<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: September 30, 1999
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
INCORPORATION 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 November 1, 1999 there were 89,948,961 shares of the registrant's
Common Stock, $0.001 par value, outstanding.
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1 Financial Statements (unaudited)
Condensed Consolidated Balance Sheets at
June 30, 1999 and September 30, 1999 ............................ 3
Condensed Consolidated Statements of Operations for
the Three Month Ended September 30, 1998
and 1999 ........................................................ 4
Condensed Consolidated Statements of Cash Flows
for the Three Months Ended September 30, 1998 and 1999 .......... 5
Notes to Condensed Consolidated Financial Statements............. 6
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................... 9
Item 3 Quantitative and Qualitative Disclosures About Market Risk.......... 18
PART II - OTHER INFORMATION
Item 1 Legal Proceedings................................................... 19
Item 6 Exhibits and Reports on Form 8-K.................................... 19
SIGNATURES 19
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
KLA-TENCOR CORPORATION
CONDENSED CONSOLIDATED UNAUDITED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
June 30, September 30,
1999 1999
---------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 271,488 $ 316,869
Short-term investments 59,574 83,046
Accounts receivable, net 280,070 332,280
Inventories 195,679 206,404
Other current assets 135,530 145,748
---------- -------------
Total current assets 942,341 1,084,347
Land, property and equipment, net 168,335 168,548
Marketable securities 424,121 353,631
Other assets 50,103 54,576
---------- -------------
Total assets $1,584,900 $1,661,102
========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 14,567 $ 16,440
Accounts payable 35,249 29,101
Other current liabilities 302,501 327,525
---------- -------------
Total current liabilities 352,317 373,066
---------- -------------
Stockholders' equity:
Common stock and capital in excess of par value 504,352 521,649
Retained earnings 723,048 762,550
Accumulated other comprehensive income 5,183 3,837
---------- -------------
Total stockholders' equity 1,232,583 1,288,036
---------- -------------
Total liabilities and stockholders' equity $1,584,900 $1,661,102
========== ============
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
3
<PAGE> 4
KLA-TENCOR CORPORATION
CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended
September 30,
1998 1999
--------- ---------
<S> <C> <C>
Revenues $ 205,230 $ 272,989
Costs and operating expenses:
Costs of goods sold 112,655 136,117
Engineering, research and development 42,926 46,718
Selling, general and administrative 52,573 53,414
Non-recurring acquisition, restructuring
and other charges -- (6,000)
--------- ---------
Total costs and operating expenses 208,154 230,249
--------- ---------
Income (loss) from operations (2,924) 42,740
Interest income and other, net 17,063 12,706
--------- ---------
Income before income taxes 14,139 55,446
Provision for income taxes 3,959 15,944
--------- ---------
Net income $ 10,180 $ 39,502
========= =========
Earnings per share:
Basic $ 0.12 $ 0.44
========= =========
Diluted $ 0.11 $ 0.42
========= =========
Weighted average number of shares:
Basic 87,342 88,996
========= =========
Diluted 89,257 93,967
========= =========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
4
<PAGE> 5
KLA-TENCOR CORPORATION
CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOW
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1998 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 10,180 $ 39,502
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 11,643 12,921
Restructuring charges -- (6,000)
Net gain on sale of marketable securities (5,119) (3,911)
Changes in assets and liabilities:
Accounts receivable, net 49,433 (36,335)
Inventories 1,848 (7,998)
Other assets 152 (11,630)
Accounts payable (15,499) (6,724)
Other current liabilities (3,485) 26,200
--------- ---------
Net cash provided by operating activities 49,153 6,025
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment (9,675) (11,841)
Net (purchases) sales of available for sale securities (16,254) 47,355
--------- ---------
Net cash (used in) provided by investing activities (25,929) 35,514
--------- ---------
Cash flows from financing activities:
Issuance of common stock, net 1,977 19,355
Stock repurchases (2,554) (2,161)
Net payments under debt obligations (1,918) (830)
--------- ---------
Net cash provided by (used in) financing activities (2,495) 16,364
--------- ---------
Effect of exchange rate changes on cash and cash equivalents (4,872) (12,522)
--------- ---------
Net increase in cash and cash equivalents 15,857 45,381
Cash and cash equivalents at beginning of period 215,970 271,488
--------- ---------
Cash and cash equivalents at end of period $ 231,827 $ 316,869
--------- ---------
Supplemental cash flow disclosures:
Income taxes paid (refunded) $ 3,763 $ (1,956)
========= =========
Interest paid $ 378 $ 84
========= =========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
5
<PAGE> 6
KLA-TENCOR CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 1. In the opinion of management, the accompanying unaudited condensed
consolidated financial statements include all adjustments (consisting only of
normal recurring accruals) necessary for their fair presentation in accordance
with generally accepted accounting principles. Preparing financial statements
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. The results for the three month
period ended September 30, 1999 are not necessarily indicative of results to be
expected for the entire year. This financial information should be read in
conjunction with the financial statements and the notes thereto included in the
Company's Annual Report on Form 10-K for the year ended June 30, 1999.
Certain items previously reported in specific financial statement captions have
been reclassified to conform with the presentation of the three month period
ended September 30, 1999.
NOTE 2. Inventories (in thousands):
<TABLE>
<CAPTION>
June 30, September 30,
1999 1999
--------- -------------
<S> <C> <C>
Customer service parts $ 41,276 $ 44,802
Raw materials 45,906 50,836
Work-in-process 52,913 60,516
Demonstration equipment 37,469 37,070
Finished goods 18,115 13,180
-------- --------
$195,679 $206,404
======== ========
</TABLE>
NOTE 3. The Company has adopted a plan to repurchase shares of its Common Stock
on the open market for the purpose of partially offsetting dilution created by
employee stock options and stock purchase plans. During the three month period
ended September 30, 1999, the Company repurchased 32,000 shares of its Common
Stock at a cost of $2.2 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 establishes new rules for the reporting
and display of comprehensive income and its components, however, it has no
effect on the Company's net income or total stockholders' equity. For the three
month periods ended September 30, 1998 and 1999, the components of comprehensive
income, net of tax, are as follows:
<TABLE>
<CAPTION>
Three months ended
September 30,
1998 1999
-------- --------
<S> <C> <C>
Net income $ 10,180 $ 39,502
Currency translation adjustments 1,182 2,228
Change in unrealized gain (loss) on investments, net (982) (3,574)
-------- --------
Other comprehensive income (loss) 200 (1,346)
-------- --------
Total comprehensive income $ 10,380 $ 38,156
======== ========
</TABLE>
6
<PAGE> 7
NOTE 5. Basic net income 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 also gives effect to all dilutive
common equivalent shares outstanding during the period. Dilutive common
equivalent shares consist of stock options. During the three month period ended
September 30, 1998, options to purchase approximately 1,058,000 shares at prices
ranging from $26.88 to $69.88 were not included in the computation of diluted
EPS because the exercise price was greater than the average market price of
common shares. During the three month period ended September 30, 1999, options
to purchase 2,500 shares at a price of $69.88 were not included in the
computation of diluted EPS because the exercise price was greater than the
average market price of common shares. The reconciling difference between the
computation of basic and diluted earnings per share for the three month periods
ended September 30, 1998 and 1999, 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
associated with the downturn in the semiconductor industry. The total pre-tax
restructuring charge was $35 million. The plan includes consolidation of
facilities, a write-down of assets associated with affected programs and
reductions in the Company's global workforce. The Company expects to continue to
utilize the restructuring reserves during the remainder of fiscal 2000 as the
program is completed.
During the three month period ended September 30, 1999, the Company determined
that $6 million of the restructuring reserve established during November 1998
would not be utilized because of a change in management's plans for utilization
of certain facilities resulting from an increase in demand for the Company's
products. Accordingly, the restructuring reserve reversal was included in the
determination of income from operations for the three month period ended
September 30, 1999.
Restructuring and related charges for the period from November 1998 until
September 30, 1999 were as follows (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
Write-down of assets (2,035) (6,729) -- (3,168) (11,932)
Cash expenditures (2,109) (409) (2,620) (1,000) (6,138)
-------- -------- -------- -------- --------
Balance at June 30, 1999 $ 8,347 $ 2,583 $ 5,506 $ 494 $ 16,930
Cash expenditure (219) (52) -- (271)
Restructuring reserve reversal (5,721) (279) -- -- (6,000)
-------- -------- -------- -------- --------
Balance at Sept 30, 1999 $ 2,407 $ 2,304 $ 5,454 $ 494 $ 10,659
======== ======== ======== ======== ========
</TABLE>
NOTE 7. In June 1999, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 137 (SFAS No. 137), "Accounting
for Derivative Instruments and Hedging Activities - Deferral of the Effective
Date of FASB Statement No. 133." SFAS No. 137 amends Statement of Financial
Accounting Standards No. 133 (SFAS No. 133), "Accounting for Derivative
Instruments and Hedging Activities," to defer its effective date to all fiscal
quarters of all fiscal years beginning after June 15, 2000. SFAS No.
