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2013 Annual Report
Driving technology into...
Lam Research Corporation
4650 Cushing Parkway
Fremont, California 94538
Phone: 1.510.572.0200
www.lamresearch.com
... the fabric of everyday life
• Collaborative Partner
•Trusted Supplier
• Delivering to Commitments
• Place of Opportunity
• Values-Based
Culture
• Investing for Profitable
Growth
• Delivering
Shareholder Value
... the fabric of everyday life
• Collaborative Partner
•Trusted Supplier
• Delivering to Commitments
• Place of Opportunity
• Values-Based
Culture
• Investing for Profitable
Growth
• Delivering
Shareholder Value
LET TER TO OUR STOCKHOLDERS
Lam Research has an established culture of delivering on the commitments we make to our customers and our
stakeholders. In that context, we can take pride in our many accomplishments made throughout fiscal 2013. The year
was highlighted by the successful integration of the Novellus acquisition within one year of close; the strengthening of
our core businesses in etch, deposition, single-wafer clean, and customer services; and solid financial performance in
the midst of transformative change for the company. These achievements position us well at an opportune time in our
industry, as significant market expansion and growth prospects emerge over the next several years.
Lam and Novellus moved quickly and effectively to establish a single company culture, surmounting what can be the
biggest challenge in merger integration and enabling us to hit the ground running on our target earnings accretion and
cost synergy plans. Importantly, we achieved each of these committed objectives on or ahead of schedule.
In our product businesses, we maintained our desired market share position of number one or strong number two in
each of our core market segments of etch, deposition, and single-wafer clean and took a number of significant steps
that position us well for the future:
• In etch, we announced a key penetration with a leading-edge logic manufacturer that marks a significant milestone
for the company: Lam Research is now in production with each of the world’s top 10 semiconductor wafer fabrication
equipment capital spenders in all of our core market segments.
• In deposition, we shipped the Company’s 500th SABRE® system during the fiscal year, underscoring our market
leadership in Copper Electrofill. We also expanded our positions in the important and growing advanced
packaging market.
• And in single-wafer clean, we are preparing to launch our next-generation product that is designed to position
Lam to compete for a broader set of applications, particularly in front-end processes. Customer evaluations of this
product are underway and we are looking forward to its release.
Supporting these product areas is a customer services business that can contribute a quarter or more of Lam’s annual
revenue and plays a vital role in defining our competitive differentiation. This business is focused on our installed
base, which today includes more than 30,000 semiconductor processing chambers. We are delivering value to our
customers by optimizing the productivity and extendibility of their installed base of Lam equipment over the lifetime of
their investment. During fiscal 2013, we enhanced our offerings across our now-expanded product set, and we expect
customer services to be instrumental in supporting our growth over the next several years.
The financial results for fiscal 2013 marked a very successful first year as a combined company. Our revenue and
shipments were up between 35 and 40 percent, both reaching record levels of $3.6 billion and $3.7 billion, respectively.
This is very solid growth, particularly in light of our focus on integration and a challenging industry environment.
We ended the year with healthy cash and short-term investment balances of $2.5 billion and generated nearly $720
million in cash flows from operations, which was up from approximately $500 million in fiscal 2012. We have continued
to balance reinvesting our cash and cash generation into the business with returns of capital to stockholders. We
concluded our $1.6 billion share repurchase program in fiscal 2013, in line with the commitment we made when we
announced the Novellus acquisition. Under the program, we retired approximately 44 million shares of common stock.
252704_LRC_Nar_R2.indd 2
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Virtually every leading-edge
device is now made using
Lam Research equipment.
Lam has a focused plan for continued strong
growth over the next three years. The plan
is rooted in an expectation for significant
expansion in wafer fabrication equipment
spending as consumer adoption of mobile
electronics spurs semiconductor unit growth. These mobile devices require progressively smaller form factors, lower
power consumption, and new feature-rich offerings, all of which are challenging our customers to achieve economic
efficiency while producing devices with greater technical complexity. Assuming macroeconomic conditions remain
stable, wafer fabrication equipment spending could rise from its current annual level in the $30 billion range to
$35 billion or more over the next few years.
For Lam Research, these dynamics present market expansion and share growth opportunities on par or better than the
industry average. To realize these opportunities, we are focused on creating value and differentiation by meeting our
customers’ diverse, complex needs. Our strategy is based on the following three themes:
1. Capitalize on addressable market expansion opportunities. We foresee up to $1 billion in annualized served market
expansion opportunity as our customers address challenging new requirements through the implementation of
technology advances including FinFET in logic, multiple patterning and 3D architectures in memory, and advanced
packaging applications. Lam’s strong product roadmap and technology expertise position us well for these
opportunities.
2. Innovate through technology and productivity to drive share gains. We are targeting market share growth across
our etch, deposition, and clean businesses, with a sharp focus on collaborating with customers to develop fast,
leading-edge solutions to their most critical challenges.
3. Strengthen our competitiveness through our customer support and services business. We are further strengthening
Lam’s value proposition throughout our customer services business by implementing initiatives that enable our
customers to reduce running costs, optimize productivity, and maximize capital efficiency.
Execution of these strategies creates the potential for Lam Research to grow at a rate as much as twice that of the
wafer fabrication equipment market over the next several years. We made positive progress towards these strategic
objectives in fiscal 2013, having achieved our merger integration goals while positioning each of our product segments
for the opportunities ahead. Based on our current outlook, we plan to gain 1 to 2 points of market share in both etch
and deposition by the end of calendar year 2013 while defending our positions in single-wafer clean ahead of our
next-generation product release. Our ability to realize our longer-term opportunities will be a function of the value we
deliver to our customers, and our success will be measured in the value we deliver to our shareholders.
In closing, we extend our deepest gratitude to all of the stakeholders whose contributions are fundamental to the
success of our business: our valued customers, our global employee organization, our trusted suppliers, and our
supportive stockholders.
Sincerely,
Martin B. Anstice
President and Chief Executive Officer
Stephen G. Newberry
Chairman of the Board
September 3, 2013
252704_LRC_Nar_R2.indd 3
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INDEPENDENT REGI ST ERED PUBLIC
ACC OUNTING FI RM
Ernst & Young LLP
San Jose, California
LEGAL COUNSEL
Jones Day
San Francisco, California
TR ANS FER AGENT AND REGI ST R AR
For a response to questions regarding
misplaced stock certificates, changes
of address, or the consolidation of
accounts, please contact the Company’s
transfer agent.
Computershare Trust Company, N.A.
P.O. Box 43006
Providence, RI 02940-3006
1.877.265.2630
Private Couriers/Registered Mail:
Computershare Trust Company, N.A.
250 Royall Street
Canton, MA 02021
TDD for Hearing Impaired:
1.800.952.9245
Foreign Shareowners:
1.781.575.2879
Website Address:
www.computershare.com/investor
STO CK LI STI NG
The Company’s common stock is traded
on the NASDAQ Global Select Market SM
under the symbol LRCX. Lam Research
is an S&P 500® company.
INVE STOR REL ATIO NS
Lam Research Corporation welcomes
inquiries from its stockholders
and other interested investors. For
additional copies of this report or other
financial information, please contact:
Investor Relations
Lam Research Corporation
4650 Cushing Parkway
Fremont, California 94538
1.510.572.1615
investor.relations@lamresearch.com
ANNUAL MEETING
The Annual Meeting of Stockholders
will be held at 9:30 a.m. Pacific Time
on Thursday, November 7, 2013, at the
Company’s corporate headquarters.
C AUT IO NS REGARDING FORW AR D-LOO KIN G
STATEMENTS
With the exception of historical facts, the
statements contained in this Letter to Our
Stockholders (“Letter”) are forward-looking
statements. Forward-looking statements are
subject to the safe harbor provisions created
by the Private Securities Litigation Reform
Act of 1995. We have identified some, but
not all, of the forward-looking statements in
the Letter by use of future-oriented words
and phrases such as “emerge”, “for the
future”, “preparing”, “expect”, “could”,
“opportunities”, “foresee”, “targeting”,
“potential” and “plan”. However, our
identification of certain statements as
forward-looking does not mean that other
statements not specifically identified are not
forward-looking. Forward-looking statements
include, but are not limited to, statements
that relate to: future changes in the company,
market expansion and growth prospects, our
positioning for future success, our plans for
launching new products, our expectations
for the prospects of our customer service
business and for the expansion in
wafer fabrication equipment spending,
opportunities for market expansion and
share growth, and our plans and strategies
for the business. These statements
are based on current expectations and
are subject to risks, uncertainties, and
changes in condition, significance, value
and effect, including without limitation
macroeconomic conditions, the actions of
our competitors, political disruptions such
as wars and terrorist events, government
actions, technology changes and those
discussed under the heading “Risk Factors”
within Item 1A of our fiscal 2013 Form 10-K;
under the heading “Cautionary Statement
Regarding Forward-Looking Statements”
at the beginning of Part I of the Form 10-K;
and other documents we file from time
to time with the Securities and Exchange
Commission (SEC), such as our quarterly
reports on Form 10-Q and current reports
on Form 8-K. These risks, uncertainties and
changes in condition, significance, value
and effect could cause our actual results
to differ materially from those expressed in
this Letter and in ways that are not readily
foreseeable. Readers are cautioned not
to place undue reliance on these forward-
looking statements, which speak only as
of the date of this Letter and are based on
information currently and reasonably known
to us. We do not undertake any obligation to
update any forward-looking statements, or to
release the results of any revisions to these
forward-looking statements, to reflect the
impact of anticipated or unanticipated events
or circumstances that occur after the date
of this Letter.
TR ADEMARK INFOR MATION
The Lam Research logo, Lam Research,
and all Lam Research product and service
names used herein are either registered
trademarks or trademarks of Lam Research
Corporation or its subsidiaries in the United
States and/or other countries. All other marks
mentioned herein are the property of their
respective holders.
252704_LRC_Nar_R2.indd 4
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OPERATOR JioMeRD
September 24, 2013
Dear Lam Research Stockholders,
We cordially invite you to attend, in person or by proxy, the Lam Research Corporation 2013 Annual Meeting of
Stockholders. The annual meeting will be held on Thursday, November 7, 2013, at 9:30 a.m. pacific standard time in
the Building CA1 Auditorium at the principal executive offices of Lam Research Corporation, which is located at 4650
Cushing Parkway, Fremont, California 94538.
At this year’s annual meeting, stockholders will be asked to elect the nominees named in the attached proxy statement
as directors to serve for the ensuing year, and until their respective successors are elected and qualified, cast an
advisory vote on the compensation of our named executive officers (“Say on Pay”) and ratify the appointment of the
independent registered public accounting firm for fiscal year 2014. The Board of Directors recommends that you vote
in favor of all three proposals. Management will not provide a business update during this meeting; please refer to our
latest quarterly earnings report for our current outlook.
Please refer to the proxy statement for detailed information about the annual meeting and each of the proposals, as
well as voting instructions. Your vote is important, and we strongly urge you to cast your vote by the
internet, phone or mail even if you plan to attend the meeting in person.
Sincerely yours,
Lam Research Corporation
Stephen G. Newberry
Chairman of the Board
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Notice of 2013 Annual Meeting
of Stockholders
4650 Cushing Parkway
Fremont, California 94538
Telephone: 510-572-0200
Date and Time
Thursday, November 7, 2013
9:30 a.m. Pacific Standard Time
Place
Lam Research Corporation
Building CA1 Auditorium
4650 Cushing Parkway
Fremont, California 94538
Items of Business
1. Election of directors to serve for the ensuing year, and until their respective successors are elected and qualified
2. Advisory vote on the compensation of our named executive officers (“Say on Pay”)
3. Ratification of the appointment of independent registered public accounting firm for fiscal year 2014
4. Transact such other business that may properly come before the annual meeting (including any adjournment or
postponement thereof)
Record Date
Only stockholders of record at the close of business on September 9, 2013, or the “Record Date,” are entitled to notice
of and to vote at the annual meeting.
Voting
Please vote as soon as possible, even if you plan to attend the annual meeting in person. You have three options
for submitting your vote before the annual meeting: by the internet, phone or mail. The proxy statement and the
accompanying proxy card provide detailed voting instructions.
Internet Availability of Proxy Materials
Our Notice of 2013 Annual Meeting of Stockholders, Proxy Statement and Annual Report to Stockholders are available
on the Lam Research website at http://investor.lamresearch.com and at www.proxyvote.com.
By Order of the Board of Directors
Sarah A. O’Dowd
Secretary
This proxy statement is first being made available and/or mailed to our stockholders on or about
September 24, 2013.
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LAM RESEARCH CORPORATION
Proxy Statement for 2013 Annual Meeting of Stockholders
TABLE OF CONTENTS
General Information
Information Concerning Solicitation and Voting .......................................................................................
Other Meeting Information ....................................................................................................................
1
1
2
Proposal No. 1: Election of Directors
5
Nominees for Director ..........................................................................................................................
5
Security Ownership of Certain Beneficial Owners and Management .......................................................... 13
Corporate Governance ........................................................................................................................ 15
Director Compensation ......................................................................................................................... 20
Section 16(a) Beneficial Ownership Reporting Compliance....................................................................... 23
Executive Compensation and Other Information ...................................................................................... 23
Compensation Discussion and Analysis ............................................................................................ 23
I. Executive Summary .............................................................................................................. 24
II. Executive Compensation Governance and Procedures .............................................................. 28
III. Primary Components of Named Executive Officer Compensation; Calendar Year 2012
Compensation Payouts; Calendar Year 2013 Compensation Targets and Metrics ........................ 30
IV. Tax and Accounting Considerations ........................................................................................ 41
Compensation Committee Report ..................................................................................................... 42
Compensation Committee Interlocks and Insider Participation .............................................................. 42
Executive Compensation Tables ....................................................................................................... 42
Securities Authorized for Issuance under Equity Compensation Plans .......................................................... 51
Proposal No. 2: Advisory Vote on the Compensation of
Our Named Executive Officers (“Say on Pay”)
52
Proposal No. 3: Ratification of the Appointment of Independent Registered Public
Accounting Firm For Fiscal Year 2014
52
Audit Committee Report ........................................................................................................................ 53
Relationship with Independent Registered Public Accounting Firm .............................................................. 53
Certain Relationships and Related Party Transactions ............................................................................... 54
Other Matters ...................................................................................................................................... 54
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Information Concerning Solicitation and Voting
Our board of directors solicits your proxy for the 2013
Annual Meeting of Stockholders and any adjournment or
postponement of the meeting, for the purposes described
in the “Notice of 2013 Annual Meeting of Stockholders.”
The table below shows important details about the annual
meeting and voting. We use the terms “Lam Research,”
“Lam,” the “Company,” “we,” “our,” and “us” in this
proxy statement to refer to Lam Research Corporation, a
Delaware corporation.
Record Date
Only stockholders of record at the close of business on
September 9, 2013, or the “Record Date,” are entitled to
receive notice of and to vote at the annual meeting.
Shares Outstanding
162,092,907 shares of common stock were outstanding
as of the Record Date.
Quorum
A majority of shares outstanding on the Record Date
constitutes a quorum. A quorum is required to transact
business at the annual meeting.
Inspector of Elections
The Company will appoint an inspector of elections to
determine whether a quorum is present. The inspector
will also tabulate the votes cast by proxy or at the
annual meeting.
Effect of Abstentions and
Broker Non-Votes
Shares voted “abstain” and broker non-votes (shares
held by brokers that do not receive voting instructions
from the beneficial owner of the shares, and do not
have discretionary authority to vote on a matter) will be
counted as present for purposes of determining whether
we have a quorum. For purposes of voting results,
abstentions will not be counted with respect to the election
of directors but will have the effect of “no” votes with
respect to other proposals, and broker non-votes will not
be counted with respect to any proposal.
Voting by Proxy
Stockholders may vote by internet, phone, or mail, per the
instructions on the accompanying proxy card.
Voting at the Meeting
Stockholders can vote in person during the meeting.
Stockholders of record will be on a list held by the
inspector of elections. Each beneficial owner (an owner
who is not the record holder of their shares) must obtain
a proxy from the beneficial owner’s brokerage firm,
bank, or the stockholder of record holding such shares
for the beneficial owner, and present it to the inspector of
elections with a ballot. Voting in person by a stockholder
as described here will replace any previous votes of that
stockholder submitted by proxy.
Changing Your Vote
Stockholders of record may change their votes by
revoking their proxies. This may be done at any time
before the polls close by (a) submitting a later-dated
proxy by the internet, telephone or mail, or (b) submitting
a vote in person at the annual meeting. Before the annual
meeting, stockholders of record may also deliver voting
instructions to our Secretary, Lam Research Corporation,
4650 Cushing Parkway, Fremont, California 94538.
If a beneficial owner holds shares through a bank or
brokerage firm, or another stockholder of record, the
beneficial owner must contact the stockholder of record in
order to revoke any prior voting instructions.
Voting Instructions
If a stockholder completes and submits proxy voting
instructions, the people named on the proxy card as
proxy holders, or the “Proxy Holders,” will follow the
stockholder’s instructions. If a stockholder submits proxy
voting instructions but does not include voting instructions
for each item, the Proxy Holders will vote as the board
recommends on each item for which the stockholder did
not include an instruction. The Proxy Holders will vote
on any other matters properly presented at the annual
meeting in accordance with their best judgment.
Voting Results
We will announce preliminary results at the annual
meeting. We will report final voting results at
http://investor.lamresearch.com and in a Form 8-K to be
filed shortly after the annual meeting.
1
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Availability of Proxy Materials
This proxy statement and the accompanying proxy card
and 2013 Annual Report will be mailed to stockholders
entitled to vote at the annual meeting who have
designated a preference for a printed copy beginning on
September 24, 2013. Stockholders who previously chose
to receive proxy materials electronically were sent an
email with instructions on how to access this year’s proxy
materials and the proxy voting site.
We have also provided our stockholders access to
our proxy materials over the internet in accordance
with rules and regulations adopted by the United
States Securities and Exchange Commission, or the
“SEC.” These materials are available on our website at
http://investor.lamresearch.com and at www.proxyvote.
com. We will furnish, without charge, a printed copy of
these materials and our 2013 Annual Report (including
exhibits) on request by phone (510-572-1615), by mail
(to Investor Relations, Lam Research Corporation, 4650
Cushing Parkway, Fremont, California 94538), or by
email (to investor.relations@lamresearch.com).
A Notice of Internet Availability of Proxy Materials will
be mailed beginning on September 24, 2013 to all
stockholders entitled to vote at the meeting. The notice will
have instructions for stockholders on how to access our
proxy materials through the internet and how to request
that a printed copy of the proxy materials be mailed to
them. The notice will also have instructions on how to
elect to receive all future proxy materials electronically
or in printed form. If you choose to receive future proxy
materials electronically, you will receive an email each
year with instructions on how to access the proxy
materials and proxy voting site.
Proxy Solicitation Costs
The Company will bear the cost of all proxy solicitation
activities. Our directors, officers and other employees
may solicit proxies personally or by telephone, email
or other communication means, without any cost to Lam
Research. In addition, we have retained AST Phoenix
Advisors to assist in obtaining proxies by mail, facsimile
or email from brokers, bank nominees and other
institutions for the annual meeting. The estimated cost of
such services is $8,500 plus out-of-pocket expenses. AST
Phoenix Advisors may be contacted at 6201 15th Avenue,
3rd Floor, Brooklyn, New York, 11219. We are required
to request that brokers and nominees who hold stock in
their names furnish our proxy materials to the beneficial
owners of the stock, and we must reimburse these brokers
and nominees for the expenses of doing so in accordance
with statutory fee schedules.
Other Meeting Information
Annual Meeting Admission
Voting on Proposals
All stockholders entitled to vote as of the Record Date
are entitled to attend the annual meeting. Admission of
stockholders will begin at 9:15 a.m. pacific standard
time on November 7, 2013. Any stockholders interested
in attending the annual meeting should be prepared to
present government-issued photo identification, such as
a valid driver’s license or passport, and verification of
ownership of Company common stock or proxy status
as of the Record Date for admittance. For stockholders
of record as of the Record Date, proof of ownership as
of the Record Date will be verified prior to admittance
into the annual meeting. For stockholders who were
not stockholders as of the Record Date but hold shares
through a bank, broker or other nominee holder, proof of
beneficial ownership as of the Record Date, such as an
account statement or similar evidence of ownership, will
be verified prior to admittance into the annual meeting.
For proxy holders, proof of valid proxy status will also
be verified prior to admittance into the annual meeting.
Stockholders and proxy holders will be admitted to the
annual meeting if they comply with these procedures.
Information on how to obtain directions to attend the
annual meeting and vote in person is available on the
Lam Research website at http://investor.lamresearch.com.
2
Pursuant to Proposal No. 1, board members will be
elected at the annual meeting to fill eleven seats on
the board to serve for the ensuing year, and until their
respective successors are elected and qualified, under a
“majority vote” standard. The majority voting standard
means that, even though there are eleven nominees
for the eleven board seats, a nominee will be elected
only if he or she receives an affirmative “for” vote from
stockholders owning, as of the Record Date, at least a
majority of the shares present and voted at the meeting
in such nominee’s election by proxy or in person. If an
incumbent fails to receive the required majority, his or
her previously submitted resignation will be promptly
considered by the board. Each stockholder may cast one
vote (“for” or “withhold”), per share held, for each of the
eleven nominees. Stockholders may not cumulate votes in
the election of directors.
Each share is entitled to one vote on Proposals No. 2
and 3. Votes may be cast “for,” “against” or “abstain” on
those Proposals.
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If a stockholder votes by means of the proxy solicited
by this proxy statement and does not instruct the Proxy
Holders how to vote, the Proxy Holders will vote: “FOR”
all individuals nominated by the board; “FOR” approval,
on an advisory basis, of the compensation of our named
executive officers; and “FOR” the ratification of Ernst &
Young LLP as the Company’s independent registered
public accounting firm for fiscal year 2014.
If you choose to vote in person, you will have an
opportunity to do so at the annual meeting. You may
either bring your proxy card to the annual meeting, or
if you do not bring your proxy card, the Company will
pass out written ballots to anyone who was a stockholder
as of the Record Date. As noted above, if you are a
beneficial owner (an owner who is not the record holder
of their shares), you will need to obtain a proxy from
your brokerage firm, bank, or the stockholder of record
holding shares on your behalf.
Voting by 401(k) Plan Participants
Employee participants in Lam’s Savings Plus Plan,
Lam Research 401(k) and the Novellus Systems, Inc.
(“Novellus“) 401(k) Plan, or the “401(k) Plans,” who
held Lam common stock in their personal 401(k) Plan
accounts as of the Record Date will receive this proxy
statement, so that each participant may vote, by proxy,
his or her interest in Lam’s common stock as held by the
401(k) Plans. The 401(k) Plan trustees, or the Company’s
Savings Plus Plan, Lam Research 401(k) Committee as the
administrator of the 401(k) Plans, will aggregate and vote
proxies in accordance with the instructions in the proxies
of employee participants that they receive.
Stockholder Accounts Sharing the
Same Last Name and Address
To reduce the expense of delivering duplicate proxy
materials to stockholders who may have more than one
account holding Lam Research stock but who share
the same address, we have adopted a procedure
approved by the SEC called “householding.” Under this
procedure, stockholders of record who have the same
address and last name will receive only one copy of
our proxy statement and annual report unless one of the
stockholders notifies our investor relations department
that he or she wants to receive separate copies. This
procedure reduces duplicate mailings and therefore
saves printing and mailing costs, as well as natural
resources. Stockholders who participate in householding
will continue to have access to all proxy materials at
http://investor.lamresearch.com, as well as the ability to
submit separate proxy voting instructions for each account
through the internet or by phone.
Stockholders holding multiple accounts of Lam common
stock may request separate copies of the proxy materials
by contacting us by phone (510-572-1615), by mail (to
Investor Relations, Lam Research Corporation, 4650
Cushing Parkway, Fremont, California 94538) or by email
(to investor.relations@lamresearch.com). Stockholders may
also request consolidation of proxy materials mailed to
multiple accounts at the same address.
Stockholder-Initiated Proposals and
Nominations for 2014 Annual Meeting
Proposals submitted under SEC rules for inclusion in
the Company’s proxy statement. Stockholder-initiated
proposals (other than director nominations) may be
eligible for inclusion in our proxy statement for next
year’s 2014 annual meeting (in accordance with SEC
Rule 14a-8) and for consideration at the 2014 annual
meeting. The Company must receive a stockholder
proposal no later than May 27, 2014 for the proposal
to be eligible for inclusion. Any stockholder interested in
submitting a proposal or nomination is advised to contact
legal counsel familiar with the detailed securities law
requirements for submitting proposals or nominations for
inclusion in a company’s proxy statement.
Proposals and nominations under Company
bylaws. Stockholders may also submit proposals for
consideration, and nominations of director candidates
for election, at the annual meeting by following certain
requirements set forth in our bylaws. The current
applicable provisions of our bylaws are described
below. Proposals will not be eligible for inclusion in the
Company’s proxy statement unless they are submitted
in compliance with then applicable SEC rules; however,
they will be presented for discussion at the annual
meeting if the requirements established by our bylaws
for stockholder proposals and nominations have
been satisfied. Under current SEC rules, stockholder
nominations for directors are not eligible for inclusion in
the Company’s proxy materials.
Our bylaws establish requirements for stockholder
proposals and nominations to be discussed at the annual
meeting even though they are not included in our proxy
statement. Assuming that the 2014 annual meeting
takes place at roughly the same date next year as the
2013 annual meeting (and subject to any change in
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our bylaws—which would be publicly disclosed by the
Company—and to any provisions of then-applicable SEC
rules), the principal requirements for the 2014 annual
meeting would be as follows:
For proposals and for nominations:
• A stockholder of record, or “the Stockholder,” must
submit the proposal or nomination in writing; it must be
received by the secretary of the Company no earlier
than July 11, 2014, and no later than August 10, 2014;
• The Stockholder’s notice to the secretary of a proposal
or nomination must state for each Stockholder and
beneficial owner of Company common stock, if any,
on behalf of whom the proposal or nomination is being
made, or a “Beneficial Owner:”
• the name and record address of the Stockholder and
the Beneficial Owner;
• the class, series and number of shares of capital stock
of the Company that are owned beneficially or of
record by the Stockholder and the Beneficial Owner;
• a description of any options, warrants, convertible
securities, or similar rights held by the Stockholder or
the Beneficial Owner with respect to the Company’s
stock, and any other opportunities by the Stockholder
or the Beneficial Owner to profit or share in any
profit derived from any increase or decrease in the
value of shares of the Company, including through a
general or limited partnership or ownership interest in
a general partner;
• a description of any proxies, contracts, or other
voting arrangements to which the Stockholder or
the Beneficial Owner is a party concerning the
Company’s stock;
• a description of any short interest held by the
Stockholder or the Beneficial Owner in the
Company’s stock;
• a description of any rights to dividends separated or
separable from the underlying shares of the Company
to which the Stockholder or the Beneficial Owner
are entitled;
• any other information relating to the Stockholder
or the Beneficial Owner that would be required to
be disclosed in a proxy statement or other filings
required to be made in connection with solicitations of
proxies for, as applicable, the proposal and/or for the
election of directors in a contested election pursuant to
Section 14 of the Securities Exchange Act of 1934, as
amended, or the “Exchange Act,” and the rules and
regulations pursuant thereto; and
• a statement whether or not the Stockholder or the
Beneficial Owner will deliver a proxy statement and
form of proxy to holders of, in the case of a proposal,
at least the percentage of voting power of all of the
shares of capital stock of the Company required under
applicable law to carry the proposal or, in the case of
nominations, at least the percentage of voting power
of all of the shares of capital stock of the Company
reasonably believed by the Stockholder or the
Beneficial Owner, as the case may be, to be sufficient
to elect the nominee or nominees proposed to be
nominated by the Stockholder or Beneficial Owner
under a majority voting standard.
Additionally, for nominations, the notice must:
• set forth, as to each person whom the Stockholder
proposes to nominate for election or reelection as
a director, all information relating to such person as
would be required to be disclosed in solicitations of
proxies for the election of such nominees as directors
pursuant to Regulation 14A under the Exchange Act;
• be accompanied by a written consent of each proposed
nominee to be named as a nominee and to serve as a
director if elected; and
• be accompanied by a statement whether such person,
if elected, intends to tender, promptly following
such person’s election or reelection, an irrevocable
conditional resignation effective upon such person’s
failure to receive the required vote for reelection or to
be renominated by the board at the next meeting at
which such person would face reelection and upon
acceptance of such resignation by the board, in
accordance with our corporate governance guidelines.
Additionally, for proposals, the notice must set forth
a brief description of such business, the reasons for
conducting such business at the meeting and any material
interest in such business of such Stockholder and the
Beneficial Owner, if any, on whose behalf the proposal
is made.
For a full description of the requirements for submitting
a proposal or nomination, see the Company’s bylaws.
Submissions or questions should be sent to: Secretary,
Lam Research Corporation, 4650 Cushing Parkway,
Fremont, California 94538.
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Nominees for Director
A board of eleven directors is to be elected at the 2013
annual meeting. In general, the eleven nominees who
receive the highest number of “for” votes will be elected.
However, any nominee who fails to receive affirmative
approval from holders of a majority of the votes cast in
such nominee’s election at the annual meeting, either by
proxy or in person, will not be elected to the board, even
if he or she is among the top eleven nominees in total
“for” votes. This requirement reflects the majority vote
provisions implemented by the Company in November
2009. The term of office of each person elected as a
director will be for the ensuing year, and until his or her
successor is elected and qualified.
Unless otherwise instructed, the Proxy Holders will vote
the proxies received by them for the eleven nominees
named below, each of whom is currently a director of
the Company. The proxies cannot be voted for more than
eleven nominees, whether or not there are additional
nominees. If any nominee of the Company should decline
or be unable to serve as a director as of the time of
the annual meeting, and unless otherwise instructed,
the proxies will be voted for any substitute nominee
designated by the present board of directors to fill the
vacancy. The Company is not aware of any nominee who
will be unable, or will decline, to serve as a director.
The below nominees for reelection have been nominated
for election to the board of directors in accordance
with the criteria and procedures discussed below in
“Corporate Governance.”
In addition to the below biographical information
concerning each board nominee’s specific experience,
attributes, positions and qualifications and age as
of September 1, 2013, we believe that each of our
nominees, while serving as a director and/or officer of
the Company, has devoted adequate time to the board
of directors and performed his or her duties with critical
attributes such as honesty, integrity, wisdom, and an
adherence to high ethical standards. Each nominee has
demonstrated strong business acumen, an ability to make
independent analytical inquiries, an ability to understand
the Company’s business environment, and an ability to
exercise sound judgment, as well as a commitment to the
Company and its core values. We believe the nominees
have an appropriate diversity and interplay of viewpoints,
skills and experiences that will encourage a robust
decision-making process for the board.
THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS A VOTE “FOR” EACH OF THE
DIRECTOR NOMINEES SET FORTH BELOW.
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Martin B. Anstice
Director since
February 2012
Eric K. Brandt
Director since
September 2010
Martin B. Anstice, age 46, has served as the Company’s President and Chief Executive
Officer since January 2012. Mr. Anstice joined the Company in April 2001 as Senior
Director, Operations Controller, was promoted to the position of Managing Director and
Corporate Controller in May 2002, and was promoted to Group Vice President, Chief
Financial Officer, and Chief Accounting Officer in June 2004. He was appointed Executive
Vice President and Chief Operating Officer in September 2008 and President in December
2010. Prior to joining the Company, Mr. Anstice held various finance positions from 1988
to 1999 at Raychem Corporation, a global materials science company. Subsequent to the
acquisition of Raychem by Tyco International, a global provider of engineered electronic
components, network solutions and wireless systems, he assumed responsibilities supporting
mergers and acquisition activities of Tyco Electronics. Mr. Anstice is an Associate member of
the Institute of Chartered Management Accountants in the United Kingdom.
The board has concluded that Mr. Anstice is qualified to serve as a director of the Company
because of his experience in the semiconductor equipment industry, including as current
President, Chief Executive Officer and a director of the Company, past President and Chief
Operating Officer, and past Chief Financial Officer of the Company, as well as his strong
leadership and prior experience as a corporate executive.
Eric K. Brandt, age 51, serves as Executive Vice President and Chief Financial Officer of
Broadcom Corporation, a global supplier of semiconductor devices, a role in which he has
served since joining Broadcom in March 2007. From September 2005 to March 2007,
Mr. Brandt served as President and Chief Executive Officer of Avanir Pharmaceuticals, Inc.,
a pharmaceutical company. Prior to Avanir Pharmaceuticals, Mr. Brandt was Executive Vice
President-Finance and Technical Operations and Chief Financial Officer of Allergan Inc.,
a global specialty pharmaceutical company, where he also held a number of other senior
positions following his arrival there in May 1999.
Mr. Brandt has served as a member of the board of directors and a member of the committee
responsible for compensation of Dentsply International, Inc., a manufacturer and distributor of
dental product solutions, since 2004.
He previously served on the board of directors of Vertex Pharmaceuticals, Inc., a
pharmaceutical company, where he was chair of the audit committee, from 2002 to 2009,
and Avanir Pharmaceuticals from 2005 to 2007.
Mr. Brandt received a B.S. degree in chemical engineering from the Massachusetts Institute of
Technology and an M.B.A. degree from the Harvard Graduate School of Business.
The board has concluded that Mr. Brandt is qualified to serve as a director of the Company
because of his financial expertise including as an active chief financial officer of a publicly
traded company that is a customer of our customers, his experience in the semiconductor
industry and his service on other boards of directors.
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Michael R. Cannon
Director since
February 2011
Michael R. Cannon, age 60, is the General Partner of MRC & LBC Partners, LLC, a private
management consulting company. From February 2007 until his retirement in January 2009,
Mr. Cannon served as President of Global Operations of Dell Inc., a computer systems
manufacturer and services provider, and from January 2009 to January 2011, he served as
a consultant to Dell. Prior to joining Dell, he was President and Chief Executive Officer of
Solectron Corporation, an electronic manufacturing services company, from January 2003 to
February 2007. From July 1996 to January 2003, Mr. Cannon served as President and Chief
Executive Officer of Maxtor Corporation, a disk drive and storage systems manufacturer.
Prior to joining Maxtor, Mr. Cannon held senior management positions at International
Business Machines Corp. (IBM), a global services, software and systems company.
Mr. Cannon has served as a member of the board of directors of Adobe Systems Inc.,
a diversified software company, since 2003, where he has been a member of the
audit committee; Seagate Technology Public Limited, a disk drive and storage solutions
company, since February 2011, where he has been a member of the nominations and
governance committee and finance committee; and Dialog Semiconductor, a mixed signal
integrated circuits company, since February 2013, where he has been a member of the
nominations committee.
Mr. Cannon previously served on the board of directors of Elster Group SE, a precision
metering and smart grid technology company, from October 2010 until the company was
acquired in August 2012; Solectron Corporation, an electronic manufacturing services
company, from January 2003 to January 2007; and Maxtor Corporation, a disk drive and
storage solutions company, from July 1996 until Seagate acquired Maxtor in May 2006.
He studied mechanical engineering at Michigan State University and completed the
Advanced Management Program at the Harvard Graduate School of Business.
The board has concluded that Mr. Cannon is qualified to serve as a director of the Company
because of his experience as a director on other public company boards, his experience in
leadership roles at a public corporation that is a customer of our customers, and his industry
and technology knowledge.
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Youssef A. El-Mansy
Director since
June 2012
Youssef A. El-Mansy, age 68, is the retired Vice President, Director of Logic Technology
Development, at Intel Corporation, a leading producer of microchips, computing and
communications products, where he was responsible for managing technology development,
the processor design center for Intel’s Technology and Manufacturing Group and two wafer
manufacturing facilities. Dr. El-Mansy joined Intel in 1979 and led microprocessor technology
development at Intel for 20 years.
Dr. El-Mansy previously served on the board of directors of Novellus Systems, Inc., from April
2004 until the company was acquired by Lam Research in June 2012, and Zygo Corporation,
an optical system designer and manufacturer, from July 2004 to June 2009.
Dr. El-Mansy is a Fellow of the Institute of Electrical and Electronics Engineers, or “IEEE,” and
has been awarded the 2004 IEEE Frederik Philips Award for leadership in developing state-
of-the-art logic technologies and the 2013 IEEE Robert Noyce Medal for establishing a highly
effective Research-Development-Manufacturing methodology that led to industry leadership in
logic technology.
Dr. El-Mansy holds B.S. and M.S. degrees in electronics and communications from Alexandria
University in Egypt and a Ph.D. degree in electronics from Carleton University in
Ottawa, Canada.
The board has concluded that Dr. El-Mansy is qualified to serve as a director of the
Company because of his more than 30 years of experience as an executive focused on
the manufacturing of technological devices and components for a major semiconductor
manufacturer; his understanding of the Company’s technologies; his knowledge of the
business and operations of Novellus, resulting from his service as a director of Novellus since
2004; and his public company experience as a director and member of a compensation
committee of another publicly traded company.
Christine A. Heckart, age 47, is the Executive Vice President, Strategy, Marketing, People and
Systems of ServiceSource International Inc., a service revenue management company, a role
in which she has served since May 2013. Prior to her promotion she was the Chief Marketing
Officer since July 2012. From February 2010 to May 2012, she was the Chief Marketing
Officer at NetApp, Inc., a data storage and management solutions provider. Ms. Heckart
served as General Manager for the TV, video and music business of Microsoft Corporation, a
developer of software, services, and hardware, from 2005 to 2010 and led global marketing
at Juniper Networks, Inc., a provider of network infrastructure solutions, from 2002 to
2005. She was President at TeleChoice, Inc., a consulting firm specializing in business and
marketing strategies, from 1995 to 2002.
Ms. Heckart holds a B.A. degree in economics from the University of Colorado at Boulder.
The board has concluded that Ms. Heckart is qualified to serve as a director of the Company
because of her experience in leadership roles at public corporations, her knowledge of the
electronics industry and her strong marketing background.
Christine A. Heckart
Director since
April 2011
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Grant M. Inman
Director since
August 1981
Grant M. Inman, age 71, is the founder and General Partner of Inman Investment
Management, a venture investment firm formed in 1998. Prior to 1998, he co-founded and
served as General Partner of Inman & Bowman, a venture capital firm formed in 1985.
Mr. Inman was a general partner of the investment banking firm Hambrecht & Quist from
1980 to 1985.
Mr. Inman has served as a member of the board of directors of Paychex, Inc., a payroll
and human resources outsourcing services company, since 1983, where he serves as a
member of the audit committee and the governance and compensation committee and is the
chairman of the investment committee. He is also a Trustee of The University of California,
Berkeley Foundation.
He previously served on the board of directors of Wind River Systems, Inc., a developer
of operating systems, middleware and software development tools, from June 1999 to
July 2009.
Mr. Inman holds a B.A. degree in economics from the University of Oregon and an M.B.A.
degree from the University of California, Berkeley.
The board has concluded that Mr. Inman is qualified to serve as a director of the Company
because of his prior service as a director of the Company, his industry knowledge, his
extensive experience on other boards (including as chairman of audit, compensation and
nominating and governance committees), and the diverse perspective he brings from his
venture investment experience.
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Catherine P. Lego
Director since
January 2006
Catherine P. Lego, age 56, is the founder of Lego Ventures LLC, a consulting services firm
for early stage electronics companies, formed in 1992. From December 1999 to December
2009, she was the General Partner of The Photonics Fund, LLP, an early stage venture capital
investment firm focused on investing in components, modules and systems companies for
the fiber optics telecommunications market, which she founded. Ms. Lego was a general
partner at Oak Investment Partners, a venture capital firm, from 1981 to 1992. Prior to Oak
Investment Partners, she practiced as a Certified Public Accountant with Coopers & Lybrand,
an accounting firm.
Ms. Lego has served as a member of the board of directors and as the chair of the audit
committee of SanDisk Corporation, a global developer of flash memory storage solutions,
since 2004 and as a director from 1989 to 2002. She has also served as a member of
the board of directors, the nominating and governance committee and the compensation
committee of Fairchild Semiconductor International Inc., a fabricator of power management
devices, since August 2013.
She previously served on the board of directors of the following public companies: ETEC
Corporation, a producer of electron beam lithography tools, from 1991 through 1997;
Uniphase Corporation (presently JDS Uniphase Corporation), a designer and manufacturer of
components and modules for the fiber optic based telecommunications industry and laser-
based semiconductor defect examination and analysis equipment, from 1994 until 1999,
when it merged with JDS-Fitel; Zitel Corporation, an information technology company, from
1995 to 2000; and Micro Linear Corporation, a fabless analog semiconductor company.
Ms. Lego also served as a member of the board of directors and as the chair of the audit
committee of the Cosworth Group, a private United Kingdom-based precision engineering
products and services company, from March 2011 to June 2013; StrataLight Communications,
Inc., a private fiber transmission subsystems developer, from September 2007 to January
2009; and WJ Communications, Inc., a broadband communications company, from October
2004 to May 2008.
She received a B.A. degree in economics and biology from Williams College and an M.S.
degree in accounting from the New York University Leonard N. Stern School of Business.
The board has concluded that Ms. Lego is qualified to serve as a director of the Company
because of her prior service on the board, her substantial accounting and financial expertise,
her knowledge of the electronics industry and the perspective of companies that are
customers of our customers, and experience on other boards, including her current service as
chairman of the audit committee of SanDisk.
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Stephen G. Newberry
Director since
June 2005
Stephen G. Newberry, age 59, has served as the Chairman of the Company’s board since
November 2012. He served as the Company’s Vice Chairman from December 2010 to
November 2012, Chief Executive Officer from June 2005 to January 2012 and President
from July 1998 to December 2010. Mr. Newberry joined the Company in August 1997 as
Executive Vice President, a role in which he served until July 1998, and Chief Operating
Officer, a role in which he served until June 2005. Prior to joining the Company,
Mr. Newberry held various executive positions at Applied Materials, Inc. during his 17-year
tenure there, including as Group Vice President of Global Operations and Planning.
Mr. Newberry has served as a member of the board of directors of Nanometrics
Incorporated, a provider of process control metrology and inspection systems, since May
2011; Splunk Inc., a software platform company for real-time operational intelligence, since
January 2013, and Semiconductor Equipment and Materials International, or “SEMI,” a
global semiconductor industry trade association, since July 2004.
Mr. Newberry previously served on the board of directors of Amkor Technology, Inc., a
provider of outsourced semiconductor packaging assembly and test services, from March
2009 to May 2011 and Nextest Systems Corporation, a developer of automated test
equipment systems for the semiconductor industry, from 2000 to 2008.
Mr. Newberry received a B.S. degree in ocean engineering from the U.S. Naval Academy
and graduated from the Program for Management Development at the Harvard Graduate
School of Business.
The board has concluded that Mr. Newberry is qualified to serve as a director of the
Company because of his 30 years’ experience in the semiconductor equipment industry,
his comprehensive understanding of the Company and its products, markets, and strategies
gained through his role as an executive of our Company, including as our Chief Executive
Officer, his active role in the semiconductor industry’s trade association, and his strong
leadership and operations expertise.
Krishna C. Saraswat
Director since
June 2012
Krishna C. Saraswat, age 66, has served as the Rickey/Nielsen Professor in the School of
Engineering of Stanford University since 2004. He has also served as a Professor of Electrical
Engineering and a Professor of Material Science and Engineering at Stanford University
since 1983.
Dr. Saraswat previously served on the board of directors of Novellus Systems, Inc. from
February 2011 until the company was acquired by Lam Research in June 2012.
Dr. Saraswat, an IEEE Life Fellow, received a B.E. degree in electronics in 1968 from the Birla
Institute of Technology and Science in Pilani, India, and M.S. and Ph.D. degrees in electrical
engineering in 1969 and 1974, respectively, from Stanford University. At Stanford University,
he has been engaged in research on new and innovative materials, structures, and process
technology of silicon, germanium and III-V devices and interconnects for VLSI, nanoelectronics
and solar cells.
The board has concluded that Dr. Saraswat is qualified to serve as a director of the
Company because of his diverse and extensive experience in research and development of
materials, structures and process technology directly related to our industry; his experience as
a professor studying and teaching electrical engineering in those areas; his strong academic
credentials, including his recognition as a recipient of numerous awards and his publication
of more than 650 technical papers; and his experience as a director of Novellus since 2011.
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William R. Spivey
Director since
June 2012
William R. Spivey, age 66, from July 2000 to September 2001, was President and
Chief Executive Officer of Luminent, Inc., a producer of fiber optic components. From
October 1997 to July 2000, he was Group President, Network Products Group of Lucent
Technologies, a producer of world-wide communications products. Previously he held senior
executive positions at AT&T Microelectronics, a communications company, and Tektronix, Inc.,
a provider of communications network management and diagnostic solutions.
Dr. Spivey has served as a member of the board of directors of Cascade Microtech, Inc., a
developer of precision electrical measurement and test of advanced semiconductor devices,
since 1998, where he chairs the compensation committee and is a member of the audit
committee; and Raytheon Company, a prime contractor on a broad portfolio of defense and
related programs for government customers, since 1999, where he chairs the compensation
committee and is a member of the governance and nominating committee and a former
member of the audit committee.
He previously served on the board of directors of Novellus Systems, Inc. from May 1998 until
the company was acquired by Lam Research in June 2012, where he was lead independent
director and chairman of the nominating and governance committee and a member of the
audit committee; Laird PLC, a global provider of products and technology solutions, from
2002 to 2012, where he was a member of the audit committee and the compensation
committee; ADT Telecommunications Inc., a supplier of networking products and systems,
from 2004 to 2010, where he served as lead independent director and on the audit and
governance committees; and Lyondell Chemical Company, a raw materials and technology
coatings industry supplier, from 2000 until 2007, where he served as chairman of the
governance committee and a member of the compensation committee.
Dr. Spivey holds a B.S. degree in physics from Duquesne University, a Masters degree in
physics from Indiana University of Pennsylvania and a Ph.D. degree in management from
Walden University.
The board has concluded that Dr. Spivey is qualified to serve as a director of the Company
because of his managerial experience at several technology companies; his service as a
director of multiple public companies; his experience as lead independent director and audit,
compensation and nominating and governance committee member; and his service as a
director of Novellus since 1998.
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Abhijit Y. Talwalkar
Director since
February 2011
Abhijit Y. Talwalkar, age 49, has been the President and Chief Executive Officer of LSI
Corporation, a leading provider of silicon, systems and software technologies for the storage
and networking markets, since 2005. Prior to joining LSI, Mr. Talwalkar was employed by
Intel Corporation, a microprocessor manufacturer, from 1993 to 2005. At Intel, he held a
number of senior management positions, including as Corporate Vice President and Co-
General Manager of the Digital Enterprise Group, which is comprised of Intel’s business
client, server, storage and communications business, and as Vice President and General
Manager for the Intel Enterprise Platform Group, where he focused on developing, marketing,
and supporting Intel business strategies for enterprise computing. Prior to joining Intel,
Mr. Talwalkar held senior engineering and marketing positions at Sequent Computer Systems,
a multiprocessing computer systems design and manufacturer that is currently a part of IBM;
Bipolar Integrated Technology, Inc., a VLSI bipolar semiconductor company; and Lattice
Semiconductor Inc., a service driven developer of programmable design solutions widely
used in semiconductor components.
Mr. Talwalkar has served as a member of the board of directors of LSI since 2005 and
the U.S. Semiconductor Industry Association, a semiconductor industry trade association,
since 2005. He is additionally a member of the U.S. delegation for World Semiconductor
Council proceedings.
He has a B.S. degree in electrical engineering from Oregon State University.
The board has concluded that Mr. Talwalkar is qualified to serve as a director of the
Company because of his experience in the semiconductor industry, including as the chief
executive officer of a semiconductor company, his leadership roles at other semiconductor
companies, and his active role in the semiconductor industry’s trade association.
Security Ownership of Certain Beneficial Owners and Management
The table below sets forth the beneficial ownership of
shares of Lam common stock by: (i) each person or entity
who we believe based on our review of filings made with
the SEC beneficially owned as of September 9, 2013,
more than 5% of Lam’s common stock on the date set
forth below; (ii) each current director of the Company;
(iii) each named executive officer identified below in the
“Compensation Discussion and Analysis” section; and
(iv) all current directors and current executive officers as
a group. With the exception of 5% owners, and unless
otherwise noted, the information below reflects holdings
as of September 9, 2013, which is the Record Date for
the 2013 annual meeting and the most recent practicable
date for determining ownership. For 5% owners, holdings
are as of the dates of their most recent ownership reports
filed with the SEC, which are the most practicable dates
for determining their holdings. The percentage of the
class owned is calculated using 162,092,907 as the
number of shares of Lam common stock outstanding on
September 9, 2013.
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Name of Person or Identity of Group
5% Stockholders
JP Morgan Chase & Co.
270 Park Avenue
New York, NY 10017
The Vanguard Group, Inc.
100 Vanguard Boulevard
Malvern, PA 19355
Directors
Martin B. Anstice (also a Named Executive Officer)
Eric K. Brandt
Michael R. Cannon
Youssef A. El-Mansy
Christine A. Heckart
Grant M. Inman
Catherine P. Lego
Stephen G. Newberry
Krishna C. Saraswat
William R. Spivey
Abhijit Y. Talwalkar
Named Executive Officers (“NEOs”)
Timothy M. Archer
Douglas R. Bettinger
Richard A. Gottscho
Sarah A. O’Dowd
Ernest E. Maddock
All current directors and executive officers as a group (15 people)(4)
Shares
Beneficially
Owned (#)(1)
Percentage
of Class
18,001,380(2)
11.1%
10,540,294(3)
6.5%
46,267
14,542
9,795
18,873
9,659
81,648
37,648
224,882
18,306
54,026
10,095
225,612(4)
19,594
21,100
30,034
7,568
822,081
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
* Less than 1%.
(1)
Includes shares subject to outstanding stock options that are now exercisable or will become exercisable within 60 days after September 9, 2013, as well as
restricted stock units, or “RSUs,” that will vest within that time period, as follows:
Name of Person or Identity of Group
Martin B. Anstice
Eric K. Brandt
Michael R. Cannon
Youssef A. El-Mansy
Christine A. Heckart
Grant M. Inman
Catherine P. Lego
Stephen G. Newberry
Krishna C. Saraswat
William R. Spivey
Abhijit Y. Talwalkar
Timothy M. Archer
Douglas R. Bettinger
Richard A. Gottscho
Sarah A. O’Dowd
Ernest E. Maddock
All current directors and executive officers as a group (15 people)
Shares
0
5,127
3,830
3,830
3,830
3,830
3,830
125,610
3,830
3,830
3,830
149,625
11,789
0
0
0
322,791
As discussed in “Director Compensation” below, the employee chairman and non-employee directors receive an annual equity grant as part of their
compensation. These grants generally vest on November 1, subject to continued service on the board as of that date, but the shares are delivered in the
following January. For 2013, Mr. Newberry received an annual grant of 1,910 RSUs and Drs. El-Mansy, Saraswat and Spivey; Messrs. Brandt, Cannon, Inman
and Talwalkar; and Mses. Heckart and Lego each received grants of 3,830 RSUs. These RSUs are included in the tables above, although the directors will not
actually receive them until January 2014.
(2) All information regarding JPMorgan Chase & Co., or “JPMorgan Chase,” is based solely on information disclosed in amendment number 4 to Schedule 13G
filed by JPMorgan Chase with the SEC on January 17, 2013 as a parent holding company on behalf of JPMorgan Chase and its wholly-owned subsidiaries:
JPMorgan Chase Bank, National Association; J.P. Morgan Investment Management Inc.; JPMorgan Asset Management (UK) Ltd.; J.P. Morgan Trust Company
of Delaware; JP Morgan Asset Management (Japan) Limited; and JPMorgan Asset Management (Canada) Inc. According to the Schedule 13G/A filing, of the
18,001,380 shares of Lam common stock reported as beneficially owned by JPMorgan Chase as of December 31, 2012, JPMorgan Chase had sole voting
power with respect to 16,419,719 shares, had shared voting power with respect to 40,513 shares, had sole dispositive power with respect to 17,942,700 shares
and shared dispositive power with respect to 58,680 shares of Lam common stock reported as beneficially owned by JPMorgan Chase as of that date.
(3) All information regarding The Vanguard Group, Inc., or “Vanguard,” is based solely on information disclosed in a Schedule 13G filed by Vanguard with the
SEC on February 13, 2013 as a parent holding company on behalf of Vanguard and its wholly-owned subsidiaries: Vanguard Fiduciary Trust Company, or
“VFTC,” and Vanguard Investments Australia, Ltd., or “VIA.” According to the Schedule 13G filing, of the 10,540,294 shares of Lam common stock reported as
beneficially owned by Vanguard as of December 31, 2012, Vanguard had sole voting power with respect to 314,260 shares, did not have shared voting power
with respect to any other shares, had sole dispositive power with respect to 10,246,534 shares and shared dispositive power with respect to 293,760 shares of
Lam common stock reported as beneficially owned by Vanguard as of that date. According to the Schedule 13G, the 10,540,294 shares of Lam common stock
reported as beneficially owned by Vanguard include 242,260 shares beneficially owned by VFTC as a result of it serving as investment manager of collective
trust accounts, and 123,500 shares beneficially owned by VIA as a result of it serving as investment manager of Australian investment offerings.
Includes 4,227 shares of common stock held indirectly in a 401(k) plan and 500 shares of common stock held by Mr. Archer’s spouse in her 401(k) plan over
which he may be deemed to have beneficial ownership.
(4)
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Corporate Governance
Our board of directors and members of management
are committed to responsible corporate governance to
manage the Company for the long-term benefit of its
stockholders. To that end, the board and management
periodically review and update, as appropriate, the
Company’s corporate governance policies and practices.
As part of that process, the board and management
review the requirements of federal and state law,
including rules and regulations of the SEC; the listing
standards for the NASDAQ Global Select Market, or
“NASDAQ;” published guidelines and recommendations
of proxy advisory firms; and published guidelines of other
selected public companies.
Corporate Governance Policies
We have instituted a variety of policies and procedures
to foster and maintain responsible corporate governance,
including the following:
Board committee charters. Each of the board’s audit,
compensation and nominating and governance
committees has a written charter adopted by the
board that establishes practices and procedures for the
committee in accordance with applicable corporate
governance rules and regulations. Each committee
reviews its charter annually and recommends changes
to the board, as appropriate. Each committee charter
is available on the investors’ page of our web site
at http://investor.lamresearch.com. Please also refer
to “Board Committees” below, for a description of
responsibilities of these board committees.
Corporate governance guidelines. We adhere to written
corporate governance guidelines, adopted by the
board and reviewed annually by the nominating and
governance committee and the board. Selected provisions
of the guidelines are discussed below, including in the
“Board Nomination Policies and Procedures,” “Director
Independence Policies” and “Other Governance
Practices” sections below. The corporate governance
guidelines are available on the investors’ page of our web
site at http://investor.lamresearch.com.
Corporate code of ethics. We maintain a code of ethics
that applies to all employees, officers, and members
of the board. The code of ethics establishes standards
reasonably necessary to promote honest and ethical
conduct, including the ethical handling of actual or
apparent conflicts of interest between personal and
professional relationships, and full, fair, accurate, timely,
and understandable disclosure in the periodic reports we
file with the SEC and in other public communications. We
will promptly disclose to the public any amendments to,
or waivers from, any provision of the code of ethics to the
extent required by applicable laws. We intend to make
this public disclosure by posting the relevant material on
our web site, to the extent permitted by applicable laws.
A copy of the code of ethics is available on the investors’
page of our web site at http://investor.lamresearch.com.
Global standards of business conduct policy. We
maintain written standards of appropriate conduct in a
variety of business situations that apply to employees
worldwide. Among other things, these global standards
of business conduct prohibit employees from engaging
in “short sales” of Lam securities or from purchasing
or selling “put” or “call” options for Lam securities
(other than stock options issued under our employee
equity plans). These measures help to ensure that
our employees will not benefit from a decline in
Lam’s stock price, and will remain focused on our
business success.
Insider trading policy. Our insider trading policy restricts
the trading of Company stock by our directors, officers,
and employees, and includes provisions addressing
insider blackout periods, margin accounts and
hedging transactions.
Board Nomination Policies and
Procedures
Board membership criteria. Under our corporate
governance guidelines, the nominating and governance
committee is responsible for assessing the appropriate
balance of experience, skills and characteristics required
for the board and for recommending director nominees to
the independent directors.
The guidelines direct the committee to consider all
factors it considers appropriate. The committee need
not consider all of the same factors for every candidate.
Factors to be considered may include, but are not limited
to: experience; business acumen; wisdom; integrity;
judgment; the ability to make independent analytical
inquiries; the ability to understand the Company’s
business environment; the candidate’s willingness and
ability to devote adequate time to board duties; specific
skills, background or experience considered necessary
or desirable for board or committee service; specific
experiences with other businesses or organizations that
may be relevant to the Company or its industry; diversity
with respect to any attribute(s) the board considers
desirable; and the interplay of a candidate’s experiences
and skills with the experiences and skills of other
board members.
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Prior to recommending that an incumbent non-employee
director be nominated for reelection to the board,
the committee reviews the experiences, skills and
qualifications of the directors to assess the continuing
relevance of the directors’ experiences, skills and
qualifications to those considered necessary or desirable
for the board at that time.
Board members may not serve on more than four boards
of public companies (including service on the Company’s
board). In addition, no director, after having attained the
age of 75 years, may be nominated for re-election or
reappointment to the board.
Nomination procedure. The nominating and governance
committee identifies, evaluates and recommends qualified
candidates for appointment or election to the board. The
committee considers recommendations from a variety of
sources, including search firms, board members, executive
officers and stockholders. Formal nominations are made
by the independent members of the board.
Certain provisions of our bylaws apply to the nomination
or recommendation of candidates by a stockholder.
Information regarding the nomination procedure is
provided in the “Stockholder-Initiated Proposals and
Nominations for 2014 Annual Meeting” section above.
Director Independence Policies
Board independence requirements. Our corporate
governance guidelines require that at least a majority of
the board members be independent in accordance with
NASDAQ rules. No director will qualify as “independent”
unless the board affirmatively determines that the director
has no relationship that would interfere with the exercise
of independent judgment as a director. In addition, no
non-employee director may serve as a consultant or
service provider to the Company without the approval
of a majority of the independent directors (and any such
director’s independence must be reassessed by the full
board following such approval).
Board member independence. The board has determined
that all current directors, other than Messrs. Anstice
and Newberry, are independent in accordance with
NASDAQ criteria for director independence.
Board committee independence. All members of
the board’s audit, compensation, and nominating
and governance committees must be independent in
accordance with applicable NASDAQ criteria as well as,
in the case of the compensation committee, applicable
rules under section 162(m) of the Internal Revenue Code
of 1986, as amended, or the “Code,” and Rule 16b-3 of
the Exchange Act as non-employee directors. See “Board
Committees” below for a description of the responsibilities
of these board committees.
Lead independent director. Our corporate governance
guidelines authorize the board to designate a lead
independent director from among the independent board
members. The lead independent director is responsible for
coordinating the activities of the independent directors,
consulting with the chairman regarding matters such as
schedules of and agendas for board meetings and the
retention of consultants who report directly to the board,
and developing the agenda for and moderating executive
sessions of the board’s independent directors. Mr. Inman
has served as the lead independent director since his
reelection at the 2012 annual meeting.
Executive sessions of independent directors. The board
and its audit, compensation, and nominating and
governance committees hold meetings of the independent
directors and committee members, without management
present, as part of each regularly scheduled meeting
and at any other time at the discretion of the board or
committee, as applicable.
Board access to independent advisors. The board as
a whole, and each of the board standing committees
separately, may retain, at the Company’s expense, and
may terminate, in their discretion, any independent
consultants, counselors, or advisors as they deem
necessary or appropriate to fulfill their responsibilities.
Leadership Structure of the Board
The current leadership structure of the board consists
of a chairman and a lead independent director. The
chairman, Mr. Newberry, served as chief executive officer
of the Company, or “CEO,” from June 2005 to January
2012. The board believes that this is the appropriate
leadership structure at this time. Lam and its stockholders
benefit from having Mr. Newberry as its chairman, as
he brings to bear his experience as CEO as well as his
other qualifications in carrying out his responsibilities as
chairman. The Company and its stockholders also benefit
from having a lead independent director to provide
independent board leadership.
