LAM RESEARCH CORPORATION 
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 2022 Form 10-K and other documents we file from time to time with theSecurities and Exchange Commission . (See "Cautionary Statement Regarding Forward-Looking Statements" in Part I of this 2022 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 Part II, Item 8 of this 2022 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
Lam Research Corporation is a global supplier of innovative wafer fabrication equipment and services to the semiconductor industry. We have built a strong global presence with core competencies in areas like nanoscale applications enablement, chemistry, plasma and fluidics, advanced systems engineering and a broad range of operational disciplines. Our products and services are designed to help our customers build smaller, and better performing devices that are used in a variety of electronic products, including mobile phones, personal computers, servers, wearables, automotive vehicles, and data storage devices. Our customer base includes leading semiconductor memory, foundry, and integrated device manufacturers that make products such as NVM, DRAM, and logic devices. Their continued success is part of our commitment to driving semiconductor breakthroughs that define the next generation. Our core technical competency is integrating hardware, process, materials, software, and process control enabling results on the wafer. Semiconductor manufacturing, our customers' business, involves the complete fabrication of multiple dies or integrated circuits on a wafer. This involves the repetition of a set of core processes and can require hundreds of individual steps. Fabricating these devices requires highly sophisticated process technologies to integrate an increasing array of new materials with precise control at the atomic scale. Along with meeting technical requirements, wafer processing equipment must deliver high productivity and be cost-effective. Demand from cloud computing, the IoT, and other markets is driving the need for increasingly powerful and cost-efficient semiconductors. At the same time, there are growing technical challenges with traditional two-dimensional scaling. These trends are driving significant inflections in semiconductor manufacturing, such as the increasing importance of vertical scaling strategies like three-dimensional architecture as well as multiple patterning to enable shrinks. We believe we are in a strong position with our leadership and expertise in deposition, etch, and clean to facilitate some of the most significant innovations in semiconductor device manufacturing. OurCustomer Support Business Group provides products and services to maximize installed equipment performance, predictability and operational efficiency. Several factors create opportunity for sustainable differentiation for us: (i) our focus on research and development, with several on-going programs relating to sustaining engineering, product and process development, and concept and feasibility; (ii) our ability to effectively leverage cycles of learning from our broad installed base; (iii) our collaborative focus with semi-ecosystem partners; (iv) our ability to identify and invest in the breadth of our product portfolio to meet technology inflections; and (v) our focus on delivering our multi-product solutions with a goal to enhance the value of Lam's solutions to our customers. Wafer fabrication equipment spending was strong throughout the 2022 fiscal year driven by increasing device manufacturing complexity and the robust secular demand for semiconductors for NAND, DRAM, and foundry logic markets. Over the longer term, we believe that secular demand for semiconductors will continue to drive sustainable growth for our products and services, and that technology inflections in our industry, including 3D device scaling, multiple patterning, process flow, and advanced packaging chip integration, will lead to an increase in the served addressable market for our products and services in the deposition, etch, and clean businesses. During fiscal year 2022, customer demand remained solid; however, ongoing supply chain constraints broadened during the period and impacted our ability to fulfill demand. While we have seen improvements in both our operations and those of our suppliers, we expect supply shortages as well as inflationary cost pressures to persist in at least the near term. Risks andLam Research Corporation 2022 10-K 28
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uncertainties related to the COVID-19 pandemic, broadening supply chain challenges, and inflationary pressures may continue to negatively impact our revenue and gross margin.