7
<PAGE> 8
133 establishes accounting and reporting standards for derivative instruments
including standalone instruments, such as forward currency exchange contracts
and interest rate 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 No. 133 in the first quarter of its fiscal year ending June 30, 2001.
The effect of SFAS No. 133 is not expected to be material to the Company's
financial statements.
NOTE 8. A discussion regarding certain pending legal proceedings is included in
Footnote 9 of the Financial Statements included in the Company's Annual Report
on Form 10-K for the year ended June 30, 1999. The information provided therein
remains unchanged. Although the outcome of these claims cannot be predicted with
certainty, management does not believe that any of these legal matters will have
a material adverse effect on the Company's financial condition. Were an
unfavorable ruling to occur, there exists the possibility of a material impact
on the net income of the period in which the ruling occurs.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
This Current Report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the of Securities
Exchange Act of 1934. Actual results could differ materially from those
projected in the forward-looking statements as a result of a number of factors,
risks and uncertainties, including the risk factors set forth in this discussion
and in the Company's Annual Report on Form 10-K for the year ended June 30,
1999. Generally, the words "anticipate", "expect", "intend", "believe" and
similar expressions identify forward looking statements. The information
included in this Quarterly Report is as of the filing date with the Securities
and Exchange Commission and future events or circumstances could differ
significantly from the forward looking statements included here.
RESULTS OF OPERATIONS
Revenues were $273 million for the three month period ended September 30, 1999,
compared to $205 million for the same period of the prior fiscal year,
representing an increase of 33%. The increase in revenues is primarily
attributable to increased capital spending by major semiconductor manufacturers.
Our Wafer Inspection products were the largest beneficiary of the increased
capital spending by major semiconductor manufacturers.
Gross margins were 50% for the three month period ended September 30, 1999,
compared to 45% of revenues for the same period in the prior fiscal year. Gross
margins increased primarily due to increased capacity utilization resulting from
higher unit volume as well as faster growth of higher margin product revenue
compared to lower margin service revenue.
Engineering, research and development (R&D) expenses were $47 million for the
three month period ended September 30, 1999 compared to $43 million for the same
period in the prior fiscal year. As a percentage of revenues, R&D expenses
decreased to 17% for the three month period ended September 30, 1999 compared to
21% for the same period in the prior fiscal year. Our investment in R&D
represents a continued commitment to product development in new and emerging
market segments and enhancements to existing products for 0.18 micron, copper
development and 300mm wafers.
Selling, general and administrative expenses were $53 million for the three
month period ended September 30, 1999 as well as for the same period in the
prior fiscal year. Selling, general and administrative expenses remained flat in
spite of the increase in revenue as a result of the restructuring and cost
reduction plans, including reductions in headcount and consolidation of
facilities, which we adopted during the three month period ended December 31,
1998.
During the three month period ended September 30, 1999, we determined that $6
million of the restructuring reserve established during November 1998 would not
be utilized because of a change in management's plans for utilization of certain
facilities resulting from an increase in demand for our products. Accordingly,
the restructuring reserve reversal was included in the determination of income
from operations for the three month period ended September 30, 1999.
Interest income and other, net, decreased to $13 million for the three months
ended September 30, 1999, compared to $17 million in the same period in the
prior fiscal year. The decrease is due to lower returns on our investment
portfolio and a smaller gain on sale of marketable securities.
9
<PAGE> 10
Our effective tax rate for the three months ended September 30, 1999 was 28% on
pretax income excluding nonrecurring income created by the reversal of our prior
fiscal year restructuring reserves. This rate is consistent with the rate
applied to recurring income during the prior fiscal year. The tax rate on the
nonrecurring income was 35%, which is consistent with the tax rate applied when
the restructuring reserve and related charge were recorded during the three
month period ended December 31, 1998. The overall tax rate was 28.8% for the
three month period ended September 30, 1999. We anticipate a tax rate of
approximately 28% for the balance of the fiscal year ending June 30, 2000.
LIQUIDITY AND CAPITAL RESOURCES
During the three month period ended September 30, 1999, cash, cash equivalents,
short-term investments and marketable securities balances decreased to $754
million from $755 million. Net cash provided by operations for the three month
period ended September 30, 1999, was $6 million, compared to $49 million of net
cash from operations for the same period of the prior fiscal year. This change
primarily resulted from increased net income before non-cash charges and an
increase in other liabilities offset by an increase in accounts receivable and
inventory. Capital expenditures of $12 million were for manufacturing and
engineering equipment and leasehold improvements necessary for our operations.
The amounts of common stock issued through our employee stock purchase program
and stock option exercises during the three month period ended September 30,
1999 was $19 million.
Working capital increased to $711 million as of September 30, 1999 compared to
$590 million at June 30, 1999 primarily due to a shift of our investment
portfolio from marketable securities into short term investments and cash
equivalents. We believe that existing liquid capital resources and funds
generated from operations combined with the ability, if necessary, to borrow
funds will be adequate to meet our operating and capital requirements and
obligations through the foreseeable future. However, we can give no assurances
that we will continue to generate sufficient funds from operations or that we
will be able to borrow funds on reasonable terms in the future, if necessary.
RISK FACTORS
Fluctuations in Operating Results and Stock Price
Our operating results have varied widely in the past and our future operating
results will continue to be subject to quarterly variations based upon a wide
variety of factors including those listed in this section and throughout this
Quarterly Report. In addition, future operating results may not follow any past
trends. The factors we believe make our results more likely to fluctuate and
difficult to predict include:
- the cyclical nature of the semiconductor industry;
- the reduction in the price and profitability of our products;
- our timing of new product introductions;
- our ability to develop and implement new technologies;
- the change in customers' schedules for fulfillment of orders;
- the cancellation of contracts by major customers; and
- our ability to manage our manufacturing requirements.
Operating results also could be affected by sudden changes in customer
requirements, currency exchange rate fluctuations and other economic conditions
affecting customer demand and the cost of operations in one or more of the
global markets in which we do business. As a result of
10
<PAGE> 11
these or other factors, we could fail to achieve our expectations as to future
revenues, gross profit and income from operations. Our failure to meet the
performance expectations set and published by external sources could result in a
sudden and significant drop in the price of our stock, particularly on a
short-term basis, and could negatively impact the value of any investment in our
stock.
Year 2000 Issue
The Year 2000 computer issue presents risks for us as it does for other
companies. The Year 2000 problem arises from the use of a two-digit field to
identify years in computer programs, and the assumption of a single century, the
1900s. Any program so created may read, or attempt to read, "00" as the year
1900. There are two other related issues which could also lead to incorrect
calculations or failure: some systems' programming assigns special meaning to
certain dates and the year 2000 is a leap year. Accordingly, some computer
hardware and software, including programs embedded within machinery and parts,
will need to be modified prior to the year 2000 in order to remain functional.
We use a significant number of computer software programs and operating systems
in our internal operations, including applications used in our financial,
product development, order management and manufacturing systems, as well as in
the products we manufacture and sell. Additionally, we are dependent upon our
critical suppliers, contract manufacturers, other vendors, and customers to
determine if their operations, products, services and payments they provide are
Year 2000 ready.
The inability of computer software programs to accurately recognize, interpret
and process date codes designating the year 2000 and beyond could cause errors
or operating problems that would disrupt business operations. If this occurred
in our internal systems it could adversely affect our ability to process orders,
forecast production requirements or issue invoices. A significant failure of our
computer integrated manufacturing systems that monitor and control factory
equipment, would disrupt manufacturing operations and cause a delay in the
completion and shipping of products. Similarly, if our critical suppliers' or
customers' systems or products fail because of a Year 2000 malfunction, their
disruption could negatively impact our operating results. Finally, if our own
products malfunctioned as a result of a failure in date recognition, we could
experience increased warranty claims and litigation which could harm our
business.
To avoid these kinds of disruptions, KLA-Tencor commenced a broad-ranging Year
2000 readiness program during fiscal 1997. The Year 2000 program was established
to ensure that all of our company-wide systems, components, infrastructure,
critical suppliers and products will operate in such a manner that business is
uninterrupted into and beyond the year 2000. The goals of the Year 2000
readiness program were to:
- - Establish and maintain up-to-date communication with users;
- - Determine systems/items that need to be addressed for Year 2000 readiness;
- - Test the above systems;
- - Correct Year 2000 problems as necessary;
- - Maintain sustained support;
- - Develop a contingency/recovery plan for unanticipated Year 2000 issues.
11
<PAGE> 12
We are on schedule to meet each of these goals in our three main areas of focus.