Other Governance Practices
In addition to the principal policies and procedures
described above, we have established a variety of other
practices to enhance our corporate governance, including
the following:
Board and committee assessments. At least bi-annually,
the board conducts a self-evaluation, overseen by the
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nominating and governance committee. To the extent the
board requests, the committee also oversees evaluations
of the board’s standing committees.
matters will be received and treated anonymously (if
the complaint or concern is submitted anonymously)
and confidentially.
Director resignation or notification of change in
executive officer status. Under our corporate governance
guidelines, any director who is also an executive
officer of the Company must offer to submit his or her
resignation as a director to the board if the director
ceases to be an executive officer of the Company. The
board may accept or decline the offer, in its discretion.
The corporate governance guidelines also require a
non-employee director to notify the nominating and
governance committee if the director changes his or her
executive position at another company. The nominating
and governance committee reviews the appropriateness
of the director’s continuing board membership under
the circumstances, and the director is expected to act
in accordance with the nominating and governance
committee’s recommendations.
Director and executive stock ownership. Under the
corporate governance guidelines, each director is
expected to own at least five times the value of the
annual cash retainer (not including any committee chair
or other supplemental retainers for directors) or 5,000
shares of Lam common stock, whichever is less, by the
fifth anniversary of his or her initial election to the board.
Guidelines for stock ownership by designated members
of the executive management team are described
below under “Compensation Discussion and Analysis.”
All of our directors and designated members of our
executive management team were in compliance with the
Company’s applicable stock ownership guidelines at the
end of fiscal year 2013.
Communications with board members. Any stockholder
who wishes to communicate directly with the board
of directors, with any board committee or with any
individual director regarding the Company may write to
the board, the committee or the director c/o Secretary,
Lam Research Corporation, 4650 Cushing Parkway,
Fremont, California 94538. The Secretary will forward all
such communications to the appropriate director(s).
Any stockholder, employee, or other person may
communicate any complaint regarding any accounting,
internal accounting control, or audit matter to the
attention of the board’s audit committee by sending
written correspondence by mail (to Lam Research
Corporation, Attention: Board Audit Committee, P.O.
Box 5010, Fremont, California 94537-5010) or by the
internet (through the Company’s third party provider
web site at https://secure.ethicspoint.com/domain/
media/en/gui/35911/index.html). The audit committee
has established procedures to ensure that employee
complaints or concerns regarding audit or accounting
Meeting Attendance
All of the directors attended at least 75% of the
aggregate number of board meetings and meetings of
board committees on which they served during their
board tenure in fiscal year 2013. Our board of directors
held a total of four meetings during fiscal year 2013.
We expect our directors to attend the annual meeting of
stockholders each year and to respond to appropriate
questions. All individuals who were directors as of the
2012 annual meeting of stockholders attended the 2012
annual meeting of stockholders.
Board Committees
The board of directors has three standing committees:
an audit committee, a compensation committee, and a
nominating and governance committee. The purpose,
membership and charter of each are described below.
Committee Memberships as of June 2013
Name
Eric K. Brandt
Michael R. Cannon
Youssef A. El-Mansy
Christine A. Heckart
Grant M. Inman
Catherine P. Lego
Krishna C. Saraswat
William R. Spivey
Abhijit Y. Talwalkar
Audit
Compensation
Nominating
and
Governance
x
x1
Chair
x2
x
x
x3
Chair4
x
Chair3
x
x
x
(1) Mr. Cannon served as a member of the compensation committee
until May 1, 2013, at which time he was appointed a member of the
audit committee.
(2) Dr. Spivey was appointed a member of the audit committee effective
November 1, 2012.
(3) Mr. Inman was appointed the chair of the nominating and governance
committee and Lead Independent Director effective November 1, 2012.
Mr. Inman served as the chair of the compensation committee until
November 1, 2012.
(4) Mr. Talwalkar was appointed the chair of the compensation committee
effective November 2, 2012.
Audit committee. The purpose of the audit committee
is to oversee the Company’s accounting and financial
reporting processes and the audits of our financial
statements, including the system of internal controls.
The audit committee is not responsible for planning
or conducting our audits, or determining whether
our financial statements are complete and accurate
or prepared in accordance with generally accepted
accounting principles.
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The board concluded that all audit committee members
are non-employee directors who are independent in
accordance with the NASDAQ listing standards and
SEC rules for audit committee member independence
and that each audit committee member is able to read
and understand fundamental financial statements as
required by the NASDAQ listing standards. The board
also determined that Ms. Lego, the chair of the committee
during fiscal year 2013, and Mr. Brandt, a member of the
committee during fiscal year 2013, are each a “financial
expert” as defined in SEC rules. The audit committee held
nine meetings during fiscal year 2013.
The audit committee’s responsibilities include (but are not
limited to) the following:
• Appoint and provide for the compensation for the
Company’s independent registered public accounting
firm, or the “Accounting Firm,” and approve, in
accordance with and in a manner consistent with
the laws, rules and regulations applicable to the
Company, all professional services to be provided to
Lam Research by the Accounting Firm
• Oversee the work, and evaluate the performance, of
the Accounting Firm
• Meet with management and the Accounting Firm
to discuss the annual financial statements and the
Accounting Firm’s report on them prior to the filing of
the Company’s annual report on Form 10-K with the
SEC, and to discuss the adequacy of internal control
over financial reporting
• Meet quarterly with management and the Accounting
Firm to discuss the quarterly financial statements prior
to the filing of the Company’s quarterly report on
Form 10-Q with the SEC
• At least annually, review and reassess the internal
audit charter and, if appropriate, recommend
proposed changes
• Review the scope, results and analysis of internal
audits (if any)
• Review and approve all related-party transactions
• Establish a procedure for receipt, retention and
treatment of any complaints received by the Company
about its accounting, internal accounting controls
or auditing matters, and for the confidential and
anonymous submission by employees of concerns
regarding questionable accounting or auditing matters
• Review and monitor the Company’s investment
policy and its investment portfolio performance and
associated risks, including but not limited to annual
review and recommendation to the full board of
management’s treasury strategy committee charter
and other compensatory plans in which the Company’s
executive officers and/or directors participate and to
produce an annual report on executive compensation
for inclusion as required in the Company’s annual
proxy statement.
The board concluded that all members of the
compensation committee are non-employee
directors who are independent in accordance with
Rule 16b-3 of the Exchange Act and the NASDAQ
criteria for director independence and who are outside
directors for purposes of section 162(m) of the Code.
The compensation committee held seven meetings during
fiscal year 2013.
The compensation committee’s responsibilities include (but
are not limited to) the following:
• Establish and review corporate goals and objectives
as relevant to the chief executive officer, the chairman
and the vice chairman, evaluate their performance
in light of these goals and objectives and based
on this evaluation recommend the chief executive
officer’s, the chairman’s and the vice chairman’s
compensation packages and payouts for approval by
the independent members of the board
• Determine compensation packages, targets, and
payouts for other executive officers
• Establish and administer stock ownership guidelines
applicable to executive officers
• Review and recommend to the board for final
approval all cash, equity-based or other compensation
arrangements applicable to the independent members
of the board
• Review and approve, subject to stockholder or board
approval as required, the creation or amendment
of any equity-based compensatory plans and other
compensatory plans as the board designates, and
administer such plans
• Oversee management’s determination as to whether
the Company’s compensation policies and practices
create risks that are reasonably likely to have a
material adverse effect on the Company
• Recommend to the board the frequency of “say
on pay” votes, review the results of “say on pay”
votes, and consider whether any adjustments to the
Company’s executive compensation program are
appropriate as a result of such votes
• Appoint and oversee compensation of and the work
of any compensation consultants, independent counsel
and advisors retained by the committee
Compensation committee. The purpose of the
compensation committee is to discharge certain
responsibilities of the board relating to executive
compensation, to oversee incentive, equity-based plans
Nominating and governance committee. The purpose of
the nominating and governance committee is to identify
individuals qualified to serve as members of the board
of the Company, to recommend nominees for election
as directors of the Company, to oversee self-evaluations
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of the board’s performance, to develop and recommend
corporate governance guidelines to the board, and to
provide oversight with respect to corporate governance
and ethical conduct.
The board concluded that all nominating and governance
committee members are non-employee directors who are
independent in accordance with the NASDAQ criteria for
director independence. The nominating and governance
committee held four meetings during fiscal year 2013.
The nominating and governance committee’s
responsibilities include (but are not limited to) the
following:
• Identify, screen, evaluate, and recommend to the
independent members of the board nominees for
election as directors of the Company at the next
annual or special meeting of stockholders at which
directors are to be elected; and identify, screen,
evaluate and recommend to the board individuals to
fill any vacancies or newly created directorships that
may occur between meetings
• Make recommendations to the board annually after
consultation with the chairman of the board and the
lead independent director, if any, with respect to
assignment of board members to committees and as
committee chairs
• Cause to be prepared and recommend to the board
the adoption of corporate governance guidelines, and
from time to time review and assess the guidelines and
recommend changes for approval by the board
• Review and assess, from time to time, the governing
documents of the Company and, if appropriate,
propose changes to the board
• Oversee on a bi-annual basis a self-evaluation of the
board and, to the extent that the board requests , the
board committees in accordance with the Company’s
corporate governance guidelines and the committee
charters and conduct from time to time a self-
evaluation of its performance
• Ensure that the board reviews CEO succession
planning and that the CEO reports to the board
regarding organization status on an appropriate basis
The nominating and governance committee recommended
the slate of nominees for director set forth in Proposal
No. 1. The independent members of the board approved
the recommendations and nominated the proposed slate
of nominees.
The nominating and governance committee will
consider for nomination persons properly nominated
by stockholders in accordance with the Company’s
bylaws and other procedures described in the
“Stockholder - Initiated Proposals and Nominations
for 2014 Annual Meeting” section above. Subject
to then-applicable law, stockholder nominations for
director will be evaluated by the Company’s nominating
and governance committee in accordance with the
same criteria as is applied to candidates identified by the
nominating and governance committee or other sources.
Board’s Role in Risk Oversight
The board of directors has oversight responsibility with
respect to our risk management activities. For a discussion
of the risks we face, see our Annual Report on Form 10-K.
The board provides risk oversight by: (1) overseeing our
risk management processes; (2) overseeing our strategic
goals and objectives in the context of our material risk
exposures; and (3) receiving reports from management
on various types of risks and management’s processes for
managing such risks.
The board has delegated oversight responsibility for
certain areas of risk exposure to its standing committees.
• Our audit committee oversees risk management
activities relating to the Company’s accounting
and financial reporting, internal controls, and the
auditing of our annual financial statements. The audit
committee also oversees our independent registered
public accounting firm and our internal audit
function. The audit committee meets privately with
our independent registered public accounting firm at
least quarterly.
• Our compensation committee oversees risk
management activities relating to the design of equity,
executive and board level compensation policies
and plans. The compensation committee works with
an independent compensation consultant and meets
privately with that consultant as appropriate.
Assessment of Compensation Risk
Management conducted a compensation risk assessment
in 2013 and concluded that the Company’s current
compensation programs are not reasonably likely to have
a material adverse effect on the Company’s business.
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Director Compensation
The compensation of our non-employee directors is
reviewed and determined annually by the board, upon
recommendation from the compensation committee.
Non-employee directors receive annual retainers and
committee chairs, the lead independent director and
committee members receive additional cash retainers.
The board endeavors to maintain forms and amounts of
director compensation that will attract and retain directors
of the caliber desired by the Company and that align
director interests with those of stockholders. Other than
Mr. Newberry, board members who are also employees
do not receive any additional compensation for service
on the board.
Annual Retainer
Lead Independent Director
Audit Committee – Chair
Audit Committee – Member
Compensation Committee – Chair
Compensation Committee – Member
Nominating and Governance Committee – Chair
Nominating and Governance Committee – Member
Non-employee directors also receive equity awards
for their board service. New non-employee directors
are generally eligible to receive an initial equity grant
in the form of RSUs, upon the date of the first regularly
scheduled board meeting attended by that director after
first being appointed or elected to the board, with a
targeted grant date value equal to $250,000 (the number
of RSUs subject to the award is determined by dividing
$250,000 by the fair market value of a share of Lam
common stock as of the date of grant, rounded down to
the nearest 10 shares). The initial RSUs vest in four equal
annual installments from the date of grant subject to the
director’s continued service on the board. These equity
grants are subject to the terms and conditions of the
Company’s 2007 Stock Incentive Plan, as amended, and
the applicable award agreements.
Our director compensation plans run on a calendar-
year basis. However, SEC rules require us to report
compensation in this proxy statement on a fiscal-year
basis. The types and rates of cash compensation are
included in the table below. Cash compensation paid
for the fiscal year ended June 30, 2013 is shown in the
table below, together with the annual cash compensation
program components in effect for calendars years 2012
and 2013. For directors who joined the board or a
committee during the fiscal year, the fiscal year 2013
compensation is prorated.
Calendar
Year 2013
($)
Calendar
Year 2012
($)
Fiscal
Year 2013
($)
60,000
20,000
25,000
12,500
20,000
10,000
10,000
5,000
60,000
15,000
25,000
12,500
20,000
10,000
10,000
5,000
60,000
17,500
25,000
12,500
20,000
10,000
10,000
5,000
Each non-employee director is eligible to receive an
annual equity grant on a designated date in January
of each year (or, if the designated date falls within a
blackout window under applicable Company policies,
on the first business day such grant is permissible under
those policies) with a targeted grant value equal to
$160,000 (the number of RSUs subject to the award is
determined by dividing $160,000 by the fair market
value of a share of Company common stock as of the
date of grant, rounded down to the nearest 10 shares).
These grants generally vest on November 1 in the year of
grant and are subject to the terms and conditions of the
Company’s 2007 Stock Incentive Plan, as amended, and
the applicable award agreements.
Each non-employee director who was on the board on
January 28, 2013 received a grant of 3,830 RSUs for
services during calendar year 2013. Each RSU grant
issued on January 28, 2013 vests in full on November 1,
2013, generally subject to the director’s continued service
on the board. Receipt of the shares is deferred until
January 31, 2014.
20
<12345678> JOB TITLE LAM Research Combo
REVISION 12
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DATE Tuesday, September 24, 2013
JOB TITLE LAM Research Combo
REVISION 12
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The following table shows compensation for fiscal year 2013 for directors other than Mr. Anstice, whose compensation
is described below under “Compensation Discussion and Analysis”:
Director Compensation for Fiscal Year 2013
Name
Stephen G. Newberry
James W. Bagley
Robert M. Berdahl
Eric K. Brandt
Michael R. Cannon
Youssef A. El-Mansy
Christine A. Heckart
Grant M. Inman
Catherine P. Lego
Kim E. Perdikou
Krishna C. Saraswat
William R. Spivey
Abhijit Y. Talwalkar
Delbert A. Whitaker
Fees
Earned
or Paid
in Cash
($)
541,692(3)
263,365(4)
42,500(5)
72,500(6)
75,625(7)
60,124(8)
70,000(9)
97,500(10)
85,000(11)
67,500(12)
55,829(13)
65,204(14)
78,750(15)
26,021(16)
Stock
Awards
($)(1)
79,723(17)
0
0
159,864(18)
159,864(18)
159,864(18)
159,864(18)
159,864(18)
159,864(18)
0
159,864(18)
159,864(18)
159,864(18)
0
Non-Equity
Incentive Plan
Compensation
($)
343,962(19)
0
0
0
0
0
0
0
0
0
0
0
0
0
All Other
Compensation
($)(2)
5,330
14,875
17,974
0
0
17,974
0
17,974
13,000
3,835
0
17,974
0
0
Total
($)
970,707
278,241
60,474
232,364
235,489
237,962
229,864
275,338
257,864
71,335
215,693
243,043
238,614
26,021
(1) The amounts shown in this column represent the grant date fair value of unvested restricted stock unit, or “RSU,” awards granted during fiscal year 2013
in accordance with Financial Accounting Standards Board Accounting Standards Codification 718, Compensation — Stock Compensation, or “ASC 718.”
However, pursuant to SEC rules, these values are not reduced by an estimate for the probability of forfeiture. The assumptions used to calculate the fair value
of the RSUs in fiscal year 2013 are set forth in Note 11 in the Notes to Consolidated Financial Statements of the Company’s Annual Report on Form 10-K for the
fiscal year ended June 30, 2013.
(2) Represents the portion of medical, dental and vision premiums paid by Lam.
(3) Mr. Newberry received $541,692, representing his $60,000 annual cash retainer as a director, $41,538 in vacation payout and the remainder as his base cash
compensation under his employment agreement. As explained below, his compensation is based on his position as an employee of Lam and chairman or vice-
chairman of the board.
(4) Mr. Bagley received $263,365, representing his compensation as an employee director through November 1, 2012, his compensation as an employee from
November 2, 2012 through his retirement on December 28, 2012, and $47,885 in vacation paid upon his retirement. As explained below, his compensation was
based on his position as an employee of Lam; he received no additional compensation as chairman of the board.
(5) Dr. Berdahl received $42,500, representing his annual retainer; $7,500 as lead independent director; and $5,000 as chair of the nominating and governance
committee. Dr. Berdahl retired as of November 1, 2012.
(6) Mr. Brandt received $72,500, representing his annual retainer and $12,500 as a member of the audit committee.
(7) Mr. Cannon received $75,625, representing his annual retainer; $7,500 as a member of the compensation committee through May 1, 2013; $5,000 as a member
of the nominating and governance committee; and $3,125 as a member of the audit committee effective May 1, 2013.
(8) Dr. El-Mansy received $60,124, representing his annual retainer and $8,589 as a member of the compensation committee. As a non-employee director
appointed to the board in connection with the acquisition of Novellus, his calendar year 2012 cash compensation was prorated on a daily basis through the end
of his term, October 31, 2012.
(9) Ms. Heckart received $70,000, representing her annual retainer and $10,000 as a member of the compensation committee.
(10) Mr. Inman received $97,500, representing his annual retainer; $13,750 as lead independent director effective November 1, 2012; $10,000 as chair of the
compensation committee through November 1, 2012; $5,000 as a member of the compensation committee effective November 2, 2012; $6,250 as chair
of the nominating and governance committee effective November 1, 2012; and $2,500 as a member of the nominating and governance committee through
October 31, 2012.
(11) Ms. Lego received $85,000, representing her annual retainer and $25,000 as chair of the audit committee.
(12) Ms. Perdikou received $67,500, representing her annual retainer, $6,250 as a member of the audit committee and $31,250 as a special payment on October 24,
2012 reflecting the prorated value of her initial RSU grant that would have vested in May 2013. Ms. Perdikou resigned as a director effective November 1, 2012.
(13) Dr. Saraswat received $55,829, representing his annual retainer and $4,295 as a member of the nominating and governance committee. As a non-employee
director appointed to the board in connection with the acquisition of Novellus, his calendar year 2012 cash compensation was prorated on a daily basis
through the end of his term, October 31, 2012.
(14) Dr. Spivey received $65,204, representing his annual retainer, $9,375 as a member of the audit committee effective November 1, 2012, and $4,295 as a
member of the nominating and governance committee. As a non-employee director appointed to the board in connection with the acquisition of Novellus, his
calendar year 2012 cash compenation was prorated on a daily basis through the end of his term, October 31, 2012.
(15) Mr. Talwalkar received $78,750, representing his annual retainer; $10,000 as chair of the compensation committee effective November 2, 2012; $5,000 as a
member of the compensation committee through November 1, 2012; and $3,750 as a member of the nominating and governance committee.
(16) Mr. Whitaker received $26,021, representing his annual retainer and $4,486 as a member of the audit committee. Mr. Whitaker retired as of November 1, 2012.
As a non-employee director appointed to the board in connection with the acquisition of Novellus, his calendar year 2012 cash compenation was prorated on a
daily basis through the end of his term, October 31, 2012.
(17) On January 28, 2013, Mr. Newberry received an annual grant of 1,910 RSUs based on the $41.74 closing price of Lam’s common stock and the target value of
$80,000, rounded down to the nearest ten shares.
(18) On January 28, 2013, each non-employee director who was on the board received an annual grant of 3,830 RSUs based on the $41.74 closing price of Lam’s
common stock and the target value of $160,000, rounded down to the nearest 10 shares.
(19) Represents $343,962 accrued on behalf of Mr. Newberry during fiscal year 2013 under the 2011/2012 LTIP-Cash program, which Mr. Newberry has received.
21
Proposal No. 1 Election of DirectorsLam Research Corporation 2013 Proxy StatementContinues on next page <12345678> JOB TITLE LAM Research Combo
REVISION 12
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DATE Tuesday, September 24, 2013
JOB TITLE LAM Research Combo
REVISION 12
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Mr. Newberry, who served as vice-chairman from
January 1, 2012 until November 1, 2012 and since
such date has served as chairman, has a different
compensation arrangement than the other directors
due to his position as an employee of the Company.
Mr. Newberry’s compensation was approved by the
independent members of the board upon recommendation
from the compensation committee. Mr. Newberry
entered into an employment agreement commencing
on January 1, 2012 and expiring on December 31,
2014, subject to the right of earlier termination in certain
circumstances. Under Mr. Newberry’s agreement,
Mr. Newberry is entitled to total annual compensation of
$500,000. That amount was paid solely in cash during
calendar 2012, and during calendar 2013 and 2014
is paid partially in RSUs, partially as a cash annual
retainer for his service as a director and the remainder
in cash, as described in the agreement. The cash annual
retainer is the same amount, and payable at the same
time, for non-employee directors. In calendar 2013 and
2014, the cash portion of Mr. Newberry’s annual base
compensation is determined by subtracting the RSU grant
value and the cash annual retainer for directors from
the total annual compensation. Mr. Newberry’s base
cash compensation is subject to annual adjustment at
the discretion of the independent members of the board.
Mr. Newberry continued vesting in his past 2011/2012
Long-Term Incentive Plan, or “LTIP,” awards, but is not
eligible for future awards under the Company’s short-term
or long term variable compensation plans. Mr. Newberry
was paid $1,892,484 under the cash component of
the 2011/2012 LTIP program in February 2013, and
19,306 shares of service-based RSUs and 17,838
shares of performance-based RSUs that were granted in
March 2011 vested on March 4, 2013 under the equity
portion of the program. He is not entitled to any other
compensation for his role as a member of the board; he is
not eligible for any performance bonus program offered
by the Company; and he is not entitled to any equity
awards other than those equity awards granted to him in
the discretion of the independent members of the board.
Mr. Newberry is eligible to participate in the Company’s
Elective Deferred Compensation Program and medical,
dental and insurance benefit programs maintained by the
Company that were generally applicable to executives of
the Company, subject to the general terms and conditions
of the programs.
If there is a change in control and involuntary termination,
involuntary termination other than in connection with a
change in control, death or disability (as each term is
defined in Mr. Newberry’s agreement), Mr. Newberry
will be entitled to (1) a lump-sum cash payment equal to
12 months of Mr. Newberry’s base compensation (less,
in the case of death, of certain insurance payments);
(2) certain unpaid amounts under the short term plan in
effect in 2011 (all of which have been paid and would
22
result in no additional payment); (3) certain medical
benefits; (4) vesting of certain stock option and restricted
stock unit awards; and (5) payment of certain unpaid
amounts under the 2011/2012 LTIP (the entire cash
portion of which was paid in February 2013 and the
entire equity portion of which was paid in March 2013
and would result in no additional payment).
If Mr. Newberry voluntarily resigns, he will be entitled
to no additional benefits (except as he may be eligible
for under the Executive Retiree Medical Plan), any vested
stock options will be cancelled 90 days after the date
of termination unless earlier exercised. RSUs will be
cancelled on the date of termination.
Mr. Bagley, who retired from his position as chairman
effective immediately prior to November 1, 2012, also
had a different compensation arrangement than the
other directors due to his position as an employee of the
Company. Mr. Bagley’s compensation was approved
by the independent members of the board upon
recommendation from the compensation committee.
Mr. Bagley had an employment contract that expired
March 31, 2012, and he continued as an employee of the
Company. His annual base compensation was $415,000.
Mr. Bagley did not receive additional compensation for
his role as a member of the board; he was not eligible
for any performance bonus program offered by the
Company; and he was not entitled to any equity awards
other than those equity awards granted to him in the
discretion of the independent members of the board.
Mr. Bagley was eligible to participate in the Company’s
Elective Deferred Compensation Program and medical,
dental and insurance benefit programs maintained by the
Company that were generally applicable to executives of
the Company, subject to the general terms and conditions
of the programs.
In addition, any members of the board prior to, or serving
as of, December 31, 2012 who retire from the board
can participate in the Company’s Executive Retirement
Medical and Dental Plan if they meet certain eligibility
requirements. The board eliminated this benefit for any
person who becomes a director after December 31,
2012. The most recent valuation of the Company’s
accumulated post-retirement benefit obligation under
Accounting Standards Codification 715, Compensation-
Retirement Benefits (“ASC 715”), as of June 30, 2013, for
eligible former directors and the current directors who
may become eligible is shown below. Factors affecting
the amount of post-retirement benefit obligation include
age at enrollment, age at retirement, coverage tier (e.g.,
single, plus spouse, plus family), interest rate, and length
of service.
<12345678> JOB TITLE LAM Research Combo
REVISION 12
SERIAL
DATE Tuesday, September 24, 2013
JOB TITLE LAM Research Combo
REVISION 12
SERIAL
DATE Tuesday, September 24, 2013
JOB NUMBER 252704
TYPE
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OPERATOR JioMeRD
Name
Stephen G. Newberry
James W. Bagley
Robert M. Berdahl
Eric K. Brandt
Michael R. Cannon
Youssef A. El-Mansy
Christine A. Heckart
Grant M. Inman
Catherine P. Lego
Kim E. Perdikou
Krishna C. Saraswat
William R. Spivey
Abhijit Y. Talwalkar
Delbert A. Whitaker
Accumulated Post-Retirement
Benefit Obligation,
as of June 2013
($)
458,000
285,000
256,000
0
0
55,000
0
241,000
426,000
0
0
61,000
0
0
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our executive
officers, directors, and people who own more than 10%
of a registered class of our equity securities to file an
initial report of ownership (on a Form 3) and reports on
subsequent changes in ownership (on Forms 4 or 5) with
the SEC by specified due dates. Our executive officers,
directors, and greater-than-10% stockholders are also
required by SEC rules to furnish us with copies of all
Section 16(a) forms they file. We are required to disclose
in this proxy statement any failure to file any of these
reports on a timely basis. Based solely on our review of
the copies of the forms that we received from the filers,
and on written representations from certain reporting
persons, we believe that all of these requirements were
satisfied during fiscal year 2013.
Executive Compensation and Other Information
Compensation Discussion and Analysis
This Compensation Discussion and Analysis, or “CD&A,” describes our executive compensation program. It is organized
as follows:
Section I………….. Executive Summary (Including Our
Philosophy and Program Design)
Section II…………. Executive Compensation
Governance and Procedures
Section III………… Primary Components of Named
Executive Officer Compensation;
Calendar Year 2012 Compensation
Payouts; Calendar Year 2013
Compensation Targets and Metrics
Section IV………… Tax and Accounting Considerations
23
Proposal No. 1 Election of DirectorsLam Research Corporation 2013 Proxy StatementContinues on next page <12345678> JOB TITLE LAM Research Combo
REVISION 12
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DATE Tuesday, September 24, 2013
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REVISION 12
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Our CD&A discusses compensation earned by our “Named Executive Officers,” or “NEOs,” who are our chief executive
officer, or “CEO,” our present and former chief financial officers, and the three other most highly compensated executive
officers, as described under SEC rules. Our NEOs for fiscal year 2013 are as follows:
Figure 1. FY2013 NEOs
Named Executive Officer
Position(s)
Martin B. Anstice
Timothy M. Archer
Douglas R. Bettinger
Richard A. Gottscho
Sarah A. O’Dowd
Ernest E. Maddock
President and Chief Executive Officer
Executive Vice President and Chief Operating Officer
Executive Vice President and Chief Financial Officer beginning March 11, 2013
Executive Vice President, Global Products
Senior Vice President, Chief Legal Officer
Executive Vice President and Chief Financial Officer through March 10, 2013; Employee through April 19, 2013
I. EXECUTIVE SUMMARY
Our executive compensation program is designed
to foster a pay-for-performance culture, motivate
performance that creates long-term stockholder value,
motivate outstanding performance at the corporate,
organization and individual levels, and motivate retention
of a long-term, high-quality management team. We have
structured our compensation program and payouts to
reflect these goals. Our CEO’s compensation in relation to
our revenue and net income is shown in Figure 2 below.
Figure 2. FY2008-FY2013 CEO Pay for Performance
CEO Pay for Performance
CEO Total Compensation(1)
Revenue
Net income (loss)
$9,393
CEO Transition(2)
$7,070
$6,210
$5,572
$4,275
$3,841(2)
)
s
d
n
a
s
u
o
h
t
n
i
(
n
o
i
t
a
s
n
e
p
m
o
C
l
a
t
o
T
$10,000
$9,000
$8,000
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$0
$4,000,000
$3,500,000
$3,000,000
$2,500,000
$2,000,000
$1,500,000
$1,000,000
$500,000
$0
-$500,000
)
s
d
n
a
s
u
o
h
t
n
i
(
e
m
o
c
n
I
t
e
N
d
n
a
e
u
n
e
v
e
R
FY2008
FY2009
FY2010
FY2011
FY2012
FY2013
(1) “CEO Total Compensation” consists of base salary, annual incentive payments, accrued values of the cash payments under the long-term incentive
program and grant date fair values of equity based awards under the long-term incentive program, and all other compensation as reported in the “Summary
Compensation Table” below.
(2) The CEO Total Compensation for fiscal year 2012 reflects Mr. Anstice’s succession of Mr. Newberry as our President and CEO as of January 1, 2012.
To understand our executive compensation program fully, we feel it is important to understand:
• Our business, our industry environment and our financial performance; and
• Our executive compensation philosophy and program design.
24
<12345678>
JOB TITLE LAM Research Combo
REVISION 12
SERIAL
DATE Tuesday, September 24, 2013
JOB TITLE LAM Research Combo
REVISION 12
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DATE Tuesday, September 24, 2013
JOB NUMBER 252704
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Our Business, Our Industry Environment and Our Financial Performance
Lam Research has been an innovative supplier of wafer
fabrication equipment and services to the semiconductor
industry for more than 30 years. Lam offers a broad
multi-product portfolio of etch, deposition, strip and
wafer cleaning solutions, which help our customers
build smaller, faster and more power-efficient integrated
circuits. These devices are used in a variety of electronic
products that impact our everyday lives, including
cell phones, computers, memory storage devices, and
networking equipment.
The semiconductor capital equipment industry has been
highly competitive and subject to business cycles that
historically have been characterized by rapid changes
in demand that necessitate adjusting spending and
managing capital allocation prudently across business
cycles. Figure 3 below shows year-over-year changes
in revenue growth for each of the electronics industry,
the semiconductor industry, and the wafer fabrication
equipment segment of the semiconductor equipment
industry from 2000 to the present. The semiconductor
industry has historically been a highly cyclical industry,
with fluctuations responding to changes in the demand for
semiconductor devices. The wafer fabrication equipment
segment in which we participate, has historically
exhibited more extreme volatility during these demand
cycles as illustrated by the graph below. To enable our
operations team to adjust quickly to these rapid changes
in demand while effectively managing costs, we have
established a flexible business model. Our compensation
program has been designed to incorporate this same
flexibility. Since exiting the global recession, the volatility
across business cycles appears to be moderating; under
these conditions, we continue to evaluate the relevance of
this trend to our program design.
Figure 3. CY2000-CY2012 Revenue Growth by Industry
Revenue Growth by Industry
Electronics Revenue Growth
Semiconductor Revenue Growth
Wafer Fabrication Equipment (WFE) Growth
120%
100%
80%
60%
)
Y
Y
/
(
e
g
n
a
h
C
%
40%
20%
0%
-20%
-40%
Y2000
C
Y2001
C
Y2002
C
Y2003
C
Y2004
C
Y2005
C
Y2006
C
Y2007
C
Y2008
C
Y2009
C
Y2010
C
Y2011
C
Y2012
C
Sources: SEMI; World Semiconductor Trade Statistics, Inc. (WSTS); Gartner, Inc.; Lam Research Corporation
25
Proposal No. 1 Election of DirectorsLam Research Corporation 2013 Proxy StatementContinues on next page <12345678>
JOB TITLE LAM Research Combo
REVISION 12
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JOB TITLE LAM Research Combo
REVISION 12
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Although we have a June fiscal year end, our executive
compensation program is designed and executed on a
calendar-year basis to correspond with our calendar-
year-based business planning. This CD&A reflects a
calendar-year orientation, as shown in Figure 4 below.
The Executive Compensation Tables at the end of this
CD&A are based on our fiscal year, as required by
SEC regulations.
Figure 4. Executive Compensation Calendar-Year Orientation
Fiscal Year 2013
Relevant for executive
compensation tables
Calendar Year 2012
Calendar Year 2013
Relevant for compensation program design and
performance evaluation
1/1/2012
1/1/2013
1/1/2014
6/24/2012
6/30/2013
In calendar year 2012, demand for semiconductor
equipment declined slightly as device manufacturers
delayed certain capacity investments in conjunction with
weak macroeconomic conditions. Despite this challenging
environment, Lam delivered solid financial performance
while successfully completing the merger of Novellus
Systems, Inc., or “Novellus,” and executing aggressive
integration plans.
Highlights for calendar year 2012:
• Recorded $3.2 billion in revenue, representing an
approximate 12% increase over calendar year 2011;
• Generated operating cash flow of $686 million,
which represents approximately 22% of revenues;
• Repurchased approximately 39 million shares of
common stock, returning approximately $1.4 billion
to stockholders;
Executive Compensation Philosophy and Program Design
Executive Compensation Philosophy
Our compensation committee’s philosophy that guided this
year’s awards and payout decisions is to:
• provide competitive compensation to attract and
retain top talent
• provide compensation that is fair to employees and
rewards corporate, organizational and individual
performance
• align pay with business objectives while driving
exceptional performance throughout fluctuating
business cycles
• optimize value to employees while maintaining cost-
effectiveness to the Company
• create stockholder value over the long term
• align annual plan to short-term performance and long-
term plan to longer-term performance
26
• Completed the acquisition of Novellus on June 4,
2012, broadening our product portfolio to include
critical thin-film deposition and photo-resist strip,
which are adjacent process steps to Lam’s core
competencies of etch and single-wafer clean; and
• Executed on-schedule planned cost synergies,
completing approximately 40% of the targeted cost
savings from the merger at the end of calendar
year 2012.
Industry conditions started to improve during the first
half of calendar year 2013 relative to the second half
of calendar year 2012 as customers increased their
investments in semiconductor equipment to support
healthy demand for mobile electronics.
• recognize that a long-term, high-quality management
team is a competitive differentiator for Lam,
enhancing customer trust/market share and, therefore,
stockholder value
Our compensation committee’s executive compensation
objectives are to:
• motivate performance that creates long-term
stockholder value
• motivate outstanding performance at the corporate,
organization and individual levels
• motivate retention of a long-term, high-quality
management team
<12345678> JOB TITLE LAM Research Combo
REVISION 12
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DATE Tuesday, September 24, 2013
JOB TITLE LAM Research Combo
REVISION 12
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To achieve these objectives, our compensation committee
authorized the following strategies:
• use a mix of equity award types
• provide an appropriate mix of short-term and long-
term rewards
• reference appropriate market data
• respond to fluctuating business cycle changes
• balance these strategies to reach an optimum result
under existing circumstances
Program Design
Our program design uses a mix of short- and long-term
components, and a mix of cash and equity components.
Our executive compensation program includes base
salary, an annual incentive program, a long-term incentive
cash program, a long-term incentive equity program,
as well as stock ownership guidelines. As illustrated in
Figure 5 below, our program design is weighted towards
performance and stockholder value. The performance-
based program components include annual incentive
program cash payouts, long-term incentive program cash
payouts and goals-based equity and stock option awards
under the long-term incentive equity program. The pay
component mix changed in 2012 due to the timing of the
Novellus acquisition but was subsequently reinstituted to
its prior mix of performance-based equity in 2013, as
further explained under “Long-Term Incentive Program –
Design” in section III below.
Figure 5. CY2011-CY2013 NEO Compensation Target Pay Mix Averages(1)
Calendar Year 2011
Average NEO Target Pay Mix
68% Performance-Based
Calendar Year 2012
Average NEO Target Pay Mix
50% Performance-Based
Calendar Year 2013
Average NEO Target Pay Mix
68% Performance-Based
Base
Salary
15.5%
Goal-Based
Equity
18.9%
Base
Salary
16.7%
Annual
Cash
Incentive
16.1%
Base
Salary
14.2%
Stock Options
17.6%
Service-
Based
Equity
16.3%
Long-Term
Cash Incentive
32.5%
Annual
Cash
Incentive
16.8%
Service-
Based
Equity
33.6%
Service-
Based
Equity
17.6%
Long-
Term
Cash
Incentive
33.6%
Annual
Cash
Incentive
15.4%
Long-Term
Cash Incentive
35.2%
Performance-Based Compensation (2)
Non-Performance-Based Compensation
(1) Data in Figure 5 for the calendar year 2011, 2012 and 2013 charts is for the then-applicable NEOs (i.e., fiscal year 2011 NEOs are represented in the calendar
year 2011 chart, etc.).
(2) For purposes of this illustration, we include goal-based RSUs and stock options as performance-based, but do not classify service-based RSUs as
performance-based.
Our stock ownership guidelines for our executive officers,
including our NEOs, are shown in Figure 6 below. The
requirements are specified in the alternative of shares
or dollars to allow for stock price volatility. Ownership
levels as shown below must be achieved within five
years of appointment as an executive officer. Increased
requirements due to promotions must be achieved within
three years of promotion. At the end of fiscal year 2013,
all of the then-employed NEOs were in compliance with
our stock ownership guidelines.
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Figure 6. Executive Stock Ownership Guidelines
Position
Chief Executive Officer
Executive Vice Presidents
Senior Vice Presidents
Guidelines (lesser of)
3x base salary or 65,000 shares
2x base salary or 20,000 shares
1x base salary or 10,000 shares
II. EXECUTIVE COMPENSATION GOVERNANCE AND PROCEDURES
Role of the Compensation Committee
Our board of directors has delegated certain
responsibilities to the compensation committee, or
the “committee,” through its committee charter. The
committee1 oversees the compensation programs in which
our executive officers (including all NEOs) participate.
The independent members of our board of directors
approve the compensation packages and payouts for
our CEO and chairman of the board, or “chairman.”
A copy of the committee’s charter can be viewed at
http://investor.lamresearch.com.
Committee responsibilities include, but are not limited
to: establishing and reviewing corporate goals and
objectives as relevant to our CEO and our chairman,
evaluating their performance in light of these goals and
Role of Committee Advisors
objectives, and based on this evaluation recommending
their compensation to the independent members of
our board of directors; determining the compensation
packages, targets, and payouts for our executive officers
other than the CEO; and reviewing, and approving where
appropriate, equity-based compensation plans. For
additional information on the committee’s responsibilities,
see “Corporate Governance: Board Committees” above.
In order to carry out these responsibilities, the committee
receives and reviews information, analysis and proposals
prepared by our management and by the committee’s
compensation consultant (see “Role of Committee
Advisors” below).
The committee is authorized to engage its own
independent advisors to assist in carrying out its
responsibilities. The committee has engaged the services
of Compensia, Inc., a national compensation consulting
firm, or “Compensia,” as the committee’s compensation
consultant. Compensia provides the committee with
independent and objective guidance regarding the
amount and types of compensation for our chairman
and executive officers and how these amounts and
types of compensation compare to other companies’
compensation practices, as well as guidance on market
trends, evolving regulatory requirements, compensation of
our independent directors, peer group composition and
other matters as requested by the committee.
Representatives of Compensia regularly attend
committee meetings (including executive sessions without
management present), communicate with the committee
chair outside of meetings, and assist the committee
with the preparation of metrics and goals. Compensia
reports to the committee, not to management. At the
committee’s request, Compensia meets with members
of management to gather and discuss information that
is relevant to advising the committee. The committee
may replace Compensia or hire additional advisors
at any time. Compensia has not provided any other
services to the committee or to our management and
has received no compensation other than with respect to
the services described above. The committee assessed
the independence of Compensia pursuant to SEC rules
and NASDAQ listing standards, including the following
factors: (1) the absence of other services provided by it
to the Company; (2) the fees paid to it by the Company
as a percentage of its total revenue; (3) its policies
and procedures to prevent conflicts of interest; (4) the
absence of any business or personal relationships with
committee members; (5) the fact that it does not own any
Lam common stock; and (6) the absence of any business
or personal relationships with our executive officers.
The committee assessed this information and concluded
that the work of Compensia has not raised any conflict
of interest.
1 For purposes of this CD&A, a reference to a compensation action or decision by the committee with respect to the NEOs means an action or decision by the
compensation committee and, in the case of our chairman and our president and chief executive officer, an action or decision by the independent members of
our board of directors upon the recommendation of the committee.
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Role of Management
Our CEO, with support from our human resources and
finance organizations, develops recommendations for the
compensation of our other executive officers, including
our NEOs. Typically, these recommendations cover
base salaries, annual incentive program target award
opportunities, long-term incentive program target award
opportunities and the criteria upon which these award
opportunities may be earned, as well as actual payout
amounts under annual and long-term incentive programs.
The committee considers the CEO’s recommendations
within the context of competitive compensation data, the
committee’s compensation philosophy and objectives,
Peer Group Practices and Survey Data
current business conditions, the advice of Compensia,
and any other factors it considers relevant. At the request
of the committee, our chairman also provides input to
the committee.
Our CEO generally attends committee meetings at
the request of the committee, but leaves the meeting
for any discussion of and decisions regarding his
own compensation, when the committee meets in
executive session, and at any other time requested by
the committee.
In establishing the total compensation levels of our
executive officers as well as the mix and weighting of
individual compensation elements, the committee monitors
compensation data from a group of comparably sized
companies in the technology industry, or the “Peer
Group,” which may differ from peer groups used by proxy
advisory firms. The committee selects the companies
constituting our Peer Group based on their comparability
to our lines of business and industry, annual revenue,
and market capitalization, and our belief that we are
likely to compete with them for executive talent. Our Peer
Group is focused on U.S. based, public semiconductor,
semiconductor equipment and materials companies, and
similarly sized high-technology equipment and hardware
companies. Figure 7 below summarizes how the Peer
Group companies compare to the Company:
Figure 7. 2013 Peer Group Revenue and Market Capitalization
Metric
Revenue
Market Capitalization
Based on these criteria, the Peer Group and targets may
be modified from time to time. Our Peer Group was
reviewed in August 2012 in light of the new Company
size following our acquisition of Novellus, and other
changes in our industry. Based on the criteria identified
above, we added five new peers (Agilent Technologies,
Inc.; Corning Incorporated; Juniper Networks, Inc.;
Figure 8. CY2013 Peer Group Companies
Lam Research
Calendar Year
2012
($M)
Target for
Peer
Group
Peer Group
Median as of
December 31, 2012
($M)
3,169
5,992
0.5 to 2 times Lam
0.33 to 3 times Lam
4,246
8,861
Micron Technology, Inc.; and NetApp, Inc.) and
removed seven former peers (Altera Corporation; Atmel
Corporation; Fairchild Semiconductor International,
Inc.; First Solar, Inc.; Molex Incorporated; SunPower
Corporation; and Teradyne, Inc.). Our Peer Group
consists of the companies listed in Figure 8 below.
Advanced Micro Devices, Inc.
Agilent Technologies, Inc.
Analog Devices, Inc.
Applied Materials, Inc.
Avago Technologies
Broadcom Corporation
Corning Incorporated
Juniper Networks, Inc,
KLA-Tencor Corporation
LSI Corporation
Marvell Technology Group Ltd
Maxim Integrated Products, Inc.
Micron Technology, Inc.
NetApp, Inc.
NVIDIA Corporation
ON Semiconductor Corporation
SanDisk Corporation
Xilinx, Inc.
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We derive revenue, market capitalization and NEO
compensation data for the Peer Group companies from
their public filings with the SEC, other publicly available
sources and survey data purchased from Radford.
The committee reviews compensation practices and
selected data on base salary, bonus targets, total cash
compensation, equity awards, and total compensation
drawn from the Peer Group companies primarily as a
reference to ensure compensation packages are within
market norms.
2012 Say on Pay Voting Results; Company Response
Typically, base pay levels are set near the middle of the
market range, and variable pay is designed to deliver
above market median compensation for exceptional
performance and below market median compensation
for poor performance. However, the committee does not
“target” pay at any specific percentile. Rather, individual
pay positioning depends on a variety of factors, such as
prior job performance, job scope and responsibilities,
skill set, prior experience, time in position, internal equity
regarding pay levels for similar skill levels or positions,
external pressures to attract and retain executive talent,
Company performance and general market conditions.
In 2012, our stockholders voted to approve our 2012
advisory vote on executive compensation, with 94.61%
of the votes cast in favor of the advisory proposal. The
committee considered this voting result, together with
advice from Compensia and the recommendations of
management, in deciding not to make any significant
design changes to the executive compensation program
for awards made during fiscal year 2013. However, in
response to comments from proxy advisory firms, we
have continued our efforts to improve our disclosure and,
in particular, to clarify the description of our executive
compensation programs.
III. PRIMARY COMPONENTS OF NAMED EXECUTIVE OFFICER COMPENSATION; CALENDAR YEAR 2012
COMPENSATION PAYOUTS; CALENDAR YEAR 2013 COMPENSATION TARGETS AND METRICS
This section describes the components of our executive
compensation program. It also describes, for each
component, the payouts to our NEOs for calendar year
2012 and the forward-looking actions taken with respect
to our NEOs in calendar year 2013.
Base Salary
We believe the purpose of base salary is to provide
competitive compensation to attract and retain top talent
and to provide compensation that is fair to employees,
including our NEOs, with a fixed amount of compensation
for the jobs they perform. Accordingly, we seek to ensure
that our base salary levels are competitive in reference to
Peer Group practice and market survey data. Adjustments
to base salary are generally considered by the committee
each year in February.
For calendar years 2012 and 2013, base salaries
for then-employed NEOs other than our CEO were
determined by the committee in February of each
year and became effective on April 1 and March 31,
respectively, based on the factors described above.
The base salary for Mr. Anstice for calendar year 2012
was set effective January 1, 2012 in connection with his
promotion to CEO and was increased effective March
31, 2013 to a more competitive level relative to our Peer
Group. Other NEO changes were due to individual
performance. The base salaries of the NEOs for calendar
years 2012 and 2013 are as follows:
Figure 9. CY2012-CY2013 NEO Base Salaries
Named Executive Officer
Martin B. Anstice
Timothy M. Archer
Douglas R. Bettinger
Richard A. Gottscho
Sarah A. O’Dowd
Ernest E. Maddock
Annual
Base Salary
as of
April 2013
($)
775,000
575,000
485,000(2)
460,000
406,000
500,000
Annual
Base Salary
as of
April 2012
($)
665,000
-(1)
-(2)
438,000
386,000
485,000
(1) Mr. Archer commenced employment with Lam on June 4, 2012. Mr. Archer’s annual base salary for calendar year 2012 at Novellus (prior to the acquisition) and
at Lam (following the acquisition) were $480,000 and $550,000, respectively.
(2) Mr. Bettinger commenced employment with Lam on March 11, 2013. Mr. Bettinger’s base salary for calendar year 2013 was determined by the committee in
January 2013.
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Annual Incentive Program
Design
Our annual incentive program is designed to provide
short-term, performance-based compensation that:
(i) is based on the achievement of pre-set annual
financial, strategic and operational objectives aligned
with outstanding performance throughout fluctuating
business cycles, and (ii) will allow us to attract and
retain top talent, while maintaining cost-effectiveness
to the Company. The committee establishes individual
target award opportunities for each executive officer
as a percentage of base salary. Specific target award
opportunities are determined based on job scope and
responsibilities, as well as an assessment of Peer Group
data. Awards have a maximum payment amount defined
as a multiple of the target award opportunity. The
maximum award for 2013 was set at 2.25 times target,
consistent with prior years.
Annual incentive program components
Annual incentive program components, each of
which plays a role in determining actual payments
made, include:
• a Funding Factor,
• a Corporate Performance Factor, and
• various Organization Performance Factors.
The Funding Factor is set by the committee to create a
maximum payout amount from which annual incentive
program payouts may be made. The committee may
exercise negative (but not positive) discretion against
the Funding Factor result, and generally the entire
funded amount is not paid out. Achievement of a
minimum level of performance against the Funding
Factor goals is required to fund any program payments.
In February 2012, for the first half of calendar year
2012, the committee set Lam-standalone non-GAAP
operating income2 as a percentage of revenue as the
metric for the Funding Factor, with the following goals:
a minimum achievement of 7.5% Lam-standalone non-
GAAP operating income as a percentage of revenue
was required to fund any program payments, and
performance greater than or equal to 20% would result
in the maximum payout potential of 225% of target,
with actual funding levels interpolated between those
points. The committee selected non-GAAP operating
income because it believes that operating income is the
performance metric that best reflects core operating
results. By excluding certain costs and expenses that are
not indicative of core results, non-GAAP results are more
useful to analyzing business trends over multiple periods.
In July 2012, the committee revisited and retained the
same metric and goals for the Funding Factor for the
second half of calendar year 2012.
As a guide for making payout decisions, the committee
primarily tracks the results of the following two
components that are weighted equally in making payout
decisions, and against which discretion may be applied
in a positive or negative direction, provided the Funding
Factor result is not exceeded:
• the Corporate Performance Factor is based on
corporate-wide metrics and stretch goals that apply to
all executive officers, and
• the Organization Performance Factors, which are
based on organization-specific metrics and stretch
goals, apply to each individual NEO.
The specific metrics and goals, and their relative
weightings, for the Corporate Performance Factor
are determined by the committee based upon the
recommendation of our CEO, and the Organization
Performance Factors are determined by our CEO, or in
the case of the CEO, by the committee.
The metrics and goals for the Corporate and
Organization Performance Factors are set either annually
or semi-annually. The semi-annual timeline for the
Corporate and Organization Performance Factors has
been used to provide flexibility to make adjustments due
to changes in our volatile business environment. Goals
are set depending on the business environment, to ensure
that they are stretch goals regardless of changes in the
environment. Accordingly, as business conditions improve,
goals are set to require better performance, and as
business conditions deteriorate, goals are set to ensure
stretch performance under more difficult conditions. Due
to the acquisition of Novellus, the metrics and goals for
the Corporate and Organization Performance Factors
were all set on a semi-annual basis. The Corporate
Performance Factor metrics and goals remained the same
throughout the calendar 2012 performance period.
2 Non-GAAP results are designed to provide information about performance without the impact of certain non-recurring and other non-operating line items.
Non-GAAP operating income is derived from GAAP results, with charges and credits in the following line items excluded from non-GAAP results for applicable
quarters during fiscal years 2013 and 2012: restructuring charges and benefits; acquisition-related and integration-related costs; certain costs associated with
a customer bankruptcy filing; costs associated with rationalization of certain product configurations; amortization related to intangible assets acquired in the
Novellus transaction; and acquisition-related inventory fair value impact.
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We believe that, over time, outstanding business
results create stockholder value. Consistent with this
belief, multiple performance-based metrics (non-GAAP
operating income, product market share, and strategic
operational and organizational metrics) are established
for our executive officers as part of the Corporate and
Organization Performance Factors.
We use organization specific metrics, including for
example, gross margin, market share and achievement
against strategic objectives, because we believe these
motivate our NEOs and the organizations they lead. We
believe the metrics and goals set under this program,
together with the exercise of discretion by the committee
as described above, have been effective to achieve pay-
for-performance results.
Figure 10. CY2010-CY2012 Annual Incentive Program Payouts
Calendar Year
2012
2011
2010
Average NEO’s Annual
Incentive Payout as %
of Target Award
Opportunity
Business Environment
93
99
Demand for semiconductor equipment declined slightly year-over-year as global economic
conditions remained weak; positive execution against integration objectives
Healthy semiconductor demand under weakening economic conditions; business conditions
deteriorated in the second half of calendar year 2011
166
Strong operating performance supported by semiconductor industry demand growth
Calendar year 2012 annual incentive program parameters and payout decisions
In February 2012, the committee set the calendar year
2012 target award opportunity and the metrics and semi-
annual goals (revisited in July 2012) for the Corporate
Performance and Organization Performance Factors
for each then-employed executive officer, including our
NEOs. In February 2013, the committee considered
the actual results under these factors and made payout
decisions for the calendar year 2012 program, all as
described below.
2012 Annual Incentive Program Target Award
Opportunities. The annual incentive program target
award opportunities for calendar year 2012 for each
NEO were:
Figure 11. CY2012 Annual Incentive Program Target Award Opportunities
Named Executive Officer(1)
Martin B. Anstice
Timothy M. Archer
Richard A. Gottscho
Sarah A. O’Dowd
Ernest E. Maddock
Target Award
Opportunity
(% of Base Salary)
125(2)
100(3)
85
75
85
(1) Mr. Bettinger did not participate because his employment with Lam commenced March 11, 2013.
(2) Mr. Anstice was promoted to CEO as of January 1, 2012.
(3) Mr. Archer, having commenced employment with Lam on June 4, 2012, was an eligible participant under the annual incentive program for the second half of
calendar year 2012. The prorated portion of his 2012 Lam annual base salary constituting earnings eligible for incentive payouts under the annual incentive
program was $304,615.
2012 Annual Incentive Program Corporate Performance
Factor. In February 2012, the committee set non-GAAP
operating income as a percentage of revenue as the
metric for the first half of calendar year 2012 Corporate
Performance Factor, and set a goal of 18% of revenue
for the first half of the year. In July 2012, the committee
revisited and retained the same metric and goal for the
Corporate Performance Factor for the second half of
the year, calculated on a Lam-standalone basis (without
regard to the performance of Novellus). These goals
were designed to be stretch goals. Actual non-GAAP
operating income percentage was 13% of revenue for the
first half of calendar year 2012, resulting in a factor of
0.75 for the first half, and 12% of revenue for the second
half, resulting in a factor of 0.71 for the second half. This
performance resulted in a total Corporate Performance
Factor for calendar year 2012 of 0.73.
2012 Annual Incentive Program Organization
Performance Factor. For 2012, the organization-
specific performance metrics and goals for each
NEO’s Organization Performance Factor (other than for
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Mr. Archer, who commenced employment with Lam on
June 4, 2012, and for Mr. Bettinger, who commenced
employment with Lam on March 11, 2013) were set on a
semi-annual basis, and were designed to be stretch goals.
The Organization Performance Factor for Mr. Anstice for
each half of calendar year 2012 and the Organization
Performance Factor for Mr. Archer for the second half
of calendar year 2012 were based on the average
of the Organization Performance Factors of all of the
organizations reporting to them. For all other NEOs, their
respective Organization Performance Factors were based
on market share, merger integration and/or strategic,
operational and organizational performance goals
specific to the organizations they managed:
• Dr. Gottscho’s Organization Performance Factor
for the first half of calendar year 2012 was
comprised of market share, strategic, operational
and organizational development goals for etch
(50%) and for clean (50%) and for the second half
of calendar 2012 was comprised of market share,
strategic, integration, operational and organizational
development goals for legacy Lam and legacy
Novellus product groups (50% each).
• Ms. O’Dowd’s Organization Performance Factor for
the first half of calendar year 2012 was comprised of
strategic, integration, operational and organizational
development goals for global human resources
(50%) and for legal (50%) and for the second half
of calendar year 2012 was comprised of strategic,
integration, operational and organizational
development goals for legal (100%).
• Mr. Maddock’s Organization Performance Factor was
comprised of strategic, integration, operational and
organizational development goals for both halves
of calendar year 2012 for finance (35%), global
information systems (35%), Silfex (20%) and investor
relations (10%).
The committee considered the individual NEO goals
and actual performance during 2012, as well as the
outstanding team effort in integrating Lam and Novellus,
and exercised discretion such that each NEO received an
Organization Performance Factor of 1.00 for the 2012
calendar year.
2012 Annual Incentive Program Payout Decisions. In
addition to considering the Corporate Performance
Factor and Organization Performance Factor results, the
committee considered the performance of the Company
on a combined basis and exercised discretion to increase
payouts for those NEOs who were Lam-standalone
executive officers during all of calendar 2012 as follows:
$55,000 to Mr. Anstice, $36,000 to Dr. Gottscho and
Mr. Maddock and $28,000 to Ms. O’Dowd. In February
2013, in light of the Funding Factor results and based on
the above results and decisions, the committee made the
following payouts for calendar year 2012 for each NEO:
Figure 12. CY2012 Annual Incentive Program Payouts
Named Executive Officer(1)
Martin B. Anstice
Timothy M. Archer
Richard A. Gottscho
Sarah A. O’Dowd
Ernest E. Maddock
Target Award
Opportunity
(% of Base Salary)
Target Award
Opportunity
($)(2)
Maximum Payout under
Funding Factor
(135% of Target
Award Opportunity)
($)(3)
125
100
85
75
85
828,485
304,615
369,169
287,416
409,127
1,118,455
411,230
498,378
388,012
552,321
Actual
Payouts
($)
771,640
263,492
355,332
276,615
389,895
(1) Mr. Bettinger did not participate because his employment with Lam commenced March 11, 2013. Mr. Archer was an eligible participant under the annual
incentive program for only the second half of calendar year 2012. In accordance with the terms of Mr. Archer’s employment agreement with Lam, Mr. Archer
was also paid a $360,804 cash bonus for the first half of calendar year 2012 under Novellus’ executive bonus program, whose terms were set prior to
the merger.
(2) Calculated by multiplying each NEO’s eligible earnings for the calendar year 2012 annual incentive program performance period (Mr. Anstice: $662,788;
Mr. Archer: $304,615; Dr. Gottscho: $434,317; Ms. O’Dowd: $383,221; Mr. Maddock: $481,326) by their respective target award opportunity percentage.
(3) The Funding Factor resulted in a potential payout of up to 135% of target award opportunity for the calendar year (based on the actual non-GAAP operating
income percentage results detailed under “Annual Incentive Program – Calendar year 2012 annual incentive program parameters and payout decisions – 2012
Annual Incentive Program Corporate Performance Factor” above and the specific goals set forth in the second paragraph under “Annual Incentive Program –
Annual incentive program components” above).
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Calendar year 2013 annual incentive program parameters
In February 2013, the committee set the target award
opportunity for each NEO (other than Mr. Bettinger
for whom the target award opportunity was set on
January 14, 2013) as a percentage of base salary, and
consistent with prior years set a cap on payments equal
to 2.25 times the target award opportunity. The target
award opportunity for each NEO is shown in Figure 13
below.
Figure 13. CY2013 Annual Incentive Program Target Award Opportunities
Named Executive Officer(1)
Martin B. Anstice
Timothy M. Archer
Douglas R. Bettinger
Richard A. Gottscho
Sarah A. O’Dowd
Target Award
Opportunity
(% of Base Salary)
150
110
85
85
80
(1) Mr. Maddock’s annual incentive program target award opportunity for calendar year 2013 was set by the committee at 85%.
The committee also approved the metric for the Funding Factor and for the Corporate Performance Factor as non-GAAP
operating income as a percentage of revenue, and set the annual goal for the Funding Factor and the first half goal
for the Corporate Performance Factor. Consistent with program design, the Corporate Performance Factor goal is more
difficult to achieve than the Funding Factor goal. Organization Performance Factor metrics and goals were also set
for each executive officer. These include strategic and operational performance goals specific to individual business
organizations and individuals. As a result, each NEO has multiple performance metrics and goals under this program.
Some of the goals set in February were semi-annual goals, and in those cases goals were set for the second half of
calendar year 2013 in August 2013.
Long-Term Incentive Program
Design
Our long-term incentive program, or “LTIP,” is designed to align pay with achievement of business objectives over a
multi-year period, and to create stockholder value over the long term. Our long-term incentive program operates on
overlapping two-calendar year cycles. Because each performance period covers performance in two calendar years,
three performance cycles affect compensation during each fiscal year.