The following table summarizes certain key financial information for the periods
indicated below:
Year Ended Change
June 26, June 27, June 28,
2022 2021 2020 FY22 vs. FY21 FY21 vs. FY20
(in thousands, except per share data and percentages)
Revenue $ 17,227,039 $ 14,626,150 $ 10,044,736 $ 2,600,889 17.8 % $ 4,581,414 45.6 %
Gross margin $ 7,871,807 $ 6,805,306 $ 4,608,693 $ 1,066,501 15.7 % $ 2,196,613 47.7 %
Gross margin as a percent of
total revenue 45.7 % 46.5 % 45.9 % (0.8)% 0.6%
Total operating expenses $ 2,489,985 $ 2,323,283 $ 1,934,891 $ 166,702 7.2 % $ 388,392 20.1 %
Net income $ 4,605,286 $ 3,908,458 $ 2,251,753 $ 696,828 17.8 % $ 1,656,705 73.6 % Net income per diluted share$ 32.75 $ 26.90 $ 15.10 $ 5.85 21.7 %$ 11.80 78.1 % Fiscal year 2022 revenue increased over 17% compared to fiscal year 2021, reflecting continued strong customer demand for semiconductor equipment. Gross margin as a percentage of revenue decreased due to inflationary cost pressures that led to higher spending on material costs, freight and logistics, and labor-related expenses, as well as unfavorable customer and product mix, partially offset by decreased variable compensation. The increase in operating expenses in fiscal year 2022 compared to fiscal year 2021 was mainly driven by higher employee-related costs as a result of increased headcount, supplies expense, rent, repair and utilities expense, and outside services spending, partially offset by lower deferred compensation plan-related costs. Fiscal year 2021 revenue increased approximately 46% compared to fiscal year 2020, reflecting stronger customer demand for semiconductor equipment. Gross margin as a percentage of revenue increased primarily due to customer and product mix, partially offset by higher costs incurred in freight and logistics as well as start-up expenses for our newMalaysia manufacturing facility. The increase in operating expenses in fiscal year 2021 compared to fiscal year 2020 was mainly driven by higher employee-related costs as a result of increased headcount and outsourcing services, deferred compensation plan-related costs, and supplies, partially offset by lower travel expenses and miscellaneous costs. Our cash and cash equivalents, investments, and restricted cash and investments balances totaled approximately$3.9 billion as ofJune 26, 2022 , compared to$6.0 billion as ofJune 27, 2021 . Cash flow provided from operating activities was$3.1 billion for fiscal year 2022 compared to$3.6 billion for fiscal year 2021. Cash flow provided from operating activities in fiscal year 2022 was primarily used for$3.9 billion in treasury stock purchases, including net share settlement on employee stock-based compensation;$815 million in dividends paid to our stockholders; and$546 million of capital expenditures. These cash outflows were partially offset by$114 million of treasury stock reissuance and Common Stock issuance resulting from our employee equity-based compensation programs. Results of Operations Revenue Year Ended June 26, June 27, June 28, 2022 2021 2020 Revenue (in millions)$ 17,227 $ 14,626 $ 10,045 China 31 % 35 % 31 % Korea 23 % 27 % 24 % Taiwan 17 % 14 % 19 % Japan 9 % 9 % 9 % United States 8 % 6 % 8 % Southeast Asia 8 % 6 % 6 % Europe 4 % 3 % 3 % Revenue increased in fiscal year 2022 compared to fiscal years 2021 and 2020, primarily due to the increased investment by our customers in semiconductor capital equipment as well as higher revenue from ourCustomer Support Business Group for spares, services, upgrades and mature node equipment. The overallAsia region continued to account for a majority of our revenues as a substantial amount of the worldwide capacity investments for semiconductor manufacturing continued to occur in this region.
The deferred revenue balance was
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The following table presents our revenue disaggregated between system and customer support-related revenue:
Year Ended
June 26, June 27, June 28,
2022 2021 2020
(in thousands)
Systems Revenue $ 11,322,271 $ 9,764,845 $ 6,625,130
Customer support-related revenue and other 5,904,768 4,861,305 3,419,606
$ 17,227,039 $ 14,626,150 $ 10,044,736
Please refer to Note 4: Revenue of our Consolidated Financial Statements in
Part II, Item 8 of this 2022 Form 10-K for additional information regarding the
composition of the two categories into which revenue has been disaggregated.
The percentage of leading- and non-leading-edge equipment and upgrade revenue from each of the markets we serve was as follows:
Year Ended
June 26, June 27, June 28,
2022 2021 2020
Memory 60 % 61 % 58 %
Foundry 26 % 32 % 31 %Logic/integrated device manufacturing 14 % 7 % 11
%
Gross Margin
Year Ended Change
June 26, June 27, June 28,
2022 2021 2020 FY22 vs. FY21 FY21 vs. FY20
(in thousands, except percentages)
Gross margin $ 7,871,807 $ 6,805,306 $ 4,608,693 $ 1,066,501 15.7 % $ 2,196,613 47.7 %
Percent of revenue 45.7 % 46.5 % 45.9 % (0.8)% 0.6%
The decrease in gross margin as a percentage of revenue for fiscal year 2022
compared to fiscal year 2021 was due to inflationary cost pressures that led to
higher spending on material costs, freight and logistics, and labor-related
expenses, as well as unfavorable customer and product mix, partially offset by
decreased variable compensation.
