiated terms.

To the extent the merger is not completed for any reason, we would have devoted substantial resources and management attention to the transaction without realizing the accompanying benefits expected by our management, and our financial condition and results of operations and the market value of our stock may be adversely affected.

Additional risks and uncertainties associated with the merger include:

| • | various conditions to the closing of the merger may not be satisfied or waived; |

| • | the failure to consummate the merger may result in negative publicity and a negative impression of us in the investment community; |

| • | we and KLA-Tencor are subject to litigation related to the merger, and may be subject to additional proceedings in the future, which may effect the merger from becoming effective within the expected time frame, or at all; |

| • | required regulatory approvals from governmental entities may delay the merger or result in the imposition of conditions that could cause the abandonment of the merger; |

| • | the merger agreement may be terminated in circumstances that would require us to pay KLA-Tencor a termination fee of up to $290 million; |

| • | the merger agreement contains provisions that could discourage a potential acquirer of the Company; |

| • | our ability to attract, recruit, retain and motivate current and prospective employees who may be uncertain about the timing of the merger or their future roles and relationships with us following the completion of the merger may be adversely affected; |

| • | the increase in our leverage and debt service obligations as a result of the assumption of KLA-Tencor’s debt and the incurrence of additional financing in connection with the merger may adversely affect the combined company’s financial condition, results of operations and earnings per share; and |

| • | the attention of our employees and management may be diverted due to activities related to the merger; and disruptions from the merger, whether completed or not, may harm our relationships |

Lam Research Corporation 2016 10-K 24

with our employees, customers, distributors, suppliers or other business partners, may impair our ability to continuously innovate to meet the industry inflections, and may result in a loss of or a substantial decrease in purchases by our customers.

Even if the KLA-Tencor Merger is Consummated, We May Not Be Able to Integrate the Business of KLA-Tencor Successfully With our Own or Realize the Anticipated Benefits of the Merger

The merger involves the combination of two companies that currently operate as independent public companies.

The combined company will be required to devote significant management attention and resources to integrating our business practices with those of KLA-Tencor.

Potential difficulties that the combined company may encounter as part of the integration process include the following:

| • | the inability to successfully combine our business with KLA-Tencor in a manner that permits the combined company to achieve the full revenue and cost synergies and other benefits anticipated to result from the merger; |

The following discussion of our financial condition and results of operations contains forward-looking statements, which are subject to risks, [removed: uncertainties] [added: uncertainties,] and changes in condition, significance, [removed: value] [added: value,] and effect.

Our actual results could differ materially from those anticipated in the forward-looking statements as a result of certain factors, including but not limited to those discussed in “Risk Factors” and elsewhere in this [removed: 2016] [added: 2017] Form 10-K and other documents we file from time to time with the Securities and Exchange Commission.

(See “Cautionary Statement Regarding Forward-Looking Statements” in Part I of this [removed: 2016] [added: 2017] Form [removed: 10-K).][added: 10-K.)]

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) provides a description of our results of operations and should be read in conjunction with our Consolidated Financial Statements and accompanying Notes to Consolidated Financial Statements included in this [removed: 2016] [added: 2017] Form 10-K.

Liquidity and Capital Resources provides an analysis of cash flows, contractual [removed: obligations] [added: obligations,] and financial position.

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Lam Research Corporation [removed: 2016] [added: 2017] 10-K [removed: 32][added: 31]

[removed: ][added: ]

During the most recent fiscal year, demand for our products improved as semiconductor device manufacturers, particularly non volatile memory [added: and foundry] customers, made capacity and technology investments.

Technology inflections in our industry, including [removed: 3DNAND,] [added: NVM,] multiple patterning, [removed: FINFET] [added: FinFET] and advanced packaging have led to an increase in our served addressable market for our [removed: deposition] [added: products in deposition, etch, single-wafer clean] and [removed: etch products.][added: customer service business.]

We believe [removed: that, over the longer term,] [added: that] demand for our products [added: and services] should increase [added: faster than overall spending on wafer fabrication equipment,] as the proportion of customers’ capital expenditures rises in these technology inflection areas, and we continue to gain market share.

| June [removed: 26, 2016] [added: 25, 2017] | | | | June [removed: 28, 2015] [added: 26, 2016] | | | | June [removed: 29, 2014] [added: 28, 2015] | | | | [removed: FY16] [added: FY17] vs. [removed: FY15] [added: FY16] | | | | | | | [removed: FY15] [added: FY16] vs. [removed: FY14] [added: FY15] | | | | | | |

| Revenue | $ | [removed: 5,885,893] [added: 8,013,620] | | | $ | [removed: 5,259,312] [added: 5,885,893] | | | $ | [removed: 4,607,309] [added: 5,259,312] | | | $ | [removed: 626,581] [added: 2,127,727] | | | [removed: 11.9] [added: 36.1] | % | | $ | [removed: 652,003] [added: 626,581] | | | [removed: 14.2] [added: 11.9] | % |

| Gross margin | $ | [removed: 2,618,922] [added: 3,603,359] | | | $ | [removed: 2,284,336] [added: 2,618,922] | | | $ | [removed: 2,007,481] [added: 2,284,336] | | | $ | [removed: 334,586] [added: 984,437] | | | [removed: 14.6] [added: 37.6] | % | | $ | [removed: 276,855] [added: 334,586] | | | [removed: 13.8] [added: 14.6] | % |

| Gross margin as a percent of total revenue | [removed: 44.5] [added: 45.0] | | % | | [removed: 43.4] [added: 44.5] | | % | | [removed: 43.6] [added: 43.4] | | % | | [removed: 1.1] [added: 0.5] | | % | | | | | [removed: (0.2] [added: 1.1] | | [removed: )%] [added: %] | | | |

| Total operating expenses | $ | [removed: 1,544,666] [added: 1,701,227] | | | $ | [removed: 1,496,297] [added: 1,544,666] | | | $ | [removed: 1,329,812] [added: 1,496,297] | | | $ | [removed: 48,369] [added: 156,561] | | | [removed: 3.2] [added: 10.1] | % | | $ | [removed: 166,485] [added: 48,369] | | | [removed: 12.5] [added: 3.2] | % |

| Net income | $ | [removed: 914,049] [added: 1,697,763] | | | $ | [removed: 655,577] [added: 914,049] | | | $ | [removed: 632,289] [added: 655,577] | | | $ | [removed: 258,472] [added: 783,714] | | | [removed: 39.4] [added: 85.7] | % | | $ | [removed: 23,288] [added: 258,472] | | | [removed: 3.7] [added: 39.4] | % |

| Net income per diluted share | $ | [removed: 5.22] [added: 9.24] | | | $ | [removed: 3.70] [added: 5.22] | | | $ | [removed: 3.62] [added: 3.70] | | | $ | [removed: 1.52] [added: 4.02] | | | [removed: 41.1] [added: 77.0] | % | | $ | [removed: 0.08] [added: 1.52] | | | [removed: 2.2] [added: 41.1] | % |

[removed: Fiscal] [added: Revenues in fiscal] year [removed: 2016] [added: 2017 increased 36% compared to fiscal year 2016, and] revenues [added: in fiscal year 2016] increased 12% compared to fiscal year 2015, reflecting [removed: an] [added: a continuous] increase in technology and capacity investments by our customers.

[removed: Gross] [added: Fiscal year 2016 gross] margin as a percentage of revenue [added: compared to fiscal year 2015] improved [removed: 1.1%, which was] primarily due to a more favorable customer and product mix.

The [removed: small decrease] [added: increase] in gross margin as a percentage of revenue for [removed: the] fiscal year [removed: 2015] [added: 2017] compared to fiscal year [removed: 2014] [added: 2016] was [removed: due] primarily [added: due] to [removed: less favorable product mix partially offset by] [added: higher revenue and] improved factory utilization [removed: due to] [added: resulting from] higher production [removed: volumes.][added: volume.]

Fiscal year 2016 also included [removed: KLA-Tencor acquisition related costs.][added: $51 million of acquisition-related costs associated with the terminated agreement with KLA-Tencor.]

Lam Research Corporation [removed: 2016] [added: 2017] 10-K [removed: 33][added: 32]

Our cash and cash equivalents, investments, and restricted cash and investments balances totaled approximately [removed: $7.1] [added: $6.3] billion as of June [removed: 26, 2016] [added: 25, 2017,] compared to [removed: $4.2] [added: $7.1] billion as of June [removed: 28, 2015.][added: 26, 2016.]

Cash flow provided from operating activities was [removed: $1.4] [added: $2.0] billion for fiscal year [removed: 2016] [added: 2017] compared to [removed: $786 million] [added: $1.4 billion] for fiscal year [removed: 2015.][added: 2016.]

Cash flow provided from operating activities in fiscal [removed: 2016] [added: 2017] was primarily used for [removed: $451.5 million] [added: $1.7 billion] of principal payments on debt instruments, [removed: $158.4] [added: $812] million in treasury stock purchases, [removed: $190.4] [added: $243] million in dividends paid to our stockholders, and [removed: $175.3] [added: $157] million of capital [removed: expenditures,] [added: expenditures] and are partially offset by [removed: $59.4] [added: $73] million of treasury stock reissuance and [removed: common stock] [added: Common Stock] issuance resulting from our employee equity-based compensation programs.

Shipments for fiscal year [removed: 2015] [added: 2017] were approximately [removed: $5.5] [added: $8.6] billion, an increase of [removed: 20%] [added: 46%] compared to fiscal year [removed: 2014.][added: 2016.]