Figure 14. FY2013 LTIP Programs
“$V” Reflects timing of cash payment and cliff vesting of equity awards
34
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The components of the long-term incentive program are:
• Cash Incentive Component
• Equity Incentive Component
At the beginning of each two-year cycle, target award
opportunities and performance metrics are established
for each program component. Of the total target award
opportunity, 50% is expressed in performance-contingent
cash and the other 50% is awarded in equity.
Consistent with our philosophy of paying for performance,
the long-term incentive program has been designed to
be 75% performance-based and 25% service-based.
We consider goal-based RSUs and stock options
as performance-based, but do not classify service-
based RSUs as performance-based. The cash incentive
component of the program is entirely performance-
based, and the equity incentive component has typically
been half performance-based and half service-based.
A deviation from the long-term program design was
made in 2012 as a result of the acquisition of Novellus.
The transaction had been announced, but had not been
concluded, when compensation decisions were made
in February 2012 and, as a result, management had
not set long-term goals for the combined organization
by that time. As a result, and to aid retention during
the integration period, for the 2012/2013 performance
period, the long-term incentive program pay components
were 50% performance-based and 50% service-based.
Since this was a deviation from the historical program
design in effect for all periods discussed other than
calendar year 2012, we reference the 75% performance-
based mix in describing the program design.
Target Award Opportunity
Under the long-term incentive program, the committee sets a target award opportunity for each participant based on
the executive’s position and responsibilities and an assessment of competitive compensation data. Payouts are limited
to a maximum of 2.5 times the target amounts. The target amounts (which included both the cash and equity long-term
incentive awards) for each NEO under the three program cycles affecting fiscal year 2013 are as follows:
Figure 15. 2011/2012 to 2013/2014 Long-Term Incentive Program Target Award
Opportunities
Named Executive Officer(1)
Martin B. Anstice
Timothy M. Archer
Douglas R. Bettinger
Richard A. Gottscho
Sarah A. O’Dowd
Ernest E. Maddock
Long-Term
Incentive Program
Performance Period
Target Award
Opportunity
($)
2013/2014
2012/2013
2011/2012
2013/2014
2012/2013
2013/2014
2013/2014
2012/2013
2011/2012
2013/2014
2012/2013
2011/2012
2013/2014
2012/2013
2011/2012
5,000,000
3,500,000
2,400,000
3,000,000
2,500,000
2,000,000
2,075,000
1,600,000
1,600,000
1,258,000
1,250,000
1,250,000
(2)
1,600,000
1,600,000
(1) Mr. Archer did not participate in the 2011/2012 long-term incentive program because his employment with Lam commenced June 4, 2012. Mr. Bettinger did not
participate in the 2011/2012 and 2012/2013 long-term incentive programs because his employment with Lam commenced March 11, 2013.
(2) The committee approved a target award opportunity of $800,000 for Mr. Maddock under the 2013/2014 LTIP-Cash portion of the program. No target award
opportunity was approved for the 2013/2014 LTIP-Equity portion of the program.
35
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Long-Term Cash Incentive Component
The cash component of the programs is 100%
performance-based and is designed to:
• motivate outstanding performance at the corporate
levels and to create long-term stockholder value,
• attract and retain top talent, and
• optimize value to employees while maintaining cost-
effectiveness to the Company.
The committee sets performance metrics under each
two-year performance period on an annual basis. Goals
against the metrics are set every six months to allow the
committee to react to changes in the external business
environment. When business conditions improve, goals
are set to require stronger performance, and when
business conditions deteriorate, goals are set to ensure
stretch performance under more difficult conditions. We
believe this flexibility motivates exceptional performance
and delivers stockholder value throughout the fluctuating
business cycles we experience.
In addition to motivating outstanding performance, the
cash portion of our long-term program builds stockholder
value in several ways. First, paying in cash rather than
equity reduces dilution for our stockholders. Second, the
program has been designed so that we can match the
quarterly expense of our cash long-term program to the
performance period in which the expense is determined
by using non-GAAP operating income as the primary
metric for this program. As a result, compensation
expense is greater in periods when non-GAAP operating
income is higher and lower in periods when non-GAAP
operating income is lower. Finally, results determined
based on performance against the pre-set goals are
adjusted to reflect stock price appreciation occurring
during the performance period, aligning results under the
program with results realized by our stockholders. The
adjustment is made quarterly referencing a ratio of (x) the
market price of our common stock over a 50-trading-
day period to (y) the market price of our common stock
over a 200-trading-day period, if the ratio is greater
than one. Thus the final payout amount is determined by
achievement against the performance goals adjusted by
stock price appreciation, or the “stock price appreciation
metric,” and subject to the cap the committee sets and
any negative discretion the committee might exercise.
For each two-year performance period, the awards are
subject to cliff vesting and payouts are made following
the end of the second year to those participants who
remain employed on the award determination date.
The cliff vesting, rather than annual vesting, assists with
both retention and aligning executives with longer-term
stockholder interests.
We believe this program has been effective in achieving
pay-for-performance results, as shown in Figure 16 below.
Figure 16. 2009/2010 to 2011/2012 Long-Term Cash Payouts
Long-Term Cash Cycle
2011/2012
2010/2011
2009/2010
Average Long-Term
Cash Payout as
% of Target
Award Opportunity
84
165
119
Business Environment
2012: Demand for semiconductor equipment declined slightly year-over-year as global
economic conditions remained weak; positive execution against integration objectives
2011: Healthy semiconductor demand under weakening economic conditions; business
conditions deteriorated in the second half of calendar year 2011
2011: Healthy semiconductor demand under weakening economic conditions; business
conditions deteriorated in the second half of calendar year 2011
2010: Strong operating performance supported by semiconductor industry demand growth
2010: Strong operating performance supported by semiconductor industry demand growth
2009: Difficult business environment of global downturn continued through the first half of
calendar year 2009; improved conditions in the second half of calendar year 2009
Payout decisions under the 2011/2012 long-term cash
program. In February 2013, the committee determined
payouts for the 2011/2012 performance cycle. The
starting price for determination of the stock price
appreciation metric was $41.21, which is based on a
200-day moving average as of December 23, 2010.
The performance metric for both years of the program
was non-GAAP operating income as a percentage of
revenue, and goals were set semi-annually and measured
on a quarterly basis. During the performance period,
these goals ranged from $115 million per quarter to
$170 million per quarter, reflecting stretch goals under
then-prevailing business conditions. Actual quarterly
performance of non-GAAP operating income ranged
from 29% to 117% of goal. Without regard to stock price
appreciation, the resulting payout would have been 75%
of target for the entire period. However, the stock price
appreciation metric served to increase the payouts to
84% of target.
36
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Payouts for the eligible NEOs were awarded at 84% of target, as shown in Figure 17 below.
Figure 17. 2011/2012 Long-Term Cash Payouts
Named Executive Officer(1)
Martin B. Anstice
Richard A. Gottscho
Sarah A. O’Dowd
Ernest E. Maddock
Cash Target Award
Opportunity
($)
Cash Payout
($)
1,200,000
1,009,325
800,000
625,000
800,000
672,883
525,690
672,883
(1) Messrs. Archer and Bettinger did not participate because their employment with Lam commenced June 4, 2012 and March 11, 2013, respectively.
Calendar year 2012 and 2013 decisions under the
2012/2013 long-term cash program. Target award
amounts were set in February 2012 for the 2012/2013
program, and are shown in Figure 18 below. At that time,
the committee also set non-GAAP operating income as the
performance metric for the 2012 calendar year portion
of the 2012/2013 program and set the starting price for
measuring stock price appreciation for the 2012 calendar
year at $43.45, the 200-day moving average as of
December 23, 2011. In February 2013, the committee
retained non-GAAP operating income as a percentage
of revenue as the performance metric and set $36.93,
the 200-day moving average as of December 21,
2012, as the starting price for measuring stock price
appreciation for the 2013 calendar year portion of the
program. Specific goals against the non-GAAP operating
income metric were set in advance on a six-month basis
throughout the two-year period and were designed to
be stretch goals. For the second half of 2012, which was
shortly after consummation of the Novellus merger, goals
were set on a Lam-standalone basis (without regard to
the performance of Novellus). Payouts for the 2012/2013
program will be determined and made in February 2014
to eligible NEOs.
Figure 18. 2012/2013 Long-Term Cash Target Award Opportunities
Named Executive Officer(1)
Martin B. Anstice
Timothy M. Archer(2)
Richard A. Gottscho
Sarah A. O’Dowd
Ernest E. Maddock(3)
Cash Target Award
Opportunity
($)
1,750,000
1,250,000
800,000
625,000
800,000
(1) Mr. Bettinger did not participate because his employment with Lam commenced March 11, 2013.
(2) Mr. Archer’s target cash award is split ratably for his participation eligibility, June 2012 to December 2013.
(3) Mr. Maddock’s employment ceased on April 19, 2013. Under the terms of his employment agreement, Mr. Maddock received a cash award for the period of his
participation in April 2013.
Calendar year 2013 decisions under the 2013/2014
long-term cash program. In February 2013, the committee
set target award amounts for each then-employed NEO
expected to continue as such under the 2013/2014
program, established the performance metric for
calendar year 2013 as non-GAAP operating income
as a percentage of revenue, and set the starting price
for measuring stock price appreciation for the 2013
calendar year at $36.93, the 200-day moving average
as of December 21, 2012. Goals against the non-GAAP
operating income were also set in February for the
first half of calendar year 2013, and in August 2013
37
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for the second half, and in each case were designed
to be stretch goals. Payouts under this program will be
determined and made in February 2015 to eligible NEOs.
The target cash award opportunity for each eligible NEO
under the 2013/2014 long-term cash program is shown in
Figure 19 below.
Figure 19. 2013/2014 Long-Term Cash Target Award Opportunities
Named Executive Officer(1)
Martin B. Anstice
Timothy M. Archer
Douglas R. Bettinger
Richard A. Gottscho
Sarah A. O’Dowd
Cash Target Award
Opportunity
($)
2,500,000
1,500,000
1,000,000
1,037,500
629,000
(1) Mr. Maddock’s target award amount for the 2013/2014 long-term incentive cash program was set at $800,000. Mr. Maddock’s employment ceased on April 19,
2013. Under the terms of his employment agreement, Mr. Maddock received a cash award for the period of his participation in May 2013.
Long-Term Equity Incentive Component
The equity portion of the long-term incentive program
is designed to attract and retain top talent, provide
competitive levels of compensation and to reward our
executive officers for outstanding Company performance
and long-term stock price appreciation. Historically, half
of the equity award (25% of the total long-term incentive
award opportunity) has been performance-based,
delivered in either performance-vested RSUs or stock
options. The remaining half of the equity award (25% of
the total long-term incentive award opportunity) has been
delivered through service-vested RSUs. The performance-
based equity component of the long-term program is
reviewed annually to determine whether performance-
based RSUs or stock options are the most appropriate
form for the award based on criteria such as the current
business environment and the perceived potential value
to motivate and retain the executives. Awards cliff vest
two years after the grant date, depending on continued
employment and, in the case of performance-based RSUs,
on performance against specified metrics and goals. The
cliff vesting, rather than annual vesting, provides for both
retention and for aligning executives with longer-term
stockholder interests.
Vesting and performance results under the 2011/2012
long-term equity program. On March 4, 2011, the
committee made a grant to each NEO under the
2011/2012 long-term equity program of performance-
based and service-based RSUs with a combined value
equal to 50% of the NEO’s total target award amount,
as shown in Figure 20. To determine the number of
performance-based and service-based RSUs, the NEO’s
long-term equity target award opportunity amount was
divided by $58.27, the closing price of our common
stock on the grant date for each award type. On the
same date, the performance criteria for the performance-
based RSUs were set. The performance metric was
non-GAAP operating income as a percentage of revenue,
and vesting was determined based on the higher of
the actual calendar year 2011 or calendar year 2012
non-GAAP operating incomes, which in 2011 was 18.1%
and in 2012 was 12.5%. Maximum vesting under the
performance-based award is 100%, and the minimum
is 0%. The award determination date for all of the
performance-based and service-based RSUs under this
program was March 4, 2013. On that date, the service-
based awards vested due to the passage of time, and the
performance-based awards vested at 92.4% under the
previously set performance criteria.
Figure 20. 2011/2012 Long-Term Equity Vesting
Named Executive Officer(1)
Martin B. Anstice
Richard A. Gottscho
Sarah A. O’Dowd
Ernest E. Maddock
Equity Target Award
Opportunity
($)
1,200,000
800,000
625,000
800,000
Target
Service-based
Restricted Stock
Units Award
(#)
Vested
Service-based
Restricted Stock
Units Award
(#)
Target
Performance-Based
Restricted Stock
Units Award
(#)
Vested
Performance-based
Restricted Stock
Units Award
(#)
10,296
6,864
5,362
6,864
10,296
6,864
5,362
6,864
10,296
6,864
5,362
6,864
9,513
6,342
4,954
6,342
(1) Messrs. Archer and Bettinger did not participate because their employment with Lam commenced June 4, 2012 and March 11, 2013, respectively.
38
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Awards under the 2012/2013 long-term equity
program. Under the 2012/2013 long-term equity
program, the committee made a grant to each NEO other
than Messrs. Archer and Bettinger, who were not then
employees, of service-based RSUs with a grant date of
February 7, 2012 and a combined value equal to 50%
of the NEO’s total target award amount, as shown in
Figure 21. For Mr. Archer, the committee made a grant
on August 3, 2012 equal to 50% of Mr. Archer’s total
target award amount, as shown in Figure 21, based on
the closing price of our common stock on the grant date
of $34.57. To determine the number of service-based
RSUs, the NEO’s equity target dollar amount was divided
by $43.38, the closing price of our common stock on
the grant date. The award determination date will be
February 7, 2014, subject to continued employment
through such date.
Figure 21. 2012/2013 Long-Term Equity Awards
Named Executive Officer(1)
Martin B. Anstice
Timothy M. Archer
Richard A. Gottscho
Sarah A. O’Dowd
Ernest E. Maddock(2)
Equity Target Award
Opportunity
($)
Service-based
Restricted Stock
Units Award
(#)
1,750,000
1,250,000
800,000
625,000
800,000
40,341
36,158
18,441
14,407
18,441
(1) Mr. Bettinger did not participate because his employment with Lam commenced March 11, 2013.
(2) Mr. Maddock’s employment ceased on April 19, 2013. Under the terms of his employment agreement, Mr. Maddock received a prorated amount of the awarded
service-based RSUs for the period of his participation in April 2013.
Calendar year 2013 decisions for the 2013/2014
long-term equity program. On February 8, 2013, the
committee made a grant under the 2013/2014 long-
term equity program to each NEO expected to continue
as such (other than Mr. Bettinger, who was not then an
employee of the Company), of options and RSUs with a
combined value equal to 50% of the NEO’s total target
award amount, as shown in Figure 22. The committee
made a comparable grant for Mr. Bettinger effective as
of March 11, 2013. The number of shares of Lam common
stock into which the options are exercisable is three times
the number of the RSUs granted. The options have a term
of seven years and cliff vest on February 8, 2015, subject
to continued employment. To determine the number of
RSUs, 50% of the NEO’s long-term equity target dollar
amount was divided by $42.61, the closing price of our
common stock on February 8, 2013 for all NEOs other
than Mr. Bettinger, and $42.41, the closing price of our
common stock on March 11, 2013, for Mr. Bettinger. The
number of shares underlying the options issued for the
other 50% of the target dollar amount was determined,
based on a Black Scholes value analysis, by using a ratio
of three options for every RSU. The RSUs also cliff vest on
February 8, 2015, subject to continued employment.
Figure 22. 2013/2014 Long-Term Equity Awards
Named Executive Officer(1)
Martin B. Anstice
Timothy M. Archer
Douglas R. Bettinger
Richard A. Gottscho
Sarah A. O’Dowd
Equity Target Award
Opportunity
($)
Service-based
Restricted Stock
Units Award
(#)
Stock Options
Award
(#)
2,500,000
1,750,000
1,000,000
1,037,500
629,000
29,335
17,601
11,789
12,174
7,380
88,005
52,803
35,367
36,522
22,140
(1) Mr. Maddock did not participate because it was known at the time that his employment with Lam would cease on April 19, 2013 and there would be no
opportunity for a grant to vest, in accordance with the terms of his employment contract.
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Employment/Change in Control Arrangements
The Company has entered into employment agreements
with Messrs. Anstice, Archer, Bettinger and Maddock
and Dr. Gottscho, and change in control agreements
with our other executive officers, including Ms. O’Dowd,
during the fiscal year. The Company entered into
new employment agreements to replace an expiring
employment agreement with Mr. Maddock and an
expiring change in control agreement with Dr. Gottscho
and a new change in control agreement with Ms. O’Dowd
to replace an expiring change in control agreement. The
Company enters into these agreements to help attract and
retain our NEOs and believes that these agreements help
facilitate a smooth transaction and transition in connection
with a change-in-control event. The employment
Other Benefits Not Available to All Employees
agreements generally provide for designated payments
in the event of an involuntary termination of employment,
death or disability, as such terms are defined in the
applicable agreements. The employment agreements, and
also the change in control agreements, generally provide
for designated payments in the case of a change in
control when coupled with an involuntary termination
(i.e., a double trigger is required before payment is made
due to, a change in control), as such terms are defined in
the applicable agreements.
For additional information about these arrangements
and detail about post-termination payments under
these arrangements, see the “Potential Payments Upon
Termination or Change in Control” section below.
Elective Deferred Compensation Plan. The Company
maintains an elective deferred compensation plan that
allows eligible employees (including all of the NEOs)
to voluntarily defer receipt of all or a portion of base
salary and certain incentive compensation payments until
a date or dates elected by the participating employee.
This allows the employee to defer taxes on designated
compensation amounts. In addition, the Company
provides a limited Company contribution to the plan for
all eligible employees.
Supplemental Health & Welfare. We provide certain
health and welfare benefits not generally available to
other employees, including the payment of premiums
for supplemental long-term disability insurance and
Company-provided coverage in the amount of $1 million
for both life and accidental death and dismemberment
insurance for all NEOs other than Mr. Maddock,
whose coverage ended upon his termination. Until
January 1, 2013, the Company also provided an
executive medical, dental, and vision reimbursement
program that reimbursed executive officers’ cost of
medical, dental, and vision expenses in excess of the
regular employee plans through the end of 2012.
We also provide post-retirement medical and dental
insurance coverage for eligible former executive officers
under our Executive Retirement Medical, Dental, and
Vision Plan, subject to certain eligibility requirements.
The program was closed to new executive officers as
of January 1, 2013. We have an independent actuarial
valuation of this post-retirement benefit conducted
annually in accordance with generally accepted
accounting principles. The most recent valuation was
conducted in June 2013 and reflected the following
retirement benefit obligation for the NEOs:
Figure 23. Post-Retirement Benefit Obligations as of June 2013
Named Executive Officer(1)
Martin B. Anstice
Timothy M. Archer
Richard A. Gottscho
Sarah A. O’Dowd
Ernest E. Maddock
(1) Mr. Bettinger was not eligible to be a participant.
40
Fiscal Year 2013
($)
232,000
43,000
443,000
328,000
871,000
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IV. TAX AND ACCOUNTING CONSIDERATIONS
Deductibility of Executive Compensation
Taxation of “Parachute” Payments
Section 162(m) of the Internal Revenue Code of 1986,
as amended, or the “Code,” imposes limitations on
the deductibility for federal income tax purposes of
compensation in excess of $1 million paid to our chief
executive officer, and any of our three other most
highly compensated executive officers (other than our
chief financial officer) in a single tax year. Generally,
compensation in excess of $1 million may only be
deducted if it is “performance-based compensation”
within the meaning of the Code.
When we design our executive compensation program,
we take into account whether a particular form of
compensation will be considered “performance-based”
compensation for purposes of section 162(m).
To facilitate the deductibility of compensation payments
under section 162(m), in fiscal year 2004, we initially
adopted the Executive Incentive Plan, or “EIP,” and
obtained stockholder approval for the EIP at that time.
We most recently amended this plan and obtained
stockholder approval for the amendment in calendar
year 2010. Both the Annual Incentive Program and the
Long-term Incentive Program are administered under the
EIP. The annual program awards and the long-term cash
awards to our NEOs generally qualify for deductibility
under section 162(m) to the extent practicable.
Consistent with the EIP and the regulations under section
162(m), compensation income realized upon the exercise
of stock options granted under our long-term incentive
program generally will be deductible because the awards
are granted by a committee whose members are outside
directors and the other conditions of the EIP are satisfied.
However, compensation associated with RSUs granted
under the long-term incentive program is deductible only
to the extent that vesting is based on specific performance
goals and the other conditions of the EIP are satisfied.
Therefore, compensation income realized upon the
vesting of service-based RSUs or upon the vesting of
equity awards not meeting the conditions required by the
EIP is not deductible to the Company to the extent that the
threshold is exceeded.
The committee monitors the application of section 162(m)
and the associated Treasury regulations and considers the
advisability of qualifying our executive compensation for
deductibility of such compensation. The committee’s policy
is to qualify our executive compensation for deductibility
under applicable tax laws to the extent practicable and
where the committee believes it is in the best interests of
the Company and its stockholders.
Sections 280G and 4999 of the Code provide that
“disqualified individuals” within the meaning of the Code
(which generally includes certain officers, directors and
employees of the Company) may be subject to additional
taxes if they receive payments or benefits in connection
with a change in control of the corporation that exceeds
certain prescribed limits. The corporation or its successor
may also forfeit a deduction on the amounts subject to this
additional tax.
We did not provide any of our executive officers,
including any NEO, any director, or any other service
provider with a “gross-up” or other reimbursement
payment for any tax liability that the individual might owe
as a result of the application of sections 280G or 4999
during fiscal year 2012, and we have not agreed and are
not otherwise obligated to provide any individual with
such a “gross-up” or other reimbursement as a result of the
application of sections 280G and 4999.
Internal Revenue Code Section 409A
Section 409A of the Code imposes significant additional
taxes on an executive officer, director, or service provider
that receives non-compliant “deferred compensation” that
is within the scope of section 409A. Among other things,
section 409A potentially applies to the cash awards
under the long-term incentive program, the Elective
Deferred Compensation Plan, certain equity awards, and
severance arrangements.
To assist our employees in avoiding additional taxes
under section 409A, we have structured the long-term
incentive program, the Elective Deferred Compensation
Plan, and our equity awards in a manner intended to
qualify them for exclusion from or compliance with
section 409A.
Accounting for Stock-Based Compensation
We follow Financial Accounting Standards Board
Accounting Standards Codification Topic 718, or
“ASC 718,” for accounting for our stock options and
other stock-based awards. ASC 718 requires companies
to calculate the grant date “fair value” of their stock
option grants and other equity awards using a variety of
assumptions. This calculation is performed for accounting
purposes. ASC 718 also requires companies to recognize
the compensation cost of stock option grants and other
stock-based awards in their income statements over the
period that an employee is required to render service in
exchange for the option or other equity award.
41
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Compensation Committee Report
The compensation committee has reviewed and discussed
with management the Compensation Discussion and
Analysis required by Item 402(b) of Regulation S-K.
Based on this review and discussion, the compensation
committee has recommended to the board of directors
that the Compensation Discussion and Analysis be
included in this proxy statement and the Company’s
Annual Report on Form 10-K.
This Compensation Committee Report shall not be
deemed “filed” with the SEC for purposes of federal
securities law, and it shall not, under any circumstances,
be incorporated by reference into any of the Company’s
past or future SEC filings. The report shall not be
deemed soliciting material.
MEMBERS OF THE COMPENSATION COMMITTEE
Youssef A. El-Mansy
Christine A. Heckart
Grant M. Inman
Abhijit Y. Talwalkar (Chair)
Compensation Committee Interlocks and Insider Participation
None of the committee members has ever been an
officer or employee of Lam Research. No interlocking
relationship exists or existed during fiscal year 2013
between any member of our compensation committee
and any member of any other company’s board of
directors or compensation committee.
Executive Compensation Tables
The following tables show compensation information for our named executive officers.
Summary Compensation Table
Name and
Principal Position
Martin B. Anstice
President and
Chief Executive Officer
Timothy M. Archer
Executive Vice President and
Chief Operating Officer(4)
Douglas R. Bettinger
Executive Vice President and
Chief Financial Officer(5)
Richard A. Gottscho
Executive Vice President,
Global Products
Sarah A. O’Dowd
Senior Vice President,
Chief Legal Officer
Ernest E. Maddock
Former Executive Vice President
and Chief Financial Officer(6)
Fiscal
Year
Salary
($)
Bonus
($)
2013
2012
2011
2013
776,904(7)
605,288
512,738
574,313(7)
2013
149,231
2013
2012
2011
2013
2012
2011
2013
2012
2011
487,735(7)
427,942
396,781
432,782(7)
377,596
363,753
446,553(7)
474,261
457,194
Stock
Awards
($)(1)
1,249,964
1,749,993
1,199,896
Option
Awards
($)(2)
1,150,947
0
0
1,999,961(10)
690,568
Non-Equity
Incentive Plan
Compensation
($)
2,376,731(12)
1,463,810(13)
2,518,831(14)
1,738,388(15)
All Other
Compensation
($)(3)
Total
($)
17,106
22,337
16,459
5,571,653
3,841,428
4,247,924
124,204
5,127,434
2,499,942(11)
459,159
272,269(16)
2,529
3,383,130
0
0
0
0
0
500(8)
5,609(9)
0
0
0
0
0
0
0
518,734
799,971
1,248,731
314,462
624,976
624,887
0
799,971
799,931
613,299
1,098,839(17)
0
0
371,788
0
0
0
0
0
905,832(18)
1,799,597(19)
808,050(20)
774,526(21)
1,611,267(22)
799,356(23)
1,012,865(24)
2,096,358(25)
15,786
19,959
18,913
12,427
15,355
16,783
2,734,893
2,159,312
3,464,022
1,939,509
1,792,453
2,616,690
694,553
1,940,462
18,413
18,069
2,305,510
3,371,552
(1) The amounts shown in this column represent the value of RSU awards granted in accordance with ASC 718. However, pursuant to SEC rules, these values
are not reduced by an estimate for the probability of forfeiture. The assumptions used to calculate the fair value of the RSUs in fiscal year 2013 are set forth in
Note 11 in the Notes to Consolidated Financial Statements of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2013.
(2) The amounts shown in this column represent the value of the stock option awards granted in accordance with ASC 718. However, pursuant to SEC rules, these
values are not reduced by an estimate for the probability of forfeiture. The assumption used to calculate the fair value of stock options in fiscal year 2013 are
set forth in Note 11 in the Notes to Consolidated Financial Statements of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2013.
(3) Please refer to the “All Other Compensation Table,” which immediately follows this table, for additional information.
(4) Mr. Archer was appointed Executive Vice President and Chief Operating Officer on June 4, 2012.
(5) Mr. Bettinger was appointed Executive Vice President and Chief Financial Officer on March 11, 2013.
(6) Mr. Maddock’s employment with Lam ceased on April 19, 2013.
(7)
(8) Represents a patent award.
(9) Represents a patent award and a bonus equal to the additional income tax due to section 409A for certain stock option awards.
(10) Represents grants of service-based RSUs: under the 2012/2013 LTIP-Equity, granted August 3, 2012 in accordance with the terms of his employment agreement
Includes vacation payouts of $71,615 for Mr. Anstice; $7,485 for Mr. Archer; $36,005 for Dr. Gottscho; $34,167 for Ms. O’Dowd; and $44,530 for Mr. Maddock.
(effective June 4, 2012) entered into in connection with the acquisition of Novellus; and under the 2013/2014 LTIP-Equity, granted February 8, 2013.
(11) Represents grant of service-based RSUs under the 2013/2014 LTIP-Equity and a new hire grant of service-based RSUs with a dollar value equal to $2,000,000
in accordance with the terms of his employment agreement.
(12) Represents $771,640 earned by Mr. Anstice under the 2012 Annual Incentive Program, or “AIP,” $183,446 accrued on Mr. Anstice’s behalf for the performance
during fiscal year 2013 under the 2011/2012 cash portion of the Long-Term Incentive Program, or “LTIP-Cash,” $740,974 accrued on Mr. Anstice’s behalf for
the performance during fiscal year 2013 under the 2012/2013 LTIP-Cash, and $680,671 accrued on Mr. Anstice’s behalf for the performance during fiscal
42
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year 2013 under the 2013/2014 LTIP-Cash. Mr. Anstice has received the amounts accrued under the 2011/2012 LTIP-Cash, and will be eligible to receive the
amounts accrued under the 2012/2013 and 2013/2014 LTIP-Cash programs if he remains employed by Lam through the respective award determination dates
in February 2014 and February 2015.
(13) Represents $521,125 earned by Mr. Anstice under the 2011 AIP, $233,936 accrued on Mr. Anstice’s behalf for the performance during fiscal year 2012 under
the 2010/2011 LTIP-Cash, $405,171 accrued on Mr. Anstice’s behalf for the performance during fiscal year 2012 under the 2011/2012 LTIP-Cash, and $303,578
accrued on Mr. Anstice’s behalf for the performance during fiscal year 2012 under the 2012/2013 LTIP-Cash. Mr. Anstice has received the amounts accrued
under the 2010/2011 and 2011/2012 LTIP-Cash programs and will be eligible to receive the amount accrued under the 2012/2013 LTIP-Cash if he remains
employed by Lam through the award determination date in February 2014.
(14) Represents $629,285 earned by Mr. Anstice under the 2010 AIP, $433,868 accrued on Mr. Anstice’s behalf for the performance during fiscal year 2011 under
the 2009/2010 LTIP-Cash, $1,033,893 accrued on Mr. Anstice’s behalf for the performance during fiscal year 2011 under the 2010/2011 LTIP-Cash, and
$421,785 accrued on Mr. Anstice’s behalf for the performance during fiscal year 2011 under the 2011/2012 LTIP-Cash. Mr. Anstice has received the amounts
accrued under the 2009/2010, 2010/2011 and 2011/2012 LTIP-Cash programs.
(15) Represents $263,492 earned by Mr. Archer under the 2012 AIP, $360,804 earned by Mr. Archer in accordance with the terms of his employment agreement
under the 2012 Novellus Executive Bonus Program for performance during the second half of fiscal year 2012, $705,689 accrued on Mr. Archer’s behalf for the
performance during the first half of fiscal year 2013 under the 2012/2013 LTIP-Cash, and $408,403 accrued on Mr. Archer’s behalf for the performance during
fiscal year 2013 under the 2013/2014 LTIP-Cash. Mr. Archer will be eligible to receive the amounts accrued under the 2012/2013 and 2013/2014 LTIP-Cash
programs if he remains employed by Lam through the respective award determination dates in February 2014 and February 2015.
(16) Represents $272,269 accrued on Mr. Bettinger’s behalf for the performance during fiscal year 2013 under the 2013/2014 LTIP-Cash. Mr. Bettinger will be eligible to
receive the amount accrued under the 2013/2014 LTIP-Cash if he remains employed by Lam through the award determination date in February 2015.
(17) Represents $355,332 earned by Dr. Gottscho under the 2012 AIP, $122,297 accrued on Dr. Gottscho’s behalf for the performance during fiscal year 2013
under the 2011/2012 LTIP-Cash, $338,731 accrued on Dr. Gottscho’s behalf for the performance during fiscal year 2013 under the 2012/2013 LTIP-Cash, and
$282,479 accrued on Dr. Gottscho’s behalf for the performance during fiscal year 2013 under the 2013/2014 LTIP-Cash. Dr. Gottscho has received the amount
accrued under the 2011/2012 LTIP-Cash, and will be eligible to receive the amounts accrued under the 2012/2013 and 2013/2014 LTIP-Cash programs if he
remains employed by Lam through the respective award determination dates in February 2014 and February 2015.
(18) Represents $339,032 earned by Dr. Gottscho under the 2011 AIP, $157,907 accrued on Dr. Gottscho’s behalf for the performance during fiscal year 2012
under the 2010/2011 LTIP-Cash, $270,114 accrued on Dr. Gottscho’s behalf for the performance during fiscal year 2012 under the 2011/2012 LTIP-Cash, and
$138,779 accrued on Dr. Gottscho’s behalf for the performance during fiscal year 2012 under the 2012/2013 LTIP-Cash. Dr. Gottscho has received the amounts
accrued under the 2010/2011 and 2011/2012 LTIP-Cash programs, and will be eligible to receive the amount accrued under the 2012/2013 LTIP-Cash if he
remains employed by Lam through the award determination date in February 2014.
(19) Represents $508,144 earned by Dr. Gottscho under the 2010 AIP, $312,385 accrued on Dr. Gottscho’s behalf for the performance during fiscal year 2011
under the 2009/2010 LTIP-Cash, $697,878 accrued on Dr. Gottscho’s behalf for the performance during fiscal year 2011 under the 2010/2011 LTIP-Cash, and
$281,190 accrued on Dr. Gottscho’s behalf for the performance during fiscal year 2011 under the 2011/2012 LTIP-Cash. Dr. Gottscho has received the amounts
accrued under the 2009/2010, 2010/2011 and 2011/2012 LTIP-Cash programs.
(20) Represents $276,615 earned by Ms. O’Dowd under the 2012 AIP, $95,545 accrued on Ms. O’Dowd’s behalf for the performance during fiscal year 2013
under the 2011/2012 LTIP-Cash, $264,633 accrued on Ms. O’Dowd’s behalf for the performance during fiscal year 2013 under the 2012/2013 LTIP-Cash, and
$171,257 accrued on Ms. O’Dowd’s behalf for the performance during fiscal year 2013 under the 2013/2014 LTIP-Cash. Ms. O’Dowd has received the amount
accrued under the 2011/2012 LTIP-Cash, and will be eligible to receive the amounts accrued under the 2012/2013 and 2013/2014 LTIP-Cash programs if she
remains employed by Lam through the respective award determination dates in February 2014 and February 2015.
(21) Represents $308,868 earned by Ms. O’Dowd under the 2011 AIP, $146,210 accrued on Ms. O’Dowd’s behalf for the performance during fiscal year 2012 under
the 2010/2011 LTIP-Cash, and $211,027 accrued on Ms. O’Dowd’s behalf for the performance during fiscal year 2012 under the 2011/2012 LTIP-Cash and
$108,421 accrued on Ms. O’Dowd’s behalf for the performance during fiscal year 2012 under the 2012/2013 LTIP-Cash. Ms. O’Dowd has received the amounts
accrued under the 2010/2011 and 2011/2012 LTIP-Cash programs, and will be eligible to receive the amount accrued under the 2012/2013 LTIP-Cash if she
remains employed by Lam through the award determination date in February 2014.
(22) Represents $435,498 earned by Ms. O’Dowd under the 2010 AIP, $309,906 accrued on Ms. O’Dowd’s behalf for the performance during fiscal year 2011
under the 2009/2010 LTIP-Cash, $646,183 accrued on Ms. O’Dowd’s behalf for the performance during fiscal year 2011 under the 2010/2011 LTIP-Cash, and
$219,680 accrued on Ms. O’Dowd’s behalf for the performance during fiscal year 2011 under the 2011/2012 LTIP-Cash. Ms. O’Dowd has received the amounts
accrued under the 2009/2010, 2010/2011 and 2011/2012 LTIP-Cash programs.
(23) Represents $389,895 earned by Mr. Maddock under the 2012 AIP, $122,297 accrued on Mr. Maddock’s behalf for the performance during fiscal year 2013
under the 2011/2012 LTIP-Cash, $204,730 accrued on Mr. Maddock’s behalf for the performance during fiscal year 2013 under the 2012/2013 LTIP-Cash, and
$82,433 accrued on Mr. Maddock’s behalf for the performance during fiscal year 2013 under the 2013/2014 LTIP-Cash. Mr. Maddock has received the amounts
accrued under the 2011/2012, 2012/2013 and 2013/2014 LTIP-Cash programs.
(24) Represents $416,823 earned by Mr. Maddock under the 2011 AIP, $187,149 accrued on Mr. Maddock’s behalf for the performance during fiscal year 2012
under the 2010/2011 LTIP-Cash, $270,114 accrued on Mr. Maddock’s behalf for the performance during fiscal year 2012 under the 2011/2012 LTIP-Cash,
and $138,779 accrued on Mr. Maddock’s behalf for the performance during fiscal year 2012 under the 2012/2013 LTIP-Cash. Mr. Maddock has received the
amounts accrued under the 2010/2011, 2011/2012 and 2012/2103 LTIP-Cash programs.
(25) Represents $591,375 earned by Mr. Maddock under the 2010 AIP, $396,679 accrued on Mr. Maddock’s behalf for the performance during fiscal year 2011
under the 2009/2010 LTIP-Cash, $827,114 accrued on Mr. Maddock’s behalf for performance during fiscal year 2011 under the 2010/2011 LTIP-Cash, and
$281,190 accrued on Mr. Maddock’s behalf for the performance during fiscal year 2011 under the 2011/2012 LTIP-Cash. Mr. Maddock has received the
amounts accrued under the 2009/2010, 2010/2011 and 2011/2012 LTIP-Cash programs.
All Other Compensation Table
Company Matching
Contribution to the
Company’s Section
401(k) Plan
($)
Company Paid
Long-Term
Disability Insurance
Premiums(1)
($)
Company
Paid Life
Insurance
Premiums(2)
($)
Company Paid
Healthcare
Insurance
Premiums(3)
($)
Company
Contribution
to the Elective
Deferred
Compensation
Plan
($)
8,494
14,660
2,145
8,262
4,203
5,156
0
0
0
1,174
0
774
1,152
1,152
384
1,152
1,152
960
4,960
4,960
0
4,652
4,571
4,571
2,500
698
0
0
2,500
2,500
Payments
in Regard to
Termination of
Employment(5)
($)
Total
($)
0
17,106
0 124,204
2,529
0
15,786
0
12,427
0
Gross Up(4)
($)
0
102,734
0
546
0
0
680,591 694,553
Name
Martin B. Anstice
Timothy M. Archer
Douglas R. Bettinger
Richard A. Gottscho
Sarah A. O’Dowd
Ernest E. Maddock
Fiscal
Year
2013
2013
2013
2013
2013
2013
(1) Represents the portion of supplemental long-term disability insurance premiums paid by Lam.
(2) Represents the portion of life insurance premiums paid by Lam.
(3) Represents the portion of executive dental and executive medical reimbursement insurance premiums paid by Lam.
(4) Represents the portion of gross up tax amount for applicable federal, state, and local laws applied to Mr. Archer’s relocation expenses and Dr. Gottscho’s
patent award bonus.
(5) Represents the severance Mr. Maddock was paid under the terms of his employment agreement, calculated as the sum of 12 months of base compensation
plus an amount equal to 50% of the average of the short-term variable compensation plan payments earned over the last five years of employment.
43
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REVISION 12
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Grants of Plan-Based Awards for Fiscal Year 2013
Estimated Future
Payouts Under
Non-Equity Incentive
Plan Awards
Grant
Date
Approval
Date
Target
($)(1)
Maximum
($)(1)
N/A
N/A
2/8/2013
1,162,500
2,615,625
2/8/2013
2,500,000
6,250,000
2/8/2013
2/8/2013
2/8/2013
2/8/2013
0
0
0
0
N/A
N/A
2/7/2013
632,500
1,423,125
2/7/2013
1,500,000
3,750,000
N/A 12/12/2011
1,250,000
3,125,000
2/8/2013
2/7/2013
2/8/2013
2/7/2013
8/3/2012 12/12/2011
0
0
0
0
0
0
Name
Award Type
Annual Incentive Program
Martin B. Anstice
LTIP-Cash
LTIP-Equity
Timothy M. Archer
Annual Incentive Program
LTIP-Cash
LTIP-Equity
Annual Incentive Program
LTIP-Cash
N/A
N/A
1/14/2013
412,250
927,563
1/14/2013
1,000,000
2,500,000
Douglas R. Bettinger
LTIP-Equity
New Hire
Annual Incentive Program
Richard A. Gottscho
LTIP-Cash
LTIP-Equity
Annual Incentive Program
Sarah A. O’Dowd
LTIP-Cash
LTIP-Equity
3/11/2013
1/14/2013
3/11/2013
1/14/2013
3/11/2013
1/14/2013
0
0
0
0
0
0
N/A
N/A
2/7/2013
391,000
879,750
2/7/2013
1,037,500
2,593,750
2/8/2013
2/7/2013
2/8/2013
2/7/2013
0
0
0
0
NA
NA
2/7/2013
2/7/2013
324,800
730,800
629,000
1,572,500
2/8/2013
2/7/2013
2/8/2013
2/7/2013
0
0
0
0
Ernest E. Maddock
Annual Incentive Program
LTIP-Cash
N/A
N/A
2/7/2013
425,000
956,250
5/14/2013
800,000
2,000,000
All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#)
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)(2)
Exercise
or Base
Price of
Option
Awards
($/sh)
0
0
0
Grant
Date Fair
Value of
Stock and
Option
Awards
($)(3)
0
0
1,249,964
0
0
0
88,005
42.61
1,150,947
0
0
29,335(4)
0
0
0
0
17,601(4)
0
0
0
0
0
0
0
0
0
52,803
42.61
36,158(5)
0
0
11,789(4)
0
0
0
0
0
0
0
0
0
35,367
42.41
47,158(6)
0
0
12,174(4)
0
0
0
7,380(4)
0
0
0
0
0
0
0
0
0
0
0
36,522
42.61
0
0
0
0
0
0
22,140
42.61
0
0
0
0
0
0
0
749,979
690,568
1,249,982
0
0
499,971
459,159
1,999,971
0
0
518,734
613,299
0
0
314,462
371,788
0
0
(1) The AIP target and maximum estimated future payouts reflected in this table were calculated using the base salary approved in February 2013, effective as of
April 2013. Actual target and maximum future payouts under the AIP are calculated based on actual eligible base earnings.
(2) Represents stock options with a seven-year term, which vest on February 8, 2015, subject to continued employment.
(3) The amounts shown in this column represent the value of RSU and stock option awards granted during fiscal year 2013 in accordance with ASC 718. However,
pursuant to SEC rules, these values are not reduced by an estimate for the probability of forfeiture. The assumptions used to calculate the fair value of the RSUs
in fiscal year 2013 are set forth in Note 11 in the Notes to Consolidated Financial Statements of the Company’s Annual Report on Form 10-K for the fiscal year
ended June 30, 2013.
(4) Represents RSUs with service-based vesting. The RSUs cliff vest on February 8, 2015, subject to continued employment.
(5) Represents RSUs with service-based vesting. The RSUs cliff vest on February 7, 2014, subject to continued employment.
(6) Represents a new hire RSU award with service-based vesting. The RSUs vest 25% on June 30, 2013, September 30, 2013, December 30, 2013 and March 11,
2014, subject to continued employment. In the event that Mr. Bettinger’s employment terminates due to a voluntary resignation prior to March 11, 2015, he shall
repay in cash or in shares the ratable portion of unearned RSUs relative to his two-year implicit service period.
44
<12345678> JOB TITLE LAM Research Combo
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DATE Tuesday, September 24, 2013
JOB TITLE LAM Research Combo
REVISION 12
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DATE Tuesday, September 24, 2013
JOB NUMBER 252704
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JOB NUMBER 252704
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Outstanding Equity Awards at 2013 Fiscal Year-End
Option Awards
Stock Awards
Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
Option
Exercise
Price
($)
Option
Expiration
Date
Number of Shares
or Units of Stock
That Have Not
Vested
(#)
Market Value
of Shares or
Units of Stock
That Have Not
Vested
($)(1)
0
0
N/A
29,335(2)
1,300,714
88,005(3)
42.61
2/8/2020
0
0
0
N/A
40,341(4)
1,788,720
0
0
0
29,120(5)
0
0
0
0
20,250(8)
56,2509)
56,250(10)
73,125(11)
45,000(12)
33,750(13)
0
0
0
0
0
0
0
0
0
38,658(5)
0
0
0
0
20.21
2/26/2014
0
N/A
52,803(3)
42.61
2/8/2020
0
0
20,250(8)
28,125(9)
0
0
0
0
0
0
0
0
29.34
21.28
23.25
29.68
22.01
24.43
0
0
N/A
N/A
12/16/2020
12/17/2019
12/13/2017
12/14/2016
12/15/2015
12/16/2014
N/A
N/A
35,367(16)
42.41
3/11/2020
0
0
N/A
36,522(3)
42.61
2/8/2020
0
0
0
0
N/A
N/A
22,140(3)
42.61
2/8/2020
0
0
0
0
N/A
20.21
2/26/2014
0
N/A
0
17,601(2)
0
36,158(6)
37,339(7)
0
0
0
0
0
0
11,789(14)
35,369(15)
0
12,174(2)
0
18,441(4)
7,380(2)
0
14,407(4)
0
0
0
780,428
0
1,603,246
1,655,611
0
0
0
0
0
0
522,724
1,568,261
0
539,795
0
817,674
327,229
0
638,806
0
0
Name
Martin B. Anstice
Timothy M. Archer
Douglas R. Bettinger
Richard A. Gottscho
Sarah A. O’Dowd
Ernest E. Maddock
(1) Calculated by multiplying the number of unvested shares by $44.34, the closing price per share of our common stock on June 28, 2013.
(2) RSUs were granted on February 8, 2013. On February 8, 2015, 100% of the RSUs will vest provided that the person remains an employee on such date.
(3) Options were granted on February 8, 2013. On February 8, 2015, 100% of the options will vest provided that the person remains an employee on such date.
(4) RSUs were granted on February 7, 2012. On February 7, 2014, 100% of the RSUs will vest provided that the person remains an employee on such date.
(5) Options were granted on February 26, 2009. On February 26, 2011, 100% of the options vested.
(6) RSUs were granted on August 3, 2012. On February 7, 2014, 100% of the RSUs will vest provided that Mr. Archer remains an employee on such date.
(7) RSUs were granted on December 14, 2011. As of the end of fiscal year 2013, 50% of the RSUs granted on December 14, 2011 had vested. On December 14,
2013, the remaining unvested RSUs will vest provided that Mr. Archer remains an employee on such date.
(8) Options were granted on December 16, 2010. As of the 2013 fiscal year-end, 50% of the options granted on December 16, 2010 had vested. On December 16,
2013 and December 16, 2014, 25% of the remaining unvested options will vest provided that Mr. Archer remains an employee on such date.
(9) Options were granted on December 17, 2009. As of the 2013 fiscal year-end, two thirds of the options granted on December 17, 2009 had vested. On
December 17, 2013, the remaining unvested options will vest provided that Mr. Archer remains an employee on such date.
(10) Options were granted on December 13, 2007 and vested at a rate of 25% per year on each anniversary of the grant date.
(11) Options were granted on December 14, 2006 and vested at a rate of 25% per year on each anniversary of the grant date.
(12) Options were granted on December 15, 2005 and vested at a rate of 25% per year on each anniversary of the grant date.
(13) Options were granted on December 16, 2004 and vested at a rate of 25% per year on each anniversary of the grant date.
(14) RSUs were granted on March 11, 2013. On February 8, 2015, 100% of the RSUs will vest provided that Mr. Bettinger remains an employee on such date.
(15) RSUs were granted on March 11, 2013. As of the end of fiscal year 2013, 25% of the RSUs granted on March 11, 2013 had vested. On each of September 30,
2013, December 30, 2013 and March 11, 2014, 25% of the remaining unvested RSUs will vest provided that Mr. Bettinger remains an employee on such date.
(16) Options were granted on March 11, 2013. On February 8, 2015, 100% of the options will vest provided that Mr. Bettinger remains an employee on such date.
45
Proposal No. 1: Election of DirectorsLam Research Corporation 2013 Proxy StatementContinues on next page <12345678> JOB TITLE LAM Research Combo
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Option Exercises and Stock Vested for Fiscal Year 2013(1)
Option Awards
Stock Awards
Number of
Shares Acquired
on Exercise
(#)
Value
Realized on
Exercise
($)
Number of
Shares Acquired
on Vesting
(#)
Value
Realized on
Vesting
($)
0
82,688
0
0
0
24,480
0
1,990,753
0
0
0
532,941
19,809
37,338
11,789
13,206
10,316
23,963
843,665
1,357,983
522,724
562,444
439,358
1,010,257
Name
Martin B. Anstice
Timothy M. Archer
Douglas R. Bettinger
Richard A. Gottscho
Sarah A. O’Dowd
Ernest E. Maddock
(1) The table shows all stock options exercised and the value realized upon exercise, and all stock awards vested and the value realized upon vesting, by the NEOs
during fiscal year 2013, which ended on June 30, 2013.
Name
Martin B. Anstice
Timothy M. Archer
Douglas R. Bettinger
Richard A. Gottscho
Sarah A. O’Dowd
Ernest E. Maddock
Non-Qualified Deferred Compensation for Fiscal Year 2013
Executive
Contributions
in FY13
($)(1)
Registrant
Contributions
in FY13
($)(2)
Aggregate
Earnings in
FY13
($)(3)
171,525
451,519
0
0
435,325
380,799
2,500
699
0
2,500
2,500
2,500
434,814
31,939
0
95,284
176,103
1,366,839
12,404,573
Aggregate
Balance at
FYE13
($)(4)
3,641,189
484,156
0
1,696,660
2,021,192
(1) The entire amount of each executive’s contributions in fiscal year 2013 is reported in each respective NEO’s compensation in our fiscal year 2013 “Summary
Compensation Table.”
(2) Represents the amount that Lam credited to the Elective Deferred Compensation Plan, or the “EDCP,” which is 3% of Executive Contribution during calendar
year 2012, to a maximum benefit of $2,500. These amounts are included in the “Summary Compensation Table” and “All Other Compensation Table.”
(3) The NEOs did not receive above-market or preferential earnings in fiscal year 2013.
(4) The fiscal year-end balance includes $3,032,350 for Mr. Anstice, $0 for Messrs. Archer and Bettinger, $1,601,376 for Dr. Gottscho, $1,407,264 for Ms. O’Dowd
and $10,654,434 for Mr. Maddock that were previously reported in our “Summary Compensation Table” in prior years’ proxy statements.
Potential Payments Upon Termination or Change in Control
The following is a summary of the employment agreements of our named executive officers.
Executive Employment Agreements
Martin B. Anstice. The Company and Mr. Anstice entered
into an employment agreement, effective January 1,
2012, for a term of three years, subject to the right of the
Company or Mr. Anstice, under certain circumstances, to
terminate the agreement prior to such time.
Under the terms of the agreement, Mr. Anstice receives a
base salary, which is reviewed annually and potentially
adjusted. It was initially set at $660,000. Mr. Anstice
is also entitled to participate in any short-term or long-
term variable compensation programs offered by the
Company to its executive officers generally, subject to
the applicable terms and conditions of those programs
and the approval of the independent members of the
board, and to participate in the Company’s Elective
Deferred Compensation Plan. Mr. Anstice receives other
benefits, such as health insurance, vacation, and benefits
under other plans and programs generally applicable to
executive officers of the Company.
46
If an Involuntary Termination (as defined in Mr. Anstice’s
agreement) of Mr. Anstice’s employment occurs, other
than in connection with a change in control (as defined
in Mr. Anstice’s agreement), Mr. Anstice will be entitled
to: (1) a lump-sum cash payment equal to 18 months of
his then-current base salary, plus an amount equal to
the average of the last five annual payments made to
Mr. Anstice under the short term variable compensation or
any predecessor or successor programs (the “Short Term
Program,” and such average, the “Five Year Average
Amount”), plus an amount equal to the pro-rata amount
he would have earned under the Short Term Program for
the calendar year in which his employment is terminated
had his employment continued until the end of such
calendar year, such pro-rata portion to be calculated
based on the performance results achieved under the
Short Term program and the number of full months
elapsed prior to the termination date; (2) payment of any
amounts accrued as of the date of termination under any
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long-term, cash-based variable-compensation programs
of the Company (the “Long Term Cash Programs”);
(3) certain medical benefits; and (4) vesting, as of the
date of termination, of a pro rata portion (based on time
of service) of the unvested stock option or RSU awards
granted to Mr. Anstice at least 12 months prior to the
termination date.
Mr. Anstice’s agreement also subjects Mr. Anstice to
customary confidentiality and non-competition obligations
during the term of the agreement, and non-solicitation
obligations for a period of six months following the
termination of his employment. The agreement also
requires Mr. Anstice to execute a release in favor of the
Company to receive the payments described above.
If a Change in Control of the Company (as defined in
Mr. Anstice’s agreement) occurs during the period of
Mr. Anstice’s employment, and if there is an Involuntary
Termination of Mr. Anstice’s employment either in
contemplation of or within the 12 months following the
Change in Control, Mr. Anstice will be entitled to: a lump-
sum cash payment equal to 18 months of Mr. Anstice’s
then-current base salary, plus an amount equal to the
Five Year Average Amount, plus an additional amount
equal to the amount he would have earned under the
Short Term Program for the calendar year in which his
employment is terminated multiplied by the number of
full months worked in that calendar year divided by
twelve; certain medical benefits; vesting, as of the date of
termination, of the unvested stock option or RSU awards
granted to Mr. Anstice prior to the Change in Control;
and payment of any amounts accrued as of the Change
in Control under the Long Term Cash Programs, plus an
amount equal to the remaining target amount under the
Long Term Cash Programs.
If Mr. Anstice’s employment is terminated due to disability
or in the event of his death, Mr. Anstice (or his estate)
will be entitled to: (1) the pro rata amount he would have
earned under the Short Term Program for the calendar
year in which his employment is terminated had his
employment continued until the end of such calendar
year, such pro rata portion to be calculated based on
the performance results achieved under the Short Term
Program and the number of full months elapsed prior to
the termination date; (2) payment of any amounts accrued
as of the date of termination under the Long Term Cash
Programs; (3) certain medical benefits; and (4) vesting, as
of the date of termination, of at least 50% of the unvested
stock option or RSU awards granted to Mr. Anstice prior
to the date of termination (or a pro rata amount, based on
period of service, if greater than 50%).
If Mr. Anstice voluntarily resigns, he will be entitled to
no additional benefits (except as he may be eligible for
under the Executive Retiree Medical Plan), stock options
and RSUs will cease to vest on the termination date, and
stock options will be cancelled unless they are exercised
within ninety days after the termination date. RSUs will be
cancelled on the termination date.
Timothy M. Archer. The Company and Mr. Archer
entered into an employment agreement, effective June 4,
2012, for a term of three years, subject to the right of the
Company or Mr. Archer, under certain circumstances,
to terminate the agreement prior to such time. The terms
of Mr. Archer’s agreement are substantively similar to
those of Mr. Anstice’s agreement, with the following
material differences: (i) Mr. Archer’s initial base salary
was set at $550,000, (ii) he was entitled to continue to
participate in the Novellus annual incentive plan for the
first half of calendar year 2012, (iii) he was entitled to
participate in the Company’s annual incentive program
for the second half of calendar year 2012, and (iv) his
agreement includes a retention bonus of $1,000,000
payable in cash, which vests on December 31, 2013,
subject to continued employment and relocation to the
San Francisco Bay Area.
The severance terms of Mr. Archer’s agreement are
generally similar to those of Mr. Anstice’s agreement,
provided that (1) Mr. Archer will receive 12-months base
salary instead of 18 months in the event of his Involuntary
Termination; and (2) instead of a payment of the Five Year
Average Amount, he will receive a payment of 50% of the
Five Year Average Amount. The Change in Control terms
of Mr. Archer’s agreement are generally similar to those
of Mr. Anstice’s agreement, provided that Mr. Archer will
receive 12-months base salary instead of 18 months in the
event of his Involuntary Termination.
Douglas R. Bettinger. The Company and Mr. Bettinger
entered into an employment agreement with a term
commencing on March 11, 2013 and ending on
July 17, 2015, subject to the right of the Company or
Mr. Bettinger, under certain circumstances, to terminate
the agreement prior to July 17, 2015. The terms of
Mr. Bettinger’s agreement are substantively similar to
those of Mr. Archer’s agreement, with the following
material differences: Mr. Bettinger’s initial base salary
was set at $485,000 and his agreement includes a
special bonus grant of RSUs with a dollar value (as
of such date) equal to $2,000,000 that vest in equal
tranches subject to continued employment on a quarterly
basis over the year following the effective date of
the agreement.
47
Proposal No. 1: Election of DirectorsLam Research Corporation 2013 Proxy StatementContinues on next page <12345678> JOB TITLE LAM Research Combo
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In the event that Mr. Bettinger’s employment terminates
due to a “voluntary resignation” (as defined in his
agreement) prior to March 11, 2015, he will be required
to repay to the Company (in cash or in vested RSU
shares) a pro rata portion of the shares granted as part
of the special bonus. In the event that Mr. Bettinger’s
employment terminates within the first year of the
employment period for any reason other than a voluntary
resignation or a termination for “cause” (as defined
in Mr. Bettinger’s agreement), the unvested portion
of all RSUs shall accelerate their vesting as of the
termination date.
The severance terms of Mr. Bettinger’s agreement are
generally similar to those of Mr. Archer’s agreement,
provided that in computing the Five Year Average
Amount any partial year short-term plan payments
in any year shall be annualized, and if employed for
less than five years, then computed based on such
fewer number of years. The Change in Control terms of
Mr. Bettinger’s agreement are generally similar to those of
Mr. Archer’s agreement.
Richard A. Gottscho. The Company and Dr. Gottscho
entered into an employment agreement, effective July 18,
2012, for a term of three years, subject to the right of the
Company or Dr. Gottscho, under certain circumstances, to
Other Executive Agreements
The Company entered into a change in control agreement
with Ms. O’Dowd, effective July 18, 2012, for a term
of three years, subject to the right of the Company or
Ms. O’Dowd, under certain circumstances, to terminate
the agreement prior to such time. The agreement provides
that if a change in control (as defined as in Ms. O’Dowd’s
agreement) of the Company occurs during the period of
her employment under the change in control agreement,
and there is an Involuntary Termination (as defined as in
her agreement) of her employment, Ms. O’Dowd will be
entitled to payments and benefits substantively similar
Equity Plans
terminate the agreement prior to such time. The terms of
Dr. Gottscho’s agreement are substantively similar to those
of Mr. Archer’s employment agreement with the following
material difference: under Dr. Gottscho’s agreement,
his initial base salary was set at $438,000. The
severance and Change in Control terms of Dr. Gottscho’s
agreement are also generally similar to those of
Mr. Archer’s agreement.
Ernest E. Maddock. The Company and Mr. Maddock
entered into an employment agreement effective
July 18, 2012 for a term of three years, subject to the
right of the Company or Mr. Maddock, under certain
circumstances, to terminate the agreement prior to such
time. This employment agreement replaced the previous
employment agreement between the Company and
Mr. Maddock effective July 1, 2009, which expired by its
terms on June 30, 2012. Mr. Maddock’s new employment
agreement had the same terms as the prior agreement.
The terms of Mr. Maddock’s most recent agreement were
substantively similar to those of Mr. Archer’s employment
agreement with the following material difference: under
Mr. Maddock’s agreement, his initial base salary was
set at $485,000. The severance and Change in Controls
terms of Mr. Maddock’s agreement are also generally
similar to those of Mr. Archer’s agreement.
to those contained in the change in control provisions of
Mr. Archer’s agreement.
The change in control agreements contain confidentiality,
non-competition, and non-solicitation terms that
are substantively similar to those of Mr. Anstice’s,
Mr. Archer’s, Mr. Bettinger’s and Dr. Gottscho’s
agreements, and require Ms. O’Dowd to execute a
release in favor of the Company to receive the payments
described in the previous paragraph.
In addition to the above, certain of our stock plans
provide for accelerated benefits after certain events.
While the applicable triggers under each plan vary, these
events generally include: (i) a merger or consolidation
in which the Company is not the surviving entity,
(ii) a sale of substantially all of the Company’s assets,
including a liquidation or dissolution of the Company,
or (iii) a change in the ownership of more than 50%
of our outstanding securities by tender offer or similar
transaction. After a designated event, the vesting of
some or all of awards granted under these plans may be
immediately accelerated in full, or certain awards may
be assumed, substituted, replaced or settled in cash by a
surviving corporation or its parent. The specific treatment
of awards in a particular transaction will be determined
by the board and/or the terms of the applicable
transaction documents.
48
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Potential Payments to Named Executive Officers Upon Termination or Change in Control
The tables below summarize the potential payments to
our NEOs, assuming a change in control of the Company
as of the end of fiscal year 2013. These amounts are
calculated assuming that the employment termination
or change in control occurs on the last day of fiscal
year 2013, June 30, 2013, except for Mr. Maddock,
whose employment terminated on April 19, 2013.
