<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: December 31, 1996
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 0-9992
KLA INSTRUMENTS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 04-2564110
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
160 Rio Robles
San Jose, California
95134
(Address of principal executive offices)
(Zip Code)
(408) 468-4200
(Registrant's telephone number, including area code)
===============================================================
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 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 X No
----- -----
As of January 31, 1997 there were 51,517,703 shares of the registrant's
Common Stock, $0.001 par value, outstanding.
<PAGE> 2
KLA INSTRUMENTS CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 1996
INDEX
<TABLE>
<CAPTION>
Page
Number
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Condensed Consolidated Statements of Operations for the
Three and Six Month Periods Ended December 31, 1995
and December 31, 1996 (unaudited)..............................3
Condensed Consolidated Balance Sheets at June 30 and
December 31, 1996 (unaudited)..................................4
Condensed Consolidated Statements of Cash Flows for
the Six Months Ended December 31, 1995
and 1996 (unaudited)...........................................5
Notes to Unaudited Condensed Consolidated
Financial Statements...........................................6
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations.............................................8
PART II OTHER INFORMATION
Item 1 Legal Proceedings................................................12
Item 2 Changes in Securities............................................12
Item 3 Defaults Upon Senior Securities..................................12
Item 4 Submission of Matters to a Vote of Security Holders..............12
Item 5 Other Events.....................................................12
Item 6 Exhibits and Reports on Form 8-K.................................13
</TABLE>
2
<PAGE> 3
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
(In thousands except per share amounts) 1996 1995 1996 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 151,671 $ 165,750 $ 315,825 $ 314,826
--------- --------- --------- ---------
Costs and expenses:
Cost of sales 75,034 75,352 149,186 142,024
Engineering, research and
development 18,671 18,036 40,166 33,657
Selling, general and administrative 29,190 29,447 64,746 57,302
--------- --------- --------- ---------
122,895 122,835 254,098 232,983
--------- --------- --------- ---------
Income from operations 28,776 42,915 61,727 81,843
Interest income and other, net 4,192 3,908 7,724 8,095
Interest expense (649) (206) (803) (624)
--------- --------- --------- ---------
Income before income taxes 32,319 46,617 68,648 89,314
Provision for income taxes 10,988 16,782 23,340 32,153
--------- --------- --------- ---------
Net income $ 21,331 $ 29,835 $ 45,308 $ 57,161
========= ========= ========= =========
Net income per share $ 0.40 $ 0.57 $ 0.86 $ 1.09
========= ========= ========= =========
Shares used in computing net income
per share 53,084 52,386 52,605 52,397
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
3
<PAGE> 4
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
December 31, June 30,
(In thousands except per share amounts) 1996 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 161,181 $ 109,404
Short-term investments 24,784 14,279
Accounts receivable, net of allowances of
$3,103 and $3,121 122,353 203,470
Inventories 126,349 132,377
Deferred income taxes 26,767 27,246
Other current assets 16,045 6,783
----------- -----------
Total current assets 477,479 493,559
Land, property and equipment, net 74,647 71,825
Marketable securities 193,968 137,728
Other assets 12,665 9,660
----------- -----------
Total assets $ 758,759 $ 712,772
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable $ 2,902 $ 3,111
Accounts payable 20,413 27,330
Income taxes payable 30,958 34,595
Other current liabilities 109,087 104,167
----------- -----------
Total current liabilities 163,360 169,203
----------- -----------
Deferred income taxes 6,316 6,320
----------- -----------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value,
1,000 shares authorized,
none issued and outstanding -- --
Common stock, $0.001 par value,
75,000 shares authorized,
51,431 and 51,030 shares issued
and outstanding 51 51
Capital in excess of par value 283,646 277,892
Retained earnings 305,085 259,777
Treasury stock (581) (581)
Net unrealized gain/(loss)
on investments 810 (131)
Cumulative translation adjustment 72 241
----------- -----------
Total stockholders' equity 589,083 537,249
----------- -----------
Total liabilities and
stockholders' equity $ 758,759 $ 712,772
=========== ===========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
4
<PAGE> 5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
(In thousands) 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 45,308 $ 57,161
Adjustments required to
reconcile net income to cash
provided by operations:
Depreciation and amortization 11,160 6,460