The increase in gross margin as a percentage of revenue for fiscal year 2021
compared to fiscal year 2020 was primarily related to customer and product mix,
partially offset by increased spending on freight and logistics due in
significant part to COVID-19 disruptions, start-up expenses for our Malaysia
manufacturing facility, and deferred compensation plan-related costs.
Research and Development
Year Ended Change
June 26, June 27, June 28,
2022 2021 2020 FY22 vs. FY21 FY21 vs. FY20
(in thousands, except percentages)
Research & development $ 1,604,248 $ 1,493,408 $ 1,252,412 $ 110,840 7.4 % $ 240,996 19.2 %
Percent of revenue 9.3 % 10.2 % 12.5 % (0.9)% (2.3)%
We continued to make significant R&D investments focused on leading-edge
deposition, etch, clean, and other semiconductor manufacturing processes. The
increase in R&D expense during fiscal year 2022 compared to fiscal year 2021 was
mainly driven by an increase of $89 million in employee-related costs due in
part to increased headcount and $43 million in spending for supplies, partially
offset by a decrease of $44 million in deferred compensation plan-related costs.
The increase in R&D expense during fiscal year 2021 compared to fiscal year 2020
was mainly driven by an increase of $137 million in employee-related costs due
in part to increased headcount, $49 million in outside service costs, $32
million in deferred compensation plan-related costs, and $27 million in spending
for supplies
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Selling, General, and Administrative
Year Ended Change
June 26, June 27, June 28,
2022 2021 2020 FY22 vs. FY21 FY21 vs. FY20
(in thousands, except percentages)
Selling, general, and administrative
("SG&A") $ 885,737 $ 829,875 $ 682,479 $ 55,862 6.7 % $ 147,396 21.6 %
Percent of revenue 5.1 % 5.7 % 6.8 % (0.6)% (1.1)%
The increase in SG&A expense during fiscal year 2022 compared to fiscal year
2021 was primarily driven by an increase of $28 million in outside service
costs, $28 million in spending for rent, repair and utilities, and $26 million
in employee-related costs due in part to increased headcount, partially offset
by a decrease of $29 million in deferred compensation plan-related costs.
The increase in SG&A expense during fiscal year 2021 compared to fiscal year
2020 was primarily due to a $97 million increase in employee-related costs due
in part to increased headcount, $37 million in outside service costs, and $21
million in deferred compensation plan-related costs, partially offset by a $9
million decrease in travel and entertainment costs.
Other Income (Expense), Net
Other income (expense), net, consisted of the following:
Year Ended Change
June 26, June 27, June 28,
2022 2021 2020 FY22 vs. FY21 FY21 vs. FY20
(in thousands, except percentages)
Interest income $ 15,209 $ 19,687 $ 85,433 $ (4,478) (22.7) % $ (65,746) (77.0) %
Interest expense (184,759) (208,597) (177,440) $ 23,838 (11.4) % $ (31,157) 17.6 %
(Losses) gains on deferred
compensation plan related assets,
net (38,053) 61,838 5,999 $ (99,891) (161.5) % $ 55,839 930.8 %
Foreign exchange (losses) gains, net (723) (6,962) (3,317) $ 6,239 (89.6) % $ (3,645) 109.9 %
Other, net 19,618 22,815 (9,499) $ (3,197) (14.0) % $ 32,314 (340.2) %
$ (188,708) $ (111,219) $ (98,824) $ (77,489) 69.7 % $ (12,395) 12.5 %
Interest income decreased in fiscal year 2022 compared to fiscal year 2021 as a
result of lower cash balances. Interest income decreased in fiscal year 2021
compared to fiscal year 2020 as a result of lower yield.
Interest expense decreased in fiscal year 2022 compared to fiscal year 2021
primarily due to the payoff of $800 million of our notes in June 2021 . Interest
expense increased in fiscal year 2021 compared to fiscal year 2020 primarily due
to the full-year impact of the issuance of $2.0 billion senior notes in fiscal
year 2020.
