<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, 1998
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-TENCOR CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 04-2564110
- ---------------------------------- ----------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
CORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
160 Rio Robles
San Jose, California
95134
(Address of principal executive offices)
(Zip Code)
(408) 875-3000
(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 29, 1999 there were 87,813,056 shares of the registrant's
Common Stock, $0.001 par value, outstanding.
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
------
PART I FINANCIAL INFORMATION
- ------ ---------------------
<S> <C> <C>
Item 1 Financial Statements (unaudited)
Condensed Consolidated Interim Balance Sheets at
June 30, 1998 and December 31, 1998 ............................. 3
Condensed Consolidated Interim Statements of Operations for
the Three and Six Month Periods Ended December 31, 1997
and 1998 ........................................................ 4
Condensed Consolidated Interim Statements of Cash Flows
for the Six Months Ended December 31, 1997 and 1998 ............. 5
Notes to Condensed Consolidated Interim Financial Statements..... 6
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................... 8
Item 3 Quantitative and Qualitative Disclosures About Market Risk.......... 11
PART II - OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security Holders................. 12
Item 6 Exhibits and Reports on Form 8-K.................................... 12
SIGNATURES 13
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
KLA-TENCOR CORPORATION
CONDENSED CONSOLIDATED UNAUDITED INTERIM BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1998
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 215,970 $ 177,626
Short-term investments 92,343 70,015
Accounts receivable, net 304,140 286,010
Inventories 234,565 209,669
Deferred income taxes 90,729 94,252
Other current assets 18,624 14,986
----------- -----------
Total current assets 956,371 852,558
Land, property and equipment, net 140,937 145,295
Marketable securities 415,168 486,115
Other assets 35,921 40,604
----------- -----------
Total assets $ 1,548,397 $ 1,524,572
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 21,482 $ 20,335
Accounts payable 46,353 23,916
Other current liabilities 282,848 292,732
----------- -----------
Total current liabilities 350,683 336,983
----------- -----------
Stockholders' equity:
Common stock and capital in excess of par value 497,583 495,644
Retained earnings 683,836 676,419
Net unrealized gain on investments 26,108 20,367
Cumulative translation adjustment (9,813) (4,841)
----------- -----------
Total stockholders' equity 1,197,714 1,187,589
----------- -----------
Total liabilities and stockholders' equity $ 1,548,397 $ 1,524,572
=========== ===========
</TABLE>
See accompanying notes to unaudited condensed consolidated interim financial
statements.
3
<PAGE> 4
KLA-TENCOR CORPORATION
CONDENSED CONSOLIDATED UNAUDITED INTERIM STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Six months ended
December 31, December 31,
------------------------ -----------------------
1997 1998 1997 1998
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Revenues $ 326,361 $ 193,371 $ 638,781 $398,601
Costs and operating expenses:
Costs of goods sold 150,235 104,909 290,999 217,564
Engineering, research and development 47,280 38,470 92,457 81,396
Selling, general and administrative 61,622 49,966 123,760 102,539
Non-recurring acquisition, restructuring
and other charges -- 42,700 -- 42,700
--------- --------- --------- -------
Total costs and operating expenses 259,137 236,045 507,216 444,199
--------- --------- --------- -------
Income (loss) from operations 67,224 (42,674) 131,565 (45,598)
Interest income and other, net 9,331 14,083 18,116 31,146
--------- --------- --------- -------
Income (loss) before income taxes 76,555 (28,591) 149,681 (14,452)
Provision (benefit) for income taxes 24,497 (10,994) 47,901 (7,035)
--------- --------- --------- -------
Net (loss) income $ 52,058 $ (17,597) $ 101,780 $ (7,417)
========= ========= ========= ========
Earnings (loss) per share:
Basic $ 0.61 $ (0.20) $ 1.20 $ (0.08)
========= ========= ========= ========
Diluted $ 0.59 $ (0.20) $ 1.15 $ (0.08)
========= ========= ========= ========
Weighted average number of shares:
Basic 84,657 87,463 84,470 87,414
========= ========= ========= ========
Diluted 88,105 87,463 88,343 87,414
========= ========= ========= ========
</TABLE>
See accompanying notes to unaudited condensed consolidated interim financial
statements.