Deferred income taxes 475 --
Changes in assets and liabilities:
Accounts receivable 81,117 (59,757)
Inventories 6,028 (33,880)
Other assets (12,267) 499
Accounts payable (6,917) 11,800
Income taxes payable (3,637) 2,988
Other current liabilities 4,920 24,481
----------- -----------
Cash provided by operating activities 126,187 9,752
----------- -----------
Cash flows from investing activities:
Capital expenditures (13,982) (13,221)
Purchases of short and
long-term available for
sale securities (200,129) (248,555)
Sales and maturities of short
and long-term available for
sale securities 134,325 237,996
----------- -----------
Cash used for investing activities (79,786) (23,780)
----------- -----------
Cash flows from financing activities:
Short-term borrowings, net (209) (3,562)
Payment of current portion
of long-term debt -- (20,000)
Sales of common stock/tax benefit
of options exercised 5,754 4,493
----------- -----------
Cash provided by/(used for)
financing activities 5,545 (19,069)
----------- -----------
Effect of exchange rate changes (169) (719)
----------- -----------
Increase/(decrease) in cash
and cash equivalents 51,777 (33,816)
Cash and cash equivalents at
beginning of period 109,404 92,059
----------- -----------
Cash and cash equivalents at
end of period $ 161,181 $ 58,243
=========== ===========
CASH PAID DURING THE PERIOD FOR:
INTEREST $ 133 $ 595
INCOME TAXES 25,997 29,603
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
5
<PAGE> 6
KLA INSTRUMENTS CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 In the opinion of the Company's management, the unaudited
consolidated condensed financial statements include all adjustments
(consisting only of adjustments that are of a normal recurring nature)
necessary for a fair statement of results. The results for the quarter
ended December 31, 1996, are not necessarily indicative of results to
be expected for the entire year. This financial information should be
read in conjunction with the Company's Annual Report on Form 10-K
(including items incorporated by reference therein) for the year ended
June 30, 1996.
Note 2 Details of certain balance sheet components (in thousands, unaudited):
<TABLE>
<CAPTION>
June 30, December 31,
1996 1996
--------- ---------
<S> <C> <C>
Inventories:
Systems raw materials $ 33,521 $ 22,668
Customer service spares 13,614 18,874
Work-in-process 47,012 59,118
Demonstration equipment 38,230 25,689
--------- ---------
$ 132,377 $ 126,349
========= =========
</TABLE>
Note 3 In April 1996, the Company adopted a plan to repurchase, at its
discretion, up to $20 million of KLA common stock on the open market,
through October 1997. The repurchase plan was terminated in December
1996. The Company repurchased approximately 81,000 shares of its common
stock during the six months ended December 31, 1996, at a cost of
approximately $1.9 million. These shares were purchased in order to
fund the Company's Excess Profit Stock Plan, and were placed in a trust
account for the benefit of the employees participating in the Excess
Profit Stock Plan.
Note 4 In August 1996, the Compensation Committee of the Board of Directors
authorized the Company to re-price stock options issued subsequent to
July 1994 through August 1996 which had exercise prices well above the
recent trading prices of the Company's common stock. This re-pricing
was done in the form of an Exchange Program, whereby eligible optionees
may cancel their current options in exchange for new options with
exercise prices at the fair market value on the date of grant.
Note 5 The Company's effective tax rate was 34% for the six months ended
December 31, 1996. The Company's effective tax rate was 36% for the
year ended June 30, 1996. This rate decrease is due primarily to the
reinstatement of the federal research and development tax credit. The
difference between the statutory tax rate and the Company's effective
tax rate is primarily due to research and development tax credits,
benefits associated with the Company's foreign sales corporation,
benefits from tax exempt interest, and state taxes.
Note 6 Net income per share is computed using the weighted average number of
common and common equivalent shares outstanding during the respective
periods, including the assumed net shares issuable upon exercise of
stock options.
6
<PAGE> 7
Note 7 Engineering, research and development expenditures were net of external
funding of $2.6 million and $7.7 million for the three and six month
periods ended December 31, 1996, respectively.
Note 8 On January 14, 1997, the Company announced the signing of a definitive
Agreement and Plan of Reorganization (the "Merger Agreement") with
Tencor Instruments. Under the terms of the Merger Agreement, shares and
options for the Company's common stock will be exchanged on a
one-for-one basis for shares and options for the common stock of Tencor
Instruments. The transaction is to be accounted for as a pooling of
interests and is structured to qualify as a tax-free reorganization.
The transaction is conditioned upon obtaining approval of both
companies' shareholders, regulatory clearance and other customary
closing conditions.