The increase in shipments during the fiscal year [removed: 2016] [added: 2017] as compared to the last two fiscal years is related to continued strengthening of customer demand for semiconductor equipment.

| | Year Ended | | | | | | | | | | | [added: | | | | | | | | | | | | | |]

| June [removed: 26, 2016] [added: 25, 2017] | | | | June [removed: 28, 2015] [added: 26, 2016] | | | | June [removed: 29, 2014] [added: 28, 2015] | | | |

| Shipments (in millions) | $ | [removed: 5,901] [added: 8,586] | | | $ | [removed: 5,472] [added: 5,901] | | | $ | [removed: 4,551] [added: 5,472] | |

| Taiwan | [removed: 25] [added: 24] | | % | | [removed: 22] [added: 25] | | % | | [removed: 21] [added: 22] | | % |

| Korea | [removed: 17] [added: 32] | | % | | [removed: 26] [added: 17] | | % | | [removed: 24] [added: 26] | | % |

| China | [removed: 20] [added: 13] | | % | | [removed: 12] [added: 20] | | % | | [removed: 15] [added: 12] | | % |

| Japan | [removed: 16] [added: 15] | | % | | [removed: 14] [added: 16] | | % | | [removed: 13] [added: 14] | | % |

| Southeast Asia | [removed: 11] [added: 4] | | % | | [removed: 5] [added: 11] | | % | | 5 | | % |

| United States | 8 | | % | | [removed: 15] [added: 8] | | % | | 15 | | % |

| Europe | [removed: 3] [added: 4] | | % | | [removed: 6] [added: 3] | | % | | [removed: 7] [added: 6] | | % |

The percentage of total [added: Lam] semiconductor processing system shipments to each of the markets we serve were as follows for fiscal years [added: 2017,] 2016, [removed: 2015,] and [removed: 2014.][added: 2015.]

| June [removed: 26, 2016] [added: 25, 2017] | | | June [removed: 28, 2015] [added: 26, 2016] | | | June [removed: 29, 2014] [added: 28, 2015] | | |

Our vision is to realize full value from natural technology extensions of our company.

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

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

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

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, storage devices, and networking equipment.

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 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 two-dimensional scaling.

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

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

Several factors create opportunity for sustainable differentiation for us: our focus on research and development, with a breadth of programs across sustaining engineering, product and process development, and concept and feasibility; our ability to effectively leverage cycles of learning from our broad installed base; and our collaborative focus with ecosystem partners.

In October 2015, we entered into an Agreement and Plan of Merger and Reorganization with KLA-Tencor.

On October 5, 2016, we announced that the parties mutually agreed to terminate that agreement.

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Operating expenses in fiscal year 2017 increased as compared to fiscal year 2016 primarily as a result of continued investments in research and development including the effect of increased employee headcount, partially offset by a decrease in acquisition-related costs associated with the terminated agreement with KLA-Tencor.

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Our shipments to memory customers during fiscal year 2017 was largely unchanged compared to fiscal year 2016.

| June 25, 2017 | | | | June 26, 2016 | | | | June 28, 2015 | | | |

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| Gross margin | $ | 3,603,359 | | | $ | 2,618,922 | | | $ | 2,284,336 | | | $ | 984,437 | | | 37.6 | % | | $ | 334,586 | | | 14.6 | % |

| June 25, 2017 | | | | June 26, 2016 | | | | June 28, 2015 | | | FY17 vs. FY16 | | | | | | | FY16 vs. FY15 | | | | | | | |

| June 25, 2017 | | | | June 26, 2016 | | | | June 28, 2015 | | | FY17 vs. FY16 | | | | | | | FY16 vs. FY15 | | | | | | | |

The increase in selling, general, and administrative (“SG&A”) expense during fiscal year 2017 compared to fiscal year 2016 was primarily due to a $36 million increase in employee compensation and benefits from increased headcount, a $15 million gain from sale of assets in fiscal year 2016, and a $14 million increase in outside services, offset by a $41 million decrease in acquisition-related costs associated with the terminated agreement with KLA-Tencor.

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| | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | | | | | | | | | | | |

| June 25, 2017 | | | | June 26, 2016 | | | | June 28, 2015 | | | | FY17 vs. FY16 | | | | | | | FY16 vs. FY15 | | | | | | |

| Loss on extinguishment of debt, net | (36,252 | | ) | | — | | | | — | | | | $ | (36,252 | ) | | (100.0 | )% | | $ | — | | | — | % |

| | $ | (90,459 | ) | | $ | (114,139 | ) | | $ | (47,189 | ) | | $ | 23,680 | | | (20.7 | )% | | $ | (66,950 | ) | | 141.9 | % |

The decrease in interest expense during fiscal year 2017 compared to fiscal year 2016 was primarily due to the retirement of the 2016 Convertible Note.

Loss on extinguishment of debt during fiscal year 2017 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.

Continues on next page

Our customers include semiconductor manufacturers that make memory, microprocessors, and other logic integrated circuits for a wide range of electronics; including mobile phones, computers, tablets, wearables, automotive features, storage devices, and networking equipment.

Our market-leading products are designed to help our customers build the smaller, faster, and more powerful devices that are necessary to power the capabilities required by end users.

The process of integrated circuits fabrication consists of a complex series of process and preparation steps, and our product offerings in deposition, etch, and clean address a number of the most critical steps in the fabrication process.

We leverage our expertise in semiconductor processing to develop technology and/or productivity solutions that typically benefit our customers through lower defect rates, enhanced yields, faster processing time, and reduced cost as well as by facilitating their ability to meet more stringent performance and design standards.

The semiconductor capital equipment industry has been highly competitive and characterized by rapid changes in demand.

This cyclicality has been mitigated in recent years by market demands and consolidation among our customers.

With a reduced number of customers, variability in their business plans lead to changes in demand for Lam’s equipment and services.

The variability in our customers’ investments during any particular period is dependent on several factors including but not limited to electronics demand, economic conditions (both general and in the semiconductor and electronics industries), industry supply and demand, prices for semiconductors, and our customers’ ability to develop and manufacture increasingly complex and costly semiconductor devices.

In October 2015, as further described in Note 19 to our Consolidated Financial Statements, we announced that we had entered into an agreement to acquire KLA-Tencor Corporation.

Fiscal year 2015 revenues increased 14% compared to fiscal year 2014, reflecting the steady increase in spending on technology inflections.

Operating expenses in fiscal year 2015 increased as compared to fiscal year 2014 primarily as a result of continued investments in the next-generation research and development.

In fiscal year 2015, we also recorded a goodwill impairment of approximately $79 million related to our single-wafer clean reporting unit.

This increase was primarily the result of approximately $2.4 billion proceeds from June 2016 senior notes issuance, net of related issuance costs combined with cash flow provided from operating activities.

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

Our shipments to memory customers increased during fiscal year 2016 primarily due to higher demand from mobile, enterprise and client solid state drives.

The decrease in SG&A expense during fiscal year 2015 compared to fiscal year 2014 was due primarily to a decrease of $11 million in integration costs, a $9 million decrease in costs associated with rationalization of product configurations, and an $8 million decrease related to impairment of long lived assets.

This decrease was offset by an $8 million increase in compensation and benefits expense.

Gain on Sale of Real Estate

During fiscal year 2014, we sold our interest in nonessential property in Palo Alto, California, resulting in $135 million in net proceeds and a realized gain of $83 million from the transaction.

| | $ | (114,139 | ) | | $ | (47,189 | ) | | $ | (37,396 | ) |

The increase in interest expense during fiscal year 2015 as compared with fiscal years 2014 was primarily due to the $1 billion Senior Note issuance in the March 2015 quarter.

Foreign exchange gains in fiscal years 2016, 2015 and 2014 were related to un-hedged portions of the balance sheet exposures.

Other, net expense realized during fiscal year 2016 was primarily due to commitment fees related to our revolving loan and term loan commitments.

Other, net expense realized during fiscal year 2015 was primarily due to a settlement of matters relating to certain investment transactions.

Other, net income realized during fiscal year 2014 was primarily due to a gain on the disposition of a private equity investment.

The decrease in the effective tax rate in fiscal year 2015 as compared to fiscal year 2014 was primarily due to geographic mix of income between higher and lower tax jurisdictions, and an increased federal tax benefit in fiscal year 2015 due to a retroactive reinstatement of the second half of fiscal year 2014 federal research and development tax credit in fiscal year 2015.

The litigation relates to the

flows attributable to a reporting unit.

This increase was primarily the result of approximately $2.4 billion net proceeds from the June 2016 debt issuances.

| Gain on sale of assets | (15.2 | | ) |

| | $ | 1,350.3 | |

Net cash provided by investing activities during fiscal year 2016 was $592.5 million, which was primarily due to net sales and maturities of available-for-sale securities of $798.8 million, and proceeds on sale of assets of $79.7 million, off-set by net transfers to restricted cash and investments of $112.4 million and capital expenditures of $175.3 million.

Net cash provided by financing activities during fiscal year 2016 was $1,595.7 million, which was primarily due to $2,338.1 million in proceeds from the issuance of long-term debt, partially offset by $451.5 million of principal payments related primarily to the maturity of $450.0 million of convertible notes in the June quarter, $158.4 million in treasury stock repurchases and $190.4 million of dividends paid to stockholders.

| | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Operating Leases | $ | 62,417 | | | $ | 20,393 | | | $ | 19,902 | | | $ | 13,570 | | | $ | 8,758 | | | $ | (206 | ) |

| Capital Leases | 7,425 | | | | 7,208 | | | | 160 | | | | 57 | | | | — | | | | — | | |

| Purchase Obligations | 231,586 | | | | 221,312 | | | | 4,358 | | | | 4,205 | | | | 1,711 | | | | — | | |

| Long-term Debt and Interest Expense (1) | 5,891,509 | | | | 138,847 | | | | 721,363 | | | | 1,547,636 | | | | 3,483,663 | | | | — | | |

As of June [removed: 26, 2016,] [added: 25, 2017,] our mutual funds are classified as trading securities.

[removed: Fixed Income] [added: Fixed-Income] Securities

Our investments in various [removed: interest earning] [added: 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 [removed: fixed income] [added: fixed-income] investment portfolio.

The following table presents the hypothetical fair values of [removed: fixed income] [added: fixed-income] securities that would result from selected potential decreases and increases in interest rates.

The hypothetical fair values as of June [removed: 26, 2016 were] [added: 25, 2017,were] as follows:

Continues on next [removed: page][added: page]

Lam Research Corporation [removed: 2016] [added: 2017] 10-K [removed: 47][added: 45]

[removed: ][added: ]

As of June [removed: 26, 2016,] [added: 25, 2017,] we had [removed: $4.55] [added: $2.9] billion in principal amount of fixed-rate long-term debt outstanding, with a fair value of [removed: $5.88] [added: $5.8] billion.

We enter into foreign currency forward [removed: and option] contracts to minimize the short-term impact of exchange rate fluctuations on certain foreign currency denominated monetary assets and liabilities, primarily [removed: third party] [added: cash, third-party] accounts [removed: receivables,] [added: receivable,] accounts [removed: payables] [added: payable,] and intercompany receivables and payables.

In addition, we hedge certain anticipated foreign currency cash flows, primarily on [removed: Japanese yen-denominated] revenues [added: denominated in Japanese yen] and [removed: euro-denominated] [added: expenses denominated in euro] and Korean [removed: won-denominated expenses.][added: won.]