The closing price per share of our common stock on
June 28, 2013, which was the last trading day of fiscal
year 2013, was $44.34. The short-term incentive plan
pro-rata amounts are calculated by multiplying the
applicable pro-rata percentage by the target. Actual
performance will not be known until the end of calendar
year 2013. Mr. Maddock’s amounts are based on his
actual termination date and only include the payments
applicable to that triggering event. The closing price
per share of our common stock on April 19, 2013 was
$41.63.
Potential Payments to Mr. Anstice Upon Termination or Change in Control as of June 30, 2013
Executive Benefits and Payments Upon Termination
Compensation
Severance
Short-term Incentive (5-year average)
Short-term Incentive (pro rata 2013)
Long-term Incentives:
2012-2013 LTIP-Cash
2013-2014 LTIP-Cash
Stock Options (Unvested and Accelerated)
Restricted Stock Units (Unvested and Accelerated)
Benefits and Perquisites
Health Benefit Continuation/COBRA Benefit
Total
Involuntary Termination
Voluntary
Termination
($)
Disability or
Death
($)
For
Cause
($)
Not for
Cause
($)
Change in
Control
($)
—
—
—
—
—
—
—
—
—
—
—
581,250
740,974
680,671
76,125
1,842,859
23,459
3,945,338
—
—
—
—
—
—
—
—
—
1,162,500
1,162,500
468,873
581,250
740,974
680,671
—
468,873
581,250
1,178,474
2,555,671
152,249
1,192,480
3,532,834
23,459
23,459
4,850,207
9,655,310
Potential Payments to Mr. Archer Upon Termination or Change in Control as of June 30, 2013
Executive Benefits and Payments Upon Termination
Compensation
Severance
Short-term Incentive (5-year average)
Short-term Incentive (pro rata 2013)
Long-term Incentives:
2012-2013 LTIP-Cash
2013-2014 LTIP-Cash
Stock Options (Unvested and Accelerated)
Restricted Stock Units (Unvested and Accelerated)
Benefits and Perquisites
Health Benefit Continuation/COBRA Benefit
Total
Involuntary Termination
Voluntary
Termination
($)
Disability or
Death
($)
For
Cause
($)
Not for
Cause
($)
Change in
Control
($)
—
—
—
—
—
—
—
—
—
—
—
316,250
705,689
408,403
45,675
1,191,859
23,459
2,691,335
—
—
—
—
—
—
—
—
—
575,000
210,633
316,250
705,689
408,403
—
—
575,000
421,266
316,250
1,018,189
1,533,403
91,349
2,383,674
23,459
23,459
2,239,434
6,362,590
49
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Potential Payments to Mr. Bettinger Upon Termination or Change in Control as of June 30, 2013
Executive Benefits and Payments Upon Termination
Compensation
Severance
Short-term Incentive (5-year average)
Short-term Incentive (pro rata 2013)
Long-term Incentives:
2012-2013 LTIP-Cash
2013-2014 LTIP-Cash
Stock Options (Unvested and Accelerated)
Restricted Stock Units (Unvested and Accelerated)
Benefits and Perquisites
Health Benefit Continuation/COBRA Benefit
Total
Involuntary Termination
Voluntary
Termination
($)
Disability or
Death
($)
For
Cause
($)
Not for
Cause
($)
Change in
Control
($)
—
—
—
—
—
—
—
—
—
—
—
206,125
—
272,269
34,130
784,153
23,459
1,320,136
—
—
—
—
—
—
—
—
—
485,000
485,000
—
—
206,125
206,125
—
—
272,269
1,022,269
—
—
68,258
2,090,986
23,459
986,853
23,459
3,896,097
Potential Payments to Dr. Gottscho Upon Termination or Change in Control as of June 30, 2013
Executive Benefits and Payments Upon Termination
Compensation
Severance
Short-term Incentive (5-year average)
Short-term Incentive (pro rata 2013)
Long-term Incentives:
2012-2013 LTIP-Cash
2013-2014 LTIP-Cash
Stock Options (Unvested and Accelerated)
Restricted Stock Units (Unvested and Accelerated)
Benefits and Perquisites
Health Benefit Continuation/COBRA Benefit
Total
Involuntary Termination
Voluntary
Termination
($)
Disability or
Death
($)
For
Cause
($)
Not for
Cause
($)
Change in
Control
($)
—
—
—
—
—
—
—
—
—
195,500
338,731
282,479
31,592
815,014
443,000
443,000
443,000
2,106,316
—
—
—
—
—
—
—
—
—
460,000
153,937
195,500
338,731
282,479
—
460,000
307,874
195,500
538,731
778,125
63,183
545,116
1,357,469
443,000
443,000
2,418,763
4,143,882
Potential Payments to Ms. O’Dowd Upon Termination or Change in Control as of June 30, 2013
Executive Benefits and Payments Upon Termination
Compensation
Severance
Short-term Incentive (5-year average)
Short-term Incentive (pro rata 2013)
Long-term Incentives:
2012-2013 LTIP-Cash
2013-2014 LTIP-Cash
Stock Options (Unvested and Accelerated)
Restricted Stock Units (Unvested and Accelerated)
Benefits and Perquisites
Health Benefit Continuation/COBRA Benefit
Total
50
Involuntary Termination
Voluntary
Termination
($)
Disability or
Death
($)
For
Cause
($)
Not for
Cause
($)
Change in
Control
($)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
406,000
296,543
195,500
420,883
643,007
38,302
996,036
13,750
3,010,021
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Potential Payments to Mr. Maddock Upon Termination or Change in Control as of April 19, 2013
Executive Benefits and Payments Upon Termination
Compensation
Severance
Short-term Incentive (5-year average)
Short-term Incentive (pro rata 2013)
Long-term Incentives:
2012-2013 LTIP-Cash
2013-2014 LTIP-Cash
Stock Options (Unvested and Accelerated)
Restricted Stock Units (Unvested and Accelerated)
Benefits and Perquisites
Health Benefit Continuation/COBRA Benefit
Total
Involuntary Termination
Voluntary
Termination
($)
Disability or
Death
($)
For
Cause
($)
Not for
Cause
($)
Change in
Control
($)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
500,000
180,591
106,250
343,491
82,433
—
447,914
871,000
2,531,679
—
—
—
—
—
—
—
—
—
Securities Authorized for Issuance Under Equity Compensation Plans
The following table provides information as of June 30,
2013, regarding securities authorized for issuance
under the Company’s equity compensation plans. The
equity compensation plans of the Company include the
1999 Employee Stock Purchase Plan, the 2007 Stock
Incentive Plan, and the 2011 Stock Incentive Plan, each as
amended and as may be amended.
Plan Category
Equity compensation plans approved by security holders
Equity compensation plans not approved by security holders
Total
Number of
Securities to be
Issued Upon
Exercise of
Outstanding
Options,
Warrants,
and Rights
(a)
4,346,146(2)
3,066,573(4)
7,412,719
Weighted-
Average
Exercise
Price of
Outstanding
Options,
Warrants,
and Rights(1)
($)(b)
33.67
25.31
26.87
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation Plans
(excluding securities reflected
in column (a))
(c)
13,765,427(3)
9,111,492(5)
22,876,919
(1) Does not include RSUs.
(2)
Includes 4,346,146 shares available for future issuance under Lam’s 2007 Stock Incentive Plan, as amended, or the “2007 Plan.” The 2007 Plan was adopted by
the board in August 2006, approved by Lam’s stockholders in November 2006, and amended by the board in November 2006 and May 2013. The term of the
2007 Plan is 10 years from the last date of any approval, amendment, or restatement of the Plan by Lam’s stockholders. The 2007 Plan reserves for issuance
up to 15,000,000 shares of Lam’s common stock.
Includes 4,191,220 shares available for future issuance under the 2007 Plan and 9,574,207 shares available for future issuance under the 1999 Employee Stock
Purchase Plan, as amended, or the “1999 ESPP.” The 1999 ESPP was adopted by the board in September 1998, approved by Lam’s stockholders in November
1998, amended by stockholder approval in November 2003, and most recently amended by the board in November 2012. The term of the 1999 ESPP is
20 years from its effective date of September 30, 1998, unless otherwise terminated or extended in accordance with its terms.
Includes 3,066,573 shares available for future issuance under Lam’s 2011 Stock Incentive Plan, as amended, or the “2011 Plan.” As part of the acquisition of
Novellus, Lam assumed the Novellus Systems, Inc. 2011 Stock Incentive Plan. The 2011 Plan was approved by Novellus shareholders before the merger but
has not been approved by a separate vote of Lam stockholders. The 2011 Plan was amended by the board in July 2012. The term of the 2011 Plan is 10 years
from its effective date of May 10, 2011, unless otherwise terminated or extended in accordance with its terms.
Includes 9,111,492 shares available for future issuance under the 2011 Plan.
(3)
(4)
(5)
51
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The Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010, or the “Dodd-Frank Act,” enables
the Company’s stockholders to vote to approve, on an
advisory or non-binding basis, the compensation of
our named executive officers, as disclosed in this proxy
statement in accordance with SEC rules. Although the
vote is advisory and is not binding on us or on our
board of directors, our compensation committee and,
as appropriate, our board, will take into account the
outcome of the vote when considering future executive
compensation decisions and will evaluate whether any
actions are necessary to address stockholder concerns.
We believe that our compensation philosophy has
allowed us to attract, retain, and motivate qualified
executive officers who have contributed to our success.
For more information regarding the compensation of our
named executive officers, our compensation philosophy,
our 2012 Say on Pay results and Company response,
we encourage you to read the section of this proxy
statement entitled “Executive Compensation and Other
Information — Compensation Discussion and Analysis,”
the compensation tables, and the narrative following the
compensation tables for a more detailed discussion of our
compensation policies and practices.
We are asking for stockholder approval, on an advisory
or non-binding basis, of the compensation of our named
executive officers, as disclosed in accordance with SEC
rules (including section 14A of the Exchange Act) in
the Compensation Discussion and Analysis section, the
compensation tables and any related narrative disclosure
included in this proxy statement. This vote is not intended to
address any specific item of compensation, but rather the
overall compensation of our named executive officers and
the policies and practices described in this proxy statement.
Stockholder approval of Proposal No. 2 requires the
affirmative vote of a majority of the shares present
and cast on the matter, in person or by proxy, at the
annual meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
“FOR” THE APPROVAL, ON AN ADVISORY OR
NON-BINDING BASIS, OF THE COMPENSATION
OF OUR NAMED EXECUTIVE OFFICERS
Proposal No. 3 Ratification of the Appointment
of Independent Registered Public Accounting
Firm For Fiscal Year 2014
Stockholders are being asked to ratify the appointment
of Ernst & Young LLP as the Company’s independent
registered public accounting firm for fiscal year 2014.
Ernst & Young LLP has been the Company’s independent
registered public accounting firm (independent auditor)
since fiscal year 1981.
Approval of Proposal No. 3 will require the affirmative
vote of a majority of the outstanding shares of common
stock present or represented and voting on the proposal
at the annual meeting. Each proxy received by the
Proxy Holders will be voted “FOR” the ratification of the
appointment of Ernst & Young LLP, unless the stockholder
provides other instructions.
Our audit committee meets periodically with Ernst &
Young LLP to review both audit and non-audit services
performed by Ernst & Young LLP, as well as the fees
charged for those services. Among other things, the
committee examines the effect that the performance
of non-audit services, if any, may have upon the
independence of the independent registered public
accounting firm. All professional services provided by
Ernst & Young LLP, including non-audit services, if any, are
subject to approval by the audit committee in accordance
with applicable securities laws, rules, and regulations.
For more information, see the “Audit Committee Report”
and the “Relationship with Independent Registered Public
Accounting Firm” sections below in this proxy statement.
A representative of Ernst & Young LLP is expected to
be present at the annual meeting and will have an
opportunity to make a statement if he or she so desires.
The representative will also be available to respond to
appropriate questions from the stockholders.
Stockholder approval of Proposal No. 3 requires the
affirmative vote of a majority of the shares present and cast
on the matter, in person or by proxy, at the annual meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
“FOR” THE RATIFICATION OF THE APPOINTMENT
OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM FOR FISCAL YEAR 2014
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Audit Committee Report
The Company’s management, audit committee and
independent registered public accounting firm (Ernst &
Young LLP) have specific but different responsibilities
relating to Lam’s financial reporting. Lam’s management is
responsible for the financial statements and for the system
of internal control and the financial reporting process.
Ernst & Young LLP has the responsibility to express an
opinion on the financial statements and the system of
internal control over financial reporting, based on the
audit they conducted in accordance with the standards of
the Public Company Accounting Oversight Board (U.S.).
The audit committee is responsible for monitoring and
overseeing these processes.
In this context and in connection with the audited financial
statements contained in the Company’s Annual Report on
Form 10-K for the fiscal year ended June 30, 2013, the
audit committee took the following actions:
• Reviewed and discussed the audited financial
statements with Company management.
• Discussed with Ernst & Young LLP the matters
required to be discussed by Rule AU380 of the
Public Company Accounting Oversight Board, or the
“PCAOB,” “Communication with Audit Committees.”
• Reviewed the written disclosures and the letter from
Ernst & Young LLP, required by Rule 3526 of the
PCAOB, “Communication with Audit Committees
Concerning Independence,” and discussed with
Ernst & Young LLP its independence.
• Based on the foregoing reviews and discussions,
recommended to the board of directors that the
audited financial statements be included in the
Company’s 2013 Annual Report on Form 10-K for
the fiscal year ended June 30, 2013 for filing with
the SEC.
This Audit Committee Report shall not be deemed “filed”
with the SEC for purposes of federal securities law, and
it shall not, under any circumstances, be incorporated by
reference into any of the Company’s past or future SEC
filings. The report shall not be deemed soliciting material.
MEMBERS OF THE AUDIT COMMITTEE
Eric K. Brandt
Michael R. Cannon*
Catherine P. Lego (Chair)
William R. Spivey
* Mr. Cannon joined the audit committee effective May 1, 2013.
Relationship with Independent Registered Public Accounting Firm
Ernst & Young LLP has audited the Company’s consolidated financial statements since the Company’s inception.
Fees Billed by Ernst & Young LLP
The table below shows the fees billed by Ernst & Young LLP for audit and other services provided to the Company in
fiscal years 2013 and 2012.
Services Rendered / Type of Fee
Audit Fees(1)
Audit-Related Fees(2)
Tax Fees
All Other Fees(3)
TOTAL
Fiscal Year
2013
($)
Fiscal Year
2012
($)
4,901,106
4,528,332
260,000
162,066
1,995
684,815
—
1,995
5,325,167
5,215,142
(1) Audit fees represent fees for professional services provided in connection with the audits of annual financial statements. Audit fees also include reviews of
quarterly financial statements, audit services related to other statutory or regulatory filings or engagements, and fees related to Ernst & Young LLP’s audit of
the effectiveness of the Company’s internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act.
(2) Audit-related fees consist of assurance and related services that are reasonably related to the audit or review of the Company’s financial statements and
are not reported above under “Audit Fees” and include fees related to services provided to support the Company’s planned disposition of the Peter Wolters
industrial applications group.
(3) All other fees represent subscription fees to Ernst & Young LLP’s accounting research service.
53
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The audit committee reviewed summaries of the services
provided by Ernst & Young LLP and the related fees during
fiscal year 2013 and has determined that the provision
of non-audit services was compatible with maintaining
the independence of Ernst & Young LLP as the Company’s
independent registered public accounting firm. The audit
committee approved 100% of the services and related
fee amounts for services provided by Ernst & Young LLP
during fiscal year 2013.
Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services
It is the responsibility of the audit committee to approve,
in accordance with Sections 10A(h) and (i) of the
Exchange Act and the rules and regulations of the SEC,
all professional services, to be provided to us by our
independent registered public accounting firm, provided
that the audit committee shall not approve any non-audit
services proscribed by Section 10A(g) of the Exchange
Act in the absence of an applicable exemption.
It is our policy that the audit committee pre-approves all
audit and permissible non-audit services provided by our
independent registered public accounting firm, consistent
with the criteria set forth in the audit committee charter
and applicable laws and regulations. The committee has
delegated to the chair of the committee the authority to
pre-approve such services, provided that the chair shall
report any decisions to pre-approve such services to the
full audit committee at its next regular meeting. These
services may include audit services, audit-related services,
tax services, and other services. Our independent
registered public accounting firm and our management
are required to periodically report to the audit committee
regarding the extent of services provided by our
independent registered public accounting firm pursuant to
any such pre-approval.
Certain Relationships and Related Party Transactions
No family relationships exist or existed during fiscal year
2013 among any of our directors and executive officers.
No related party transactions occurred during fiscal
year 2013.
Other Matters
We are not aware of any other matters to be submitted
to the annual meeting. If any other matters properly
come before the annual meeting, the Proxy Holders
intend to vote the shares they represent as the board of
directors may recommend or, if the board does not make
a recommendation, as the Proxy Holders decide in their
reasonable judgment.
It is important that your stock holdings be represented at
the meeting, regardless of the number of shares you hold.
We urge you to complete and return the accompanying
proxy card in the enclosed envelope, or vote your shares
by telephone or internet, as described in the materials
accompanying this proxy statement.
By Order of the Board of Directors,
Sarah A. O’Dowd
Secretary
Fremont, California
Dated: September 24, 2013
54
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2013
OR
‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from
to
Commission file number: 0-12933
.
LAM RESEARCH CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
4650 Cushing Parkway
Fremont, California
(Address of principal executive offices)
94-2634797
(I.R.S. Employer
Identification No.)
94538
(Zip code)
Registrant’s telephone number, including area code: (510) 572-0200
Securities registered pursuant to Section 12(b) of the Act:
Title of class
Common Stock, Par Value $0.001 Per Share
Name of exchange on which registered
The NASDAQ Stock Market LLC
(NASDAQ Global Select Market)
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes È No ‘
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes ‘ No È
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes È No ‘
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or
for such shorter period that the registrant was required to submit and post such files). Yes È No ‘
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. È
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act. (Check one):
Large accelerated filer È
Non-accelerated filer ‘ (Do not check if a smaller reporting company)
Accelerated filer
‘
Smaller reporting company ‘
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes ‘ No È
The aggregate market value of the Registrant’s Common Stock, $0.001 par value, held by non-affiliates of the Registrant, as of
December 23, 2012, the last business day of the most recently completed second fiscal quarter with respect to the fiscal year covered
by this Form 10-K, was $4,776,853,218. Common Stock held by each officer and director and by each person who owns 5% or more
of the outstanding Common Stock has been excluded from this computation in that such persons may be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive determination of such status for other purposes.
As of August 20, 2013, the Registrant had 163,149,977 outstanding shares of Common Stock.
Parts of the Registrant’s Proxy Statement for the Annual Meeting of Stockholders expected to be held on or about November 7,
2013 are incorporated by reference into Part III of this Form 10-K. (However, the Reports of the Audit Committee and Compensation
Committee are expressly not incorporated by reference herein.)
Documents Incorporated by Reference
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LAM RESEARCH CORPORATION
2013 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
Part I.
Item 1.
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1A.
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1B.
Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2.
Item 3.
Item 4.
Part II.
Item 5.
Item 6.
Item 7.
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Discussion and Analysis of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7A.
Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . . . .
Item 8.
Item 9.
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9A.
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9B.
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part III.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Directors, Executive Officers, and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . .
Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part IV.
Item 15.
Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
3
14
26
26
26
26
27
31
33
46
49
49
49
50
51
51
51
51
51
52
100
104
2
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PART I
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
With the exception of historical facts, the statements contained in this discussion are forward-looking
statements, which are subject to the safe harbor provisions created by the Private Securities Litigation Reform
Act of 1995. Certain, but not all, of the forward-looking statements in this report are specifically identified as
forward-looking, by use of phrases and words such as “we believe,” “we anticipate,” “we expect,” “may,”
“should,” “could,” and other future-oriented terms. The identification of certain statements as “forward-
looking” is not intended to mean that other statements not specifically identified are not forward-looking.
Forward-looking statements include, but are not limited to, statements that relate to our future revenue,
shipments, costs, earnings, income, margins, product development, demand, acceptance and market share,
competitiveness, market opportunities, product performance, levels of research and development (“R&D”), the
success of our marketing, sales and service efforts, outsourced activities and operating expenses, anticipated
manufacturing, customer and technical requirements, the ongoing viability of the solutions that we offer and
our customers’ success, tax expenses, our management’s plans and objectives for our current and future
operations and business focus, the levels of customer spending, general economic conditions, the sufficiency
of financial resources to support future operations, and capital expenditures. Such statements are based on
current expectations and are subject to risks, uncertainties, and changes in condition, significance, value and
effect, including without limitation those discussed below under the heading “Risk Factors” within Item 1A
and elsewhere in this report and other documents we file from time to time with the Securities and Exchange
Commission (the “SEC”), such as our quarterly reports on Form 10-Q and our current reports on Form 8-K.
Such risks, uncertainties and changes in condition, significance, value and effect could cause our actual
results to differ materially from those expressed in this report and in ways we cannot readily foresee. Readers
are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the
date hereof and are based on information currently and reasonably known to us. We do not undertake any
obligation to release the results of any revisions to these forward-looking statements, which may be made to
reflect events or circumstances that occur after the date of this report or to reflect the occurrence or effect of
anticipated or unanticipated events.
Item 1.
Business
Incorporated in 1980, Lam Research Corporation (“Lam Research,” “Lam,” “we,” or the “Company”) is a
Delaware corporation, headquartered in Fremont, California. We maintain a network of facilities throughout
Asia, Europe, and North America in order to meet the needs of our dynamic customer base.
Additional information about Lam Research is available on our website at www.lamresearch.com.
Our Annual Report on Form 10-K, Quarterly Reports on Forms 10-Q, Current Reports on Forms 8-K, and
any amendments to those reports are available on our website as soon as reasonably practical after we file them
with or furnish them to the SEC and are also available online at the SEC’s website at www.sec.gov.
The Lam Research logo, Lam Research, and all product and service names used in this report are either
registered trademarks or trademarks of Lam Research Corporation or its subsidiaries in the United States and/or
other countries. All other marks mentioned herein are the property of their respective holders.
Lam Research is a global supplier of innovative wafer fabrication equipment and services to the
semiconductor industry. We design, manufacture, market, refurbish, and service semiconductor processing
systems that are used in the fabrication of integrated circuits (“ICs”). Our market-leading products are designed
to help our customers build the smaller, faster, and more power-efficient devices that are used in a variety of
electronic products, including cell phones, computers, storage devices, and networking equipment.
3
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The Company’s customer base includes leading semiconductor memory, foundry, and integrated device
manufacturers (“IDMs”) that make products such as DRAM, NAND memory, and logic devices. Semiconductor
manufacturing, our customers’ business, involves the complete fabrication of multiple die, or ICs, on a wafer.
This involves the repetition of a set of core processes and can require hundreds of individual steps. On a silicon
wafer, a tiny, intricate pattern is precisely replicated across the wafer surface to create identical miniature
devices, where features can be 1,000 times smaller than a grain of sand. Fabricating these devices requires highly
sophisticated process technologies and precision control at the atomic scale. Along with meeting technical
requirements, wafer processing equipment must deliver high productivity and be cost-effective.
At Lam Research, we leverage our expertise in semiconductor device processing to develop enabling
technology and productivity solutions that typically benefit our customers through lower defect rates, enhanced
yields, faster processing time, and/or reduced cost. We offer a broad portfolio of complementary products that
are used in several areas of the semiconductor manufacturing process flow, including plasma etch, thin film
deposition, photoresist strip, and wafer cleaning. These processes, which are repeated numerous times during the
wafer fabrication cycle, are required to manufacture every type of semiconductor device.
Our products are used primarily in front-end wafer processing, which involves the steps that create the
active components of a device (transistor, capacitor) and their wiring (interconnect). Market demand for ever-
smaller IC designs is driving the development of and migration to new fabrication strategies, such as three-
dimensional (“3D”) architectures and multiple patterning. We also address processes for back-end wafer-level
packaging (“WLP”), which is an alternative to traditional two dimensional packaging and offers a smaller form
factor, increased interconnect speed and bandwidth, and lower power consumption, among other benefits. In
addition, our products are well-suited for related markets that rely on semiconductor processes and require
production-proven manufacturing capability, such as micro-electromechanical systems (“MEMS”).
We are the market leader in plasma etch, a highly critical process step that selectively removes materials
from the wafer to create the features and patterns of a device. The Company’s high-productivity thin film
deposition systems form a device’s sub-microscopic layers of conducting (metal) or insulating (dielectric)
materials. Our market-leading photoresist strip systems remove the photoresist mask before a wafer proceeds to
the next processing step. Lam’s suite of single-wafer wet and plasma-based wafer cleaning products remove
particles and residues from the wafer surface before or after adjacent processes.
Our Customer Support Business Group (“CSBG”) provides products and services to maximize installed
equipment performance and operational efficiency. We offer a broad range of services to deliver value
throughout the lifecycle of our equipment, including customer service, spares, upgrades, and refurbishment of
our etch, deposition, photoresist strip, and clean products. Many of the technical advances that we introduce in
our newest products are also available as upgrades, which provide customers with a cost-effective strategy for
extending the performance and capabilities of their existing wafer fabrication lines. CSBG also offers refurbished
and newly built previous-generation (legacy) equipment for those applications that do not require the most
advanced wafer processing capability.
Silfex and Peter Wolters are wholly-owned subsidiaries of Lam. Silfex is a leading provider of high-purity
custom silicon components and assemblies that serve technology markets including solar, optics, and
semiconductor equipment. Peter Wolters is a leader in the design and manufacture of high-precision grinding,
lapping, polishing, and deburring systems used in the automotive, aerospace, medical, semiconductor
manufacturing and other industries.
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Products
Plasma Etch
As the semiconductor industry continues to improve device performance and shrink critical feature sizes,
plasma etch faces multiple challenges. These include processing smaller features, new materials, new transistor
structures, increasingly complex film stacks, and ever higher aspect ratio structures. For conductor etch,
requirements include delivering atomic precision control for etching FinFET/3D gate transistors, multi–film
stacks for high-k/metal gate structures, and multiple patterning structures. Dielectric etch processes must be able
to maintain etch profiles on increasingly high aspect ratio (“HAR”) structures such as in 3D NAND devices, etch
new multi-layer photoresist materials and amorphous carbon hardmasks, and avoid damaging fragile low-k
materials. In emerging 3D integrated circuits (“3D ICs”), through-silicon vias (“TSVs”) are now used to provide
interconnect capability for die-to-die and wafer-to-wafer stacking. Critical factors for TSV are etching a variety
of materials in the same chamber (in situ), as well as being able to use both conventional and special techniques
for deep silicon etching. For all etch processes, it is important to provide excellent profile control and across-
wafer uniformity while maintaining high productivity and cost efficiency.
Conductor Etch — 2300® Kiyo® Product Family, 2300® Versys® Metal Product Family
The 2300 Kiyo product family delivers high-performance, high-productivity, low-risk solutions for
conductor etch applications. Superior uniformity, uniformity control, and repeatability are enabled by a
symmetrical chamber design, leading electrostatic chuck technology, and independent tuning features. The Kiyo
products deliver high productivity with low defectivity on multi-film stacks, enabled by in situ etch capability,
continuous plasma, and advanced Waferless Autoclean technology. Applications include shallow trench isolation
(“STI”), high-k/metal gate, FinFET and tri-gate, and multiple patterning. The 2300 Versys Metal product family
provides a flexible platform for back-end-of-line (“BEOL”) metal etch processes. Symmetrical chamber design
and independent tuning features provide critical dimension, profile uniformity, and uniformity control for metal
hardmask applications. The products’ proprietary chamber cleaning technology ensures high availability, high
yield, and exceptional process repeatability for aluminum etching. Applications include metal hardmask, high-
density aluminum line, and aluminum pad.
Dielectric Etch — 2300® Flex™ Product Family
The 2300 Flex product family offers differentiated technologies and application-focused capabilities for
critical dielectric etch applications. Exceptional uniformity, repeatability, and tunability are enabled by a unique
multi-frequency, small-volume, confined plasma design. The systems deliver high productivity with low
defectivity, enabled by in situ multi-step etch and continuous plasma capability. Low-risk, cost-effective
upgrades provide evolutionary product transitions that extend product life and maximize return on investment.
Applications include low-k and ultra low-k dual damascene, HAR and self-aligned contacts, capacitor cell, and
mask open.
TSV Etch — 2300® Syndion® Product Family
Based on Lam’s production-proven conductor etch products, the 2300 Syndion TSV etch family provides
low-risk, flexible solutions to address multiple TSV etch applications. The Syndion products provide a low cost
of ownership due to high etch rates, excellent repeatability, and in situ etching of multiple materials in the TSV
stack (silicon, dielectrics, conducting films). The systems support both conventional single-step etch and rapidly
alternating process (“RAP”). High process flexibility, superior profile control, and excellent uniformity enable
successful TSV implementation for a variety of CMOS 3D IC and image sensor applications.
Thin Film Deposition
In leading-edge semiconductor designs, metal deposition processes face significant scaling and integration
challenges. For advanced copper interconnect structures, challenges for electrochemical deposition (“ECD”)
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include providing complete, void-free fill of HAR structures with low defectivity and high productivity.
Electroplating of copper and other metals is also used for TSV and WLP applications, such as forming
conductive bumps and redistribution layers (“RDLs”). These applications require excellent within-wafer
uniformity at high plating rates, minimizing defects, and reducing costs. For tungsten chemical vapor deposition
(“CVD”) processes, key requirements are minimizing contact resistance to meet lower power consumption
requirements and achieving void-free fill for narrow nanoscale structures. In addition, good barrier step coverage
at reduced thicknesses relative to physical vapor deposition/CVD barrier films is also needed to improve contact
fill and reduce resistivity.
In dielectric deposition, high-productivity, high-quality films are needed for a number of critical process
steps. For example, next-generation FinFET transistor structures and BEOL self-aligned double patterning
require highly conformal film deposition and atomic level control of film dimensions to ensure device
performance. The numerous alternating film layers used in new 3D NAND designs require exceptional stress and
defectivity control and ultra-smooth film deposition. Plasma-enhanced CVD (“PECVD”) is often used for these
applications, as well as for advanced WLP, where depositing high-quality films without exceeding thermal
budgets is essential. For gapfill deposition, achieving defect-free fills while maintaining high throughput is
essential. Preferred approaches are to use high-density plasma CVD (“HDP-CVD”) either as a complete gapfill
solution or as a cap over other gapfill technologies to enhance process control and mitigate integration risks.
Lastly, innovative post-deposition film treatments such as ultraviolet thermal processing (“UVTP”) are being
used to improve low-k film integrity and increase strain in nitride layers for improved device performance.
Copper Metal Films — SABRE® Product Family
The SABRE ECD product family is the industry’s productivity-leading platform for copper damascene
manufacturing. Electrofill® technology provides high-throughput, void-free fill with superior defect density
performance for advanced technology nodes. SABRE chemistry packages provide leading-edge fill performance
for the lowest defectivity, widest process window, and highest rates of bottom-up growth to fill the most
challenging HAR features. System capabilities include deposition of copper directly on various liner materials,
important for next-generation metallization schemes. The number of yielding ICs per wafer has also been
improved by increasing the usable die area through industry-leading process edge exclusion. Applications
include copper deposition for both advanced logic and memory interconnect. We also offer the SABRE 3D
system to address TSV and WLP applications, such as copper pillar, RDL, underbump metallization, bumping,
and microbumps used in post-TSV processing.
Tungsten Metal Films — ALTUS® Product Family
Lam’s market-leading ALTUS systems deposit highly conformal atomic layer films for advanced tungsten
metallization applications. The patented Multi-Station Sequential Deposition (“MSSD”) architecture enables a
nucleation layer to be formed using Pulsed Nucleation Layer (“PNL”) technology and bulk CVD fill to be
performed in situ. PNL, Lam’s atomic layer deposition (“ALD”) technology, is used in the deposition of tungsten
nitride films to achieve high step coverage with reduced thickness relative to conventional barrier films. PNL is
also used to reduce thickness and alter CVD bulk fill grain growth, lowering the overall resistivity of thin
tungsten films. The advanced ExtremeFill CVD tungsten technology provides extendibility to fill the most
challenging structures at advanced technology nodes. Applications include tungsten plug and via fill, low-stress
composite interconnects, and tungsten nitride barrier for via and contact metallization.
PECVD Dielectric Films — VECTOR® Product Family
Lam’s VECTOR family of PECVD systems delivers superior thin film quality, wafer-to-wafer uniformity,
productivity, and low cost of ownership. The MSSD architecture enables industry-leading performance with both
sequential processing and parallel processing to provide broad process flexibility for a range of applications.
VECTOR products offer specialized systems for logic and memory applications. VECTOR Express offers a
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small footprint with four processing stations. VECTOR Excel is a modular tool for advanced technology nodes
where pre-and-post film deposition treatments are needed. VECTOR Extreme accommodates up to 12 process
stations for high-throughput memory processes. Applications include deposition of ashable hardmasks, oxides,
nitrides, carbides, and anti-reflective layers.
Gapfill Dielectric Films — SPEED® Product Family
Lam’s SPEED HDP-CVD products provide void-free gapfill of high-quality dielectric films with superior
throughput and reliability. The unique source design provides excellent particle performance, while the ability to
customize the deposition and in situ etching profile ensures best-of-breed across-wafer thickness and gapfill
uniformity. Together, the chamber and plasma source designs allow large batch sizes between cleans and faster
cleans to deliver superior throughput. Broad process flexibility is available on the same platform, without
requiring major hardware changes. Target applications include STI, pre-metal dielectrics, inter-layer dielectrics,
inter-metal dielectrics, and passivation layers.
Film Treatment — SOLA® Product Family
The SOLA UVTP product family is used for treatment of BEOL low-k dielectric films and front-end-of-line
(“FEOL”) silicon nitride strained films. The systems incorporate a proprietary treatment process that modifies the
physical characteristics of a previously deposited film through exposure to ultraviolet light, gases and vapors, and
heat. The Multi-Station Sequential Processing (“MSSP”) architecture allows independent control of temperature,
wavelength, and intensity at each station of the wafer path. This enables delivery of best-in-class film properties,
within-wafer and wafer-to-wafer uniformity, and productivity.
Photoresist Strip
With the semiconductor industry’s migration to ultra-shallow junctions, multiple patterning, ultra low-k
dielectrics, and 3D architectures, photoresist strip processes need to manage more complex device structures. At
the transistor level, small changes can affect junction resistivity, junction depth, and dopant activation, thereby
affecting device performance. For interconnect structures, unwanted changes in the properties of low-k
dielectrics can also impact performance. These concerns are driving the development of new photoresist strip
processes for advanced technology nodes. Challenges include removing residues, minimizing oxidation and
silicon loss, and providing damage-free results, while at the same time delivering high throughput and low cost
of ownership.
Photoresist Strip — G400®, GxT®, G3D®
Lam’s photoresist strip systems are based on our production-proven MSSP platform. The MSSP architecture
provides multiple process stations, where both temperature and chemistry may be independently controlled,
allowing bulk strip, high-dose implant strip (“HDIS”), and dry clean processes to be performed all on the same
platform. The high-productivity G400 is targeted for bulk strip and HDIS applications, primarily in large DRAM
and NAND memory fabs. Enhanced source technology combined with faster wafer heating provides high
throughput for bulk strip and implant strip applications. The GxT system is designed for critical logic device
manufacturing process steps that demand low silicon loss and ultra-low defectivity. The G3D system’s unique
combination of multi-station high-productivity, low-temperature, and directional processing capability delivers
high-productivity strip and complete residue removal for advanced WLP applications.
Single-Wafer Clean
Wafer cleaning is a critical function that must be repeated many times during the semiconductor
manufacturing process, from device fabrication through packaging. As device geometries shrink and new
materials are introduced, the number of cleaning steps continues to grow. Furthermore, each step has different
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selectivity and defectivity requirements that add to manufacturing complexity. For next-generation devices,
fragile structures need to be cleaned without causing damage. In addition, cleaning steps that target the bevel
region can help eliminate the wafer edge as a source of yield-limiting defects as well as increase the number of
good die at the wafer’s edge to improve yield.
Wet Clean — DV-Prime®, Da Vinci®, SP Series
Lam’s single-wafer spin technology pioneered the industry transition from batch to single-wafer wet
processing. These production-proven spin wet clean systems provide the productivity and flexibility needed for
both high-volume manufacturing and leading-edge development across multiple technology nodes and for all
device types. The products deliver excellent process uniformity across the wafer, wafer-to-wafer, and lot-to-lot.
Proprietary technologies enhance damage-free particle removal and dry wafers so that they are free of pattern
collapse and watermarks. Offering the latest in dilute chemistry and solvent systems, the products meet
defectivity and material integrity requirements. Applications include particle, polymer, and residue removal;
photoresist removal; and wafer backside/bevel cleaning. Our wet clean systems are also used for multiple wet
etch and clean applications for WLP, including silicon substrate thinning, wafer stress relief, and backside/bevel
clean.
Plasma Bevel Clean — 2300® Coronus®
The 2300 Coronus plasma-based bevel clean system enhances die yield by removing residues and unwanted
films from the wafer’s edge that can impact the device area. The system combines the ability of plasma to
selectively remove a wide variety of materials with a proprietary confinement technology that protects the die
area. High system uptime and throughput, excellent process repeatability, and efficient in situ removal of multi-
material film stacks and residues ensure high productivity for increased wafer output. Applications include post-
STI, gate, middle-of-line, and BEOL etch; pre- and post-deposition; and metal film removal to prevent arcing
during plasma etch or deposition steps. It is also the industry’s only bevel clean product that removes amorphous-
carbon films and carbon-rich residues.
Legacy Products
For applications that do not require the most advanced wafer processing capability, semiconductor
manufacturers can benefit from the proven performance of previous-generation products to increase their
production capacity at a reduced economic investment. Purchasing through an original equipment manufacturer
(“OEM”) like Lam Research minimizes the risks of unexpected costs and unpredictable time to production that
are typically associated with used systems purchases. To meet semiconductor manufacturers’ needs for high-
performance, maximum-predictability, and low-risk equipment, Lam provides refurbished and newly built legacy
products. Our products also provide production-worthy, cost-effective solutions for the MEMS and light emitting
diode (“LED”) markets.
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Products Table
Market
Front-End Wafer Processing
Plasma Etch
Thin Film Deposition
Process/Application
Products
Conductor Etch
Dielectric Etch
TSV Etch
Copper Metal Films
Tungsten Metal Films
PECVD Dielectric Films
Gapfill Dielectric Films
Film Treatment (UVTP)
2300® Kiyo® product family
2300® Flex™ product family
2300® Syndion® product family
SABRE® product family
ALTUS® product family
VECTOR® product family
SPEED® product family
SOLA® product family
Photoresist Strip
Photoresist Strip
G400®, GxT®
Single-Wafer Clean
Spin Wet Clean
Plasma Bevel Clean
DV-Prime®, Da Vinci®, SP Series
2300® Coronus®
Back-End Wafer-Level Packaging and Through Silicon Via
Plasma Etch
Thin Film Deposition
TSV Etch
Metal Films
Photoresist Strip
Photoresist Strip
Single-Wafer Clean
Spin Wet Clean
Related Manufacturing Markets
2300® Syndion® product family
SABRE® 3D
G3D®
SP Series
MEMS
LED
Deep Silicon Etch, PECVD Dielectric Films, Spin Wet Clean, Dry
Strip/Descum
Plasma Etch, PECVD Dielectrics, Copper Metal Films, Dry Strip/
Descum
Fiscal Periods Presented
All references to fiscal years apply to our fiscal years, which ended June 30, 2013, June 24, 2012, and
June 26, 2011. In all sections of this document, the fiscal 2012 information presented reflects 20 days of
Novellus related activity. There is no Novellus related activity reflected in periods prior to fiscal year 2012.
Research and Development
The market for semiconductor capital equipment is characterized by rapid technological change and product
innovation. Our ability to achieve and maintain our competitive advantage depends in part on our continued and
timely development of new products and enhancements to existing products. Accordingly, we devote a
significant portion of our personnel and financial resources to R&D programs and seek to maintain close and
responsive relationships with our customers and suppliers.
Our R&D expenses during fiscal years 2013, 2012, and 2011 were $683.7 million, $444.6 million, and
$373.3 million, respectively. The majority of R&D spending over the past three years has been targeted at etch,
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deposition, single-wafer clean, and other semiconductor manufacturing products. We believe current challenges
for customers at various points in the semiconductor manufacturing process present opportunities for us.
We expect to continue to make substantial investments in R&D to meet our customers’ product needs,
support our growth strategy, and enhance our competitive position.
Marketing, Sales, and Service
Our marketing, sales, and service efforts are focused on building long-term relationships with our customers
and targeting product and service solutions designed to meet their needs. These efforts are supported by a team of
product marketing and sales professionals as well as equipment and process engineers who work closely with
individual customers to develop solutions for their wafer processing needs. We maintain ongoing service
relationships with our customers and have an extensive network of service engineers in place throughout the
United States, Europe, Taiwan, Korea, Japan, and Asia Pacific. We believe that comprehensive support programs
and close working relationships with customers are essential to maintaining high customer satisfaction and our
competitiveness in the marketplace.
We provide standard warranties for our systems. The warranty provides that systems shall be free from
defects in material and workmanship and conform to agreed-upon specifications. The warranty is limited to
repair of the defect or replacement with new or like-new equivalent goods and is valid when the buyer provides
prompt notification within the warranty period of the claimed defect or non-conformity and also makes the items
available for inspection and repair. We also offer extended warranty packages to our customers to purchase as
desired.
International Sales
A significant portion of our sales and operations occur outside the United States and, therefore, may be
subject to certain risks, including but not limited to tariffs and other barriers, difficulties in staffing and managing
non-U.S. operations, adverse tax consequences, foreign currency exchange rate fluctuations, changes in currency
controls, compliance with U.S. and international laws and regulations, including U.S. export restrictions, and
economic and political conditions. Any of these factors may have a material adverse effect on our business,
financial position, and results of operations and cash flows. For geographical reporting, revenue is attributed to
the geographic location in which the customers’ facilities are located. Revenue by region was as follows:
June 30,
2013
Revenue:
Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
North America . . . . . . . . . . . . . . . . . . . . . . .
Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . .
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,026,548
734,324
603,821
573,696
368,095
292,432
Year Ended
June 24,
2012
(in thousands)
$ 467,922
458,531
893,549
292,963
308,189
244,038
June 26,
2011
$ 766,910
393,004
756,660
492,600
405,371
423,148
Total revenue . . . . . . . . . . . . . . . . . . . .
$3,598,916
$2,665,192
$3,237,693
Long-Lived Assets
Refer to Note 18 of our Consolidated Financial Statements, included in Item 15 of this report, for
information concerning the geographic locations of long-lived assets.
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Customers
Our customers include many of the world’s leading semiconductor manufacturers. Customers continue to
establish joint ventures, alliances and licensing arrangements which have the potential to positively or negatively
impact our competitive position and market opportunities. In fiscal year 2013, three customers, Samsung
Electronics Company, Ltd., SK Hynix Inc., and Taiwan Semiconductor Manufacturing Company, Ltd., combined
represented approximately 46% of total revenues and each customer individually represented greater than 10% of
total revenues. In fiscal year 2012, the same three customers combined represented approximately 50% of total
revenues and each customer individually represented greater than 10% of total revenues. In fiscal year 2011,
Samsung Electronics Company, Ltd. represented approximately 24% of total revenues.
A material reduction in orders from our customers could adversely affect our results of operations and
projected financial condition. Our business depends upon the expenditures of semiconductor manufacturers.
Semiconductor manufacturers’ businesses, in turn, depend on many factors, including their economic capability,
the current and anticipated market demand for integrated circuits and the availability of equipment capacity to
support that demand.
Backlog
In general, we schedule production of our systems based upon our customers’ delivery requirements. In
order for a system to be included in our backlog, the following conditions must be met: 1) we have received a
written customer request that has been accepted, 2) we have an agreement on prices and product specifications,
and 3) there is a scheduled shipment within the next 12 months. In order for spares and services to be included in
our backlog, the following conditions must be met: 1) we have received a written customer request that has been
accepted and (2) delivery of products or provision of services is anticipated within the next 12 months. Where
specific spare parts and customer service purchase contracts do not contain discrete delivery dates, we use
volume estimates at the contract price and over the contract period, not to exceed 12 months, in calculating
backlog amounts. Our policy is to revise our backlog for order cancellations and to make adjustments to reflect,
among other things, changes in spares volume estimates and customer delivery date changes. At June 30, 2013
and June 24, 2012, our backlog was approximately $764 million and $870 million, respectively. Generally,
orders for our products and services are subject to cancellation by our customers with limited penalties. Because
some orders are received and shipped in the same quarter and because customers may change delivery dates and
cancel orders, our backlog at any particular date is not necessarily indicative of business volumes or actual
revenue levels for succeeding periods.
Manufacturing
Our manufacturing operations consist mainly of assembling and testing components, sub-assemblies, and
modules that are then integrated into finished systems prior to shipment to or at the location of our customers.
Most of the assembly and testing of our products is conducted in cleanroom environments.
We have agreements with third parties to outsource certain aspects of our manufacturing, production
warehousing, and logistics functions. We believe that these outsourcing contracts provide us more flexibility to
scale our operations up or down in a timely and cost effective manner, enabling us to respond to the cyclical
nature of our business. We believe that we have selected reputable providers and have secured their performance
on terms documented in written contracts. However, it is possible that one or more of these providers could fail
to perform as we expect, and such failure could have an adverse impact on our business and have a negative
effect on our operating results and financial condition. Overall, we believe we have effective mechanisms to
manage risks associated with our outsourcing relationships. Refer to Note 14 of our Consolidated Financial
Statements, included in Item 15 of this report, for further information concerning our outsourcing commitments.
Certain components and sub-assemblies that we include in our products may only be obtained from a single
supplier. We believe that, in many cases, we could obtain and qualify alternative sources to supply these
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products. Nevertheless, any prolonged inability to obtain these components could have an adverse effect on our
operating results and could unfavorably impact our customer relationships.
Environmental Matters
We are subject to a variety of governmental regulations related to the management of hazardous materials
that we use in our business operations. We are currently not aware of any pending notices of violation, fines,
lawsuits, or investigations arising from environmental matters that would have a material effect on our business.
We believe that we are generally in compliance with these regulations and that we have obtained (or will obtain
or are otherwise addressing) all necessary environmental permits to conduct our business. Nevertheless, the
failure to comply with present or future regulations could result in fines being imposed on us, require us to
suspend production or cease operations or cause our customers to not accept our products. These regulations
could require us to alter our current operations, to acquire significant additional equipment, or to incur substantial
other expenses to comply with environmental regulations. Our failure to control the use, sale, transport or
disposal of hazardous substances could subject us to future liabilities.
Employees
As of August 20, 2013, we had approximately 6,600 regular employees. Although we have employment-
related agreements with a number of key employees, these agreements do not guarantee continued service. Each
of our employees is required to comply with our policies relating to maintaining the confidentiality of our non-
public information.
In the semiconductor and semiconductor equipment industries, competition for highly skilled employees is
intense. Our future success depends, to a significant extent, upon our continued ability to attract and retain
qualified employees particularly in the R&D and customer support functions.
Competition
The semiconductor capital equipment industry is characterized by rapid change and is highly competitive
throughout the world. To compete effectively, we invest significant financial resources to continue to strengthen
and enhance our product and services portfolio and to maintain customer service and support locations globally.
Semiconductor manufacturers evaluate capital equipment suppliers in many areas, including, but not limited to,
process performance, productivity, customer support, defect control, and overall cost of ownership, which can be
affected by many factors such as equipment design, reliability, software advancements, and similar factors. Our
ability to succeed in the marketplace depends upon our ability to maintain existing products and introduce
product enhancements and new products that meet customer requirements on a timely basis. In addition,
semiconductor manufacturers must make a substantial investment to qualify and integrate new capital equipment
into semiconductor production lines. As a result, once a semiconductor manufacturer has selected a particular
supplier’s equipment and qualified it for production, the manufacturer generally maintains that selection for that
specific production application and technology node as long as the supplier’s products demonstrate performance
to specification in the installed base. Accordingly, we may experience difficulty in selling to a given customer if
that customer has qualified a competitor’s equipment. We must also continue to meet the expectations of our
installed base of customers through the delivery of high-quality and cost-efficient spare parts in the presence of
third-party spare parts provider competition.
We face significant competition with all of our products and services. Our primary competitors in the etch
market are Tokyo Electron, Ltd. and Applied Materials, Inc. Our primary competitors in the single-wafer wet
clean market are Dainippon Screen Manufacturing Co. Ltd. and Tokyo Electron, Ltd. In the tungsten CVD,
PECVD, HDP-CVD, ECD and PVD markets, our primary competitor is Applied Materials, Inc. In the PECVD
market, we also compete against ASM International. Our primary competitors in the surface preparation product
arena are Mattson Technologies, Inc. and PSK, Inc.
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Certain of our existing and potential competitors have substantially greater financial resources and larger
engineering, manufacturing, marketing, and customer service and support organizations than we do. In addition,
we face competition from a number of emerging companies in the industry. We expect our competitors to
continue to improve the design and performance of their current products and processes and to introduce new
products and processes with enhanced price/performance characteristics. If our competitors make acquisitions or
enter into strategic relationships with leading semiconductor manufacturers, or other entities, covering products
similar to those we sell, our ability to sell our products to those customers could be adversely affected. There can
be no assurance that we will continue to compete successfully in the future.
Patents and Licenses
Our policy is to seek patents on inventions relating to new or enhanced products and processes developed as
part of our ongoing research, engineering, manufacturing, and support activities. We currently hold a number of
United States and foreign patents covering various aspects of our products and processes. We believe that the
duration of our patents generally exceeds the useful life of the technologies and processes disclosed and claimed
in them. Our patents, which cover material aspects of our past and present core products, have current durations
ranging from approximately one to twenty years. We believe that, although the patents we own and may obtain in
the future will be of value, they alone will not determine our success. Our success depends principally upon our
engineering, marketing, support, and delivery skills. However, in the absence of patent protection, we may be
vulnerable to competitors who attempt to imitate our products, manufacturing techniques, and processes. In
addition, other companies and inventors may receive patents that contain claims applicable or similar to our
products and processes. The sale of products covered by patents of others could require licenses that may not be
available on terms acceptable to us, or at all. For further discussion of legal matters, see Item 3, “Legal
Proceedings,” of this report.
EXECUTIVE OFFICERS OF THE COMPANY
As of August 27, 2013, the executive officers of Lam Research were as follows:
Name
Age
Title
Martin B. Anstice . . . . . . . . . . . . .
Timothy M. Archer . . . . . . . . . . . .
Douglas R. Bettinger . . . . . . . . . . .
Richard A. Gottscho . . . . . . . . . . .
Sarah A. O'Dowd . . . . . . . . . . . . .
46
46
46
61
63
President and Chief Executive Officer
Executive Vice President and Chief Operating Officer
Executive Vice President, Chief Financial Officer and Chief
Accounting Officer
Executive Vice President, Global Products Group
Senior Vice President, Chief Legal Officer
Martin B. Anstice is President and Chief Executive Officer of Lam Research. Mr. Anstice joined the
Company in April 2001 as Senior Director, Operations Controller. He was promoted to Chief Financial Officer in
June 2004, appointed Executive Vice President and Chief Operating Officer in September 2008, and promoted to
President in December 2010. In January 2012, Mr. Anstice was appointed Chief Executive Officer and in
February 2012, appointed to the Lam Research Corporation board of directors. He began his career at Raychem
Corporation where, during his 13-year tenure, he held numerous finance roles of increasing responsibility in
Europe and North America. After Tyco International, Ltd. acquired Raychem in 1999, Mr. Anstice assumed
responsibility for supporting mergers and acquisitions at Tyco Electronics Corporation. Mr. Anstice is an
associate member of the Chartered Institute of Management Accountants in the United Kingdom.
Timothy M. Archer joined Lam Research in June 2012 as the Company’s Executive Vice President, Chief
Operating Officer. Prior to Lam Research, Mr. Archer spent 18 years at Novellus Systems in various technology
development and business leadership roles, including most recently as Chief Operating Officer from January
2011 to June 2012, Executive Vice President Worldwide Sales, Marketing, and Customer Satisfaction from
September 2009 to January 2011, and Executive Vice President of the PECVD and Electrofill Business Units
from November 2008 to September 2009. Mr. Archer’s tenure at Novellus Systems also included assignments as
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Senior Director of Technology for Novellus Systems Japan from 1999 to 2001 and Senior Director of
Technology for the Electrofill Business Unit from April 2001 to April 2002. Mr. Archer started his career in
1989 at Tektronix where he was responsible for process development for high-speed bipolar integrated
circuits. Mr. Archer completed the Program for Management Development at Harvard Graduate School of
Business and holds a Bachelor of Science degree in Applied Physics from the California Institute of Technology.
Douglas R. Bettinger is Executive Vice President, Chief Financial Officer of Lam Research. Prior to joining
the company, Mr. Bettinger served as Senior Vice President and Chief Financial Officer of Avago Technologies
from August 2008 to February 2013. From 2007 to 2008, he served as Vice President of Finance and Corporate
Controller at Xilinx, Inc., and from 2004 to 2007, he was Chief Financial Cfficer at 24/7 Customer, a privately
held company. Mr. Bettinger worked at Intel Corporation from 1993 to 2004, where he held several senior-level
finance and manufacturing operations positions, including Corporate Planning and Reporting Controller and
Malaysia Site Operations Controller. He earned a master’s degree in business administration in finance from the
University of Michigan and has a bachelor of science degree in economics from the University of Wisconsin in
Madison.
Richard A. Gottscho is the Company’s Executive Vice President, Global Products Group, a position he has
held since August 2010. Prior to that time, he had been Group Vice President and General Manager, Etch
Businesses since March 2007. Dr. Gottscho joined the Company in January 1996 and has served at various
Director and Vice President levels in support of etch products, CVD products, and corporate research. Prior to
joining Lam Research, Dr. Gottscho was a member of Bell Laboratories for 15 years where he started his career
working in plasma processing. During his tenure at Bell, he headed research departments in electronics materials,
electronics packaging, and flat panel displays. Dr. Gottscho is the author of numerous papers, patents, and
lectures in plasma processing and process control. He is a recipient of the American Vacuum Society’s Peter
Mark Memorial Award and Plasma Science and Technology Division Prize, the Gaseous Electronics Conference
Foundation Lecturer, the Dry Process Symposium Nishizawa Award, and the Tegal Thinker Award. He is a
fellow of the American Physical and American Vacuum Societies and has served on numerous editorial boards of
refereed technical publications, program committees for major conferences in plasma science and engineering,
and was vice-chair of a National Research Council study on plasma science in the 1980s. Dr. Gottscho earned
Ph.D. and B.S. degrees in physical chemistry from the Massachusetts Institute of Technology and the
Pennsylvania State University, respectively.
Sarah A. O’Dowd joined Lam Research in September 2008 as Group Vice President and Chief Legal
Officer, responsible for general legal matters, intellectual property and ethics & compliance. In addition to her
Legal function, in April 2009 she was appointed Vice President of Human Resources and served in this dual
capacity from April 2009 through May 2012. Prior to joining Lam Research, Ms. O’Dowd was Vice President
and General Counsel for FibroGen, Inc. from February 2007 until September 2008. Until February 2007,
Ms. O’Dowd was a shareholder in the law firm of Heller Ehrman LLP for more than twenty years, practicing in
the areas of corporate securities, governance and mergers and acquisitions for a variety of clients, principally
publicly traded high technology companies. She served in a variety of leadership and management roles at Heller
Ehrman, including Managing Partner of the Silicon Valley and San Diego offices, member of the firm’s Policy
Committee and, as head of the firm’s business practice groups, a member of the firm’s Executive Committee.
Ms. O’Dowd earned her J.D. and M.A. in communications from Stanford University and her bachelor of arts
degree in mathematics from Immaculata College.
Item 1A. Risk Factors
In addition to the other information in this 2013 Form 10-K, the following risk factors should be carefully
considered in evaluating the Company and its business because such factors may significantly impact our
business, operating results, and financial condition. As a result of these risk factors, as well as other risks
discussed in our other SEC filings, our actual results could differ materially from those projected in any forward-
looking statements. No priority or significance is intended, nor should be attached, to the order in which the risk
factors appear.
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The Semiconductor Equipment Industry is Subject to Major Fluctuations and, as a Result, We Face Risks
Related to Our Strategic Resource Allocation Decisions
The business cycle in the semiconductor equipment industry has historically been characterized by frequent
periods of rapid change in demand that challenge our management to adjust spending and other resources
allocated to operating activities. During periods of rapid growth or decline in demand for our products and
services, we face significant challenges in maintaining adequate financial and business controls, management
processes, information systems, procedures for training and managing our work force, and in appropriately sizing
our supply chain infrastructure, work force, and other components of our business on a timely basis. If we do not
adequately meet these challenges during periods of demand decline, our gross margins and earnings may be
negatively impacted.
We continuously reassess our strategic resource allocation choices in response to the changing business
environment. If we do not adequately adapt to the changing business environment, we may lack the infrastructure
and resources to scale up our business to meet customer expectations and compete successfully during a period
of growth, or we may expand our capacity too rapidly and/or beyond what is appropriate for the actual demand
environment.
Especially during transitional periods, resource allocation decisions can have a significant impact on our
future performance, particularly if we have not accurately anticipated industry changes. Our success will depend,
to a significant extent, on the ability of our executive officers and other members of our senior management to
identify and respond to these challenges effectively.
Future Declines in the Semiconductor Industry, and the Overall World Economic Conditions on Which it is
Significantly Dependent, Could Have a Material Adverse Impact on Our Results of Operations and Financial
Condition
Our business depends on the capital equipment expenditures of semiconductor manufacturers, which in turn
depend on the current and anticipated market demand for integrated circuits. The semiconductor industry is
cyclical in nature and experiences periodic downturns. Global economic and business conditions, which are often
unpredictable, have historically impacted customer demand for our products and normal commercial
relationships with our customers, suppliers, and creditors. Additionally, in times of economic uncertainty our
customers’ budgets for our products, or their ability to access credit to purchase them, could be adversely
affected. This would limit their ability to purchase our products and services. As a result, economic downturns
can cause material adverse changes to our results of operations and financial condition including, but not limited
to:
•
•
•
•
•
•
•
•
•
•
a decline in demand for our products or services;
an increase in reserves on accounts receivable due to our customers’ inability to pay us;
an increase in reserves on inventory balances due to excess or obsolete inventory as a result of our
inability to sell such inventory;
valuation allowances on deferred tax assets;
restructuring charges;
asset impairments including the potential impairment of goodwill and other intangible assets;
a decline in the value of our investments;
exposure to claims from our suppliers for payment on inventory that is ordered in anticipation of
customer purchases that do not come to fruition;
a decline in the value of certain facilities we lease to less than our residual value guarantee with the
lessor; and
challenges maintaining reliable and uninterrupted sources of supply.
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Fluctuating levels of investment by semiconductor manufacturers may materially affect our aggregate
shipments, revenues and operating results. Where appropriate, we will attempt to respond to these fluctuations
with cost management programs aimed at aligning our expenditures with anticipated revenue streams, which
sometimes result in restructuring charges. Even during periods of reduced revenues, we must continue to invest
in research and development (“R&D”) and maintain extensive ongoing worldwide customer service and support
capabilities to remain competitive, which may temporarily harm our profitability and other financial results.
Our Long-term Success, Results of Operations and the Value of Our Common Stock Depend on Our Ability to
Successfully Combine the Novellus Business With Our Pre-existing Business, Which May Be More Difficult,
Costly or Time-consuming Than Expected
On June 4, 2012, we acquired Novellus, and we are currently combining Novellus’ business with our pre-
existing business. Our future success, results of operations and the value of our common stock depend, in part, on
our ability to realize the anticipated benefits of the acquisition. To realize these anticipated benefits, we must
successfully combine our businesses in an efficient and effective manner and communicate the impact that a
business combination will have on our financial statements. If we are not able to achieve and clearly
communicate these objectives within the anticipated time frame, or at all, the anticipated benefits and cost
savings of the acquisition may not be realized fully, or at all, or may take longer than expected to realize, and our
results of operations and the value of our common stock may be adversely affected.
