Item 8. Financial Statements and Supplementary Data

Index to Consolidated Financial Statements

			Page
Consolidated Statements of Operations — Years Ended June 27, 2021, June 28, 2020, and June 30, 2019			41
Consolidated Statements of Comprehensive Income — Years Ended June 27, 2021, June 28, 2020, and June 30, 2019			42
Consolidated Balance Sheets — June 27, 2021, and June 28, 2020			43
Consolidated Statements of Cash Flows — Years Ended June 27, 2021, June 28, 2020, and June 30, 2019			44
Consolidated Statements of Stockholders’ Equity — Years Ended June 27, 2021, June 28, 2020, and June 30, 2019			46
Notes to Consolidated Financial Statements			47
Reports of Independent Registered Public Accounting Firm			74

Lam Research Corporation 2021 10-K 40

LAM RESEARCH CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

			Year Ended
June 27, 2021						June 28, 2020						June 30, 2019
Revenue			$	14,626,150					$	10,044,736					$	9,653,559
Cost of goods sold			7,820,844						5,436,043						5,295,100
Gross margin			6,805,306						4,608,693						4,358,459
Research and development			1,493,408						1,252,412						1,191,320
Selling, general, and administrative			829,875						682,479						702,407
Total operating expenses			2,323,283						1,934,891						1,893,727
Operating income			4,482,023						2,673,802						2,464,732
Other expense, net			(111,219)						(98,824)						(18,161)
Income before income taxes			4,370,804						2,574,978						2,446,571
Income tax expense			(462,346)						(323,225)						(255,141)
Net income			$	3,908,458					$	2,251,753					$	2,191,430
Net income per share:
Basic			$	27.22					$	15.55					$	14.37
Diluted			$	26.90					$	15.10					$	13.70
Number of shares used in per share calculations:
Basic			143,609						144,814						152,478
Diluted			145,320						149,090						159,915

See Notes to Consolidated Financial Statements

Lam Research Corporation 2021 10-K 41

LAM RESEARCH CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

			Year Ended
June 27, 2021						June 28, 2020						June 30, 2019
Net income			$	3,908,458					$	2,251,753					$	2,191,430
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment			14,398						(6,441)						(6,648)
Cash flow hedges:
Net unrealized gains (losses) during the period			22,139						(30,603)						2,461
Net (gains) losses reclassified into net income			(3,468)						2,137						(2,749)
			18,671						(28,466)						(288)
Available-for-sale investments:
Net unrealized (losses) gains during the period			(4,098)						1,842						3,535
Net losses (gains) reclassified into net income			786						935						(199)
			(3,312)						2,777						3,336
Defined benefit plans, net change in unrealized component			326						1,949						(2,981)
Other comprehensive income (loss), net of tax			30,083						(30,181)						(6,581)
Comprehensive income			$	3,938,541					$	2,221,572					$	2,184,849

See Notes to Consolidated Financial Statements

Lam Research Corporation 2021 10-K 42

LAM RESEARCH CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

			June 27, 2021						June 28, 2020
ASSETS:
Cash and cash equivalents			$	4,418,263					$	4,915,172
Investments			1,310,872						1,795,080
Accounts receivable, less allowance of $5,255 as of June 27, 2021 and $5,465 as of June 28, 2020			3,026,430						2,097,099
Inventories			2,689,294						1,900,024
Prepaid expenses and other current assets			207,528						146,160
Total current assets			11,652,387						10,853,535
Property and equipment, net			1,303,479						1,071,499
Restricted cash and investments			252,487						253,911
Goodwill			1,490,134						1,484,436
Intangible assets, net			132,365						168,532
Other assets			1,061,300						727,134
Total assets			$	15,892,152					$	14,559,047
LIABILITIES AND STOCKHOLDERS’ EQUITY:
Trade accounts payable			$	829,710					$	592,387
Accrued expenses and other current liabilities			1,719,483						1,272,655
Deferred profit			967,325						457,523
Current portion of long-term debt and finance lease obligations			11,349						839,877
Total current liabilities			3,527,867						3,162,442
Long-term debt and finance lease obligations, less current portion			4,990,333						4,970,848
Income taxes payable			948,037						909,709
Other long-term liabilities			398,727						332,559
Total liabilities			9,864,964						9,375,558
Commitments and contingencies
Temporary equity, convertible notes			—						10,995
Stockholders’ equity:
Preferred stock, at par value of $0.001 per share; authorized - 5,000 shares, none outstanding			—						—
Common stock, at par value of $0.001 per share; authorized 400,000 shares as of June 27, 2021 and June 28, 2020; issued and outstanding 142,501 shares as of June 27, 2021, and 145,331 shares as of June 28, 2020			143						145
Additional paid-in capital			7,052,962						6,695,858
Treasury stock, at cost, 150,766 shares as of June 27, 2021, and 145,432 shares as of June 28, 2020			(15,646,701)						(12,949,889)
Accumulated other comprehensive loss			(64,128)						(94,211)
Retained earnings			14,684,912						11,520,591
Total stockholders’ equity			6,027,188						5,172,494
Total liabilities and stockholders’ equity			$	15,892,152					$	14,559,047

See Notes to Consolidated Financial Statements

Lam Research Corporation 2021 10-K 43

LAM RESEARCH CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

			Year Ended
June 27, 2021						June 28, 2020						June 30, 2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income			$	3,908,458					$	2,251,753					$	2,191,430
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			307,151						268,525						309,281
Deferred income taxes			(151,477)						(17,777)						(4,980)
Equity-based compensation expense			220,164						189,197						187,234
Other, net			(17,392)						6,628						1,524
Changes in operating asset and liability accounts:
Accounts receivable, net of allowance			(928,928)						(641,827)						732,138
Inventories			(792,591)						(411,608)						281,355
Prepaid expenses and other assets			(59,189)						(14,354)						(17,864)
Trade accounts payable			184,615						208,478						(131,472)
Deferred profit			508,008						76,207						(178,074)
Accrued expenses and other liabilities			409,344						211,229						(194,559)
Net cash provided by operating activities			3,588,163						2,126,451						3,176,013
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures and intangible assets			(349,096)						(203,239)						(303,491)
Purchases of available-for-sale securities			(3,389,388)						(2,897,627)						(2,930,049)
Proceeds from maturities of available-for-sale securities			2,381,758						1,647,379						466,539
Proceeds from sales of available-for-sale securities			1,472,152						1,235,248						1,137,302
Other, net			(42,155)						(25,845)						(7,355)
Net cash provided by (used for) investing activities			73,271						(244,084)						(1,637,054)

Lam Research Corporation 2021 10-K 44

			Year Ended
June 27, 2021						June 28, 2020						June 30, 2019
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of long-term debt			$	—					$	1,974,651					$	2,476,720
Principal payments on long-term debt and finance lease obligations and payments for debt issuance costs			(862,060)						(667,537)						(117,653)
Net (repayment) from commercial paper			—						—						(361,754)
Proceeds from borrowings on revolving credit facility			—						1,250,000						—
Repayment of borrowings on revolving credit facility			—						(1,250,000)						—
Treasury stock purchases			(2,697,704)						(1,369,649)						(3,780,611)
Dividends paid			(726,992)						(656,838)						(678,348)
Reissuances of treasury stock related to employee stock purchase plan			97,764						85,439						77,961
Proceeds from issuance of common stock			24,123						8,084						6,813
Other, net			(2,113)						1,920						(13,208)
Net cash used for financing activities			(4,166,982)						(623,930)						(2,390,080)
Effect of exchange rate changes on cash, cash equivalents and restricted cash			7,215						(2,750)						(4,041)
Net (decrease) increase in cash, cash equivalents and restricted cash			(498,333)						1,255,687						(855,162)
Cash, cash equivalents and restricted cash at beginning of year			5,169,083						3,913,396						4,768,558
Cash, cash equivalents and restricted cash at end of year			$	4,670,750					$	5,169,083					$	3,913,396
Schedule of non-cash transactions
Accrued payables for stock repurchases			$	20,005					$	82					$	29
Accrued payables for capital expenditures			61,392						37,812						23,185
Dividends payable			185,431						167,129						158,868
Transfers of finished goods inventory to property and equipment			80,252						51,694						54,533
Supplemental disclosures:
Cash payments for interest			$	203,932					$	171,889					$	76,933
Cash payments for income taxes, net			518,567						222,909						300,268
Reconciliation of cash, cash equivalents, and restricted cash			June 27, 2021						June 28, 2020						June 30, 2019
Cash and cash equivalents			$	4,418,263					$	4,915,172					$	3,658,219
Restricted cash and cash equivalents			252,487						253,911						255,177
Total cash, cash equivalents, and restricted cash			$	4,670,750					$	5,169,083					$	3,913,396

See Notes to Consolidated Financial Statements

Lam Research Corporation 2021 10-K 45

LAM RESEARCH CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except per common share data)

			Common Stock Shares						Common Stock						Additional Paid-in Capital						Treasury Stock						Accumulated Other Comprehensive Income(Loss)						Retained Earnings						Total
Balance at June 24, 2018			156,892						$	157					$	6,144,425					$	(7,846,476)					$	(57,449)					$	8,261,194					$	6,501,851
Issuance of common stock			1,090						1						6,812						—						—						—						6,813
Purchase of treasury stock			(21,059)						(21)						—						(3,780,503)						—						—						(3,780,524)
Reissuance of treasury stock			622						—						53,555						24,406						—						—						77,961
Equity-based compensation expense			—						—						187,234						—						—						—						187,234
Effect of conversion of convertible notes			2,783						3						(11,361)						—						—						—						(11,358)
Exercise of warrants			4,105						4						(12)						—						—						—						(8)
Reclassification from temporary to permanent equity			—						—						28,752						—						—						—						28,752
Adoption of ASU 2014-09			—						—						—						—						—						139,355						139,355
Adoption of ASU 2016-16			—						—						—						—						—						(443)						(443)
Adoption of ASU 2018-02			—						—						—						—						(2,227)						2,227						—
Net income			—						—						—						—						—						2,191,430						2,191,430
Other comprehensive loss			—						—						—						—						(4,354)						—						(4,354)
Cash dividends declared ($4.40 per common share)			—						—						—						—						—						(662,844)						(662,844)
Balance at June 30, 2019			144,433						144						6,409,405						(11,602,573)						(64,030)						9,930,919						4,673,865
Issuance of common stock			1,288						1						8,083						—						—						—						8,084
Purchase of treasury stock			(5,371)						(5)						—						(1,369,697)						—						—						(1,369,702)
Reissuance of treasury stock			513						1						63,057						22,381						—						—						85,439
Equity-based compensation expense			—						—						189,197						—						—						—						189,197
Effect of conversion of convertible notes			4,468						4						(12,328)						—						—						—						(12,324)
Reclassification from temporary to permanent equity			—						—						38,444						—						—						—						38,444
Adoption of ASU 2016-02			—						—						—						—						—						3,018						3,018
Net income			—						—						—						—						—						2,251,753						2,251,753
Other comprehensive loss			—						—						—						—						(30,181)						—						(30,181)
Cash dividends declared ($4.60 per common share)			—						—						—						—						—						(665,099)						(665,099)
Balance at June 28, 2020			145,331						145						6,695,858						(12,949,889)						(94,211)						11,520,591						5,172,494
Issuance of common stock			1,089						$	1					$	24,122					$	—					$	—					$	—					$	24,123
Purchase of treasury stock			(5,819)						(5)						—						(2,717,622)						—						—						(2,717,627)
Reissuance of treasury stock			484						—						76,954						20,810						—						—						97,764
Equity-based compensation expense			—						—						220,164						—						—						—						220,164
Effect of conversion of convertible notes			1,416						2						24,869						—						—						—						24,871
Reclassification from temporary to permanent equity			—						—						10,995						—						—						—						10,995
Adoption of ASU 2018-18			—						—						—						—						—						1,157						1,157
Net income			—						—						—						—						—						3,908,458						3,908,458
Other comprehensive income			—						—						—						—						30,083						—						30,083
Cash dividends declared ($5.20 per common share)			—						—						—						—						—						(745,294)						(745,294)
Balance at June 27, 2021			142,501						$	143					$	7,052,962					$	(15,646,701)					$	(64,128)					$	14,684,912					$	6,027,188

See Notes to Consolidated Financial Statements

Lam Research Corporation 2021 10-K 46

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 27, 2021

Note 1: Company and Industry Information

The Company designs, manufactures, markets, refurbishes, and services semiconductor processing equipment used in the fabrication of integrated circuits. Semiconductor manufacturing, our customers’ business, involves the complete fabrication of multiple dies or integrated circuits on a wafer. This involves the repetition of a set of core processes and can require hundreds of individual steps. Fabricating these devices requires highly sophisticated process technologies to integrate an increasing array of new materials with precise control at the atomic scale. Along with meeting technical requirements, wafer processing equipment must deliver high productivity and be cost-effective.