The gains or losses on deferred compensation plan related assets, net in fiscal
years 2022, 2021 and 2020 were driven by fluctuations in the fair market value
of the underlying funds.
The variation in other, net for the fiscal year 2022 compared to fiscal years
2021 and 2020 was primarily driven by fluctuations in the fair market value of
equity investments.
Income Tax Expense
Our provision for income taxes and effective tax rate for the periods indicated
were as follows:
Year Ended Change
June 26, June 27, June 28,
2022 2021 2020 FY22 vs. FY21 FY21 vs. FY20
(in thousands, except percentages)
Income tax expense $ 587,828 $ 462,346 $ 323,225 $ 125,482 27.1 % $ 139,121 43.0 %
Effective tax rate 11.3 % 10.6 % 12.6 % 0.7% (2.0)%
The increase in the effective tax rate in fiscal year 2022 as compared to fiscal
year 2021 was primarily due to the change in level and proportion of income in
higher and lower tax jurisdictions.
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The decrease in the effective tax rate in fiscal year 2021 as compared to fiscal year 2020 was primarily due to a cumulative income tax benefit reversal due to a court ruling in fiscal year 2020, as outlined below. InNovember 2019 , theU.S. Court of Appeals for the Ninth Circuit ("Ninth Circuit") rejected the en banc appeal petitioned byAltera Corporation ("Altera") inJuly 2019 . In that quarter, we evaluated the impact of the decision and viewed the denial as an indication that Altera's position of excluding stock-based compensation expense in an intercompany cost-sharing arrangement was unlikely to be sustained upon further litigation. As a result, we reversed$75 million of net tax assets associated with stock-based compensation benefits related to previous years in the Condensed Consolidated Financial Statements in the three months endedDecember 29, 2019 and we no longer reflected a net tax benefit within our financial statements related to excluding stock-based compensation from our intercompany cost-sharing arrangement. InFebruary 2020 , Altera petitioned theSupreme Court of the United States ("SCOTUS") to hear their case. InJune 2020 , theSCOTUS denied the petition. 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 outsidethe United States . International pre-tax income is taxable inthe United States at a lower effective tax rate than the federal statutory tax rate. Please refer to Note 7 of our Consolidated Financial Statements in Part II, Item 8 of this 2022 Form 10-K. A provision enacted as part of the 2017 Tax Cuts & Jobs Act requires companies to capitalize research and experimental expenditures for tax purposes in tax years beginning afterDecember 31, 2021 (our fiscal year 2023). If this provision is not repealed or deferred, we expect our fiscal year 2023 cash tax payments to increase significantly compared to our fiscal year 2022. OnAugust 16, 2022 , the Inflation Reduction Act was signed into law. In general, the provisions of the IRA will be effective beginning with our fiscal year 2024, with certain exceptions. The IRA includes a new 15% corporate minimum tax. We are in the process of evaluating the potential impacts of the IRA. The impact on income taxes due to changes in legislation is required under the authoritative guidance of Accounting Standard Codification ("ASC") 740, Income Taxes, to be recognized in the period in which the law is enacted. While we do not currently expect the IRA to have a material impact on our effective tax rate, our analysis is ongoing and incomplete, and it is possible that the IRA could have a material adverse effect on our tax liability. We will continue to monitor issuance of additional guidance. Deferred Income Taxes 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 were$1,103 million and$772 million at the end of fiscal years 2022 and 2021, respectively. These gross deferred tax assets were offset by gross deferred tax liabilities of$234 million and$187 million and a valuation allowance representing our entireCalifornia deferred tax asset balance due to the single sales factor apportionment resulting in lower taxable income inCalifornia of$309 million and$277 million at the end of fiscal years 2022 and 2021, respectively. The change in gross deferred tax assets, gross deferred tax liabilities, and valuation allowance between fiscal year 2022 and 2021 is primarily due to increases in gross deferred tax assets for outside basis differences of foreign subsidiaries and tax credits and increases in gross deferred tax liabilities for capital assets.
We evaluate if the deferred tax assets are realizable on a quarterly basis and will continue to assess the need for changes in valuation allowances, if any.