4
<PAGE> 5
KLA-TENCOR CORPORATION
CONDENSED CONSOLIDATED UNAUDITED INTERIM STATEMENTS OF CASH FLOW
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
-------------------------
1997 1998
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 101,780 $ (7,417)
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 18,228 21,721
Non-recurring acquisition charges -- 7,700
Changes in assets and liabilities:
Accounts receivable, net (122,067) 40,353
Inventories (26,791) 21,976
Other assets (7,217) (627)
Accounts payable 14,007 (23,690)
Other current liabilities 16,300 3,321
--------- ---------
Net cash provided by (used in)
operating activities (5,760) 63,337
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment (33,701) (10,173)
Net purchases of available for sale securities (75,738) (54,384)
Acquisition of assets and technology -- (12,522)
--------- ---------
Net cash used in investing activities (109,439) (77,079)
--------- ---------
Cash flows from financing activities:
Issuance of common stock, net 25,350 18,710
Stock repurchases (7,546) (20,648)
Net payments under debt obligations (1,222) (4,483)
--------- ---------
Net cash provided by financing activities 16,582 (6,421)
--------- ---------
Effect of exchange rate changes on cash and cash equivalents 10,525 (18,181)
--------- ---------
Net increase (decrease) in cash and cash equivalents (88,092) (38,344)
Cash and cash equivalents at beginning of period 279,225 215,970
--------- ---------
Cash and cash equivalents at end of period $ 191,133 $ 177,626
--------- ---------
Supplemental cash flow disclosures:
Income taxes paid $ 45,292 $ 6,415
Interest paid $ 1,307 $ 996
</TABLE>
See accompanying notes to unaudited condensed consolidated interim financial
statements.
5
<PAGE> 6
KLA-TENCOR CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
NOTE 1. In the opinion of the management of KLA-Tencor Corporation (the
Company), the unaudited condensed consolidated interim financial statements
include only those normal recurring adjustments necessary for a fair statement
of results. The results for the three month period ended December 31, 1998 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 for the year ended June 30, 1998.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect amounts reported in the financial statements and accompanying notes.
Actual amounts could differ materially from those amounts.
NOTE 2. Inventories (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1998 1998
-------- -------------
<S> <C> <C>
Customer service parts $ 31,671 $ 57,159
Raw materials 49,630 42,967
Work-in-process 79,238 54,184
Demonstration equipment 47,234 26,896
Finished goods 26,792 28,463
-------- --------
$234,565 $209,669
======== ========
</TABLE>
NOTE 3. In August 1997, the Company adopted a plan to repurchase shares of its
own Common Stock on the open market the purpose of which is to partially offset
dilution created by employee stock options and stock purchase plans. During the
six month period ended December 31, 1998, the Company repurchased 542,000 shares
of its Common Stock at a cost of $20.6 million.
NOTE 4. As of July 1, 1998, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income" which
establishes the requirements for reporting and presentation of comprehensive
income and its components. SFAS No. 130 requires accumulated translation
adjustments and net unrealized gains/losses on investments to be included in
other comprehensive income. The adoption of SFAS No. 130 did not impact the
Company's net income (loss) or total stockholders' equity. For the three month
and six month period ended December 31, 1997 and 1998, the components of total
comprehensive income (loss) are as follows:
<TABLE>
<CAPTION>
Three months ended Six months ended
December 31, December 31,
------------------------- -------------------------
1997 1998 1997 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income (loss) $ 52,058 $ (17,597) $ 101,780 $ (7,417)
Foreign currency translation adjustments (4,490) 3,790 (5,054) 4,972
Unrealized gains (losses) on investments,
net of taxes 1,295 (4,759) 9,678 (5,741)
--------- --------- --------- ---------
Other comprehensive income (loss) (3,195) (969) 4,624 (769)
--------- --------- --------- ---------
Total comprehensive income (loss) $ 48,863 $ (18,566) $ 106,404 $ (8,186)
========= ========= ========= =========
</TABLE>
6
<PAGE> 7
NOTE 5. Basic net income (loss) per share, is calculated using the weighted
average number of shares of common stock outstanding during the period. Diluted
earnings per share is computed in the same manner and additionally gives effect
to all dilutive potential common shares outstanding during the period. Diluted
net loss per share is calculated using the weighted average number of shares of
common stock outstanding during the period; the options outstanding during the
three and six month periods ended December 31, 1998 were excluded from the
computation of diluted net loss per share because the effect in periods with a
net loss would be antidilutive. The reconciling difference between the
computation of basic and diluted earnings per share for the three and six month
period ended December 31, 1997, is the inclusion of the dilutive effect of stock
options issued to employees under employee stock option plans.