To protect against the reduction in value of anticipated revenues denominated in Japanese yen and [removed: euro-denominated] [added: expenses denominated in euro] and Korean [removed: won-denominated expenses,] [added: won,] we enter into foreign currency forward and option contracts that generally expire within 12 [removed: months,] [added: months] and no later than 24 months.

We also enter into foreign currency forward contracts to hedge the gains and losses generated by the remeasurement of certain non-U.S.-dollar denominated monetary assets and liabilities, primarily [removed: third party] [added: cash, third-party] accounts [removed: receivables,] [added: receivable,] accounts [removed: payables] [added: payable,] and intercompany receivables and payables.

The change in fair value of these balance sheet hedge contracts is recorded into earnings as a component of other income (expense), [removed: net] [added: net,] and offsets the change in fair value of the foreign currency denominated monetary assets and liabilities also recorded in other income (expense), net, assuming the hedge contract fully covers the [removed: intercompany and trade receivable balances.][added: hedged items.]

The notional amount and unrealized gain of our outstanding forward and option contracts that are designated as cash flow hedges, as of June [removed: 26, 2016] [added: 25, 2017,] are shown in the table below.

Lam Research Corporation [removed: 2016] [added: 2017] 10-K [removed: 48][added: 46]

[added: This table also] shows the change in fair value of these [removed: cash flow hedges] [added: balance sheet hedges,] assuming a hypothetical foreign currency exchange rate movement of [removed: plus-or-minus] [added: plus or minus] 10 percent and [removed: plus-or-minus] [added: plus or minus] 15 percent.

| | | Notional Amount | | | | Unrealized FX [removed: Gain / (Loss)] [added: Gain/(Loss)] | | | | | Valuation of FX Contracts Given an X% Increase (+)/Decrease(-) in Each | | | | | | |

| June [removed: 26, 2016] [added: 25, 2017] | | | | [removed: \=+ / -] [added: \= +/-] (10%) | | | | [removed: \=+ / -] [added: \= +/-] (15%) | | | | | | | | | |

| | | (in [removed: $ Millions)] [added: millions)] | | | | | | | | | | | | | | | |

(1) Contracts were entered into and designated as cash flow hedges under ASC [removed: 815,] [added: 815] during the fiscal year as part of our cash flow hedge program.

The contracts were subsequently de-designated during the year ended June [removed: 26, 2016.][added: 25, 2017.]

(2) Contracts were entered into to [removed: off-set] [added: offset] the [added: de-designated] buy put contracts, and while not designated as a cash flow hedge they are considered to be part of our cash flow hedge program.

The notional amount and unrealized loss of our outstanding foreign currency forward contracts that are designated as balance sheet hedges, as of June [removed: 26, 2016] [added: 25, 2017,] are shown in the table below.

[removed: This] [added: The following] table [removed: also] shows the change in fair value of these [removed: balance sheet] [added: fair value] hedges, assuming a hypothetical [removed: foreign currency exchange] [added: benchmark interest] rate movement of [removed: plus-or-minus] [added: plus or minus] 10 [removed: percent] [added: BPS] and [removed: plus-or-minus] [added: plus or minus] 15 [removed: percent.][added: BPS.]

| | June [removed: 26, 2016] [added: 25, 2017] | | | | [removed: \=+ / -] [added: \= +/-] (10%) | | | | [removed: \=+ / -] [added: \= +/-] (15%) | | | | | | | | |

Lam Research Corporation [removed: 2016] [added: 2017] 10-K [removed: 49][added: 47]

Interest rate risk is present with both [removed: fixed] [added: fixed-] and floating-rate debt.

During the fiscal year ended June 26, 2016, we entered into a series of interest rate contracts with a total notional value of [removed: $400.0] [added: $400] million where we received fixed rates and paid variable rates based on certain benchmark interest rates.

| [removed: Fair Value as of June 26, 2016] | | [removed: | |] Valuation of Fair Value Hedge Given an Interest Rate Increase of X Basis Points | | | | | | | [added: | Fair Value as of | | | |] Valuation of Fair Value Hedge Given an Interest Rate Decrease of X Basis Points | | | | | | [added: |]

| | | [removed: | |] 10 BPS | | | [added: |] 15 BPS | | | | [removed: 10 BPS] [added: —%] | | | [removed: 15 BPS] | [added: (10 BPS)] | | [added: | | (15 BPS) | | |]

| [removed: (in $ Millions)] | | [added: (in millions)] | | | | | | | | | | | | | | | [added: |]

We manage our interest rate exposure on anticipated issuances of debt through [removed: forward starting] [added: forward-starting] interest rate swap agreements.

During the fiscal year ended June 26, 2016, we entered into and settled a series of forward-starting interest rate swap agreements with a total notional value of [removed: $600.0] [added: $600] million, associated with our June 2016 debt offering.

Lam Research Corporation [removed: 2016] [added: 2017] 10-K [removed: 50][added: 48]

| | June 25, 2017 | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Time deposit | $ | 640,666 | | | $ | 640,666 | | | $ | 640,666 | | | $ | 640,666 | | | $ | 640,666 | | | $ | 640,666 | | | $ | 640,666 | |

| Municipal notes and bonds | 197,037 | | | | 196,890 | | | | 195,918 | | | | 194,876 | | | | 193,834 | | | | 192,792 | | | | 191,751 | | |

| U.S. Treasury and agencies | 821,172 | | | | 813,220 | | | | 804,147 | | | | 795,049 | | | | 785,862 | | | | 776,677 | | | | 767,493 | | |

| Government-sponsored enterprises | 25,355 | | | | 25,069 | | | | 24,783 | | | | 24,496 | | | | 24,210 | | | | 23,924 | | | | 23,638 | | |

| Foreign government bonds | 65,205 | | | | 64,482 | | | | 63,752 | | | | 63,022 | | | | 62,292 | | | | 61,563 | | | | 60,833 | | |

| Bank and corporate notes | 2,494,798 | | | | 2,475,500 | | | | 2,455,967 | | | | 2,436,436 | | | | 2,416,907 | | | | 2,397,381 | | | | 2,377,857 | | |

| Mortgage backed securities - residential | 105,825 | | | | 104,728 | | | | 103,543 | | | | 102,358 | | | | 101,171 | | | | 99,984 | | | | 98,797 | | |

| Mortgage backed securities - commercial | 68,710 | | | | 67,719 | | | | 66,729 | | | | 65,739 | | | | 64,750 | | | | 63,761 | | | | 62,773 | | |

| Total | $ | 4,418,768 | | | $ | 4,388,274 | | | $ | 4,355,505 | | | $ | 4,322,642 | | | $ | 4,289,692 | | | $ | 4,256,748 | | | $ | 4,223,808 | |

The hypothetical fair values as of June 25, 2017, were as follows:

| | June 25, 2017 | | | | | | | | | | | | | | | | | | | | | | | | | |

| | (in thousands) | | | | | | | | | | | | | | | | | | | | | | | | | |

| Mutual funds | $ | 42,191 | | | $ | 47,816 | | | $ | 50,629 | | | 56,254 | | | $ | 61,879 | | | $ | 64,692 | | | $ | 70,318 | |

This table also shows the change in fair value of these cash flow hedges

Continues on next page


assuming a hypothetical foreign currency exchange rate movement of plus or minus 10 percent and plus or minus 15 percent.

| Sell | Japanese yen | $ | 670.2 | | | $ | (1.4 | | ) | | $ | 66.4 | | | $ | 99.6 | |

| Buy | Euro | 58.9 | | | | 2.7 | | | | | 6.1 | | | | 9.1 | | |

| Buy | Korean won | 22.0 | | | | — | | | | | 2.2 | | | | 3.3 | | |

| | | | | | | $ | 1.3 | | | | $ | 74.7 | | | $ | 112.0 | |

| Buy put | Japanese yen | $ | 36.0 | | | $ | 1.0 | | | | $ | 3.2 | | | $ | 4.5 | |

| Buy put de-designated (1) | Japanese yen | 26.5 | | | | 0.2 | | | | | 2.0 | | | | 3.0 | | |

| Sell put (2) | Japanese yen | 26.5 | | | | (0.2 | | | ) | | 1.9 | | | | 3.0 | | |

| | | | | | | $ | 1.0 | | | | $ | 7.1 | | | $ | 10.5 | |

| | | Notional Amount | | | | Unrealized FX Gain/(Loss) | | | | | Valuation of FX Contracts Given an X% Increase (+)/Decrease(-) in Each | | | | | | |

| Sell | Japanese yen | $ | 269.5 | | | $ | — | | | | $ | 26.9 | | | $ | 40.4 | |

| Sell | Korean won | 34.1 | | | | 0.2 | | | | | 3.4 | | | | 5.1 | | |

| Buy | Euro | 18.4 | | | | — | | | | | 1.9 | | | | 2.7 | | |

| Buy | Taiwan dollar | 11.2 | | | | — | | | | | 1.1 | | | | 1.7 | | |

| Buy | Swiss francs | 8.7 | | | | — | | | | | 0.9 | | | | 1.3 | | |

| Buy | Chinese renminbi | 7.2 | | | | — | | | | | 0.7 | | | | 1.1 | | |

| | | | | | | $ | 0.2 | | | | $ | 34.9 | | | $ | 52.3 | |

Continues on next page


| | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | | | | | | |

| | | | June 25, 2017 | | | | | | | | | | | | | | | | | |

| | June 26, 2016 | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Time Deposit | $ | 904,243 | | | $ | 904,243 | | | $ | 904,243 | | | $ | 904,243 | | | $ | 904,243 | | | $ | 904,243 | | | $ | 904,243 | |

| Municipal Notes and Bonds | 266,956 | | | | 266,857 | | | | 266,532 | | | | 265,725 | | | | 264,913 | | | | 264,101 | | | | 263,290 | | |

| US Treasury & Agencies | 461,378 | | | | 461,378 | | | | 460,090 | | | | 456,788 | | | | 453,313 | | | | 449,837 | | | | 446,361 | | |

| Government-Sponsored Enterprises | 32,316 | | | | 32,309 | | | | 32,201 | | | | 31,963 | | | | 31,726 | | | | 31,488 | | | | 31,250 | | |

| Foreign Government Bonds | 42,093 | | | | 42,037 | | | | 41,789 | | | | 41,512 | | | | 41,233 | | | | 40,956 | | | | 40,678 | | |

| Bank and Corporate Notes | 1,000,189 | | | | 996,383 | | | | 989,991 | | | | 983,341 | | | | 976,693 | | | | 970,045 | | | | 963,397 | | |

| Mortgage Backed Securities - Residential | 17,715 | | | | 17,626 | | | | 17,458 | | | | 17,280 | | | | 17,100 | | | | 16,922 | | | | 16,743 | | |

| Mortgage Backed Securities - Commercial | 55,947 | | | | 55,635 | | | | 55,317 | | | | 54,999 | | | | 54,681 | | | | 54,363 | | | | 54,045 | | |

| Total | $ | 2,780,837 | | | $ | 2,776,468 | | | $ | 2,767,621 | | | $ | 2,755,851 | | | $ | 2,743,902 | | | $ | 2,731,955 | | | $ | 2,720,007 | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | June 26, 2016 | | | | | | | | | | | | | | | | | | | | | | | | | |

| Mutual Funds | $ | 30,241 | | | $ | 34,273 | | | $ | 36,289 | | | 40,321 | | | $ | 44,353 | | | $ | 46,369 | | | $ | 50,401 | |

