<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: March 31, 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 April 30, 1999 there were 88,158,752 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 Interim Balance Sheets at
June 30, 1998 and March 31, 1999 ................................ 3
Condensed Consolidated Interim Statements of Operations for
the Three and Nine Month Periods Ended March 31, 1998
and 1999 ........................................................ 4
Condensed Consolidated Interim Statements of Cash Flows
for the Nine Months Ended March 31, 1998 and 1999 ............... 5
Notes to Condensed Consolidated Interim Financial Statements..... 6
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................... 8
Item 3 Quantitative and Qualitative Disclosures About Market Risk.......... 11
PART II - OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K.................................... 13
SIGNATURES 13
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
KLA-TENCOR CORPORATION
CONDENSED CONSOLIDATED UNAUDITED INTERIM BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
June 30, March 31,
1998 1999
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 215,970 $ 245,185
Short-term investments 92,343 36,382
Accounts receivable, net 304,140 297,185
Inventories 234,565 199,877
Deferred income taxes 90,729 95,263
Other current assets 18,624 18,450
---------- ----------
Total current assets 956,371 892,342
---------- -----------
Land, property and equipment, net 140,937 146,127
Marketable securities 415,168 466,112
Other assets 35,921 36,711
---------- ----------
Total assets $1,548,397 $1,541,292
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 21,482 $ 16,412
Accounts payable 46,353 29,999
Other current liabilities 282,848 294,554
---------- ----------
Total current liabilities 350,683 340,965
---------- ----------
Stockholders' equity:
Common stock and capital in excess of par value 497,583 490,801
Retained earnings 683,836 697,201
Net unrealized gain on investments 26,108 18,765
Cumulative translation adjustment (9,813) (6,440)
---------- ----------
Total stockholders' equity 1,197,714 1,200,327
---------- ----------
Total liabilities and stockholders' equity $1,548,397 $1,541,292
========== ==========
</TABLE>
See accompanying notes to unaudited condensed consolidated
interim financial statements.
3
<PAGE> 4
KLA-TENCOR CORPORATION
CONDENSED CONSOLIDATED UNAUDITED INTERIM STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, March 31,
1998 1999 1998 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $274,164 $210,939 $912,945 $609,540
Costs and operating expenses:
Costs of goods sold 134,224 110,680 425,223 328,244
Engineering, research and development 46,051 39,500 138,508 120,896
Selling, general and administrative 60,054 47,795 183,814 150,334
Non-recurring acquisition, restructuring
and other charges 3,127 -- 3,127 42,700
-------- -------- -------- --------
Total costs and operating expenses 243,456 197,975 750,672 642,174
-------- -------- -------- --------
Income (loss) from operations 30,708 12,964 162,273 (32,634)
Interest income and other, net 11,899 15,898 30,015 47,044
-------- -------- -------- --------
Income before income taxes 42,607 28,862 192,288 14,410
Provision for income taxes 13,636 8,080 61,537 1,045
-------- -------- -------- --------
Net income $ 28,971 $ 20,782 $130,751 $ 13,365
======== ======== ======== ========
Earnings per share:
Basic $ 0.34 $ 0.24 $ 1.55 $ 0.15
======== ======== ======== ========
Diluted $ 0.33 $ 0.22 $ 1.48 $ 0.15
======== ======== ======== ========
Weighted average number of shares:
Basic 84,985 87,880 84,505 87,574
======== ======== ======== ========
Diluted 87,785 92,964 88,246 91,222
======== ======== ======== ========
</TABLE>
See accompanying notes to unaudited condensed consolidated
interim financial statements.
4
<PAGE> 5
KLA-TENCOR CORPORATION
CONDENSED CONSOLIDATED UNAUDITED INTERIM STATEMENTS OF CASH FLOW
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
1998 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $130,751 $ 13,365
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 27,929 35,121
Restructuring charges -- 35,000
In-process technology -- 7,700
Changes in assets and liabilities:
Accounts receivable, net (79,042) 25,034
Inventories (45,385) 22,949
Other assets (15,736) (1,287)
Accounts payable 8,706 (17,404)
Other current liabilities 9,243 (22,808)
-------- --------
Net cash provided by operating activities 36,466 97,670
-------- --------
Cash flows from investing activities:
Purchases of property and equipment (50,880) (25,238)
Net purchases of available for sale securities (106,309) (2,350)
Acquisition of assets and technology --- (12,522)
-------- --------
Net cash used in investing activities (157,189) (40,110)
-------- --------
Cash flows from financing activities:
Issuance of common stock, net 36,554 26,657
Stock repurchases (11,188) (33,448)
Net payments under debt obligations (4,524) (7,773)
-------- --------
Net cash provided by (used in) financing activities 20,842 (14,564)
-------- --------
Effect of exchange rate changes on cash and cash equivalents 12,348 (13,781)
-------- --------
Net increase (decrease) in cash and cash equivalents (87,533) 29,215
Cash and cash equivalents at beginning of period 279,225 215,970
-------- --------
Cash and cash equivalents at end of period $191,692 $245,185
-------- --------
Supplemental cash flow disclosures:
Income taxes paid $ 54,251 $ 4,387
======== ========
Interest paid $ 790 $ 1,685
======== ========
</TABLE>
See accompanying notes to unaudited condensed consolidated
interim financial statements.