NOTE 6. In November 1998, the Company entered into a restructuring plan to
address the downturn in the semiconductor industry. The total restructuring
charge was $35 million or $0.26 cents per share for the three months ended
December 31, 1998. The plan includes consolidation of facilities, a write-down
of assets associated with affected programs and reductions in the Company's
global workforce. Restructuring and related charges were as follows for the
period ended December 31, 1998 (in thousands):
<TABLE>
<CAPTION>
Severance
Facilities Inventory and Benefits Other Total
---------- --------- ------------ ------- -------
<S> <C> <C> <C> <C> <C>
Restructuring provision $12,491 $ 9,721 $ 8,126 $ 4,662 $35,000
Incurred to date 2,724 6,300 1,710 2,165 12,899
------- ------- ------- ------- -------
Balance at
December 31, 1998 $ 9,767 $ 3,421 $ 6,416 $ 2,497 $22,101
======= ======= ======= ======= =======
</TABLE>
NOTE 7. During the second quarter of fiscal 1999 the Company acquired certain
assets and intellectual property in separate transactions with Keithley
Instruments, Inc. and Uniphase Corporation. These acquisitions were accounted
for using the purchase method of accounting. The aggregate purchase price of
approximately $13 million was allocated to the acquired assets, liabilities
assumed, intangible assets and goodwill and resulted in a pre-tax charge of
approximately $7.7 million for acquired in-process research and development.
NOTE 8. In June 1997, the Financial Accounting Standards Board issued Statement
No. 131, "Disclosures about Segments of an Enterprise and Related Information."
This Statement establishes standards for public business enterprises to report
information about operating segments in annual financial statements and requires
those enterprises to report selected information about operating segments and
related disclosures about products and services, geographic areas, and major
customers. This Statement is required to be adopted in the Company's annual
financial statements for fiscal year ending June 30, 1999. The effect of SFAS
No. 131 is not expected to be material to the Company's financial statement
disclosure.
In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities" (SFAS 133). It
establishes accounting and reporting standards for derivative instruments
including standalone instruments, such as forward currency exchange contracts
and interest note swaps or embedded derivatives and requires that these
instruments be marked-to-market on an ongoing basis. These market value
adjustments are to be included either in the income statement or stockholders'
equity, depending on the nature of the transaction. The Company is required to
adopt SFAS 133 in the first quarter of its fiscal year ending June 30, 2000. The
effect of SFAS No. 133 is not expected to be material to the Company's financial
statements.
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.
Important factors that could cause actual results to differ are described in the
following discussion and under "Risk Factors" below.
RESULTS OF OPERATIONS
Revenues were $193 million and $399 million for the three and six month periods
ended December 31, 1998, compared to $326 million and $639 million for the same
periods of the prior fiscal year, representing a decrease of 41% and 38% for the
respective periods. The decrease in revenues is primarily attributable to
reductions in capital spending by major semiconductor manufacturers worldwide
due in part to excess manufacturing capacity resulting from smaller dimensions,
reduced demand from Asian markets and continued price competition in response to
oversupply in the DRAM market.
In response to the current market conditions, the Company implemented a
restructuring plan during its second fiscal quarter which resulted in a one-time
charge of $35 million. The charge consisted primarily of costs associated with
the consolidation of facilities, a write-down of assets associated with affected
programs and employee severance and related benefits associated with a reduction
in force completed during the quarter.