The Company sells its products and services primarily to companies involved in the production of semiconductors in the United States, China, Europe, Japan, Korea, Southeast Asia, and Taiwan.

The semiconductor industry is cyclical in nature and has historically experienced periodic downturns and upturns. Today’s leading indicators of changes in customer investment patterns, such as electronics demand, memory pricing, and foundry utilization rates, may not be any more reliable than in prior years. Demand for the Company’s equipment can vary significantly from period to period as a result of various factors including, but not limited to economic conditions; supply, demand, and prices for semiconductors; customer capacity requirements; and the Company’s ability to develop and market competitive products. For these and other reasons, the Company’s results of operations for fiscal years 2021, 2020, and 2019 may not necessarily be indicative of future operating results.

Note 2: Summary of Significant Accounting Policies

The preparation of financial statements in conformity with GAAP requires management to make judgments, estimates, and assumptions that could affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. The Company bases its estimates and assumptions on historical experience and on various other assumptions it believes to be applicable and evaluates them on an ongoing basis to ensure they remain reasonable under current conditions. Actual results could differ significantly from those estimates.

Revenue Recognition: The Company recognizes revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services by following a five-step process, (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when or as the Company satisfies a performance obligation, as further described below.

Identify the contract with a customer. The Company generally considers documentation of terms with an approved purchase order as a customer contract provided that collection is considered probable, which is assessed based on the creditworthiness of the customer as determined by credit checks, payment histories, and/or other circumstances.

Identify the performance obligations in the contract. Performance obligations include sales of systems, spare parts, and services. In addition, customer contracts contain provisions for installation and training services which have been deemed immaterial in the context of the contract.

Determine the transaction price. The transaction price for the Company’s contracts with its customers consists of both fixed and variable consideration provided it is probable that a significant reversal of revenue will not occur when the uncertainty related to variable consideration is resolved. Fixed consideration includes amounts to be contractually billed to the customer while variable consideration includes estimates for discounts and credits for future usage which are based on contractual terms outlined in volume purchase agreements and other factors known at the time. The Company generally invoices customers at shipment and for professional services either as provided or upon meeting certain milestones. Customer invoices are generally due within 30 to 90 days after issuance. The Company’s contracts with customers typically do not include significant financing components as the period between the transfer of performance obligations and timing of payment are generally within one year.

Allocate the transaction price to the performance obligations in the contract. For contracts that contain multiple performance obligations, the Company allocates the transaction price to the performance obligations on a relative standalone selling price basis. Standalone selling prices are based on multiple factors including, but not limited to historical discounting trends for products and services and pricing practices in different geographies.

Recognize revenue when or as the Company satisfies a performance obligation. Revenue for systems and spares are recognized at a point in time, which is generally upon shipment or delivery. Revenue from services is recognized over time as services are completed or ratably over the contractual period of generally one year or less.

Inventory Valuation: Inventories are stated at the lower of cost or net realizable value using standard costs that approximate actual costs on a first-in, first-out basis. Finished goods are reported as inventories until the point of title transfer to the customer. Unless

Lam Research Corporation 2021 10-K 47

specified in the terms of sale, title generally transfers at the physical transfer of the products to the freight carriers. Transfer of title for shipments to Japanese customers occurs at the time of customer acceptance.

Management evaluates the need to record adjustments for impairment of inventory at least quarterly. The Company’s policy is to assess the valuation of all inventories including manufacturing raw materials, work-in-process, finished goods, and spare parts in each reporting period. Obsolete inventory or inventory in excess of management’s estimated usage requirement is written down to its estimated market value if less than cost. Estimates of market value include but are not limited to management’s forecasts related to the Company’s future manufacturing schedules, customer demand, technological and/or market obsolescence, general semiconductor market conditions, and possible alternative uses. If future customer demand or market conditions are less favorable than the Company’s projections, additional inventory write-downs may be required and would be reflected in cost of goods sold in the period in which the revision is made.

Warranty: Typically, the sale of semiconductor capital equipment includes providing parts and service warranties to customers as part of the overall price of the system. The Company provides standard warranties for its systems. The Company records a provision for estimated warranty expenses to cost of sales for each system when it recognizes revenue. The Company does not maintain general or unspecified reserves; all warranty reserves are related to specific systems. All actual or estimated parts and labor costs incurred in subsequent periods are charged to those established reserves on a system-by-system basis.

While the Company periodically monitors the performance and cost of warranty activities, if actual costs incurred are different than its estimates, the Company may recognize adjustments to provisions in the period in which those differences arise or are identified. In addition to the provision of standard warranties, the Company offers customer-paid extended warranty services. Revenues for extended maintenance and warranty services with a fixed payment amount are recognized on a straight-line basis over the term of the contract. Related costs are recorded as incurred.

Equity-based Compensation — Employee Stock Plans: The Company recognizes the fair value of equity-based compensation expense. The Company determines the fair value of its RSUs, excluding market-based performance RSUs, based upon the fair market value of Company’s Common Stock at the date of grant, discounted for dividends. The Company estimates the fair value of its market-based performance RSUs using a Monte Carlo simulation model at the date of the grant. The Company estimates the fair value of its stock options using a Black-Scholes option valuation model. This model requires the input of subjective assumptions, including expected stock price volatility and the estimated life of each award. The Company amortizes the fair value of equity-based awards over the vesting periods of the award, and the Company has elected to use the straight-line method of amortization.

Income Taxes: Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as the tax effect of carryforwards. The Company records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. Realization of its net deferred tax assets is dependent on future taxable income. The Company believes it is more likely than not that such assets will be realized; however, ultimate realization could be negatively impacted by market conditions and other variables not known or anticipated at this time. In the event that the Company determines that it will not be able to realize all or part of its net deferred tax assets, an adjustment will be charged to earnings in the period such determination is made. Likewise, if the Company later determines that it is more likely than not that the deferred tax assets will be realized, then the previously provided valuation allowance will be reversed.

The Company recognizes the benefit from a tax position only if it is more likely than not that the position will be sustained upon audit based solely on the technical merits of the tax position. The Company’s policy is to include interest and penalties related to uncertain tax positions as a component of income tax expense.

Goodwill and Intangible Assets: The valuation of intangible assets acquired in a business combination requires the use of management estimates including but not limited to estimating future expected cash flows from assets acquired and determining discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable, and as a result, actual results may differ from estimates. Estimates associated with the accounting for acquisitions may change as additional information becomes available. The Company amortizes intangible assets with estimable useful lives over their respective estimated useful lives.

Goodwill represents the amount by which the purchase price in each business combination exceeds the fair value of the net tangible and identifiable intangible assets acquired. Each component of the Company for which discrete financial information is available and for which management regularly reviews the results of operations is considered a reporting unit. All goodwill acquired in a business combination is assigned to one or more reporting units as of the acquisition date. Goodwill is assigned to the Company’s reporting units that are expected to benefit from the synergies of the combination. The goodwill assigned to a reporting unit is the difference between the acquisition consideration assigned to the reporting unit on a relative fair value basis and the fair value of acquired assets and liabilities that can be specifically attributed to the reporting unit.

The Company reviews goodwill at least annually for impairment during the fourth quarter of each fiscal year and if certain events or indicators of impairment occur between annual impairment tests. The process of evaluating the potential impairment of goodwill requires significant judgment. When reviewing goodwill for impairment, the Company first performs a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. In performing a

Lam Research Corporation 2021 10-K 48

qualitative assessment, it consider business conditions and other factors including, but not limited to (i) adverse industry or economic trends, (ii) restructuring actions and lower projections that may impact future operating results, (iii) sustained decline in share price, and (iv) overall financial performance and other events affecting the reporting units. If the Company concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then a quantitative impairment test is performed by estimating the fair value of the reporting unit and comparing it to its carrying value, including goodwill allocated to that reporting unit. The Company did not record impairments of goodwill during the years ended June 27, 2021, June 28, 2020, or June 30, 2019.

The Company determines the fair value of its reporting units by using an income approach. Under the income approach, the Company determines fair value based on estimated future cash flows of each reporting unit, discounted by an estimated weighted-average cost of capital, which reflects the overall level of inherent risk of a reporting unit and the rate of return an outside investor would expect to earn.

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

If after completing the quantitative assessment the carrying value of a reporting unit exceeds its fair value, the Company would record an impairment charge equal to the excess of the carrying value of the reporting unit over its fair value, up to the amount the goodwill assigned to the reporting unit.

Impairment of Long-lived Assets (Excluding Goodwill): The Company reviews intangible assets whenever events or circumstances indicate that the carrying value of an asset or asset group may not be recoverable. If such indicators are present, the Company determines whether the sum of the estimated undiscounted cash flows attributable to the assets is less than their carrying value. If the sum is less, the Company recognizes an impairment loss based on the excess of the carrying amount of the assets over their respective fair values. Fair value is determined by discounted future cash flows, appraisals, or other methods. The Company recognizes an impairment charge to the extent the fair value attributable to the asset are less than the asset’s carrying value. The fair value of the asset then becomes the asset’s new carrying value, which the Company depreciates over the remaining estimated useful life of the asset. Assets to be disposed of are reported at the lower of the carrying amount or fair value. For the periods presented, there was no impairment of long-lived assets. In addition, for fully amortized intangible assets, we derecognize the gross cost and accumulated amortization in the period we determine the intangible asset no longer enhances future cash flows.

Fiscal Year: The Company follows a 52/53-week fiscal reporting calendar, and its fiscal year ends on the last Sunday of June each year. The Company’s most recent fiscal years ended June 27, 2021 and June 28, 2020 each included 52 weeks, and the fiscal year ended June 30, 2019 included 53 weeks.

Principles of Consolidation: The Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Cash Equivalents and Investments: Investments purchased with an original maturity of three months or less are considered cash equivalents. The Company also invests in certain mutual funds, which include equity and fixed-income securities, related to its obligations under its deferred compensation plan, and such investments are classified as trading securities on the consolidated balance sheets. All of the Company’s other investments are classified as available-for-sale at the respective balance sheet dates. The Company accounts for its investment portfolio at fair value. Investments classified as trading securities are recorded at fair value based upon quoted market prices. Differences between the cost and fair value of trading securities are recognized as other expense, net in the Consolidated Statement of Operations. The investments classified as available-for-sale are recorded at fair value based upon quoted market prices, and difference between the cost and fair value of available-for-sale securities is presented as a component of accumulated other comprehensive income (loss). Following the adoption of Accounting Standard Codification Topic 326 (see additional information in Note 3: Recent Accounting Pronouncements), under Subtopic 326-30, the Company evaluates its investments with fair value less than amortized cost by first considering whether the Company has the intent to sell the security or whether it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis. In either such situation, the difference between fair value and amortized cost is recognized as a loss in the income statement. Where such sales are not likely to occur, the Company considers whether a portion of the loss is the result of a credit loss. To the extent such losses are the result of credit losses, those amounts are recognized in the income statement. All other differences between fair value and amortized cost are recognized in other comprehensive income. No such losses were recognized through the income statement during the year ended June 27, 2021. No other-than-temporary impairment charges were recognized during the years ended June 28, 2020 or June 30, 2019.