5
<PAGE> 6
KLA-TENCOR CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
NOTE 1. In the opinion of the management of KLA-Tencor Corporation (the
Company), accompanying unaudited condensed consolidated interim financial
statements have been prepared on substantially the same basis as the annual
consolidated financial statements and include all adjustments, consisting only
of normal recurring accruals, necessary for a fair presentation of results. The
results for the three month period ended March 31, 1999 are not necessarily
indicative of results to be expected for the entire year. This financial
information should be read in conjunction with the Company's Annual Report on
Form 10-K for the year ended June 30, 1998.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect amounts reported in the financial statements and accompanying notes.
Actual amounts could differ materially from those amounts.
NOTE 2. Inventories (in thousands):
<TABLE>
<CAPTION>
June 30, March 31,
1998 1999
-------- ----------
<S> <C> <C>
Customer service parts $ 31,671 $ 54,964
Raw materials 49,630 44,945
Work-in-process 79,238 52,233
Demonstration equipment 47,234 23,631
Finished goods 26,792 24,104
-------- --------
$234,565 $199,877
======== ========
</TABLE>
NOTE 3. In August 1997, the Company 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 nine
month period ended March 31, 1999, the Company repurchased 779,000 shares of its
Common Stock at a cost of $33 million.
NOTE 4. As of July 1, 1998, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income" which
establishes the requirements for reporting and presentation of comprehensive
income and its components. SFAS No. 130 requires accumulated translation
adjustments and net unrealized gains/losses on investments to be included in
other comprehensive income. The adoption of SFAS No. 130 did not impact the
Company's net income (loss) or total stockholders' equity. For the three month
and nine month periods ended March 31, 1998 and 1999, the components of total
comprehensive income are as follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, March 31,
1998 1999 1998 1999
------- ------- -------- -------
<S> <C> <C> <C> <C>
Net income $28,971 $20,782 $130,751 $13,365
------- ------- -------- -------
Foreign currency translation adjustments 405 (1,599) (4,649) 3,373
Unrealized gains (losses) on investments,
net of taxes (1,125) (1,602) 8,553 (7,343)
------- ------- -------- -------
Other comprehensive income (loss) (720) (3,201) 3,904 (3,970)
------- ------- -------- -------
Total comprehensive income $28,251 $17,581 $134,655 $ 9,395
======= ======= ======== =======
</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
potential common shares outstanding during the period. During the three and nine
month periods ended March 31, 1998, options to purchase approximately 5,026,000
and 1,058,000 shares, respectively, at prices ranging from $39.75 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 and
nine month periods ended March 31, 1999, options to purchase approximately
41,000 and 1,552,000 shares, respectively, at prices ranging from $39.00 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.
The reconciling difference between the computation of basic and diluted earnings
per share for the three and nine month periods ended March 31, 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 1999 and into
fiscal 2000 as the program is completed. Restructuring and related charges were
as follows for the period from inception to March 31, 1999 (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
Utilized to date (4,026) (6,300) (2,504) (2,722) (15,552)
------ ------ ------ ------ -------
Balance at
March 31, 1999 $ 8,465 $3,421 $5,622 $1,940 $19,448
======= ====== ====== ====== =======
</TABLE>
NOTE 7. During the second quarter of fiscal 1999 the Company acquired certain
assets and intellectual property in separate transactions with Keithley
Instruments, Inc. and Uniphase Corporation. These acquisitions were accounted
for using the purchase method of accounting. The aggregate purchase price of
approximately $13 million was allocated to the acquired assets, liabilities
assumed, intangible assets and goodwill and resulted in a pre-tax charge of
approximately $8 million for acquired in-process research and development. The
Company's assessment of the value of the in-process research and development
acquired from Keithley Instruments, Inc. took into consideration the expected
future cash flows from the acquired technology which is expected to be utilized
in products during the current fiscal year.