The three focus areas of our Year 2000 readiness program are: internal
information and operating systems; our supply chain; and external product
readiness.
The first focus area is our internal information and operating systems. The
project team for information and operating systems is composed of managers and
individual contributors from our computer information systems group and other
functional areas including finance and human resources, augmented by
representatives from each operational division. We also have project managers
responsible for readiness in functional areas such as treasury, facilities,
security, engineering, manufacturing, and service. This internal Year 2000
readiness program includes three major activities:
- - Inventory collection and categorization, which includes identification of
all our systems and items that need to be addressed for year 2000 readiness
and creation of a master list categorized by critical need;
- - Assessment, in which each functional group evaluates the readiness of
systems inventoried; including as necessary, researching vendor
documentation, direct vendor contact, code search, and/or execution of a
detailed test plan; and
- - Remediation or correction of the problems found, which include vendor
provided application patches, correction of bugs as necessary and needed
upgrades of software and hardware.
As of September 30, 1999, we have completed a majority of the activities of this
project, and we continue to address any remaining issues to ensure that accurate
information will be available prior to January 1, 2000.
The second area of emphasis in our Year 2000 readiness program is to ensure our
supply chain is prepared. Product divisions identified over 400 key suppliers
that needed to be evaluated. Questionnaires were sent to each of these
suppliers, whose responses were reviewed and classified. On-site audits were
performed at critical suppliers where readiness issues could be of serious
consequence to our operations. In addition, over 100 more suppliers are being
systematically reviewed by telephone to confirm that their preparations will be
completed as required. As of September 30, 1999 we were able to classify all our
key suppliers as low risk with respect to Year 2000 readiness, and we continue
to monitor the addition of new suppliers to assure readiness is maintained.
However, the readiness of third parties overall varies widely. Because our
readiness is dependent on timely Year 2000 readiness of third parties, there can
be no assurances that our efforts alone will resolve all Year 2000 issues
applicable to our internal processes or our products.
The final area of focus for our Year 2000 readiness program is our external
products. KLA-Tencor has over 18,000 installed tools at our customers' sites. We
know that Year 2000 readiness is a major issue for our customers, who face
important logistical issues in assuring their continued operations. Our field
service engineers have audited the majority of our tools for their configuration
to determine what needs to be done to bring our products, including older
out-of-
12
<PAGE> 13
warranty products, to a state of readiness for the Year 2000. Readiness, upgrade
requirements or "never ready" status has been reviewed through a series of
system audits and an implementation plan put in place as required for each of
our products. The framework of this project is similar to that established for
our internal systems. This program has covered several key areas including date
inspections, operating system investigations, runtime tests, software
inspections and third party software component inventory. As of September 30,
1999, we have met the majority of the goals of this project, and we continue to
address the remaining issues to ensure accurate information will be available
prior to January 1, 2000.
The costs of our Year 2000 readiness program are primarily associated with the
use of existing internal resources and incremental external spending. We
estimate we have incurred approximately $8 million of incremental external
spending directly associated with this program through September 30, 1999. We
anticipate we will incur future incremental external spending to complete our
readiness program of approximately $1 million. However, the actual future
incremental spending may prove to be higher. Also, this estimate does not
include the costs that could be incurred if one or more of our significant third
party service providers fails to achieve Year 2000 readiness. We have not
separately identified the costs incurred for our Year 2000 readiness program
that are the result of use of internal resources and therefore, these costs are
not included in the above estimates.
Based on currently available information, we do not believe that the Year 2000
issues related to internal systems or products sold by us to customers, as
discussed above, will have a material impact on our financial condition or
overall trends in results of operations. While we have undertaken a Year 2000
readiness program and have performed extensive testing of our internal systems
and the products we manufacture, we are uncertain to what extent we may be
affected by such matters. A significant disruption of our financial management
and control systems or a lengthy interruption in our manufacturing operations
caused by a Year 2000 readiness program related issue could result in a material
adverse impact on our operating results and financial condition. A supplier's
failure to ensure Year 2000 capability or our customer's concerns about Year
2000 readiness of our product could seriously harm our business.
We believe that Year 2000 readiness will be achieved prior to January 1, 2000.
However, due to the substantial nature of work and the extent of testing that
must take place, there can be no assurance that we will not experience delays or
material costs associated with the program, which could be potentially
detrimental to our operations . Furthermore, we cannot assure that such programs
will successfully detect and correct all potential year 2000 associated problems
in advance. To date, costs of bringing our products and systems to a state of
compliance with the year 2000 have not been material and we do not anticipate
future costs will have a material impact on our financial statements.
Semiconductor Equipment Industry Volatility
The semiconductor equipment industry is highly cyclical. The purchasing
decisions of our customers are highly dependent on the economies of both the
local markets in which they are located and the semiconductor industry
worldwide. The timing, length and severity of the up-and-down cycles in the
semiconductor equipment industry are difficult to predict. This
13
<PAGE> 14
cyclical nature of our marketplace impacts our ability to accurately budget our
expense levels, which are based in part on our projections of future revenues.
When cyclical fluctuations result in lower than expected revenue levels,
operating results may be adversely affected and cost reduction measures may be
necessary in order for us to remain competitive and financially sound. During a
down cycle, we must be in a position to adjust our cost and expense structure to
the prevailing market condition and to continue to motivate and retain our key
employees. In addition, during periods of rapid growth, we must be able to
increase manufacturing capacity and personnel to meet customer demand. We can
provide no assurance that these objectives can be met in a timely manner in
response to industry cycles. If we fail to respond to industry cycles, our
business could be adversely impacted.
During the most recent down cycle, the semiconductor industry experienced excess
production capacity that caused semiconductor manufacturers to decrease capital
spending. We generally do not have long-term volume production contracts with
our customers and we do not control the timing or volume of orders placed by our
customers. Whether and to what extent our customers place orders for any
specific products and the mix and quantities of products included in those
orders are factors beyond our control. Insufficient orders will result in
under-utilization of our manufacturing facilities and infrastructure and will
negatively impact our operating results and financial condition.
Technological Change and Customer Requirements
Success in the semiconductor equipment industry depends, in part, on continual
improvement of existing technologies and rapid innovation of new solutions. For
example, the semiconductor industry continues to shrink the size of
semiconductor devices and recently has begun to commercialize the process of
copper-based interconnects. These and other evolving customer needs require us
to respond with continued development programs and to cut back or discontinue
older programs which may no longer have industry-wide support. Technical
innovations are inherently complex and require long development cycles and
appropriate professional staffing. Our competitive advantage and future business
success depend on our ability to accurately predict evolving industry standards,
develop and introduce new products which successfully address changing customer
needs, win market acceptance of these new products and manufacture these new
products in a timely and cost-effective manner. If we do not develop and
introduce new products and technologies in a timely manner in response to
changing market conditions or customer requirements, our business could be
seriously harmed.
In this environment, we must continue to make significant investments in
research and development in order to enhance the performance and functionality
of our products, to keep pace with competitive products and to satisfy customer
demands for improved performance, features and functionality. There can be no
assurance that revenues from future products or product enhancements will be
sufficient to recover the development costs associated with such products or
enhancements or that we will be able to secure the financial resources necessary
to fund future development. Substantial research and development costs typically
are incurred before we confirm the technical feasibility and commercial
viability of a product, and not all development activities result in
commercially viable products. In addition, we cannot ensure that these products
or enhancements will receive market acceptance or that we will be able to sell
these
14
<PAGE> 15
products at prices that are favorable to us. Our business will be adversely
impacted if we are unable to sell our products at favorable prices or if our
products are not accepted by the market in which we operate.
Competition
Our industry includes large manufacturers with substantial resources to support
customers worldwide. Our future performance depends, in part, upon our ability
to continue to compete successfully worldwide. Some of our competitors are
diversified companies with greater financial resources and more extensive
research, engineering, manufacturing, marketing and customer service and support
capabilities than we can provide. We face competition from companies whose
strategy is to provide a broad array of products, some of which compete with the
products and services that we offer. These competitors may bundle their products
in a manner that may discourage customers from purchasing our products. In
addition, we face competition from smaller emerging semiconductor equipment
companies whose strategy is to provide a portion of the products and services
which we offer, using innovative technology to sell products into specialized
markets. Loss of competitive position could negatively impact our prices,
customer orders, revenues, gross margins, and market share, any of which would
negatively impact our operating results and financial condition. Our failure to
compete successfully with these other companies would seriously harm our
business.
International Trade and Economic Conditions
Ours is an increasingly global market. A significant percentage of our revenues
are derived from outside the United States and we expect that international
revenues will continue to represent a substantial percentage of our revenues.