Allowance for Expected Credit Losses: The Company maintains an allowance for expected losses resulting from the inability of its customers to make required payments. The Company evaluates its allowance for expected credit losses based on a combination of factors. In circumstances where specific invoices are deemed uncollectible, the Company provides a specific allowance against the amount due to reduce the net recognized receivable to the amount it reasonably believes will be collected. The Company also

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provides allowances based on its write-off history. Bad debt expense was not material for fiscal years ended June 27, 2021, June 28, 2020, and June 30, 2019.

Property and Equipment: Property and equipment is stated at cost. Equipment is depreciated by the straight-line method over the estimated useful lives of the assets, generally three to five years. Furniture and fixtures are depreciated by the straight-line method over the estimated useful lives of the assets, generally five years. Software is amortized by the straight-line method over the estimated useful lives of the assets, generally three to five years. Buildings are depreciated by the straight-line method over the estimated useful lives of the assets, generally twenty-five years. Leasehold improvements are generally amortized by the straight-line method over the shorter of the life of the related asset or the term of the underlying lease. Amortization of finance leases is included with depreciation expense.

Derivative Financial Instruments: In the normal course of business, the Company’s financial position is routinely subjected to market risk associated with interest rate and foreign currency exchange rate fluctuations. The Company’s policy is to mitigate the effect of interest rate fluctuations on certain proposed debt instruments and exchange rate fluctuations on certain foreign currency denominated business exposures. The Company has a policy that allows the use of derivative financial instruments to hedge foreign currency exchange rate fluctuations on forecasted revenue and expenses and net monetary assets or liabilities denominated in various foreign currencies. The Company carries derivative financial instruments (derivatives) on the balance sheet at their fair values. The Company does not use derivatives for trading or speculative purposes. The Company does not believe that it is exposed to more than a nominal amount of credit risk in its interest rate and foreign currency hedges, as counterparties are large, global and well-capitalized financial institutions. The Company maintains an active currency hedging program and believes there is minimal risk that appropriate derivatives to maintain the Company’s hedging program would not be available in the future.

To hedge foreign currency risks, the Company uses foreign currency exchange forward and option contracts, where possible and prudent. These hedge contracts are valued using standard valuation formulas with assumptions about future foreign currency exchange rates derived from existing exchange rates, interest rates, and other market factors.

The Company considers its most current forecast in determining the level of foreign currency denominated revenue and expenses to hedge as cash flow hedges. The Company combines these forecasts with historical trends to establish the portion of its expected volume to be hedged. The revenue and expenses are hedged and designated as cash flow hedges to protect the Company from exposures to fluctuations in foreign currency exchange rates. If the underlying forecasted transaction does not occur, or it becomes probable that it will not occur, the related hedge gains and losses on the cash flow hedge are reclassified from accumulated other comprehensive income (loss) to other expense, net on the Consolidated Statement of Operations at that time.

Leases: Lease expense for operating leases is recognized on a straight-line basis over the lease term. The Company includes renewals and terminations in the calculation of the right-of-use asset and liability when the provision is reasonably certain to be exercised. The Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of future lease payments when the rate implicit in the lease is unknown.

The Company has elected the following practical expedients and accounting policy elections for accounting under ASC 842: (i) leases with an initial lease term of 12 months or less are not recorded on the balance sheet; and (ii) lease and non-lease components of a contract are accounted for as a single lease component.

Guarantees: The Company has certain finance leases that contain provisions whereby the properties subject to the finance leases may be remarketed at lease expiration. The Company has guaranteed to the lessor an amount approximating the lessor’s investment in the property. Also, the Company’s guarantees generally include certain indemnifications to its lessors for environmental matters, potential overdraft protection obligations to financial institutions related to one of the Company’s subsidiaries, indemnifications to the Company’s customers for certain infringement of third-party intellectual property rights by its products and services, indemnifications for its officers and directors, and the Company’s warranty obligations under sales of its products.

Foreign Currency Translation: The Company’s non-U.S. subsidiaries that operate in a local currency environment, where that local currency is the functional currency, primarily generate and expend cash in their local currency. Accordingly, all balance sheet accounts of these local functional currency subsidiaries are translated into U.S. dollars at the fiscal period-end exchange rate, and income and expense accounts are translated into U.S. dollars using average rates in effect for the period, except for costs related to those balance sheet items that are translated using historical exchange rates. The resulting translation adjustments are recorded as cumulative translation adjustments and are a component of accumulated other comprehensive income (loss). Remeasurement adjustments are recorded in other expense, net, where the U.S. dollar is the functional currency.

Note 3: Recent Accounting Pronouncements

Recently Adopted or Effective

In June 2016, the Financial Accounting Standards Board (“FASB”) released Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments – Credit Losses (Topic 326).” The amendment revises the impairment model to utilize an expected loss methodology in place of the previously used incurred loss methodology, which results in more timely recognition of losses on financial instruments, including but not limited to, available for sale debt securities and accounts receivable. The FASB issued a subsequent

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amendment to the initial guidance in April 2019 and November 2019 within ASU 2019-04 and ASU 2019-11, respectively. The adoption of these standards in the first quarter of fiscal year 2021 did not have a material impact on the Company’s Consolidated Financial Statements.

In November 2018, the FASB issued ASU 2018-18, “Collaborative Arrangements (Topic 808).” The amendment clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under Topic 606 when the counterparty is a customer for a good or service that is a distinct unit of account. The amendment also precludes entities from presenting consideration from transactions with a collaborator that is not a customer together with revenue recognized from contracts with customers. The adoption of this standard in the first quarter of fiscal year 2021 did not have a material impact on the Company’s Consolidated Financial Statements.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The ASU provides temporary optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued. In January 2021, the FASB issued ASU 2021-01, “ Reference Rate Reform (Topic 848),” which permits entities to apply optional expedients in Topic 848 to derivative instruments modified because of discounting transition resulting from reference rate reform. ASU 2020-04 became effective upon issuance and may be applied prospectively to contract modifications made on or before December 31, 2022. ASU 2021-01 became effective upon issuance and may be applied on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020 or prospectively for contract modifications made on or before December 31, 2022. The Company has not yet applied the relief afforded by these standard amendments and is currently assessing contracts that will require modification due to reference rate reform to which these standard amendments may be applied.

Updates Not Yet Effective

In August 2020, the FASB issued ASU No. 2020-06, “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”, which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. Among other changes, ASU 2020-06 removes from U.S. GAAP the liability and equity separation model for convertible instruments with a cash conversion feature, and as a result, after adoption, entities will no longer separately present in equity an embedded conversion feature for such debt. ASU 2020-06 also eliminates the treasury stock method to calculate diluted earnings per share and requires the if-converted method. The provisions of ASU 2020-06 are applicable for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The Company is required to adopt this standard in the first quarter of fiscal year 2023. The update permits the use of either the modified retrospective or fully retrospective method of transition. The Company does not expect adoption of this standard to have a material impact on its Consolidated Financial Statements.

Note 4: Revenue

Deferred Revenue

Revenue of $452.8 million included in deferred profit at June 28, 2020 was recognized during fiscal year 2021.

The following table summarizes the transaction price for contracts that have not yet been recognized as revenue as of June 27, 2021 and when the Company expects to recognize the amounts as revenue:

			Less than 1 Year						1-3 Years						More than 3 Years						Total
			(in thousands)
Deferred revenue			$	955,157					$	163,650		(1)			$	—					$	1,118,807

(1) This amount is reported in Deferred profit on the Company's Consolidated Balance Sheets as the customers can demand the liability to be performed at any time.

Lam Research Corporation 2021 10-K 51

Disaggregation of Revenue

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

			Year Ended
			June 27, 2021						June 28, 2020						June 30, 2019
			(in thousands)
Systems Revenue			$	9,764,845					$	6,625,130					$	6,451,104
Customer support-related revenue and other			4,861,305						3,419,606						3,202,455
			$	14,626,150					$	10,044,736					$	9,653,559

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

Customer support-related revenue includes sales of customer service, spares, upgrades, and non-leading-edge equipment from the Company’s Reliant product line.

The Company operates in one reportable business segment: manufacturing and servicing of wafer processing semiconductor manufacturing equipment. Refer to Note 20 - Segment, Geographic Information, and Major Customers; for additional information regarding the Company’s evaluation of reportable business segments and the disaggregation of revenue by the geographic regions in which the Company operates.

Additionally, the Company serves three primary markets: memory, foundry, and logic/integrated device manufacturing. The following table presents the percentages of leading- and non-leading-edge equipment and upgrade revenue to each of the primary markets the Company serves:

			Year Ended
			June 27, 2021						June 28, 2020						June 30, 2019
Memory			61		%				58		%				70		%
Foundry			32		%				31		%				20		%
Logic/integrated device manufacturing			7		%				11		%				10		%

Note 5: Equity-based Compensation Plans

The Company has stock plans that provide for grants of equity-based awards to eligible participants, including stock options and restricted stock units, of the Company’s Common Stock. An option is a right to purchase Common Stock at a set price. An RSU award is an agreement to issue a set number of shares of Common Stock at the time of vesting. The Company also has an employee stock purchase plan that allows employees to purchase its Common Stock at a discount through payroll deductions.

The Lam Research Corporation 2007 Stock Incentive Plan, as amended and restated, 2011 Stock Incentive Plan, as amended and restated, and the 2015 Stock Incentive Plan (collectively the “Stock Plans”), provide for the grant of non-qualified equity-based awards to eligible employees, consultants and advisors, and non-employee directors of the Company and its subsidiaries. The 2015 Stock Incentive Plan was approved by stockholders authorizing up to 18,000,000 shares for issuance under the plan. Additionally, 1,232,068 shares that remained available for grants under the Company’s 2007 Stock Incentive Plan were added to the shares available for issuance under the 2015 Stock Incentive Plan. As of June 27, 2021, there were a total of 8,585,404 shares available for future issuance under the Stock Plans. New shares are issued from the Company’s balance of authorized Common Stock from the 2015 Stock Incentive Plan to satisfy stock option exercises and vesting of awards.

The Company recognized the following equity-based compensation expense and benefits in the Consolidated Statements of Operations:

			Year Ended
June 27, 2021						June 28, 2020						June 30, 2019
			(in thousands)
Equity-based compensation expense			$	220,164					$	189,197					$	187,234
Income tax benefit recognized related to equity-based compensation			$	49,313					$	36,135					$	47,396
Income tax benefit realized from the exercise and vesting of options and RSUs			$	97,275					$	67,060					$	49,242

The estimated fair value of the Company’s equity-based awards, less expected forfeitures, is amortized over the awards’ vesting terms on a straight-line basis.

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Restricted Stock Units

During the fiscal years 2021, 2020, and 2019, the Company issued both service-based RSUs and market-based performance RSUs (“PRSUs”). Service-based RSUs typically vest over a period of 3 years or less. Market-based PRSUs generally vest three years from the grant date if certain performance criteria are achieved and require continued employment. Based upon the terms of such awards, the number of shares that can be earned over the performance periods is based on the Company’s Common Stock price performance compared to the market price performance of a designated benchmark index, ranging from 0% to 150% of target. The designated benchmark index was the Philadelphia Semiconductor Total Return Index (“XSOX”) for market-based PRSUs issued in 2021 and 2020 and the Philadelphia Semiconductor Sector Index (“SOX”) for market-based PRSUs issued in 2019. The stock price performance or market price performance is measured using the closing price for the 50-trading days prior to the dates the performance period begins and ends. The target number of shares represented by the market-based PRSUs is increased by 2% of target for each 1% that Common Stock price performance exceeds the market price performance of the designated benchmark index. Market-based PRSUs issued in 2021 and 2020 utilized the XSOX, which index gives effect to the reinvestment of dividends paid on its constituent holdings, as the benchmark; and accordingly the Company's Common Stock price performance was adjusted for the reinvestment of dividends on Common Stock on the ex-dividend date. By contrast, market-based PRSUs issued in 2019 utilized the SOX as a benchmark, which excluded the impact of dividends; accordingly the Company's Common Stock price performance was not adjusted for the reinvestment of dividends. The result of the vesting formula is rounded down to the nearest whole number. Total stockholder return is a measure of stock price appreciation in this performance period.