7
<PAGE> 8
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion and analysis may contain forward-looking statements
that reflect the Company's current judgment regarding the matters addressed by
such statements. Because such statements apply to future events, they are
subject to risks and uncertainties that could cause actual results to differ
substantially. Important factors that could cause actual results to differ are
described in the following discussion and are particularly noted under "Risk
Factors" on page 9.
RESULTS OF OPERATIONS
Net Sales Net sales decreased 8.5% and increased 0.3%, respectively, for the
three and six month periods ended December 31, 1996 as compared to the same
periods of the prior fiscal year. Unit sales in the WISARD business unit
declined in both periods, reflecting the industry's continued capital spending
weakness. Many of the leading manufacturers have placed new fab construction on
hold while they evaluate the marketplace and assess the future supply/demand
relationship for various semiconductor devices. Net sales increases were
recorded in the RAPID business unit for both periods, primarily as a result of
increased unit volumes. The Company attributes the increases primarily to the
ongoing industry-wide retooling for advanced reticle manufacturing, as well as
continuing industry movement towards smaller line widths.
Gross Margin Gross margins were 50.5% and 52.8% of net sales, respectively, for
the three and six month periods ended December 31, 1996 as compared to 54.5% and
54.9% of net sales for the same periods of the prior fiscal year. Gross margins
decreased primarily because of the changing product mix occurring as WISARD
sales decreased as a percentage of total Company revenues. Additionally, WISARD
gross margins decreased as a result of unit volume inefficiencies and new
product startup costs. These effects were partially offset by the rising gross
margins in other business units, most notably RAPID and E-Beam Metrology.
Although gross margins for the RAPID business unit have increased as a result of
higher unit volume efficiencies and lower installation and warranty costs, these
margins are still below the Company average.
Engineering, Research and Development Engineering, research and development
expenses were 12.3% and 12.7% of net sales, respectively, for the three and six
month periods ended December 31, 1996 compared to 10.9% and 10.7% of net sales
for the same periods in the prior fiscal year. These expenditures were net of
external funding of $2.6 million and $7.7 million for the three and six month
periods ended December 31, 1996, respectively. Net engineering expenditures rose
$0.6 million and $6.5 million, respectively, during the three and six month
periods ended December 31, 1996, compared to the same periods in the prior
fiscal year. The Company is concentrating on broad opportunities in yield
management, including the networking of all measurement tools in a fab, the
development of new measurement tools, and the related software for using those
tools.
Selling, General and Administrative Selling, general and administrative ("SG&A")
expenses were 19.2% and 20.5% of net sales, respectively, for the three and six
month periods ended December 31, 1996 compared to 17.8% and 18.2% of net sales
for the same periods of the prior fiscal year. SG&A expenses reflected the
continued investment in Customer Group sales and applications resources.
Operating costs also included sales representative commissions of approximately
$4 million and $9 million, respectively, for the three and six month periods
ended December 31, 1996, which related to orders previously taken by the
Company's former representative in Japan but which
8
<PAGE> 9
shipped during the respective periods. These commissions will phase out
substantially during the next two quarters.
Interest Income, Expense and Other Interest income, expense and other, net,
decreased $0.2 million and $0.5 million, respectively, for the three and six
month periods ended December 31, 1996 as compared to the same periods of the
prior fiscal year. These decreases are due primarily to lower yields on the
Company's investment portfolio partially offset by higher average cash balances.
Provision for Income Taxes The Company's effective tax rate was 34% for the six
months ended December 31, 1996. The Company's effective tax rate was 36% for the
year ended June 30, 1996. This rate decrease is due primarily to the
reinstatement of the federal research and development tax credit. The difference
between the statutory tax rate and the Company's effective tax rate is primarily
due to research and development tax credits, benefits associated with the
Company's foreign sales corporation, benefits from tax exempt interest, and
state taxes.
The IRS is currently auditing the Company's federal income tax returns for
fiscal years 1985 through 1992. The Company has received a notice of proposed
tax deficiency for such years. The Company filed a tax protest letter with the
IRS on June 10, 1996, in response to the IRS notice. Management believes
sufficient taxes have been provided in prior years and that the ultimate outcome
of the IRS audit will not have a material adverse impact on the Company's
financial position or results of operations.