Uncertain Tax Positions
We re-evaluate 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. Any 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
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 as a result of the need to make estimates about matters that are inherently uncertain. The preparation of financial statements in conformity withU.S. generally accepted accounting principles ("GAAP") requires management to make certain 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. We base our estimates and assumptions on historical experience and on various other assumptions we believe 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, which could have a material impact on our business, results of operations, and financial condition. Our critical accounting estimates include: •the recognition and valuation of revenue from arrangements with multiple performance obligations which impacts revenue; •the valuation of inventory, which impacts gross margin; •the valuation of warranty reserves, which impacts gross margin; •the recognition and measurement of current and deferred income taxes, including the measurement of uncertain tax positions, which impact our provision for income tax expenses; and Lam Research Corporation 2022 10-K 32 -------------------------------------------------------------------------------- Table of Contents •the valuation and recoverability of long-lived assets, which impacts gross margin and operating expenses when we record asset impairments or accelerate their depreciation or amortization. We believe that the following critical accounting policies reflect the more significant judgments and estimates used in the preparation of our consolidated financial statements regarding the critical accounting estimates indicated above. See Note 2, "Summary of Significant Accounting Policies," of our Consolidated Financial Statements in Part II, Item 8 of this 2022 Form 10-K for additional information regarding our accounting policies. Revenue Recognition: We recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services by following a five-step process, (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when or as we satisfy a performance obligation, as further described below.
Identify the contract with a customer. We generally consider documentation of terms with an approved purchase order as a customer contract, provided that collection is considered probable, which is assessed based on the creditworthiness of the customer as determined by credit checks, payment histories, and/or other circumstances.
Identify the performance obligations in the contract. Performance obligations
include sales of systems, spare parts, and services. In addition, our customer
contracts contain provisions for installation and training services which have
been deemed immaterial in the context of the contract.
Determine the transaction price. The transaction price for our contracts with
customers consists of both fixed and variable consideration provided it is
probable that a significant reversal of revenue will not occur when the
uncertainty related to variable consideration is resolved. Fixed consideration
includes amounts to be contractually billed to the customer while variable
consideration includes estimates for discounts and credits for future usage
which are based on contractual terms outlined in volume purchase agreements and
other factors known at the time. We generally invoice customers at shipment and
for professional services either as provided or upon meeting certain milestones.
Customer invoices are generally due within 30 to 90 days after issuance. Our
contracts with customers typically do not include significant financing
components as the period between the transfer of performance obligations and
timing of payment are generally within one year.
Allocate the transaction price to the performance obligations in the contract.
For contracts that contain multiple performance obligations, we allocate the
transaction price to the performance obligations in the contract on a relative
standalone selling price basis. Standalone selling prices are based on multiple
factors including, but not limited to historical discounting trends for products
and services and pricing practices in different geographies.
Recognize revenue when or as we satisfy a performance obligation. Revenue for
systems and spares are recognized at a point in time, which is generally upon
shipment or delivery. Revenue from services is recognized over time as services
are completed or ratably over the contractual period of generally one year or
less.
Inventory Valuation: 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 requirement is written down to its estimated net
realizable 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 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 the revision is made.
Warranty: We record a provision for estimated warranty expenses to cost of sales
for each system when we recognize revenue. 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. We do not maintain
general or unspecified reserves; all warranty reserves are related to specific
systems.
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 this time. In the event that we
determine that we will not be able to realize all or part of our net deferred
tax assets, an adjustment will 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 will be realized, then the previously
provided valuation allowance will be reversed.
We recognize the benefit from a tax position only if it is more likely than not
that the position will be sustained upon audit based solely on the technical
merits of the tax position. Our policy is to include interest and penalties
related to uncertain tax positions as a component of income tax expense.
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Long-lived Assets: We review goodwill at least annually for impairment during the fourth quarter of each fiscal year and if certain events or indicators of impairment occur between annual impairment tests. The process of evaluating the potential impairment of goodwill requires significant judgment. When reviewing goodwill for impairment, we first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. In performing a qualitative assessment, we consider business conditions and other factors including, but not limited to (i) adverse industry or economic trends, (ii) restructuring actions and lower projections that may impact future operating results, (iii) sustained decline in share price, and (iv) overall financial performance and other events affecting the reporting units. If we conclude that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then a quantitative impairment test is performed by estimating the fair value of the reporting unit and comparing it to its carrying value, including goodwill allocated to that reporting unit. We determine the fair value of our reporting units by using an income approach. 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, 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. Changes in judgment on these assumptions and estimates could result in a goodwill impairment charge.