The following table summarizes the Company’s combined service-based RSUs and market-based PRSUs:

			Number of Shares (in thousands)						Weighted-Average Grant Date Fair Value
Outstanding, June 28, 2020			1,722						$	214.93
Granted			527						558.64
Vested			(886)						200.16
Forfeited or canceled			(57)						270.00
Outstanding, June 27, 2021			1,306						$	345.70

Of the 1.3 million shares outstanding at June 27, 2021, 1.0 million are service-based RSUs and 0.3 million are market-based PRSUs. The fair value of the Company’s service-based RSUs was calculated based on the fair market value of the Company’s stock at the date of grant, discounted for dividends. The fair value of the Company’s market-based PRSUs granted during fiscal years 2021, 2020, and 2019 was calculated using a Monte Carlo simulation model at the date of the grant, resulting in a weighted average grant-date fair value per share of $640.69, $320.69, and $165.78, respectively. The total fair value of service-based RSUs and market-based RSUs that vested during fiscal years 2021, 2020, and 2019 was $177.4 million, $166.9 million, and $152.1 million, respectively.

As of June 27, 2021, the Company had $364.6 million of total unrecognized compensation expense which is expected to be recognized over a weighted-average remaining period of approximately 2.3 years.

Stock Options

The Company granted stock options with a 7-year maximum contractual term to a limited group of executive officers during fiscal years 2021, 2020, and 2019. Stock options typically vest over a period of three years or less. The Company had 219.9 thousand options outstanding at June 27, 2021 with a weighted-average exercise price of $201.44 per share, of which 119.4 thousand were exercisable with a weighted-average exercise price of $148.15 per share. As of June 27, 2021, the Company had $6.3 million of total unrecognized compensation expense related to unvested stock options granted and outstanding which is expected to be recognized over a weighted-average remaining period of 2.0 years.

ESPP

The Company has an employee stock purchase plan (the “ESPP”) which allows employees to designate a portion of their base compensation to be deducted and used to purchase the Company’s Common Stock at a purchase price per share of the lower of 85% of the fair market value of the Company’s Common Stock on the first or last day of the applicable purchase period. Typically, each offering period lasts 12 months and contains one interim purchase date.

During fiscal year 2021, approximately 484 thousand shares of the Company’s Common Stock were sold to employees under the ESPP. At June 27, 2021, approximately 5.9 million shares were available for purchase, and the Company had $31.9 million of total unrecognized compensation cost, which is expected to be recognized over a remaining period of less than one year.

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Note 6: Other Expense, Net

The significant components of other expense, net, were as follows:

			Year Ended
June 27, 2021						June 28, 2020						June 30, 2019
			(in thousands)
Interest income			$	19,687					$	85,433					$	98,771
Interest expense			(208,597)						(177,440)						(117,263)
Gains on deferred compensation plan related assets, net			61,838						5,999						10,464
Foreign exchange (losses) gains, net			(6,962)						(3,317)						826
Other, net			22,815						(9,499)						(10,959)
			$	(111,219)					$	(98,824)					$	(18,161)

Interest income in the year ended June 27, 2021, decreased compared to the year ended June 28, 2020, primarily as a result of lower yield. Interest income decreased in the year ended June 28, 2020, compared to the year ended June 30, 2019, as a result of lower yield, partially offset by a higher cash balance.

Interest expense in the year ended June 27, 2021, increased compared to the year ended June 28, 2020, primarily due to the full year impact of the issuance of the $2.0 billion senior notes in fiscal year 2020. The increase in interest expense in the year ended June 28, 2020, compared to the year ended June 30, 2019, was primarily due to the full year impact of the issuance of the $2.5 billion of senior notes in fiscal year 2019 and issuance of the $2.0 billion senior notes in fiscal year 2020.

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

The gains in other, net for the year ended June 27, 2021 compared to the years ended June 28, 2020 and June 30, 2019 were primarily driven by private equity investments.

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Note 7: Income Taxes

The components of income (loss) before income taxes were as follows:

			Year Ended
			June 27, 2021						June 28, 2020						June 30, 2019
			(in thousands)
United States			$	120,161					$	44,739					$	(59,876)
Foreign			4,250,643						2,530,239						2,506,447
			$	4,370,804					$	2,574,978					$	2,446,571

Significant components of the provision (benefit) for income taxes attributable to income before income taxes were as follows:

			Year Ended
			June 27, 2021						June 28, 2020						June 30, 2019
			(in thousands)
Federal:
Current			$	437,525					$	216,513					$	143,845
Deferred			(139,531)						(18,458)						(10,722)
			297,994						198,055						133,123
State:
Current			13,560						4,724						5,994
Deferred			(8,324)						6,524						4,944
			5,236						11,248						10,938
Foreign:
Current			162,738						119,766						110,283
Deferred			(3,622)						(5,844)						797
			159,116						113,922						111,080
Total provision for income taxes			$	462,346					$	323,225					$	255,141

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Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as the tax effect of carryforwards. Significant components of the Company’s net deferred tax assets and liabilities were as follows:

			June 27, 2021						June 28, 2020
			(in thousands)
Deferred tax assets:
Tax carryforwards			$	281,022					$	249,874
Allowances and reserves			165,335						119,974
Equity-based compensation			7,322						7,167
Inventory valuation differences			28,877						26,069
Outside basis differences of foreign subsidiaries			193,734						105,159
Operating lease liabilities			37,562						40,157
Other			22,575						26,361
Gross deferred tax assets			736,427						574,761
Valuation allowance			(277,133)						(244,973)
Net deferred tax assets			459,294						329,788
Deferred tax liabilities:
Intangible assets			(3,113)						(6,442)
Convertible debt			—						(24,530)
Capital assets			(97,602)						(105,508)
Amortization of goodwill			(13,161)						(12,256)
Right-of-use assets			(37,562)						(40,157)
Other			(262)						(7,509)
Gross deferred tax liabilities			(151,700)						(196,402)
Net deferred tax assets			$	307,594					$	133,386

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

The Company previously made an accounting policy election to record deferred taxes related to Global Intangible Low-Taxed Income (“GILTI”).

Realization of the Company’s net deferred tax assets is based upon the weighting of available evidence, including such factors as the recent earnings history and expected future taxable income. The Company believes it is more likely than not that such deferred tax assets will be realized with the exception of $277.1 million related to California deferred tax assets. At June 27, 2021, the Company continued to record a valuation allowance to offset the entire California deferred tax asset balance due to the single sales factor apportionment resulting in lower taxable income in California.

At June 27, 2021, the Company had federal net operating loss carryforwards of $25.2 million. If not utilized, these losses will begin to expire in fiscal year 2022, and are subject to limitation on their utilization.

At June 27, 2021, the Company had state net operating loss carryforwards of $94.5 million. If not utilized, these losses will begin to expire in fiscal year 2023 and are subject to limitation on their utilization.

At June 27, 2021, the Company had state tax credit carryforwards of $408.9 million. Substantially all of these credits can be carried forward indefinitely.

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A reconciliation of income tax expense provided at the federal statutory rate (21% in fiscal years 2021, 2020, and 2019) to actual income tax expense is as follows:

			Year Ended
			June 27, 2021						June 28, 2020						June 30, 2019
			(in thousands)
Income tax expense computed at federal statutory rate			$	917,869					$	540,745					$	513,780
State income taxes, net of federal tax benefit			(33,478)						(28,046)						(17,565)
Foreign income taxed at different rates			(365,886)						(146,023)						(260,344)
Settlements and reductions in uncertain tax positions			(13,613)						(12,854)						(31,291)
Tax credits			(86,709)						(88,762)						(71,779)
State valuation allowance, net of federal tax benefit			39,477						30,923						26,742
Equity-based compensation			(45,764)						(23,248)						(7,566)
Other permanent differences and miscellaneous items			50,450						50,490						39,251
U.S. tax reform impacts			—						—						63,913
			$	462,346					$	323,225					$	255,141

In November 2019, the Ninth Circuit rejected the en banc appeal petitioned by Altera in July 2019. In that quarter, the Company evaluated the impact of the decision and viewed the denial as an indication that Altera’s position of excluding stock-based compensation expense in an intercompany cost-sharing arrangement was unlikely to be sustained upon further litigation. As a result, the Company reversed $74.5 million of net tax assets associated with stock-based compensation benefits related to previous years in the Condensed Consolidated Financial Statements in the three months ended December 29, 2019 and the Company no longer reflected a net tax benefit within its financial statements related to excluding stock-based compensation from its intercompany cost-sharing arrangement. In February 2020, Altera petitioned the SCOTUS to hear their case. In June 2020, the SCOTUS denied the petition.

Earnings of the Company’s foreign subsidiaries included in consolidated retained earnings that are indefinitely reinvested in foreign operations aggregated to approximately $774.5 million at June 27, 2021. If these earnings were remitted to the United States, they would be subject to foreign withholding taxes of approximately $122.1 million at current statutory rates. The potential tax expense associated with these foreign withholding taxes would be substantially offset by foreign tax credits that would be generated in the United States upon remittance.

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The Company’s gross uncertain tax positions were $566.8 million, $476.7 million, and $420.8 million as of June 27, 2021, June 28, 2020, and June 30, 2019, respectively. During fiscal year 2021, gross uncertain tax positions increased by $90.1 million. The amount of uncertain tax positions that, if recognized, would impact the effective tax rate was $504.4 million, $423.8 million, and $376.0 million, as of June 27, 2021, June 28, 2020, and June 30, 2019, respectively. The aggregate changes in the balance of gross uncertain tax positions were as follows:

			(in thousands)
Balance as of June 24, 2018			$	305,413
Settlements and effective settlements with tax authorities			(3,705)
Lapse of statute of limitations			(28,176)
Increases in balances related to tax positions taken during prior periods			78,927
Decreases in balances related to tax positions taken during prior periods			(1,577)
Increases in balances related to tax positions taken during current period			69,890
Balance as of June 30, 2019			420,772
Settlements and effective settlements with tax authorities			(1,836)
Lapse of statute of limitations			(8,026)
Increases in balances related to tax positions taken during prior periods			3,206
Decreases in balances related to tax positions taken during prior periods			(3,989)
Increases in balances related to tax positions taken during current period			66,568
Balance as of June 28, 2020			476,695
Settlements and effective settlements with tax authorities			(1,443)
Lapse of statute of limitations			(8,456)
Increases in balances related to tax positions taken during prior periods			15,986
Decreases in balances related to tax positions taken during prior periods			(2,746)
Increases in balances related to tax positions taken during current period			86,735
Balance as of June 27, 2021			$	566,771

The Company recognizes interest expense and penalties related to the above uncertain tax positions within income tax expense. The Company had accrued $54.6 million, $40.2 million, and $19.1 million cumulatively for gross interest and penalties as of June 27, 2021, June 28, 2020, and June 30, 2019, respectively.

The Company is subject to audits by state and foreign tax authorities. The Company is unable to make a reasonable estimate as to when cash settlements, if any, with the relevant taxing authorities will occur.

The Company files U.S. federal, U.S. state, and foreign income tax returns. As of June 27, 2021, tax years 2004-2021 remain subject to examination in the jurisdictions where the Company operates. The Internal Revenue Service (“IRS”) is examining the Company’s U.S. federal income tax return for the fiscal year ended June 24, 2018. As of June 27, 2021, no significant adjustments have been proposed by the IRS. The Company is unable to make a reasonable estimate as to when cash settlements, if any, with the IRS will occur.

The Company is in various stages of examinations in connection with all of its tax audits worldwide, and it is difficult to determine when these examinations will be settled. It is reasonably possible that over the next 12-month period the Company may experience an increase or decrease in its uncertain tax positions as a result of tax examinations or lapses of statutes of limitation. The change in uncertain tax positions may range up to $37.7 million.

Note 8: Net Income per Share

Basic net income per share is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted net income per share is computed using the treasury stock method, for dilutive stock options, restricted stock units, and convertible notes.

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The following table reconciles the inputs to the basic and diluted computations for net income per share.