Liquidity and Capital Resources Cash, cash equivalents, short-term investments
and marketable securities balances increased $119 million to $380 million at
December 31, 1996. Cash generated by operations for the six month period ended
December 31, 1996, was $126.2 million, derived primarily from net income and
reductions in accounts receivable. The Company's capital expenditures were
primarily in facilities improvements, new computers to accommodate general
business needs, manufacturing tooling to improve production efficiencies, and
engineering computers and equipment to support the Company's expanding research
and development efforts. The Company's capital expenditures are generally
consistent with prior levels of expenditures. The Company believes that its
current level of liquid assets, credit, facilities and expected cash generated
from operations are sufficient to fund growth through the next fiscal year.
RISK FACTORS
Fluctuations in Quarterly Operating Results The Company's quarterly operating
results have fluctuated in the past and may fluctuate in the future. The
Company's operating results are dependent on many factors, including the
economic conditions in the semiconductor industry, the size and timing of the
receipt of orders from customers, customer cancellations or delays of shipments,
the Company's ability to develop, introduce, and market new and enhanced
products on a timely basis, the introduction of new products by its competitors,
changes in average selling prices and product mix, and exchange rate
fluctuations, among others. The Company's expense levels will be based, in part,
on expectations of future revenues. If revenue levels in a particular quarter do
not meet expectations, operating results could be adversely affected. The
Company's results of operations for a particular quarter could be adversely
affected if anticipated shipments are delayed or canceled by one or more
customers or if shipments are delayed due to manufacturing difficulties. The
slowdown in the semiconductor industry and in the construction of new wafer
fabrication facilities has resulted in the Company experiencing a reduction in
new orders as well as rescheduled and canceled orders. There can be no assurance
that this slowdown will not continue. There can be no assurance that these and
other factors will not materially adversely affect the Company's business and
financial results.
9
<PAGE> 10
Current Slowdown and Volatility in the Semiconductor Equipment Industry The
Company's business depends and will depend in the future upon the capital
equipment expenditures of semiconductor manufacturers, which in turn depend on
the current and anticipated market demand for integrated circuits and products
utilizing integrated circuits. In addition, the Company's business depends upon
the new construction of semiconductor fabrication facilities and, as to existing
fabrication facilities, enhancements to improve yields. The semiconductor
industry has been cyclical in nature and historically has experienced periodic
downturns. The semiconductor industry is presently experiencing a slowdown in
terms of product demand and volatility in terms of product pricing. This
slowdown and volatility has caused the semiconductor industry to reduce
purchases of semiconductor manufacturing equipment and construction of new
fabrication facilities. These conditions have adversely affected the Company and
may continue to adversely affect, aggregate bookings, revenues and operating
results, and no assurance can be given that the Company's bookings, revenues and
operating results will not be adversely affected by future downturns in the
semiconductor industry. Even during periods of reduced revenues, in order to
remain competitive, the Company will be required to continue to invest in
research and development and to maintain extensive ongoing worldwide customer
service and support capability which could adversely affect its financial
results.
Dependence on New Products and Processes; Rapid Technological Change Rapid
technological changes in semiconductor manufacturing processes subject the
semiconductor manufacturing equipment industry to increased pressure to maintain
technological parity with deep submicron process technology. The Company
believes that its future success will depend in part upon its ability to
develop, manufacture and successfully introduce new products with improved
capabilities and to continue to enhance existing products. Due to the risks
inherent in transitioning to new products, the Company will be required to
accurately forecast demand for new products while managing the transition from
older products. If new products have reliability or quality problems, reduced
orders, higher manufacturing costs, delays in acceptance of and payment for new
products and additional service and warranty expense may result. In the past,
the Company has experienced some delays as well as reliability and quality
problems in connection with product introductions, resulting in some of these
consequences. There can be no assurance that the Company will successfully
develop and manufacture new products, or that new products introduced by the
Company will be accepted in the marketplace. If the Company does not
successfully introduce new products, the Company's results of operations will be
materially adversely affected.
In addition, the Company expects to continue to make significant investments in
research and development. There can be no assurance that future technologies,
processes or product developments will not render the Company's current product
offerings obsolete or that the Company will be able to develop and introduce new
products or enhancements to its existing products which satisfy customer needs
in a timely manner or achieve market acceptance. The failure to do so could
adversely affect the Company's business.