This table also

| Sell | Japanese Yen | $ | 219.1 | | | $ | (11.8 | | ) | | $ | 23.0 | | | $ | 34.5 | |

| Buy | Korean Won | 8.6 | | | | 0.1 | | | | | 0.9 | | | | 1.3 | | |

| Buy | Euro | 36.3 | | | | 0.8 | | | | | 3.7 | | | | 5.5 | | |

| | | | | | | $ | (10.9 | | ) | | $ | 27.6 | | | $ | 41.3 | |

| Buy Put (1) | Japanese Yen | $ | 39.1 | | | $ | (0.4 | | ) | | $ | 0.5 | | | $ | 0.8 | |

| Sell put (2) | Japanese Yen | 39.1 | | | | — | | | | | 0.1 | | | | 0.3 | | |

| | | | | | | $ | (0.4 | | ) | | $ | 0.6 | | | $ | 1.1 | |

| Sell | Japanese Yen | $ | 56.9 | | | $ | 1.3 | | | | $ | 5.8 | | | $ | 8.5 | |

| Sell | Korean Won | 5.0 | | | | (0.1 | | | ) | | 0.5 | | | | 0.7 | | |

| Buy | Swiss Francs | 4.5 | | | | — | | | | | 0.4 | | | | 0.7 | | |

| Buy | Taiwan Dollar | 23.3 | | | | (0.1 | | | ) | | 2.3 | | | | 3.5 | | |

| Buy | Chinese Renminbi | 9.1 | | | | — | | | | | 0.9 | | | | 1.4 | | |

| Buy | Singapore Dollar | 18.3 | | | | — | | | | | 1.8 | | | | 2.7 | | |

| Buy | Euro | 16.0 | | | | (0.4 | | | ) | | 1.6 | | | | 2.4 | | |

| | | | | | | $ | 0.7 | | | | $ | 13.3 | | | $ | 19.9 | |

The following table shows the change in fair value of these fair value hedges, assuming a hypothetical benchmark interest rate movement of plus-or-minus 10 BPS and plus-or-minus 15 BPS.

| | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| $ | 8.6 | | | $ | 5.5 | | $ | 3.9 | | | $ | 11.6 | | $ | 13.2 | |

Incorporated in 1980, Lam Research Corporation (“Lam Research,” “Lam,” “we,” “our,” [added: “us,”] or [removed: the “Company”)] [added: “the Company”)] is a Delaware corporation, headquartered in Fremont, California.

Continues on next [removed: page][added: page]

Lam Research Corporation [removed: 2016] [added: 2017] 10-K 3

[removed: ][added: ]

Our Annual Report on Form 10-K, Quarterly Reports on Forms 10-Q, Current Reports on Forms 8-K, [added: Proxy Statements] and [removed: any amendments to those reports] [added: all other filings we make with the SEC] are available on our website as soon as reasonably practical after we file them with or furnish them to the SEC and are also available online at the SEC’s website at www.sec.gov.

Our [removed: market-leading] products [added: and services] are designed to help our customers build smaller, faster, [removed: more powerful,] and [removed: more power-efficient] [added: better performing] devices that are used in a variety of electronic products, including mobile phones, [removed: wearables, tablets,] [added: personal] computers, [added: servers, wearables,] automotive devices, storage devices, and networking equipment.

Our customer base includes leading semiconductor memory, foundry, and integrated device manufacturers (“IDMs”) that make products such as [removed: NAND,] [added: non-volatile memory (“NVM”),] DRAM memory, and logic devices.

Semiconductor manufacturing, our customers’ business, involves the complete fabrication of multiple dies or [removed: ICs] [added: integrated circuits (“ICs”)] on a wafer.

Fabricating these devices requires highly sophisticated process technologies [removed: and precision] [added: to integrate an increasing array of new materials with precise] control at the atomic scale.

In addition, our products are well-suited for related markets that rely on semiconductor processes and require production-proven manufacturing capability, such as [added: complementary metal-oxide-semiconductor (“CMOS”) image sensors (“CIS”) and] micro-electromechanical systems (“MEMS”).

Our Customer Support Business Group (“CSBG”) provides products and services to maximize installed equipment [removed: performance] [added: performance, predictability,] and operational efficiency.

[added: Additionally,] CSBG [removed: also offers refurbished] [added: provides new] and [removed: newly built] [added: refurbished] previous-generation (legacy) equipment for those applications that do not require the most advanced wafer processing capability.

Lam Research Corporation [removed: 2016] [added: 2017] 10-K 4

These applications require excellent within-wafer uniformity [removed: at] [added: with] high plating rates, minimal defects, and cost competitiveness.

For tungsten chemical vapor deposition [removed: (“CVD”) / atomic] [added: (“CVD”)/atomic] layer deposition (“ALD”) processes, key requirements are minimizing contact resistance to meet lower power consumption requirements and achieving void-free fill for narrow nanoscale structures.

In addition, good barrier step coverage at reduced thicknesses relative to physical vapor [removed: deposition/CVD] [added: deposition (“PVD”)/CVD] barrier films is also needed to improve contact fill and reduce resistivity.

In dielectric deposition, high-productivity, high-quality films are needed for a number of critical [removed: process steps.][added: patterning and gapfill applications.]

Plasma-enhanced CVD (“PECVD”) is used to deposit multiple dielectric films, including the alternating mold stack layers used in [removed: 3D NAND memory.][added: NVM memory and critical patterning layers for logic/foundry.]

SABRE chemistry packages provide leading-edge fill performance for low defectivity, [added: a] wide process window, and high rates of bottom-up growth to fill the most challenging HAR features.

[removed: PNL,] [added: PNL®,] our ALD technology, is used in the deposition of tungsten nitride films to achieve high step coverage with reduced thickness relative to conventional barrier films.

The advanced [removed: ExtremeFill] [added: ExtremeFillTM] CVD [removed: tungsten technology provides] [added: and LFW (low-fluorine tungsten) ALD technologies provide] extendibility to fill the most challenging structures at advanced technology nodes.

Applications include tungsten plug and via fill, [removed: 3D NAND wordlines,] [added: NVM word lines,] low-stress composite interconnects, and tungsten nitride barrier for via and contact metallization.

Lam Research Corporation [removed: 2016] [added: 2017] 10-K 5

The VECTOR family of PECVD [removed: and ALD] systems delivers advanced thin film quality, wafer-to-wafer uniformity, productivity, and low cost of ownership.

[removed: VECTOR] [added: The] Express [added: platform] offers a small footprint with four processing stations.

[removed: VECTOR] Excel is a modular [removed: tool] [added: platform] for advanced technology nodes where pre-and-post [removed: film] deposition treatments are needed.

[removed: VECTOR] [added: The] Extreme [added: platform] accommodates up to 12 processing stations for high-throughput applications.

[removed: VECTOR] [added: Our] Q [added: platform] accommodates up to 16 processing stations for depositing multi-stack films.

For conductor etch, requirements include delivering atomic-scale control for etching FinFET/3D gate transistors, [removed: multi–film] [added: multi-film] stacks for high-k/metal gate structures, and multiple patterning structures.

Dielectric etch processes must be able to maintain etch profiles on increasingly HAR structures such as in [removed: 3D NAND] [added: NVM] devices, etch new multi-layer photoresist materials and amorphous carbon hardmasks, and avoid damaging fragile low-k materials.

To address technology inflections in patterning, the Kiyo family offers state-of-the-art [removed: technology] [added: capability] with [removed: the Hydra patterning system; this capacity] [added: our Hydra® technology, which] enables [removed: within wafer] [added: extraordinary within-wafer] uniformity for FEOL/BEOL process modules in [removed: 3D NAND,] [added: NVM,] DRAM and logic devices.

Applications include FinFET gate, fin definition, STI, high-k/metal [removed: gate] [added: gate,] and multiple patterning.

Lam Research Corporation [removed: 2016] [added: 2017] 10-K 6

[added: The products’ proprietary chamber cleaning technology] ensures high availability, high yield, and exceptional process repeatability for BEOL processing.

Applications include low-k and ultra low-k dual damascene, mask open, and high aspect ratio applications for DRAM capacitor cell, [removed: 3D NAND] [added: NVM] hole, trench, and contact.

Based on our production-proven conductor etch products, the Syndion [removed: TSV etch] family provides low-risk, flexible solutions to address multiple TSV [added: and CIS] etch applications.

For next-generation devices, fragile structures need to be cleaned without [removed: causing damage.][added: being damaged.]

In addition, cleaning steps that target the bevel region can help eliminate the potential source of yield-limiting defects at the wafer’s edge, [removed: in order to increase] [added: thereby increasing] the number of good die at the wafer’s edge and [removed: improve] [added: improving] yield.

[removed: The single-wafer] [added: Single-wafer] spin technology pioneered the industry transition from batch to single-wafer wet processing.

Applications include particle, polymer, and residue removal; photoresist removal; [removed: and] wafer [removed: backside/bevel cleaning and film removal.][added: backside/]

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 vision is to realize full value from natural technology extensions of our company.

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

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

Demand from cloud computing (the “Cloud”), the Internet of Things (“IoT”), and other markets is driving the need for increasingly powerful and cost\-efficient semiconductors.