			Year Ended
June 27, 2021						June 28, 2020						June 30, 2019
			(in thousands, except per share data)
Numerator:
Net income			$	3,908,458					$	2,251,753					$	2,191,430
Denominator:
Basic average shares outstanding			143,609						144,814						152,478
Effect of potential dilutive securities:
Employee stock plans			1,168						1,236						1,323
Convertible notes			543						3,040						5,610
Warrants			—						—						504
Diluted average shares outstanding			145,320						149,090						159,915
Net income per share - basic			$	27.22					$	15.55					$	14.37
Net income per share - diluted			$	26.90					$	15.10					$	13.70

For purposes of computing diluted net income per share, weighted-average common shares do not include potentially dilutive securities that are anti-dilutive under the treasury stock method. The impact from potentially dilutive securities, including options and RSUs, were not material for fiscal years ended June 27, 2021, June 28, 2020, and June 30, 2019.

Note 9: Financial Instruments

Fair Value

The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact, and it considers assumptions that market participants would use when pricing the asset or liability.

A fair value hierarchy has been established that prioritizes the inputs to valuation techniques used to measure fair value. The level of an asset or liability in the hierarchy is based on the lowest level of input that is significant to the fair value measurement. Assets and liabilities carried at fair value are classified and disclosed in one of the following three categories:

Level 1: Valuations based on quoted prices in active markets for identical assets or liabilities with sufficient volume and frequency of transactions.

Level 2: Valuations based on observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or model-derived valuations techniques for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3: Valuations based on unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities and based on non-binding, broker-provided price quotes and may not have been corroborated by observable market data.

The Company engages with pricing vendors to provide fair values for a majority of its Level 1 and Level 2 investments. The vendors provide either a quoted market price in an active market or use observable inputs without applying significant adjustments in their pricing. Significant observable inputs include interest rates and yield curves observable at commonly quoted intervals, volatility and credit risks. The fair value of derivative contracts is determined using observable market inputs such as the foreign currency rates, forward rate curves, currency volatility and interest rates and considers nonperformance risk of the Company and its counterparties.

The Company’s primary financial instruments include its cash, cash equivalents, investments, restricted cash and investments, long-term investments, accounts receivable, accounts payable, long-term debt and leases, and foreign currency related derivative instruments. The estimated fair value of cash, accounts receivable, and accounts payable approximates their carrying value due to the short period of time to their maturities. The estimated fair values of lease obligations approximate their carrying value as the majority of these obligations have interest rates that adjust to market rates on a periodic basis. Refer to Note 14 - Long Term Debt and Other Borrowings for additional information regarding the fair value of the Company’s senior notes and convertible senior notes.

Lam Research Corporation 2021 10-K 59

Investments

The following tables set forth the Company’s cash, cash equivalents, investments, restricted cash and investments, and other assets measured at fair value on a recurring basis as of June 27, 2021, and June 28, 2020:

			June 27, 2021
																								(Reported Within)
Cost						Unrealized Gain						Unrealized (Loss)						Fair Value						Cash and Cash Equivalents						Investments						Restricted Cash & Investments						Other Assets
			(in thousands)
Cash			$	875,738					$	—					$	—					$	875,738					$	873,278					$	—					$	2,460					$	—
Time deposit			1,548,874						—						—						1,548,874						1,298,847						—						250,027						—
Level 1:
Money market funds			2,246,138						—						—						2,246,138						2,246,138						—						—						—
U.S. Treasury and agencies			204,743						96						(47)						204,792						—						204,792						—						—
Mutual funds			80,694						15,510						(33)						96,171						—						—						—						96,171
Level 1 total			2,531,575						15,606						(80)						2,547,101						2,246,138						204,792						—						96,171
Level 2:
Government-sponsored enterprises			3,498						7						—						3,505						—						3,505						—						—
Foreign government bonds			32,995						21						(4)						33,012						—						33,012						—						—
Corporate notes and bonds			1,043,308						2,247						(457)						1,045,098						—						1,045,098						—						—
Mortgage backed securities - residential			5,623						54						—						5,677						—						5,677						—						—
Mortgage backed securities - commercial			18,830						17						(59)						18,788						—						18,788						—						—
Level 2 total			1,104,254						2,346						(520)						1,106,080						—						1,106,080						—						—
Total			$	6,060,441					$	17,952					$	(600)					$	6,077,793					$	4,418,263					$	1,310,872					$	252,487					$	96,171

			June 28, 2020
																								(Reported Within)
Cost						Unrealized Gain						Unrealized (Loss)						Fair Value						Cash and Cash Equivalents						Investments						Restricted Cash & Investments						Other Assets
			(in thousands)
Cash			$	977,862					$	—					$	—					$	977,862					$	973,978					$	—					$	3,884					$	—
Time deposit			2,244,655						—						—						2,244,655						1,994,628						—						250,027						—
Level 1:
Money market funds			1,709,350						—						—						1,709,350						1,709,350						—						—						—
U.S. Treasury and agencies			552,088						373						(9)						552,452						76,992						475,460						—						—
Mutual funds			68,784						4,571						(928)						72,427						—						—						—						72,427
Level 1 total			2,330,222						4,944						(937)						2,334,229						1,786,342						475,460						—						72,427
Level 2:
Government-sponsored enterprises			31,442						12						—						31,454						25,999						5,455						—						—
Foreign government bonds			10,693						28						(5)						10,716						2,540						8,176						—						—
Corporate notes and bonds			1,405,615						5,344						(302)						1,410,657						131,685						1,278,972						—						—
Mortgage backed securities - residential			3,142						71						—						3,213						—						3,213						—						—
Mortgage backed securities - commercial			23,660						144						—						23,804						—						23,804						—						—
Level 2 total			1,474,552						5,599						(307)						1,479,844						160,224						1,319,620						—						—
Total			$	7,027,291					$	10,543					$	(1,244)					$	7,036,590					$	4,915,172					$	1,795,080					$	253,911					$	72,427

The Company accounts for its investment portfolio at fair value. Realized gains (losses) for investment sales are specifically identified. Management assesses the fair value of investments in debt securities that are not actively traded through consideration of interest rates and their impact on the present value of the cash flows to be received from the investments.

Gross realized gains/(losses) from sales of investments were insignificant in the fiscal years 2021, 2020, and 2019.

Lam Research Corporation 2021 10-K 60

The following is an analysis of the Company’s cash, cash equivalents, investments, and restricted cash and investments in unrealized loss positions. As of June 27, 2021, there are no unrealized loss positions with a duration equal to or greater than twelve months:

			June 27, 2021
Unrealized Losses Less than 12 Months
Fair Value						Gross Unrealized Loss
			(in thousands)
U.S. Treasury and agencies			$	122,791					$	(47)
Mutual funds			2,642						(33)
Foreign government bonds			2,133						(4)
Corporate notes and bonds			278,133						(457)
Mortgage backed securities - commercial			15,076						(59)
			$	420,775					$	(600)

The amortized cost and fair value of cash equivalents, investments, and restricted investments with contractual maturities as of June 27, 2021, are as follows:

			Cost						Fair Value
			(in thousands)
Due in one year or less			$	4,198,483					$	4,198,992
Due after one year through five years			866,243						867,562
Due in more than five years			39,283						39,330
			$	5,104,009					$	5,105,884

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

Derivative Instruments and Hedging

The Company carries derivative financial instruments (“derivatives”) on its Consolidated Balance Sheets at their fair values. The Company enters into foreign currency forward contracts and foreign currency options with financial institutions with the primary objective of reducing volatility of earnings and cash flows related to foreign currency exchange rate fluctuations. In addition, the Company enters into interest rate swap arrangements to manage interest rate risk. The counterparties to these derivatives are large, global financial institutions that the Company believes are creditworthy, and therefore, it does not consider the risk of counterparty nonperformance to be material.

Under the master netting agreements with the respective counterparties to the Company’s derivative contracts, subject to applicable requirements, the Company is allowed to net settle transactions of the same currency with a single net amount payable by one party to the other. However, the Company has elected to present the derivative assets and derivative liabilities on a gross basis on its balance sheet. As of June 27, 2021 and June 28, 2020, the potential effect of rights of offset associated with the above foreign exchange and interest rate contracts would be immaterial to the Consolidated Balance Sheets.

Cash Flow Hedges

The Company’s financial position is routinely subjected to market risk associated with foreign currency exchange rate fluctuations on non-U.S. dollar transactions or cash flows. The Company’s policy is to mitigate the foreign exchange risk arising from the fluctuations in the value of these non-U.S. dollar denominated transactions or cash flows through a foreign currency cash flow hedging program, using forward contracts and foreign currency options that generally expire within 12 months and no later than 24 months. These hedge contracts are designated as cash flow hedges and are carried on the Company’s balance sheet at fair value with the effective portion of the contracts’ gains or losses included in accumulated other comprehensive income (loss) and subsequently recognized in revenue/expense in the same period the hedged items affect earnings.

In addition, the Company has entered into interest rate swap agreements to hedge against the variability of cash flows due to changes in certain benchmark interest rates on fixed rate debt. These instruments are designated as cash flow hedges at inception and are settled in conjunction with the issuance of debt. The effective portion of the contracts’ gains or losses is included in accumulated other comprehensive income (loss) and is amortized into income as the hedged item affects earnings. During the year ended June 28, 2020, the company recognized a net loss of $31.5 million of accumulated other comprehensive income, net of tax, related to interest rate swap agreements. No such activity occurred during the years ended June 27, 2021 or June 30, 2019.

Lam Research Corporation 2021 10-K 61

At inception and at each quarter-end, hedges are tested prospectively and retrospectively for effectiveness using regression analysis. Changes in the fair value of foreign exchange contracts due to changes in time value are included in the assessment of effectiveness. To qualify for hedge accounting, the hedge relationship must meet criteria relating to both the derivative instrument and the hedged item. These criteria include identification of the hedging instrument, the hedged item, the nature of the risk being hedged, and how the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair value or cash flows will be measured. There were no material gains or losses during the fiscal years ended June 27, 2021, June 28, 2020, or June 30, 2019 associated with forecasted transactions that failed to occur. There were no material gains or losses during the fiscal year ended June 30, 2019 associated with ineffectiveness.

To receive hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedge, and the hedges must be tested to demonstrate an expectation of providing highly effective offsetting changes to future cash flows on hedged transactions. When derivative instruments are designated and qualify as effective cash flow hedges, the Company recognizes effective changes in the fair value of the hedging instrument within accumulated other comprehensive income (loss) until the hedged exposure is realized. Consequently, the Company’s results of operations are not subject to fluctuation as a result of changes in the fair value of the derivative instruments. If hedges are not highly effective or if the Company does not believe that the underlying hedged forecasted transactions will occur, the Company may not be able to account for its derivative instruments as cash flow hedges. If this were to occur, future changes in the fair values of the Company’s derivative instruments would be recognized in earnings. Additionally, related amounts previously recorded in other comprehensive income would be reclassified to earnings immediately.

As of June 27, 2021, the fair value of outstanding cash flow hedges was not material. Additionally, as of June 27, 2021, the Company had an immaterial net gain or loss accumulated in other comprehensive income, net of tax, related to foreign exchange cash flow hedges and interest rate contracts which it expects to reclassify from other comprehensive income into earnings over the next 12 months.

The following table provides the total notional value of cash flow hedge instruments outstanding as of June 27, 2021:

			June 27, 2021
			(In thousands)
Buy Contracts			$	353,313
Sell Contacts			598,407

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

						Year Ended June 27, 2021												Year Ended June 28, 2020
			Location of Gain (Loss) Recognized in or Reclassified into Income			Gain Recognized in AOCI						Gain (Loss) Reclassified from AOCI into Income						Gain (Loss) Recognized in AOCI						Gain (Loss) Reclassified from AOCI into Income
Derivatives in Cash Flow Hedging Relationships						(in thousands)
Foreign exchange contracts			Revenue			$	17,614					$	868					$	4,095					$	2,418
Foreign exchange contracts			Cost of goods sold			3,756						3,659						(2,104)						(3,101)
Foreign exchange contracts			R&D			898						—						—						—
Foreign exchange contracts			SG&A			4,190						3,623						(1,158)						(1,501)
Interest rate contracts			Other expense, net			—						(3,855)						(40,610)						(700)
						$	26,458					$	4,295					$	(39,777)					$	(2,884)

Balance Sheet Hedges

The Company also enters into foreign currency forward contracts to hedge fluctuations associated with foreign currency denominated monetary assets and liabilities, primarily cash, third-party accounts receivable, accounts payable, and intercompany receivables and payables. These forward contracts are not designated for hedge accounting treatment. Therefore, the change in fair value of these derivatives is recorded as a component of other expense, net and offsets the change in the carrying value of the foreign currency denominated assets and liabilities related to remeasurement, which are also recorded in other expense, net. As of June 27, 2021 and June 28, 2020, the fair value of outstanding balance sheet hedges was not material.