Highly Competitive Industry The semiconductor equipment industry is highly
competitive. The Company has experienced and expects to continue to face
substantial competition throughout the world. The Company believes that to
remain competitive, it will require significant financial resources in order to
offer a broad range of products, to maintain customer service and support
centers worldwide, and to invest in product and process research and
development. The Company believes that the semiconductor equipment industry is
becoming increasingly dominated by large manufacturers such as Applied
Materials, Inc., which recently entered the yield management market, Hitachi
Electronics Engineering Co., Ltd. and Tokyo Electron Limited, who have the
resources to support customers on a worldwide basis. Many of these competitors
have substantially greater financial resources and more extensive engineering,
manufacturing, marketing and customer service and support capabilities than the
Company. In addition, there are smaller emerging semiconductor equipment
companies which provide
10
<PAGE> 11
innovative technology. The Company expects its competitors to continue to
improve the design and performance of their current products and processes and
to introduce new products and processes with improved price and performance
characteristics. No assurance can be given that the Company will be able to
compete successfully worldwide.
Importance of International Sales International sales accounted for 65%, 69% and
68% of the Company's net sales for fiscal years 1994, 1995 and 1996,
respectively. The Company expects that international sales will continue to
represent a significant percentage of its net sales. The future performance of
the Company will be dependent, in part, upon its ability to continue to compete
successfully in Asia, one of the largest areas for the sale of yield management
and process monitoring equipment. The Company's ability to compete in this area
in the future is dependent upon the continuation of favorable trading
relationships between the region (especially Japan and Korea) and the United
States and the continuing ability of the Company to maintain satisfactory
relationships with leading semiconductor companies in the region. International
sales and operations may be adversely affected by imposition of governmental
controls, restrictions on export technology, political instability, trade
restrictions, changes in tariffs and the difficulties associated with staffing
and managing international operations. In addition, international sales may be
adversely affected by the economic conditions in each country. The net sales and
income from the Company's international business may be affected by fluctuations
in currency exchange rates. Although the Company attempts to manage near term
currency risks through "hedging," there can be no assurance that such efforts
will be adequate. These factors could have a material adverse effect on the
Company's future business and financial results.
RECENT DEVELOPMENTS
On January 14, 1997, the Company announced the signing of a definitive Agreement
and Plan of Reorganization (the "Merger Agreement") with Tencor Instruments.
Under the terms of the Merger Agreement, shares and options for the Company's
common stock will be exchanged on a one-for-one basis for shares and options for
the common stock of Tencor Instruments. The transaction is to be accounted for
as a pooling of interests and is structured to qualify as a tax-free
reorganization. The transaction is conditioned upon obtaining approval of both
companies' shareholders, regulatory clearance and other customary closing
conditions.
11
<PAGE> 12
PART II OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
None.
ITEM 2 CHANGES IN SECURITIES
Not Applicable.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of KLA Instruments Corporation
was held on November 18, 1996 at the Company's corporate
headquarters in San Jose, California. Of the 51,062,224 shares
outstanding as of the record date, 46,439,642 shares (90.9%) were
present or represented by proxy at the meeting.
1. The table below presents the results of the election of
the Company's board of directors.
<TABLE>
<CAPTION>
Votes Votes
For Withheld
---------- ---------
<S> <C> <C>
Samuel Rubinovitz 45,971,086 474,309
Kenneth Levy 46,008,305 437,090
</TABLE>
2. The stockholders approved amendments to the Company's 1982 Stock
Option Plan (the "Option Plan") to (a) increase the number of shares
reserved for issuance under the Option Plan by 1,600,000 shares, and
(b) provide for automatic increases (i) each subsequent year by an
amount equal to three percent of the outstanding shares and (ii) by
an amount equal to the number of shares repurchased at any time for
issuance under the Option Plan, and (c) to extend the term of the
Option Plan to July 29, 2006. This proposal was approved by the
stockholders and received 21,231,159 votes for, 18,012,212 votes
against, with 131,618 votes abstaining, and 7,070,406 broker
non-votes.
3. The stockholders approved an amendment to the 1981 Employee Stock
Purchase Plan to increase the number of shares reserved thereunder
by 800,000 shares. This proposal was approved by the stockholders
and received 38,207,365 votes for, 1,062,224 votes against, with
109,400 votes abstaining, and 7,066,406 broker non-votes.
4. The stockholders ratified the appointment of Price Waterhouse LLP
as the Company's independent accountants for the fiscal year ended
June 30, 1997. This proposal received 46,305,643 votes for, 46,851
votes against, with 92,901 votes abstaining.
ITEM 5 OTHER EVENTS
Not Applicable.