Gross margins were 46% and 45% of revenues for the three and six month periods
ended December 31, 1998, compared to 54% of revenues for the same periods in the
prior fiscal year. Gross margins declined year over year primarily due to
reduced capacity utilization resulting from lower business volume. Additionally,
margins were impacted by a shift in product mix away from higher margin product
sales in the wafer inspection products and an increase in the percentage of
sales in the lower margin service business.
Engineering, research and development (R&D) expenses were $38 million and $81
million for the three and six month periods ended December 31, 1998 compared to
$47 million and $92 million for the same periods in the prior fiscal year. As a
percentage of revenues, R&D expenses increased to 20% for the three and six
month periods ended December 31, 1998 compared to 14% for the same periods in
the prior fiscal year. The decrease in absolute dollars is primarily
attributable to the cost reduction measures and the restructuring actions the
Company has executed as result of the current semiconductor industry downturn.
Selling, general and administrative (SG&A) expenses were $50 million and $103
million for the three and six month periods ended December 31, 1998, compared to
$62 million and $124 million for the same periods in the prior fiscal year. The
decrease in dollars during the period is primarily due to cost reduction and
restructuring actions implemented by the Company during fiscal 1999, including
headcount reduction and the consolidation of facilities.
Interest income and other, net, increased $5 million and $13 million for the
three and six month periods ended December 31, 1998, compared to the same
periods in the prior fiscal year. The increase is due primarily to gains
realized on the sale of equity securities held in a former supplier company as
well as increases in interest income on higher average cash equivalents and
investment balances.
8
<PAGE> 9
During the three month period ended December 31, 1998, the Company realized an
effective 38% tax rate for the period which is comprised of a 35% tax benefit
from the effect of non-recurring restructuring and acquisition costs and a 28%
tax rate on income excluding the one-time charge. The Company anticipates
approximately a 28% tax rate in the balance of fiscal 1999 which is lower than
the 32% tax rate incurred in the prior fiscal year due primarily to a higher
proportion of income derived from tax-exempt interest in the current year.
LIQUIDITY AND CAPITAL RESOURCES
During the six month period ended December 31, 1998, cash, cash equivalents,
short-term investments and marketable securities balances increased
approximately $10 million to $734 million. Cash provided by operations for the
six month period was $63 million, resulting primarily from collections on
accounts receivable and reduced inventory spending. Capital expenditures of $10
million were primarily for manufacturing equipment necessary for the Company's
operations. In addition, the Company paid approximately $13 million for the
acquisition of assets and intellectual property from Keithley Instruments, Inc.
and from Uniphase Corporation during the second quarter of fiscal 1999.
Working capital decreased to $516 million as of December 31, 1998 compared to
$606 million at June 30, 1998 primarily due to a shift of the Company's
investment portfolio to a higher percentage of long-term securities. The Company
believes that existing liquid resources and funds generated from operations
combined with its ability, if necessary, to borrow funds will be adequate to
meet its operating and capital requirements and obligations through the
foreseeable future.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. These date code fields
will need to accept four digit entries to distinguish 21st century dates from
20th century dates. As a result, many companies' software and computer systems
may need to be upgraded or replaced in order to comply with such "Year 2000"
requirements. The Company believes that the majority of its products and systems
are Year 2000 ready or will be brought to a state of readiness prior to the year
2000. Costs to bring its products and systems to a state of compliance with the
year 2000 have not been material and the Company does not anticipate future
costs will have a material impact on the financial statements; however, complete
testing is not feasible and unexpected problems may remain. In addition, the
Company utilizes third-party equipment and software that which are also under
evaluation and planning for Year 2000 readiness. Failure of the Company's
products or third-party equipment or software to operate properly with regard to
the Year 2000 and thereafter could require the Company to incur unanticipated
expenses to remedy any problems, which could have a material adverse effect on
the Company's business and operating results.