Lam Research Corporation 2021 10-K 62

The following table provides the total notional value of balance sheet hedge instruments outstanding as of June 27, 2021:

			June 27, 2021
			(In thousands)
Buy Contracts			$	214,606
Sell Contacts			228,880

The effect of the Company’s balance sheet hedge derivative instruments on the Company’s Consolidated Statement of Operations was as follows:

						Year Ended
June 27, 2021						June 28, 2020
Derivatives Not Designated as Hedging Instruments:			Location of Gain (Loss) Recognized in Income			Gain Recognized in Income						Loss Recognized in Income
						(in thousands)
Foreign exchange contracts			Other expense, net			$	7,057					$	(5,971)

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, investments, restricted cash and investments, trade accounts receivable, and derivative financial instruments used in hedging activities. Cash is placed on deposit at large, global financial institutions. Such deposits may be in excess of insured limits. Management believes that the financial institutions that hold the Company’s cash are creditworthy and, accordingly, minimal credit risk exists with respect to these balances.

The Company’s overall portfolio of available-for-sale securities must maintain an average minimum rating of “AA-” or “Aa3” as rated by Standard and Poor’s, Fitch Ratings, or Moody’s Investor Services. To ensure diversification and minimize concentration, the Company’s policy limits the amount of credit exposure with any one financial institution or commercial issuer.

The Company is exposed to credit losses in the event of nonperformance by counterparties on foreign currency and interest rate hedge contracts that are used to mitigate the effect of exchange rate and interest rate fluctuations and on contracts related to structured share repurchase arrangements. These counterparties are large, global financial institutions and, to date, no such counterparty has failed to meet its financial obligations to the Company.

Credit risk evaluations, including trade references, bank references, and Dun & Bradstreet ratings, are performed on all new customers, and the Company monitors its customers’ financial condition and payment performance. In general, the Company does not require collateral on sales.

As of June 27, 2021, two customers accounted for approximately 23% and 13%, of accounts receivable, respectively. As of June 28, 2020, two customers accounted for approximately 21%, and 12% of accounts receivable, respectively. No other customers accounted for more than 10% of accounts receivable, respectively. The Company’s balance and transactional activity for its allowance for doubtful accounts is not material as of and for the twelve months ended June 27, 2021, June 28, 2020, and June 30, 2019. Refer to Note 20 - Segment, Geographic Information, and Major Customers for additional information regarding customer concentrations.

Note 10: Inventories

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

			June 27, 2021						June 28, 2020
			(in thousands)
Raw materials			$	1,519,456					$	1,161,961
Work-in-process			391,686						251,199
Finished goods			778,152						486,864
			$	2,689,294					$	1,900,024

Lam Research Corporation 2021 10-K 63

Note 11: Property and Equipment

Property and equipment, net, is presented in the table below.

			June 27, 2021						June 28, 2020
			(in thousands)
Manufacturing and engineering equipment			$	1,328,399					$	1,154,668
Buildings and improvements			840,661						660,865
Computer and computer-related equipment			181,781						178,193
Office equipment, furniture and fixtures			95,259						83,386
Land			84,681						58,805
			2,530,781						2,135,917
Less: accumulated depreciation and amortization			(1,271,356)						(1,082,827)
			$	1,259,425					$	1,053,090

The Company has excluded $44.1 million, and $18.4 million of finance right-of-use assets recorded within property and equipment, net from the table above for the years ended June 27, 2021 and June 28, 2020, respectively. See Note 15 - Leases for additional information regarding these finance lease right-of-use assets. Depreciation expense, excluding amortization of finance lease right of use assets, during fiscal years 2021 and 2020 was $229.8 million and $198.8 million, respectively. During fiscal year 2019, depreciation expense, including amortization of capital leases, was $182.1 million.

Note 12: Goodwill and Intangible Assets

Goodwill

The balance of goodwill was $1.5 billion as of June 27, 2021 and June 28, 2020, respectively. As of June 27, 2021 and June 28, 2020, $61.1 million of the goodwill balance is tax deductible, and the remaining balance is not tax deductible due to purchase accounting and applicable foreign law. No goodwill impairments were recognized in fiscal years 2021, 2020, or 2019.

Intangible Assets

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

			June 27, 2021																		June 28, 2020
			Gross						Accumulated Amortization						Net						Gross						Accumulated Amortization						Net
			(in thousands)
Customer relationships			$	630,303					$	(581,406)					$	48,897					$	630,137					$	(532,550)					$	97,587
Existing technology			669,359						(659,898)						9,461						668,992						(654,382)						14,610
Patents and other intangible assets			132,774						(58,767)						74,007						98,342						(42,007)						56,335
Total intangible assets			$	1,432,436					$	(1,300,071)					$	132,365					$	1,397,471					$	(1,228,939)					$	168,532

The Company recognized $70.6 million, $66.2 million, and $127.3 million in intangible asset amortization expense during fiscal years 2021, 2020, and 2019, respectively. No intangible asset impairments were recognized in fiscal years 2021, 2020, or 2019.

The estimated future amortization expense of intangible assets as of June 27, 2021, is reflected in the table below. The table excludes $14.1 million of capitalized costs for intangible assets that have not yet been placed into service.

Fiscal Year			Amount
			(in thousands)
2022			$	70,190
2023			24,228
2024			13,647
2025			7,431
2026			2,034
Thereafter			711
			$	118,241

Lam Research Corporation 2021 10-K 64

Note 13: Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following:

			June 27, 2021						June 28, 2020
			(in thousands)
Accrued compensation			$	552,925					$	402,401
Warranty reserves			176,030						117,839
Income and other taxes payable			348,206						215,652
Dividend payable			185,431						167,129
Other			456,891						369,634
			$	1,719,483					$	1,272,655

Note 14: Long Term Debt and Other Borrowings

As of June 27, 2021, and June 28, 2020, the Company’s outstanding debt consisted of the following:

			June 27, 2021												June 28, 2020
			Amount (in thousands)						Effective Interest Rate						Amount (in thousands)						Effective Interest Rate
Fixed-rate 2.80% Senior Notes Due June 15, 2021 (“2021 Notes”)			$	—					—		%				$	800,000					2.95		%
Fixed-rate 3.80% Senior Notes Due March 15, 2025 (“2025 Notes”)			500,000						3.87		%				500,000						3.87		%
Fixed-rate 3.75% Senior Notes Due March 15, 2026 ("2026 Notes")			750,000						3.86		%				750,000						3.86		%
Fixed-rate 4.00% Senior Notes Due March 15, 2029 ("2029 Notes")			1,000,000						4.09		%				1,000,000						4.09		%
Fixed-rate 1.90% Senior Note Due June 15, 2030 ("2030 Notes")			750,000						2.01		%				750,000						2.01		%
Fixed-rate 2.625% Convertible Notes Due May 15, 2041 (“2041 Notes”)			—			(1)			—		%				48,460			(2)			4.28		%
Fixed-rate 4.875% Senior Notes Due March 15, 2049 ("2049 Notes")			750,000						4.93		%				750,000						4.93		%
Fixed-rate 2.875% Senior Note Due June 15, 2050 ("2050 Notes")			750,000						2.93		%				750,000						2.93		%
Fixed-rate 3.125% Senior Note Due June 15, 2060 ("2060 Notes")			500,000						3.18		%				500,000						3.18		%
Total debt outstanding, at par			5,000,000												5,848,460
Unamortized discount			(38,243)												(53,086)
Fair value adjustment - interest rate contracts			6,621			(3)									8,405			(3)
Unamortized bond issuance costs			(7,443)												(8,301)
Total debt outstanding, at carrying value			$	4,960,935											$	5,795,478
Reported as:
Current portion of long-term debt			$	—											$	836,107
Long-term debt			4,960,935												4,959,371
Total debt outstanding, at carrying value			$	4,960,935											$	5,795,478

(1)On March 26, 2021, the Company issued a notice of redemption to the existing bondholders with a redemption date of May 21, 2021. As such, the convertible notes outstanding on May 21, 2021 were redeemed by the Company.

(2)As of June 28, 2020, these notes were convertible at the option of the bondholder. This is a result of the following condition being met: the market value of the Company’s Common Stock was greater than 130% of the convertible notes conversion price for 20 or more of the 30 consecutive trading days preceding the quarter-end. As a result, the 2041 Notes were classified in current liabilities and a portion of the equity component associated with the convertible notes, representing the unamortized discount, was classified in temporary equity on the Company’s Consolidated Balance Sheets.

(3)This amount represents a cumulative fair value gain for discontinued hedging relationships, net of an immaterial amount of amortization as of the periods presented.

Lam Research Corporation 2021 10-K 65

The Company’s contractual cash obligations relating to its outstanding debt as of June 27, 2021, were as follows:

Payments Due by Fiscal Year:
			(in thousands)
2022			$	—
2023			—
2024			—
2025			500,000
2026			750,000
Thereafter			3,750,000
Total			$	5,000,000

Convertible Senior Notes

In June 2012, with the acquisition of Novellus, the Company assumed $700 million in aggregate principal amount of 2.625% Convertible Senior Notes due May 15, 2041 (the “2041 Notes”). On May 21, 2021, the 2041 Notes then outstanding were redeemed pursuant to Section 6.01 of the underlying indenture at a price equal to outstanding principal plus accrued and unpaid interest.

No 2041 Notes were outstanding as of June 27, 2021. Selected additional information regarding the 2041 Notes outstanding as of June 28, 2020, is as follows:

									2041 Notes
									June 28, 2020
									(in thousands, except years, percentages, conversion rate, and conversion price)
Carrying amount of permanent equity component, net of tax									$	161,467
Carrying amount of temporary equity component, net of tax									$	10,995
Remaining amortization period (years)									20.9

Senior Notes

On May 5, 2020, the company completed a public offering of $750 million aggregate principal amount of the Company’s Senior Notes due June 15, 2030 (the “2030 Notes”), $750 million aggregate principal amount of the Company’s Senior Notes due June 15, 2050 (the “2050 Notes”), and $500 million aggregate principal amount of the Company’s Senior Notes due June 15, 2060 (the “2060 Notes”). The Company pays interest at an annual rate of 1.90%, 2.875%, and 3.125%, on the 2030, 2050, and 2060 Notes, respectively, on a semi-annual basis on June 15 and December 15 of each year.

On March 4, 2019, the company completed a public offering of $750 million aggregate principal amount of the Company’s Senior Notes due March 15, 2026 (the “2026 Notes”), $1.0 billion aggregate principal amount of the Company’s Senior Notes due March 15, 2029 (the “2029 Notes”), and $750 million aggregate principal amount of the Company’s Senior Notes due March 15, 2049 (the “2049 Notes”). The Company pays interest at an annual rate of 3.75%, 4.00%, and 4.875%, on the 2026, 2029, and 2049 Notes, respectively, on a semi-annual basis on March 15 and September 15 of each year.

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

On March 12, 2015, the Company completed a public offering of $500 million aggregate principal amount of the Company’s Senior Notes due March 15, 2025 (the “2025 Notes”). The Company pays interest at an annual rate of 3.80% on the 2025 Notes on a semi-annual basis on March 15 and September 15 of each year.