If after completing the quantitative assessment the carrying value of a reporting unit exceeds its fair value, we would record an impairment charge equal to the excess of the carrying value of the reporting unit over its fair value, up to the amount of the goodwill assigned to the reporting unit.
For other long-lived assets, we review them whenever events or changes in circumstances indicate the carrying value of an asset or asset group may not be recoverable. If such indicators are present, we determine whether the sum of the estimated undiscounted cash flows attributable to the assets is less than their carrying value. If the sum is less, we recognize 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. We recognize an impairment charge to the extent the present value of anticipated net cash flows attributable to the asset is less than the asset's carrying value. The fair value of the asset then becomes the asset's new carrying value, which we depreciate 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. In addition, for fully amortized intangible assets, we de-recognize the gross cost and accumulated amortization in the period we determine the intangible asset no longer enhances future cash flows.
Recent Accounting Pronouncements
For a description of recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on our consolidated financial statements, see Note 3, "Recent Accounting Pronouncements," of our Consolidated Financial Statements, included in Part II, Item 8 of this 2022 Form 10-K.
Liquidity and Capital Resources
Total gross cash, cash equivalents, investments, and restricted cash and investments balances were$3.9 billion at the end of fiscal year 2022 compared to$6.0 billion at the end of fiscal year 2021. This decrease was primarily due to Common Stock repurchases in connection with our stock repurchase program, dividends paid, and capital expenditures, partially offset by cash provided by operating activities.
Cash Flow from Operating Activities
Net cash provided by operating activities of
Net income$ 4,605,286 Non-cash charges: Depreciation and amortization 333,739 Deferred income taxes (257,438) Equity-based compensation expense 259,064
Changes in operating asset and liability accounts (1,796,226) Other
(44,751)
$ 3,099,674
Significant changes in operating asset and liability accounts, net of foreign
exchange impact, included the following uses of cash: increases in accounts
receivable of $1.3 billion , inventories of $1.4 billion , and prepaid expenses
and other assets of $53 million ; partially offset by the following sources of
cash: increases in deferred profit of $605 million , accounts payable of $168
million , and accrued expenses and other liabilities of $123 million .
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Cash Flow from Investing Activities
Net cash provided by investing activities during fiscal year 2022 was
Cash Flow from Financing Activities
Net cash used for financing activities during fiscal year 2022 was$4.6 billion , primarily consisting of$3.9 billion in Common Stock repurchases, including net share settlement on employee stock-based compensation; and$815 million of dividends paid; partially offset by$114 million of stock issuance and treasury stock reissuances associated with our employee stock-based compensation plans.
Liquidity
Given that the semiconductor industry is highly competitive and has historically experienced rapid changes in demand, we believe that maintaining sufficient liquidity reserves is important to support sustaining levels of investment in R&D and capital infrastructure. Anticipated cash flows from operations based on our current business outlook, combined with our current levels of cash, cash equivalents, and short-term investments as ofJune 26, 2022 , are expected to be sufficient to support our anticipated levels of operations, investments, debt service requirements, capital expenditures, capital redistributions, and dividends through at least the next twelve months. However, uncertainty in the global economy and the semiconductor industry, as well as disruptions in credit markets, have in the past, and could in the future, impact customer demand for our products, as well as our ability to manage normal commercial relationships with our customers, suppliers, and creditors. 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, we may require additional funding and need or choose 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, the ongoing COVID-19 pandemic has in the past caused disruption in the capital markets, and were it to do the same in the future, that could make any financing more challenging, and there can be no assurance that we will be able to obtain such financing on commercially reasonable terms or at all.
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. Certain obligations that are recorded on our balance sheet in accordance with GAAP include our long-term debt, operating leases and finance leases; refer to Notes 14 and 15 of our Consolidated Financial Statements in Part II, Item 8 of this 2022 Form 10-K for further discussion. Our off-balance sheet arrangements and our transition tax liability are presented as purchase obligations, refer to Note 17 of our Consolidated Financial Statements in Part II, Item 8 of this 2022 Form 10-K for further discussion.
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