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

These trends are driving significant inflections in semiconductor manufacturing, such as the increasing importance of vertical scaling strategies like three-dimensional (“3D”) architectures as well as multiple patterning to enable shrinks.

These demand and technology inflections have significantly expanded our addressable markets from about 26% of wafer fabrication equipment (“WFE”) spending in calendar year 2013 to about 34% in calendar year 2016.

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

Several factors create opportunity for sustainable differentiation for us: (i) our focus on research and development, with several on-going programs relating to sustaining engineering, product and process development, and concept and feasibility; (ii) our ability to effectively leverage cycles of learning from our broad installed base; and (iii) our collaborative focus with semi-ecosystem partners.

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For NVM applications, high-quality conformal films are needed to form device isolation and ensure structural integrity.

These applications require excellent thickness uniformity, low defectivity, and stress control.

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ALD Dielectric Films — Striker® Product Family

The Striker family of ALD systems delivers highly conformal dielectric films for spacer-based patterning and liner applications in the most advanced memory and logic structures.

The MSSD architecture combines the required film performance with both sequential and parallel processing modes to provide flexibility to deliver both precise control of critical dimensions and low cost of ownership.

The unique capability to deliver tunable and high-quality films over a vast range of temperatures and process conditions allows the Striker family to deliver unique and high electrical quality films to support the most demanding logic, DRAM, NVM, and CIS applications.

Striker products include specialized systems for logic and memory applications, with similar multiple platform options as are available for our VECTOR products.

Applications include conformal deposition of dielectric films for spacers and liners.

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For both Kiyo and Versys Metal families, multiple platforms options are available to address fab productivity needs; these include the 2300e4®, 2300e5®, and 2300e6® platforms.

Multiple platforms are available - including 2300e4®, 2300e5®, 2300e6® - to address fab productivity needs.

Multiple platforms are available - including 2300e4®, 2300e5®, 2300e6® - to address fab productivity needs.

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bevel cleaning; and film removal.

These products benefit from many of the technical advances from our newest systems, enabling extended lifetime and productivity.

Accordingly, we devote a significant

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Strategic investments to encourage local semiconductor manufacturing and supply chain in China could increase competition from domestic equipment manufacturers in China.

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We design, manufacture, market, refurbish, and service semiconductor processing systems that are used in the fabrication of integrated circuits (“ICs”).

On a silicon wafer, a tiny, intricate pattern is precisely replicated across the wafer surface to create identical miniature devices, where features can be 1,000 times smaller than a grain of sand.

We leverage our expertise in semiconductor device processing to develop technology and/or productivity solutions that typically benefit our customers through lower defect rates, enhanced yields, faster processing time, and reduced cost as well as by facilitating their ability to meet more stringent performance and design standards.

We offer a broad portfolio of complementary products that are used in several areas of the semiconductor manufacturing process flow, including thin film deposition, plasma etch, and single-wafer clean.

These processes, which are repeated numerous times during the wafer fabrication cycle, are utilized to manufacture every type of semiconductor device.

Our products are used primarily in front-end wafer processing, which involves the steps that create the active components of a device (transistor, capacitor) and their wiring (interconnect).

Market demand for IC designs is driving the development of and migration to fabrication strategies such as three-dimensional (“3D”) architectures and multiple patterning.

Our high-productivity thin film deposition systems form a device’s sub-microscopic layers of conducting (metal) or insulating (dielectric) materials.

We are the market leader in plasma etch, a highly critical process step that selectively removes materials from the wafer to create the features and patterns of a device.

Our wet spin clean and plasma-based bevel clean products remove particles, residues and film from the wafer surface before or after adjacent processes.

This application requires excellent thickness uniformity along with exceptional stress control.

The products’ proprietary chamber cleaning technology

We believe that comprehensive

Certain of our existing and potential competitors have substantially greater financial resources and larger engineering, manufacturing, marketing, and customer service and support organizations than we do.

[added: These accruals are reviewed at] least quarterly and adjusted to reflect the effects of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular matter.

| | |

| --- | --- |

These accruals are reviewed at

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Lam Research Corporation 2016 10-K 27


For the fiscal year ended June [removed: 26, 2016][added: 25, 2017]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, [removed: or] a smaller reporting [added: company, or an emerging growth] company.

See the definitions of “large accelerated filer,” “accelerated [removed: filer” and] [added: filer”,] “smaller reporting [added: company”, and “emerging growth] company” in Rule 12b-2 of the Exchange Act.

The aggregate market value of the Registrant’s Common Stock, $0.001 par value, held by non-affiliates of the Registrant, as of December [removed: 27, 2015,] [added: 25, 2016,] the last business day of the most recently completed second fiscal quarter with respect to the fiscal year covered by this Form 10-K, was [removed: $8,074,598,541.][added: $12,210,431,182.]

As of August 10, [removed: 2016,] [added: 2017,] the Registrant had [removed: 160,260,009] [added: 162,454,686] outstanding shares of Common Stock.

Parts of the Registrant’s Proxy Statement for the Annual Meeting of Stockholders expected to be held on or about November [removed: 9, 2016] [added: 8, 2017,] are incorporated by reference into Part III of this Form 10-K.

[removed: ][added: ]

[removed: 2016] [added: 2017] ANNUAL REPORT ON FORM 10-K

| Item 1. | [removed: [Business](#sE9816C89F20900EF998B3B6893DE71C3)] [added: [Business](#s8A72693021DD54ACAAB8FE6EE711D68D)] | [removed: [3](#sE9816C89F20900EF998B3B6893DE71C3)] [added: [3](#s8A72693021DD54ACAAB8FE6EE711D68D)] |

| Item 1A. | [Risk [removed: Factors](#s3BC13D88FEF4C40480CC3B68A6BDD95C)] [added: Factors](#s37B8EA58DBAD5EC29E4E767A89D70C0E)] | [removed: [13](#s3BC13D88FEF4C40480CC3B68A6BDD95C)] [added: [14](#s37B8EA58DBAD5EC29E4E767A89D70C0E)] |

| Item 1B. | [Unresolved Staff [removed: Comments](#s1B266C553A2A5ADB3E713B68A6E28B50)] [added: Comments](#s0BF4D2725FCC50889FC8D8EDF183C93B)] | [removed: [27](#s1B266C553A2A5ADB3E713B68A6E28B50)] [added: [25](#s0BF4D2725FCC50889FC8D8EDF183C93B)] |

| Item 2. | [removed: [Properties](#sC0360DF692D61B49044F3B68A70FDBCB)] [added: [Properties](#sD22495FC4D79535EAF53FA9137DC495A)] | [removed: [27](#sC0360DF692D61B49044F3B68A70FDBCB)] [added: [25](#sD22495FC4D79535EAF53FA9137DC495A)] |

| Item 3. | [Legal [removed: Proceedings](#s4A52FEAE7DB9D521E0693B68A72E7B1C)] [added: Proceedings](#sADCA0AF688EF5AF28EB60DAABE9A22FD)] | [removed: [27](#s4A52FEAE7DB9D521E0693B68A72E7B1C)] [added: [26](#sADCA0AF688EF5AF28EB60DAABE9A22FD)] |

| Item 4. | [Mine Safety [removed: Disclosures](#s1DDED394C29F88725CD23B68A7645661)] [added: Disclosures](#sEA03DCCDB2C45484BA55079DA8F82753)] | [removed: [28](#s1DDED394C29F88725CD23B68A7645661)] [added: [26](#sEA03DCCDB2C45484BA55079DA8F82753)] |

| [Part [removed: II.](#s12C3ED782EF6CCC7A44C3B68A784D8EC)] [added: II.](#s58E7786CA5A35F9B8A7C55EEBB2477D2)] | | |

| Item 5. | [Market for the Registrant’s Common Equity, Related Stockholder [removed: Matters] [added: Matters,] and Issuer Purchases of Equity [removed: Securities](#sCDA89F582A19B7C7225C3B6896275642)] [added: Securities](#s00EED9E204795A5D927C1FE826055E9C)] | [removed: [28](#sCDA89F582A19B7C7225C3B6896275642)] [added: [27](#s00EED9E204795A5D927C1FE826055E9C)] |

| Item 6. | [Selected Financial [removed: Data](#s9667652F2EBB298D16453B68A7DE0EB4)] [added: Data](#s2ABAEAF7D4365DB281FF947D79AC530D)] | [removed: [31](#s9667652F2EBB298D16453B68A7DE0EB4)] [added: [30](#s2ABAEAF7D4365DB281FF947D79AC530D)] |

| Item 7. | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#sC441172CB9EB1706A5B93B68A808077C)] [added: Operations](#s29263142F4345487B17B11C0B20095EC)] | [removed: [32](#sF218504CB3690102641F3B689330A76C)] [added: [32](#s2F3729194BEF5B13BF2884827F244CE1)] |

| Item 7A. | [Quantitative and Qualitative Disclosures [removed: about] [added: About] Market [removed: Risk](#s531755F038A8473DD9D13B68923BC1FE)] [added: Risk](#sEF2388748A2B50879F0251120CBD8933)] | [removed: [47](#s531755F038A8473DD9D13B68923BC1FE)] [added: [45](#sEF2388748A2B50879F0251120CBD8933)] |

| Item 8. | [Financial Statements and Supplementary [removed: Data](#sA8017D0EBE895F71DB433B68A8D596ED)] [added: Data](#s974C69F819635EB29F67E0D1E094C301)] | [removed: [51](#sA8017D0EBE895F71DB433B68A8D596ED)] [added: [49](#s974C69F819635EB29F67E0D1E094C301)] |

| Item 9. | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#sEACF7544FFF79A42E3A43B68B2D86C3D)] [added: Disclosure](#sC212A0DC261455539A920AF1DFAC1D7B)] | [removed: [100](#sEACF7544FFF79A42E3A43B68B2D86C3D)] [added: [95](#sC212A0DC261455539A920AF1DFAC1D7B)] |

| Item 9A. | [Controls and [removed: Procedures](#sEE3B06AD3394BF667CB53B68B2E7CFD3)] [added: Procedures](#s808F1B50D7E75D2B8AFBBEA8E12956A3)] | [removed: [100](#sEE3B06AD3394BF667CB53B68B2E7CFD3)] [added: [95](#s808F1B50D7E75D2B8AFBBEA8E12956A3)] |

| Item 9B. | [Other [removed: Information](#s038F65FBCA8C9B0FD3C73B68B3193722)] [added: Information](#s535A7A9A244759838308F9D18DC3D63D)] | [removed: [100](#s038F65FBCA8C9B0FD3C73B68B3193722)] [added: [95](#s535A7A9A244759838308F9D18DC3D63D)] |