The Company is in the process of contacting its critical suppliers,
manufacturers, distributors, and other vendors to determine if their operations
and the products and services that they provide to the Company are Year 2000
compliant. Where practicable, the Company will attempt to mitigate its risks
with respect to the failure of third parties to be Year 2000 ready, including
developing contingency plans. However, such failures, including failures of any
contingency plans, remain a possibility and could have a material adverse impact
on the Company's results of operations or financial condition. Furthermore, the
purchasing patterns of customers or potential customers may be affected by Year
2000 issues as companies expend significant resources to correct their current
systems for Year 2000 compliance. These expenditures may result in reduced funds
available to purchase products and services such as those offered by the
Company, which could have a material adverse effect on the Company's business
and operating results.
9
<PAGE> 10
RISK FACTORS
During the calendar year operating results have been adversely affected as the
Company experienced declines in orders, revenues and margins due to reduced
capital equipment spending by the semiconductor industry. During the second
quarter of fiscal 1999, the Company implemented a restructuring plan to address
the current downturn in the semiconductor industry which resulted in a
non-recurring pre-tax charge of $35 million. This restructuring plan includes a
consolidation of facilities, a write-down of assets associated with affected
programs and employee severance and related benefits costs. There can be no
assurance that this cost reduction plan will be sufficient to address the
current market conditions. The current semiconductor industry decline is
primarily due to excess semiconductor manufacturing capacity worldwide, coupled
with the Asian financial crisis. The Company's operating results are dependent
on many factors, including economic conditions in the semiconductor and related
industries, both in the US and abroad, the size and timing of orders from
customers, customer cancellations or delays in shipments, the Company's ability
to develop, introduce, and market new and enhanced products on a timely basis,
among others. The Company has experienced reductions in orders, cancellations
and delays in shipments which may continue to adversely affect sales and margins
in future periods. The Company's expense levels are based, in part, on
expectations of future revenues. Operating results have fluctuated in the past
and may fluctuate in the future. If revenue levels in a particular period do not
meet expectations, operating results may be adversely affected and additional
cost reduction measures may be necessary for the Company to remain competitive
in the marketplace.
Rapid technological changes in semiconductor manufacturing processes subject the
semiconductor manufacturing equipment industry to increased pressure to maintain
technological parity with deep sub-micron process technology. Although the
Company is focused on controlling expenses in the current downturn in the
semiconductor industry, the Company continues to believe that its future success
will depend in part upon its ability to develop, manufacture and successfully
introduce new products with improved capabilities (including 300mm wafers and
sub-quarter micron design rules) and to continue to enhance existing products.
The Company must be able to forecast demand for new products while managing the
transition from older products. There can be no assurance that the Company will
successfully or timely develop and manufacture new products or that any such
products will be accepted in the marketplace. If new products have reliability
or quality problems, reduced orders, higher manufacturing costs, delays in
collecting accounts receivable and additional service and warranty expense may
result. Additionally, there can be no assurance that future technologies,
processes or product developments will not render the Company's current product
offerings obsolete. However, if the Company does not continue to successfully
introduce new products, its results of operations will be adversely affected.
The Company expects to continue to make significant investments in research and
development and to sustain its current spending levels for customer support in
fiscal year 1999 to meet current customer requirements and effectively position
the Company for growth when the business cycle turns favorable.
The semiconductor equipment industry is highly competitive and global in nature
and the Company has experienced and expects to continue to face substantial
competition. The Company believes that to remain competitive 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's business depends and
will continue to 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. The current industry downturn has had an adverse effect on the
semiconductor industry's level of capital expenditures. The Company believes
that it is relatively well positioned for this downturn because of its array of
products, its focus on yield improvement and process development rather than
pure wafer fabrication facility capacity, its sales of metrology products to
non-semiconductor industries and
10
<PAGE> 11
its strong balance sheet. The Company believes that the semiconductor equipment
industry is becoming increasingly dominated by large manufacturers with the
resources to support customers worldwide. Some 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 can provide innovative technology. No assurance can be given
that the Company will be able to compete successfully worldwide or that the
Company will be able to withstand the effects of an industry downturn in the
short term or over an extended period if the downturn is prolonged.