NOTE 8. During the third quarter of fiscal 1999, the Company realized a gain of
approximately $11 million for the sale of the Company's interest in KLA Acrotec
Ltd. and the settlement of certain related patent litigation with Orbotech Ltd.
NOTE 9. In June 1997, the Financial Accounting Standards Board issued Statement
No. 131, "Disclosures about Segments of an Enterprise and Related Information."
This Statement establishes standards for public business enterprises to report
information about operating segments in annual financial statements and requires
those enterprises to report selected information about operating segments and
related disclosures about products and services, geographic areas, and major
customers. This Statement is required to be adopted in the
7
<PAGE> 8
Company's annual financial statements for fiscal year ending June 30, 1999. The
effect of SFAS No. 131 is not expected to be material to the Company's financial
statement disclosure.
In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities" (SFAS 133). It
establishes accounting and reporting standards for derivative instruments
including standalone instruments, such as forward currency exchange contracts
and interest 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 133 in the first quarter of its fiscal year ending June 30, 2000. The
effect of SFAS No. 133 is not expected to be material to the Company's financial
statements.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion and analysis may contain forward-looking statements
that reflect the Company's current judgment regarding the matters addressed by
such statements. Because such statements apply to future events, they are
subject to risks and uncertainties that could cause actual results to differ.
Important factors that could cause actual results to differ are described in the
following discussion and under "Risk Factors" below.
RESULTS OF OPERATIONS
Revenues were $211 million and $610 million for the three and nine month periods
ended March 31, 1999, compared to $274 million and $913 million for the same
periods of the prior fiscal year, representing a decrease of 23% and 33% for the
respective periods. The decrease in revenues period over period is primarily
attributable to reduced capital spending by major semiconductor manufacturers
worldwide and stagnant economic conditions of countries in the Asia Pacific
region.
The Company implemented a restructuring plan during the second quarter of fiscal
1999 which resulted in a one-time charge of $35 million. The charge consisted
primarily of costs associated with the consolidation of facilities, a write-down
of assets associated with affected programs and employee severance and related
benefits associated with a reduction in force. The Company has incurred
approximately $16 million in costs related to this plan as of the end of its
third quarter of fiscal 1999.
Gross margins were 48% and 46% of revenues for the three and nine month periods
ended March 31, 1999, compared to 51% and 53% of revenues for the same periods
in the prior fiscal year. Gross margins declined year over year primarily due to
reduced capacity utilization resulting from lower unit volume and a higher
percentage of service revenue included in total revenue as product sales
declined during the recent downturn. The sequential quarterly improvement in
margins realized during the third quarter of fiscal 1999 is a result of
increased sales of higher margin wafer inspection products and reductions in
manufacturing overhead.
Engineering, research and development (R&D) expenses were $40 million and $121
million for the three and nine month periods ended March 31, 1999 compared to
$46 million and $139 million for the same periods in the prior fiscal year. As a
percentage of revenues, R&D expenses increased to 19% and 20% for the three and
nine month periods ended March 31, 1999 compared to 17% and 15% for the same
periods in the prior fiscal year. The Company's 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 (SG&A) expenses were $48 million and $150
million for the three and nine month periods ended March 31, 1999, compared to
$60 million and $184 million for the same periods in the prior fiscal year. The
decrease in SG&A expenses during the current fiscal period reflects the
implementation of the Company's restructuring and cost reduction plans including
reductions in headcount and consolidation of facilities.
Interest income and other, net, increased $4 million and $17 million for the
three and nine month periods ended March 31, 1999, compared to the same periods
in the prior fiscal year. The increases are due primarily to a one-time gain
from the sale of the Company's interest in KLA Acrotec and settlement of certain
related litigation in the current quarter, sale of equity securities held in a
former supplier company and increases in interest income on higher average cash
equivalents and investment balances.
9
<PAGE> 10
During the three month period ended March 31, 1999, the Company realized an
effective 28% tax rate which is lower than the 32% tax rate incurred in the
prior fiscal year due primarily to a higher proportion of income derived from
tax-exempt interest in the period.