| [Part [removed: III.](#s11C8107FDEF399B196093B68B33BDDD0)] [added: III.](#s67CFC05CD5F852E882D7179E2E353FB1)] | | |

| Item 10. | [Directors, Executive [removed: Officers] [added: Officers,] and Corporate [removed: Governance](#s9BCAC9EE5C152ADAE3E73B68B36CF848)] [added: Governance](#s892B8D3252EE5743BF0117DBCF60368E)] | [removed: [101](#s9BCAC9EE5C152ADAE3E73B68B36CF848)] [added: [96](#s892B8D3252EE5743BF0117DBCF60368E)] |

| Item 11. | [Executive [removed: Compensation](#s1788D15142B880A0D7C13B68B38EC103)] [added: Compensation](#s0B4BFF8CB6CB54909D3AF825166951AB)] | [removed: [101](#s1788D15142B880A0D7C13B68B38EC103)] [added: [96](#s0B4BFF8CB6CB54909D3AF825166951AB)] |

| Item 12. | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#s02137C315889936D06963B68B3BF7BC0)] [added: Matters](#sF7A6DB4846A55EF49502EDBC33534D3B)] | [removed: [101](#s02137C315889936D06963B68B3BF7BC0)] [added: [96](#sF7A6DB4846A55EF49502EDBC33534D3B)] |

| Item 13. | [Certain Relationships and Related [removed: Transactions,] [added: Transactions] and Director [removed: Independence](#s8F6922D09EE1994A244B3B68B3E07C64)] [added: Independence](#s31FCC4D095105CE3B9803B2CCCF4EDEB)] | [removed: [101](#s8F6922D09EE1994A244B3B68B3E07C64)] [added: [96](#s31FCC4D095105CE3B9803B2CCCF4EDEB)] |

| Item 14. | [Principal Accounting Fees and [removed: Services](#s8428613722D5150C60643B68B412F1DE)] [added: Services](#s4A05736E254B5124B8158B0B561D6516)] | [removed: [101](#s8428613722D5150C60643B68B412F1DE)] [added: [96](#s4A05736E254B5124B8158B0B561D6516)] |

| [Part [removed: IV.](#sB4CC47F2AE1E5C4BDC053B68B4356F63)] [added: IV.](#s24E54166D3A75480AC1600184E6DEA73)] | | |

| Item 15. | [Exhibits, Financial Statement [removed: Schedules](#s0517D4433DBF504D9B6C3B68B4651E62)] [added: Schedules](#s01535EB7C19C50FF98E8E5C83E2E24E9)] | [removed: [102](#s0517D4433DBF504D9B6C3B68B4651E62)] [added: [97](#s01535EB7C19C50FF98E8E5C83E2E24E9)] |

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Lam Research Corporation [removed: 2016] [added: 2017] 10-K [removed: 2][added: 1]

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,” “anticipate,” “expect,” [added: “plan,” “aim,”] “may,” “should,” [removed: “could”] [added: “could,” “would,” “continue,”] and other future-oriented terms.

The identification of certain statements as “forward-looking” [removed: is] [added: does] not [removed: intended to] mean that other statements not specifically identified are not forward-looking.

Forward-looking statements [removed: include,] [added: include] but are not limited [removed: to,] [added: to] statements that relate to: [removed: our ability to close the acquisition of KLA-Tencor Corporation ("KLA-Tencor") and;] trends and opportunities in the global economic environment and the semiconductor industry; the anticipated levels of, and rates of change in, future shipments, margins, market share, capital expenditures, [added: research and development expenditures,] international sales, [removed: revenue] [added: revenue,] and operating expenses generally; management’s plans and objectives for our current and future operations and business focus; volatility in our quarterly results; customer and end user requirements and our ability to satisfy those requirements; customer capital spending and their demand for our products, and the reliability of indicators of change in customer spending and demand; the effect of variability in our [removed: customers'] [added: customers’] business plans on demand for our equipment and services; changes in demand for our products and in our market share resulting from, among other things, increases in our [removed: customers'] [added: customers’] proportion of capital expenditure (with respect to certain technology inflections); hedging transactions; our ability to defend our market share; [removed: our ability to obtain] and [removed: qualify alternative sources of supply; and] to gain new market share; our ability to obtain and qualify alternative sources of supply; 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; [removed: levels of research and development expenditures;] the success of joint development [added: and collaboration] relationships with customers, [removed: suppliers] [added: suppliers,] or [removed: other industry members; and] [added: others;] outsourced activities; the role of component suppliers in our business; [added: our leadership and competency, and their ability to facilitate innovation; our ability to continue to, including] the [added: underlying factors that, create sustainable differentiation; the] resources invested to comply with evolving standards and the impact of such efforts; 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 [removed: liabilities] [added: liabilities,] and the adequacy of our accruals relating to them); our access to capital markets; our intention to pay quarterly dividends and the amounts thereof, if any; our ability and intention to repurchase our shares; our ability to manage and grow our cash position; and the sufficiency of our financial resources to support future business activities (including but not limited to operations, investments, debt service [removed: requirements] [added: requirements,] and capital expenditures).

Such risks, [removed: uncertainties] [added: 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.

10-K 1 lrcx_10kx2017xdocument.htm 10-K

| | | | | Emerging growth company | | ¨ |

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Except as expressly incorporated by reference herein, the Registrant’s proxy statement shall not be deemed to be part of this report.

| [Part I.](#sFB2C9E12F224584E819998200228F70E) | | |

| [Signatures](#s1B787E1DC6325261BD67298F0D3449EB) | | [98](#s1B787E1DC6325261BD67298F0D3449EB) |

| [Exhibit Index](#sFD825957C6E350CB82BE004CB2E8390F) | | [101](#sFD825957C6E350CB82BE004CB2E8390F) |

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Lam Research Corporation 2017 10-K 2


10-K 1 lrcx_10kx2016xdocument.htm 10-K

(However, the Reports of the Audit Committee and Compensation Committee are expressly not incorporated by reference herein.)

| [Part I.](#sC9FC32F9FE295B0528C13B68A6676B6B) | | |

| [Signatures](#sBAB2570AB9C3E1D90DB33B6895399E8A) | | [103](#sBAB2570AB9C3E1D90DB33B6895399E8A) |

| [Exhibit Index](#s7DB29C39638B0D1D695F3B68B4BA870D) | | [106](#s7DB29C39638B0D1D695F3B68B4BA870D) |

Our executive offices and principal operating and R&D facilities are located in [removed: Fremont, Livermore,] [added: Fremont] and [removed: San Jose, California,] [added: Livermore, California;] Tualatin, [removed: Oregon,] [added: Oregon;] and Villach, Austria.

The majority of the Fremont and Livermore facilities are held under operating leases expiring [added: in] 2020 and [removed: 2021, in addition the Villach facilities are held under capital leases expiring in calendar year 2016.][added: 2021.]

Our Fremont, Livermore, and Villach leases [removed: generally] include options to renew or purchase the facilities.

In addition, we lease or own properties for our service, technical [removed: support] [added: support,] and sales personnel throughout the United States, [added: China,] Europe, [removed: Taiwan, Korea,] Japan, [removed: China, and] [added: Korea,] Southeast Asia, and [added: Taiwan and] lease or own manufacturing facilities located in [removed: Illinois,] Ohio, [removed: Germany,] and Korea.

The [removed: company] [added: Company] owns two properties in Fremont, as well [removed: as,] [added: as] the Tualatin facilities.

The Villach facilities are held under capital leases expiring in calendar year 2021.

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Lam Research Corporation 2017 10-K 25


During fiscal year 2016 we sold our San Jose facilities and entered into an operating lease for use of the buildings for a portion of calendar year 2016.

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Lam Research Corporation 2017 10-K 26


Our Common Stock is traded on the Nasdaq Global Select [removed: Market] [added: MarketSM] under the symbol [removed: LRCX.][added: “LRCX.” As of August 10, 2017, we had 440 stockholders of record.]

In [added: the second] fiscal [removed: year 2016] [added: quarter of 2017] we [removed: paid] [added: increased] our stockholders quarterly [removed: dividends of $0.30] [added: dividend to $0.45] per [removed: share,] [added: share; previous to that quarter of fiscal year 2017] and [removed: in] [added: throughout] fiscal year [removed: 2015,] [added: 2016,] quarterly dividends of [removed: $0.18] [added: $0.30] per [removed: share.][added: share were paid.]

Repurchases [removed: will] [added: may] be funded using our [removed: on-shore] [added: onshore] cash and [removed: on-shore] [added: onshore] cash [removed: generation.][added: generation, or our available debt instruments.]

As part of our share repurchase program, we may from [removed: time-to-time] [added: time to time] enter into structured share repurchase arrangements with financial institutions using general corporate funds.

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Lam Research Corporation [removed: 2016] [added: 2017] 10-K [removed: 28][added: 27]

[removed: ][added: ]

| Period | Total Number of Shares Repurchased (1) | | | Average Price Paid [removed: Per Share] [added: per Share(2)] | | | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | | Amount Available Under Repurchase Program | | |

| Quarter [removed: Ended] [added: ended] September [removed: 27, 2015] [added: 25, 2016] | [removed: 1,413] [added: 20] | | | $ | [removed: 72.69 |] [added: 90.53] | | [removed: 1,205] | [added: —] | | [removed: $] | 229,094 | | [added: |]

| [removed: May 23, 2016 -] [added: Available balance as of] June 26, 2016 | [removed: 99] | | | [removed: $] | [removed: 83.63] | | | [removed: —] | | | $ | 229,094 | |

| (1) | In addition to shares repurchased under the Board-authorized repurchase program, [removed: we] [added: the Company] acquired [removed: 924,823] [added: 809,427] shares at a total cost of [removed: $67.6] [added: $93.8] million which we withheld through net share settlements to cover minimum tax withholding obligations upon the vesting of restricted stock unit awards granted under our equity compensation plans. The shares retained through these net share settlements are not a part of the Board-authorized repurchase [removed: program] [added: program,] but instead are authorized under our equity compensation plans. |

Lam Research Corporation [removed: 2016] [added: 2017] 10-K [removed: 29][added: 28]

Cumulative [removed: 5-year] [added: Five-Year] Return

The graph below compares Lam Research Corporation’s cumulative [removed: 5-year] [added: five-year] total shareholder return on Common Stock with the cumulative total returns of the [removed: NASDAQ] [added: Nasdaq] Composite index, [added: the Standard & Poor’s (“S&P”) 500 index,] and the Philadelphia [removed: (“PHLX”)] Semiconductor Sector Index.