Specific issues that must be addressed in integrating the operations of Novellus into our pre-existing
operations in order to realize the anticipated benefits of the acquisition include, among other things:
•
•
•
•
integrating and optimizing the utilization of the properties, equipment, suppliers, distribution
channels, manufacturing, service, marketing, promotion and sales activities and information
technologies of the combined company;
consolidating corporate and administrative infrastructures of the combined company;
coordinating geographically dispersed organizations of the combined company;
retaining and growing business at existing customers and attracting new customers to the
combined company;
• managing our contractual and business relationships with common suppliers and customers to
reduce inconsistent or inefficient effects;
•
•
•
retaining key employees and utilizing their technical knowledge and business expertise;
communicating the inherently complex factors that a business combination will have on our
financial position and results of operations; and
conforming standards, controls, procedures, policies, business cultures and compensation
structures throughout the combined company.
In addition, integration efforts will also divert management attention and resources, the actual integration
may result in additional and unforeseen expenses, and the anticipated benefits of the integration plan may not be
realized. Actual synergies, if achieved at all, may be lower than what we expect and may take longer to achieve
than anticipated. If we are not able to adequately address these challenges, we may be unable to successfully
integrate the combined company’s operations or to realize the anticipated benefits of the acquisition.
Our Quarterly Revenues and Operating Results Are Unpredictable
Our revenues and operating results may fluctuate significantly from quarter to quarter due to a number of
factors, not all of which are in our control. We manage our expense levels based in part on our expectations of
future revenues. Because our operating expenses are based in part on anticipated future revenues, and a certain
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amount of those expenses are relatively fixed, a change in the timing of recognition of revenue and/or the level of
gross profit from a small number of transactions can unfavorably affect operating results in a particular quarter.
Factors that may cause our financial results to fluctuate unpredictably include, but are not limited to:
•
•
•
•
economic conditions in the electronics and semiconductor industries in general and specifically the
semiconductor equipment industry;
the size and timing of orders from customers;
procurement shortages;
the failure of our suppliers or outsource providers to perform their obligations in a manner consistent
with our expectations;
• manufacturing difficulties;
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customer cancellations or delays in shipments, installations, and/or customer acceptances;
the extent that customers continue to purchase and use our products and services in their business;
changes in average selling prices, customer mix, and product mix;
our ability in a timely manner to develop, introduce and market new, enhanced, and competitive
products;
our competitors’ introduction of new products;
legal or technical challenges to our products and technology;
transportation, communication, demand, information technology or supply disruptions based on factors
outside our control such as strikes, acts of God, wars, terrorist activities, and natural disasters;
legal, tax, accounting, or regulatory changes (including but not limited to change in import/export
regulations) or changes in the interpretation or enforcement of existing requirements;
changes in our estimated effective tax rate;
foreign currency exchange rate fluctuations; and
the dilutive impact of our convertible notes and related warrants on our earnings per share.
Our Leverage and Debt Service Obligations and Potential Note Conversion or Related Hedging Activities May
Adversely Affect Our Financial Condition, Results of Operations and Earnings Per Share
As a result of the sale of our 2016 and 2018 convertible notes and the assumption of the 2041 convertible
notes in connection with the Novellus acquisition (collectively the “Notes”), we have a greater amount of debt
than we have maintained in the past. Our maintenance of higher levels of indebtedness could have adverse
consequences including:
•
•
•
impacting our ability to satisfy our obligations;
increasing the portion of our cash flows that may have to be dedicated to interest and principal
payments and may not be available for operations, working capital, capital expenditures, expansion,
acquisitions or general corporate or other purposes; and
impairing our ability to obtain additional financing in the future.
Our ability to meet our expenses and debt obligations will depend on our future performance, which will be
affected by financial, business, economic, regulatory and other factors. Furthermore, our operations may not
generate sufficient cash flows to enable us to meet our expenses and service our debt. As a result, we may need to
enter into new financing arrangements to obtain the necessary funds. If we determine it is necessary to seek
additional funding for any reason, we may not be able to obtain such funding or, if funding is available, obtain it
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on acceptable terms. If we fail to make a payment on our debt, we could be in default on such debt, and this
default could cause us to be in default on our other outstanding indebtedness.
Conversion of our Notes may cause dilution to our shareholders and to our earnings per share. Upon
conversion of any Notes, we will deliver cash in the amount of the principal amount of the Notes and, with
respect to any excess conversion value greater than the principal amount of the Notes, shares of our common
stock, which would result in dilution to our shareholders. This dilution may be mitigated to some extent by the
hedging transactions we entered into in connection with the sale of the 2016 and 2018 Notes. Prior to the
maturity of the Notes, if the price of our common stock exceeds the conversion price, U.S. GAAP requires that
we report an increase in diluted share count, which would result in lower reported earnings per share. The price
of our common stock could also be affected by sales of our common stock by investors who view the Notes as a
more attractive means of equity participation in our company and by hedging activity that may develop involving
our common stock by holders of the Notes.
We Have a Limited Number of Key Customers
Sales to a limited number of large customers constitute a significant portion of our overall revenue,
shipments and profitability. As a result, the actions of even one customer may subject us to variability in those
areas that are difficult to predict. In addition, large customers may be able to negotiate requirements that result in
decreased pricing, increased costs and/or lower margins for us, such as regional manufacturing expectations,
compliance to specific environmental, social and corporate governance standards, and limitations on our ability
to share jointly developed technology with others. Similarly, significant portions of our credit risk may, at any
given time, be concentrated among a limited number of customers, so that the failure of even one of these key
customers to pay its obligations to us could significantly impact our financial results. As of June 30, 2013, two
customers accounted for approximately 22% and 14% of accounts receivable. As of June 24, 2012, three
customers accounted for approximately 24%, 17%, and 11% of accounts receivable.
We Depend on New Products and Processes for Our Success. Consequently, We are Subject to Risks
Associated with Rapid Technological Change
Rapid technological changes in semiconductor manufacturing processes subject us to increased pressure to
develop technological advances that enable those processes. We believe that our future success depends in part
upon our ability to develop and offer new products with improved capabilities and to continue to enhance our
existing products. If new products have reliability, quality, or design problems, our performance may be
impacted by reduced orders, higher manufacturing costs, delays in acceptance of and payment for new products,
and additional service and warranty expenses. We may be unable to develop and manufacture new products
successfully, or new products that we introduce may fail in the marketplace. The expected industry transition to a
450mm platform represents an emerging challenge for our business, and our failure to address that transition in a
timely manner with productive and cost-effective products could adversely affect our business in a material way.
Our failure to commercialize new products in a timely manner could result in loss of market share, unanticipated
costs, and inventory obsolescence, which would adversely affect our financial results.
In order to develop new products and processes, we expect to continue to make significant investments in
R&D and to pursue joint development relationships with customers, suppliers or other members of the industry.
We must manage product transitions and joint development relationships successfully, as the introduction of new
products could adversely affect our sales of existing products and certain jointly developed technologies may be
subject to restrictions on our ability to share that technology with other customers, which could limit our market
for products incorporating those technologies. Future technologies, processes or product developments may
render our current product offerings obsolete, leaving us with non-competitive products, or obsolete inventory, or
both. Moreover, customers may adopt new technologies or processes to address the complex challenges
associated with next generation devices. This shift may result in a reduction in the size of our addressable
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markets or could increase the relative size of markets in which we either do not compete or have relatively low
market share.
We are Subject to Risks Relating to Product Concentration and Lack of Product Revenue Diversification
We derive a substantial percentage of our revenues from a limited number of products. System sales
constitute a significant portion of our total revenue. Our systems are priced up to approximately $9 million per
unit, and our revenues in any given quarter are dependent upon the acceptance of a limited number of systems.
As a result, the inability to recognize revenue on even a few systems can cause a significantly adverse impact on
our revenues for a given quarter, and, in the longer term, the continued market acceptance of these products is
critical to our future success. Our business, operating results, financial condition, and cash flows could therefore
be adversely affected by:
•
•
•
•
•
•
•
a decline in demand for even a limited number of our products;
a failure to achieve continued market acceptance of our key products;
export restrictions or other regulatory or legislative actions that could limit our ability to sell those
products to key customer or market segments;
an improved version of products being offered by a competitor in the market in which we participate;
increased pressure from competitors that offer broader product lines;
technological changes that we are unable to address with our products; or
a failure to release new or enhanced versions of our products on a timely basis.
In addition, the fact that we offer limited product lines creates the risk that our customers may view us as
less important to their business than our competitors that offer additional products as well. This may impact our
ability to maintain or expand our business with certain customers. Such product concentration may also subject
us to additional risks associated with technology changes. Our business is affected by our customers’ use of our
products in certain steps in their wafer fabrication processes. Should technologies change so that the manufacture
of semiconductors requires fewer steps using our products, this could have a larger impact on our business than it
would on the business of our less concentrated competitors.
Strategic Alliances and Potential Customer Consolidation May Have Negative Effects on Our Business
Increasingly, semiconductor manufacturing companies are entering into strategic alliances or consolidating
with one another to expedite the development of processes and other manufacturing technologies and/or achieve
economies of scale. The outcomes of such an alliance can be the definition of a particular tool set for a certain
function and/or the standardization of a series of process steps that use a specific set of manufacturing
equipment; while the outcomes of consolidation can lead to an overall reduction in the market for semiconductor
manufacturing equipment as customers’ operations achieve economies of scale and/or increased purchasing
power based on their higher volumes. While in certain instances this could work to our advantage, if our
equipment becomes the basis for the function or process as the tool of choice for the larger consolidated customer
or alliance, it could also work to our disadvantage if a competitor’s tools or equipment become the standard
equipment for such functions or processes.
Similarly, our customers may team with, or follow the lead of, educational or research institutions that
establish processes for accomplishing various tasks or manufacturing steps. If those institutions utilize a
competitor’s equipment when they establish those processes, it is likely that customers will tend to use the same
equipment in setting up their own manufacturing lines. Even if they select Lam equipment, the institutions and
the customers that follow their lead could impose conditions on acceptance of that equipment, such as adherence
to standards and requirements or limitations on how we license our proprietary rights, that increase our costs or
require us to take on greater risk. These actions could adversely impact our market share and financial results.
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We Depend On a Limited Number of Key Suppliers and Outsource Providers, and We Run the Risk That They
Might Not Perform as We Expect
Outsource providers and component suppliers have played and will continue to play a key role in our
manufacturing operations and in many of our transactional and administrative functions, such as information
technology, facilities management, and certain elements of our finance organization. These providers and
suppliers might suffer financial setbacks, be acquired by third parties, become subject to exclusivity
arrangements that preclude further business with us or suffer force majeure events that could interrupt or impair
their continued ability to perform as we expect.
Although we attempt to select reputable providers and suppliers, and we attempt to secure their performance
on terms documented in written contracts, it is possible that one or more of these providers or suppliers could fail
to perform as we expect, and such failure could have an adverse impact on our business. In some cases, the
requirements of our business mandate that we obtain certain components and sub-assemblies included in our
products from a single supplier or a limited group of suppliers. Where practical, we endeavor to establish
alternative sources to mitigate the risk that the failure of any single provider or supplier will adversely affect our
business, but this is not feasible in all circumstances. There is therefore a risk that a prolonged inability to obtain
certain components or secure key services could impair our ability to manage operations, ship products and
generate revenues, which could adversely affect our operating results and damage our customer relationships.
We Face Risks Related to the Disruption of Our Primary Manufacturing Facilities
Our manufacturing facilities are concentrated in just a few locations. These locations are subject to
disruption for a variety of reasons such as natural disasters, terrorist attacks, disruptions of our information
technology resources and utility interruptions. Such disruptions may cause delays in shipping our products which
could result in the loss of business or customer trust, adversely affecting our business and operating results.
Once a Semiconductor Manufacturer Commits to Purchase a Competitor’s Semiconductor Manufacturing
Equipment, the Manufacturer Typically Continues to Purchase that Competitor’s Equipment, Making it More
Difficult for Us to Sell Our Equipment to that Customer
Semiconductor manufacturers must make a substantial investment to qualify and integrate wafer processing
equipment into a semiconductor production line. We believe that once a semiconductor manufacturer selects a
particular supplier’s processing equipment, the manufacturer generally relies upon that equipment for that
specific production line application for an extended period of time. Accordingly, we expect it to be more difficult
to sell our products to a given customer if that customer initially selects a competitor’s equipment for the same
product line application.
We Face a Challenging and Complex Competitive Environment
We face significant competition from multiple competitors. Other companies continue to develop systems
and products that are competitive to ours and may introduce new products, which may affect our ability to sell
our existing products. We face a greater risk if our competitors enter into strategic relationships with leading
semiconductor manufacturers covering products similar to those we sell or may develop, as this could adversely
affect our ability to sell products to those manufacturers.
We believe that to remain competitive we must devote significant financial resources to offer a broad range
of products, to maintain customer service and support centers worldwide, and to invest in product and process
R&D. Certain of our competitors, especially those that are created and financially backed by foreign
governments, have substantially greater financial resources and more extensive engineering, manufacturing,
marketing, and customer service and support resources than we do and therefore have the potential to
increasingly dominate the semiconductor equipment industry. These competitors may deeply discount or give
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away products similar to those that we sell, challenging or even exceeding our ability to make similar
accommodations and threatening our ability to sell those products. We also face competition from our own
customers, who in some instances have established affiliated entities that manufacture equipment similar to ours.
For these reasons, we may fail to continue to compete successfully worldwide.
In addition, our competitors may be able to develop products comparable or superior to those we offer or
may adapt more quickly to new technologies or evolving customer requirements. In particular, while we continue
to develop product enhancements that we believe will address future customer requirements, we may fail in a
timely manner to complete the development or introduction of these additional product enhancements
successfully, or these product enhancements may not achieve market acceptance or be competitive. Accordingly,
competition may intensify, and we may be unable to continue to compete successfully in our markets, which
could have a material adverse effect on our revenues, operating results, financial condition, and/or cash flows.
Our Future Success Depends Heavily on International Sales and the Management of Global Operations
Non-U.S. sales accounted for approximately 80% of total revenue in fiscal year 2013, 83% of total revenue
in fiscal year 2012, and 88% of total revenue in fiscal year 2011. We expect that international sales will continue
to account for a substantial majority of our total revenue in future years.
We are subject to various challenges related to international sales and the management of global operations
including, but not limited to:
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•
•
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•
•
•
•
trade balance issues;
global economic and political conditions, including the ongoing macroeconomic challenges associated
with sovereign debt levels in certain euro-zone countries and the financial contagion to global markets;
changes in currency controls;
differences in the enforcement of intellectual property and contract rights in varying jurisdictions;
our ability to respond to customer and foreign government demands for locally sourced systems, spare
parts and services and develop the necessary relationships with local suppliers;
compliance with U.S. and international laws and regulations affecting foreign operations, including
U.S. and international export restrictions and foreign labor laws;
fluctuations in interest and foreign currency exchange rates;
our ability to repatriate cash in a tax-efficient manner;
the need for technical support resources in different locations; and
our ability to secure and retain qualified people in all necessary locations for the successful operation
of our business.
Certain international sales depend on our ability to obtain export licenses from the U.S. government. Our
failure or inability to obtain such licenses would substantially limit our markets and severely restrict our
revenues. Many of the challenges noted above are applicable in China, which is a fast developing market for the
semiconductor equipment industry and therefore an area of potential significant growth for our business. As the
business volume between China and the rest of the world grows, there is inherent risk, based on the complex
relationships among China, Taiwan, Japan, South Korea, and the United States, that political and diplomatic
influences might lead to trade disruptions. This would adversely affect our business with China, Taiwan, Japan,
and/or South Korea and perhaps the entire Asia Pacific region. A significant trade disruption in these areas could
have a materially adverse impact on our future revenue and profits.
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We are potentially exposed to adverse as well as beneficial movements in foreign currency exchange rates.
The majority of our sales and expenses are denominated in U.S. dollars. However, we are exposed to foreign
currency exchange rate fluctuations primarily related to revenues denominated in Japanese yen and expenses
denominated in euro. Currently, we enter into foreign currency forward contracts to minimize the short-term
impact of the foreign currency exchange rate fluctuations on certain foreign currency monetary assets and
liabilities, primarily third party accounts receivables, accounts payables and intercompany receivables and
payables. In addition, we hedge certain anticipated foreign currency cash flows, primarily anticipated revenues
denominated in Japanese yen and euro-denominated expenses. We believe these are our primary exposures to
currency rate fluctuation. We expect to continue to enter into hedging transactions, for the purposes outlined, for
the foreseeable future. However, these hedging transactions may not achieve their desired effect because
differences between the actual timing of the underlying exposures and our forecasts of those exposures may leave
us either over-or under-hedged on any given transaction. Moreover, by hedging these foreign currency
denominated revenues, expenses, monetary assets and liabilities with foreign currency forward contracts, we may
miss favorable currency trends that would have been advantageous to us but for the hedges. Additionally, we are
exposed to short-term foreign currency exchange rate fluctuations on non-U.S. dollar-denominated monetary
assets and liabilities (other than those currency exposures previously discussed) and currently we do not enter
into foreign currency hedge contracts against these exposures. Therefore, we are subject to both favorable and
unfavorable foreign currency exchange rate fluctuations to the extent that we transact business (including
intercompany transactions) for these currencies.
The magnitude of our overseas business also affects where our cash is generated. Certain uses of cash, such
as share repurchases or the repayment of our convertible notes, can usually only be made with cash balances and
cash generated on-shore. Since the majority of our cash is generated outside of the United States, this may limit
certain business decisions and adversely affect business outcomes.
Our Ability to Attract, Retain and Motivate Key Employees Is Critical to Our Success
Our ability to compete successfully depends in large part on our ability to attract, retain and motivate key
employees. This is an ongoing challenge due to intense competition for top talent, as well as fluctuations in
industry economic conditions that may require cycles of hiring activity and workforce reductions. Our success in
hiring depends on a variety of factors, including the attractiveness of our compensation and benefit programs and
our ability to offer a challenging and rewarding work environment. We periodically evaluate our overall
compensation programs and make adjustments, as appropriate, to maintain or enhance their competitiveness. If
we are not able to successfully attract, retain and motivate key employees, we may be unable to capitalize on
market opportunities and our operating results may be materially and adversely affected.
We Rely Upon Certain Critical Information Systems for the Operation of Our Business
We maintain and rely upon certain critical information systems for the effective operation of our business.
These information systems include telecommunications, the internet, our corporate intranet, various computer
hardware and software applications, network communications, and e-mail. These information systems may be
owned and maintained by us, our outsource providers or third parties such as vendors and contractors. These
information systems are subject to attacks, failures, and access denials from a number of potential sources
including viruses, destructive or inadequate code, power failures, and physical damage to computers, hard drives,
communication lines, and networking equipment. Confidential information stored on these information systems
could be compromised. To the extent that these information systems are under our control, we have implemented
security procedures, such as virus protection software and emergency recovery processes, to mitigate the outlined
risks. However, security procedures for information systems cannot be guaranteed to be failsafe and our inability
to use or access these information systems at critical points in time, or unauthorized releases of confidential
information, could unfavorably impact the timely and efficient operation of our business.
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In addition, we have recently merged our global enterprise system with the enterprise system used by
Novellus Systems, Inc. prior to its acquisition by Lam. Combining these two systems was a complex process and
there is possibility for error in the merger process. While we have exerted considerable efforts to ensure a fully
operational system, should an error occur there could be a short term adverse effect on our ability to conduct
business in an efficient manner.
Our Financial Results May be Adversely Impacted by Higher than Expected Tax Rates or Exposure to
Additional Tax Liabilities
As a global company, our effective tax rate is highly dependent upon the geographic composition of
worldwide earnings and tax regulations governing each region. We are subject to income taxes in the United
States and various foreign jurisdictions, and significant judgment is required to determine worldwide tax
liabilities. Our effective tax rate could be adversely affected by changes in the split of earnings between countries
with differing statutory tax rates, in the valuation of deferred tax assets, in tax laws, by material audit
assessments, or changes in or expirations of agreements with tax authorities. These factors could affect our
profitability. In particular, the carrying value of deferred tax assets, which are predominantly in the United States,
is dependent on our ability to generate future taxable income in the United States. In addition, the amount of
income taxes we pay is subject to ongoing audits in various jurisdictions, and a material assessment by a
governing tax authority could affect our profitability.
A Failure to Comply with Environmental Regulations May Adversely Affect Our Operating Results
We are subject to a variety of governmental regulations related to the handling, discharge, and disposal of
toxic, volatile or otherwise hazardous chemicals. We believe that we are generally in compliance with these
regulations and that we have obtained (or will obtain or are otherwise addressing the need for) all environmental
permits necessary to conduct our business. These permits generally relate to the handling and disposal of
hazardous wastes. Nevertheless, the failure to comply with present or future regulations could result in fines
being imposed on us, require us to suspend production, or cease operations or cause our customers to not accept
our products. These regulations could require us to alter our current operations, to acquire significant additional
equipment or to incur substantial other expenses to comply with environmental regulations. Any failure to
comply with regulations governing the use, handling, sale, transport or disposal of hazardous substances could
subject us to future liabilities.
If We Choose to Acquire or Dispose of Product Lines and Technologies, We May Encounter Unforeseen Costs
and Difficulties That Could Impair Our Financial Performance
An important element of our management strategy is to review acquisition prospects that would complement
our existing products, augment our market coverage and distribution ability, or enhance our technological
capabilities. As a result, we may make acquisitions of complementary companies, products or technologies, or
we may reduce or dispose of certain product lines or technologies that no longer fit our long-term strategies.
Managing an acquired business, disposing of product technologies or reducing personnel entail numerous
operational and financial risks, including difficulties in assimilating acquired operations and new personnel or
separating existing business or product groups, diversion of management’s attention away from other business
concerns, amortization of acquired intangible assets, adverse customer reaction to our decision to cease support
for a product, and potential loss of key employees or customers of acquired or disposed operations. There can be
no assurance that we will be able to achieve and manage successfully any such integration of potential
acquisitions, disposition of product lines or technologies, or reduction in personnel or that our management,
personnel, or systems will be adequate to support continued operations. Any such inabilities or inadequacies
could have a material adverse effect on our business, operating results, financial condition, and cash flows.
In addition, any acquisition could result in changes such as potentially dilutive issuances of equity
securities, the incurrence of debt and contingent liabilities, the amortization of related intangible assets, and
23
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goodwill impairment charges, any of which could materially adversely affect our business, financial condition,
and results of operations and/or the price of our Common Stock.
The Market for Our Common Stock is Volatile, Which May Affect Our Ability to Raise Capital, Make
Acquisitions, or Subject Our Business to Additional Costs
The market price for our Common Stock is volatile and has fluctuated significantly over the past years. The
trading price of our Common Stock could continue to be highly volatile and fluctuate widely in response to a
variety of factors, many of which are not within our control or influence. These factors include but are not
limited to the following:
•
•
•
•
•
•
•
•
•
•
•
general market, semiconductor, or semiconductor equipment industry conditions;
economic or political events and trends occurring globally or in any of our key sales regions;
variations in our quarterly operating results and financial condition, including our liquidity;
variations in our revenues, earnings or other business and financial metrics from forecasts by us or
securities analysts, or from those experienced by other companies in our industry;
announcements of restructurings, reductions in force, departure of key employees, and/or
consolidations of operations;
government regulations;
developments in, or claims relating to, patent or other proprietary rights;
technological innovations and the introduction of new products by us or our competitors;
commercial success or failure of our new and existing products;
disruptions of relationships with key customers or suppliers; or
dilutive impacts of our Notes and related warrants.
In addition, the stock market experiences significant price and volume fluctuations. Historically, we have
witnessed significant volatility in the price of our Common Stock due in part to the actual or anticipated
movement in interest rates and the price of and markets for semiconductors. These broad market and industry
factors have and may again adversely affect the price of our Common Stock, regardless of our actual operating
performance. In the past, following volatile periods in the price of their stock, many companies became the
object of securities class action litigation. If we are sued in a securities class action, we could incur substantial
costs, and it could divert management’s attention and resources and have an unfavorable impact on our financial
performance and the price for our Common Stock.
Intellectual Property, Indemnity and Other Claims Against Us Can be Costly and We Could Lose Significant
Rights That are Necessary to Our Continued Business and Profitability
Third parties may assert infringement, unfair competition, product liability, breach of contract, or other
claims against us. From time to time, other parties send us notices alleging that our products infringe their patent
or other intellectual property rights. In addition, law enforcement authorities may seek criminal charges relating
to intellectual property or other issues. We also face risks of claims arising from commercial and other
relationships. In addition, our Bylaws and other indemnity obligations provide that we will indemnify officers
and directors against losses that they may incur in legal proceedings resulting from their service to Lam
Research. From time to time, in the normal course of business, we indemnify third parties with whom we enter
into contractual relationships, including customers and suppliers, with respect to certain matters. We have agreed,
under certain conditions, to hold these third parties harmless against specified losses, such as those arising from a
breach of representations or covenants, other third party claims that our products when used for their intended
24
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purposes infringe the intellectual property rights of such other third parties, or other claims made against certain
parties. In such cases, it is our policy either to defend the claims or to negotiate licenses or other settlements on
commercially reasonable terms. However, we may be unable in the future to negotiate necessary licenses or
reach agreement on other settlements on commercially reasonable terms, or at all, and any litigation resulting
from these claims by other parties may materially adversely affect our business and financial results, and we may
be subject to substantial damage awards and penalties. Moreover, although we have insurance to protect us from
certain claims and cover certain losses to our property, such insurance may not cover us for the full amount of
any losses, or at all, and may be subject to substantial exclusions and deductibles.
We May Fail to Protect Our Critical Proprietary Technology Rights, Which Could Affect Our Business
Our success depends in part on our proprietary technology and our ability to protect key components of that
technology through patents, copyrights and trade secret protection. Protecting our key proprietary technology
helps us to achieve our goals of developing technological expertise and new products and systems that give us a
competitive advantage; increasing market penetration and growth of our installed base; and providing
comprehensive support and service to our customers. As part of our strategy to protect our technology we
currently hold a number of United States and foreign patents and pending patent applications, and we keep
certain information, processes and techniques as trade secrets. However, other parties may challenge or attempt
to invalidate or circumvent any patents the United States or foreign governments issue to us, these governments
may fail to issue patents for pending applications, or we may lose trade secret protection over valuable
information due to the actions or omissions of third parties or even our own employees. Additionally, even when
patents are issued or trade secret processes are followed, the legal systems in certain of the countries in which we
do business do not enforce patents and other intellectual property rights as rigorously as the United States. The
rights granted or anticipated under any of our patents, pending patent applications or trade secrets may be
narrower than we expect or, in fact, provide no competitive advantages. Any of these circumstances could have a
material adverse impact on our business.
We May Incur Impairments to Goodwill or Long Lived Assets
We review our long-lived assets, including goodwill and other intangible assets, for impairment annually or
whenever events or changes in circumstances indicate that the carrying amount of these assets may not be
recoverable. Negative industry or economic trends, including reduced market prices of our common stock,
reduced estimates of future cash flows, disruptions to our business, slower growth rates, or lack of growth in our
relevant business segments, could lead to impairment charges against our long-lived assets, including goodwill
and other intangible assets. If, in any period, our stock price decreases to the point where our fair value, as
determined by our market capitalization, is less than the book value of our assets, this could also indicate a
potential impairment, and we may be required to record an impairment charge in that period, which could
adversely affect our result of operations.
Our valuation methodology for assessing impairment requires management to make judgments and
assumptions based on historical experience and to rely heavily on projections of future operating performance.
We operate in a highly competitive environment and projections of future operating result and cash flows may
vary significantly from actual results. Additionally, if our analysis indicates potential impairment to goodwill one
or more of our business segments, we may be required to record additional charges to earnings in our financial
statements, which could negatively affect our results of operations.
We Are Exposed to Various Risks from Our Regulatory Environment
We are subject to various risks related to (i) new, different, inconsistent or even conflicting laws, rules and
regulations that may be enacted by legislative bodies and/or regulatory agencies in the countries that we operate;
(ii) disagreements or disputes between national or regional regulatory agencies related to international trade; and
(iii) the interpretation and application of laws, rules and regulations. As a public company with global operations,
25
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OPERATOR JioMeRD
we are subject to the laws of multiple jurisdictions and the rules and regulations of various governing bodies,
including those related to financial and other disclosures, corporate governance, privacy, anti-corruption, such as
the Foreign Corrupt Practices Act and other local laws prohibiting corrupt payments to governmental officials,
and antitrust regulations, among others. One of these laws imposes new disclosure requirements regarding the
use of certain minerals, which may have originated from the Democratic Republic of the Congo and adjoining
countries in our products. This new requirement could affect the pricing, sourcing and availability of minerals
used in the manufacture of components we use in our products. In addition, there will be additional costs
associated with complying with the disclosure requirements, such as costs related to determining the source of
any of the covered minerals used in our products. Our supply chain is complex, and we may be unable to verify
the origins for all metals used in our products. Financial reform legislation and the regulations enacted under
such legislation have also added costs to our business by, among other things, requiring advisory votes on
executive compensation and on severance packages upon a change in control.
To maintain high standards of corporate governance and public disclosure, we intend to invest all
reasonably necessary resources to comply with all evolving standards. Changes in or ambiguous interpretations
of laws, regulations and standards may create uncertainty regarding compliance matters. Efforts to comply with
new and changing regulations have resulted in, and are likely to continue to result in, increased general and
administrative expenses and a diversion of management’s time and attention from revenue generating activities
to compliance activities. If we are found by a court or regulatory agency not to be in compliance with the laws
and regulations, our business, financial condition, and results of operations could be adversely affected.
Item 1B. Unresolved Staff Comments
None.
Item 2.
Properties
Our executive offices and principal operating and R&D facilities are located in Fremont, California,
Livermore, California, San Jose, California, Tualatin, Oregon, and Villach, Austria. The Fremont and Livermore
facilities are held under operating leases expiring in 2015 and the San Jose and Tualatin facilities are owned by
the Company. Our Fremont and Livermore operating leases generally include options to renew or purchase the
facilities. In addition, we lease or own properties for our service, technical support and sales personnel
throughout the United States, Europe, Taiwan, Korea, Japan, and Asia Pacific and lease or own manufacturing
facilities located in Eaton, Ohio, Rendsburg, Germany, Chandler, Arizona, and Des Plaines, Illinois. Our
facilities lease obligations are subject to periodic increases. We believe that our existing facilities are well-
maintained and in good operating condition.
Item 3.
Legal Proceedings
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. These accruals are reviewed at least quarterly and adjusted to reflect the effects of
negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a
particular matter. To the extent there is a reasonable possibility that the losses could exceed the amounts already
accrued, the Company believes that the amount of any such additional loss would be immaterial to the
Company’s business, financial condition, and results of operations.
Item 4.
Mine Safety Disclosures
Not applicable.
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PART II
Item 5.
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities
Stock Information
Our Common Stock is traded on the NASDAQ Global Select Market under the symbol LRCX. As of
August 20, 2013 we had 487 stockholders of record. In fiscal years 2013 and 2012 we did not declare or pay cash
dividends to our stockholders. We currently have no plans to declare or pay cash dividends. The table below sets
forth the high and low prices of our common stock as reported by The NASDAQ Stock Market LLC, for the
period indicated:
First Quarter
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$37.99
$38.14
$43.92
$49.13
$31.93
$31.17
$35.32
$39.94
2013
High
Low
First Quarter
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$46.27
$45.48
$45.04
$45.29
$34.92
$34.81
$36.15
$35.84
2012
High
Low
Repurchase of Company Shares
On December 14, 2011, the Board of Directors authorized the repurchase of up to $1.6 billion of Company
common stock, which replaced the previous repurchase authorizations. The Company completed the repurchase
of all amounts available under this share repurchase authorization during the year ended June 30, 2013.
On April 22, 2013, the Board of Directors authorized the repurchase of up to $250 million of Company
common stock. These repurchases can be conducted on the open market or as private purchases and may include
the use of derivative contracts with large financial institutions, in all cases subject to compliance with applicable
law. Repurchases will be funded using the Company’s on-shore cash and on-shore cash generation. This
repurchase program has no termination date and may be suspended or discontinued at any time.
As part of its share repurchase program, the Company may from time-to-time enter into structured share
repurchase arrangements with financial institutions using general corporate funds. Such arrangements entered
into or settled during the year ended June 30, 2013 included the following:
Collared Accelerated Share Repurchases — Settled During Current Fiscal Year
During the year ended June 24, 2012, the Company entered into two share repurchase transactions under
one master repurchase arrangement. Under these collared accelerated share repurchase transactions (“ASRs”),
the Company made up-front cash payments of $375 million and $200 million, respectively, three days after the
respective trade date in exchange for an initial delivery of 6.6 million and 3.9 million shares of its common stock,
respectively. The number of shares to ultimately be repurchased by the Company is based generally on the
volume-weighted average price (“VWAP”) of the Company’s common stock during the term of the ASR minus a
pre-determined discount set at inception of the ASR, subject to collar provisions that provide a minimum and
maximum number of shares that the Company could repurchase under the agreements.
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The minimum and maximum thresholds for each transaction were established based on the average of the
VWAP prices for the Company’s common stock during an initial hedge period. The Company received
incremental shares on top of the initial shares delivered such that the total number of shares received after the
initial hedge period equaled 8.8 million and 4.8 million shares, equivalent to the minimum number of shares to
be delivered under the terms of the ASRs, respectively. The ASRs were scheduled to end on or before
September 18, 2012 and October 9, 2012, respectively. However, each ASR was subject to acceleration at the
option of the counterparty at any time after June 27, 2012 and July 19, 2012, respectively. At the conclusion of
the ASRs, the Company was to receive additional shares based on the VWAP of the Company’s common stock
during the term of the agreement minus the pre-determined fixed discount, such that the total number of shares
received under the ASRs would not exceed the maximum of 10.8 million and 6.6 million shares, respectively.
The Company accounted for each ASR as two separate transactions: (a) as shares of common stock acquired
in a treasury stock transaction recorded on the acquisition date and (b) as a forward contract indexed to the
Company’s own common stock and classified in stockholders’ equity. As such, the Company accounted for the
shares that it received under the ASRs as a repurchase of its common stock for the purpose of calculating
earnings per common share. The Company has determined that the forward contract indexed to the Company’s
common stock met all of the applicable criteria for equity classification in accordance with the Derivatives and
Hedging topic of the FASB ASC, and, therefore, the ASRs were not accounted for as derivative instruments. As
of June 24, 2012, the aggregate repurchase price of $575.0 million was reflected as Treasury stock, at cost, in the
Consolidated Balance Sheet.
The counterparty to the $375 million ASR designated July 6, 2012 as the accelerated termination date, at
which time the Company settled the ASR and received an additional 1.3 million shares of common stock in
addition to the minimum shares already received, which represented a weighted average share price of
approximately $36.80 for the transaction period. The counterparty to the $200 million ASR designated July 25,
2012 as the accelerated termination date, at which time the Company settled the ASR and received an additional
0.7 million shares of common stock in addition to the minimum shares already received, which represented a
weighted average share price of approximately $36.12 for the transaction period.
Collared Accelerated Share Repurchases — Executed During Current Fiscal Year
During the year ended June 30, 2013, the Company entered into a share repurchase transaction under the
existing master repurchase arrangement. Under this ASR, the Company made an up-front cash payment of
$86.4 million, in exchange for an initial delivery of 1.5 million shares of its common stock and a subsequent
delivery of 0.4 million shares following the initial hedge period
As with the prior ASRs, the minimum and maximum thresholds for the transaction were established based
on the average of the VWAP prices for the Company’s common stock during an initial hedge period. The ASR
was scheduled to end at any time after March 21, 2013 and on or before May 21, 2013. At the conclusion of the
ASRs, the Company was to receive additional shares based on the VWAP of the Company’s common stock
during the term of the agreement minus the pre-determined fixed discount, such that the total number of shares
received under this ASR would not exceed the maximum of 2.2 million shares.
The counterparty designated May 21, 2013 as the termination date, at which time the Company settled the
ASR and received an additional 0.1 million shares of common stock in addition to the minimum shares already
received, which represented a weighted average share price of approximately $42.71 for the transaction period.
As of June 30, 2013, the aggregate repurchase price of $86.4 million is reflected as Treasury stock, at cost,
in the Consolidated Balance Sheet.
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Share repurchases, including those under the repurchase program, were as follows:
Period
Total Number of
Shares
Repurchased (1)
Average Price
Paid Per Share*
Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs
Amount Available
Under
Repurchase
Program
(in thousands, except per share data)
Amount available at June 24, 2012 . . . . . . .
Quarter ending September 23, 2012 . . . . . . .
Quarter ending December 23, 2012 . . . . . . .
Quarter ended March 31, 2013 . . . . . . . . . . .
Authorization of $250 million -
April 2013 . . . . . . . . . . . . . . . . . . . . . . . .
April 1, 2013 - April 30, 2013 . . . . . . . . . . .
May 1, 2013 - May 31, 2013 . . . . . . . . . . . .
June 1, 2013 - June 30, 2013 . . . . . . . . . . . .
12,098
10,384
5,533
21
107
14
Total . . . . . . . . . . . . . . . . . . . . . . . . . . .
28,157
$34.79
$34.76
$37.96
$41.93
$47.11
$45.97
$35.28
11,970
10,190
5,312
—
90
—
27,562
$911,933
$567,932
$213,903
$ —
$250,000
$250,000
$250,000
$250,000
$250,000
* Average price paid per share excludes accelerated share repurchases for which cost was incurred in fiscal year
2012, but shares were received in fiscal year 2013 and for which costs were incurred in the quarter ended
March 31, 2013, but for which final settlement of shares was not received until the quarter ended June 30,
2013. See Collared Accelerated Share Repurchases section above for details regarding average price
associated with these transactions.
(1)
In addition to shares repurchased under Board authorized repurchase programs, included in this column are
595,000 shares acquired at a total cost of $22.9 million which the Company withheld through net share
settlements to cover 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 plans.
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Cumulative 5-year Return
The graph below compares Lam Research Corporation’s cumulative 5-year total shareholder return on
common stock with the cumulative total returns of the NASDAQ Composite index and the Research Data Group,
Incorporated (“RDG”) Semiconductor Composite index. The graph tracks the performance of a $100 investment
in our common stock and in each of the indices (with the reinvestment of all dividends) from June 30, 2008 to
June 30, 2013.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Lam Research Corporation, the NASDAQ Composite Index, the S&P 500 Index,
and the RDG Semiconductor Composite Index
$180
$160
$140
$120
$100
$80
$60
$40
$20
$0
6/08
6/09
6/10
6/11
6/12
6/13
Lam Research Corporation (LRCX)
S&P 500
NASDAQ Composite
RDG Semiconductor Composite
*$100 invested on 6/30/08 in stock or index, including reinvestment of dividends.
Fiscal year ending June 30.
Copyright© 2013 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved.
Lam Research Corporation (LRCX) . . . . . . . . . . . . . . . .
NASDAQ Composite . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
S&P 500 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
RDG Semiconductor Composite . . . . . . . . . . . . . . . . . . .
100.00
100.00
100.00
100.00
71.92
80.56
73.79
77.27
105.28
93.30
84.43
95.93
122.49
124.28
110.35
119.71
104.40
132.47
116.36
116.91
122.66
155.74
140.32
130.56
6/08
6/09
6/10
6/11
6/12
6/13
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Item 6.
Selected Financial Data (derived from audited financial statements)
OPERATIONS:
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill impairment (2) . . . . . . . . . . . . . . . .
Restructuring charges, net (3) . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
409A expense (4)
Legal judgment . . . . . . . . . . . . . . . . . . . . . . .
Operating income (loss)
. . . . . . . . . . . . . . . .
Net income (loss)
. . . . . . . . . . . . . . . . . . . . .
Net income (loss) per share:
June 30,
2013 (1)
June 24,
2012 (1)
Year Ended
June 26,
2011
June 27,
2010
June 28,
2009
(in thousands, except per share data)
$3,598,916
1,403,059
—
1,813
—
—
118,071
113,879
$2,665,192
1,084,069
—
1,725
—
—
237,733
168,723
$3,237,693
1,497,232
—
11,579
—
—
804,285
723,748
$2,133,776
969,935
—
21,314
(38,590)
—
425,410
346,669
$1,115,946
388,734
96,255
44,513
3,232
4,647
(281,243)
(302,148)
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
0.67
0.66
$
$
1.36
1.35
$
$
5.86
5.79
$
$
2.73
2.71
$
$
(2.41)
(2.41)
BALANCE SHEET:
Working capital . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term obligations, less current
$2,389,354
7,250,315
$2,988,181
8,004,652
$2,592,506
4,053,867
$1,198,004
2,487,392
$ 855,064
1,993,184
portion . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,170,048
1,255,600
903,263
160,600
158,019
(1) Fiscal year 2013 amounts include operating results of Novellus. Fiscal year 2012 amounts include 20 days
of operating results of Novellus from the acquisition date of June 4, 2012. The acquisition was accounted for
as a business combination in accordance with the applicable accounting guidance.
(2) During fiscal year 2009, a combination of factors, including the economic environment, a sustained decline
in our market valuation and a decline in our operating results indicated possible impairment of our goodwill.
We conducted an analysis and concluded that the fair value of our Clean Product Group had been reduced
below its carrying value. As a result, we recorded a non-cash goodwill impairment charge of approximately
$96.3 million during fiscal year 2009.
(3) Restructuring charges, net exclude restructuring charges (releases) included in cost of goods sold and
reflected in gross margin of ($1.0) million, $3.4 million, and $21.0 million for fiscal years 2012, 2010, and
2009, respectively. Restructuring amounts included in cost of goods sold and reflected in gross margin
during fiscal year 2009 primarily relate to the Company’s alignment of its cost structure with the outlook for
the economic environment and business opportunities.
(4) 409A expense excludes a credit included in cost of goods sold and reflected in gross margin of $5.8 million
in fiscal year 2010 related to a reversal of accrued liabilities due to final settlement of matters associated
with our Internal Revenue Code Section 409A (“409A”) expenses from the 2007 voluntary independent
stock option review. Following a voluntary independent review of its historical stock option granting
process, the Company considered whether Section 409A of the Internal Revenue Code of 1986, as amended
(“IRC”), and similar provisions of state law, applied to certain stock option grants as to which, under the
applicable accounting guidance, intrinsic value was deemed to exist at the time of the options’ measurement
dates. If, under applicable tax principles, an employee stock option is not considered as granted with an
exercise price equal to the fair market value of the underlying stock on the grant date, then the optionee may
be subject to federal and state penalty taxes under Section 409A (collectively, “Section 409A
liabilities”). On March 30, 2008, the Board of Directors authorized the Company (i) to assume potential
Section 409A Liabilities, inclusive of applicable penalties and interest, of current and past employees arising
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OPERATOR JioMeRD
from the exercise in 2006 or 2007 of Company stock options that vested after 2004, and (ii) if necessary, to
compensate such employees for additional tax liability associated with that assumption.
QUARTERLY FISCAL YEAR 2013:
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charges, net - operating expenses . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income per share
Three Months Ended (1)
June 30,
2013
March 31, December 23,
2013
2012
September 23,
2012
(in thousands, except per share data)
$986,214
413,927
792
86,498
85,707
$844,928
339,832
—
10,819
18,996
$860,886
315,414
1,021
4,042
6,408
$906,888
333,886
—
16,712
2,768
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
0.53
0.50
$
$
0.12
0.11
$
$
0.04
0.04
$
$
0.02
0.02
Number of shares used in per share calculations:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
162,520
169,722
163,034
168,504
170,699
173,027
179,928
181,926
June 24,
2012
Three Months Ended (1)
March 25, December 25,
2012
2011
September 25,
2011
QUARTERLY FISCAL YEAR 2012:
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charges, net - operating expenses . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income per share
(in thousands, except per share data)
$741,814
298,213
—
32,670
18,069
$658,961
267,147
—
58,118
45,604
$583,981
234,826
—
47,546
33,212
$680,436
283,883
1,725
99,399
71,838
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
0.13
0.13
$
$
0.38
0.38
$
$
0.28
0.27
$
$
0.58
0.58
Number of shares used in per share calculations:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
133,997
135,842
119,841
120,956
119,739
120,873
123,130
124,049
(1) Our reporting period is a 52/53-week fiscal year. The fiscal years ended June 30, 2013 and June 24, 2012
included 53 and 52 weeks, respectively. All quarters presented above included 13 weeks, except the quarter
ended March 31, 2013, which included 14 weeks.
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REVISION 12
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DATE Tuesday, September 24, 2013
JOB NUMBER 252704
TYPE
PAGE NO. 87
OPERATOR JioMeRD
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of our financial condition and results of operations contains forward-looking
statements, which are subject to risks, uncertainties and changes in condition, significance, value and effect.
Our actual results could differ materially from those anticipated in the forward-looking statements as a result
of certain factors, including but not limited to those discussed in “Risk Factors” and elsewhere in this 2013
Form 10-K and other documents we file from time to time with the Securities and Exchange Commission. (See
“Cautionary Statement Regarding Forward-Looking Statements” in Part I of this 2013 Form 10-K).
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)
provides a description of our results of operations and should be read in conjunction with our Consolidated
Financial Statements and accompanying Notes to Consolidated Financial Statements included in this 2013
Form 10-K. MD&A consists of the following sections:
Executive Summary provides a summary of the key highlights of our results of operations and our
management’s assessment of material trends and uncertainties relevant to our business.
Results of Operations provides an analysis of operating results.
Critical Accounting Policies and Estimates discusses accounting policies that reflect the more significant
judgments and estimates used in the preparation of our consolidated financial statements.
Liquidity and Capital Resources provides an analysis of cash flows, contractual obligations and financial
position.
Executive Summary
We design, manufacture, market, refurbish, and service semiconductor processing equipment used in the
fabrication of integrated circuits and are recognized as a major provider of such equipment to the worldwide
semiconductor industry. Our customers include semiconductor manufacturers that make memory,
microprocessors, and other logic integrated circuits for a wide range of consumer and industrial electronics.
Semiconductor wafers are subjected to a complex series of process and preparation steps that result in the
simultaneous creation of many individual integrated circuits. We leverage our expertise in semiconductor
processing to develop technology and productivity solutions that typically benefit our customers through lower
defect rates, enhanced yields, faster processing time, and reduced cost as well as by facilitating their ability to
meet more stringent performance and design standards.
The semiconductor capital equipment industry has been highly competitive and subject to business cycles
that historically have been characterized by rapid changes in demand that necessitate adjusting spending and
managing capital allocation prudently across business cycles. Today’s leading indicators of change 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 our equipment can vary significantly from period to period as a
result of various factors, including, but not limited to, economic conditions (both general and in the
semiconductor and electronics industries), industry supply and demand, prices for semiconductors, customer
capacity requirements, and our ability to develop, acquire, and market competitive products. For these and other
reasons, our results of operations during any particular period are not necessarily indicative of future operating
results.
Demand for our products declined slightly in the first half of fiscal year 2013 as semiconductor device
manufacturers delayed certain capacity investments. Industry conditions started to improve during the second
half of fiscal year 2013 as customers increased their investments in semiconductor equipment to support healthy
demand. We believe that, over the long term, demand for our products will increase as customers’ capital
33
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DATE Tuesday, September 24, 2013
JOB NUMBER 252704
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PAGE NO. 88
OPERATOR JioMeRD
expenditures rise to meet growing demand for semiconductor devices, particularly in mobile markets, and
address the increasing complexity of semiconductor manufacturing.
The following summarizes certain key annual financial information for the periods indicated below:
Revenue . . . . . . . . . . . . . . . . . . .
Gross margin . . . . . . . . . . . . . . .
Gross margin as a percent of
total revenue . . . . . . . . . . . . .
Total operating expenses . . . . . .
Net income . . . . . . . . . . . . . . . .
Diluted net income per share . . .
June 30,
2013
Year Ended
June 24,
2012
June 26,
2011
FY13 vs. FY12
FY12 vs. FY11
(in thousands, except per share data and percentages)
$3,598,916
1,403,059
$2,665,192
1,084,069
$3,237,693
1,497,232
$933,724
$318,990
35.0% $(572,501)
29.4% $(413,163)
-17.7%
-27.6%
39.0%
40.7%
46.2%
-1.7%
-5.5%
1,284,988
113,879
0.66
$
846,336
168,723
1.35
692,947
723,748
5.79
$438,652
$ (54,844)
(0.69)
$
51.8% $ 153,389
-32.5% $(555,025)
(4.44)
-51.1% $
22.1%
-76.7%
-76.7%
$
$
On June 4, 2012 we completed our acquisition of Novellus Systems, Inc (“Novellus”). Results for fiscal
year 2013 include Novellus operations. Results for fiscal year 2012 include Novellus operations from the
acquisition date through June 24, 2012. Lam’s primary reasons for this acquisition were to complement existing
product offerings and to provide opportunities for revenue growth and cost synergies.
Fiscal year 2013 revenues increased 35% compared to fiscal year 2012, reflecting a full fiscal year of
operations post-acquisition of Novellus. The decrease in gross margin as a percentage of revenue for the fiscal
year 2013 compared to fiscal year 2012 was due primarily to amortization of acquired intangible assets and
acquisition-related inventory fair value adjustments. Operating expenses in fiscal year 2013 increased as
compared to fiscal year 2012 primarily reflecting a full fiscal year of operations post-acquisition of Novellus and
operating expenses related to acquired intangible asset amortization and Novellus integration costs.
Our cash and cash equivalents, short-term investments, and restricted cash and investments balances totaled
approximately $2.7 billion as of June 30, 2013 compared to $3.0 billion as of June 24, 2012. This decrease was
primarily the result of $956 million of share repurchases offset by $720 million in cash provided by operating
activities. This compares to $499 million in cash provided by operating activities during fiscal year 2012. The
increased operating cash flows in fiscal year 2013 versus fiscal year 2012 were primarily the result of higher
revenue levels.
Results of Operations
Shipments and Backlog
June 30,
2013
Year Ended
June 24,
2012
June 26,
2011
Shipments (in millions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,714
$2,672
$3,306
Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
29%
20%
16%
16%
11%
8%
18%
17%
36%
11%
10%
8%
23%
13%
21%
17%
13%
13%
Shipments for fiscal year 2013 were approximately $3.7 billion and increased by 39% compared to fiscal
year 2012. Shipments for fiscal year 2012 were approximately $2.7 billion and decreased by 19% compared to
fiscal year 2011. The increase in shipments during fiscal year 2013 as compared to fiscal year 2012 related to
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PAGE NO. 89
OPERATOR JioMeRD
having a full year of combined operations with Novellus and the strengthening of customer demand in the second
half of fiscal year 2013. The decrease in shipments during fiscal year 2012 as compared to fiscal year 2011
related to change in demand for semiconductor equipment, especially in the first half of fiscal year 2012.
The percentage of total system shipments to each of the market segments we serve were as follows for fiscal
years 2013, 2012, and 2011. In the December 2011 quarter we modified the foundry category to include
manufacturers that have a majority of their logic capacity available for the foundry business. These shipments
were previously reported in the logic/integrated device manufacturing category.
Year Ended
June 30,
2013
June 24,
2012
June 26,
2011
Memory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foundry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Logic/integrated device manufacturing . . . . . . . . . . . . . . . . .
36%
49%
15%
45%
46%
9%
49%
32%
19%
Unshipped orders in backlog as of June 30, 2013 were approximately $764 million and decreased from
approximately $870 million as of June 24, 2012. Our unshipped orders backlog includes orders for systems,
spares, and services. Please refer to “Backlog” in Part I Item 1, “Business” of this report for a description of our
policies for adding to and adjusting backlog.
Revenue
Year Ended
June 30,
2013
June 24,
2012
June 26,
2011
Revenue (in millions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,599
$2,665
$3,238
Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
29%
20%
17%
16%
10%
8%
18%
17%
33%
11%
12%
9%
24%
12%
23%
15%
13%
13%
The revenue increase in fiscal year 2013 as compared to fiscal year 2012 reflected a full fiscal year of
operations post-acquisition of Novellus. The revenue decrease in fiscal year 2012 as compared to fiscal year 2011
was due to the decrease in customer capacity investments. Our revenue levels are generally correlated to the amount
of shipments and our installation and acceptance timelines. The overall Asia region continues to account for a
majority of our revenues as a substantial amount of the worldwide capacity additions for semiconductor
manufacturing continues to occur in this region. Our deferred revenue balance increased to $389.2 million as of
June 30, 2013 compared to $335.4 million as of June 24, 2012, due to increased customer shipment levels in the
second half of fiscal year 2013. Our deferred revenue balance does not include shipments to Japanese customers, to
whom title does not transfer until customer acceptance. Shipments to Japanese customers are classified as inventory
at cost until the time of customer acceptance. The anticipated future revenue value from shipments to Japanese
customers was approximately $70 million as of June 30, 2013 compared to $23 million as of June 24, 2012.
Gross Margin
June 30,
2013
Year Ended
June 24,
2012
June 26,
2011
FY13 vs. FY12
FY12 vs. FY11
(in thousands, except percentages)
Gross margin . . . . . . . . . . . . . . . .
Percent of total revenue . . . . . . .
$1,403,059
$1,084,069
$1,497,232
$318,990
29.4% $(413,163)
-27.6%
39.0%
40.7%
46.2%
-1.7%
-5.5%
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The decrease in gross margin as a percentage of revenue for fiscal year 2013 compared to fiscal year 2012
was due primarily to higher acquisition-related inventory fair value adjustments of approximately $77 million,
amortization of acquired intangible assets of approximately $78 million, and $16 million of costs associated with
rationalization of certain product configurations. Offsetting these higher acquisition and product configuration
related expenses was a favorable change in gross margin as a result of increased business volume.
The decrease in gross margin as a percentage of revenue for fiscal year 2012 compared to fiscal year 2011
was due primarily to decreased factory and field utilization as a result of lower volume, and less favorable
customer and product mix.
Research and Development
Year Ended
June 30,
2013
June 24,
2012
June 26,
2011
FY13 vs. FY12
FY12 vs. FY11
(in thousands, except percentages)
Research & development (“R&D”) . . . . .
Percent of total revenue . . . . . . . . . . . . . .
$683,688
$444,559
$373,293
$239,129
53.8% $71,266
19.1%
19.0%
16.7%
11.5%
2.3%
5.2%
We continued to make significant R&D investments focused on leading-edge plasma etch, deposition,
single-wafer clean and other semiconductor manufacturing requirements. Fiscal year 2013 reflects a full year of
combined operations with Novellus, while fiscal year 2012 reflects mainly Lam as a standalone entity. Increased
R&D expense included $111 million in salary and benefits mainly due to higher headcount, $46 million in
supplies, $26 million in depreciation and amortization due to new product development, $15 million in outside
services, and an additional $12 million in rent, utilities and repairs. Overall R&D expenses as a percentage of
revenue have increased as a result of technology inflections such as the transition to multi-patterning and three
dimensional devices.
The increase in R&D spending during fiscal year 2012 compared to fiscal year 2011 was due primarily to an
$18 million increase in salary and benefits as a result of higher headcount, a $21 million increase in supplies, and
an $11 million increase in depreciation related to new product development. Also included in our results are
$11 million of Novellus-related R&D expenses that were incurred in the June 2012 quarter from the acquisition
date through June 24, 2012.
Selling, General and Administrative
June 30,
2013
Year Ended
June 24,
2012
June 26,
2011
FY13 vs. FY12
(in thousands, except percentages)
FY12 vs. FY11
Selling, general & administrative
(“SG&A”) . . . . . . . . . . . . . . . . . . . . . . .
Percent of total revenue . . . . . . . . . . . . . .
$599,487
$400,052
$308,075
$199,435
49.9% $91,977
29.9%
16.7%
15.0%
9.5%
1.7%
5.5%
The increase in SG&A expense during fiscal year 2013 compared to fiscal year 2012 was due primarily to
the impact of combined operations with Novellus. Increased expense includes $108 million in salary and benefits
due to higher headcount, $73 million of intangible asset amortization, $29 million in integration cost, and
$14 million in rent/repair/utilities, all offset by a $47 million decrease in acquisition-related cost.
The increase in SG&A expense during fiscal year 2012 compared to fiscal year 2011 was due primarily to
$63 million in expenses related to the Novellus acquisition and integration and $13 million of Novellus related
SG&A expenses, including $4 million of intangible asset amortization, incurred in the June 2012 quarter from
the acquisition date through June 24, 2012.
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JOB NUMBER 252704
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PAGE NO. 91
OPERATOR JioMeRD
Restructuring
During fiscal year 2011 we incurred restructuring charges of $11.6 million consisting primarily of certain
facilities charges related to the reassessment of future obligations for previously restructured leases.
For further details related to restructuring, see Note 19 of the Notes to Consolidated Financial Statements.
Other Income (Expense), Net
Other income (expense), net, consisted of the following:
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gains (losses) on deferred compensation plan related
assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange loss . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net
Year Ended
June 30,
2013
June 24,
2012
June 26,
2011
$ 14,737
(60,408)
(in thousands)
$ 12,141
(38,962)
$ 9,890
(5,380)
9,764
(6,808)
(8,698)
(914)
(397)
(5,183)
5,682
(11,085)
(2,516)
$(51,413)
$(33,315)
$ (3,409)
The increase in interest income during fiscal year 2013 as compared with fiscal year 2012 and during fiscal
year 2012 compared with fiscal year 2011 was primarily due to increases in our average cash and investment
balances from cash provided by operations and proceeds from convertible note financing, which was partially
offset by treasury stock transactions and the decrease in interest rate yields.
The increase in interest expense during fiscal year 2013 as compared with fiscal year 2012 and during fiscal
year 2012 as compared with fiscal year 2011 was primarily due to the issuance of the $900 million convertible
notes during May 2011 and the 2041 Notes assumed in June 2012 in connection with the Novellus acquisition.
Foreign exchange losses in fiscal year 2013 were related to un-hedged portions of the balance sheet
exposures, primarily in the Japanese yen, Korean won and Taiwanese dollar. We incurred insignificant foreign
exchange losses in fiscal year 2012 related to un-hedged balance sheet exposures. Foreign exchange losses in
fiscal year 2011 were related to un-hedged portions of the balance sheet exposures, primarily in the euro,
Korean won, and Singapore dollar.
Other expenses during fiscal year 2013 increased as compared to fiscal year 2012 primarily due to a
$3.7 million other-than-temporary impairment of a public equity investment recognized during the March 2013
quarter. Other expenses during fiscal year 2012 increased as compared to fiscal year 2011 primarily due to a
$1.7 million other-than temporary impairment of a private equity investment recognized during the September
2011 quarter and increased charitable contributions.
Income Tax Expense
Our annual income tax expense(benefit) was $(47.2) million, $35.7 million, and $77.1 million in fiscal years
2013, 2012, and 2011, respectively. Our effective tax rate for fiscal years 2013, 2012, and 2011 was (70.8) %,
17.5%, and 9.6%, respectively. The decrease in the effective tax rate in fiscal year 2013 as compared to fiscal
year 2012 was primarily due to the level of income, tax benefits related to the recognition of previously
unrecognized tax benefits due to lapse of statute of limitations and successful resolution of certain tax matters,
the change in geographical mix of income between higher and lower tax jurisdictions, and tax benefit due to the
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PAGE NO. 92
OPERATOR JioMeRD
retroactive reinstatement of the federal research and development tax credit in January 2013. The increase in the
effective tax rate in fiscal year 2012 as compared to fiscal year 2011 was primarily due to the level of income, the
change in geographical mix of income between higher and lower tax jurisdictions, decrease in federal research
and development tax credit due to the expiration of the credit on December 31, 2011, increase in non-deductible
stock based compensation, and non-deductible acquisition costs.
International revenues account for a significant portion of our total revenues, such that a material portion of
our pre-tax income is earned and taxed outside the United States at rates that are generally lower than in the
United States. Please refer to Note 15 of the Notes to Consolidated Financial Statements.
Deferred Income Taxes
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as
the tax effect of carryforwards. Our gross deferred tax assets, composed primarily of reserves and accruals that
are not currently deductible and tax credit carryforwards, were $317.8 million and $253.7 million at the end of
fiscal years 2013 and 2012, respectively. These gross deferred tax assets were offset by deferred tax liabilities of
$259.3 million and $285.6 million at the end of fiscal years 2013 and 2012, respectively, and a valuation
allowance of $76.6 million and $55.2 million at the end of fiscal years 2013 and 2012, respectively. The change
in the gross deferred tax assets and deferred tax liabilities between fiscal year 2013 and 2012 is primarily due to
an increase of tax credit attributes resulting from the extension of the federal research and development tax credit
in fiscal year 2013, resolution of certain tax matters, and reversal of deferred tax liabilities related to intangibles
and fixed assets.