The Company expects that international revenues will continue to represent a
significant percentage of its revenues and international revenues and operations
may be adversely affected by economic conditions specific to each country. The
future performance of the Company depends, in part, upon its ability to continue
to compete successfully worldwide. Asia Pacific is one of the largest regions
for the sale of yield management and process monitoring equipment and countries
in this region, including Japan, Korea and Taiwan, have experienced weaknesses
in their currency, banking and equity markets in recent periods. The US and
Europe have shown relative strength during this downturn; however, weaknesses in
these regions may also adversely affect demand for the Company's products and
the Company's consolidated results of operations. In addition, international
sales may be adversely affected by fluctuations in foreign currency, 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. Although the
Company attempts to manage near term currency risks through the use of hedging
instruments, there can be no assurance that such efforts will be adequate. These
factors may have a material adverse effect on the Company's future business and
financial results.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's market risk exposures as set forth in its Annual Report on Form
10-K for the year ended June 30, 1998 have not changed significantly.
11
<PAGE> 12
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of KLA-Tencor Corporation was held on
November 19, 1998 at the Company's offices in Milpitas, California. Of
the 87,321,556 shares outstanding as of September 18, 1988, the record
date, 75,126,534 shares (86%) were present or represented by proxy at
the meeting.
1. The table below presents the results of the election to the Company's
board of directors.
<TABLE>
<CAPTION>
Votes
Votes For Withheld
---------- --------
<S> <C> <C>
James W. Bagley 74,367,931 488,603
Edward W. Barnholt 74,656,074 470,460
Dean O. Morton 74,642,236 484,298
Kenneth L. Schroeder 74,641,810 484,724
</TABLE>
2. The stockholders approved an amendment to the 1997 Employee Stock
Purchase Plan to increase the number of shares reserved for issuance
thereunder by 1,000,000 shares of Common Stock. This proposal received
57,480,851 votes for, 3,456,114 votes against, with 398,961 votes
abstaining, and 13,790,608 broker non-votes.
3. The stockholders approved amendments to the 1997 Employee Stock
Purchase Plan to increase the number of shares of Common Stock reserved
for issuance thereunder on the first day of each subsequent fiscal year
by the lesser of (a) 2,000,000 shares or (b) the number of shares which
the Company estimates (based on the previous 12 month period) it will be
required to issue under the 1997 Purchase Plan during the forthcoming
fiscal year. This proposal received 44,757,829 votes for, 16,174,363
votes against, with 403,734 votes abstaining, and 13,790,608 broker
non-votes.
4. The stockholders approved the 1998 Outside Director Option Plan and
reserved for issuance thereunder 1,000,000 shares of Common Stock. This
proposal received 46,643,026 votes for, 15,245,588 votes against, with
447,312 votes abstaining, and 13,790,608 broker non-votes.
5. The stockholders ratified the appointment of PricewaterhouseCoopers
LLP as the Company's independent accountants for the fiscal year ended
June 30, 1999. This proposal received 74,728,073 votes for, 172,205
votes against, with 226,256 votes abstaining.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
--------
27.1 Financial Data Schedule.
12
<PAGE> 13
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-TENCOR CORPORATION
(Registrant)
February 9, 1999 ROBERT J. BOEHLKE
- ---------------- -------------------------------
(Date) Robert J. Boehlke
Executive Vice President
and Chief Financial Officer
13
<PAGE> 14
Index to Exhibits
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
<S> <C>
27.1 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 177,626
<SECURITIES> 556,130
<RECEIVABLES> 286,010
<ALLOWANCES> 0
<INVENTORY> 209,669
<CURRENT-ASSETS> 852,558
<PP&E> 281,612
<DEPRECIATION> 136,317
<TOTAL-ASSETS> 1,524,572
<CURRENT-LIABILITIES> 336,983
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0
0
<COMMON> 495,644
<OTHER-SE> 691,945
<TOTAL-LIABILITY-AND-EQUITY> 1,524,572
<SALES> 398,601
<TOTAL-REVENUES> 398,601
<CGS> 217,564
<TOTAL-COSTS> 444,199
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 805
<INCOME-PRETAX> (14,452)
<INCOME-TAX> (7,035)
<INCOME-CONTINUING> (7,417)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,417)
<EPS-PRIMARY> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