Our international revenues and operations are affected by economic conditions
specific to each country and region. Although economies in the Asia Pacific
region have stabilized to some degree, compared to early-to-mid fiscal 1999, and
certain countries such as Taiwan have relatively healthy economies, we remain
cautious about general macroeconomic developments in the Asia Pacific region,
particularly Japan. Japan's economy is important to the overall financial health
of the region. If the economies in the Asia Pacific region stagnate or
deteriorate, the economies of other regions could also be impaired. Because of
our significant dependence on international revenues, our operating results
could be negatively impacted by a continued or additional decline in the
economies of any of the countries or regions in which we do business.
Managing global operations and sites located throughout the world presents
challenges associated with, among other things, cultural diversity and
organizational alignment. Moreover, each region in the global semiconductor
equipment market exhibits unique characteristics that can cause capital
equipment investment patterns to vary significantly from period to period.
Periodic local or international economic downturns, trade balance issues,
political instability and fluctuations in interest and currency exchange rates
could negatively impact our business and results of operations. Although we
attempt to manage near term currency risks through the use of hedging
instruments, there can be no assurance that such efforts will be adequate.
15
<PAGE> 16
Intellectual Property Obsolescence and Infringement
Our success is dependent in part on our technology and other proprietary rights.
We own various United States and international patents and have additional
pending patent applications relating to some of our products and technologies.
The process of seeking patent protection is lengthy and expensive, and we cannot
be certain that pending or future applications will actually result in issued
patents, or that, issued patents will be of sufficient scope or strength to
provide meaningful protection or commercial advantage to us. Other companies and
individuals, including our larger competitors, may develop technologies that are
similar or superior to our technology or design around the patents we own.
We also maintain trademarks on certain of our products and services and claim
copyright protection for certain proprietary software and documentation.
However, we can give no assurance that our trademarks and copyrights will be
upheld or successfully deter infringement by third parties.
While patent, copyright and trademark protection for our intellectual property
is important, we believe our future success in highly dynamic markets is most
dependent upon the technical competence and creative skills of our personnel. We
attempt to protect our trade secret and other proprietary information through
agreements with our customers, suppliers, employees and consultants and through
other security measures. We also rely on trade secret protection for our
technology, in part through confidentiality agreements with our employees,
consultants and third parties. We also maintain exclusive and non-exclusive
licenses with third parties for strategic technology used in certain products.
However, these employees, consultants and third parties may breach these
agreements, and we may not have adequate remedies for wrongdoing. In addition,
the laws of certain territories in which we develop, manufacture or sell our
products may not protect our intellectual property rights to the same extent as
do the laws of the United States.
As is typical in the semiconductor equipment industry, from time to time we have
received communications from other parties asserting the existence of patent
rights, copyrights, trademark rights or other intellectual property rights which
they believe cover certain of our products, processes, technologies or
information. Our customary practice is to evaluate such assertions and consider
whether to seek licenses where appropriate. Based on industry practice and prior
experience, we believe that licenses or other rights, if necessary, will be
available on commercially reasonable terms for existing or future claims.
Nevertheless, we cannot ensure that licenses can be obtained, or if obtained
will be on acceptable terms or that litigation or other administrative
proceedings will not occur. The inability to obtain necessary licenses or other
rights on reasonable terms could seriously harm our operating results and
financial condition.
Key Suppliers
We use a wide range of materials in the production of our products including
custom electronic and mechanical components, and we use numerous suppliers to
supply materials. We generally do not have guaranteed supply arrangements with
our suppliers. Because of the variability and uniqueness of customers orders, we
do not maintain an extensive inventory of materials for manufacturing. We seek
to minimize the risk of production and service interruptions and/or shortages of
key parts by selecting and qualifying alternative suppliers for key parts,
monitoring
16
<PAGE> 17
the financial stability of key suppliers, and maintaining appropriate
inventories of key parts. Although we make reasonable efforts to ensure that
parts are available from multiple suppliers, key parts may be available only
from a single supplier or a limited group of suppliers. There can be no
assurance that our business will not be harmed if we do not receive sufficient
parts to meet our production requirements in a timely and cost-effective manner.
Operations at our primary manufacturing facilities and our assembly
subcontractors are subject to disruption for a variety of reasons, including
work stoppages, fire, earthquake, flooding or other natural disasters, as well
as Year 2000 related problems. Such disruption could cause delays in shipments
of products to our customers. We cannot ensure that alternate production
capacity would be available if a major disruption were to occur, or that if it
were available, it could be obtained on favorable terms. Such a disruption could
result in cancellation of orders or loss of customers and could seriously harm
our business.
Key Employees
Our employees are vital to our success, and our key management, engineering and
other employees are difficult to replace. We generally do not have employment
contracts with our key employees. Further, we do not maintain key person life
insurance on any of our employees. The expansion of high technology companies
worldwide has increased demand and competition for qualified personnel. We may
not be able to attract, assimilate or retain qualified employees in the future.
These factors could seriously harm our business.
Acquisitions
We seek to develop new technologies from both internal and external sources. As
part of this effort, we may make acquisitions of, or significant investments in,
businesses with complementary products, services and/or technologies.
Acquisitions involve numerous risks, including management issues and costs in
connection with integration of the operations, technologies, and products of the
acquired companies, possible write-downs of impaired assets, and the potential
loss of key employees of the acquired companies. The inability to effectively
manage these risks could seriously harm our business.
Litigation
We have in the past been involved in litigation relating to the infringement by
us of other parties' patents and intellectual property rights. This type of
litigation tends to be expensive and requires significant management time and
attention. In addition, if we lose in this type of litigation, a court could
require us to pay substantial damages and/or royalties, prohibiting us from
using essential technologies. For these and other reasons, this type of
litigation could have a material adverse effect on our business, financial
condition and results of operations. Also, although we may seek to obtain a
license under a third party's intellectual property rights in order to bring an
end to certain claims or actions asserted against us, we may not be able to
obtain such a license on reasonable terms or at all.
17
<PAGE> 18
Euro Conversion
A new European currency was implemented commencing in January 1999 to replace
the separate currencies of eleven western European countries. This requires
changes in our operations as we modify systems and commercial arrangements to
deal with the new currency. Modifications are necessary in operations such as
payroll, benefits and pension systems, contracts with suppliers and customers,
and internal financial reporting systems. During the three-year transition
period in which transactions may also be made in the old currencies, we must
maintain dual currency processes for our operations. We have identified the
issues created by this problem and the cost of this effort is not expected to
have a material effect on our business or results of operations. We cannot be
assured, however, that all problems will be foreseen and corrected or that no
material disruption of our business will occur.
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.
18
<PAGE> 19
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
A discussion regarding certain pending legal proceedings is included in
Footnote 9 of the Financial Statements included in the Company's Annual
Report on Form 10-K for the year ended June 30, 1999. The information
provided therein remains unchanged. Although the outcome of these claims
cannot be predicted with certainty, management does not believe that any
of these legal matters will have a material adverse effect on the
Company's financial condition. Were an unfavorable ruling to occur,
there exists the possibility of a material impact on the net income of
the period in which the ruling occurs.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule.
3.2 By-Laws as amended on October 4, 1999.
(b) 8-K
None
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)
November 12, 1999 /s/ ROBERT J. BOEHLKE
- ----------------- --------------------------------
(Date) Robert J. Boehlke
Executive Vice President
and Chief Financial Officer
19
<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit # Description
- --------- -----------
<S> <C>
3.2 By-Laws as amended on October 4, 1999.
27.1 Financial Data Schedule
</TABLE>
<PAGE> 1
KLA-TENCOR CORPORATION
A DELAWARE CORPORATION
BY-LAWS
ORIGINALLY ADOPTED: JUNE 12, 1989
AS AMENDED: NOVEMBER 17, 1998
Bylaws - November 17, 1998
<PAGE> 2
KLA-TENCOR CORPORATION,
A DELAWARE CORPORATION
BY-LAWS
ORIGINALLY ADOPTED: JUNE 12, 1989
AS AMENDED: NOVEMBER 17, 1998
ARTICLE I
STOCKHOLDERS
Section 1. Annual Meeting. An annual meeting of the stockholders, for
the election of directors to succeed those whose terms expire and for the
transaction of such other business as may properly come before the meeting,
shall be held at such place, on such date, and at such time as the Board of
Directors shall each year fix, which date shall be within thirteen months
subsequent to the last annual meeting of stockholders.
Section 2. Special Meetings. Special meetings of the stockholders, for
any purpose or purposes prescribed in the notice of the meeting, may be called
only by the Board of Directors and shall be held at such place, on such date,
and at such time as they shall fix. Business transacted at special meetings
shall be confined to the purpose or purposes stated in the notice.