We record a valuation allowance to reduce our deferred tax assets to the amount that is more-likely-than-not
to be realized. Realization of our net deferred tax assets is dependent on future taxable income. We believe it is
more likely than not that such assets will be realized; however, ultimate realization could be negatively impacted
by market conditions and other variables not known or anticipated at this time. In the event that we determine
that we would not be able to realize all or part of our net deferred tax assets, an adjustment would be charged to
earnings in the period such determination is made. Likewise, if we later determine that it is more-likely-than-not
that the deferred tax assets would be realized, then the previously provided valuation allowance would be
reversed. Our fiscal years 2013 and 2012 valuation allowance of $76.6 million and $55.2 million primarily relate
to California and certain foreign deferred tax assets.
At our fiscal year end of June 30, 2013 we continue to record a valuation allowance to offset the entire
California deferred tax asset balance due to the impact of the cost of performance sales factor sourcing rule and
the single sales factor apportionment election resulting in lower taxable income in California. We also continue
to record valuation allowance on certain foreign entities’ net operating losses.
We evaluate the realizability of the deferred tax assets quarterly and will continue to assess the need for
changes in valuation allowances, if any.
Uncertain Tax Positions
We reevaluate uncertain tax positions on a quarterly basis. This evaluation is based on factors including, but
not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit, and
new audit activity. Such a change in recognition or measurement would result in the recognition of a tax benefit
or an additional charge to the tax provision.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles
(“GAAP”) requires management to make certain judgments, estimates and assumptions that could affect the
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DATE Tuesday, September 24, 2013
JOB NUMBER 252704
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PAGE NO. 93
OPERATOR JioMeRD
reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. We based our estimates and assumptions on historical
experience and on various other assumptions we believed to be applicable and evaluate them on an ongoing basis
to ensure they remain reasonable under current conditions. Actual results could differ significantly from those
estimates.
The significant accounting policies used in the preparation of our financial statements are described in
Note 2 of our Consolidated Financial Statements. Some of these significant accounting policies are considered to
be critical accounting policies. A critical accounting policy is defined as one that has both a material impact on
our financial condition and results of operations and requires us to make difficult, complex and/or subjective
judgments, often regarding estimates about matters that are inherently uncertain.
We believe that the following critical accounting policies reflect the more significant judgments and
estimates used in the preparation of our consolidated financial statements.
Revenue Recognition: We recognize all revenue when persuasive evidence of an arrangement exists,
delivery has occurred and title has passed or services have been rendered, the selling price is fixed or
determinable, collection of the receivable is reasonably assured, and we have received customer acceptance,
completed our system installation obligations, or are otherwise released from our installation or customer
acceptance obligations. If terms of the sale provide for a lapsing customer acceptance period, we recognize
revenue upon the expiration of the lapsing acceptance period or customer acceptance, whichever occurs first. If
the practices of a customer do not provide for a written acceptance or the terms of sale do not include a lapsing
acceptance provision, we recognize revenue when it can be reliably demonstrated that the delivered system meets
all of the agreed-to customer specifications. In situations with multiple deliverables, we recognize revenue upon
the delivery of the separate elements to the customer and when we receive customer acceptance or are otherwise
released from our customer acceptance obligations. We allocate revenue from multiple-element arrangements
among the separate elements based on their relative selling prices, provided the elements have value on a stand-
alone basis. Our sales arrangements do not include a general right of return. The maximum revenue we recognize
on a delivered element is limited to the amount that is not contingent upon the delivery of additional items. We
generally recognize revenue related to sales of spare parts and system upgrade kits upon shipment. We generally
recognize revenue related to services upon completion of the services requested by a customer order. We
recognize revenue for extended maintenance service contracts with a fixed payment amount on a straight-line
basis over the term of the contract. When goods or services have been delivered to the customer but all
conditions for revenue recognition have not been met, we record deferred revenue and/or deferred costs of sales
in deferred profit on our Consolidated Balance Sheet.
Inventory Valuation: Inventories are stated at the lower of cost or market using standard costs that generally
approximate actual costs on a first-in, first-out basis. We maintain a perpetual inventory system and continuously
record the quantity on-hand and standard cost for each product, including purchased components, subassemblies,
and finished goods. We maintain the integrity of perpetual inventory records through periodic physical counts of
quantities on hand. Finished goods are reported as inventories until the point of title transfer to the customer.
Unless specified in the terms of sale, title generally transfers when we complete physical transfer of the products
to the freight carrier. Transfer of title for shipments to Japanese customers generally occurs at the time of
customer acceptance.
Management evaluates the need to record adjustments for impairment of inventory at least quarterly. Our
policy is to assess the valuation of all inventories including manufacturing raw materials, work-in-process,
finished goods, and spare parts in each reporting period. Obsolete inventory or inventory in excess of
management’s estimated usage requirements over the next 12 to 36 months 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 our future manufacturing schedules, customer demand, technological and/or market obsolescence,
general semiconductor market conditions, and possible alternative uses. If future customer demand or market
39
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SERIAL
DATE Tuesday, September 24, 2013
JOB NUMBER 252704
TYPE
PAGE NO. 94
OPERATOR JioMeRD
conditions are less favorable than our projections, additional inventory write-downs may be required and would
be reflected in cost of goods sold in the period in which we make the revision.
Warranty: Typically, the sale of semiconductor capital equipment includes providing parts and service
warranty to customers as part of the overall price of the system. We provide standard warranties for our systems.
When appropriate, we record a provision for estimated warranty expenses to cost of sales for each system when
we recognize revenue. We do not maintain general or unspecified reserves; all warranty reserves are related to
specific systems. The amount recorded is based on an analysis of historical activity that uses factors such as type
of system, customer, geographic region, and any known factors such as tool reliability trends. All actual or
estimated parts and labor costs incurred in subsequent periods are charged to those established reserves on a
system-by-system basis.
Actual warranty expenses are accounted for on a system-by-system basis and may differ from our original
estimates. While we periodically monitor the performance and cost of warranty activities, if actual costs incurred
are different than our estimates, we may recognize adjustments to provisions in the period in which those
differences arise or are identified. In addition to the provision of standard warranties, we offer 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 Purchase Plan (“ESPP”) and Employee Stock Plans:
GAAP requires us to recognize the fair value of equity-based compensation in net income. We determine the fair
value of our restricted stock units (“RSUs”) based upon the fair market value of Company stock at the date of
grant. We estimate the fair value of our stock options and ESPP awards using the Black-Scholes option valuation
model. This model requires us to input highly subjective assumptions, including expected stock price volatility
and the estimated life of each award. We amortize the fair value of equity-based awards over the vesting periods
of the awards, and we have elected to use the straight-line method of amortization.
We make quarterly assessments of the adequacy of our tax credit pool related to equity-based compensation
to determine if there are any deficiencies that we are required to recognize in our Consolidated Statements of
Operations. We will only recognize a benefit from stock-based compensation in paid-in-capital if we realize an
incremental tax benefit after all other tax attributes currently available to us have been utilized. In addition, we
have elected to account for the indirect benefits of stock-based compensation on the research tax credit through
the income statement (continuing operations) rather than through paid-in-capital. We have also elected to net
deferred tax assets and the associated valuation allowance related to net operating loss and tax credit
carryforwards for the accumulated stock award tax benefits for income tax footnote disclosure purposes. We will
track these stock award attributes separately and will only recognize these attributes through paid-in-capital.
Income Taxes: Deferred income taxes reflect the net tax effect of temporary differences between the
carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax
purposes, as well as the tax effect of carryforwards. We record a valuation allowance to reduce our deferred tax
assets to the amount that is more likely than not to be realized. Realization of our net deferred tax assets is
dependent on future taxable income. We believe it is more-likely-than-not that such assets will be realized;
however, ultimate realization could be negatively impacted by market conditions and other variables not known
or anticipated at the time. In the event that we determine that we would not be able to realize all or part of our net
deferred tax assets, an adjustment would be charged to earnings in the period such determination is made.
Likewise, if we later determine that it is more-likely-than-not that the deferred tax assets would be realized, then
the previously provided valuation allowance would be reversed.
We recognize the benefit from a tax position only if it is more-likely-than-not that the position would be
sustained upon audit based solely on the technical merits of the tax position. Our policy is to include interest and
penalties related to unrecognized tax benefits as a component of income tax expense. Please refer to Note 15 of
the Notes to the Consolidated Financial Statements for additional information.
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REVISION 12
SERIAL
DATE Tuesday, September 24, 2013
JOB NUMBER 252704
TYPE
PAGE NO. 95
OPERATOR JioMeRD
In addition, the calculation of our tax liabilities involves dealing with uncertainties in the application of
complex tax regulations. We recognize liabilities for uncertain tax positions based on a two-step process. The
first step is to evaluate the tax position for recognition by determining if the weight of available evidence
indicates that it is more-likely-than-not that the position will be sustained on audit, including resolution of related
appeals or litigation processes, if any. The second step requires us to estimate and measure the tax benefit as the
largest amount that is more than 50% likely to be realized upon ultimate settlement. It is inherently difficult and
subjective to estimate such amounts, as this requires us to determine the probability of various possible
outcomes. We reevaluate these uncertain tax positions on a quarterly basis. This evaluation is based on factors
including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues
under audit, and new audit activity. Such a change in recognition or measurement would result in the recognition
of a tax benefit or an additional charge to the tax provision in the period such determination is made.
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.
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 segment 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. We test
goodwill and identifiable intangible assets with indefinite useful lives for impairment at least annually. We
amortize intangible assets with estimable useful lives over their respective estimated useful lives, and we review
for impairment whenever events or changes in circumstances indicate that the carrying amount of the intangible
asset may not be recoverable and the carrying amount exceeds its fair value.
We review goodwill at least annually for impairment. If certain events or indicators of impairment occur
between annual impairment tests, we would perform an impairment test of goodwill at that date. In testing for a
potential impairment of goodwill, we: (1) allocate goodwill to our reporting units to which the acquired goodwill
relates; (2) estimate the fair value of our reporting units; and (3) determine the carrying value (book value) of
those reporting units, as some of the assets and liabilities related to those reporting units are not held by those
reporting units but by a corporate function. Prior to this allocation of the assets to the reporting units, we are
required to assess long-lived assets for impairment. Furthermore, if the estimated fair value of a reporting unit is
less than the carrying value, we must estimate the fair value of all identifiable assets and liabilities of that
reporting unit, in a manner similar to a purchase price allocation for an acquired business. This can require
independent valuations of certain internally generated and unrecognized intangible assets such as in-process
R&D and developed technology. Only after this process is completed can the amount of goodwill impairment, if
any, be determined. Beginning with our fiscal year 2012 goodwill impairment analysis, we adopted new
accounting guidance that allowed us to first assess qualitative factors to determine whether it was necessary to
perform a quantitative analysis. Under the revised guidance, an entity is no longer required to calculate the fair
value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more-likely-
than-not that its fair value is less than its carrying amount. Our most recent annual goodwill impairment analysis,
which was performed as of April 1, 2013, did not result in a goodwill impairment charge, nor did we record any
goodwill impairment in fiscal 2012 or 2011. As a result of historical performance and growth potential, our
Clean systems reporting unit may be at greater risk for goodwill impairment than our other reporting units if our
actual results for this reporting unit differ from our projections.
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REVISION 12
SERIAL
DATE Tuesday, September 24, 2013
JOB NUMBER 252704
TYPE
PAGE NO. 96
OPERATOR JioMeRD
The process of evaluating the potential impairment of goodwill is subjective and requires significant
judgment at many points during the analysis. We determine the fair value of our reporting units by using a
weighted combination of both a market and an income approach, as this combination is deemed to be the most
indicative of fair value in an orderly transaction between market participants.
Under the market approach, we use information regarding the reporting unit as well as publicly available
industry information to determine various financial multiples to value our reporting units. Under the income
approach, we determine fair value based on estimated future cash flows of each reporting unit, discounted by an
estimated weighted-average cost of capital, which reflects the overall level of inherent risk of a reporting unit and
the rate of return an outside investor would expect to earn.
In estimating the fair value of a reporting unit for the purposes of our annual or periodic analyses, we make
estimates and judgments about the future cash flows of our reporting units, including estimated growth rates and
assumptions about the economic environment. Although our cash flow forecasts are based on assumptions that
are consistent with the plans and estimates we are using to manage the underlying businesses, there is significant
judgment involved in determining the cash flows attributable to a reporting unit. In addition, we make certain
judgments about allocating shared assets to the estimated balance sheets of our reporting units. We also consider
our market capitalization and that of our competitors on the date we perform the analysis. Changes in judgment
on these assumptions and estimates could result in a goodwill impairment charge.
As a result, several factors could result in impairment of a material amount of our goodwill balance in future
periods, including, but not limited to: (1) weakening of the global economy, weakness in the semiconductor
equipment industry, or our failure to reach our internal forecasts, which could impact our ability to achieve our
forecasted levels of cash flows and reduce the estimated discounted cash flow value of our reporting units; and
(2) a decline in our stock price and resulting market capitalization, if we determine that the decline is sustained
and indicates a reduction in the fair value of our reporting units below their carrying value. In addition, the value
we assign to intangible assets, other than goodwill, is based on our estimates and judgments regarding
expectations such as the success and life cycle of products and technology acquired. If actual product acceptance
differs significantly from our estimates, we may be required to record an impairment charge to write down the
asset to its realizable value.
Recent Accounting Pronouncements
In June 2011, the Financial Accounting Standards Board (“FASB”) issued new authoritative guidance that
increases the prominence of items reported in other comprehensive income (“OCI”) by eliminating the option to
present components of OCI as part of the statement of changes in stockholders’ equity. The amendments in this
standard require that all non-owner changes in stockholders’ equity be presented either in a single continuous
statement of comprehensive income or in two separate but consecutive statements. We adopted this guidance in
the September 2012 quarter. The implementation of this authoritative guidance did not have an impact on our
financial position or results of operations, but did change the presentation of our financial statements.
In February 2013, the FASB issued an accounting standard update regarding the reporting of amounts
reclassified out of accumulated other comprehensive income. The February 2013 update does not change the
current requirements for reporting net income or other comprehensive income in financial statements. However,
this update requires an entity to present on the face of the financial statements or in the notes amounts
reclassified from each component of accumulated other comprehensive income and the income statement line
items affected by the reclassification. As allowed in the update, the Company elected to early adopt these
disclosure amendments in the quarter ended March 31, 2013. The implementation of this update did not impact
the Company’s financial position, results of operations or cash flows as it was disclosure-only in nature.
In July 2013, the FASB released Accounting Standards Update 2013-11 "Presentation of an Unrecognized
Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists".
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PAGE NO. 97
OPERATOR JioMeRD
The new standard requires that an unrecognized tax benefit should be presented as a reduction of a deferred tax
asset for a net operating loss carryforward or other tax credit carryforward when settlement in this manner is
available under the tax law. We are required to adopt this standard starting fiscal year 2015 and are currently in
the process of determining the impact, if any, on our financial position.
Liquidity and Capital Resources
Total gross cash, cash equivalents, short-term investments, and restricted cash and investments balances
were $2.7 billion at the end of fiscal year 2013 compared to $3.0 billion at the end of fiscal year 2012. This
decrease was primarily due to share repurchases of $956 million, partially offset by cash generated by operations
of $720 million. Approximately $2.0 billion of our total cash and investments as of June 30, 2013 were held
outside the U.S. in our foreign subsidiaries, of which substantially all would be subject to tax at U.S. rates if it
were to be repatriated. Refer to Note 15 of our Consolidated Financial Statements, included in Item 15 of this
report, for information concerning the potential tax impact of repatriating earnings for certain non-U.S.
subsidiaries that are permanently reinvested outside the U.S.
Cash Flows from Operating Activities
Net cash provided by operating activities of $720 million during fiscal year 2013 consisted of (in millions):
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash charges:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . .
Equity-based compensation . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charges, net
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of convertible note discount . . . . . . . . . . . . . . . . .
Impairment of investment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in operating asset and liability accounts . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$113.9
304.1
99.3
1.8
(70.2)
31.6
3.7
200.2
35.5
$719.9
Significant changes in operating asset and liability accounts, net of foreign exchange impact, included the
following sources of cash: decreases in accounts receivable of $162.6 million and inventories of $76.4 million
and an increase in deferred profit of $60.2 million, partially offset by the following uses of cash: decreases in
accounts payable of $58.1 million and accrued liabilities of $43.8 million.
Cash Flows from Investing Activities
Net cash used for investing activities during fiscal year 2013 was $238.6 million which was primarily due to
capital expenditures of $160.8 million and net purchases of available-for-sale securities of $58.4 million.
Cash Flows from Financing Activities
Net cash used for financing activities during fiscal year 2013 was $887.8 million which was primarily due to
$955.7 million in treasury stock repurchases, partially offset by net proceeds from issuance of common stock
related to employee equity-based plans of $70.6 million.
Liquidity
Given the cyclical nature of the semiconductor equipment industry, we believe that maintaining sufficient
liquidity reserves is important to support sustaining levels of investment in R&D and capital infrastructure. Based
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<12345678> JOB TITLE LAM Research Combo
REVISION 12
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DATE Tuesday, September 24, 2013
JOB NUMBER 252704
TYPE
PAGE NO. 98
OPERATOR JioMeRD
upon our current business outlook, we expect that our levels of cash, cash equivalents, and short-term
investments at June 30, 2013 will be sufficient to support our presently anticipated levels of operations,
investments, debt service requirements, and capital expenditures, through at least the next 12 months.
In the longer term, liquidity will depend to a great extent on our future revenues and our ability to
appropriately manage our costs based on demand for our products and services. While we have substantial cash
balances in the United States and offshore, we may require additional funding and need to raise the required
funds through borrowings or public or private sales of debt or equity securities. We believe that, if necessary, we
will be able to access the capital markets on terms and in amounts adequate to meet our objectives. However,
given the possibility of changes in market conditions or other occurrences, there can be no certainty that such
funding will be available in needed quantities or on terms favorable to us.
Off-Balance Sheet Arrangements and Contractual Obligations
We have certain obligations to make future payments under various contracts, some of which are recorded
on our balance sheet and some of which are not. Obligations are recorded on our balance sheet in accordance
with GAAP and include our long-term debt which is outlined in the following table and noted below. Our off-
balance sheet arrangements include contractual relationships and are presented as operating leases and purchase
obligations in the table below. Our contractual cash obligations and commitments as of June 30, 2013, relating to
these agreements and our guarantees are included in the following table. The amounts in the table below exclude
$246.5 million of liabilities related to uncertain tax benefits as we are unable to reasonably estimate the ultimate
amount or time of settlement. See Note 15 of Notes to the Consolidated Financial Statements for further
discussion.
Total
Less than
1 year
Operating Leases . . . . . . . . . . . . . . . . . .
Capital Leases . . . . . . . . . . . . . . . . . . . .
Purchase Obligations . . . . . . . . . . . . . . .
Long-term Debt and Interest
$
39,148
13,981
158,596
$ 14,122
1,849
147,425
1-3
years
(in thousands)
$ 17,815
3,625
9,045
3-5
years
More than
5 years
Sublease
Income
$
$
7,967
8,507
2,126
4,446
—
—
$(5,202)
—
—
Expense* . . . . . . . . . . . . . . . . . . . . . .
2,145,977
26,248
502,215
497,290
1,120,224
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,357,702
$189,644
$532,700
$515,890
$1,124,670
$(5,202)
* The conversion period for the 2041 Notes opened as of June 30, 2013 and as such the net carrying value of the
2041 Notes is included within current liabilities on our Consolidated Balance Sheet. The $700 million
principal balance of the 2041 Notes has been included in the more than 5 years payment period in the table
above, which reflects the contractual maturity assuming no conversion. See Note 13 of our Consolidate
Financial Statements, included in Item 15 of this report, for additional information concerning the 2041 Notes
and associated conversion features.
Operating Leases
We lease most of our administrative, R&D and manufacturing facilities, regional sales/service offices and
certain equipment under non-cancelable operating leases. Certain of our facility leases for buildings located at
our Fremont, California headquarters, Livermore facilities, and certain other facility leases provide us with an
option to extend the leases for additional periods or to purchase the facilities. Certain of our facility leases
provide for periodic rent increases based on the general rate of inflation. In addition to amounts included in the
table above, we have guaranteed residual values for certain of our Fremont and Livermore facility leases of up to
$164.9 million. See Note 14 of Notes to the Consolidated Financial Statements for further discussion.
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OPERATOR JioMeRD
Capital Leases
Capital leases reflect building and office equipment lease obligations. The amounts in the table above
include the interest portion of payment obligations.
Purchase Obligations
Purchase obligations consist of significant contractual obligations either on an annual basis or over multi-
year periods related to our outsourcing activities or other material commitments, including vendor-consigned
inventories. The contractual cash obligations and commitments table presented above contains our minimum
obligations at June 30, 2013 under these arrangements and others. For obligations with cancellation provisions,
the amounts included in the preceding table were limited to the non-cancelable portion of the agreement terms or
the minimum cancellation fee. Actual expenditures will vary based on the volume of transactions and length of
contractual service provided.
Long-Term Debt
On May 11, 2011, we issued and sold $450.0 million in aggregate principal amount of 0.5% convertible
notes due 2016 (the “2016 Notes”) and $450.0 million in aggregate principal amount of 1.25% convertible notes
due 2018 (the “2018 Notes,” and collectively with the “2016 Notes”, the “Notes”). The 2016 Notes were issued
at par and pay interest at a rate of 0.5% per annum and the 2018 Notes were issued at par and pay interest at rate
of 1.25% per annum. The Notes may be converted into our common stock, under certain circumstances, based on
an initial conversion rate of 15.8687 shares of our common stock per $1,000 principal amount of Notes, which is
equal to a conversion price of approximately $63.02 per share of our common stock. The conversion price will be
subject to adjustment in some events but will not be adjusted for accrued interest. Concurrently with the issuance
of the Notes, we purchased convertible note hedges for $181.1 million and sold warrants for $133.8 million. The
separate convertible note hedges and warrant transactions are structured to reduce the potential future economic
dilution associated with the conversion of the Notes.
In June 2012, with the acquisition of Novellus, we assumed $700 million in aggregate principal amount of
2.625% Convertible Senior Notes due May 2041 (the “2041 Notes”). The 2041 Notes were issued at par and pay
interest at a rate of 2.625% per annum. The 2041 Notes may be converted, under certain circumstances, into our
common stock based on an initial conversion rate of 28.4781 shares of common stock per $1,000 principal
amount of notes, which represents an initial conversion price of approximately $35.11 per share of common
stock.
During fiscal year 2013, 2012, and 2011 we made $2.2 million, $5.3 million, and $4.5 million, respectively,
in principal payments on long-term debt and capital leases, respectively.
Other Guarantees
We have issued certain indemnifications to our lessors for taxes and general liability under some of our
agreements. We have entered into certain insurance contracts that may limit our exposure to such
indemnifications. As of June 30, 2013, we had not recorded any liability on our Consolidated Financial
Statements in connection with these indemnifications, as we do not believe, based on information available, that
it is probable that we will pay any amounts under these guarantees.
Generally, we indemnify, under pre-determined conditions and limitations, our customers for infringement
of third-party intellectual property rights by our products or services. We seek to limit our liability for such
indemnity to an amount not to exceed the sales price of the products or services subject to its indemnification
obligations. We do not believe, based on information available, that it is probable that we will pay any material
amounts under these guarantees.
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OPERATOR JioMeRD
We provide guarantees and standby letters of credit to certain parties as required for certain transactions
initiated during the ordinary course of business. As of June 30, 2013, the maximum potential amount of future
payments that we could be required to make under these arrangements and letters of credit was $15.0 million. We
do not believe, based on historical experience and information currently available, that it is probable that any
amounts will be required to be paid.
Warranties
We offer standard warranties on our 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.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Investments
We maintain an investment portfolio of various holdings, types, and maturities. As of June 30, 2013, our
mutual funds are classified as trading securities. Investments classified as trading securities are recorded at fair
value based upon quoted market prices. Any material differences between the cost and fair value of trading
securities is recognized as “Other income (expense)” in our Consolidated Statement of Operations. All of our
other short-term investments are classified as available-for-sale and consequently are recorded in the
Consolidated Balance Sheets at fair value with unrealized gains or losses reported as a separate component of
accumulated other comprehensive income, net of tax.
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Interest Rate Risk
Fixed Income Securities
Our investments in various interest earning securities carry a degree of market risk for changes in interest
rates. At any time, a sharp rise in interest rates could have a material adverse impact on the fair value of our fixed
income investment portfolio. Conversely, declines in interest rates could have a material adverse impact on
interest income for our investment portfolio. We target to maintain a conservative investment policy, which
focuses on the safety and preservation of our capital by limiting default risk, market risk, reinvestment risk, and
concentration risk. The following table presents the hypothetical fair values of fixed income securities that would
result from selected potential decreases and increases in interest rates. Market changes reflect immediate
hypothetical parallel shifts in the yield curve of plus or minus 50 basis points (“BPS”), 100 BPS, and 150 BPS.
The hypothetical fair values as of June 30, 2013 were as follows:
Valuation of Securities
Given an Interest Rate
Decrease of X Basis Points
Fair Value as of
June 30, 2013
Valuation of Securities
Given an Interest Rate
Increase of X Basis Points
(150 BPS)
(100 BPS)
(50 BPS)
0.00%
50 BPS
100 BPS
150 BPS
(in thousands)
Municipal Notes and
Bonds . . . . . . . . . . . . $ 273,239 $ 271,741 $ 270,243 $ 268,746 $ 267,248 $ 265,750 $ 264,252
US Treasury &
Agencies . . . . . . . . .
Government-Sponsored
Enterprises . . . . . . . .
Foreign Government
159,745
158,261
156,778
155,293
153,811
152,327
150,843
55,937
55,560
55,182
54,805
54,427
54,049
53,671
Bond . . . . . . . . . . . .
25,450
25,291
25,131
24,972
24,813
24,654
24,495
Corporate Notes and
Bonds . . . . . . . . . . . .
874,596
869,895
865,194
860,492
855,790
851,089
846,388
Mortgage Backed
Securities -
Residential . . . . . . . .
Mortgage Backed
Securities -
Commercial . . . . . . .
28,544
28,151
27,758
27,365
26,972
26,579
26,186
110,105
109,389
108,673
107,958
107,241
106,525
105,809
Total . . . . . . . . . . . . . . . $1,527,616 $1,518,288 $1,508,959 $1,499,631 $1,490,302 $1,480,973 $1,471,644
We mitigate default risk by investing in high credit quality securities and by positioning our portfolio to
respond appropriately to a significant reduction in a credit rating of any investment issuer or guarantor. The
portfolio includes only marketable securities with active secondary or resale markets to achieve portfolio
liquidity and maintain a prudent amount of diversification.
Long-Term Debt
As of June 30, 2013, we had $1.6 billion in principal amount of fixed-rate long-term debt outstanding, with
a fair value of $2.0 billion. The fair value of our Notes is subject to interest rate risk, market risk and other
factors due to the convertible feature. Generally, the fair value of Notes will increase as interest rates fall and/or
our common stock price increases, and decrease as interest rates rise and/or our common stock price decreases.
The interest and market value changes affect the fair value of our Notes but do not impact our financial position,
cash flows, or results of operations due to the fixed nature of the debt obligations. We do not carry the Notes at
fair value, but present the fair value of the principal amount of our Notes for disclosure purposes.
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Equity Price Risk
Publicly Traded Securities
The values of our investments in publicly traded securities, including mutual funds related to our obligations
under our deferred compensation plans, are subject to market price risk. The following table presents the
hypothetical fair values of our publicly traded securities that would result from selected potential decreases and
increases in the price of each security in the portfolio. Potential fluctuations in the price of each security in the
portfolio of plus or minus 10%, 15%, or 25% were selected based on potential near-term changes in those
security prices. The hypothetical fair values as of June 30, 2013 were as follows:
Valuation of Securities
Given an X% Decrease
in Stock Price
Fair Value as of
June 30, 2013
Valuation of Securities
Given an X% Increase
in Stock Price
(25%)
(15%)
(10%)
0.00%
10%
15%
25%
$13,662
$15,484
$16,394
(in thousands)
$18,216
$20,038
$20,948
$22,770
Mutual Funds . . . . . . . . . . . . . . . .
Publicly traded equity
securities . . . . . . . . . . . . . . . . .
$ 5,322
$ 6,032
$ 6,386
Total . . . . . . . . . . . . . . . . . . . . . . .
$18,984
$21,515
$22,781
$ 7,096
$25,312
$ 7,806
$ 8,160
$ 8,870
$27,843
$29,109
$31,640
Foreign Currency Exchange (“FX”) Risk
We conduct business on a global basis in several major international currencies. As such, we are potentially
exposed to adverse as well as beneficial movements in foreign currency exchange rates. The majority of our
revenues and expenses are denominated in U.S. dollars. However, we are exposed to foreign currency exchange
rate fluctuations primarily related to revenues denominated in Japanese yen and euro-denominated expenses.
Currently, we enter into foreign currency forward contracts to minimize the short-term impact of foreign
currency exchange rate fluctuations on certain foreign currency denominated monetary assets and liabilities,
primarily third party accounts receivables, accounts payables and intercompany receivables and payables. In
addition, we hedge certain anticipated foreign currency cash flows, primarily on Japanese yen-denominated
revenues and euro-denominated expenses. We currently believe these are our primary exposures to currency rate
fluctuation.
To protect against the reduction in value of anticipated revenues denominated in Japanese yen-and euro-
denominated expenses, we enter into foreign currency forward contracts that generally expire within 12 months,
and no later than 24 months. These foreign currency forward contracts are designated as cash flow hedges and
are carried on our balance sheet at fair value, with the effective portion of the contracts’ gains or losses included
in accumulated other comprehensive income (loss) and subsequently recognized in earnings in the same period
the hedged revenue and/or expense is recognized. We also enter into foreign currency forward contracts to hedge
the gains and losses generated by the remeasurement of certain non-U.S.-dollar denominated monetary assets and
liabilities, primarily third party accounts receivables, accounts payables and intercompany receivables and
payables. The change in fair value of these balance sheet hedge contracts is recorded into earnings as a
component of other income (expense), net and offsets the change in fair value of the foreign currency
denominated monetary assets and liabilities also recorded in other income (expense), net, assuming the hedge
contract fully covers the intercompany and trade receivable balances. The notional amount and unrealized gain of
our outstanding forward contracts that are designated as cash flow hedges, as of June 30, 2013 are shown in the
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table below. This table also shows the change in fair value of these cash flow hedges assuming a hypothetical
foreign currency exchange rate movement of plus-or-minus 10 percent and plus-or-minus 15 percent.
Notional
Amount
Unrealized FX
Gain / (Loss)
June 30, 2013
Valuation of Fx Contracts Given an X%
Increase (+)/Decrease(-) in Each Fx
Rate
+ / - (10%)
+ / - (15%)
(in $ Millions)
Cash Flow Hedge
Sell
. . . . . . . . . . . . . .
Buy . . . . . . . . . . . . . .
Japanese Yen
Euro
$137.3
$ 59.9
$1.5
$1.8
$3.3
$13.6
$ 6.1
$19.7
$20.3
$ 9.2
$29.5
The notional amount and unrealized loss of our outstanding foreign currency forward contracts that are
designated as balance sheet hedges, as of June 30, 2013 are shown in the table below. This table also shows the
change in fair value of these balance sheet hedges, assuming a hypothetical foreign currency exchange rate
movement of plus-or-minus 10 percent and plus-or-minus 15 percent. These changes in fair values would be
offset in other income (expense), net, by corresponding change in fair values of the foreign currency
denominated monetary assets and liabilities, assuming the hedge contract fully covers the intercompany and trade
receivable balances.
Notional
Amount
Unrealized FX
Gain / (Loss)
June 30, 2013
Valuation of Fx Contracts Given an X%
Increase (+)/Decrease(-) in Each Fx
Rate
+ / - (10%)
+ / - (15%)
(in $ Millions)
Balance Sheet Hedge
Sell . . . . . . . . . . . . . . . . . . .
Japanese Yen $ 97.4
Sell . . . . . . . . . . . . . . . . . . .
Euro $
0.8
Korean Won $ 14.1
Buy . . . . . . . . . . . . . . . . . . .
Buy . . . . . . . . . . . . . . . . . . . Taiwan Dollar $120.6
Swiss Francs $ 17.1
Buy . . . . . . . . . . . . . . . . . . .
$ 0.0
$ 0.0
$ 0.0
$(0.5)
$ 0.0
$(0.5)
$ 9.7
$ 0.1
$ 1.4
$12.0
$ 1.7
$24.9
$14.6
$ 0.1
$ 2.1
$18.1
$ 2.6
$37.5
Item 8.
Financial Statements and Supplementary Data
The Consolidated Financial Statements required by this Item are set forth on the pages indicated in
Item 15(a). The unaudited quarterly results of our operations for our two most recent fiscal years are incorporated
in this Item by reference under Item 6, “Selected Financial Data” above.
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), as of June 30, 2013, we carried out an evaluation, under the supervision and with the participation of our
management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures as defined in Rule 13a-15(e). Based upon that
evaluation, our Chief Executive Officer and our Chief Financial Officer each concluded that our disclosure
controls and procedures are effective at the reasonable assurance level.
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We intend to review and evaluate the design and effectiveness of our disclosure controls and procedures on
an ongoing basis and to correct any material deficiencies that we may discover. Our goal is to ensure that our
senior management has timely access to material information that could affect our business.
Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial reporting during our most recent fiscal
quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial
reporting.
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate “internal control over financial
reporting”, as that term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Management has used the
framework set forth in the report entitled “Internal Control — Integrated Framework” published by the
Committee of Sponsoring Organizations of the Treadway Commission to evaluate the effectiveness of the
Company’s internal control over financial reporting. Based on that evaluation, management has concluded that
the Company’s internal control over financial reporting was effective as of June 30, 2013 at providing reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with GAAP.
Ernst & Young LLP, an independent registered public accounting firm, has audited the Company’s internal
control over financial reporting, as stated in their report, which is included in Part IV, Item 15 of this 2013
Form 10-K.
Effectiveness of Controls
While we believe the present design of our disclosure controls and procedures and internal control over
financial reporting is effective at the reasonable assurance level, future events affecting our business may cause
us to modify our disclosure controls and procedures or internal controls over financial reporting. The
effectiveness of controls cannot be absolute because the cost to design and implement a control to identify errors
or mitigate the risk of errors occurring should not outweigh the potential loss caused by the errors that would
likely be detected by the control. Moreover, we believe that a control system cannot be guaranteed to be 100%
effective all of the time. Accordingly, a control system, no matter how well designed and operated, can provide
only reasonable, not absolute, assurance that the control system’s objectives will be met.
Item 9B. Other Information
None.
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PART III
We have omitted from this 2013 Form 10-K certain information required by Part III because we, as the
Registrant, will file a definitive proxy statement with the Securities and Exchange Commission (SEC) within
120 days after the end of our fiscal year, pursuant to Regulation 14A, as promulgated by the SEC, for our Annual
Meeting of Stockholders expected to be held on or about November 7, 2013 (the “Proxy Statement”), and certain
information included in the Proxy Statement is incorporated into this report by reference. (However, the Reports
of the Audit Committee and Compensation Committee in the Proxy Statement are expressly not incorporated by
reference into this report.)
Item 10.
Directors, Executive Officers, and Corporate Governance
For information regarding our executive officers, see Part I, Item 1 of this 2013 Form 10-K under the
caption “Executive Officers of the Company,” which information is incorporated into Part III by reference.
The information concerning our directors required by this Item is incorporated by reference to our Proxy
Statement under the heading “Proposal No. 1 — Election of Directors.”
The information concerning our audit committee and audit committee financial experts required by this Item
is incorporated by reference to our Proxy Statement under the heading “Corporate Governance.”
The information concerning compliance by our officers, directors and 10% shareholders with Section 16 of
the Exchange Act required by this Item is incorporated by reference to our Proxy Statement under the heading
“Section 16(a) Beneficial Ownership Reporting Compliance.”
The Company has adopted a Corporate Code of Ethics that applies to all employees, officers, and directors
of the Company. Our Code of Ethics is publicly available on the investor relations page of our website at http://
investor.lamresearch.com. To the extent required by law, any amendments to, or waivers from, any provision of
the Code of Ethics will promptly be disclosed to the public. To the extent permitted by applicable legal
requirements, we intend to make any required public disclosure by posting the relevant material on our website in
accordance with SEC rules.
Item 11.
Executive Compensation
The information required by this Item is incorporated by reference to our Proxy Statement under the heading
“Executive Compensation and Other Information.”
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
The information required by this Item is incorporated by reference to our Proxy Statement under the
headings “Proposal No. 1 — Election of Directors,” “Compensation Committee Interlocks and Insider
Participation,” “Compensation Committee Report,” “Security Ownership of Certain Beneficial Owners and
Management” and “Securities Authorized for Issuance Under Equity Compensation Plans.”
Item 13.
Certain Relationships and Related Transactions, and Director Independence
The information required by this Item is incorporated by reference to our Proxy Statement under the
headings “Certain Relationships and Related Transactions” and “Corporate Governance”.
Item 14.
Principal Accounting Fees and Services
The information required by this Item is incorporated by reference to our Proxy Statement under the heading
“Relationship with Independent Registered Public Accounting Firm.”
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PAGE NO. 106
OPERATOR JioMeRD
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a) The following documents are filed as part of this Annual Report on Form 10-K
1. Index to Financial Statements
Consolidated Balance Sheets — June 30, 2013 and June 24, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations — Years Ended June 30, 2013, June 24, 2012 , and June 26,
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Other Comprehensive Income — Years Ended June 30, 2013, June 24,
2012, and June 26, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows — Years Ended June 30, 2013, June 24, 2012, and
June 26, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Stockholders’ Equity — Years Ended June 30, 2013, June 24, 2012,
and June 26, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reports of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2. Index to Financial Statement Schedules
Page
53
54
55
56
57
58
98
Schedule II — Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
103
Schedules, other than those listed above, have been omitted since they are not applicable/not
required, or the information is included elsewhere herein.
3. See (b) of this Item 15, which is incorporated herein by reference.
(b) The list of Exhibits follows page 104 of this 2013 Form 10-K and is incorporated herein by this
reference.
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LAM RESEARCH CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, less allowance for doubtful accounts of $5,448 as of June 30,
2013 and $5,248 as of June 24, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash and investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
June 30,
2013
June 24,
2012
$ 1,162,473
1,334,745
$ 1,564,752
1,297,931
602,624
559,317
27,674
106,996
3,793,829
603,910
166,536
1,452,196
1,074,345
159,499
765,818
632,853
47,782
105,973
4,415,109
584,596
166,335
1,446,303
1,240,427
151,882
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 7,250,315
$ 8,004,652
LIABILITIES AND STOCKHOLDERS' EQUITY
Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred profit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of long-term debt, convertible notes, and capital leases . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt, convertible notes, and capital leases . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
200,254
464,528
225,038
514,655
1,404,475
789,256
246,479
134,313
$
258,778
492,178
164,833
511,139
1,426,928
761,783
274,240
219,577
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,574,523
2,682,528
Commitments and contingencies
Senior convertible notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stockholders' equity:
Preferred stock, at par value of $0.001 per share; authorized - 5,000 shares, none
outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock, at par value of $0.001 per share; authorized - 400,000 shares; issued
and outstanding - 162,873 shares at June 30, 2013 and 186,656 shares at
June 24, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock, at cost, 89,205 shares at June 30, 2013 and 62,068 shares at
186,920
190,343
—
—
163
5,084,544
187
4,943,539
June 24, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3,539,830)
(28,693)
2,972,688
(2,636,936)
(33,818)
2,858,809
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,488,872
5,131,781
Total liabilities and stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 7,250,315
$ 8,004,652
See Notes to Consolidated Financial Statements
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LAM RESEARCH CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
June 30,
2013
Year Ended
June 24,
2012
June 26,
2011
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,598,916
2,195,857
$2,665,192
1,581,123
$3,237,693
1,740,461
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development
Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charges, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,403,059
683,688
599,487
1,813
1,084,069
444,559
400,052
1,725
1,497,232
373,293
308,075
11,579
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,284,988
846,336
692,947
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense (benefit)
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
118,071
(51,413)
66,658
(47,221)
237,733
(33,315)
204,418
35,695
804,285
(3,409)
800,876
77,128
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 113,879
$ 168,723
$ 723,748
Net income per share:
Basic net income per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted net income per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
0.67
0.66
$
$
1.36
1.35
$
$
5.86
5.79
Number of shares used in per share calculations:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
168,932
124,176
123,529
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
173,430
125,233
125,019
See Notes to Consolidated Financial Statements
54
<12345678> JOB TITLE LAM Research Combo
REVISION 12
SERIAL
DATE Tuesday, September 24, 2013
JOB NUMBER 252704
TYPE
PAGE NO. 109
OPERATOR JioMeRD
LAM RESEARCH CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Year Ended
June 30,
2013
June 24,
2012
June 26,
2011
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$113,879
$168,723 $723,748
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment
Cash flow hedges:
. . . . . . . . . . . . . . . . . . . . . . . . . .
5,303
(37,332)
80,695
Net unrealized gains (losses) during the period . . . . . . . . . . . . . . . . .
Net losses (gains) reclassified into earnings . . . . . . . . . . . . . . . . . . .
Available-for-sale investments:
Net unrealized gains (losses) during the period . . . . . . . . . . . . . . . . .
Net losses (gains) reclassified into earnings . . . . . . . . . . . . . . . . . . .
Defined benefit plans, net change in unrealized component . . . . . . . . . . .
10,607
(7,573)
3,034
(3,844)
4,137
293
(3,505)
(9,342)
8,549
(793)
(204)
(849)
(1,053)
(4,401)
(5,134)
5,716
582
185
(666)
(481)
(1,186)
Other comprehensive income (loss), net of tax . . . . . . . . . . . . . . . . . . . . . . . . .
5,125
(43,579)
79,610
Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$119,004
$125,144 $803,358
See Notes to Consolidated Financial Statements
55
<12345678> JOB TITLE LAM Research Combo
REVISION 12
SERIAL
DATE Tuesday, September 24, 2013
JOB NUMBER 252704
TYPE
PAGE NO. 110
OPERATOR JioMeRD
LAM RESEARCH CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charges, net
Impairment of investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax benefit on equity-based compensation plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefit on equity-based compensation plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of convertible note discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in operating asset and liability accounts:
Accounts receivable, net of allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred profit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended
June 30,
2013
June 24,
2012
June 26,
2011
$
113,879
$ 168,723
$ 723,748
304,116
(70,155)
1,813
3,711
99,330
(483)
539
31,558
35,388
162,634
76,351
2,880
(58,081)
60,205
(43,752)
100,825
42,446
866
1,724
81,559
1,510
(2,686)
27,028
10,877
66,064
73,987
43,171
12,145
(9,236)
(119,975)
74,759
(10,721)
11,579
—
53,012
28,775
(23,290)
3,554
(2,341)
(89,716)
(77,461)
(25,282)
42,320
34,012
138,080
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
719,933
499,028
881,028
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures and intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash acquired in (paid for) business acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales and maturities of available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of equity method and other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receipt of loan payments (loans made) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfer of restricted cash and investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(160,795)
(9,916)
(1,097,956)
1,039,551
—
(10,000)
660
(181)
(107,272)
418,681
(883,429)
841,440
(10,740)
8,375
2,677
(6)
(127,495)
—
(564,485)
210,962
(417)
—
1,544
(22)
Net cash provided by (used for) investing activities . . . . . . . . . . . . . . . . . . . . . . . . .
(238,637)
269,726
(479,913)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt and capital lease obligations . . . . . . . . . . . . . . . . . . . . . . . . .
Net proceeds from issuance of long-term debt & convertible notes . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of convertible note hedge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefit on equity-based compensation plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash received in settlement of (paid in advance for) stock repurchase contracts . . . . . . . . . . . .
Reissuances of treasury stock related to employee stock purchase plan . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2,234)
—
—
—
(539)
(955,661)
—
31,265
39,379
(5,265)
—
—
—
2,686
(772,663)
55,194
25,525
1,776
Net cash provided by (used for) financing activities . . . . . . . . . . . . . . . . . . . . . . . . .
(887,790)
(692,747)
Effect of exchange rate changes on cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,215
(402,279)
1,564,752
(3,387)
72,620
1,492,132
(4,530)
882,831
133,830
(181,125)
23,290
(211,316)
(149,589)
21,194
12,401
526,986
18,264
946,365
545,767
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,162,473
$1,564,752
$1,492,132
Schedule of noncash transactions
Accrued payables for stock repurchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplemental disclosures:
Cash payments for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash payments for income taxes, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
— $
20,853
26,635
7,695
$
$
8,246
29,113
$
$
$
—
232
70,774
See Notes to Consolidated Financial Statements
56
<12345678> JOB TITLE LAM Research Combo
REVISION 12
SERIAL
DATE Tuesday, September 24, 2013
JOB NUMBER 252704
TYPE
PAGE NO. 111
OPERATOR JioMeRD
LAM RESEARCH CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
Balance at June 27, 2010 . . . . . . . . . . . . . . 125,946
$126
$1,452,939 $(1,581,417)
$(69,849)
$1,966,336 $1,768,135
Common
Stock
Shares
Common
Stock
Additional
Paid-in
Capital
Treasury
Stock
Accumulated
Other
Comprehensive
Income(Loss)
Retained
Earnings
Total
Sale of common stock . . . . . . . . . . . . . . . .
Purchase of treasury stock . . . . . . . . . . . . .
Income tax benefit on equity-based
compensation plans . . . . . . . . . . . . . . . .
Reissuance of treasury stock . . . . . . . . . . .
Equity-based compensation expense . . . . .
Issuance of convertible notes . . . . . . . . . .
Sale of warrants . . . . . . . . . . . . . . . . . . . . .
Purchase of convertible note hedge . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income . . . . . . . . . .
Balance at June 26, 2011 . . . . . . . . . . . . . . 123,579
1,513
Sale of common stock . . . . . . . . . . . . . . . .
Purchase of treasury stock . . . . . . . . . . . . . (21,946)
Income tax benefit on equity-based
compensation plans . . . . . . . . . . . . . . . .
Reissuance of treasury stock . . . . . . . . . . .
Equity-based compensation expense . . . . .
Shares issued as acquisition
—
821
—
consideration . . . . . . . . . . . . . . . . . . . . . 82,689
—
—
—
—
Acquisition of convertible debt . . . . . . . . .
Exercise of convertible note . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income . . . . . . . . . .
Balance at June 24, 2012 . . . . . . . . . . . . . . 186,656
Sale of common stock . . . . . . . . . . . . . . . .
3,301
Purchase of treasury stock . . . . . . . . . . . . . (28,157)
Income tax benefit on equity-based
compensation plans . . . . . . . . . . . . . . . .
Reissuance of treasury stock . . . . . . . . . . .
Equity-based compensation expense . . . . .
Reclassification from temporary to
permanent equity . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income . . . . . . . . . .
—
1,073
—
—
—
—
—
—
1
83
—
—
—
—
187
3
(28)
—
1
—
—
—
—
1,744
(4,790)
2
(5)
12,404
(149,589)
—
(197,840)
—
—
—
12,406
— (347,434)
—
679
—
—
—
—
—
—
—
1
—
—
—
—
—
—
124
28,775
3,549
53,012
110,655
133,830
(114,110)
—
—
—
17,666
—
—
—
—
—
—
—
—
—
—
—
—
—
79,610
—
28,775
21,218
2
53,012
—
110,655
—
—
133,830
— (114,110)
723,748
79,610
723,748
—
1,531,465 (1,761,591)
9,761
2,690,086 2,469,845
1
(22)
1,767
158,673
—
(896,971)
1,510
3,899
81,559
—
21,626
—
—
—
—
—
—
1,768
—
— (738,320)
—
—
—
1,510
25,526
81,559
3,026,905
137,783
(22)
—
—
—
—
—
—
—
—
—
—
—
(43,579)
— 3,026,988
137,783
—
(22)
—
168,723
(43,579)
168,723
—
4,943,539 (2,636,936)
(33,818)
2,858,809 5,131,781
39,377
—
—
(934,780)
(483)
(622)
99,310
3,423
—
—
—
31,886
—
—
—
—
—
—
—
—
—
—
39,380
— (934,808)
—
—
—
(483)
31,265
99,310
—
—
5,125
—
113,879
—
3,423
113,879
5,125
Balance at June 30, 2013 . . . . . . . . . . . . . . 162,873
$163
$5,084,544 $(3,539,830)
$(28,693)
$2,972,688 $4,488,872
See Notes to Consolidated Financial Statements
57
<12345678> JOB TITLE LAM Research Combo
REVISION 12
SERIAL
DATE Tuesday, September 24, 2013
JOB NUMBER 252704
TYPE
PAGE NO. 112
OPERATOR JioMeRD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2013
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 wafers are subjected to a complex series
of process and preparation steps that result in the simultaneous creation of many individual integrated circuits.
The Company leverages its expertise in the areas of etch, deposition, and single-wafer clean to develop
processing solutions that typically benefit its customers through lower defect rates, enhanced yields, faster
processing time, and reduced cost.
The Company sells its products and services primarily to companies involved in the production of
semiconductors in North America, Europe, Taiwan, Korea, Japan, and other countries in Asia Pacific.
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 2013, 2012, and 2011 may not necessarily be
indicative of future operating results.
Note 2: Summary of Significant Accounting Policies
The preparation of financial statements, in conformity with U.S. Generally Accepted Accounting Principles
(“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 we believed to be applicable, and evaluated them on an on-going basis to
ensure they remain reasonable under current conditions. Actual results could differ significantly from those
estimates.
Revenue Recognition: The Company recognizes revenue when persuasive evidence of an arrangement
exists, delivery has occurred and title has passed or services have been rendered, the selling price is fixed or
determinable, collection of the receivable is reasonably assured, and the Company has received customer
acceptance, completed its system installation obligations, or is otherwise released from its installation or
customer acceptance obligations. If terms of the sale provide for a lapsing customer acceptance period, the
Company recognizes revenue upon the expiration of the lapsing acceptance period or customer acceptance,
whichever occurs first. If the practices of a customer do not provide for a written acceptance or the terms of sale
do not include a lapsing acceptance provision, the Company recognizes revenue when it can be reliably
demonstrated that the delivered system meets all of the agreed-to customer specifications. In situations with
multiple deliverables, revenue is recognized upon the delivery of the separate elements to the customer and when
the Company receives customer acceptance or is otherwise released from its customer acceptance obligations.
Revenue from multiple-element arrangements is allocated among the separate elements based on their relative
selling prices, provided the elements have value on a stand-alone basis. Our sales arrangements do not include a
general right of return. The maximum revenue recognized on a delivered element is limited to the amount that is
not contingent upon the delivery of additional items. Revenue related to sales of spare parts and system upgrade
kits is generally recognized upon shipment. Revenue related to services is generally recognized upon completion
of the services requested by a customer order. Revenue for extended maintenance service contracts with a fixed
payment amount is recognized on a straight-line basis over the term of the contract. When goods or services have
58
<12345678> JOB TITLE LAM Research Combo
REVISION 12
SERIAL
DATE Tuesday, September 24, 2013
JOB NUMBER 252704
TYPE
PAGE NO. 113
OPERATOR JioMeRD
been delivered to the customer but all conditions for revenue recognition have not been met, the Company defers
revenue recognition until customer acceptance and records the deferred revenue and/or deferred costs of sales in
deferred profit on the Consolidated Balance Sheet.
Inventory Valuation: Inventories are stated at the lower of cost or market using standard costs which
generally approximate actual costs on a first-in, first-out basis. The Company maintains a perpetual inventory
system and continuously records the quantity on-hand and standard cost for each product, including purchased
components, subassemblies, and finished goods. The Company maintains the integrity of perpetual inventory
records through periodic physical counts of quantities on hand. Finished goods are reported as inventories until
the point of title transfer to the customer. Transfer of title for shipments to Japanese customers generally occurs
at time of customer acceptance.
Standard costs are reassessed as needed but annually at a minimum, and reflect acquisition costs.
Acquisition costs are generally based on the most recent vendor contract prices for purchased parts, normalized
assembly and test labor utilization levels, methods of manufacturing, and normalized overhead. Manufacturing
labor and overhead costs are attributed to individual product standard costs at a level planned to absorb spending
at average utilization volumes.
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 requirements over the next 12 to 36 months 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, possible alternative uses, and ultimate realization of
excess inventory. 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 sales in the
period the revision is made.
Warranty: Typically, the sale of semiconductor capital equipment includes providing parts and service
warranty 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
upon revenue recognition. The amount recorded is based on an analysis of historical activity which uses factors
such as type of system, customer, geographic region, and any known factors such as tool reliability trends. All
actual or estimated parts and labor costs incurred in subsequent periods are charged to those established reserves
on a system-by-system basis.
Actual warranty expenses are accounted for on a system-by-system basis and may differ from the
Company’s original estimates. 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 Purchase Plan (“ESPP”) and Employee Stock Plans: The
Company recognizes the fair value of equity-based awards as employee compensation expense. The fair value of
the Company’s restricted stock units was calculated based upon the fair market value of Company stock at the
date of grant. The fair value of the Company’s stock options and ESPP awards was estimated using a Black-
Scholes option valuation model. This model requires the input of highly subjective assumptions, including
expected stock price volatility and the estimated life of each award. The fair value of equity-based awards is
amortized over the vesting period of the award and the Company has elected to use the straight-line method of
amortization.
59
<12345678> JOB TITLE LAM Research Combo
REVISION 12
SERIAL
DATE Tuesday, September 24, 2013
JOB NUMBER 252704
TYPE
PAGE NO. 114
OPERATOR JioMeRD
Income Taxes: Deferred income taxes reflect the net 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 the Company’s 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 the time. In the event that the Company determines that it would not be able
to realize all or part of its net deferred tax assets, an adjustment would be charged to earnings in the period such
determination is made. Likewise, if the Company later determined that it is more-likely-than-not that the deferred
tax assets would be realized, then the previously provided valuation allowance would be reversed.
The Company recognizes the benefit from a tax position only if it is more-likely-than-not that the position
would be sustained upon audit based solely on the technical merits of the tax position. Our policy is to include
interest and penalties related to unrecognized tax benefits as a component of income tax expense. The Company
must make certain estimates and judgments in determining income tax expense for financial statement purposes.
These estimates and judgments occur in the calculation of tax credits, benefits, and deductions, and in the
calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of
revenue and expense for tax and financial statement purposes, as well as the interest and penalties relating to
these uncertain tax positions. Significant changes to these estimates may result in an increase or decrease to our
tax provision in a subsequent period.
In addition, the calculation of the Company’s tax liabilities involves uncertainties in the application of complex
tax regulations. The Company recognizes liabilities for uncertain tax positions based on the two-step process. The
first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates
that it is more-likely-than-not that the position will be sustained on tax audit, including resolution of related appeals
or litigation processes, if any. The second step requires the Company to estimate and measure the tax benefit as the
largest amount that is more-likely-than-not to be realized upon ultimate settlement. It is inherently difficult and
subjective to estimate such amounts, as this requires us to determine the probability of various possible outcomes.
The Company reevaluates these uncertain tax positions on a quarterly basis. This evaluation is based on factors
including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under
audit, and new audit activity. Such a change in recognition or measurement would result in the recognition of a tax
benefit or an additional charge to the tax provision in the period such determination is made.
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.
Goodwill represents the amount by which the purchase price of a 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 segment 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 tests goodwill and
identifiable intangible assets with indefinite useful lives for impairment at least annually. The value intangible assets
with estimable useful lives is amortized over their respective estimated useful lives, and the Company reviews for
impairment whenever events or changes in circumstances indicate that the carrying amount of the intangible asset
may not be recoverable and the carrying amount exceeds its fair value.
60
<12345678> JOB TITLE LAM Research Combo
REVISION 12
SERIAL
DATE Tuesday, September 24, 2013
JOB NUMBER 252704
TYPE
PAGE NO. 115
OPERATOR JioMeRD
The Company reviews goodwill at least annually for impairment. Should certain events or indicators of
impairment occur between annual impairment tests, the Company would perform an impairment test of goodwill
at that date. In testing for a potential impairment of goodwill, the Company: (1) allocates goodwill to our
reporting units to which the acquired goodwill relates; (2) estimates the fair value of its reporting units; and
(3) determines the carrying value (book value) of those reporting units. Prior to this allocation of the assets to the
reporting units, the Company is required to assess long-lived assets for impairment. Furthermore, if the estimated
fair value of a reporting unit is less than the carrying value, the Company must estimate the fair value of all
identifiable assets and liabilities of that reporting unit, in a manner similar to a purchase price allocation for an
acquired business. This can require independent valuations of certain internally generated and unrecognized
intangible assets such as in-process research and development and developed technology. Only after this process
is completed can the amount of goodwill impairment, if any, be determined. Beginning with its fiscal year 2012
goodwill impairment analysis, the Company adopted new accounting guidance that allowed it to first assess
qualitative factors to determine whether it was necessary to perform a quantitative analysis. Under the revised
guidance, an entity no longer required to calculate the fair value of a reporting unit unless the entity determines,
based on a qualitative assessment, that it is more-likely-than-not that its fair value is less than its carrying
amount. The Company did not record impairments of goodwill during the years ended June 30, 2013, June 24,
2012, or June 26, 2011.
The process of evaluating the potential impairment of goodwill is subjective and requires significant
judgment at many points during the analysis. The Company determines the fair value of its reporting units by
using a weighted combination of both a market and an income approach, as this combination is deemed to be the
most indicative of our fair value in an orderly transaction between market participants.
Under the market approach, the Company utilizes information regarding the reporting unit as well as
publicly available industry information to determine various financial multiples to value our reporting units.
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 for the purposes of the Company’s annual or periodic
analyses, 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 our reporting units. The Company also considers its market capitalization and
that of its competitors on the date it performs the analysis. Changes in judgment on these assumptions and
estimates could result in a goodwill impairment charge.
As a result, several factors could result in impairment of a material amount of the Company’s goodwill
balance in future periods, including, but not limited to: (1) weakening of the global economy, weakness in the
semiconductor equipment industry, or failure of the Company to reach its internal forecasts, which could impact
the Company’s ability to achieve its forecasted levels of cash flows and reduce the estimated discounted cash
flow value of its reporting units; and (2) a decline in the Company’s stock price and resulting market
capitalization, if the Company determines that the decline is sustained and indicates a reduction in the fair value
of the Company’s reporting units below their carrying value. Further, the value assigned to intangible assets,
other than goodwill, is based on estimates and judgments regarding expectations such as the success and life
cycle of products and technology acquired. If actual product acceptance differs significantly from the estimates,
the Company may be required to record an impairment charge to write down the asset to its realizable value.
Fiscal Year: The Company follows a 52/53-week fiscal reporting calendar, and its fiscal year ends on the
last Sunday of June each year. The Company’s most recent fiscal year ended on June 30, 2013 and included 53
61
<12345678> JOB TITLE LAM Research Combo
REVISION 12
SERIAL
DATE Tuesday, September 24, 2013
JOB NUMBER 252704
TYPE
PAGE NO. 116
OPERATOR JioMeRD
weeks. The fiscal years ended June 24, 2012 and June 26, 2011 included 52 weeks. The Company’s next fiscal
year, ending on June 29, 2014 will include 52 weeks.
Principles of Consolidation: The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in
consolidation.