The graph tracks the performance of a $100 investment in our Common Stock and in each of the indices (with the reinvestment of all dividends) from June 30, [removed: 2011] [added: 2012,] to June 30, [removed: 2016.][added: 2017.]

| COMPARISON OF [removed: 5 YEAR] [added: FIVE-YEAR] CUMULATIVE TOTAL RETURN* | | | |

| | Among Lam Research Corporation, the [removed: NASDAQ] [added: Nasdaq] Composite Index, the S&P 500 Index, and the [removed: PHLX] [added: Philadelphia] Semiconductor Index | | |

[removed: ][added: ]

*$100 invested on [removed: 6/30/2011] [added: 6/30/2012] in stock or index, including reinvestment of dividends.

Fiscal [removed: Year] [added: years] ending June 30.

Lam Research Corporation [removed: 2016] [added: 2017] 10-K [removed: 30][added: 29]

| | 2017 | | | | | | |

| First quarter | $ | 95.77 | | | $ | 79.15 | |

| Second quarter | $ | 108.60 | | | $ | 90.56 | |

| Third quarter | $ | 129.35 | | | $ | 105.30 | |

| Fourth quarter | $ | 167.05 | | | $ | 124.91 | |

In November 2016, the Board of Directors authorized us to repurchase up to $1.0 billion of our Common Stock, which included the remaining value available under our prior authorization.

On April 19, 2017, we entered into two separate accelerated share repurchase agreements (collectively, the “ASR”) with two financial institutions to repurchase a total of $500 million of our Common Stock.

We took an initial delivery of approximately 2,570,000 shares, which represented 70% of the prepayment amount divided by our closing stock price on April 19, 2017.

The total number of shares to be received under the ASR is based upon the average daily volume weighted average price of our Common Stock during the repurchase period, less an agreed upon discount.

Following our fiscal year end, the counterparties designated June 30, 2017, as the termination date, at which time we settled the ASR.

Approximately 780,000 shares were received at final settlement, which represented a weighted-average share price of approximately $149.16 for the transaction period.

| Board-approved increase (November 2016) | | | | | | | | | | | 1,000,000 | | |

| Quarter ended December 25, 2016 | 735 | | | $ | 103.43 | | | 619 | | | 934,986 | | |

| Quarter ended March 26, 2017 | 1,826 | | | $ | 115.12 | | | 1,223 | | | 795,226 | | |

| March 27, 2017 - April 23, 2017 | 2,682 | | | $ | 128.27 | | | 2,672 | | | 282,141 | | |

| April 24, 2017 - May 21, 2017 | 5 | | | $ | 150.58 | | | — | | | 282,141 | | |

| May 22, 2017 - June 25, 2017 | 55 | | | $ | 154.92 | | | — | | | 282,141 | | |

| Total | 5,323 | | | $ | 137.39 | | | 4,514 | | | $ | 282,141 | |

| (2) | Average price paid per share excludes effect of accelerated share repurchases, see additional disclosure above regarding our accelerated share repurchase activity during the fiscal year. |

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Copyright © 2017 Standard & Poor’s, a division of S&P Global.

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| | 6/12 | | | 6/13 | | | 6/14 | | | 6/15 | | | 6/16 | | | 6/17 | |

| Lam Research Corporation | 100.00 | | | 117.49 | | | 179.56 | | | 218.44 | | | 229.31 | | | 391.30 | |

| Nasdaq Composite Index | 100.00 | | | 117.69 | | | 155.50 | | | 177.19 | | | 173.36 | | | 221.11 | |

| S&P 500 Index | 100.00 | | | 120.60 | | | 150.27 | | | 161.43 | | | 167.87 | | | 197.92 | |

| Philadelphia Semiconductor Sector Index | 100.00 | | | 116.96 | | | 156.62 | | | 161.36 | | | 173.61 | | | 241.00 | |

| | |

| --- | --- |

As of August 10, 2016, we had 454 stockholders of record.

| | 2015 | | | | | | |

| First Quarter | $ | 77.35 | | | $ | 66.70 | |

| Second Quarter | $ | 85.70 | | | $ | 65.78 | |

| Third Quarter | $ | 84.49 | | | $ | 69.92 | |

| Fourth Quarter | $ | 84.39 | | | $ | 69.07 | |

On April 29, 2014, the Board of Directors authorized the repurchase of up to $850 million of Common Stock.

We currently are restricted from repurchasing our common stock pursuant to the KLA-Tencor merger agreement.

| Available balance as of June 28, 2015 | | | | | | | | | | | $ | 316,587 | |

| Quarter Ended December 27, 2015 | 184 | | | $ | 69.76 | | | — | | | $ | 229,094 | |

| Quarter Ended March 27, 2016 | 297 | | | $ | 67.63 | | | — | | | $ | 229,094 | |

| March 28, 2016 - April 24, 2016 | 127 | | | $ | 82.54 | | | — | | | $ | 229,094 | |

| April 25, 2016 - May 22, 2016 | 10 | | | $ | 75.03 | | | — | | | $ | 229,094 | |

| Total | 2,130 | | | $ | 72.84 | | | 1,205 | | | $ | 229,094 | |

Copyright© 2016 S&P, a division of McGraw Hill Financial.

| | 6/11 | | | 6/12 | | | 6/13 | | | 6/14 | | | 6/15 | | | 6/16 | |

| Lam Research Corporation | 100.00 | | | 85.23 | | | 100.14 | | | 153.04 | | | 186.18 | | | 195.44 | |

| NASDAQ Composite | 100.00 | | | 108.58 | | | 128.19 | | | 169.08 | | | 192.10 | | | 187.57 | |

| S&P 500 | 100.00 | | | 105.45 | | | 127.17 | | | 158.46 | | | 170.22 | | | 177.02 | |

| PHLX Semiconductor | 100.00 | | | 104.43 | | | 123.18 | | | 166.91 | | | 174.92 | | | 184.43 | |

| | Year [removed: Ended(1)] [added: Ended] | | | | | | | | | | | | | | | | | | | [added: |]

| June [added: 25, 2017 | | | | June] 26, 2016 | | | | June 28, 2015 | | | | June 29, 2014 | | | | June 30, 2013 | | | | [removed: June 24, 2012] | [removed: | | |]

| | (in thousands, except per share data) | | | | | | | | | | | | | | | | | | | [added: |]

| OPERATIONS: | | | | | | | | | | | | | | | | | | | | [added: |]

| Revenue | $ | [removed: 5,885,893] [added: 8,013,620] | | | $ | [removed: 5,259,312] [added: 5,885,893] | | | $ | [removed: 4,607,309] [added: 5,259,312] | | | $ | [removed: 3,598,916] [added: 4,607,309] | | | $ | [removed: 2,665,192] [added: 3,598,916] | | [added: |]

| Gross margin | [added: 3,603,359 | | | |] 2,618,922 | | | | 2,284,336 | | | | 2,007,481 | | | | 1,403,059 | | | | [removed: 1,084,069 | | |]

| Goodwill impairment [removed: (2)] [added: (1)] | — | | | | [removed: 79,444] [added: —] | | | | [removed: —] [added: 79,444] | | | | — | | | | — | | | [added: |]

| Restructuring charges, net | — | | | | — | | | | — | | | | [removed: 1,813] [added: —] | | | | [removed: 1,725] [added: 1,813] | | | [added: |]

| Operating income | [added: 1,902,132 | | | |] 1,074,256 | | | | 788,039 | | | | 677,669 | | | | 118,071 | | | | [removed: 237,733 | | |]

| Net income | [added: 1,697,763 | | | |] 914,049 | | | | 655,577 | | | | 632,289 | | | | 113,879 | | | | [removed: 168,723 | | |]

| Net income per share: | | | | | | | | | | | | | | | | | | | | [added: |]

| Basic | $ | [removed: 5.75] [added: 10.47] | | | $ | [removed: 4.11] [added: 5.75] | | | $ | [removed: 3.84] [added: 4.11] | | | $ | [removed: 0.67] [added: 3.84] | | | $ | [removed: 1.36] [added: 0.67] | | [added: |]

| Diluted | $ | [removed: 5.22] [added: 9.24] | | | $ | [removed: 3.70] [added: 5.22] | | | $ | [removed: 3.62] [added: 3.70] | | | $ | [removed: 0.66] [added: 3.62] | | | $ | [removed: 1.35] [added: 0.66] | | [added: |]

| Cash dividends declared per common share | $ | [removed: 1.20] [added: 1.65] | | | $ | [removed: 0.84] [added: 1.20] | | | $ | [removed: 0.18] [added: 0.84] | | | $ | [removed: —] [added: 0.18] | | | $ | — | | [added: |]

| BALANCE SHEET: | | | | | | | | | | | | | | | | | | | | [added: |]

| Working capital | $ | [removed: 6,795,109] [added: 6,192,383] | | | $ | [removed: 3,639,488] [added: 6,795,109] | | | $ | [removed: 3,201,661] [added: 3,639,488] | | | $ | [removed: 2,389,354] [added: 3,201,661] | | | $ | [removed: 2,988,181] [added: 2,389,354] | | [added: |]

| Current portion of long-term debt and capital leases | [removed: 949,494] [added: 908,439] | | | | [removed: 1,359,650] [added: 947,733] | | | [added: (2)] | [removed: 518,267] [added: 1,355,705] | | | [added: (2)] | [removed: 514,655] [added: 518,267] | | | | [removed: 511,139] [added: 514,655] | | | [added: |]

| [removed: (2)] [added: (1)] | Goodwill impairment analysis during fiscal year 2015 resulted in a non-cash impairment charge to our [removed: single-wafer clean] [added: Single-Wafer Clean] reporting unit, extinguishing the goodwill ascribed to the reporting unit. |

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Lam Research Corporation [removed: 2016] [added: 2017] 10-K [removed: 31][added: 30]