Section 3. Notice of Meetings. Written notice of the place, date, and
time of all meetings of the stockholders shall be given, not less than ten (10)
nor more than sixty to each stockholder entitled to vote at such meeting, except
as otherwise provided herein or required by law (meaning, here and hereinafter,
as required from time to time by the Delaware General Corporation Law or the
Certificate of Incorporation of the Corporation). When a meeting is adjourned to
another place, date or time, written notice need not be given of the adjourned
meeting if the place, date and time thereof are announced at the meeting at
which the adjournment is taken; provided, however, that if the date of any
adjourned meeting is more than thirty (30) days after the date for which the
meeting was originally noticed, or if a new record date is fixed for the
adjourned meeting, written notice of the place, date, and time of the adjourned
meeting shall be given in conformity herewith. At any adjourned meeting, any
business may be transacted which might have been transacted at the original
meeting.
Section 4. Quorum. At any meeting of the stockholders, the holders of a
majority of all of the shares of the stock entitled to vote at the meeting,
present in person or by proxy, shall constitute a quorum for all purposes,
unless or except to the extent that the presence of a larger number may be
required by law.
If a quorum shall fail to attend any meeting, the chairman of the
meeting or the holders of a majority of the shares of stock entitled to vote who
are present, in person or by proxy, may adjourn the meeting to another place,
date or time.
If a notice of any adjourned special meeting of stockholders is sent to
all stockholders entitled to vote thereat, stating that it will be held with
those present
Bylaws - November 17, 1998
<PAGE> 3
constituting a quorum, then, provided that those present hold more than 33-1/3%
of the shares entitled to vote, those present at such adjourned meeting shall
constitute a quorum, and all matters shall be determined by a majority of the
votes cast at such meeting.
* Section 5. Conduct of the Stockholders' Meeting. At every meeting of
the stockholders, the Chairman of the Board of the Corporation, or in his
absence the Chief Executive Officer of the Corporation, or in his absence the
President of the Corporation, or in his absence the Vice President designated by
the Chairman of the Board or the Chief Executive Officer, or in the absence of
such designation any Vice President, or in the absence of the Chairman of the
Board, Chief Executive Officer, President or any Vice President a chairman
chosen by the majority of the voting shares represented in person or by proxy,
shall act as chairman of the meeting. The Secretary of the Corporation or a
person designated by the chairman shall act as Secretary of the meeting. Unless
otherwise approved by the chairman, attendance at the Stockholders' Meeting
shall be restricted to stockholders of record, persons authorized in accordance
with Section 8 of these By-Laws to act by proxy, and officers of the
Corporation.
Section 6. Conduct of Business. The Chairman shall call the meeting to
order, establish the agenda, and conduct the business of the meeting in
accordance herewith or, at the Chairman's discretion, in accordance with the
wishes of the stockholders in attendance.
The Chairman shall also conduct the meeting in an orderly manner, rule
on the precedence of, and procedure on, motions and other procedural matters,
and exercise discretion with respect to such procedural matters with fairness
and good faith toward all those entitled to take part. The Chairman may impose
reasonable limits on the amount of time taken up at the meeting on discussion in
general or on remarks by any one stockholder. Should any person in attendance
become unruly or obstruct the meeting proceedings, the Chairman shall have the
power to have such person removed from participation. Notwithstanding anything
in these By-Laws to the contrary, no business shall be conducted at any meeting
except in accordance with the procedures set forth in this Section 6, Section 7
below and Section 11 of Article II below. The Chairman of any meeting shall, if
the facts warrant, determine and declare to the meeting that business was not
properly brought before the meeting and in accordance with the provisions of
this Section 6, Section 7 below and Section 11 of Article II below, and if he
should so determine, he shall so declare to the meeting and any such business
not properly brought before the meeting shall not be transacted.
Section 7. Notice of Stockholder Business. At an annual or special
meeting of the stockholders, only such business shall be conducted as shall have
been properly brought before the meeting. To be properly brought before a
meeting, business must be (a) specified in the notice of meeting (or any
supplement thereto) given by or at the
- --------
* As amended April 30, 1997.
Bylaws - November 17, 1998
2
<PAGE> 4
direction of the Board of Directors, (b) properly brought before the meeting by
or at the direction of the Board of Directors, (c) if at an annual meeting,
properly brought before the meeting by a stockholder, or (d) if at a special
meeting, if, and only if, the notice of a special meeting provides for business
to be brought before the meeting by stockholders, properly brought before the
meeting by a stockholder.
For business to be properly brought before a meeting by a stockholder,
the stockholder must have given timely notice thereof in writing to the
Secretary of the Corporation. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Corporation no later than the date upon which stockholder proposals to be
included in the Corporation's Proxy Statement must be received by the
Corporation under the requirements of the Securities Exchange Act of 1934, as
amended, and the rules promulgated thereunder.
A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before the annual or special meeting
(a) a brief description of the business desired to be brought before the annual
or special meeting and the reasons for conducting such business at the annual or
special meeting, (b) the name and address, as they appear on the Corporation's
books, of the stockholder proposing such business, (c) the class and number of
shares of the Corporation which are beneficially owned by the stockholder, (d)
any material interest of the stockholder in such business and (e) such other
information relating to the stockholder or the proposal as is required to be
disclosed under the rules of the Securities and Exchange Commission governing
the solicitation of proxies with respect to such proposal, whether or not such
proxies are in fact solicited by the stockholder.
Notwithstanding anything in these By-Laws to the contrary, no business
shall be conducted at an annual or special meeting except in accordance with the
procedures set forth in this Section 7. The chairman of the meeting shall, if
the facts warrant, determine and declare to the meeting that business was not
properly brought before the meeting and in accordance with the provisions of
this Section 7, and if he should so determine, he shall so declare to the
meeting and any such business not properly brought before the meeting shall not
be transacted.
Section 8. Proxies and Voting. Each stockholder entitled to vote at a
meeting of stockholders or to express consent or dissent to corporate action in
writing without a meeting may authorize another person or persons to act for him
by a written or electronic proxy, filed in accordance with the procedure
established for meeting or taking of action in writing, but no such proxy shall
be noted or acted upon after three (3) years from its date, unless the proxy
provides for a longer period. Any copy, facsimile telecommunications or other
reliable reproduction of the writing or transmission created pursuant to this
Section 8 may be substituted or used in lieu of the original writing or
transmission for any and all purposes for which the original writing or
transmission could be used, provided that such copy, facsimile telecommunication
or other reproduction shall be a complete reproduction of the entire original
writing or transmission. An electronic
Bylaws - November 17, 1998
3
<PAGE> 5
proxy (which may be transmitted via telephone, e-mail, the Internet or such
other electronic means as the Board of Directors may determine from time to
time) shall be deemed executed if the Company receives an appropriate electronic
transmission from the stockholder or the stockholder's attorney-in-fact along
with a pass code or other identifier which reasonably establishes the
stockholder or the stockholder's attorney-in-fact as the sender of such
transmission. The revocability of a proxy that states on its face that it is
irrevocable shall be governed by the provisions of Section 212(c) of the General
Corporation Law of Delaware.
Each stockholder shall have one vote for every share of stock entitled
to vote which is registered in his name on the record date for the meeting,
except as otherwise provided herein or required by law.
All voting, including on the election of directors but excepting where
otherwise required by law, may be by voice vote; provided, however, that upon
demand therefor by a stockholder entitled to vote or his proxy, a stock vote
shall be taken. Every stock vote shall be taken by ballots, each of which shall
state the name of the stockholder or proxy voting and such other information as
may be required under the procedure established for meeting. Every vote taken by
ballots shall be counted by an inspector or inspectors appointed by the chairman
of the meeting.
All elections shall be determined by a plurality of the votes cast,
and, except as otherwise required by law or these By-Laws, all other matters
shall be determined by a majority of the votes cast.
All elections shall be determined by a plurality of the votes cast, and
except as otherwise required by law or By-Laws, all other matters shall be
determined by a majority of the votes cast.
Section 9. Stock List. A complete list of stockholders entitled to vote
at any meeting of stockholders, arranged in alphabetical order for each class of
stock and showing address of each such stockholder and the number of shares
registered in his or her name, shall be open to the examination of any such
stockholder, for any purpose germane to the meeting, during ordinary business
hours for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or if not so specified, at the place
where the meeting is to be held.
The stock list shall also be kept at the place of the meeting during
the whole time thereof and shall be open to the examination of any such
stockholder who is present. This list shall presumptively determine the identity
of the stockholders entitled to vote at the meeting and the number of shares
held by each of them.
Section 10. Elimination of Written Consent. Any action required or
permitted to be taken by the stockholders of the corporation must be effected at
a duly called annual
Bylaws - November 17, 1998
4
<PAGE> 6
or special meeting of stockholders of the corporation and may not be effected by
any consent in writing by such stockholders.