12
<PAGE> 13
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
2.1 Agreement and Plan of Reorganization dated January 14, 1997 by
and among the Company, Tencor Instruments, a California
corporation ("Tencor") and Tiger Acquisition Corp., a
California corporation and wholly-owned subsidiary of the
Company (incorporated herein by reference to the exhibits to
Current Report on Form 8-K filed with the SEC on January 22,
1997).
11.1 Calculations of Earnings Per Share
27.1 Financial Data Schedule
99.1 Stock Option Agreement dated January 14, 1997 by and between
Tencor and the Company (incorporated herein by reference to
the exhibits to Current Report on Form 8-K filed with the SEC
on January 22, 1997).
99.2 Stock Option Agreement dated January 14, 1997 by and between
the Company and Tencor (incorporated herein by reference to
the exhibits to Current Report on Form 8-K filed with the SEC
on January 22, 1997).
(b) Reports on Form 8-K
Current Report on Form 8-K filed January 22, 1997
The Company filed a Form 8-K on January 22, 1997 announcing the
signing on January 14, 1997 of an Agreement and Plan of
Reorganization with Tencor Instruments. In connection with the
merger, holders of outstanding Tencor common stock will receive, in
exchange for each share of Tencor common stock held by them, one
share of the Company's common stock. The merger is intended to be a
tax-free reorganization under Section 368(a) of the Internal Revenue
Code of 1986, as amended, and is intended to be treated as a pooling
of interests for financial reporting purposes in accordance with
generally accepted accounting principles. The transaction is
conditioned on obtaining the approval of both companies'
shareholders, regulatory clearance and other customary closing
conditions.
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
KLA INSTRUMENTS CORPORATION
(Registrant)
February 11, 1997 /s/ ROBERT J. BOEHLKE
- ------------------- ------------------------------------
Date Robert J. Boehlke
Vice President Finance and Administration,
and Chief Financial Officer
<PAGE> 15
EXHIBIT INDEX
Exhibit Number Description
- -------------- ---------------
2.1 Agreement and Plan of Reorganization dated January 14, 1997 by
and among the Company, Tencor Instruments, a California
corporation ("Tencor") and Tiger Acquisition Corp., a
California corporation and wholly-owned subsidiary of the
Company (incorporated herein by reference to the exhibits to
Current Report on Form 8-K filed with the SEC on January 22,
1997).
11.1 Calculations of Earnings Per Share
27.1 Financial Data Schedule
99.1 Stock Option Agreement dated January 14, 1997 by and between
Tencor and the Company (incorporated herein by reference to
the exhibits to Current Report on Form 8-K filed with the SEC
on January 22, 1997).
99.2 Stock Option Agreement dated January 14, 1997 by and between
the Company and Tencor (incorporated herein by reference to
the exhibits to Current Report on Form 8-K filed with the SEC
on January 22, 1997).
<PAGE> 1
EXHIBIT 11.1
KLA INSTRUMENTS CORPORATION
CALCULATION OF EARNINGS PER SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
(In thousands except per share amounts) 1996 1995 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Primary earnings per share
Net income $21,331 $29,835 $45,308 $57,161
======= ======= ======= =======
Average common and common
equivalent shares:
Average common shares outstanding 51,307 50,363 51,244 50,512
Dilutive options 1,777 2,023 1,361 1,885
------- ------- ------- -------
53,084 52,386 52,605 52,397
======= ======= ======= =======
Net income per share $ 0.40 $ 0.57 $ 0.86 $ 1.09
======= ======= ======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENT OF OPERATIONS, THE CONSOLIDATED BALANCE SHEET
AND THE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 161,181
<SECURITIES> 218,752
<RECEIVABLES> 125,456
<ALLOWANCES> 3,103
<INVENTORY> 126,349
<CURRENT-ASSETS> 477,479
<PP&E> 133,459
<DEPRECIATION> 58,812
<TOTAL-ASSETS> 758,759
<CURRENT-LIABILITIES> 163,360
<BONDS> 0
0
0
<COMMON> 51
<OTHER-SE> 589,032
<TOTAL-LIABILITY-AND-EQUITY> 758,759
<SALES> 315,825
<TOTAL-REVENUES> 315,825
<CGS> 149,186
<TOTAL-COSTS> 149,186
<OTHER-EXPENSES> 104,912
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 803
<INCOME-PRETAX> 68,648
<INCOME-TAX> 23,340
<INCOME-CONTINUING> 45,308
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 45,308
<EPS-PRIMARY> 0.86
<EPS-DILUTED> 0.86
</TABLE>