The Company may redeem the 2025, 2026, 2029, 2030, 2049, 2050, and 2060 Notes (collectively the “Senior Notes”) at a redemption price equal to 100% of the principal amount of such series (“par”), plus a “make whole” premium as described in the indenture in respect to the Senior Notes and accrued and unpaid interest before December 15, 2024 for the 2025 Notes, before January 15, 2026 for the 2026 Notes, before December 15, 2028 for the 2029 Notes, before March 15, 2030 for the 2030 Notes, before September 15, 2048 for the 2049 Notes, before December 15, 2049 for the 2050 Notes, and before December 15, 2059 for the 2060 Notes. The Company may redeem the Senior Notes at par, plus accrued and unpaid interest at any time on or after December 24, 2024 for the 2025 Notes, on or after January 15, 2026 for the 2026 Notes, on or after December 15, 2028 for the 2029 Notes, on or after March 15, 2030 for the 2030 Notes, on or after September 15, 2048 for the 2049 Notes, on or after December 15, 2049 for the 2050 Notes, and on or after December 15, 2059 for the 2060 Notes. In addition, upon the occurrence of certain events, as described in the indenture, the Company will be required to make an offer to repurchase the Senior Notes at a price equal to 101% of the principal amount of the respective note, plus accrued and unpaid interest.

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Selected additional information regarding the Senior Notes outstanding as of June 27, 2021, is as follows:

			Remaining Amortization period						Fair Value of Notes (Level 2)
			(years)						(in thousands)
2025 Notes			3.7						$	550,340
2026 Notes			4.7						$	838,890
2029 Notes			7.7						$	1,157,490
2030 Notes			9.0						$	748,193
2049 Notes			27.7						$	1,004,213
2050 Notes			29.0						$	746,910
2060 Notes			39.0						$	514,050

Revolving Credit Facility

On March 12, 2014, the Company established an unsecured Credit Agreement. This agreement was amended on November 10, 2015 (the “Amended and Restated Credit Agreement”), October 13, 2017 (the “2nd Amendment”), February 25, 2019 (the “3rd Amendment”), and June 17, 2021 (the “Second Amended and Restated Credit Agreement). Among other things, the Second Amended and Restated Credit Agreement provides for a $250 million increase in the Company’s revolving credit facility, from $1.25 billion to $1.50 billion with a syndicate of lenders, along with an expansion option that will allow the Company, subject to certain requirements, to request an increase in the facility of up to an additional $600.0 million, for a potential total commitment of $2.10 billion. The facility matures on June 17, 2026.

Interest on amounts borrowed under the credit facility is, at the Company’s option, based on (1) a base rate, defined as the greatest of (a) prime rate, (b) Federal Funds rate plus 0.5%, or (c) one-month LIBOR plus 1.0%, plus a spread of 0.00% to 0.30%, or (2) LIBOR , plus a spread of 0.805% to 1.30%, in each case plus a facility fee, with such spread and facility fee determined based on the rating of the Company’s non-credit enhanced, senior unsecured long-term debt. Such spreads and such facility fees are further subject to sustainability adjustments as described in the Second Amended and Restated Credit Agreement, in each case based on the Company’s performance of certain energy savings and health and safety standards metrics. Principal and any accrued and unpaid interest is due and payable upon maturity. Additionally, the Company will pay the lenders a quarterly commitment fee that varies based on the Company’s credit rating. The Second Amended and Restated Credit Agreement incorporates provisions for the replacement of LIBOR or other reference rates with alternative reference rates under certain circumstances, including when, or if, such reference rates cease to be available. The Second Amended and Restated Credit Agreement contains affirmative covenants, negative covenants, financial covenants, and events of default. As of June 27, 2021, the Company had no borrowings outstanding under the credit facility and was in compliance with all financial covenants.

Commercial Paper Program

On November 13, 2017, the Company established a commercial paper program under which the Company may issue unsecured commercial paper notes on a private placement basis up to a maximum aggregate principal amount of $1.25 billion. In July 2021, the Company amended the CP Program size to a maximum aggregate amount outstanding at any time of $1.5 billion. The net proceeds from the CP Program will be used for general corporate purposes, including repurchases of the Company’s Common Stock from time to time under the Company’s stock repurchase program. Amounts available under the CP Program may be re-borrowed. The CP Program is backstopped by the Company’s Revolving Credit Arrangement. As of June 27, 2021, the Company had no outstanding borrowings under the CP Program.

Interest Cost

The following table presents the amount of interest cost recognized relating to both the contractual interest coupon and amortization of the debt discount, issuance costs, and effective portion of interest rate contracts with respect to the Senior Notes, convertible notes, commercial paper, and the revolving credit facility during the fiscal years ended June 27, 2021, June 28, 2020, and June 30, 2019.

			Year Ended
			June 27, 2021						June 28, 2020						June 30, 2019
			(in thousands)
Contractual interest coupon			$	197,367					$	169,483					$	100,712
Amortization of interest discount			3,934						4,280						3,937
Amortization of issuance costs			1,639						1,632						1,426
Effect of interest rate contracts, net			2,070						1,037						4,086
Total interest cost recognized			$	205,010					$	176,432					$	110,161

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Note 15: Leases

The Company leases certain office spaces, manufacturing and warehouse spaces, equipment, and vehicles. While the majority of the Company’s lease arrangements are operating leases, the Company has certain leases that qualify as finance leases.

The components of lease expense were as follows for the years ended June 27, 2021 and June 28, 2020:

			Year Ended
			June 27, 2021						June 28, 2020
			(in thousands)
Financing lease cost:
Amortization of right-of-use assets			$	7,131					$	3,613
Interest on lease liabilities			697						506
Total finance lease cost			$	7,828					$	4,119
Operating lease cost			$	51,519					$	46,101
Variable lease cost			219,040						91,851

Variable lease payments are expensed as incurred and are not included within the right of use asset and lease liability calculation. Variable lease payments primarily include costs associated with the Company’s third-party logistics arrangements that contain one or more embedded leases. Variable lease costs will fluctuate based on factory output and material receipt volumes. Short-term rental expense, for agreements less than one year in duration, were immaterial for the twelve months ended June 27, 2021 and June 28, 2020, respectively.

Supplemental cash flow information related to leases was as follows as of June 27, 2021 and June 28, 2020:

			Year Ended
			June 27, 2021						June 28, 2020
			(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows paid for operating leases			$	63,895					$	50,223
Financing cash flows paid for principal portion of finance leases			5,952						3,539
Right-of-use assets obtained in exchange for lease obligations:
Operating leases			$	48,993					108,816
Finance leases			29,497						3,019

Lam Research Corporation 2021 10-K 68

Supplemental balance sheet information related to leases were as follows as of June 27, 2021 and June 28, 2020:

			June 27, 2021						June 28, 2020
			(in thousands)
Operating leases
Other assets			$	173,784					$	174,583
Accrued expenses and other current liabilities			$	45,310					$	49,480
Other long-term liabilities			118,385						123,889
Total operating lease liabilities			$	163,695					$	173,369
Finance Leases
Property and Equipment, net			$	44,054					$	18,409
Current portion of long-term debt and lease liabilities			$	11,349					$	3,770
Long-term debt and lease liabilities, less current portion			29,398						11,477
Total finance lease liabilities			$	40,747					$	15,247

			June 27, 2021												June 28, 2020
			Weighted-Average Remaining Lease Term						Weighted-Average Discount Rate						Weighted-Average Remaining Lease Term						Weighted-Average Discount Rate
			(in years)												(in years)
Operating leases			5.5						2.30		%				9.0						2.57		%
Finance leases			5.3						1.69		%				4.1						2.79		%

As of June 27, 2021, the maturities of lease liabilities are as follows:

			Operating Leases						Finance Leases
			(in thousands)
2022			$	48,487					$	11,870
2023			32,774						6,438
2024			22,756						5,882
2025			17,803						5,152
2026			12,702						5,062
Thereafter			38,628						8,244
Total lease payments			$	173,150					$	42,648
Less imputed interest			(9,455)						(1,901)
Total			$	163,695					$	40,747

Selected Leases and Related Guarantees

The Company had leases regarding certain improved properties in Fremont and Livermore, California (the “California Facility Leases”) that were classified as operating leases as of June 28, 2020. On September 21, 2020, the Company renewed these leases for an additional seven-year term, and concluded the modified leases are finance leases, and recognized approximately $31.4 million of property and equipment, net, for the associated right of use assets, and $29.8 million of finance lease obligations ($3.1 million classified in current portion of long-term debt and finance lease obligations and the remainder in long-term debt and finance lease obligations, less current portion). The Company is required to maintain cash collateral in an aggregate of approximately $250 million in separate interest-bearing accounts as security for the Company’s obligations. These amounts are recorded with other restricted cash and investments in the Company’s Consolidated Balance Sheet as of June 27, 2021 and June 28, 2020.

During the term of the California Facility Leases and when the terms of the California Facility Leases expire, the property subject to the California Facility Leases may be re-marketed. The Company has guaranteed to the lessor that each property will have a certain minimum residual value. The aggregate maximum guarantee made by the Company under the California Facility Leases is $298.4 million.

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The Company leases the majority of its administrative, R&D and manufacturing facilities, regional sales/service offices, and certain equipment under non-cancelable leases. Certain of the Company’s facility leases for buildings located at its Fremont, California headquarters; Tualatin, Oregon campus; and certain other facility leases provide the Company with options to extend the leases for additional periods or to purchase the facilities. Certain of the Company’s facility leases provide for periodic rent increases based on the general rate of inflation. The Company’s rental expense for facilities occupied during fiscal year 2019 was $28.1 million.

Note 16: Retirement and Deferred Compensation Plans

Employee Savings and Retirement Plan

The Company maintains a 401(k) retirement savings plan for its eligible employees in the United States. Each participant in the plan may elect to contribute from 1% to 75% of annual eligible earnings to the plan, subject to statutory limitations. The Company makes matching employee contributions in cash to the plan at the rate of 50% of the first 6% of earnings contributed. Employees participating in the 401(k) retirement savings plan are fully vested in the Company matching contributions, and investments are directed by participants. The Company made matching contributions of $26.9 million, $23.6 million, and $24.1 million, in fiscal years 2021, 2020, and 2019, respectively.

Deferred Compensation Arrangements

The Company has an unfunded, non-qualified deferred compensation plan whereby executives may defer a portion of their compensation. Participants earn a return on their deferred compensation based on their allocation of their account balance among various mutual funds. The Company controls the investment of these funds, and the participants remain general creditors of the Company. Participants are able to elect the payment of benefits on a specified date at least three years after the opening of a deferral sub-account or upon retirement. Distributions are made in the form of lump sum or annual installments over a period of up to 20 years as elected by the participant. If no alternate election has been made, a lump sum payment will be made upon termination of a participant’s employment with the Company. As of June 27, 2021, and June 28, 2020, the liability of the Company to the plan participants was $297.3 million and $220.0 million, respectively, which was recorded in accrued expenses and other current liabilities and other long-term liabilities on the Consolidated Balance Sheets. As of June 27, 2021, and June 28, 2020, the Company had investments in the aggregate amount of $313.9 million and $235.1 million, respectively, which correlate to the deferred compensation obligations, which were recorded in other assets on the Consolidated Balance Sheets.

Post-Retirement Healthcare Plan

The Company maintains a post-retirement healthcare plan for certain executive and director retirees. Coverage continues through the duration of the lifetime of the retiree or the retiree’s spouse, whichever is longer. The benefit obligation was $40.1 million and $41.0 million as of June 27, 2021, and June 28, 2020, respectively.

Note 17: Commitments and Contingencies

The Company has certain obligations to make future payments under various contracts; some of these are recorded on its balance sheet and some are not. Obligations that are recorded on the Company’s balance sheet include the Company’s operating and finance lease obligations. Obligations that are not recorded on the Company’s balance sheet include contractual relationships for purchase obligations and certain guarantees. The Company’s commitments relating to off-balance sheet agreements are included in the tables below. These amounts exclude $527.3 million of liabilities related to uncertain tax positions (see Note 7 - Income Taxes for further discussion), $180.0 million of liability associated with a minimum purchase penalty obligation to a certain supplier, and $200.7 million of capital expenditures associated with facilities under construction as of the end of the fiscal year because the Company is unable to reasonably estimate the ultimate amount or time of settlement.