ARTICLE II
BOARD OF DIRECTORS
** Section 1. Number and Term of Office. The number of directors shall be
eleven (11)*** and, thereafter, shall be fixed from time to time exclusively by
the Board of Directors pursuant to a resolution adopted by a majority of the
total number of authorized directors (whether or not there exists any vacancies
in previously authorized directorships at the time any such resolution is
presented to the Board for adoption). The directors shall be divided into three
classes, as nearly equal in number as reasonably possible, with the term of
office of the first class to expire at the 1990 annual meeting of stockholders,
the term of office of the second class to expire at the 1991 annual meeting of
stockholders and the term of office of the third class to expire at the 1992
annual meeting of stockholders. At each annual meeting of stockholders following
such initial classification and election, directors shall be elected to succeed
those directors whose term expire for a term of office to expire at the third
succeeding annual meeting of stockholders after their election. All directors
shall hold office until the expiration of the term for which elected and until
their successors are elected, except in the case of the death, resignation or
removal of any director.
Section 2. Vacancies and Newly Created Directorships. Subject to the
rights of the holders of any series of Preferred Stock then outstanding, newly
created directorships resulting from any increase in the authorized number of
directors or any vacancies in the Board of Directors resulting from death,
resignation, retirement, disqualification or other cause (other than removal
from office by a vote of stockholders) may be filled only by a majority vote of
the directors then in office, though less than a quorum, and directors so chosen
shall hold office for a term expiring at the annual meeting of stockholders at
which the term of office of the class to which they have been elected expires.
No decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.
Section 3. Removal. Subject to the rights of the holders of any series
of Preferred Stock then outstanding, any directors, or the entire Board of
Directors, may be removed from office at any time, but only for cause and only
by the affirmative vote of the holders of at least a majority of the voting
power of all of the then-outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors, voting together as a
single class. Vacancies in the Board of Directors resulting from such removal
may be filled by (i) a majority of the directors then in office, though less
than a quorum, or (ii) the stockholders at a special meeting of the stockholders
properly called for that
- --------
** As amended April 30, 1997.
*** As amended November 17, 1998
Bylaws - November 17, 1998
5
<PAGE> 7
purpose, by the vote of the holders of a majority of the shares entitled to vote
at such special meeting. Directors so chosen shall hold office for a term
expiring at the annual meeting of stockholders at which the term of office of
the class to which they have been elected expires.
Section 4. Regular Meetings. Regular meetings of the Board of Directors
shall be held at such place or places, on such date or dates, and at such time
or times as shall have been established by the Board of Directors and publicized
among all directors. A notice of each regular meeting shall not be required.
Section 5. Special Meetings. Special meetings of the Board of Directors
may be called by one-third of the directors then in office (rounded up to the
nearest whole number), the Chairman of the Board or by the chief executive
officer and shall be held at such place, on such date, and at such time as they
or he shall fix. Notice of the place, date, and time of each such special
meeting shall be given each director by whom it is not waived by mailing written
notice not fewer than five (5) days before the meeting or by telecopying or
delivering by overnight courier service the same not fewer than twenty-four (24)
hours before the meeting. Unless otherwise indicated in the notice thereof, any
and all business may be transacted at a special meeting.
Section 6. Quorum. At any meeting of the Board of Directors, a majority
of the total number of authorized Directors shall constitute a quorum for all
purposes. If a quorum shall fail to attend any meeting, a majority of those
present may adjourn the meeting to another place, date, or time, without further
notice or waiver thereof.
Section 7. Participation in Meetings by Conference Telephone. Members
of the Board of Directors, or of any committee thereof, may participate in a
meeting of such Board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other and such participation shall constitute presence in
person at such meeting.
Section 8. Conduct of Business. At any meeting of the Board of
Directors, business shall be transacted in such order and manner as the Board
may from time to time determine, and all matters shall be determined by the vote
of a majority of the directors present, except as otherwise provided herein or
required by law. Action may be taken by the Board of Directors without a meeting
if all members thereof consent thereto in writing, and the writing or writings
are filed with the minutes of proceedings of the Board of Directors.
Section 9. Powers. The Board of Directors may, except as otherwise
required by, law, exercise all such powers and do all such acts and things as
may be exercised or done by the Corporation, including, without limiting the
generality of the foregoing, the unqualified power:
(1) To declare dividends from time to time in accordance
with law;
Bylaws - November 17, 1998
6
<PAGE> 8
(2) To purchase or otherwise acquire any property, rights
or privileges on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in
such form as it may determine, of written obligations of every kind, negotiable
or non-negotiable, secured or unsecured, and to do all things necessary in
connection therewith;
(4) To remove any officer of the Corporation with or
without cause, and from time to time to devolve the powers and duties of any
officer upon any other person for the time being;
(5) To confer upon any officer of the Corporation the
power to appoint, remove and suspend subordinate officers, employees and agents;
(6) To adopt from time to time such stock, option, stock
purchase, bonus or other compensation plans for directors, officers, employees
and agents of the Corporation and its subsidiaries as it may determine;
(7) To adopt from time to time such insurance,
retirement, and other benefit plans for directors, officers, employees and
agents of the Corporation and its subsidiaries as it may determine; and
(8) To adopt from time to time regulations, not
inconsistent with these ByLaws, for the management of the Corporation's business
and affairs.
Section 10. Compensation of Directors. Directors, as such, may receive,
pursuant to resolution of the Board of Directors, fixed fees and other
compensation for their services as directors, including, without limitation,
their services as members of committees of the Board of Directors.
Section 11. Nomination of Director Candidates. Subject to the rights of
holders of any class or series of Preferred Stock then outstanding, nominations
for the election of directors may be made by the Board of Directors or any
nominating or proxy committee appointed by the Board of Directors or by any
stockholder entitled to vote in the election of Directors generally who complies
with the notice and procedural requirements of this Section 11. All nominees for
election to the Board shall satisfy the qualification requirements for
membership on the Board of Directors of the Corporation established by any
nominating committee designated by the Board, which requirements shall be
designed to evaluate, without limitation, the following:
(a) The applicability of the Candidate's business
experience and knowledge to the Corporation's business, including any technical
skills, industry contacts or other special qualifications which would make the
Candidate a valuable member of the Board.
Bylaws - November 17, 1998
7
<PAGE> 9
(b) The resulting balance of knowledge and experience
which would exist on the Board if the Candidate were elected in light of the
business experience and knowledge of the other persons likely to be elected to
the Board.
(c) The Candidate's other business interests and
commitments and the extent to which such interests and commitments are
inconsistent or incompatible with such Candidate's effective board membership,
including the extent to which the Nominating Committee believes that such
Candidate's membership on the Board may be detrimental to the long-term
interests of the Corporation and to the maximization of the value of the
Corporation's stockholders' investment in the Corporation.
In addition to any other applicable requirements, any such stockholder
nomination shall be made only pursuant to timely notice in writing to the
Secretary of the Corporation setting forth such stockholder's intent to make a
nomination or nominations. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal offices of the Corporation
not later than the date on which stockholder proposals to be included in the
proxy statement with respect to any annual or special meeting must be received
by the Corporation under the requirements of the Securities Exchange Act of
1934, as amended, and the rules promulgated thereunder.
Each such notice by a stockholder shall set forth: (a) the name and
address, as they appear on the Corporation's stock register, of the stockholder
who intends to make the nomination; (b) a representation that the stockholder is
a holder of record of stock of the Corporation entitled to vote for the election
of Directors on the date of such notice and intends to appear in person or by
proxy at the meeting to nominate the person or persons specified in the notice;
(c) a description of all arrangements or understandings between the stockholder
and each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
stockholder; (d) the name, age, business and residence address and principal
occupation of each person the stockholder proposes to nominate for election as a
director; (e) such other information regarding the stockholder and each nominee
proposed by such stockholder as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and Exchange
Commission, whether or not proxies are in fact solicited for the election of
such person; and (f) the signed consent of each nominee to serve as a director
of the Corporation if so elected. The Corporation or any nominating committee
designated by the Board of Directors may require any proposed nominee to furnish
such other information as may reasonably be required by the Corporation or such
committee to determine the qualification of such nominee for election as a
director of the Corporation.
In the event that a person is validly designated as a nominee in
accordance with this Section 11 and shall thereafter become unable or unwilling
to stand for election to the Board of Directors, the Board of Directors or the
stockholder who proposed such nominee as the case may be, may designate a
substitute nominee; provided, however, that (i) in the case of the persons
nominated by a stockholder, such a substitution may only be made if
Bylaws - November 17, 1998
8
<PAGE> 10
a written notice to the Secretary setting forth such information regarding such
substitute nominee as would have been required to be delivered to the Secretary
pursuant to this Section 11 had such substitute nominee been initially proposed
as a nominee is received by the Corporation at its principal executive offices
not less than thirty (30) days before the date of the election at which the
initial nominee was nominated to stand or (ii) in the case of persons nominated
by the Board of Directors the substitute nominee must be designated not less
than thirty (30) days before the date of the election at which the initial
nominee was nominated to stand.
