8-KOther Events

LAM RESEARCH CORP 8-K Report, Corporate Update (Jun 23, 2014)

Filed June 23, 2014For Securities:LRCX

Summary

Lam Research Corporation (LRCX) filed an 8-K on June 23, 2014, detailing significant changes to its executive compensation program and announcing a gain from asset sales. The company has shifted its Long-Term Incentive Program (LTIP) away from cash components to entirely equity-based awards. A new "Market-Based Performance Restricted Stock Unit" has been introduced, which measures the company's stock performance relative to the Philadelphia Semiconductor Sector Index (SOX) over a three-year period, with no floor and a 150% ceiling on target awards. This extension of the LTIP performance period necessitated a one-time, two-year award to ensure participants could receive a long-term award vesting in 2016. These changes aim to better align executive incentives with shareholder value creation and market performance.

Key Highlights

  • 1Lam Research has replaced the cash portion of its Long-Term Incentive Program (LTIP) with equity-based awards for 2014.
  • 2A new "Market-Based Performance Restricted Stock Unit" (RSU) will be used for LTIP awards.
  • 3The new LTIP metric compares Lam Research's stock performance against the Philadelphia Semiconductor Sector Index (SOX) over the performance period.
  • 4The LTIP performance period has been extended from two to three years.
  • 5The Market-Based Performance RSU has no vesting floor and a 150% ceiling on target award vesting.
  • 6A one-time, two-year LTIP award was granted to bridge the transition and ensure a 2016 vesting opportunity.
  • 7The company completed the sale of real estate interests on June 4, 2014, generating $135 million in net proceeds and an $83 million gain.

Frequently Asked Questions

The company has made its Long-Term Incentive Program (LTIP) entirely equity-based, replacing the previous cash component. A new type of award, the Market-Based Performance Restricted Stock Unit, has been introduced which ties executive compensation to the company's stock performance relative to the SOX index over a three-year period.

The new Market-Based Performance Restricted Stock Unit measures the company's stock price performance against the Philadelphia Semiconductor Sector Index (SOX) over a three-year performance period. It has a vesting ceiling of 150% of target units and no minimum vesting floor.

The LTIP performance period was extended from two to three years. The one-time, two-year award was implemented to ensure that participants would still have an opportunity to receive a long-term award that vests in calendar year 2016, bridging the gap created by the extended performance cycle.

On June 4, 2014, Lam Research sold certain real estate interests, resulting in $135 million in net proceeds and a pre-tax gain of $83 million. This gain will be recognized in the company's GAAP financial results for the June 2014 quarter.