LIQUIDITY AND CAPITAL RESOURCES
During the nine month period ended March 31, 1999, cash, cash equivalents,
short-term investments and marketable securities balances increased to $748
million. Cash provided by operations for the nine month period was $98 million,
resulting primarily from net income before non-cash charges, collections on
accounts receivable and reductions in inventory. Capital expenditures of $25
million were primarily for manufacturing and engineering equipment necessary for
the Company's operations. In addition, the Company paid approximately $13
million for the acquisition of assets and intellectual property from Keithley
Instruments, Inc. and from Uniphase Corporation during the second quarter of
fiscal 1999. During the period ended March 31, 1999, the Company increased its
repurchases of common stock to $33 million compared to $11 million in the prior
period and amounts of common stock issued through the Company's employee stock
purchase program and stock option exercises decreased period over period.
Working capital decreased to $551 million as of March 31, 1999 compared to $606
million at June 30, 1998 primarily due to a shift of the Company's investment
portfolio to a higher percentage of marketable securities. The Company believes
that existing liquid capital resources and funds generated from operations
combined with the ability, if necessary, to borrow funds will be adequate to
meet its operating and capital requirements and obligations through the
foreseeable future.
YEAR 2000 COMPLIANCE
The Company has a formally structured Year 2000 Readiness Plan and is making
consistent progress in executing to this plan. The Year 2000 project team
includes all Company facilities, locations, and organizations as considered
necessary to ensure awareness and readiness, and includes regular review and
reporting on the status of Year 2000 readiness. The Company believes that Year
2000 readiness will be achieved prior to the year 2000, however, due to
substantial nature of the work and the extensive testing that must take place,
there can be no assurance that there won't be delays or material costs
associated with the plan or that there will not be adverse effects on operations
relating to or as a result of Year 2000 readiness planning and implementation.
Costs to bring its products and systems to a state of compliance with the year
2000 have not been material and the Company does not anticipate future costs
will have a material impact on the financial statements. Failure of the
Company's products or third-party equipment or software to operate properly with
regard to the Year 2000 and thereafter could require the Company to incur
unanticipated expenses to remedy any problems, which could have a material
adverse effect on the Company's business and operating results.
As part of the Year 2000 Readiness Plan, the Company is contacting its critical
suppliers, manufacturers, distributors, and other vendors to determine if their
operations and the products and services they provide to the Company are Year
2000 compliant. Where practicable, the Company is attempting to mitigate its
risks with respect to the failure of third parties to be Year 2000 ready,
including developing contingency plans. Additional testing and contingency
planning will continue to verify the effectiveness of implementation actions.
However, failure of any contingency plans or implementation actions, remain a
possibility and could have a material adverse impact on the Company's results of
operations or financial condition. Furthermore, the purchasing patterns of
customers or potential customers may be affected by Year 2000 issues as
companies expend significant resources to correct their current systems for Year
2000 compliance. These expenditures may result in reduced funds available to
purchase products and services such as those offered by the Company, which could
have a material adverse effect on the Company's business and operating results.
10
<PAGE> 11
RISK FACTORS
The semiconductor equipment industry is highly competitive and global in nature
and the Company has experienced and expects to continue to face substantial
competition. The Company believes that to remain competitive will require
significant financial resources in order to offer a broad range of products, to
maintain customer service and support centers worldwide, and to invest in
product and process research and development. The Company's business depends and
will continue to depend in the future upon the capital equipment expenditures of
semiconductor manufacturers, which in turn depend on the current and anticipated
market demand for integrated circuits and products utilizing integrated
circuits. The recent industry downturn has had an adverse effect on the
semiconductor industry's level of capital expenditures. The Company believes it
has been relatively well positioned for the downturn because of its array of
products, its focus on yield improvement and process development rather than
pure wafer fabrication facility capacity, its sales of metrology products to
non-semiconductor industries and its strong balance sheet. The Company believes
that the semiconductor equipment industry is becoming increasingly dominated by
large manufacturers with the resources to support customers worldwide. Some of
these competitors have substantially greater financial resources and more
extensive engineering, manufacturing, marketing and customer service and support
capabilities than the Company. In addition, there are smaller emerging
semiconductor equipment companies which can provide innovative technology. No
assurance can be given that the Company will be able to compete successfully
worldwide or that the Company will be able to withstand the effects of an
industry downturn in the short term or over an extended period if a downturn is
prolonged.