If the chairman of the meeting for the election of Directors determines
that a nomination of any candidate for election as a Director at such meeting
was not made in accordance with the applicable provisions of this Section 11,
such nomination shall be void; provided, however, that nothing in this Section
11 shall be deemed to limit any voting rights upon the occurrence of dividend
arrearages, provided to holders of Preferred Stock pursuant to the Preferred
Stock designation for any series of Preferred Stock.
ARTICLE III
COMMITTEES
Section 1. Committees of the Board of Directors. The Board of
Directors, by a resolution passed by a vote of a majority of the whole Board,
may from time to time designate committees of the Board, with such lawfully
delegable powers and duties as it thereby confers, to serve at the pleasure of
the Board and shall, for those committees and any others provided for herein,
elect a director or directors to serve as the member or members, designating, if
it desires, other directors as alternate members who may replace any absent or
disqualified member at any meeting of the committee. Any committee so designated
may exercise the power and authority of the Board of Directors to declare a
dividend, to authorize the issuance of stock or to adopt a certificate of
ownership and merger pursuant to Section 253 of the Delaware General Corporation
Law if the resolution which designates the committee or a supplemental
resolution of the Board of Directors shall so provide. In the absence or
disqualification of any member of any committee and any alternate member in his
place, the member or members of the committee present at the meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may by
unanimous vote appoint another member of the Board of Directors to act at the
meeting in the place of the absent or disqualified member.
Section 2. Conduct of Business. Each committee may determine the
procedural rules for meeting and conducting its business and shall act in
accordance therewith, except as otherwise provided herein or required by law.
Adequate provision shall be made for notice to members of all meetings;
one-third of the authorized members shall constitute a quorum unless the
committee shall consist of one or two members, in which event one member shall
constitute a quorum; and all matters shall be determined by a majority vote of
the members present. Action may be taken by any committee without a meeting if
all members thereof consent thereto in writing, and the writing or writings are
filed with the minutes of the proceedings of such committee.
Bylaws - November 17, 1998
9
<PAGE> 11
ARTICLE IV
OFFICERS
* Section 1. Generally. The officers of the Corporation shall consist of
a Chairman of the Board, a Chief Executive Officer, a President, one or more
Vice Presidents, a Secretary, a Chief Financial Officer and such other officers
as may from time to time be appointed by the Board of Directors. Officers shall
be elected by the Board of Directors, which shall consider that subject at its
first meeting after every annual meeting of stockholders. Each officer shall
hold office until his successor is elected and qualified or until his earlier
resignation or removal. The Chairman of the Board, the Chief Executive Officer
and the President shall each be members of the Board of Directors. Any number of
offices may be held by the same person.
**** Section 2. Chairman of the Board. The Chairman of the Board, if such an
officer be elected, shall, if present, preside at meetings of the Board of
Directors and exercise and perform such other powers and duties as may from time
to time be assigned to him by the Board of Directors or as may be prescribed by
these By-Laws. If there is no Chief Executive Officer, then the Chairman of the
Board shall also be the Chief Executive Officer of the Corporation and shall
have the powers and duties prescribed in Article IV, Section 3 of these By-Laws.
* Section 3. Chief Executive Officer. Subject to such supervisory powers,
if any, as may be given by the Board of Directors to the Chairman of the Board,
if there be such an officer, the Chief Executive Officer of the Corporation
shall, subject to the control of the Board of Directors, have general
supervision, direction, and control of the business and the officers of the
Corporation. He shall preside at all meetings of the stockholders and, in the
absence or nonexistence of a Chairman of the Board, at all meetings of the Board
of Directors. He shall have the general powers and duties of management usually
vested in the Chief Executive Officer of a Corporation and shall have such other
powers and duties as may be prescribed by the Board of Directors or these
By-Laws.
* Section 4. President. The President shall be the chief operating
officer of the Corporation with such duties and powers as may be prescribed by
the Chief Executive Officer or the Board of Directors.
* Section 5. Vice President. Each Vice President shall have such powers
and duties as may be delegated to him by the Board of Directors.
Section 6. Chief Financial Officer. The Chief Financial Officer shall
have the responsibility for maintaining the financial records of the Corporation
and shall have custody of all monies and securities of the Corporation. He shall
make or cause to be made such disbursements of the funds of the Corporation as
are authorized and shall
- --------
**** As amended April 30, 1997.
Bylaws - November 17, 1998
10
<PAGE> 12
render from time to time an account of all such transactions and of the
financial condition of the Corporation. The Chief Financial Officer shall also
perform such other duties as the Board of Directors may from time to time
prescribe.
Section 7. Secretary. The Secretary shall issue all authorized notices
for, and shall keep, or cause to be kept, minutes of all meetings of the
stockholders, the Board of Directors, and all committees of the Board of
Directors. The Secretary shall keep, or cause to be kept at the principal
executive office or at the office of the Corporation's transfer agent or
registrar, a record of the Corporation's stockholders, giving the names and
addresses of all stockholders and the number and class of shares held by each.
The Secretary shall have charge of the seal and the corporate books of the
Corporation and shall perform such other duties as the Board of Directors may
from time to time prescribe.
Section 8. Delegation of Authority. The Board of Directors may from
time to time delegate the powers or duties of any officer to any other officers
or agents, notwithstanding any provision hereof.
Section 9. Removal. Any officer of the Corporation may be removed at
any time, with or without cause, by the Board of Directors.
***** Section 10. Action With Respect to Securities of Other Corporations.
Unless otherwise directed by the Board of Directors, the Chairman of the Board,
the Chief Executive Officer or any officer of the Corporation authorized by the
Chairman of the Board or the Chief Executive Officer shall have power to vote
and otherwise act on behalf of the Corporation, in person or by proxy, at any
meeting of stockholders of or with respect to any action of stockholders of any
other corporation in which this Corporation may hold securities and otherwise to
exercise any and all rights and powers which this Corporation may possess by
reason of its ownership of securities in such other corporation.
ARTICLE V
STOCK
****** Section 1. Certificates of Stock. Each stockholder shall be entitled to
a certificate signed by, or in the name of the Corporation by, the Chairman of
the Board, the Chief Executive Officer, the President or a Vice President, and
by the Secretary or an Assistant Secretary, or the Chief Financial Officer or
Treasurer (if there be such an officer), certifying the number of shares owned
by him or her. Any of or all the signatures on the certificate may be facsimile.
- --------
***** As amended April 30, 1997.
****** As amended April 30, 1997.
Bylaws - November 17, 1998
11
<PAGE> 13
Section 2. Transfers of Stock. Transfers of stock shall be made only
upon the transfer books of the Corporation kept at an office of the Corporation
or by transfer agents designated to transfer shares of the stock of the
Corporation. Except where a certificate is issued in accordance with Section 4
of Article V of these By-Laws, an outstanding certificate for the number of
shares involved shall be surrendered for cancellation before a new certificate
is issued therefor.
Section 3. Record Date. The Board of Directors may fix a record date,
which shall not be more than sixty (60) days nor fewer than ten (10) days before
the date of any meeting of stockholders, no more than sixty (60) days prior to
the time for other action hereinafter described, as of which there shall be
determined the stockholders who are entitled: to notice of or to vote at any
meeting of stockholders or any adjournment thereof; to express consent to
corporate action in writing without a meeting (if the Corporation's charter
allows such action without a meeting); to receive payment of any dividend or
other distribution or allotment of any rights; or to exercise any rights with
respect to any change, conversion or exchange of stock or with respect to any
other lawful action.
Section 4. Lost, Stolen or Destroyed Certificates. In the event of the
loss, theft or destruction of any certificate of stock, another may be issued in
its place pursuant to such regulations as the Board of Directors may establish
concerning proof of such loss, theft or destruction and concerning the giving of
a satisfactory bond or bonds of indemnity.
Section 5. Regulations. The issue, transfer, conversion and
registration of certificates of stock shall be governed by such other
regulations as the Board of Directors may establish.
ARTICLE VI
NOTICES
Section 1. Notices. Except as otherwise specifically provided herein or
required by law, all notices required to be given to any stockholder, director,
officer, employee or agent shall be in writing and may in every instance be
effectively given by hand delivery to the recipient thereof, by depositing such
notice in the mails, postage paid, or by sending such notice by prepaid
telegram, mailgram or commercial courier service. Any such notice shall be
addressed to such stockholder, director, officer, employee or agent at his or
her last known address as the same appears on the books of the Corporation. The
time when such notice shall be deemed to given shall be the time such notice is
received by such stockholder, director, officer, employee or agent, or by any
person accepting such notice on behalf of such person, if hand delivered, or the
time such notice is dispatched, if delivered through the mails or by telegram,
mailgram or courier.