Cash Equivalents and Short-Term 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
short-term 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 income (expense)” in the Consolidated Statement of Operations. The investments classified
as available-for-sale are recorded at fair value based upon quoted market prices, and temporary difference
between the cost and fair value of available-for-sale securities is presented as a separate component of
accumulated other comprehensive income (loss). Unrealized losses on available-for-sale securities are charged
against “Other income (expense)” when a decline in fair value is determined to be other-than-temporary. The
Company considers several factors to determine whether a loss is other-than-temporary. These factors include
but are not limited to: (i) the extent to which the fair value is less than cost basis, (ii) the financial condition and
near term prospects of the issuer, (iii) the length of time a security is in an unrealized loss position and (iv) the
Company’s ability to hold the security for a period of time sufficient to allow for any anticipated recovery in fair
value. The Company’s ongoing consideration of these factors could result in additional impairment charges in the
future, which could adversely affect its results of operation. An other-than-temporary impairment is triggered
when there is an intent to sell the security, it is more-likely-than-not that the security will be required to be sold
before recovery, or the security is not expected to recover the entire amortized cost basis of the security. Other-
than-temporary impairments attributed to credit losses are recognized in the income statement. The specific
identification method is used to determine the realized gains and losses on investments.
Allowance for Doubtful Accounts: The Company evaluates its allowance for doubtful accounts based on a
combination of factors. In circumstances where specific invoices are deemed to be uncollectible, the Company
provides a specific allowance for bad debt against the amount due to reduce the net recognized receivable to the
amount it reasonably believes will be collected. The Company also provides allowances based on its write-off
history.
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 eight 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 to thirty-three 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 capital
leases is included with depreciation expense.
Impairment of Long-Lived Assets (Excluding Goodwill and Intangibles): The Company routinely considers
whether indicators of impairment of long-lived assets are present. 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. If the assets determined to be impaired are to be held and used, the Company
recognizes an impairment charge to the extent the present value of anticipated net cash flows attributable to the
62
<12345678> JOB TITLE LAM Research Combo
REVISION 12
SERIAL
DATE Tuesday, September 24, 2013
JOB NUMBER 252704
TYPE
PAGE NO. 117
OPERATOR JioMeRD
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. The Company did not record impairments of
long lived assets held for use during fiscal years 2013, 2012, or 2011.
Derivative Financial Instruments: In the normal course of business, the Company’s financial position is
routinely subjected to market risk associated with foreign currency exchange rate fluctuations. The Company’s
policy is to mitigate the effect of these 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’s exposures are in liquid currencies (Japanese yen, Swiss francs, euros,
Taiwanese dollars, and Korean won), so 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 contracts, where
possible and prudent. These forward 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 interest and other income (expense) on the consolidated statement of operations
at that time.
Guarantees: The Company has certain operating leases that contain provisions whereby the properties
subject to the operating leases may be remarketed at lease expiration. The Company has guaranteed to the lessor
an amount approximating the lessor’s investment in the property. The Company has recorded a liability for
certain guaranteed residual values related to these specific operating lease agreements. Also, the Company’s
guarantees generally include certain indemnifications to its lessors under operating lease agreements 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, 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. Billings and receipts for their labor and services are primarily denominated in the local currency,
and the workforce is paid in local currency. Accordingly, all balance sheet accounts of these local functional
currency subsidiaries are translated at the fiscal period-end exchange rate, and income and expense accounts are
translated 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). Translation
adjustments are recorded in other income (expense), net, where the U.S. dollar is the functional currency.
63
<12345678> JOB TITLE LAM Research Combo
REVISION 12
SERIAL
DATE Tuesday, September 24, 2013
JOB NUMBER 252704
TYPE
PAGE NO. 118
OPERATOR JioMeRD
Note 3: Recent Accounting Pronouncements
In June 2011, the Financial Accounting Standards Board (“FASB”) issued new authoritative guidance that
increases the prominence of items reported in other comprehensive income (“OCI”) by eliminating the option to
present components of OCI as part of the statement of changes in stockholders’ equity. The amendments in this
standard require that all non-owner changes in stockholders’ equity be presented either in a single continuous
statement of comprehensive income or in two separate but consecutive statements. The Company adopted this
guidance in the September 2012 quarter. The implementation of this authoritative guidance did not have an
impact on the Company’s financial position or results of operations, but did change the presentation of the
Company’s financial statements.
In February 2013, the FASB issued an accounting standard update regarding the reporting of amounts
reclassified out of accumulated other comprehensive income. The February 2013 update does not change the
current requirements for reporting net income or other comprehensive income in financial statements. However,
this update requires an entity to present on the face of the financial statements or in the notes amounts
reclassified from each component of accumulated other comprehensive income and the income statement line
items affected by the reclassification. As allowed in the update, the Company elected to early adopt these
disclosure amendments in the quarter ended March 31, 2013. The implementation of this update did not impact
the Company’s financial position, results of operations or cash flows as it was disclosure-only in nature.
In July 2013, the FASB released Accounting Standards Update 2013-11 "Presentation of an Unrecognized
Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists".
The new standard requires that an unrecognized tax benefit should be presented as a reduction of a deferred tax
asset for a net operating loss carryforward or other tax credit carryforward when settlement in this manner is
available under the tax law. The Company is required to adopt this standard starting fiscal year 2015 and is
currently in the process of determining the impact, if any, on its financial position.
Note 4: 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.
64
<12345678> JOB TITLE LAM Research Combo
REVISION 12
SERIAL
DATE Tuesday, September 24, 2013
JOB NUMBER 252704
TYPE
PAGE NO. 119
OPERATOR JioMeRD
The following table sets forth the Company’s financial assets and liabilities measured at fair value on a
recurring basis:
Fair Value Measurement at June 30, 2013
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
(In thousands)
Assets
Short-Term Investments
Money Market Funds . . . . . . . . . . . . . . . . . . . . .
Municipal Notes and Bonds . . . . . . . . . . . . . . . .
US Treasury and Agencies . . . . . . . . . . . . . . . . .
Government-Sponsored Enterprises . . . . . . . . . .
Foreign Government Bonds . . . . . . . . . . . . . . . .
Corporate Notes and Bonds . . . . . . . . . . . . . . . .
. . . . .
Mortgage Backed Securities - Residential
. . . .
Mortgage Backed Securities - Commercial
Total Short-Term Investments
Equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mutual Funds . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivatives Assets . . . . . . . . . . . . . . . . . . . . . . .
$ 725,311
268,746
155,293
54,805
24,972
860,492
27,365
107,958
$2,224,942
7,096
18,216
4,929
$ 725,311
—
155,293
—
—
164,885
—
—
$1,045,489
7,096
18,216
—
$
—
268,746
—
54,805
24,972
695,607
27,365
107,958
$1,179,453
—
—
4,929
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,255,183
$1,070,801
$1,184,382
$—
—
—
—
—
—
—
—
$—
—
—
—
$—
Liabilities
Derivative liabilities . . . . . . . . . . . . . . . . . . . . . .
$
1,815
$
—
$
1,620
$195
The amounts in the table above are reported in the consolidated balance sheet as of June 30, 2013 as
follows:
Total
(Level 1)
(Level 2)
(Level 3)
Reported As:
Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . .
Short-Term Investments . . . . . . . . . . . . . . . . .
Restricted Cash and Investments . . . . . . . . . .
Prepaid Expenses and Other Current
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
(In thousands)
$
$ 725,311
1,334,746
164,885
$ 725,311
155,293
164,885
—
1,179,453
—
4,929
25,312
—
25,312
4,929
—
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,255,183
$1,070,801
$1,184,382
$—
—
—
—
—
$—
Accrued Expenses and Other Current
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Non-current Liabilities . . . . . . . . . . . .
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . .
$
$
1,620
195
1,815
$
$
—
—
—
$
$
1,620
—
1,620
$—
195
$195
65
<12345678> JOB TITLE LAM Research Combo
REVISION 12
SERIAL
DATE Tuesday, September 24, 2013
JOB NUMBER 252704
TYPE
PAGE NO. 120
OPERATOR JioMeRD
The following table sets forth the Company’s financial assets and liabilities measured at fair value on a
recurring basis:
Fair Value Measurement at June 24, 2012
Quoted Prices
in Active Markets
for Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
(In thousands)
Assets
Short-Term Investments
Money Market Funds . . . . . . . . . . . . . . . . . . . . .
Municipal Notes and Bonds . . . . . . . . . . . . . . . .
US Treasury and Agencies . . . . . . . . . . . . . . . . .
Government-Sponsored Enterprises . . . . . . . . . .
Foreign Government Bonds . . . . . . . . . . . . . . . .
Corporate Notes and Bonds . . . . . . . . . . . . . . . .
. . . . .
Mortgage Backed Securities - Residential
. . . .
Mortgage Backed Securities - Commercial
Total Short-Term Investments
Equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mutual Funds . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivatives Assets . . . . . . . . . . . . . . . . . . . . . . .
$1,318,812
322,567
137,446
123,268
6,358
768,901
25,972
84,853
$2,788,177
5,913
17,754
5,020
$1,318,812
—
130,624
—
—
164,885
—
—
$1,614,321
5,913
17,754
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,816,864
$1,637,988
$
—
322,567
6,822
123,268
6,358
604,016
25,972
84,853
$1,173,856
—
—
5,020
$1,178,876
$—
—
—
—
—
—
—
—
$—
—
—
—
$—
Liabilities
Derivative liabilities . . . . . . . . . . . . . . . . . . . . . .
$
4,529
$
—
$
4,328
$201
The amounts in the table above are reported in the consolidated balance sheet as of June 24, 2012 as
follows:
Total
(Level 1)
(Level 2)
(Level 3)
Reported As:
Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . .
Short-Term Investments . . . . . . . . . . . . . . . . .
Restricted Cash and Investments . . . . . . . . . .
Prepaid Expenses and Other Current
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
(In thousands)
$
$1,325,361
1,297,931
164,885
$1,318,812
130,624
164,885
6,549
1,167,307
—
5,020
23,667
—
23,667
5,020
—
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,816,864
$1,637,988
$1,178,876
$—
—
—
—
—
$—
Accrued Expenses and Other Current
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Non-current Liabilities . . . . . . . . . . . .
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . .
$
$
4,328
201
4,529
$
$
—
—
—
$
$
4,328
—
4,328
$—
201
$201
The Company’s primary financial instruments include its cash, cash equivalents, short-term investments,
restricted cash and investments, long-term investments, accounts receivable, accounts payable, long-term debt and
capital leases, and foreign currency related derivatives. 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 capital lease obligations approximate their carrying value as the substantial majority of these obligations
have interest rates that adjust to market rates on a periodic basis. Refer to Note 13 of the Notes to the Consolidated
Financial Statements for additional information regarding the fair value of the Company’s convertible notes.
66
<12345678> JOB TITLE LAM Research Combo
REVISION 12
SERIAL
DATE Tuesday, September 24, 2013
JOB NUMBER 252704
TYPE
PAGE NO. 121
OPERATOR JioMeRD
Investments
The following tables summarize the Company’s investments (in thousands):
June 30, 2013
June 24, 2012
Cost
Unrealized
Gain
Unrealized
(Loss)
Fair Value
Cost
Unrealized
Gain
Unrealized
(Loss)
Fair Value
Cash . . . . . . . . . . . . . . . . . . . . . $ 438,813
Fixed Income Money Market
Funds . . . . . . . . . . . . . . . . . .
Municipal Notes and Bonds . .
US Treasury and Agencies . . .
Government-Sponsored
Enterprises . . . . . . . . . . . . . .
Foreign Government Bonds . .
Corporate Notes and Bonds . .
Mortgage Backed Securities -
725,311
268,390
155,648
54,835
24,950
861,109
Residential . . . . . . . . . . . . . .
27,618
Mortgage Backed Securities -
Commercial . . . . . . . . . . . . .
108,204
Total Cash and Short -
$ —
$ — $ 438,813 $ 240,841
$ —
$ — $ 240,841
—
805
18
65
47
1,328
29
426
—
(449)
(373)
(95)
(25)
(1,945)
725,311 1,318,812
321,001
268,746
137,516
155,293
54,805
24,972
860,492
123,269
6,315
767,847
(282)
27,365
25,857
(672)
107,958
84,682
—
1,574
43
67
43
1,443
121
555
— 1,318,812
322,567
137,446
(8)
(113)
(68)
—
(389)
123,268
6,358
768,901
(6)
25,972
(384)
84,853
Term Investments . . . $2,664,878
$2,718
$(3,841) $2,663,755 $3,026,140
$3,846
$ (968) $3,029,018
Publicly Traded Equity
Securities . . . . . . . . . . . . . . . $
Private Equity Securities . . . . .
Mutual Funds . . . . . . . . . . . . .
5,610
5,000
16,611
$1,486
—
1,619
$ — $
—
(14)
7,096 $
5,000
18,216
9,320
5,000
17,459
$ —
—
366
$(3,407) $
—
(71)
5,913
5,000
17,754
Total Financial
Instruments . . . . $2,692,099
$5,823
$(3,855) $2,694,067 $3,057,919
$4,212
$(4,446) $3,057,685
As Reported
Cash and Cash Equivalents . . . $1,162,473
Short-Term Investments . . . . . 1,335,868
Restricted Cash and
$ —
2,718
$ — $1,162,473 $1,564,752
1,334,745 1,295,053
(3,841)
$ —
3,846
$ — $1,564,752
1,297,931
(968)
Investments . . . . . . . . . . . . .
Other Assets . . . . . . . . . . . . . .
166,536
27,222
—
3,105
—
(14)
166,536
30,313
166,335
31,779
—
366
—
(3,478)
166,335
28,667
Total . . . . . . . . $2,692,099
$5,823
$(3,855) $2,694,067 $3,057,919
$4,212
$(4,446) $3,057,685
The Company accounts for its investment portfolio at fair value. Realized gains (losses) for investment sales
are specifically identified. Management assesses the fair value of investments in debt securities that are not
actively traded through consideration of interest rates and their impact on the present value of the cash flows to
be received from the investments. The Company also considers whether changes in the credit ratings of the issuer
could impact the assessment of fair value. Net realized gains (losses) on investments included other-than-
temporary impairment charges of $3.7 million, $1.7 million, and $0 million in fiscal years 2013, 2012, and 2011,
respectively. Additionally, gross realized gains/(losses) from sales of investments were approximately $1.6
million and $(1.5) million in fiscal year 2013, $1.4 million and $(1.0) million in fiscal year 2012, and $0.7
million and $(0.3) million in fiscal year 2011, respectively.
67
<12345678> JOB TITLE LAM Research Combo
REVISION 12
SERIAL
DATE Tuesday, September 24, 2013
JOB NUMBER 252704
TYPE
PAGE NO. 122
OPERATOR JioMeRD
The following is an analysis of the Company’s fixed income securities in unrealized loss positions (in
thousands):
Fixed Income Securities
Municipal Notes and Bonds . . .
US Treasury and Agencies . . . .
Government-Sponsored
Enterprises . . . . . . . . . . . . . .
Foregin Government Bonds . . .
Corporate Notes and Bonds . . .
Mortgage Backed Securities -
June 30, 2013
UNREALIZED LOSSES
LESS THAN 12 MONTHS
UNREALIZED LOSSES
12 MONTHS OR GREATER
TOTAL
Fair Value
Unrealized
Fair Value
Unrealized
Fair Value Unrealized
$ 65,792
116,312
$ (449)
(373)
$ —
—
$ —
—
$ 65,792
116,312
$ (449)
(373)
14,929
13,700
390,119
(95)
(25)
(1,918)
—
—
895
—
—
—
(27)
—
14,929
13,700
391,014
(95)
(25)
(1,945)
24,952
(282)
Residential . . . . . . . . . . . . . .
24,952
(282)
Mortgage Backed Securities -
Commercial
. . . . . . . . . . . . .
69,357
(579)
4,158
(93)
73,515
(672)
Total Fixed Income . . . . . . . . . . . .
$695,161
$(3,721)
$5,053
$(120)
$700,214
$(3,841)
The amortized cost and fair value of cash equivalents, short-term investments, and restricted cash and
investments with contractual maturities are as follows:
Cost
Estimated
Fair
Value
(in thousands)
Due in one year or less . . . . . . . . . . . . . . . . . . . . . . . .
Due after one year through five years . . . . . . . . . . . . .
Due in more than five years . . . . . . . . . . . . . . . . . . . .
$1,171,873
888,904
165,288
$1,172,331
887,858
164,753
$2,226,065
$2,224,942
Management has the ability, if necessary, to liquidate any of its cash equivalents and short-term investments
in order to meet the Company’s liquidity needs in the next 12 months. Accordingly, those investments with
contractual maturities greater than one year 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 with financial institutions with the
primary objective of reducing volatility of earnings and cash flows related to foreign currency exchange rate
fluctuations. The counterparties to these foreign currency forward contracts are large global financial institutions
that the Company believes are creditworthy, and therefore, we do not consider the risk of counterparty
nonperformance to be material.
Cash Flow Hedges
The Company’s financial position is routinely subjected to market risk associated with foreign currency
exchange rate fluctuations on non-US dollar transactions or cash flows, primarily from Japanese yen-
denominated revenues and euro-denominated expenses. The Company’s policy is to mitigate the foreign
exchange risk arising from the fluctuations in the value of these non-US dollar denominated transactions or cash
flows through a foreign currency cash flow hedging program, using foreign currency forward contracts that
68
<12345678> JOB TITLE LAM Research Combo
REVISION 12
SERIAL
DATE Tuesday, September 24, 2013
JOB NUMBER 252704
TYPE
PAGE NO. 123
OPERATOR JioMeRD
generally expire within 12 months and no later than 24 months. These foreign currency forward contracts are
designated as cash flow hedges and are carried on the Company’s balance sheet at fair value with the effective
portion of the contracts’ gains or losses included in accumulated other comprehensive income (loss) and
subsequently recognized in revenue/expense in the same period the hedged items are recognized.
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 currency forward contracts due to changes in time
value are excluded from the assessment of effectiveness and are recognized in revenue in the current period. The
change in time value related to these contracts was not material for all reported periods. To qualify for hedge
accounting, the hedge relationship must meet criteria relating both to 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 gains or losses during the twelve months ended
June 30, 2013 or June 24, 2012 associated with ineffectiveness or forecasted transactions that failed to occur.
To receive hedge accounting treatment, all hedging relationships are formally documented at the inception
of the hedge and the hedges must be tested to demonstrate an expectation of providing highly effective offsetting
changes to future cash flows on hedged transactions. When derivative instruments are designated and qualify as
effective cash flow hedges, the Company recognizes effective changes in the fair value of the hedging instrument
within accumulated other comprehensive income (loss) until the hedged exposure is realized. Consequently, with
the exception of excluded time value and hedge ineffectiveness recognized, the Company’s results of operations
are not subject to fluctuation as a result of changes in the fair value of the derivative instruments. If hedges are
not highly effective or if the Company does not believe that the underlying hedged forecasted transactions will
occur, the Company may not be able to account for its derivative instruments as cash flow hedges. If this were to
occur, future changes in the fair values of the Company’s derivative instruments would be recognized in
earnings. Additionally, related amounts previously recorded in “Other comprehensive income” would be
reclassified to income immediately. At June 30, 2013, the Company had gains of $2.8 million accumulated in
Other Comprehensive Income, which it expects to reclassify from Other Comprehensive Income into earnings
over the next 12 months.
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 third party accounts receivables, accounts
payables and intercompany receivables and payables. These foreign currency forward contracts are not
designated for hedge accounting treatment. Therefore, the change in fair value of these derivatives is recorded as
a component of other income (expense) and offsets the change in fair value of the foreign currency denominated
assets and liabilities, which are also recorded in other income (expense).
69
<12345678> JOB TITLE LAM Research Combo
REVISION 12
SERIAL
DATE Tuesday, September 24, 2013
JOB NUMBER 252704
TYPE
PAGE NO. 124
OPERATOR JioMeRD
As of June 30, 2013, the Company had the following outstanding foreign currency forward contracts that
were entered into under its cash flow and balance sheet hedge program:
Foreign Currency Forward
Contracts
Japanese Yen . . . . . . . . . .
Swiss Francs . . . . . . . . . . .
Euro . . . . . . . . . . . . . . . . .
Korean Won . . . . . . . . . . .
. . . . . . . . .
Taiwan Dollar
Derivatives Designated as
Hedging Instruments:
Derivatives Not Designated as
Hedging Instruments:
(in thousands)
Buy Contracts
Sell Contracts
Buy Contracts
Sell Contracts
$ —
—
59,885
—
—
$59,885
$137,286
—
—
—
—
$137,286
$ —
18,726
19,307
14,095
120,603
$172,731
$ 97,408
1,633
20,112
—
—
$119,153
The fair value of derivatives instruments in the Company’s consolidated balance sheet as of June 30, 2013
and June 24, 2012 were as follows:
June 30, 2013
Fair Value of Derivative Instruments
June 24, 2012
Fair Value of Derivative Instruments
Asset Derivatives
Balance Sheet
Location
Fair
Value
Liability Derivatives
Balance Sheet
Location
Asset Derivatives
Balance Sheet
Location
Fair
Value
(in thousands)
Fair
Value
Liability Derivatives
Balance Sheet
Location
Fair
Value
Derivatives designated as hedging
instruments:
Foreign exchange forward
contracts . . . . . . . . . . . . . . . . . . .
Derivatives not designated as hedging
instruments:
Prepaid expense
and other assets $4,858 Accrued liabilities $1,577
Prepaid expense
and other assets $3,358 Accrued liabilities $3,403
Foreign exchange forward
contracts . . . . . . . . . . . . . . . . . . .
Prepaid expense
and other assets
71 Accrued liabilities
Prepaid expense
and other assets 1,662 Accrued liabilities
43
Total derivatives
$4,929
$1,620
$5,020
925
$4,328
70
<12345678> JOB TITLE LAM Research Combo
REVISION 12
SERIAL
DATE Tuesday, September 24, 2013
JOB NUMBER 252704
TYPE
PAGE NO. 125
OPERATOR JioMeRD
The effect of derivative instruments designated as cash flow hedges, before tax, on the Company’s
Consolidated Statements of Operations was as follows:
Twelve Months Ended June 30, 2013 Twelve Months Ended June 24, 2012
Ineffective
Portion and
Amount
Excluded from
Effectiveness
Testing
Effective Portion
Ineffective
Portion and
Amount
Excluded from
Effectiveness
Testing
Effective Portion
Location of Gain (Loss)
Recognized in or
Reclassified
into Income
Gain (Loss)
Recognized
in AOCI
Gain (Loss)
Reclassified
from AOCI
into Income
Gain (Loss)
Recognized
in Income
Gain (Loss)
Recognized
in AOCI
Gain (Loss)
Reclassified
from AOCI
into Income
Gain (Loss)
Recognized in
Income
(in thousands)
(in thousands)
Derivatives Designated as
Hedging Instruments
Foreign Exchange Contracts . . . . Revenue
Foreign Exchange Contracts . . . . Cost of goods sold
Foreign Exchange Contracts . . . .
Selling, general,
and administrative
Foreign Exchange Contracts . . . . Other income
8,322
2,443
10,036
(1,229)
1,154
(416)
(expense)
—
—
11,919
8,391
—
—
—
(33)
(33)
(1,079)
(5,952)
(5,500)
(2,166)
(2,311)
(883)
—
—
(9,342)
(8,549)
—
—
—
796
796
The effect of derivative instruments not designated as cash flow hedges on the Company’s Consolidated
Statement of Operations was as follows:
Derivatives Not Designated as Hedging Instruments:
Location of Loss Recognized
in Income
Twelve Months Ended
June 30, 2013
Loss
Recognized in
Income
June 24, 2012
Loss
Recognized in
Income
(in thousands)
Foreign Exchange Contracts . . . . . . . . . . . . . . . . . . . . . . . . Other income (expense)
$(1,585)
$(39,629)
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist
principally of cash and cash equivalents, short term investments, restricted cash and investments, trade accounts
receivable, and derivative financial instruments used in hedging activities. Cash is placed on deposit in 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 over-all portfolio of available-for-sale securities must maintain an average minimum rating
of “AA-” or “Aa3” as rated by Standard and Poor’s or Moody’s Investor Services, respectively. 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 the foreign
currency forward contracts that are used to mitigate the effect of exchange rate fluctuations and on contracts
related to structured share repurchase agreements. 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 statements and payment
performance. In general, the Company does not require collateral on sales.
71
<12345678> JOB TITLE LAM Research Combo
REVISION 12
SERIAL
DATE Tuesday, September 24, 2013
JOB NUMBER 252704
TYPE
PAGE NO. 126
OPERATOR JioMeRD
As of June 30, 2013, two customers accounted for approximately 22% and 14% of accounts receivable. As
of June 24, 2012, three customers accounted for approximately 24%, 17%, and 11% of accounts receivable.
Note 5: Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or market. Shipments to Japanese
customers, to whom title does not transfer until customer acceptance, are classified as inventory and carried at
cost until title transfers. Inventories consist of the following:
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work-in-process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$312,484
101,530
145,303
$342,283
118,566
172,004
$559,317
$632,853
June 30,
2013
June 24,
2012
(in thousands)
Note 6: Property and Equipment
Property and equipment, net, consist of the following:
June 30,
2013
June 24,
2012
(in thousands)
Manufacturing, engineering and office equipment . . . .
Computer equipment and software . . . . . . . . . . . . . . . .
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . .
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 521,047
120,144
65,360
249,126
76,225
21,110
$ 468,739
104,919
65,228
231,536
54,327
19,770
Less: accumulated depreciation and amortization . . . .
1,053,012
(449,102)
944,519
(359,923)
$ 603,910
$ 584,596
Depreciation expense, including amortization of capital leases, during fiscal years 2013, 2012, and 2011,
was $126.5 million, $74.0 million, and $54.0 million, respectively.
Note 7: Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following:
June 30,
2013
June 24,
2012
(in thousands)
Accrued compensation . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warranty reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income and other taxes payable . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$254,795
52,252
39,420
118,061
$274,165
63,988
24,745
129,280
$464,528
$492,178
72
<12345678> JOB TITLE LAM Research Combo
REVISION 12
SERIAL
DATE Tuesday, September 24, 2013
JOB NUMBER 252704
TYPE
PAGE NO. 127
OPERATOR JioMeRD
Note 8: Other Income (Expense), Net
The significant components of other income (expense), net, are as follows:
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gains (losses) on deferred compensation plan related
assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange gains (losses) . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net
Year Ended
June 30,
2013
June 24,
2012
June 26,
2011
$ 14,737
(60,408)
(in thousands)
$ 12,141
(38,962)
$ 9,890
(5,380)
9,764
(6,808)
(8,698)
(914)
(397)
(5,183)
5,682
(11,085)
(2,516)
$(51,413)
$(33,315)
$ (3,409)
Note 9: 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 (“RSUs”), and convertible notes. The following table
reconciles the numerators and denominators of the basic and diluted computations for net income per share.
Year Ended
June 26,
June 24,
June 30,
2013
2011
2012
(in thousands, except per share data)
Numerator:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$113,879
$168,723
$723,748
Denominator:
Basic average shares outstanding . . . . . . . . . . . . .
Effect of potential dilutive securities:
168,932
124,176
123,529
Employee stock plans . . . . . . . . . . . . . . . . . .
Convertible notes . . . . . . . . . . . . . . . . . . . . .
2,558
1,940
910
147
1,490
—
Diluted average shares outstanding . . . . . . . . . . .
173,430
125,233
125,019
Net income per share - basic . . . . . . . . . . . . . . . . . . . .
Net income per share - diluted . . . . . . . . . . . . . . . . . . .
$
$
0.67
0.66
$
$
1.36
1.35
$
$
5.86
5.79
For purposes of computing diluted net income per share, weighted-average common shares do not include
potentially dilutive securities that are anti-dilutive under the treasury stock method. The following potentially
dilutive securities were excluded:
Year Ended
June 30,
2013
June 24,
2012
June 26,
2011
Number of options and RSUs excluded . . . . . . . . . . . . . . . . .
534
(in thousands)
382
241
Diluted shares outstanding include only the effect of the 2041 Notes. Diluted shares outstanding do not
include any effect resulting from warrants, assumed conversion of the notes, or note hedges associated with the
Company’s 2016 or 2018 Notes (as described in Note 13) as their impact would have been anti-dilutive.
73
<12345678> JOB TITLE LAM Research Combo
REVISION 12
SERIAL
DATE Tuesday, September 24, 2013
JOB NUMBER 252704
TYPE
PAGE NO. 128
OPERATOR JioMeRD
Note 10: Comprehensive Income (Loss)
The components of accumulated other comprehensive loss, net of tax at the end of the period, as well as the
activity during the period, were as follows:
Accumulated
Foreign Currency
Translation
Adjustment
Accumulated
Unrealized Holding
Gain (Loss) on
Cash Flow Hedges
$(22,481)
$ (212)
Accumulated
Unrealized Holding
Gain (Loss) on
Available-for-Sale
Investments
(in thousands)
$ (308)
Accumulated
Unrealized
Components of
Defined Benefit Plans
Total
$(10,817)
$(33,818)
5,303
10,607
(3,844)
(3,505)
8,561
—
(7,573) (1)
4,137 (2)
—
(3,436)
Balance as of June 24, 2012 . . . . .
Other comprehensive income
(loss) before
relcassifications . . . . . . . . . . . .
Losses (gains) reclassified from
accumulated other
comprehensive income to net
income . . . . . . . . . . . . . . . . . . .
Net current-period other
comprehensive income
(loss)
. . . . . . . . . . . . . . . . . . . .
$ 5,303
Balance as of June 30, 2013 . . . . .
$(17,178)
$ 3,034
$ 2,822
$
$
293
(15)
$ (3,505)
$ 5,125
$(14,322)
$(28,693)
(1) Amount of after tax gain reclassified from accumulated other comprehensive income into net income
located in revenue: $8,932 gain, cost of goods sold: $1,048 loss and selling, general and administrative
expenses: $311 loss.
(2) Amount of loss reclassified from accumulated other comprehensive income into net income located in other
expense, net
Tax related to the components of other comprehensive income during the period were as follows:
Tax benefit (expense) on change in unrealized gains/losses
on cash flow hedges:
Tax expense on unrealized gains/losses arising during
Year Ended
June 30,
2013
June 24,
2012
June 26,
2011
(in thousands)
the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(1,312) $ — $ —
—
Tax expense on gains/losses reclassified to earnings . . .
818
—
(494) —
—
Tax benefit (expense) on change in unrealized gains/losses on
available-for-sale investments:
Tax benefit (expense) on unrealized gains/losses
arising during the period . . . . . . . . . . . . . . . . . . . . . . .
1,428
233
(120)
Tax (benefit) expense on gains/losses reclassified to
earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2,026)
(598)
474
707
436
316
Tax benefit on change in unrealized components of defined
benefit plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
586
944
2,162
Tax benefit (expense) on other comprehensive income (loss) . . . . $ (506) $1,651 $2,478
74
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JOB NUMBER 252704
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PAGE NO. 129
OPERATOR JioMeRD
Note 11: Equity-Based Compensation Plans
The Company has adopted stock plans that provide for the grant to employees of equity-based awards,
including stock options and RSUs, of Lam Research Common Stock. In addition, these plans permit the grant of
nonstatutory equity-based awards to consultants and outside directors. An option is a right to purchase the
Company’s stock at a set price. An RSU award is an agreement to issue shares of the Company’s stock at the time
of vesting. Pursuant to the plans, the equity-based award exercise price is determined by the Board of Directors or
its designee, the plan administrator, but in no event will the exercise price for any option be less than the fair market
value of the Company’s Common Stock on the date of grant. Equity-based awards granted under the plans vest over
a period determined by the Board of Directors or the plan administrator, typically over a period of three years or
less. The Company also has an ESPP that allows employees to purchase shares of its Common Stock through
payroll deduction at a discounted price. A summary of stock plan transactions is as follows:
Options Outstanding
Restricted Stock Units Outstanding
Weighted-
Average
Fair Market Value
at Grant
June 27, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested restricted stock . . . . . . . . . . . . . . . . . . . . . . . . . . .
June 26, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Awards assumed in Novellus acquisition . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested restricted stock . . . . . . . . . . . . . . . . . . . . . . . . . . .
June 24, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested restricted stock . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of
Shares
Weighted-
Average
Exercise
Price
885,425
$21.61
— $ —
$21.68
$20.35
(572,182)
(3,310)
309,933
3,932,143
$21.50
$25.17
— $ —
$23.70
$21.71
(74,615)
(265,384)
3,902,077
288,867
(1,546,028)
(73,993)
$25.14
$42.59
$25.47
$26.24
Number of
Shares
2,740,762
922,210
(154,185)
(1,177,447)
2,331,340
1,291,808
2,336,283
(120,070)
(1,507,883)
4,331,478
2,563,670
(299,079)
(1,754,273)
June 30, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,570,923
$26.87
4,841,796
Outstanding and exercisable options presented by price range at June 30, 2013 are as follows:
$30.50
$50.11
$32.20
$27.03
$39.90
$35.99
$41.23
$40.91
$35.47
$41.01
$38.76
$39.70
$42.52
$39.32
Range of Exercise Prices
Options Outstanding
Weighted-
Average
Remaining
Life
(Years)
Weighted-
Average
Exercise
Price
Number of
Options
Outstanding
$9.44-$20.82 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$21.04-$25.68 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$26.11-29.68 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$30.48-$37.11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$42.41-$42.61 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
447,220
777,248
828,487
229,101
288,867
$9.44-$42.61 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,570,923
3.32
4.33
4.91
2.99
6.62
4.48
$15.99
$22.37
$29.29
$34.78
$42.59
Options Exercisable
Weighted-
Average
Exercise
Price
$15.94
$22.58
$29.32
$35.56
Number of
Options
Exercisable
437,715
615,744
633,083
174,641
—
$26.87
1,861,183
$24.53
The Lam Research Corporation 2007 Stock Incentive Plan and 2011 Stock Incentive Plan (collectively the
“Stock Plans”) provide for the grant of non-qualified equity-based awards to eligible employees, consultants and
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OPERATOR JioMeRD
advisors, and non-employee directors of the Company and its subsidiaries. As of June 30, 2013 there were a total
of 7,412,719 shares subject to options and restricted stock units issued and outstanding under the Company’s
Stock Plans. As of June 30, 2013, there were a total of 13,302,712 shares available for future issuance under the
Stock Plans.
The ESPP 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 comprises three interim purchase dates. The Plan Administrator (the
Compensation Committee of the Board) is authorized to set a limit on the number of shares a plan participant can
purchase on any single plan exercise date. Prior to August 27, 2012, the ESPP provided for an automatic annual
increase in the number of shares in the plan reserve available for issuance. These increases occurred on the first
business day of each calendar year commencing with 2004, on a one-for-one basis with each share of Common
Stock that the Company had repurchased, and designated for this purpose, by a number of shares equal to the
lesser of (i) 2,000,000, (ii) one and one-half percent (1.5%) of the number of shares of all classes of Common
Stock of the Company outstanding on the first business day of such calendar year, or (iii) a lesser number
determined by the Plan Administrator. Subsequent to August 27, 2012, increases in shares available for issuance
under the ESPP must be specifically authorized by the Plan Administrator. During fiscal year 2013 there was no
increase to the number of shares of Lam Research Common Stock reserved for issuance under the 1999 ESPP.
During fiscal years 2012 and 2011 the number of shares of Lam Research Common Stock reserved for issuance
under the 1999 ESPP increased by 1.8 million and 1.9 million, respectively.
During fiscal year 2013, a total of 1,072,396 shares of the Company’s Common Stock were sold to
employees under the 1999 ESPP. At June 30, 2013 9,574,207 shares were available for purchase under the 1999
ESPP.
The estimated fair value of the Company’s stock-based awards, less expected forfeitures, is amortized over
the awards’ vesting period on a straight-line basis. The Company recognized the following equity-based
compensation expenses and benefits during the fiscal years noted:
Year Ended
June 30,
2013
June 24,
2012
June 26,
2011
Equity-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax benefit recognized in the Consolidated Statement of Operations related
(in millions)
$81.6
$99.3
to equity-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax benefit realized from the exercise and vesting of options and RSUs . . . . . . . . . .
$17.6
$21.6
$12.2
$11.8
$53.0
$ 8.6
$16.3
Stock Options and Restricted Stock Units
Stock Options
The fair value of the Company’s stock options granted during fiscal year 2013 and fiscal year 2012, in
connection with the acquisition of Novellus, was estimated using a Black-Scholes option valuation model. The
Company did not grant any stock options during fiscal year 2011. This model requires the input of highly
subjective assumptions, including expected stock price volatility and the estimated life of each award:
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected term (years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
76
Year Ended
June 30,
2013
June 24,
2012
36.60% 38.04%
0.55%
0.81%
3.89
4.79
0%
0%
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The year-end intrinsic value relating to stock options for fiscal years 2013, 2012, and 2011 is presented
below:
Intrinsic value - options outstanding . . . . . . . . . . . . . . . . . . . .
Intrinsic value - options exercisable . . . . . . . . . . . . . . . . . . . .
Intrinsic value - options exercised . . . . . . . . . . . . . . . . . . . . .
$44.9
$36.9
$25.4
June 30,
2013
Year Ended
June 24,
2012
(millions)
$49.9
$30.1
$ 1.3
June 26,
2011
$ 6.7
$ 6.7
$16.7
As of June 30, 2013, there was $7.4 million of total unrecognized compensation cost related to unvested
stock options granted and outstanding; that cost is expected to be recognized over a weighted average remaining
vesting period of 1.4 years.
Restricted Stock Units
The fair value of the Company’s restricted stock units was calculated based upon the fair market value of
the Company’s stock at the date of grant. As of June 30, 2013, there was $126.3 million of total unrecognized
compensation cost related to unvested restricted stock units granted; that cost is expected to be recognized over a
weighted average remaining vesting period of 1.9 years.
ESPP
ESPP rights were valued using the Black-Scholes model. During fiscal years 2013, 2012, and 2011 ESPP
was valued assuming the following weighted-average assumptions:
June 30,
2013
Year Ended
June 24,
2012
June 26,
2011
Expected life (years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected stock price volatility . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.68
0.64
0.72
32.42% 44.22% 42.25%
0.61%
0.11%
0.15%
0%
0%
0%
As of June 30, 2013, there was $2.2 million of total unrecognized compensation cost related to the ESPP
that is expected to be recognized over a remaining vesting period of 2 months.
Note 12: Retirement and Deferred Compensation Plans
Employee Savings and Retirement Plan
The Company maintains a 401(k) retirement savings plan for its full-time employees in North America.
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 $8.7 million, $5.8 million, and $5.1 million, in fiscal years 2013,
2012, and 2011, respectively.
Deferred Compensation Arrangements
The Company has an unfunded, non-qualified deferred compensation plan whereby certain executives may
defer a portion of their compensation. Participants earn a return on their deferred compensation based on their
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allocation of their account balance among measurement 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 subaccount or upon retirement.
Distributions are made in the form of lump sum or annual installments over a period of up to 20 years as elected
by the participant. If no alternate election has been made, a lump sum payment will be made upon termination of
a participant’s employment with the Company. As of June 30, 2013 and June 24, 2012 the liability of the
Company to the plan participants was $79.7 million and $79.0 million, respectively, which was recorded in
accrued expenses and other current liabilities on the Consolidated Balance Sheets. As of June 30, 2013 and
June 24, 2012 the Company had investments in the aggregate amount of $98.1 million and $83.2 million
respectively that correlate to the deferred compensation obligations, which were recorded in other assets on the
Consolidated Balance Sheets.
Postretirement Healthcare Plan
The Company maintains a postretirement 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 $21.4 million and $19.8 million as of June 30, 2013 and June 24, 2012, respectively.
Note 13: Long Term Debt
The following table reflects the carrying value of the Company’s convertible notes and other long-term debt
as of June 30, 2013 and June 24, 2012:
June 30,
2013
June 24,
2012
(in millions)
0.50% Notes due 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Unamortized interest discount . . . . . . . . . . . . . . . . . .
$ 450.0
(45.7)
$ 450.0
(60.3)
Net carrying amount of 0.50% Notes due 2016 . . . . .
1.25% Notes due 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Unamortized interest discount . . . . . . . . . . . . . . . . . .
Net carrying amount of 1.25% Notes due 2018 . . . . .
2.625% Notes due 2041 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Unamortized interest discount . . . . . . . . . . . . . . . . . .
Net carrying amount of 2.625% Notes due 2041 . . . .
404.3
450.0
(76.9)
373.1
699.9
(186.9)
513.0
389.7
450.0
(90.4)
359.6
699.9
(190.3)
509.6
Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: current portion of debt . . . . . . . . . . . . . . . . . . . . . . . .
1,290.4
(513.0)
1,258.9
(509.6)
Long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 777.4
$ 749.3
Convertible Senior Notes
In May 2011, the Company issued and sold $450.0 million in aggregate principal amount of 0.50%
Convertible Senior Notes due May 2016 (the “2016 Notes”) at par. At the same time, the Company issued and
sold $450.0 million in aggregate principal amount of 1.25% Convertible Senior Notes due May 2018 (the
“2018 Notes”) at par. The 2016 Notes and the 2018 Notes may be converted, under certain circumstances, based
on an initial conversion rate of 15.8687 shares of common stock per $1,000 principal amount of notes (which
represents an initial conversion price of approximately $63.02 per share of common stock). The net proceeds to
the Company from the sale of the 2016 Notes and the 2018 Notes were $835.5 million. The Company pays cash
interest at an annual rate of 0.5% and 1.25%, respectively, on the 2016 Notes and the 2018 Notes, payable semi-
annually on May 15 and November 15 of each year.
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In June 2012, with the acquisition of Novellus Systems, Inc. (see Note 16), the Company assumed
$700.0 million in aggregate principal amount of 2.625% Convertible Senior Notes due May 2041 (the “2041
Notes,” and collectively with the 2016 Notes and the 2018 Notes, the “Notes”). The 2041 Notes may be
converted, under certain circumstances, based on an initial conversion rate of 28.4781 shares of common stock
per $1,000 principal amount of notes (which represents an initial conversion price of approximately $35.11 per
share of common stock). The Company pays cash interest at an annual rate of 2.625%, payable semi-annually on
May 15 and November 15 of each year. The 2041 Notes also have a contingent interest payment provision that
may require us to pay additional interest based on certain thresholds, beginning with the semi-annual interest
payment commencing on May 15, 2021, and upon the occurrence of certain events, as outlined in the indenture
governing the 2041 Notes. The maximum amount of the contingent interest will accrue at a rate of 2.1% per
annum, excluding any potential impact from dividends deemed payable to holders of the 2041 Notes. The
contingent interest payment provision has been identified as an embedded derivative, to be accounted for
separately, and is recorded at fair value at the end of each reporting period in other non-current liabilities, with
any gains and losses recorded in interest expense, within the Consolidated Statements of Operations.
The Company separately accounts for the liability and equity components of the Notes. The initial debt
components of the 2016 Notes, the 2018 Notes, and the 2041 Notes were valued at $373.8 million,
$345.1 million, and $509.5 million, respectively, based on the present value of the future cash flows using
discount rates of 4.29%, 5.27%, and 4.28%, respectively, the Company’s borrowing rate at the date of the
issuance or assumption for similar debt instruments without the conversion feature. The carrying values of the
equity components of the 2016 Notes, the 2018 Notes, and the 2041 Notes were $76.2 million, $104.9 million,
and $328.1 million, respectively as of June 30, 2013. The effective interest rates on the liability components of
the 2016 Notes, the 2018 Notes, and the 2041 Notes for the year ended June 30, 2013 were 4.29%, 5.27%, and
4.28% respectively. The following table presents the amount of interest cost recognized relating to both the
contractual interest coupon and amortization of the discount on the liability component of the Notes during the
years ended June 30, 2013, June 24, 2012, and June 26, 2011.
Contractual interest coupon . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of interest discount . . . . . . . . . . . . . . . . . . . . . .
Amortization of issuance costs . . . . . . . . . . . . . . . . . . . . . . . .
Total interest cost recognized . . . . . . . . . . . . . . . . . . . . .
June 30,
2013
June 24,
2012
June 26,
2011
$26.2
31.6
2.4
$60.2
(in millions)
$ 9.2
27.0
2.4
$38.6
$1.1
3.6
0.3
$5.0
The remaining bond discount of the 2016 Notes, the 2018 Notes, and the 2041 Notes of $45.7 million,
$76.9 million, and $186.9 million, respectively, as of June 30, 2013 will be amortized over their respective
remaining lives of approximately 2.9 years, 4.9 years, and 27.9 years. As of June 30, 2013, the if-converted value
of the 2016 and 2018 Notes did not exceed the aggregate principal amount. As of June 30, 2013, the if-converted
value of the 2041 Notes exceeded the aggregate principal amount by $184 million.
2016 Notes
The 2016 Notes may be converted at any time prior to the close of business on the business day immediately
preceding February 15, 2016, at the option of the holder, only under the following circumstances: 1) during the
five business-day period after any ten consecutive trading-day period (the “measurement period”) in which the
trading price per $1,000 principal amount of 2016 Notes for each day of such measurement period was less than
98% of the product of the last reported sale price of the Company’s common stock and the applicable conversion
rate on each such trading day; 2) during any fiscal quarter commencing after the fiscal quarter ending
September 25, 2011, if the last reported sale price of the Company’s common stock for 20 or more trading days
in a period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal
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quarter is greater than or equal to 130% of the conversion price in effect on the last trading day of the
immediately preceding fiscal quarter; or 3) upon the occurrence of specified corporate events. On and after
February 15, 2016 until the close of business on the second scheduled trading day immediately preceding the
maturity date of May 15, 2016, holders may convert their notes at any time, regardless of the foregoing
circumstances.
Upon conversion, a holder will receive the conversion value of the 2016 Notes to be converted equal to the
conversion rate multiplied by the volume weighted average price of the Company’s common stock during a
specified period following the conversion date. The conversion value of each 2016 Note will be paid in: 1) cash
equal to the principal amount of the note and 2) to the extent the conversion value exceeds the principal amount
of the note, common stock (plus cash in lieu of any fractional shares of common stock). The conversion price
will be subject to adjustment in some events but will not be adjusted for accrued interest. Upon a “fundamental
change” at any time, as defined, the Company will in some cases increase the conversion rate for a holder who
elects to convert its 2016 Notes in connection with such fundamental change. In addition, the holders may require
the Company to repurchase for cash all or a portion of their notes upon a “designated event” at a price equal to
100% of the principal amount of the notes being repurchased plus accrued and unpaid interest, if any.
Concurrently with the issuance of the 2016 Notes, the Company purchased a convertible note hedge and
sold warrants. The separate convertible note hedge and warrant transactions are collectively structured to reduce
the potential future economic dilution associated with the conversion of the 2016 Notes and to increase the
effective initial conversion price to $71.34 per share. Each of these components is discussed separately below:
Convertible Note Hedge. Counterparties agreed to sell to the Company up to approximately 7.1 million
shares of the Company’s common stock, which is the number of shares initially issuable upon conversion of
the 2016 Notes in full, at a price of $63.02 per share. The convertible note hedge transaction will be settled
in net shares and will terminate upon the earlier of the maturity date of the 2016 Notes or the first day none
of the 2016 Notes remains outstanding due to conversion or otherwise. Settlement of the convertible note
hedge in net shares, based on the number of shares issued upon conversion of the 2016 Notes, on the
expiration date would result in the Company receiving net shares equivalent to the number of shares
issuable by the Company upon conversion of the 2016 Notes. Should there be an early unwind of the
convertible note hedge transaction, the number of net shares potentially received by the Company will
depend upon 1) the then existing overall market conditions, 2) the Company’s stock price, 3) the volatility
of the Company’s stock, and 4) the amount of time remaining before expiration of the convertible note
hedge. The convertible note hedge transaction cost of $76.2 million has been accounted for as an equity
transaction. The Company initially recorded approximately $28.2 million in stockholders’ equity from the
net deferred tax asset related to the convertible note hedge at inception of the transaction.
Sold Warrants. The Company received $57.6 million from the same counterparties from the sale of warrants
to purchase up to approximately 7.1 million shares of the Company’s common stock at an exercise price of
$71.34 per share. The warrants expire on a series of dates between August 15, 2016 and October 21, 2016.
At expiration, the Company may, at its option, elect to settle the warrants on a net share basis. As of
June 30, 2013, the warrants had not been exercised and remained outstanding. The value of the warrants was
initially recorded in equity and continues to be classified as equity.
2018 Notes
The 2018 Notes may be converted at any time prior to the close of business on the business day immediately
preceding February 15, 2018, at the option of the holder only under the following circumstances: 1) during the
five business-day period after any ten consecutive trading-day period (the “measurement period”) in which the
trading price per $1,000 principal amount of 2018 Notes for each day of such measurement period was less than
98% of the product of the last reported sale price of the Company’s common stock and the applicable conversion
rate on each such trading day; 2) during any fiscal quarter commencing after the fiscal quarter ending
September 25, 2011, if the last reported sale price of the Company’s common stock for 20 or more trading days
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in a period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal
quarter is greater than or equal to 130% of the conversion price in effect on the last trading day of the
immediately preceding fiscal quarter; or 3) upon the occurrence of specified corporate events. On and after
February 15, 2018 until the close of business on the second scheduled trading day immediately preceding the
maturity date of May 15, 2018, holders may convert their notes at any time, regardless of the foregoing
circumstances.
Upon conversion, a holder will receive the conversion value of the 2018 Notes to be converted equal to the
conversion rate multiplied by the volume weighted average price of the Company’s common stock during a
specified period following the conversion date. The conversion value of each 2018 Notes will be paid in: 1) cash
equal to the principal amount of the note and 2) to the extent the conversion value exceeds the principal amount
of the note, common stock (plus cash in lieu of any fractional shares of common stock). The conversion price
will be subject to adjustment in some events but will not be adjusted for accrued interest. Upon a “fundamental
change” at any time, as defined, the Company will in some cases increase the conversion rate for a holder who
elects to convert its 2018 Notes in connection with such fundamental change. In addition, the holders may require
the Company to repurchase for cash all or a portion of their notes upon a “designated event” at a price equal to
100% of the principal amount of the notes being repurchased plus accrued and unpaid interest, if any.
Concurrently with the issuance of the 2018 Notes, the Company purchased a convertible note hedge and
sold warrants. The separate convertible note hedge and warrant transactions are collectively structured to reduce
the potential future economic dilution associated with the conversion of the 2018 Notes and to increase the
effective initial conversion price to $76.10 per share. Each of these components is discussed separately below:
Convertible Note Hedge. Counterparties agreed to sell to the Company up to approximately 7.1 million
shares of the Company’s common stock, which is the number of shares initially issuable upon conversion of
the 2018 Notes in full, at a price of $63.02 per share. The convertible note hedge transaction will be settled
in net shares and will terminate upon the earlier of the maturity date of the 2018 Notes or the first day none
of the 2018 Notes remains outstanding due to conversion or otherwise. Settlement of the convertible note
hedge in net shares, based on the number of shares issued upon conversion of the 2018 Notes, on the
expiration date would result in the Company receiving net shares equivalent to the number of shares
issuable by the Company upon conversion of the 2018 Notes. Should there be an early unwind of the
convertible note hedge transaction, the number of net shares potentially received by the Company will
depend upon 1) the then existing overall market conditions, 2) the Company’s stock price, 3) the volatility
of the Company’s stock, and 4) the amount of time remaining before expiration of the convertible note
hedge. The convertible note hedge transaction cost of $104.9 million has been accounted for as an equity
transaction. The Company initially recorded approximately $38.8 million in stockholders’ equity from the
net deferred tax asset related to the convertible note hedge at inception of the transaction.
Sold Warrants. The Company received $76.3 million from the same counterparties from the sale of warrants
to purchase up to approximately 7.1 million shares of the Company’s common stock at an exercise price of
$76.10 per share. The warrants expire on a series of dates between August 15, 2018 and October 23, 2018.
At expiration, the Company may, at its option, elect to settle the warrants on a net share basis. As of
June 30, 2013, the warrants had not been exercised and remained outstanding. The value of the warrants was
initially recorded in equity and continues to be classified as equity.
2041 Notes
The 2041 Notes may be converted at any time prior to the close of business on the business day immediately
preceding February 15, 2041, at the option of the holder only under the following circumstances: 1) during the
five business-day period after any ten consecutive trading-day period (the “measurement period”) in which the
trading price per $1,000 principal amount of 2041 notes for each day of such measurement period was less than
98% of the product of the last reported sale price of the Company’s common stock and the applicable conversion
rate on each such trading day; 2) during any fiscal quarter, if the last reported sale price of the Company’s
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JOB NUMBER 252704
TYPE
PAGE NO. 136
OPERATOR JioMeRD
common stock for 20 or more trading days in a period of 30 consecutive trading days ending on the last trading
day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price in effect
on the last trading day of the immediately preceding fiscal quarter; or 3) upon the occurrence of specified
corporate events. On and after February 15, 2041 until the close of business on the third scheduled trading day
immediately preceding the maturity date of May 15, 2041, holders may convert their notes at any time, regardless
of the foregoing circumstances.
Upon conversion, a holder will receive the conversion value of the 2041 Notes to be converted equal to the
conversion rate multiplied by the volume weighted average price of the Company’s common stock during a
specified period following the conversion date. The conversion value of each 2041 Note will be paid in: 1) cash
equal to the principal amount of the note and 2) to the extent the conversion value exceeds the principal amount
of the note, common stock (plus cash in lieu of any fractional shares of common stock). The conversion price
will be subject to adjustment in some events but will not be adjusted for accrued interest. Upon a “fundamental
change” at any time, as defined, the Company will in some cases increase the conversion rate for a holder who
elects to convert its 2041 Notes in connection with such fundamental change. In addition, the holders may require
the Company to repurchase for cash all or a portion of their notes upon a “designated event” at a price equal to
100% of the principal amount of the notes being repurchased plus accrued and unpaid interest, if any.
On or after May 21, 2021, we may redeem all or part of the 2041 Notes for the principal plus any accrued
and unpaid interest if the closing price of our common stock has been at least 150% of the conversion price then
in effect for at least 20 trading days during any period of 30 consecutive trading days prior to the date on which
we provide notice of redemption.
Conversion Period
During the fiscal quarter ended June 30, 2013, the Company’s common stock for 20 or more trading days of
the 30 consecutive trading days preceding the quarter end was greater than or equal to 130% of the 2041 Note
conversion price. As a result, the 2041 Notes became convertible at the option of the holder anytime during the
fiscal quarter ending September 29, 2013. However, there have been no conversions of the 2041 Notes as of
August 27, 2013.
In connection with the acquisition of Novellus in June 2012, the 2041 Notes could have been converted into
the Company’s common stock at any time from and after the later of (1) the date that was 30 scheduled trading
days immediately prior to the anticipated closing date of the merger and (2) the date on which we delivered to the
note holders notice of the merger, until 35 business days after the actual closing date of the merger, or July 24,
2012. During the period ending June 24, 2012, 65 of the 2041 Notes, with a total par value of $65,000, were
converted at the note holders’ option. In conjunction with the conversion, 137 shares of common stock were
issued.
As a result of the open conversion period, the carrying amount of the 2041 Notes was classified in current
liabilities in our Consolidated Balance Sheet as of June 30, 2013 and June 24, 2012. The excess of the amount of
cash payable, if converted, over the carrying amount of the 2041 Notes was classified as temporary equity as of
June 30, 2014 June 24, 2012. Upon closure of a conversion period, all 2041 Notes not converted are reclassified
back to noncurrent liabilities and the temporary equity is reclassified to permanent equity.
Fair Value of Notes
As of June 30, 2013, the face values of the 2016 Notes, 2018 Notes, and 2041 Notes were $450.0 million,
$450.0 million, and $699.9 million, respectively. As of June 30, 2013, the fair values of the 2016 Notes, 2018
Notes, and 2041 Notes, which includes the debt and equity components, were approximately $482.9 million,
$500.5 million, and $1,001.6 million respectively, based on quoted market prices (level 1 inputs within the fair
value hierarchy).
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REVISION 12
SERIAL
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JOB NUMBER 252704
TYPE
PAGE NO. 137
OPERATOR JioMeRD
Contractual Obligations
The Company’s contractual cash obligations relating to its convertible notes and other long-term debt as of
June 30, 2013 were as follows:
Payments due by period:
One year* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Two years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Three years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Four years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Over five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term
Debt
(in thousands)
$ 699,935
—
450,000
—
450,000
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . .
Current portion of long-term debt
1,599,935
699,935
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 900,000
* As noted above, the conversion period for the 2041 Notes opened as of June 30, 2013. As there is the potential
for conversion at the option of the holder, the principal balance of the 2041 notes has been included in the one
year payment period. As of August 27, 2013, none of the 2041 notes had been converted during the conversion
period beginning June 30, 2013.
Note 14: Commitments
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 capital lease obligations. Obligations that are not recorded on the Company’s balance
sheet include contractual relationships for operating leases, purchase obligations, and certain guarantees. The
Company’s commitments relating to capital leases and off-balance sheet agreements are included in the tables
below. These amounts exclude $246.5 million of liabilities related to uncertain tax benefits because the Company
is unable to reasonably estimate the ultimate amount or time of settlement. See Note 15, of Notes to Consolidated
Financial Statements for further discussion.
Capital Leases
Capital leases reflect building and office equipment leases. The Company’s contractual cash obligations
relating to its existing capital leases, including interest, as of June 30, 2013 were as follows:
Payments due by period:
One year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Two years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Three years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Four years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Over five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest on capital leases . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of capital leases . . . . . . . . . . . . . . . . . . . .
Capital
Leases
(in thousands)
$ 1,849
1,828
1,797
8,507
—
—
13,981
492
1,641
Long-term portion of capital leases . . . . . . . . . . . . . . . . . .
$11,848
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<12345678> JOB TITLE LAM Research Combo
REVISION 12
SERIAL
DATE Tuesday, September 24, 2013
JOB NUMBER 252704
TYPE
PAGE NO. 138
OPERATOR JioMeRD
Operating Leases and Related Guarantees
The Company leases the majority of its administrative, R&D and manufacturing facilities, regional sales/
service offices and certain equipment under non-cancelable operating leases. Certain of the Company’s facility
leases for buildings located at its Fremont, California headquarters 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 years 2013, 2012, and 2011 was approximately
$14 million, $11 million, and $9 million, respectively.
On December 18, 2007, the Company entered into two operating leases regarding certain improved
properties in Livermore, California. These leases were amended on April 3, 2008 and July 9, 2008 (as so
amended, the “Livermore Leases”). On December 21, 2007, the Company entered into a series of four amended
and restated operating leases (the “New Fremont Leases,” and collectively with the Livermore Leases, the
“Operating Leases”) with regard to certain improved properties at the Company’s headquarters in Fremont,
California.
The Operating Leases have a term of approximately seven years ending on the first business day in January
2015. The Company may, at its discretion and with 30 days’ notice, elect to purchase the property that is the
subject of the Operating Lease for an amount approximating the sum required to pay the amount of the lessor’s
investment in the property and any accrued but unpaid rent.
The Company is required, pursuant to the terms of the Operating Leases, to maintain collateral in an
aggregate of approximately $164.9 million in separate interest-bearing accounts as security for the Company’s
obligations under the Operating Leases. This amount is recorded as restricted cash in the Company’s
Consolidated Balance Sheet as of as of June 30, 2013.
When the terms of the Operating Leases expire, the property subject to that Operating Lease may be
remarketed. The Company has guaranteed to the lessor that each property will have a certain minimum residual
value. The aggregate guarantee made by the Company under the Operating Leases is generally no more than
approximately $141.7 million; however, under certain default circumstances, the guarantee with regard to an
Operating Lease may be 100% of the lessor’s aggregate investment in the applicable property, which in no case
will exceed $164.9 million, in the aggregate.
During fiscal years 2011 and 2010, the Company recognized restructuring charges of $13.7 million and
$13.0 million, respectively, related to the reassessment of the residual value guarantee for such lease.
Accordingly, an amount of $26.7 million has been recorded in other long-term liabilities as of June 30, 2013.
The Company’s contractual cash obligations with respect to operating leases, excluding the residual value
guarantees discussed above, as of June 30, 2013 were as follows:
Payments due by period:
One year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Two years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Three years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Four years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Over five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Sublease Income . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating
Leases
(in thousands)
$14,122
10,386
7,429
6,346
1,621
4,446
(5,202)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$39,148
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JOB NUMBER 252704
TYPE
PAGE NO. 139
OPERATOR JioMeRD
Other Guarantees
The Company has issued certain indemnifications to its lessors for taxes and general liability under some of
its agreements. The Company has entered into certain insurance contracts that may limit its exposure to such
indemnifications. As of June 30, 2013, the Company had not recorded any liability on its Consolidated Financial
Statements in connection with these indemnifications, as it does not believe, based on information available, that
it is probable that any 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, based on information available, that it
is probable that any material amounts will be paid under these guarantees.