[removed: ][added: ]

| June [removed: 28, 2015] [added: 25, 2017] | | | | March [removed: 29, 2015] [added: 26, 2017] | | | | December [removed: 28, 2014] [added: 25, 2016] | | | | September [removed: 28, 2014] [added: 25, 2016] | | | |

| QUARTERLY FISCAL YEAR [removed: 2015:] [added: 2017:] | | | | | | | | | | | | | | | |

| (1) | Our reporting period is a 52/53-week fiscal year. The fiscal years ended June [removed: 26, 2016] [added: 25, 2017,] and June [removed: 28, 2015] [added: 26, 2016,] included 52 weeks. All quarters presented above included 13 weeks. |

| | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | | | | | | |

| Total assets | 12,122,765 | | | | 12,264,315 | | | (2) | 9,358,904 | | | (2) | 7,986,998 | | | (2) | 7,241,645 | | | (2) |

| Long-term obligations, less current portion | 2,185,338 | | | | 3,744,205 | | | (2) | 1,386,536 | | | (2) | 1,191,913 | | | (2) | 1,161,378 | | | (2) |

| (2) | Adjusted for effects of retrospective implementation of ASU 2015-3, see Notes 3 and 13 to the Consolidated Financial Statements contained in Part II, Item 8. |

| Revenue | $ | 2,344,907 | | | $ | 2,153,995 | | | $ | 1,882,299 | | | $ | 1,632,419 | |

| Gross margin | 1,068,961 | | | | 971,404 | | | | 846,797 | | | | 716,197 | | |

| Operating income | 607,939 | | | | 538,418 | | | | 439,828 | | | | 315,947 | | |

| Net income | 526,424 | | | | 574,713 | | | | 332,791 | | | | 263,835 | | |

| Basic | $ | 3.25 | | | $ | 3.52 | | | $ | 2.05 | | | $ | 1.64 | |

| Diluted | $ | 2.82 | | | $ | 3.10 | | | $ | 1.81 | | | $ | 1.47 | |

| Basic | 162,213 | | | | 163,408 | | | | 162,659 | | | | 160,607 | | |

| Diluted | 186,427 | | | | 185,094 | | | | 183,543 | | | | 180,017 | | |

| | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Total assets | 12,271,528 | | | | 9,364,648 | | | | 7,993,306 | | | | 7,250,315 | | | | 8,004,652 | | |

| Long-term obligations, less current portion | 3,749,657 | | | | 1,388,335 | | | | 1,198,221 | | | | 1,170,048 | | | | 1,255,600 | | |

| (1) | Fiscal years 2016, 2015, 2014, and 2013 amounts include operating results of Novellus. Fiscal year 2012 amounts include 20 days of operating results of Novellus from the acquisition date of June 4, 2012. The Novellus acquisition was accounted for as a business combination in accordance with the applicable accounting guidance. |

| Revenue | $ | 1,481,370 | | | $ | 1,393,333 | | | $ | 1,232,241 | | | $ | 1,152,368 | |

| Gross margin | 641,538 | | | | 600,602 | | | | 536,657 | | | | 505,539 | | |

| Goodwill impairment | 79,444 | | | | — | | | | — | | | | — | | |

| Operating income | 191,035 | | | | 239,965 | | | | 188,741 | | | | 168,298 | | |

| Net income | 131,271 | | | | 206,285 | | | | 176,940 | | | | 141,081 | | |

| Basic | $ | 0.83 | | | $ | 1.30 | | | $ | 1.11 | | | $ | 0.87 | |

| Diluted | $ | 0.74 | | | $ | 1.16 | | | $ | 1.00 | | | $ | 0.80 | |

| Basic | 158,590 | | | | 158,992 | | | | 159,248 | | | | 161,685 | | |

| Diluted | 176,575 | | | | 177,531 | | | | 177,046 | | | | 177,118 | | |

| Consolidated Statements of Operations — Years Ended June [added: 25, 2017, June] 26, 2016, [removed: June 28, 2015,] and June [removed: 29, 2014] [added: 28, 2015] | [removed: [52](#sAE5CE74A9C2FC7C652393B687F57B174)] [added: [50](#s3FDB6D6D5DD65D0AB0511A9A1745F5D9)] |

| Consolidated Statements of Comprehensive Income — Years Ended June [added: 25, 2017, June] 26, 2016, [removed: June 28, 2015,] and June [removed: 29, 2014] [added: 28, 2015] | [removed: [53](#s3CB15857A8C509C8050D3B687C30E6D4)] [added: [51](#s025045BD6B6954788227E11472E2E23D)] |

| Consolidated Balance Sheets — June [removed: 26, 2016] [added: 25, 2017,] and June [removed: 28, 2015] [added: 26, 2016] | [removed: [54](#s16D7C265876CFB02F0703B687F11A8AC)] [added: [52](#s20E006B5811252F181EDE663233024F4)] |

| Consolidated Statements of Cash Flows — Years Ended June [added: 25, 2017, June] 26, 2016, [removed: June 28, 2015,] and June [removed: 29, 2014] [added: 28, 2015] | [removed: [55](#s841D8C95643C3C4BA80C3B687FC70CA4)] [added: [53](#s738FDE6518A95227A6392A1360E4067B)] |

| Consolidated Statements of Stockholders’ Equity — Years Ended June [added: 25, 2017, June] 26, 2016, [removed: June 28, 2015,] and June [removed: 29, 2014] [added: 28, 2015] | [removed: [57](#s3E2A37DFF918C5ED14473B6880249BF0)] [added: [55](#sEA17F4791D0E5D90B34BBC6C5A657FC8)] |

| Notes to Consolidated Financial Statements | [removed: [58](#sBBC2E580623282E96E4A3B68AAC4E49A)] [added: [56](#sB8214FBD66635701A9E1A247C25AF75A)] |

| Reports of Independent Registered Public Accounting Firm | [removed: [98](#s50DE6F94C93E973C6A153B68B2CB8401)] [added: [93](#s46DA60CD25B353089DDAA8F89C61CBA7)] |

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Lam Research Corporation [removed: 2016] [added: 2017] 10-K [removed: 51][added: 49]

[removed: ][added: ]

| June [removed: 26, 2016] [added: 25, 2017] | | | | June [removed: 28, 2015] [added: 26, 2016] | | | | June [removed: 29, 2014] [added: 28, 2015] | | | |

| Revenue | $ | [removed: 5,885,893] [added: 8,013,620] | | | $ | [removed: 5,259,312] [added: 5,885,893] | | | $ | [removed: 4,607,309] [added: 5,259,312] | |

| Cost of goods sold | [removed: 3,266,971] [added: 4,410,261] | | | | [removed: 2,974,976] [added: 3,266,971] | | | | [removed: 2,599,828] [added: 2,974,976] | | |

| Gross margin | [removed: 2,618,922] [added: 3,603,359] | | | | [removed: 2,284,336] [added: 2,618,922] | | | | [removed: 2,007,481] [added: 2,284,336] | | |

| Research and development | [removed: 913,712] [added: 1,033,742] | | | | [removed: 825,242] [added: 913,712] | | | | [removed: 716,471] [added: 825,242] | | |

| Selling, [removed: general] [added: general,] and administrative | [removed: 630,954] [added: 667,485] | | | | [removed: 591,611] [added: 630,954] | | | | [removed: 613,341] [added: 591,611] | | |

| Goodwill impairment | — | | | | [removed: 79,444] [added: —] | | | | [removed: —] [added: 79,444] | | |

| Total operating expenses | [removed: 1,544,666] [added: 1,701,227] | | | | [removed: 1,496,297] [added: 1,544,666] | | | | [removed: 1,329,812] [added: 1,496,297] | | |

| Operating income | [removed: 1,074,256] [added: 1,902,132] | | | | [removed: 788,039] [added: 1,074,256] | | | | [removed: 677,669] [added: 788,039] | | |

| Other expense, net | [removed: (114,139] [added: (90,459] | | ) | | [removed: (47,189] [added: (114,139] | | ) | | [removed: (37,396] [added: (47,189] | | ) |

| Income before income taxes | [removed: 960,117] [added: 1,811,673] | | | | [removed: 740,850] [added: 960,117] | | | | [removed: 723,363] [added: 740,850] | | |

| Income tax expense | [removed: (46,068] [added: (113,910] | | ) | | [removed: (85,273] [added: (46,068] | | ) | | [removed: (91,074] [added: (85,273] | | ) |

| Net income | $ | [removed: 914,049] [added: 1,697,763] | | | $ | [removed: 655,577] [added: 914,049] | | | $ | [removed: 632,289] [added: 655,577] | |

| Basic | $ | [removed: 5.75] [added: 10.47] | | | $ | [removed: 4.11] [added: 5.75] | | | $ | [removed: 3.84] [added: 4.11] | |

| Diluted | $ | [removed: 5.22] [added: 9.24] | | | $ | [removed: 3.70] [added: 5.22] | | | $ | [removed: 3.62] [added: 3.70] | |

| Basic | [removed: 158,919] [added: 162,222] | | | | [removed: 159,629] [added: 158,919] | | | | [removed: 164,741] [added: 159,629] | | |

| Diluted | [removed: 175,159] [added: 183,770] | | | | [removed: 177,067] [added: 175,159] | | | | [removed: 174,503] [added: 177,067] | | |

Lam Research Corporation [removed: 2016] [added: 2017] 10-K [removed: 52][added: 50]

| Foreign currency translation adjustment | [removed: (4,403] [added: (2,843] | | ) | | [removed: (22,139] [added: (4,403] | | ) | | [removed: 4,192] [added: (22,139] | | [added: )] |

| Net unrealized [removed: (losses)] gains [added: (losses)] during the period | [removed: (17,725] [added: 5,841] | | [removed: )] | | [removed: 1,595] [added: (17,725] | | [added: )] | | [removed: 8,004] [added: 1,595] | | |

| Net losses (gains) reclassified into earnings | [removed: 4,961] [added: 8,971] | | | | [removed: (4,388] [added: 4,961] | | [removed: )] | | [removed: (10,892] [added: (4,388] | | ) |

| | [removed: (12,764] [added: 14,812] | | [removed: )] | | [removed: (2,793] [added: (12,764] | | ) | | [removed: (2,888] [added: (2,793] | | ) |

| Net unrealized [removed: gains] (losses) [added: gains] during the period | [removed: 9,028] [added: (3,789] | | [added: )] | | [removed: (5,389] [added: 9,028] | | [removed: )] | | [removed: 1,407] [added: (5,389] | | [added: )] |

| Net (gains) losses reclassified into earnings | [removed: (371] [added: (1] | | ) | | [removed: 71] [added: (371] | | [added: )] | | [removed: 165] [added: 71] | | |