Section 2. Waivers. A written waiver of any notice, signed by a
stockholder, director, officer, employee or agent, whether before or after the
time of the event for which notice is to be given, shall be deemed equivalent to
the notice required to be given to such stockholder, director, officer, employee
or agent. Neither the business nor the purpose of
Bylaws - November 17, 1998
12
<PAGE> 14
any meeting need be specified in such a waiver. Attendance of a person at a
meeting shall constitute a waiver of notice for such meeting, except when the
person attends a meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened.
ARTICLE VII
MISCELLANEOUS
Section 1. Facsimile Signatures. In addition to the provisions for use
of facsimile signatures elsewhere specifically authorized in these By-Laws,
facsimile signatures of any officer or officers of the Corporation may be used
whenever and as authorized by the Board of Directors or a committee thereof.
Section 2. Corporate Seal. The Board of Directors may provide a
suitable seal, containing the name of the Corporation, which seal shall be in
the charge of the Secretary. If and when so directed by the Board of Directors
or a committee thereof, duplicates of the seal may be kept and used by the Chief
Financial Officer or by an Assistant Secretary.
Section 3. Reliance Upon Books, Reports and Records. Each director,
each member of any committee designated by the Board of Directors, and each
officer of the Corporation shall, in the performance of his duties, be fully
protected in relying in good faith upon the books of account or other records of
the Corporation, including reports made to the Corporation by any of its
officers, by an independent certified public accountant, or by an appraiser
selected with reasonable care.
Section 4. Fiscal Year. The fiscal year of the Corporation shall be as
fixed by the Board of Directors.
Section 5. Time Periods. In applying any provision of these By-Laws
which require that an act be done or not done a specified number of days prior
to an event or that an act be done during a period of a specified number of days
prior to an event, calendar days shall be used, the day of the doing of the act
shall be excluded, and the day of the event shall be included.
ARTICLE VIII
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1. Right to Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative
("proceeding"), by reason of the fact that he or a person of whom he is the
legal representative, is or was a director, officer or employee of the
Corporation or is or was serving at the request of the Corporation as a
director, officer or employee of another corporation, or of a partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, whether the basis of such proceeding is alleged action in an
official capacity as a director, officer or employee
Bylaws - November 17, 1998
13
<PAGE> 15
or in any other capacity while serving as a director, officer or employee, shall
be indemnified and held harmless by the Corporation to the fullest extent
authorized by Delaware Law, as the same exists or may hereafter be amended (but,
in the case of any such amendment, only to the extent that such amendment
permits the Corporation to provide broader indemnification rights than said Law
permitted the Corporation to provide prior to such amendment) against all
expenses, liability and loss (including attorneys' fees, judgments, fines, ERISA
excise taxes or penalties, amounts paid or to be paid in settlement and amounts
expended in seeking indemnification granted to such person under applicable law,
this by-law or any agreement with the Corporation) reasonably incurred or
suffered by such person in connection therewith and such indemnification shall
continue as to a person who has ceased to be a director, officer or employee and
shall inure to the benefit of his or her heirs, executors and administrators;
provided however, that, except as provided in Section 2 of this Article VIII,
the Corporation shall indemnify any such person seeking indemnity in connection
with an action, suit or proceeding (or part thereof) initiated by such person
only if such action, suit or proceeding (or part thereof) was authorized by the
Board of Directors of the Corporation. Such right shall be a contract right and
shall include the right to be paid by the Corporation expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
however, that, if the Delaware General Corporation Law then so requires, the
payment of such expenses incurred by a director or officer of the Corporation in
his or her capacity as a director or officer (and not in any other capacity in
which service was or is rendered by such person while a director or officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of such proceeding, shall be made only upon delivery to
the Corporation of an undertaking, by or on behalf of such director or officer,
to repay all amounts so advanced if it should be determined ultimately that such
director or officer is not entitled to be indemnified under this Section 1 or
otherwise.
Section 2. Right of Claimant to Bring Suit. If a claim under Section 1
of this Article VIII is not paid in full by the Corporation within twenty (20)
days after a written claim has been received by the Corporation, the claimant
may at any time thereafter bring suit against the Corporation to recover the
unpaid amount of the claim and, if such suit is not frivolous or brought in bad
faith, the claimant shall be entitled to be paid also the expense of prosecuting
such claim. It shall be a defense to any such action (other than an action
brought to enforce a claim for expenses incurred in defending any proceeding in
advance of its final disposition where the required undertaking, if any, has
been tendered to this Corporation) that the claimant has not met the standards
of conduct which make it permissible under the Delaware General Corporation Law
for the Corporation to indemnify the claimant for the amount claimed, but the
burden of proving such defense shall be on the Corporation. Neither the failure
of the Corporation (including its Board of Directors, independent legal counsel,
or its stockholders) to have made a determination prior to the commencement of
such action that indemnification of the claimant is proper in the circumstances
because he has met the applicable standard of conduct set forth in the Delaware
General Corporation Law, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) that the
Bylaws - November 17, 1998
14
<PAGE> 16
claimant has not met such applicable standard of conduct, shall be a defense to
the action or create a presumption that claimant has not met the applicable
standard of conduct.
Section 3. Non-Exclusivity of Rights. The rights conferred on any
person in Sections 1 and 2 of this Article VIII shall not be exclusive of any
other right which such persons may have or hereafter acquire under any statute,
provision of the Certificate of Incorporation, by-law, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 4. Indemnification Contracts. The Board of Directors is
authorized to enter into a contract with any director, officer, employee or
agent of the Corporation, or any person serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, including employee
benefit plans, providing for indemnification rights equivalent to or, if the
Board of Directors so determines, greater than, those provided for in this
Article VIII.
Section 5. Insurance. The Corporation shall maintain insurance to the
extent reasonably available, at its expense, to protect itself and any such
director, officer, employee or agent of the Corporation or another corporation,
partnership, joint venture, trust or other enterprise against any such expense,
liability or loss, whether or not the Corporation would have the power to
indemnify such person against such expense, liability or loss under the Delaware
General Corporation Law.
Section 6. Effect of Amendment. Any amendment, repeal or modification
of any provision of this Article VIII by the stockholders and the Directors of
the Corporation shall not adversely affect any right or protection of a director
or officer of the Corporation existing at the time of such amendment, repeal or
modification.
Section 7. Savings Clause. If this Article VIII or any portion hereof
shall be invalidated on any ground by any court of competent jurisdiction, then
the Corporation shall nevertheless indemnify each director, officer, employee
and agent of the Corporation as to costs, charges and expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement with respect
to any action, suit or proceeding, whether civil, criminal, administrative or
investigative, including an action by or in the right of the Corporation, to the
full extent permitted by an applicable portion of this Article VIII that shall
not have been invalidated and to the full extent permitted by applicable law.
ARTICLE IX
AMENDMENTS
The Board of Directors is expressly empowered to adopt, amend or repeal
By-Laws or the Corporation. Any adoption, amendment or repeal of By-Laws of the
Corporation by the Board of Directors shall require the approval of a majority
of the total number of authorized directors (whether or not there exist any
vacancies in previously authorized directorships at the time any resolution
providing for adoption, amendment or repeal is
Bylaws - November 17, 1998
15
<PAGE> 17
presented to the Board). The stockholders shall also have power to adopt, amend
or repeal the By-Laws of the Corporation. In the event of any such adoption,
amendment or repeal of these By-Laws by Stockholders, in addition to any vote of
the holders or any class or series of stock of this Corporation required by law
or by these By-Laws, the affirmative vote of the holders of at least a majority
of the voting power of all of the then-outstanding shares of the capital stock
of the Corporation entitled to vote generally in the election of directors,
voting together as a single class, shall be required.
Bylaws - November 17, 1998
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED 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> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 316,869
<SECURITIES> 436,677
<RECEIVABLES> 332,280
<ALLOWANCES> 0
<INVENTORY> 206,404
<CURRENT-ASSETS> 1,084,347
<PP&E> 327,088
<DEPRECIATION> 158,540
<TOTAL-ASSETS> 1,661,102
<CURRENT-LIABILITIES> 373,066
<BONDS> 0
0
0
<COMMON> 521,649
<OTHER-SE> 766,387
<TOTAL-LIABILITY-AND-EQUITY> 1,661,102
<SALES> 272,989
<TOTAL-REVENUES> 272,989
<CGS> 136,117
<TOTAL-COSTS> 230,249
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 173
<INCOME-PRETAX> 55,446
<INCOME-TAX> 15,944
<INCOME-CONTINUING> 39,502
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 39,502
<EPS-BASIC> 0.44
<EPS-DILUTED> 0.42
</TABLE>