The Company provides guarantees and standby letters of credit to certain parties as required for certain
transactions initiated during the ordinary course of business. As of June 30, 2013, the maximum potential amount
of future payments that we could be required to make under these arrangements and letters of credit was
$15.0 million. We do not believe, based on historical experience and information currently available, that it is
probable that any amounts will be required to be paid.
Purchase Obligations
Purchase obligations consist of significant contractual obligations either on an annual basis or over multi-
year periods related to the Company’s outsourcing activities or other material commitments, including vendor-
consigned inventories. The contractual cash obligations and commitments table presented below contains the
Company’s minimum obligations at June 30, 2013 under these arrangements and others. For obligations with
cancellation provisions, the amounts included in the following table were limited to the non-cancelable portion of
the agreement terms or the minimum cancellation fee. Actual expenditures will vary based on the volume of
transactions and length of contractual service provided.
The Company’s commitments related to these agreements as of June 30, 2013 are as follows:
Payments due by period:
One year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Two years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Three years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Four years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Over five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase
Obligations
(in thousands)
$147,425
5,733
3,312
1,063
1,063
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$158,596
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.
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PAGE NO. 140
OPERATOR JioMeRD
Changes in the Company’s product warranty reserves were as follows:
Balance at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warranties issued during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warranties assumed in Novellus acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements made during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in liability for pre-existing warranties . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended
June 30,
2013
June 24,
2012
(in thousands)
$ 70,161
74,779
—
(92,456)
5,594
$ 40,951
45,095
38,967
(58,710)
3,858
Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 58,078
$ 70,161
Less: long-term portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5,826)
(6,173)
Accrued warranty, current
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 52,252
$ 63,988
Note 15: Income Taxes
The components of income (loss) before income taxes are as follows:
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (46,392)
113,050
June 30,
2013
Year Ended
June 24,
2012
(in thousands)
$ (6,950)
211,368
June 26,
2011
$159,250
641,626
$ 66,658
$204,418
$800,876
Significant components of the provision (benefit) for income taxes attributable to income before income
taxes are as follows:
June 30,
2013
Year Ended
June 24,
2012
(in thousands)
June 26,
2011
Federal:
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (1,096)
(60,172)
$ 5,038
(1,033)
$ 55,119
(25,143)
$(61,268)
$ 4,005
$ 29,976
State:
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 3,332
(6,351)
$ 1,297
336
$ 3,159
26,589
$ (3,019)
$ 1,633
$ 29,748
Foreign:
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 20,640
(3,574)
$33,871
(3,814)
$ 22,556
(5,152)
$ 17,066
$30,057
$ 17,404
Total Provision (Benefit) for Income Taxes . . . . . .
$(47,221)
$35,695
$ 77,128
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JOB NUMBER 252704
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PAGE NO. 141
OPERATOR JioMeRD
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 are as follows:
June 30,
2013
June 24,
2012
(in thousands)
Deferred tax assets:
Tax carryforwards . . . . . . . . . . . . . . . . . .
Allowances and reserves . . . . . . . . . . . .
Equity-based compensation . . . . . . . . . .
Inventory valuation differences . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 169,371
94,720
19,586
22,833
11,286
$ 114,974
102,041
24,960
8,233
3,506
Gross deferred tax assets . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . .
317,796
(76,594)
253,714
(55,213)
Net deferred tax assets . . . . . . . . . . . . . . . . . .
Deferred tax liabilities:
Intangible Assets . . . . . . . . . . . . . . . . . . .
Convertible debt . . . . . . . . . . . . . . . . . . .
Temporary differences for capital
assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of goodwill . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . .
241,202
198,501
(94,836)
(98,482)
(117,312)
(81,608)
(41,470)
(9,950)
(14,581)
(71,439)
(8,180)
(7,060)
Gross deferred tax liabilities . . . . . . . . . . . . . .
(259,319)
(285,599)
Net deferred tax assets . . . . . . . . . . . . . . . . . .
$ (18,117)
$ (87,098)
The change in the gross deferred tax assets, gross deferred tax liabilities and valuation allowance between
fiscal year 2013 and 2012 is primarily attributable to reversal of deferred tax liabilities related to intangibles and
fixed assets due to non-deductibility of amortization and depreciation resulting from purchase price accounting
adjustments, an increase of tax credit attributes resulting from the extension of the federal research and
development tax credit in fiscal year 2013, and resolution of certain tax matters. 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 $76.6 million primarily related to California and certain
foreign deferred tax assets.
The provisions related to the tax accounting for stock-based compensation prohibit the recognition of a
deferred tax asset for an excess benefit that has not yet been realized. As a result, the Company will only
recognize an excess benefit from stock-based compensation in additional paid-in-capital if an incremental tax
benefit is realized after all other tax attributes currently available to us have been utilized. In addition, the
Company continued to elect to account for the indirect benefits of stock-based compensation such as the research
and development tax credit through the consolidated statement of operations.
At June 30, 2013, the Company had federal net operating loss carryforwards of approximately $158.6 million.
These losses will begin to expire in the year 2018, and are subject to limitations on their utilization.
As of June 30, 2013, the Company had state net operating loss carryforward of approximately
$129.3 million. If not utilized, the net operating loss carryforwards will begin to expire in the year 2015, and are
subject to limitations on their utilization.
At June 30, 2013, the Company had federal tax credit carryforwards of approximately $86.1 million, of
which $83.4 million will begin to expire in fiscal year 2027. The remaining balance of $2.7 million of credits
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may be carried forward indefinitely. The tax benefits relating to approximately $8.7 million of federal tax credit
carryforwards will be credited to additional paid-in-capital when recognized.
At June 30, 2013, the Company had state tax credit carryforwards of approximately $192.0 million.
Substantially all tax credits may be carried forward indefinitely. The tax benefits relating to approximately
$36.7 million of the state tax credit carryforwards will be credited to additional paid-in-capital when recognized.
At June 30, 2013, the Company had foreign net operating loss carryforwards of approximately
$57.2 million, of which approximately $30.0 million may be carried forward indefinitely and $27.2 million will
begin to expire in fiscal year 2014.
A reconciliation of income tax expense provided at the federal statutory rate (35% in fiscal years 2013, 2012
and 2011) to actual income expense is as follows:
Income tax expense computed at federal statutory rate . . . . . . . .
. . . . . . . . . . . . . . .
State income taxes, net of federal tax benefit
Foreign income taxed at different rates . . . . . . . . . . . . . . . . . . . .
Tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State valuation allowance, net of federal tax benefit . . . . . . . . . .
Equity-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other permanent differences and miscellaneous items . . . . . . . .
Year Ended
June 30,
2013
June 24,
2012
June 26,
2011
$ 23,332
(13,588)
(40,255)
(42,593)
11,538
20,318
—
(5,973)
(in thousands)
$ 71,546
(4,895)
(51,425)
(5,791)
5,862
14,123
5,683
592
$ 280,306
9,322
(217,982)
(16,503)
10,078
12,244
—
(337)
$(47,221)
$ 35,695
$ 77,128
Effective from fiscal year 2003 through June 2013, the Company had a tax holiday in Switzerland for one of
its foreign subsidiaries, which was conditional upon the Company meeting certain employment and
investment thresholds. The impact of the tax holiday decreased income taxes by approximately $10.8 million,
$22.3 million, and $119.5 million for fiscal years 2013, 2012, and 2011, respectively. The benefit of the tax
holiday on diluted earnings per share was approximately $0.06 in fiscal year 2013, $0.18 in fiscal year 2012, and
$0.96 in fiscal year 2011. The Company obtained a new Swiss ruling that is effective until June 30, 2023.
Effective from January 2007 through December 2012, Novellus had a tax holiday in Singapore for one of its
foreign subsidiaries. The tax holiday was terminated effective January 1, 2013. The benefit of the Singapore tax
holiday for the Company’s fiscal year 2013 results is immaterial.
Unremitted earnings of the Company’s foreign subsidiaries included in consolidated retained earnings
aggregated to approximately $2.1 billion at June 30, 2013. These earnings are indefinitely reinvested in foreign
operations. If these earnings were remitted to the United States, they would be subject to U.S. and foreign
withholding taxes of approximately $462.2 million at current statutory rates. The Company’s federal income tax
provision includes U.S. income taxes on certain foreign-based income.
As of June 30, 2013, the total gross unrecognized tax benefits were $333.1 million compared to
$343.8 million as of June 24, 2012, and $181.5 million as of June 26, 2011. During fiscal year 2013, gross
unrecognized tax benefits decreased by approximately $10.7 million. The amount of unrecognized tax benefits
88
<12345678> JOB TITLE LAM Research Combo
REVISION 12
SERIAL
DATE Tuesday, September 24, 2013
JOB NUMBER 252704
TYPE
PAGE NO. 143
OPERATOR JioMeRD
that, if recognized, would impact the effective tax rate was $257.7 million, $278.2 million, and $120.4 million as
of June 30, 2013, June 24, 2012, and June 26, 2011, respectively. The aggregate changes in the balance of gross
unrecognized tax benefits were as follows:
Balance as of June 27, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements and effective settlements with tax authorities . . . . . . . . . . . . . . . . . . . . . . . . . .
Lapse of statute of limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increases in balances related to tax positions taken during prior periods . . . . . . . . . . . . . . .
Decreases in balances related to tax positions taken during prior periods . . . . . . . . . . . . . .
Increases in balances related to tax positions taken during current period . . . . . . . . . . . . . .
Balance as of June 26, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements and effective settlements with tax authorities . . . . . . . . . . . . . . . . . . . . . . . . . .
Lapse of statute of limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increases in balances related to tax positions taken during prior periods . . . . . . . . . . . . . . .
Decreases in balances related to tax positions taken during prior periods . . . . . . . . . . . . . .
Increases in balances related to tax positions taken during current period . . . . . . . . . . . . . .
Tax positions assumed in Novellus transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance as of June 24, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements and effective settlements with tax authorities . . . . . . . . . . . . . . . . . . . . . . . . . .
Lapse of statute of limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increases in balances related to tax positions taken during prior periods . . . . . . . . . . . . . . .
Decreases in balances related to tax positions taken during prior periods . . . . . . . . . . . . . .
Increases in balances related to tax positions taken during current period . . . . . . . . . . . . . .
Tax positions assumed in Novellus transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance as of June 30, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(in millions)
$190.5
(24.2)
(5.2)
13.7
(13.4)
20.1
181.5
(0.2)
(6.6)
1.4
(4.3)
22.3
149.7
343.8
(3.4)
(51.4)
11.3
(11.3)
35.2
8.9
$333.1
The Company recognizes interest expense and penalties related to the above unrecognized tax benefits
within income tax expense. The Company had accrued $25.5 million, $25.2 million, and $16.9 million,
cumulatively, for gross interest and penalties as of June 30, 3013, June 24, 2012, and June 26, 2011, respectively.
The Internal Revenue Service (“IRS”) has completed its audit of the Company’s U.S. income tax return for
fiscal years 2008 and 2009. As a result of the settlement of the IRS audit, the Company reduced its unrecognized
tax benefits by approximately $1.8 million in fiscal year 2013. In addition, the Company is also subject to audits
by state and foreign tax authorities. The Company is unable to make a reasonable estimate as to when cash
settlements, if any, with the relevant taxing authorities will occur.
The Company files U.S. federal, U.S. state, and foreign income tax returns. As of June 30, 2013, tax years
2003-2012 remain subject to examination in the jurisdictions where the Company operates.
The Company is in various stages of the 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
twelve-month period the Company may experience an increase or decrease in its unrecognized tax benefits. It is
not possible to determine either the magnitude or the range of any increase or decrease at this time.
Note 16: Acquisitions
On June 4, 2012 (“the acquisition date”), the Company acquired all of the outstanding common shares of
Novellus in an all-stock transaction valued at approximately $3.0 billion. The results of Novellus’ operations
have been included in the consolidated financial statements for the period from June 4, 2012 to June 24, 2012.
Lam’s primary reasons for this acquisition were to complement existing product offerings and to provide
89
<12345678> JOB TITLE LAM Research Combo
REVISION 12
SERIAL
DATE Tuesday, September 24, 2013
JOB NUMBER 252704
TYPE
PAGE NO. 144
OPERATOR JioMeRD
opportunities for revenue and cost synergies. Novellus’ primary business focus is to develop, manufacture, sell
and support equipment used in the fabrication of integrated circuits, commonly called semiconductors.
Customers for this equipment manufacture semiconductors for sale or for incorporation in their own products, or
provide semiconductor-manufacturing services to third parties. Novellus also develops, manufactures, sells and
supports grinding, lapping and polishing equipment for a broad spectrum of industrial applications.
As a result of the acquisition, Lam Research issued common stock and equity-based awards, subject to
certain exceptions, as follows:
(i)
each issued and outstanding share of common stock of Novellus was converted into 1.125 (the
“exchange ratio”) shares of Lam Research common stock, with cash paid in lieu of fractional shares;
(ii) each outstanding option for Novellus’ common stock held by a then-current employee of Novellus, whether
vested or unvested, was assumed by Lam Research and converted into an option (A) to acquire that number
of shares of Lam Research common stock (rounded down to the nearest whole share) equal to the product of
(x) the number of shares of Novellus common stock for which such option was exercisable immediately
prior to the acquisition date multiplied by (y) the exchange ratio and (B) with an exercise price per share of
Lam Research (rounded up to the nearest whole penny) equal to the quotient obtained by dividing (z) the
exercise price per share of Novellus common stock subject to such option immediately prior to the
acquisition date divided by (y) the exchange ratio. Each assumed stock option will be subject to, and
exercisable and vested on, the same terms and conditions applicable to such assumed stock option
(consistent with the terms of the applicable Novellus stock plan, the applicable stock option agreement and
any other applicable Novellus plan) as of immediately prior to the acquisition date; and
(iii) each outstanding Novellus RSU and each outstanding Novellus performance-based RSU (“PSU”) held
by a then-current employee of Novellus, whether vested or unvested, was assumed by Lam Research
and converted into a restricted stock unit to acquire the number of shares of Lam Research common
stock (rounded down to the nearest whole share) equal to the product obtained by multiplying (x) the
number of shares of Novellus common stock subject to such RSU or PSU, as applicable, immediately
prior to the acquisition date by (y) 1.125. Novellus PSUs that vest in connection with the
consummation of the acquisition will become fully vested with respect to the maximum number of
shares of Novellus common stock payable pursuant to such Novellus PSU. Each assumed RSU or PSU,
as applicable, will be subject to, and vested on, the same terms and conditions applicable to such
assumed RSU or PSU.
Consideration Transferred
The table below details the consideration transferred to acquire Novellus:
(in thousands, except per share amounts)
Conversion
Calculation
Estimated
Fair Value
Lam common stock issued at merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Per share price of Lam common stock as of June 4, 2012 . . . . . . . . . . . . . .
82,689
$ 35.99
Estimated fair value of vested Lam equivalent restricted stock (1)
. . . . . . . .
Estimated fair value of vested Lam equivalent stock options (2) . . . . . . . . . .
Estimated purchase price consideration . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,975,977
$
9,599
41,412
$3,026,988
(1) The fair value of Lam Research equivalent restricted stock as of the acquisition date was estimated based
upon the per share price of Lam Research common stock as of June 4, 2012, and giving effect to the
exchange ratio of 1.125.
(2) The fair value of the Lam Research equivalent stock options as of the acquisition date was estimated using
the Black-Scholes valuation model. Assumptions used are the same as those for acquired awards as
disclosed in Note 11 of Notes to Consolidated Financial Statements.
90
<12345678> JOB TITLE LAM Research Combo
REVISION 12
SERIAL
DATE Tuesday, September 24, 2013
JOB NUMBER 252704
TYPE
PAGE NO. 145
OPERATOR JioMeRD
Net Assets Acquired
The transaction has been accounted for using the acquisition method of accounting which requires that
assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. The following
table summarizes the assets acquired and liabilities assumed as of the acquisition date:
Cash and investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets acquired . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other current liabilities . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
Convertible notes - equity component . . . . . . . . . . . . . . . .
June 4, 2012
(in thousands)
$1,059,859
241,924
309,213
55,502
289,126
1,219,100
1,283,111
36,494
4,494,329
(83,028)
(199,262)
(20,388)
(509,805)
(326,732)
(328,126)
Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,026,988
The following table is a summary of the fair value estimates of the identifiable intangible assets and their
useful lives:
Existing technology . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . .
In-process research and design . . . . . . . . . . . . . . . . . . .
Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Backlog . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional development rights . . . . . . . . . . . . . . . . . . .
Useful
Life
Estimated
Fair Value
June 4, 2012
(in thousands, except years)
$ 580,000
580,000
30,000
10,000
10,000
9,100
7
6-10
Indefinite
6
1
Indefinite
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,219,100
Critical estimates in valuing certain intangible assets include but are 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.
With respect to the acquisition of Novellus, acquired intangibles primarily included existing technology and
customer relationships. Existing technology represents the underlying hardware, software, robotics, chemical and
mechanical processes embedded in the various tools, which have passed technological feasibility. Existing
technology was valued using the relief from royalty method, a form of the income approach. The relief from
royalty method estimates the cost savings that accrue to the owner of an intangible asset that would otherwise be
payable as royalties or license fees on revenues earned through the use of the asset. The value of the intangible
asset is equal to the present value of the after-tax royalty savings attributable to owning the intangible asset.
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<12345678> JOB TITLE LAM Research Combo
REVISION 12
SERIAL
DATE Tuesday, September 24, 2013
JOB NUMBER 252704
TYPE
PAGE NO. 146
OPERATOR JioMeRD
Customer relationships have value when they represent an identifiable and predictable source of cash flows
to the combined business enterprise. Customer relationships that resulted in repeat purchases and customer
loyalty were valued using the multiperiod excess earning method, a form of the income approach. The estimated
fair value of the customer contracts and related relationships represents the sum of the present value of the
expected cash flows attributable to those customer relationships. The cash flows were determined from the
revenue and profit forecasts associated with existing contracts and renewals, as well as add-ons and growth
opportunities that are expected to be generated from these customer relationships.
The goodwill recognized is attributable primarily to expected synergies and other benefits that the Company
believes will result from combining the operations of Novellus with the operations of Lam. The $1.3 billion
goodwill that was acquired is not expected to be deductible for income tax purposes. As of June 30, 2013 there
are no remaining preliminary purchase price allocations and the measurement period is considered closed.
Acquisition Costs
The Company recognized $36 million of acquisition related costs that were expensed in the year ended
June 24, 2012. These costs are included within selling, general, and administrative expense in the Consolidated
Statement of Operations.
Actual and Pro-forma Results
The amounts of revenue and net income (loss) of Novellus included in the Company’s consolidated
Statement of Operations from the acquisition date to June 24, 2012 are as follows:
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(in thousands)
$ 25,843
$(29,187)
The unaudited pro-forma results presented below include the effects of the Novellus acquisition as if it had
been consummated as of June 28, 2010. The pro forma results below include adjustments related to conforming
revenue accounting policies, depreciation and amortization to reflect the fair value of acquired property, plant
and equipment and identifiable intangible assets, and the associated income tax impacts. The pro forma results
for the years ended June 24, 2012 include $122 million of costs related to inventory fair value adjustments on
products sold, share-based compensation associated with accelerated vesting and acquisition-related costs, which
are not expected to occur in future quarters. The pro forma information does not necessarily reflect the actual
results of operations had the acquisition been consummated at the beginning of the fiscal reporting period
indicated nor is it indicative of future operating results. The pro forma information does not include any
adjustment for (i) potential revenue enhancements, cost synergies or other operating efficiencies that could result
from the acquisition or (ii) transaction or integration costs relating to the acquisition.
Year Ended
June 24,
2012
June 26,
2011
(in thousands, except per share amounts)
Pro forma revenue . . . . . . . . . . . . . . . . . . . . .
Pro forma net income . . . . . . . . . . . . . . . . . . .
Pro forma basic earnings per share . . . . . . . .
Pro forma diluted earnings per share . . . . . . .
$3,804,252
$ 152,981
0.76
$
0.74
$
$4,743,797
$ 894,864
4.34
$
4.18
$
Note 17: Goodwill and Intangible Assets
Goodwill
There were no significant changes in the goodwill balance during the twelve months ended June 30, 2013.
Of the $1.5 billion goodwill balance, $61 million is tax deductible and the remaining balance is not tax
deductible due to purchase accounting and applicable foreign law.
92
<12345678> JOB TITLE LAM Research Combo
REVISION 12
SERIAL
DATE Tuesday, September 24, 2013
JOB NUMBER 252704
TYPE
PAGE NO. 147
OPERATOR JioMeRD
Intangible Assets
The following table provides the Company’s intangible assets as of June 30, 2013 (in thousands, except
years):
Gross
Accumulated
Amortization
Net
Weighted-
Average Useful
Life (years)
Customer relationships . . . . . . . . . . . . . . . . . . . . $ 624,686
653,628
Existing technology . . . . . . . . . . . . . . . . . . . . . . .
32,053
Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,000
Backlog . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
35,216
Other intangible assets . . . . . . . . . . . . . . . . . . . .
$(103,519) $ 521,167
513,734
(139,894)
10,017
(22,036)
—
(10,000)
327
(34,889)
9.01
6.97
6.09
1.00
4.10
Intangible assets subject to amortization . . . . . . .
In process research and development
. . . . . . . . .
Development rights . . . . . . . . . . . . . . . . . . . . . . .
1,355,583
20,000
9,100
(310,338)
Intangible assets not subject to amortization . . .
29,100
1,045,245
20,000
9,100
29,100
Total intangible assets . . . . . . . . . . . . . . . . . . . . . $1,384,683
$(310,338) $1,074,345
The following table provides details of the Company’s intangible assets as of June 24, 2012 (in thousands,
except years):
Gross
Accumulated
Amortization
Net
Weighted-
Average Useful
Life (years)
Customer relationships . . . . . . . . . . . . . . . . . . . . $ 615,411
642,311
Existing technology . . . . . . . . . . . . . . . . . . . . . . .
30,870
Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,000
Backlog . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
35,216
Other intangible assets . . . . . . . . . . . . . . . . . . . .
$ (32,041) $ 583,370
593,933
13,345
9,452
1,227
(48,378)
(17,525)
(548)
(33,989)
9.04
6.97
6.05
1.00
4.10
Intangible assets subject to amortization . . . . . . .
. . . . . . . . .
In process research and development
Development rights . . . . . . . . . . . . . . . . . . . . . . .
1,333,808
30,000
9,100
(132,481)
Intangible assets not subject to amortization . . .
39,100
1,201,327
30,000
9,100
39,100
Total intangible assets . . . . . . . . . . . . . . . . . . . . . $1,372,908
$(132,481) $1,240,427
The Company recognized $177.6 million, $26.9 million, and $21.0 million, in intangible asset amortization
expense during fiscal years 2013, 2012, and 2011, respectively.
The estimated future amortization expense of intangible assets, excluding those with indefinite lives, as of
June 30, 2013 was as follows (in thousands):
Fiscal Year
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter
Amount
$ 160,887
157,310
155,093
153,352
152,100
266,503
$1,045,245
93
<12345678> JOB TITLE LAM Research Combo
REVISION 12
SERIAL
DATE Tuesday, September 24, 2013
JOB NUMBER 252704
TYPE
PAGE NO. 148
OPERATOR JioMeRD
Note 18: 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 six geographic regions: North America, Europe, Japan, Korea, Taiwan, and Asia
Pacific. For geographical reporting, revenue is attributed to the geographic location in which the customers’
facilities are located while long-lived assets are attributed to the geographic locations in which the assets are
located.
Revenues and long-lived assets by geographic region were as follows:
June 30,
2013
Revenue:
Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
North America . . . . . . . . . . . . . . . . . . . . . . .
Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . .
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,026,548
734,324
603,821
573,696
368,095
292,432
Year Ended
June 24,
2012
(in thousands)
$ 467,922
458,531
893,549
292,963
308,189
244,038
June 26,
2011
$ 766,910
393,004
756,660
492,600
405,371
423,148
Total revenue . . . . . . . . . . . . . . . . . . . .
$3,598,916
$2,665,192
$3,237,693
June 30,
2013
June 24,
2012
(in thousands)
June 26,
2011
Long-lived assets:
North America . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . .
Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 484,273
109,934
5,079
2,953
680
991
$ 463,156
107,893
8,317
3,169
1,068
993
$ 191,221
69,442
3,738
3,897
1,067
1,093
Total long-lived assets . . . . . . . . . . . . .
$ 603,910
$ 584,596
$ 270,458
In fiscal year 2013, three customers accounted for approximately 19%, 15%, and 11% of total revenues. In
fiscal year 2012, three customers accounted for approximately 30%, 12%, and 10% of total revenues. In fiscal
year 2011, one customer accounted for approximately 24% of total revenues.
Note 19: Restructuring Charges
From time to time, Lam initiates restructuring activities to appropriately align its cost structure relative to
prevailing economic and industry conditions and associated customer demand as well as in connection with
certain acquisitions. Costs associated with restructuring actions can include termination benefits and related
charges in addition to facility closure, contract termination and other related activities.
Accounting for restructuring activities, as compared to regular operating cost management activities,
requires an evaluation of formally committed and approved plans. Restructuring activities have comparatively
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greater strategic significance and materiality and may involve exit activities, whereas regular cost containment
activities are more tactical in nature and are rarely characterized by formal and integrated action plans or exiting
a particular product, facility, or service.
March 2009 Plan
Beginning in the March 2009 quarter, the Company incurred restructuring expenses designed to align the
Company’s cost structure with its outlook for the economic environment and business opportunities. The
remaining liability under this plan of $26.7 million relates to the residual value guarantee under certain of the
Company’s unoccupied operating leases. See Note 14 to the Consolidated Financial Statements for additional
information regarding residual value guarantees.
Acquired Restructuring Liabilities
In addition to restructuring plans initiated by the Company, a restructuring liability related to future rent
obligations on unoccupied facilities was assumed in the Novellus acquisition. The associated liability balance of
$11.4 million, as of June 30, 2013, is expected to be paid by the end of fiscal year 2017.
Note 20: Stock Repurchase Program
On December 14, 2011, the Board of Directors authorized the repurchase of up to $1.6 billion of Company
common stock, which replaced the previous repurchase authorizations. The Company completed the repurchase
of all amounts available under this share repurchase authorization during the year ended June 30, 2013.
On April 22, 2013, the Board of Directors authorized the repurchase of up to $250 million of Company
common stock. These repurchases can be conducted on the open market or as private purchases and may include
the use of derivative contracts with large financial institutions, in all cases subject to compliance with applicable
law. Repurchases will be funded using the Company’s on-shore cash and on-shore cash generation. This
repurchase program has no termination date and may be suspended or discontinued at any time.
Repurchases under the repurchase program were as follows during the periods indicated:
Period
Total Number of
Shares
Repurchased
Total Cost of
Repurchase
Average Price Paid
Per Share*
(in thousands, except per share data)
Amount Available
Under Repurchase
Program
Available balance as of June 24, 2012 . . . . . .
Quarter ended September 23, 2012 . . . . . . . .
Quarter ended December 23, 2012 . . . . . . . . .
Quarter ended March 31, 2013 . . . . . . . . . . . .
Authorization of new $250 million -
April 2013 . . . . . . . . . . . . . . . . . . . . . . . . . .
Quarter ended June 30, 2013 . . . . . . . . . . . . .
11,970
10,190
5,312
$344,001
$354,029
$213,903
$34.79
$34.74
$37.73
90
$ —
$ —
$911,933
$567,932
$213,903
$ —
$250,000
$250,000
* Average price paid per share excludes accelerated share repurchases for which cost was incurred in fiscal year
2012, but shares were received in fiscal year 2013 and for which costs were incurred in the quarter ended
March 31, 2013, but for which final settlement of shares was not received until the quarter ended June 30,
2013. See Collared Accelerated Share Repurchases section below for details regarding average price
associated with these transactions.
In addition to shares repurchased under Board authorized repurchase program shown above, during the year
ended June 30, 2013, the Company acquired 595,000 shares at a total cost of $22.9 million which the Company
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withheld through net share 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 plans.
As part of its share repurchase program, the Company may from time-to-time enter into structured share
repurchase arrangements with financial institutions using general corporate funds. Such arrangements entered
into or settled during the year ended June 30, 2013 included the following:
Collared Accelerated Share Repurchases — Settled During Current Fiscal Year
During the year ended June 24, 2012, the Company entered into two share repurchase transactions under
one master repurchase arrangement. Under these collared accelerated share repurchase transactions (“ASRs”),
the Company made up-front cash payments of $375 million and $200 million, respectively, three days after the
respective trade date in exchange for an initial delivery of 6.6 million and 3.9 million shares of its common stock,
respectively. The number of shares to ultimately be repurchased by the Company is based generally on the
volume-weighted average price (“VWAP”) of the Company’s common stock during the term of the ASR minus a
pre-determined discount set at inception of the ASR, subject to collar provisions that provide a minimum and
maximum number of shares that the Company could repurchase under the agreements.
The minimum and maximum thresholds for each transaction were established based on the average of the
VWAP prices for the Company’s common stock during an initial hedge period. The Company received
incremental shares on top of the initial shares delivered such that the total number of shares received after the
initial hedge period equaled 8.8 million and 4.8 million shares, equivalent to the minimum number of shares to
be delivered under the terms of the ASRs, respectively. The ASRs were scheduled to end on or before
September 18, 2012 and October 9, 2012, respectively. However, each ASR was subject to acceleration at the
option of the counterparty at any time after June 27, 2012 and July 19, 2012, respectively. At the conclusion of
the ASRs, the Company would receive additional shares based on the VWAP of the Company’s common stock
during the term of the agreement minus the pre-determined fixed discount, such that the total number of shares
received under the ASRs would not exceed the maximum of 10.8 million and 6.6 million shares, respectively.
The Company accounted for each ASR as two separate transactions: (a) as shares of common stock acquired
in a treasury stock transaction recorded on the acquisition date and (b) as a forward contract indexed to the
Company’s own common stock and classified in stockholders’ equity. As such, the Company accounted for the
shares that it received under the ASRs as a repurchase of its common stock for the purpose of calculating
earnings per common share. The Company has determined that the forward contract indexed to the Company’s
common stock met all of the applicable criteria for equity classification in accordance with the Derivatives and
Hedging topic of the FASB ASC, and, therefore, the ASRs were not accounted for as derivative instruments. As
of June 24, 2012, the aggregate repurchase price of $575.0 million was reflected as Treasury stock, at cost, in the
Consolidated Balance Sheet.
The counterparty to the $375 million ASR designated July 6, 2012 as the accelerated termination date, at
which time the Company settled the ASR and received an additional 1.3 million shares of common stock in
addition to the minimum shares already received, which represented a weighted average share price of
approximately $36.80 for the transaction period. The counterparty to the $200 million ASR designated July 25,
2012 as the accelerated termination date, at which time the Company settled the ASR and received an additional
0.7 million shares of common stock in addition to the minimum shares already received, which represented a
weighted average share price of approximately $36.12 for the transaction period.
Collared Accelerated Share Repurchases — Executed During Current Fiscal Year
During the year ended June 30, 2013, the Company entered into a share repurchase transaction under the
existing master repurchase arrangement. Under this ASR, the Company made an up-front cash payment of
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$86.4 million, in exchange for an initial delivery of 1.5 million shares of its common stock and a subsequent
delivery of 0.4 million shares following the initial hedge period
As with the prior ASRs, the minimum and maximum thresholds for the transaction were established based
on the average of the VWAP prices for the Company’s common stock during an initial hedge period. The ASR
was scheduled to end at any time after March 21, 2013 and on or before May 21, 2013. At the conclusion of the
ASRs, the Company would receive additional shares based on the VWAP of the Company’s common stock
during the term of the agreement minus the pre-determined fixed discount, such that the total number of shares
received under this ASR would not exceed the maximum of 2.2 million shares.
The counterparty designated May 21, 2013 as the termination date, at which time the Company settled the
ASR and received an additional 0.1 million shares of common stock in addition to the minimum shares already
received, which represented a weighted average share price of approximately $42.71 for the transaction period.
As of June 30, 2013, the aggregate repurchase price of $86.4 million is reflected as Treasury stock, at cost,
in the Consolidated Balance Sheet.
Note 21: Legal Proceedings
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. To the extent there is a reasonable possibility that the losses could exceed the
amounts already accrued, the Company believes that the amount of any such additional loss would be immaterial
to the Company’s business, financial condition, and results of operations.
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Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of Lam Research Corporation
We have audited the accompanying consolidated balance sheets of Lam Research Corporation as of June 30,
2013 and June 24, 2012, and the related consolidated statements of operations, comprehensive income,
stockholders’ equity and cash flows for each of the three years in the period ended June 30, 2013. Our audits also
included the financial statement schedule listed in the Index at Item 15. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the
consolidated financial position of Lam Research Corporation at June 30, 2013 and June 24, 2012, and the
consolidated results of its operations and its cash flows for each of the three years in the period ended June 30,
2013, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), Lam Research Corporation's internal control over financial reporting as of June 30, 2013, based
on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (1992 framework) and our report dated August 27, 2013, expressed
an unqualified opinion thereon.
/s/ ERNST & YOUNG LLP
San Jose, California
August 27, 2013
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Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of Lam Research Corporation
We have audited Lam Research Corporation’s internal control over financial reporting as of June 30, 2013
based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (1992 framework) (the COSO criteria). Lam Research Corporation
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 conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). 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.
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.
In our opinion, Lam Research Corporation maintained, in all material respects, effective internal control
over financial reporting as of June 30, 2013, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated balance sheets of Lam Research Corporation as of June 30, 2013 and June 24,
2012, and the related consolidated statement of income, comprehensive income, stockholders’ equity and cash
flows for each of the three years in the period ended June 30, 2013 of Lam Research Corporation and our report
dated August 27, 2013 expressed an unqualified opinion thereon.
San Jose, California
August 27, 2013
/s/ ERNST & YOUNG LLP
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the
Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
LAM RESEARCH CORPORATION
By /s/ Martin B. Anstice
Martin B. Anstice
President and Chief Executive Officer
Dated: August 27, 2013
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POWER OF ATTORNEY AND SIGNATURES
By signing this Annual Report on Form 10-K below, I hereby appoint each of Martin B. Anstice and
Douglas R. Bettinger, jointly and severally, as my attorney-in-fact to sign all amendments to this Form 10-K on
my behalf, and to file this Form 10-K (including all exhibits and other related documents) with the Securities and
Exchange Commission. I authorize each of my attorneys-in-fact to (1) appoint a substitute attorney-in-fact for
himself and (2) perform any actions that he believes are necessary or appropriate to carry out the intention and
purpose of this Power of Attorney. I ratify and confirm all lawful actions taken directly or indirectly by my
attorneys-in-fact and by any properly appointed substitute attorneys-in-fact.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed
below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signatures
Principal Executive Officer
/s/ Martin B. Anstice
Martin B. Anstice
Principal Financial Officer and Principal
Accounting Officer
/s/ Douglas R. Bettinger
Douglas R. Bettinger
Other Directors
/s/ Stephen G. Newberry
Stephen G. Newberry
/s/ Eric K. Brandt
Eric K. Brandt
/s/ Michael R. Cannon
Michael R. Cannon
/s/ Youssef A. El-Mansy
Youssef A. El-Mansy
/s/ Christine Heckart
Christine Heckart
/s/ Grant M. Inman
Grant M. Inman
/s/ Catherine P. Lego
Catherine P. Lego
Title
Date
President and Chief Executive
Officer
August 27, 2013
Executive Vice President, Chief
Financial Officer, and
Chief Accounting Officer
August 27, 2013
Chairman
August 27, 2013
August 27, 2013
August 27, 2013
August 27, 2013
August 27, 2013
August 27, 2013
August 27, 2013
Director
Director
Director
Director
Director
Director
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Signatures
/s/ Krishna Saraswat
Krishna Saraswat
/s/ William R. Spivey
William R. Spivey
/s/ Abhi Talwalkar
Abhi Talwalkar
Director
Director
Director
Title
Date
August 27, 2013
August 27, 2013
August 27, 2013
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LAM RESEARCH CORPORATION
SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS
Description
Balance at
Beginning of Period
Charged to Costs
and Expenses
Write-offs, Net of
Recoveries (1)
Balance at End of
Period
(in thousands)
Additions
YEAR ENDED JUNE 30, 2013
Deducted from asset accounts:
Allowance for doubtful accounts . . .
$ 5,248
$200
$ —
$5,448
YEAR ENDED JUNE 24, 2012
Deducted from asset accounts:
Allowance for doubtful accounts . . .
$ 4,720
$403
$
125
$5,248
YEAR ENDED JUNE 26, 2011
Deducted from asset accounts:
Allowance for doubtful accounts . . .
$10,609
$290
$(6,179)
$4,720
(1) During fiscal year 2012, write-off, net of recoveries represents $0.1 million of recoveries against previously
written-off balances
During fiscal year 2011, write-off, net of recoveries represents $3.8 million release of allowance and $2.4
million write-off of customer specific accounts.
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Exhibit
3.1(2)
LAM RESEARCH CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED JUNE 30, 2013
EXHIBIT INDEX
Description
Certificate of Incorporation of the Registrant, dated September 7, 1989; as amended by the
Agreement and Plan of Merger, Dated February 28, 1990; the Certificate of Amendment dated
October 28, 1993; the Certificate of Ownership and Merger dated December 15, 1994; the
Certificate of Ownership and Merger dated June 25, 1999 and the Certificate of Amendment
effective as of March 7, 2000; and the Certificate of Amendment effective as of November 5,
2009.
3.2(28)
Bylaws of the Registrant, as amended, dated May 17, 2013.
3.3(2)
4.1(14)
4.2(14)
Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock
dated January 27, 1997.
Indenture (including Form of Notes), dated as of May 11, 2011, by and between Lam Research
Corporation, and The Bank of New York Mellon Trust Company, N.A, as trustee, with respect to
the 2016 Notes
Indenture (including Form of Notes), dated as of May 11, 2011, by and between Lam Research
Corporation, and The Bank of New York Mellon Trust Company, N.A, as trustee, with respect to
the 2018 Notes
4.8(5)*
Amended and restated 1997 Stock Incentive Plan.
4.12(4)*
Amended and restated 1999 Stock Option Plan.
4.13(29)*
Lam Research Corporation 1999 Employee Stock Purchase Plan, as amended.
4.14(10)*
Lam Research Corporation 2004 Executive Incentive Plan, as amended.
4.15*
Lam Research Corporation 2007 Stock Incentive Plan, as amended.
4.16(15)*
Lam Research Corporation Elective Deferred Compensation Plan.
4.17(15)*
Lam Research Corporation Elective Deferred Compensation Plan II.
4.18(18)
Indenture between Novellus Systems, Inc. as Issuer and The Bank of New York Mellon Trust
Company, N.A. as Trustee, dated as of May 10, 2011, including the form of 2.625% Senior
Convertible Notes due 2041.
4.19(13)
Supplemental Indenture among the Registrant, as Guarantor, Novellus Systems, Inc. as Issuer and
The Bank of New York Mellon Trust Company, N.A. as Trustee, dated as of June 4, 2012.
10.3(1)*
Form of Indemnification Agreement.
10.99(3)*
10.102(6)
10.103(6)
Form of Nonstatutory Stock Option Agreement — Lam Research Corporation 1997 Stock
Incentive Plan.
Form of Restricted Stock Unit Award Agreement (U.S. Agreement A) — Lam Research
Corporation 1997 Stock Incentive Plan.
Form of Restricted Stock Unit Award Agreement (non-U.S. Agreement I-A) — Lam Research
Corporation 1997 Stock Incentive Plan.
10.106(7)*
Form of Restricted Stock Unit Award Agreement (U.S. Agreement) — Lam Research Corporation
2007 Stock Incentive Plan
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10.107(8)
10.108(8)
10.117(9)
10.118(9)
10.119(9)
10.120(9)
10.121(9)
10.122(9)
10.123(9)
10.124(9)
10.125(9)
10.126(9)
10.127(9)
10.128(9)
10.129(9)
10.130(9)
10.131(9)
10.132(9)
10.133(9)
10.134(9)
10.135(9)
Form of Restricted Stock Unit Award Agreement — Outside Directors (U.S. Agreement) — Lam
Research Corporation 2007 Stock Incentive Plan.
Form of Restricted Stock Unit Award Agreement — Outside Directors (non-U.S. Agreement) —
Lam Research Corporation 2007 Stock Incentive Plan.
Lease Agreement (Fremont Building #1) between Lam Research Corporation and BNP Paribas
Leasing Corporation, dated December 21, 2007.
Pledge Agreement (Fremont Building #1) between Lam Research Corporation and BNP Paribas
Leasing Corporation, dated December 21, 2007.
Closing Certificate and Agreement (Fremont Building #1) between Lam Research Corporation and
BNP Paribas Leasing Corporation, dated December 21, 2007.
Agreement Regarding Purchase and Remarketing Options (Fremont Building #1) between Lam
Research Corporation and BNP Paribas Leasing Corporation, dated December 21, 2007.
Lease Agreement (Fremont Building #2) between Lam Research Corporation and BNP Paribas
Leasing Corporation, dated December 21, 2007.
Pledge Agreement (Fremont Building #2) between Lam Research Corporation and BNP Paribas
Leasing Corporation, dated December 21, 2007.
Closing Certificate and Agreement (Fremont Building #2) between Lam Research Corporation and
BNP Paribas Leasing Corporation, dated December 21, 2007.
Agreement Regarding Purchase and Remarketing Options (Fremont Building #2) between Lam
Research Corporation and BNP Paribas Leasing Corporation, dated December 21, 2007.
Lease Agreement (Fremont Building #3) between Lam Research Corporation and BNP Paribas
Leasing Corporation, dated December 21, 2007.
Pledge Agreement (Fremont Building #3) between Lam Research Corporation and BNP Paribas
Leasing Corporation, dated December 21, 2007.
Closing Certificate and Agreement (Fremont Building #3) between Lam Research Corporation and
BNP Paribas Leasing Corporation, dated December 21, 2007.
Agreement Regarding Purchase and Remarketing Options (Fremont Building #3) between Lam
Research Corporation and BNP Paribas Leasing Corporation, dated December 21, 2007.
Lease Agreement (Fremont Building #4) between Lam Research Corporation and BNP Paribas
Leasing Corporation, dated December 21, 2007.
Pledge Agreement (Fremont Building #4) between Lam Research Corporation and BNP Paribas
Leasing Corporation, dated December 21, 2007.
Closing Certificate and Agreement (Fremont Building #4) between Lam Research Corporation and
BNP Paribas Leasing Corporation, dated December 21, 2007.
Agreement Regarding Purchase and Remarketing Options (Fremont Building #4) between Lam
Research Corporation and BNP Paribas Leasing Corporation, dated December 21, 2007.
Lease Agreement (Livermore/Parcel 6) between Lam Research Corporation and BNP Paribas
Leasing Corporation, dated December 18, 2007.
Pledge Agreement (Livermore/Parcel 6) between Lam Research Corporation and BNP Paribas
Leasing Corporation, dated December 18, 2007.
Closing Certificate and Agreement (Livermore/Parcel 6) between Lam Research Corporation and
BNP Paribas Leasing Corporation, dated December 18, 2007.
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10.136(9)
10.137(9)
10.138(9)
10.139(9)
10.140(9)
10.141(9)
10.142(9)
Agreement Regarding Purchase and Remarketing Options (Livermore/Parcel 6) between Lam
Research Corporation and BNP Paribas Leasing Corporation, dated December 18, 2007.
Construction Agreement (Livermore/Parcel 6) between Lam Research Corporation and BNP
Paribas Leasing Corporation, dated December 18, 2007.
Lease Agreement (Livermore/Parcel 7) between Lam Research Corporation and BNP Paribas
Leasing Corporation, dated December 18, 2007.
Pledge Agreement (Livermore/Parcel 7) between Lam Research Corporation and BNP Paribas
Leasing Corporation, dated December 18, 2007.
Closing Certificate and Agreement (Livermore/Parcel 7) between Lam Research Corporation and
BNP Paribas Leasing Corporation, dated December 18, 2007.
Agreement Regarding Purchase and Remarketing Options (Livermore/Parcel 7) between Lam
Research Corporation and BNP Paribas Leasing Corporation, dated December 18, 2007.
Construction Agreement (Livermore/Parcel 7) between Lam Research Corporation and BNP
Paribas Leasing Corporation, dated December 18, 2007.
10.143(33)
First Modification Agreement (Fremont Buildings #1, #2, #3, #4) between Lam Research
Corporation and BNP Paribas Leasing Corporation, dated April 3, 2008.
10.144(33)
First Modification Agreement (Livermore Parcel 6) between Lam Research Corporation and BNP
Paribas Leasing Corporation, dated April 3, 2008.
10.145(33) Second Modification Agreement (Livermore Parcel 6) between Lam Research Corporation and
BNP Paribas Leasing Corporation, dated July 9, 2008.
10.146(33) First Modification Agreement (Livermore Parcel 7) between Lam Research Corporation and BNP
Paribas Leasing Corporation, dated July 9, 2008.
10.148(11)* Form of Indemnification Agreement.
10.149(11)* Reformation of Stock Option Agreement.
10.150(12)* Stock Option Amendment and Special Bonus Agreement.
10.156(16)* Employment Agreement with Stephen G. Newberry, dated November 30, 2011.
10.157(16)* Employment Agreement with Martin B. Anstice, dated November 30, 2011.
10.158(17)* Employment Agreement with Timothy M. Archer, dated March 6, 2012.
10.159(13)* Form of Indemnification Agreement.
10.160(19) Assignment and Assumption of Lessee’s Interest in Lease (Units 8 and 9, Palo Alto) and
Covenants, Conditions and Restrictions on Leasehold Interests (Units 1-12, Palo Alto) by and
between Varian Associates, Inc. and Novellus dated May 7, 1997.
10.161(20) Environmental Agreement by and between Varian Associates, Inc. and Novellus dated May 7,
1997.
10.162(21)* Form of Novellus Directors and Officers Indemnification Agreement.
10.163(22)* GaSonics International Corporation 1994 Stock Option/Stock Issuance plan, together with forms of
agreements thereunder, as assumed by Novellus.
10.164(22)* GaSonics International Corporation Supplemental Stock Option Plan, as assumed by Novellus.
10.165(23)* Novellus 2001 Stock Incentive Plan, as amended, together with forms of agreement thereunder.
10.166(24)* SpeedFam-IPEC, Inc. Amended and Restated 1995 Stock Plan, as assumed by Novellus.
10.167(24)* SpeedFam-IPEC, Inc. 2001 Nonstatutory Stock Option Plan, together with forms of agreements
thereunder, as assumed by Novellus.
106
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10.168(24) Lease Guaranty between Novellus and Phoenix Industrial Investment Partners, L.P. dated
January 21, 2003.
10.169(25) Binding Memorandum of Understanding between Novellus, and Applied Materials, Inc., effective
as of September 3, 2004. Portions of this exhibit have been omitted pursuant to a request for
confidential treatment.
10.170(26)* Novellus Amended Executive Voluntary Deferred Compensation Plan, as amended.
10.171(27)* Novellus Accelerated Stock Vesting Retirement Plan Summary.
10.172(30)* Novellus Systems, Inc. 2011 Stock Incentive Plan, as amended July 18, 2012.
10.173*
Forms of Nonstatutory Stock Option Agreement under the Novellus 2011 Stock Incentive Plan.
10.174(30)* Forms of restricted stock unit award agreement under the Novellus 2011 Stock Incentive Plan.
10.175(31)* Employment Agreement with Douglas R. Bettinger, dated February 25, 2013.
10.176*
Form of Nonstatutory Stock Option Agreement — Lam Research Corporation 2007 Stock
Incentive Plan.
10.177(32)* Employment Agreement with Ernest E. Maddock, dated September 7, 2012.
10.178(32)* Employment Agreement with Richard A. Gottscho, dated September 7, 2012.
10.179(32)* Form of Change in Control Agreement.
21
23.1
24
31.1
31.2
32.1
32.2
Subsidiaries of the Registrant.
Consent of Independent Registered Public Accounting Firm.
Power of Attorney (See Signature page)
Rule 13a — 14(a) / 15d — 14(a) Certification (Principal Executive Officer)
Rule 13a — 14(a) / 15d — 14(a) Certification (Principal Financial Officer)
Section 1350 Certification — (Principal Executive Officer)
Section 1350 Certification — (Principal Financial Officer)
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
(1)
(2)
(3)
(4)
Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended April 3,
1988.
Incorporated by reference to Registrant’s Amendment No. 2 to its Annual Report on Form 10K/A for the
fiscal year ended June 25, 2000, and Registrant’s Current Report on Form 8-K filed on November 10, 2009.
Incorporated by reference to Registrant’s Annual Report on Form 10-K for the fiscal year ended June 27,
2004.
Incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the quarter ended
December 29, 2002.
107
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(5)
(6)
(7)
(8)
(9)
Incorporated by reference to Registrant’s Current Report on Form 8-K filed on November 8, 2005.
Incorporated by reference to Registrant’s Current Report on Form 8-K filed on February 6, 2006.
Incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the quarter ended
December 24, 2006.
Incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 25,
2007.
Incorporated by reference to Registrant’s Annual Report on Form 10-K for the fiscal year ended June 24,
2007.
(10) Incorporated by reference to Registrant’s Annual Report on Form 10-K for the fiscal year ended June 27,
2010.
(11) Incorporated by reference to Registrant’s Current Report on Form 8-K filed on November 13, 2008.
(12) Incorporated by reference to Registrant’s Current Report on Form 8-K filed on May 8, 2008.
(13) Incorporated by reference to Registrant’s Current Report on Form 8-K filed on June 4, 2012.
(14) Incorporated by reference to Registrant’s Current Report on Form 8-K filed on May 11, 2011
(15) Incorporated by reference to Registrant’s Annual Report on Form 10-K for the fiscal year ended June 26,
2011.
(16) Incorporated by reference to Registrant’s Current Report on Form 8-K filed on December 5, 2011.
(17) Incorporated by reference to Registrant’s Amendment No. 1 to Registration Statement on Form S-4, filed on
March 6, 2012.
(18) Incorporated by reference to Novellus’ Current Report on Form 8-K filed on May 10, 2011 (SEC
File No. 000-17157).
(19) Incorporated by reference to Novellus’ Current Report on Form 8-K filed on July 7, 1997 (SEC
File No. 000-17157).
(20) Incorporated by reference to Novellus’ Current Report on Form 8-K filed on July 7, 1997 (SEC
File No. 000-17157).
(21) Incorporated by reference to Novellus’ Quarterly Report on Form 10-Q filed on August 13, 2002 (SEC
File No. 000-17157).
(22) Incorporated by reference to Novellus’ Annual Report on Form 10-K filed on March 23, 2001 (SEC
File No. 000-17157).
(23) Incorporated by reference to Novellus’ Quarterly Report on Form 10-Q filed on July 31, 2009 (SEC
File No. 000-17157).
(24) Incorporated by reference to Novellus’ Annual Report on Form 10-K filed on March 5, 2003 (SEC
File No. 000-17157).
(25) Incorporated by reference to Novellus’ Current Report on Form 8-K filed on September 24, 2004 (SEC
File No. 000-17157).
(26) Incorporated by reference to Novellus’ Report on Form 10-Q filed on November 5, 2008 (SEC
File No. 000-17157).
(27) Incorporated by reference to Novellus’ Quarterly Report on Form 10-Q filed on November 2, 2010 (SEC
File No. 000-17157).
(28) Incorporated by reference to Registrant’s Current Report on Form 8-K filed on May 22, 2013.
(29) Incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the quarter ended
December 23, 2012.
(30) Incorporated by reference to Registrant’s Annual Report on Form 10-K for the fiscal year ended June 24,
2012.
(31) Incorporated by reference to Registrant’s Current Report on Form 8-K filed on February 26, 2013.
(32) Incorporated by reference to Registrant’s Current Report on Form 8-K filed on September 10, 2012.
(33) Incorporated by reference to Registrant’s Annual Report on Form 10-K for the fiscal year ended June 29,
*
2008.
Indicates management contract or compensatory plan or arrangement in which executive officers of the
Company are eligible to participate.
108
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SUBSIDIARY
STATE OR OTHER JURISDICTION OF OPERATION
SUBSIDIARIES OF THE REGISTRANT
Exhibit 21
Lam Research AG
Austria
Lam Research Management GmbH
Austria
Novellus Systems Export, Inc.
Barbados
IPEC FSC Ltd
Barbados
IPEC International Sales FSC Ltd
Barbados
Novellus Systems, Inc.
California, United States
Novellus Systems International, LLC
California, United States
Angstron Systems, Inc.
California, United States
Gamma Precision Technology
California, United States
Lam Research International Holdings Ltd.
Cayman Islands
Lam Research (Shanghai) Co., Ltd.
China
Lam Research Semiconductor (Suzhou) Co., Ltd.
China
China
Lam Research Service Co., Ltd.
Novellus Systems Semiconductor Equipment Shanghai Co. Ltd. China
China
Novellus Systems International Trading (Shanghai) Co. Ltd.
China
Peter Wolters Precision Machinery (Shanghai) Co., Ltd.
Delaware, United States
Lam Research International Holding Company
Delaware, United States
Novellus International Holdco, LLC.
Delaware, United States
SpeedFam-IPEC International Services, LLC
Delaware, United States
Tmation Inc.
Delaware, United States
Novellus Development Company, LLC
Delaware, United States
Silfex, Inc.
France
Lam Research SAS
France
Novellus Singapore Pte. Ltd., France Branch
Germany
Lam Research GmbH
Germany
NHL Sub GmbH
Germany
Peter Wolters GmbH
Hong Kong
Lam Research (H.K.) Limited
Hong Kong
Novellus Systems Service (Hong Kong) Limited
Illinois, United States
Peter Wolters of America, Inc.
India
Lam Research (India) Private Ltd.
India
Peter Wolters Precision Solutions (India) Pvt. Ltd.
Ireland
Lam Research (Ireland) Limited
Ireland
Novellus Systems Ireland Ltd.
Israel
Lam Research (Israel) Ltd.
Israel
Lam Research Services Ltd.
Israel
GaSonics Israel Ltd.
Israel
Novellus Systems International BV, Israel Branch
Italy
Lam Research S.r.l.
Italy
Novellus Systems Italy SRL
Japan
Lam Research Co., Ltd.
Japan
Peter Wolters Japan Co., Ltd.
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SUBSIDIARY
STATE OR OTHER JURISDICTION OF OPERATION
Novellus Singapore Pte. Ltd., Japan Branch
Lam Research Luxembourg S.à.r.l.
SpeedFam IPEC (Malaysia) Sdn. Bhd.
Lam Research Malaysia Sdn. Bhd.
LAM Research B.V.
Lam Research International B.V.
Peter Wolters International Holding Company B.V.
Novellus Systems International B.V.
Voumard, Inc.
Lam Research Korea Limited
Lam Research Korea LLC YH
Novellus Singapore Pte. Ltd., Korea Branch
Lam Research Singapore Pte Ltd
SEZ Asia Pacific Pte. Ltd. (in liquidation)
Novellus Systems International BV, Singapore Branch
Novellus Singapore Pte. Ltd.
Novellus Singapore Holdings Pte. Ltd.
Lam Research Holding GmbH
Lam Research International Sàrl
Novellus Systems (Schweiz) Holding GmbH
Voumard Machines Co SARL
Lam Research Co., Ltd.
Lam Research (H.K.) Limited, Taiwan Branch
Novellus Systems Service (Hong Kong) Limited, Taiwan
Branch
Lam Research Ltd.
Peter Wolters UK Ltd.
Novellus Systems UK Limited
Novellus Vietnam LLC
Japan
Luxembourg
Malaysia
Malaysia
Netherlands
Netherlands
Netherlands
Netherlands
New York, United States
Republic of Korea
Republic of Korea
Republic of Korea
Singapore
Singapore
Singapore
Singapore
Singapore
Switzerland
Switzerland
Switzerland
Switzerland
Taiwan
Taiwan
Taiwan
United Kingdom
United Kingdom
United Kingdom
Vietnam
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Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statements (Form S-4 No. 333-30545 and
333-179267) of Lam Research Corporation and in the related Prospectus and in the Registration Statements
(Form S-8 Nos. 333-01011, 333-18115, 333-32981, 333-45265, 333-66833, 333-72751, 333-93115, 333-74500,
333-84638, 333-127936, 333-138545, 333-156335, 333-181878 and 333-185641) pertaining to the amended and
restated 1996 Performance-Based Restricted Stock Plan, 1997 Stock Incentive Plan, 1999 Employee Stock
Purchase Plan, 1999 Stock Option Plan, 2007 Stock Incentive Plan, and the Savings Plus Plan, 401(k) of Lam
Research Corporation and the Novellus Systems, Inc. 2011 Stock Incentive Plan, Novellus Systems, Inc. 2001
Stock Incentive Plan, as amended, Novellus Systems, Inc. 2001 Non-Qualified Stock Option Plan, as amended,
SpeedFam-IPEC, Inc. 2001 Nonstatutory Stock Option Plan, as amended, SpeedFam-IPEC, Inc. Amended and
Restated 1995 Stock Plan, GaSonics International Corporation Supplemental Stock Option Plan, as amended,
GaSonics International Corporation 1994 Stock Option/Stock Issuance Plan, as amended, and the Novellus
Systems, Inc. Retirement Plan of our reports dated August 27, 2013, with respect to the consolidated financial
statements and schedule of Lam Research Corporation and the effectiveness of internal control over financial
reporting of Lam Research Corporation included in this Annual Report (Form 10-K) for the year ended June 30,
2013, filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
San Jose, California
August 27, 2013
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Exhibit 31.1
RULE 13a-14(a)/15d-14(a) CERTIFICATION (PRINCIPAL EXECUTIVE OFFICER)
I, Martin B. Anstice, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Lam Research Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a)
b)
c)
d)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board
of directors (or persons performing the equivalent functions):
a)
b)
all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
August 27, 2013
/s/ Martin B. Anstice
Martin B. Anstice
President and Chief Executive Officer
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Exhibit 31.2
RULE 13a-14(a)/15d-14(a) CERTIFICATION (PRINCIPAL FINANCIAL OFFICER)
I, Douglas R. Bettinger, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Lam Research Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a)
b)
c)
d)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board
of directors (or persons performing the equivalent functions):
a)
b)
all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
August 27, 2013
/s/ Douglas R. Bettinger
Douglas R. Bettinger
Executive Vice President, Chief Financial Officer
and Chief Accounting Officer
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Exhibit 32.1
SECTION 1350 CERTIFICATION (PRINCIPAL EXECUTIVE OFFICER)
In connection with the Annual Report of Lam Research Corporation (the “Company”) on Form 10-K for the
fiscal period ending June 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the
“Report”), I, Martin B. Anstice, President and Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
August 27, 2013
/s/ Martin B. Anstice
Martin B. Anstice
President and Chief Executive Officer
The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350, as adopted pursuant to
§ 906 of the Sarbanes-Oxley Act of 2002, and will not be deemed “filed” for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liability of that
section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities
Act of 1933, as amended, or the Exchange Act, except to the extent that Lam Research Corporation specifically
incorporates it by reference.
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Exhibit 32.2
SECTION 1350 CERTIFICATION (PRINCIPAL FINANCIAL OFFICER)
In connection with the Annual Report of Lam Research Corporation (the “Company”) on Form 10-K for the
fiscal period ending June 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the
“Report”), I, Douglas R. Bettinger, Executive Vice President, Chief Financial Officer and Chief Accounting
Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
August 27, 2013
/s/ Douglas R. Bettinger
Douglas R. Bettinger
Executive Vice President, Chief Financial Officer
and Chief Accounting Officer
The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350, as adopted pursuant to
§ 906 of the Sarbanes-Oxley Act of 2002, and will not be deemed “filed” for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liability of that
section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities
Act of 1933, as amended, or the Exchange Act, except to the extent that Lam Research Corporation specifically
incorporates it by reference.
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2013 Annual Report
Driving technology into...
Lam Research Corporation
4650 Cushing Parkway
Fremont, California 94538
Phone: 1.510.572.0200
www.lamresearch.com