During last four fiscal quarters operating results were adversely affected as
the Company experienced declines in orders, revenues and margins due to reduced
capital equipment spending by the semiconductor industry. The semiconductor
industry has historically been highly cyclical and has been subject to
significant downturns at various times that have been characterized by
diminished product demand. In response to the recent market conditions, the
Company implemented a restructuring plan during the second quarter of fiscal
1999 which resulted in a non-recurring pre-tax charge of $35 million. This
restructuring plan includes a consolidation of facilities, a write-down of
assets associated with affected programs and employee severance and related
benefits costs. There can be no assurance that this cost reduction plan will be
sufficient to address the market conditions going forward. The recent
semiconductor industry decline was primarily due to excess semiconductor
manufacturing capacity worldwide, coupled with the Asian financial crisis. The
Company's operating results are dependent on many factors, including economic
conditions in the semiconductor and related industries, both in the US and
abroad, the size and timing of orders from customers, customer cancellations or
delays in shipments, the Company's ability to develop, introduce, and market new
and enhanced products on a timely basis, among others. The Company has
experienced reductions in orders, cancellations and delays in shipments which
may continue to adversely affect sales and margins in future periods. The
Company's expense levels are based, in part, on expectations of future revenues.
Operating results have fluctuated in the past and may fluctuate in the future.
If revenue levels in a particular period do not meet expectations, operating
results may be adversely affected and additional cost reduction measures may be
necessary for the Company to remain competitive in the marketplace.
Rapid technological changes in semiconductor manufacturing processes subject the
semiconductor manufacturing equipment industry to increased pressure to maintain
technological parity with deep sub-micron process technology. Although the
Company has been focused on controlling expenses throughout the recent downturn
in the semiconductor industry, the Company continues to believe that its future
success will depend in part upon its ability to develop, manufacture and
successfully introduce new products with improved capabilities (including
sub-quarter micron design rules, copper development and 300mm wafers) and to
11
<PAGE> 12
continue to enhance existing products. The Company must be able to forecast
demand for new products while managing the transition from older products. There
can be no assurance that the Company will successfully or timely develop and
manufacture new products or that any such products will be accepted in the
marketplace. If new products have reliability or quality problems, reduced
orders, higher manufacturing costs, delays in collecting accounts receivable and
additional service and warranty expense may result. Additionally, there can be
no assurance that future technologies, processes or product developments will
not render the Company's current product offerings obsolete. If the Company does
not continue to successfully introduce new products, its results of operations
will be adversely affected. The Company expects to continue to make significant
investments in research and development and to sustain its current spending
levels for customer support in the foreseeable future to meet current customer
requirements and effectively position the Company for growth.
The Company expects that international revenues will continue to represent a
significant percentage of its revenues and international revenues and operations
may be adversely affected by economic conditions specific to each country. The
future performance of the Company depends, in part, upon its ability to continue
to compete successfully worldwide. Asia Pacific is one of the largest regions
for the sale of yield management and process monitoring equipment and countries
in this region, including Japan, Korea and Taiwan, have experienced weaknesses
in their currency, banking and equity markets in recent periods. The US and
Europe have shown relative strength during this downturn; however, weaknesses in
these regions may also adversely affect demand for the Company's products and
the Company's consolidated results of operations. In addition, international
sales may be adversely affected by fluctuations in foreign currency, imposition
of governmental controls, restrictions on export technology, political
instability, trade restrictions, changes in tariffs and the difficulties
associated with staffing and managing international operations. Although the
Company attempts to manage near term currency risks through the use of hedging
instruments, there can be no assurance that such efforts will be adequate. These
factors may have a material adverse effect on the Company's future business and
financial results.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's market risk exposures as set forth in its Annual Report on Form
10-K for the year ended June 30, 1998 have not changed significantly.
12
<PAGE> 13
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule.
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)
May 7, 1999 Robert J. Boehlke
- ----------------------------------- ---------------------------------------
(Date) Robert J. Boehlke
Executive Vice President
and Chief Financial Officer
13
<PAGE> 14
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
27.1 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<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> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 245,185
<SECURITIES> 502,494
<RECEIVABLES> 297,185
<ALLOWANCES> 0
<INVENTORY> 199,877
<CURRENT-ASSETS> 892,342
<PP&E> 289,726
<DEPRECIATION> 143,599
<TOTAL-ASSETS> 1,541,292
<CURRENT-LIABILITIES> 340,965
<BONDS> 0
0
0
<COMMON> 490,801
<OTHER-SE> 709,526
<TOTAL-LIABILITY-AND-EQUITY> 1,541,292
<SALES> 609,540
<TOTAL-REVENUES> 609,540
<CGS> 328,244
<TOTAL-COSTS> 642,174
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,077
<INCOME-PRETAX> 14,410
<INCOME-TAX> 1,045
<INCOME-CONTINUING> 13,365
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,365
<EPS-PRIMARY> 0.15<F1>
<EPS-DILUTED> 0.15
<FN>
<F1>For purposes of this exhibit, primary means basic.
</FN>
</TABLE>