Other Guarantees

The Company has issued certain indemnifications to its lessors for taxes and general liability under some of its agreements. The Company has entered into insurance contracts that are intended to limit its exposure to such indemnifications. As of June 27, 2021, the Company had not recorded any liability on its Consolidated Financial Statements in connection with these indemnifications, as it does not believe that it is probable that any material amounts will be paid under these guarantees.

Generally, the Company indemnifies, under pre-determined conditions and limitations, its customers for infringement of third-party intellectual property rights by the Company’s products or services. The Company seeks to limit its liability for such indemnity to an amount not to exceed the sales price of the products or services subject to its indemnification obligations. The Company does not believe that it is probable that any material amounts will be paid under these guarantees.

The Company provides guarantees and standby letters of credit to certain parties as required for certain transactions initiated during the ordinary course of business. As of June 27, 2021, the maximum potential amount of future payments that the Company could be required to make under these arrangements and letters of credit was $74.3 million. The Company does not believe, based on historical experience and information currently available, that it is probable that any material amounts will be required to be paid.

In addition, the Company has entered into indemnification agreements with its officers and directors, consistent with its Bylaws and Certificate of Incorporation; and under local law, the Company may be required to provide indemnification to its employees for actions

Lam Research Corporation 2021 10-K 70

within the scope of their employment. Although the Company maintains insurance contracts that cover some of the potential liability associated with these indemnification agreements, there is no guarantee that all such liabilities will be covered. The Company does not believe, based on historical experience and information currently available, that it is probable that any material amounts will be required to be paid under such indemnification agreements or statutory obligations.

Purchase Obligations

Purchase obligations consist of non-cancelable significant contractual obligations either on an annual basis or over multi-year periods. The contractual cash obligations and commitments table presented below contains the Company’s minimum obligations at June 27, 2021, under these arrangements and others. For obligations with cancellation provisions, the amounts included in the following table were limited to the non-cancelable portion of the agreement terms or the minimum cancellation fee. Actual expenditures will vary based on the volume of transactions and length of contractual service provided.

The Company’s commitments related to these agreements as of June 27, 2021, were as follows:

Payments Due by Fiscal Year:			Purchase Obligations
			(in thousands)
2022			$	660,201
2023			57,023
2024			57,023
2025			20,362
2026			20,362
Thereafter			3,215
Total			$	818,186

Warranties

The Company provides standard warranties on its systems. The liability amount is based on actual historical warranty spending activity by type of system, customer, and geographic region, modified for any known differences such as the impact of system reliability improvements. As of June 27, 2021, warranty reserves totaling $15.7 million were recognized in other long-term liabilities, the remainder were included in accrued expenses and other current liabilities in the Company’s Consolidated Balance Sheets.

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

			Year Ended
June 27, 2021						June 28, 2020
			(in thousands)
Balance at beginning of period			$	129,197					$	127,932
Warranties issued during the period			229,026						151,508
Settlements made during the period			(172,759)						(131,177)
Changes in liability for pre-existing warranties			6,294						(19,066)
Balance at end of period			$	191,758					$	129,197

Legal Proceedings

While the Company is not currently a party to any legal proceedings that it believes material, the Company is either a defendant or plaintiff in various actions that have arisen from time to time in the normal course of business, including intellectual property claims. The Company accrues for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Significant judgment is required in both the determination of probability and the determination as to whether a loss is reasonably estimable. Based on current information, the Company does not believe that a material loss from known matters is probable and therefore has not recorded an accrual of any material amount for litigation or other contingencies related to existing legal proceedings.

Note 18: Stock Repurchase Program

In November 2020, the Board of Directors authorized the Company to repurchase up to an additional $5.0 billion of Common Stock; this authorization supplements the remaining balances from any prior authorizations. These repurchases can be conducted on the open market or as private purchases and may include the use of derivative contracts with large financial institutions, in all cases subject to compliance with applicable law. This repurchase program has no termination date and may be suspended or discontinued at any time.

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Repurchases under the repurchase program were as follows during the periods indicated:

Period			Total Number of Shares Repurchased						Total Cost of Repurchase						Average Price Paid Per Share**(1)**						Amount Available Under Repurchase Program
			(in thousands, except per share data)
Available balance as of June 28, 2020																					$	1,773,427
Quarter ended September 27, 2020			1,344						$	461,998					$	343.73					$	1,311,429
Board authorization, $5 billion increase, November 2020																					$	6,311,429
Quarter ended December 27, 2020			1,789						$	724,485					$	404.98					$	5,586,944
Quarter ended March 28, 2021			1,474						$	925,099					$	519.30					$	4,661,845
Quarter ended June 27, 2021			922			(2)			$	439,625					$	619.76					$	4,222,220

(1) Average price paid per share excludes the effect of accelerated share repurchases. See additional disclosure below regarding the Company’s accelerated share repurchase activity during the fiscal year.

(2) Includes shares received at final settlement of accelerated share repurchase agreements; see additional disclosures below regarding the Company’s accelerated share repurchase activity during the fiscal year.

In addition to the shares repurchased under the Board-authorized repurchase program shown above, the Company acquired 290 thousand shares at a total cost of $166.4 million during the 12 months ended June 27, 2021, which the Company withheld through net settlements to cover minimum tax withholding obligations upon the vesting of restricted stock unit awards granted under the Company’s equity compensation plans. The shares retained by the Company through these net share settlements are not a part of the Board-authorized repurchase program but instead are authorized under the Company’s equity compensation plan.

Accelerated Share Repurchase Agreements

On February 11, 2021, the Company entered into an accelerated share repurchase agreement (the “February 2021 ASR") with a financial institution to repurchase a total of $500 million of Common Stock. The Company took an initial delivery of approximately 655 thousand shares, which represented 75% of the prepayment amount divided by the Company’s closing stock price on February 11, 2021. The total number of shares received under the February 2021 ASR was based upon the average daily volume weighted average price of the Company’s Common Stock during the repurchase period, less an agreed upon discount. Final settlement of the February 2021 ASR occurred during May 2021, resulting in the receipt of approximately 213 thousand additional shares, which yielded a weighted-average share price of approximately $575.74 for the transaction period.

Note 19: Comprehensive Income (Loss)

The components of accumulated other comprehensive loss, net of tax at the end of June 27, 2021, as well as the activity during the fiscal year ended June 27, 2021, were as follows:

			Accumulated Foreign Currency Translation Adjustment						Accumulated Unrealized Gain or Loss on Cash Flow Hedges						Accumulated Unrealized Holding Gain or Loss on Available-For- Sale Investments						Accumulated Unrealized Components of Defined Benefit Plans						Total
			(in thousands)
Balance as of June 28, 2020			$	(45,811)					$	(32,796)					$	4,923					$	(20,527)					$	(94,211)
Other comprehensive income (loss) before reclassifications			14,398						22,139						(4,098)						326						32,765
(Gains) losses reclassified from accumulated other comprehensive income (loss) to net income (1)			—						(3,468)						786						—						(2,682)
Net current-period other comprehensive income (loss)			14,398						18,671						(3,312)						326						30,083
Balance as of June 27, 2021			$	(31,413)					$	(14,125)					$	1,611					$	(20,201)					$	(64,128)

(1)Amount of after-tax gain reclassified from accumulated other comprehensive income into net income is not material individually or in the aggregate, or to any individual location in our Consolidated Statement of Operations.

Tax related to other comprehensive income, and the components thereto, for the years ended June 27, 2021, June 28, 2020, and June 30, 2019 was not material.

Lam Research Corporation 2021 10-K 72

Note 20: Segment, Geographic Information, and Major Customers

The Company operates in one reportable business segment: manufacturing and servicing of wafer processing semiconductor manufacturing equipment. The Company’s material operating segments qualify for aggregation due to their customer base and similarities in economic characteristics, nature of products and services, and processes for procurement, manufacturing, and distribution.

The Company operates in seven geographic regions: United States, China, Europe, Japan, Korea, Southeast Asia, and Taiwan. For geographical reporting, revenue is attributed to the geographic location in which the customers’ facilities are located, while long-lived assets; which includes property and equipment, net, and recognized right of use assets reported in other assets in the Consolidated Balance Sheets as of June 27, 2021 and June 28, 2020; are attributed to the geographic locations in which the assets are located.

Revenues and long-lived assets by geographic region were as follows:

			Year Ended
June 27, 2021						June 28, 2020						June 30, 2019
Revenue:			(in thousands)
China			$	5,137,886					$	3,083,916					$	2,161,440
Korea			3,924,685						2,391,257						2,205,348
Taiwan			2,117,999						1,906,223						1,596,261
Japan			1,363,907						954,743						1,969,869
Southeast Asia			945,478						587,638						615,813
United States			672,716						812,482						748,601
Europe			463,479						308,477						356,227
Total revenue			$	14,626,150					$	10,044,736					$	9,653,559

			June 27, 2021						June 28, 2020						June 30, 2019
Long-lived assets:			(in thousands)
United States			$	1,137,490					$	1,052,714					$	933,054
Southeast Asia			129,881						31,027						5,542
Europe			77,661						80,297						72,928
Korea			62,502						49,943						28,200
Taiwan			47,279						11,555						6,759
Japan			13,149						11,826						5,750
China			9,301						8,720						6,844
			$	1,477,263					$	1,246,082					$	1,059,077

In fiscal year 2021, three customers accounted for approximately 25%, 12%, and 10% of total revenues, respectively. In fiscal year 2020, four customers accounted for approximately 24%, 14%, 10%, and 10% of total revenues, respectively. In fiscal year 2019, four customers accounted for approximately 15%, 14%, 14%, and 14%, of total revenues, respectively. No other customers accounted for more than 10% of total revenues.

Lam Research Corporation 2021 10-K 73

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Lam Research Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Lam Research Corporation (the Company) as of June 27, 2021 and June 28, 2020, the related consolidated statements of operations, comprehensive income, stockholders‘ equity and cash flows for each of the three years in the period ended June 27, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of June 27, 2021 and June 28, 2020, and the results of its operations and its cash flows for each of the three years in the period ended June 27, 2021, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of June 27, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated August 17, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

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Inventory - Valuation

Description of the Matter			The Company’s inventories totaled $2.7 billion as of June 27, 2021, representing 17% of total assets. As explained in Note 2 to the consolidated financial statements, the Company assesses the valuation of all inventories including manufacturing raw materials, work-in-process, finished goods, and spare parts in each reporting period. Obsolete inventory or inventory in excess of management’s estimated usage requirement is written down to its estimated net realizable value if less than cost. Auditing management’s estimates for excess and obsolete inventory involved subjective auditor judgment because management’s assessment of whether a write down is required and the measurement of any excess of cost over net realizable value is judgmental and considers a number of qualitative factors that are affected by market and economic conditions outside the Company’s control.
How We Addressed the Matter in Our Audit			We evaluated and tested the Company’s processes and the design and operating effectiveness of internal controls addressing the identified audit risks. This included controls over management’s assessment of inventory valuation, including the development of forecasted usage of inventories and consideration of how factors outside of the Company’s control might affect management’s judgment related to the valuation of excess and obsolete inventory. Our audit procedures included, among others, evaluating the significant assumptions (e.g., forecasts related to the Company’s future manufacturing schedules, customer demand, technological and/or market obsolescence, and possible alternative uses) and the underlying data used in management’s excess and obsolete inventory valuation assessment. We evaluated inventory levels compared to forecasted demand, historical sales and specific product considerations. We also assessed the historical accuracy of management’s estimates.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 1981.

San Jose, California

August 17, 2021

Lam Research Corporation 2021 10-K 75

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Lam Research Corporation

Opinion on Internal Control over Financial Reporting

We have audited Lam Research Corporation’s internal control over financial reporting as of June 27, 2021, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Lam Research Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of June 27, 2021, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of June 27, 2021 and June 28, 2020, the related consolidated statements of operations, comprehensive income, stockholders‘ equity and cash flows for each of the three years in the period ended June 27, 2021, and the related notes and our report dated August 17, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

San Jose, California

August 17, 2021

Lam Research Corporation 2021 10-K 76