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|
FORM 10-Q
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(Mark one)
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||||
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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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KLA-Tencor Corporation
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(Exact name of registrant as specified in its charter)
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Delaware
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04-2564110
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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One Technology Drive, Milpitas, California
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95035
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(Address of Principal Executive Offices)
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(Zip Code)
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Large accelerated filer
x
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Accelerated filer
¨
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Non-accelerated filer
¨
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Smaller reporting company
¨
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(Do not check if a smaller reporting company)
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Page
Number
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PART I
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FINANCIAL INFORMATION
|
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Item 1
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Item 2
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Item 3
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Item 4
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PART II
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OTHER INFORMATION
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Item 1
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Item 1A
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Item 2
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Item 3
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Item 4
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Item 5
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Item 6
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ITEM 1.
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FINANCIAL STATEMENTS
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(In thousands)
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September 30,
2015 |
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June 30,
2015 |
||||
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ASSETS
|
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||||
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Current assets:
|
|
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||||
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Cash and cash equivalents
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$
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763,697
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$
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838,025
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Marketable securities
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1,505,750
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1,549,086
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Accounts receivable, net
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460,813
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585,494
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Inventories
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650,496
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617,904
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Deferred income taxes
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231,982
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236,253
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Other current assets
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62,680
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77,814
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Total current assets
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3,675,418
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3,904,576
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Land, property and equipment, net
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302,868
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314,591
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Goodwill
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335,218
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335,263
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Purchased intangibles, net
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8,242
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11,895
|
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Other non-current assets
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249,577
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|
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259,687
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Total assets
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$
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4,571,323
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$
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4,826,012
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LIABILITIES AND STOCKHOLDERS’ EQUITY
|
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||||
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Current liabilities:
|
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||||
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Accounts payable
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$
|
107,363
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$
|
103,342
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Deferred system profit
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134,188
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|
148,691
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||
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Unearned revenue
|
63,700
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71,335
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Current portion of long-term debt
|
—
|
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|
16,981
|
|
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Other current liabilities
|
609,990
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|
661,414
|
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Total current liabilities
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915,241
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1,001,763
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Non-current liabilities:
|
|
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Long-term debt
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3,151,046
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3,173,435
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Unearned revenue
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44,970
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47,145
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Other non-current liabilities
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165,625
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182,230
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Total liabilities
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4,276,882
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|
4,404,573
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Commitments and contingencies (Note 11 and Note 12)
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Stockholders’ equity:
|
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||||
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Common stock and capital in excess of par value
|
385,633
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474,374
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Accumulated deficit
|
(45,055
|
)
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(12,362
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)
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Accumulated other comprehensive income (loss)
|
(46,137
|
)
|
|
(40,573
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)
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Total stockholders’ equity
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294,441
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421,439
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Total liabilities and stockholders’ equity
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$
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4,571,323
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|
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$
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4,826,012
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Three months ended
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||||||
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September 30,
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||||||
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(In thousands, except per share amounts)
|
2015
|
|
2014
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||||
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Revenues:
|
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||||
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Product
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$
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460,739
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$
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476,598
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Service
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181,905
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166,303
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Total revenues
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642,644
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|
|
642,901
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Costs and expenses:
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||||
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Costs of revenues
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270,244
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288,467
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Engineering, research and development
|
119,943
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143,637
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Selling, general and administrative
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91,663
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101,644
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Interest expense
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30,564
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13,521
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Other expense (income), net
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(4,069
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)
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(3,375
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)
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Income before income taxes
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134,299
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99,007
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Provision for income taxes
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29,402
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26,774
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Net income
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$
|
104,897
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$
|
72,233
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Net income per share:
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||||
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Basic
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$
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0.67
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$
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0.44
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Diluted
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$
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0.66
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$
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0.43
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Cash dividends declared per share
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$
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0.52
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$
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0.50
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Weighted-average number of shares:
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||||
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Basic
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156,820
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164,845
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Diluted
|
157,984
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166,580
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Three months ended
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||||||
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September 30,
|
||||||
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(In thousands)
|
2015
|
|
2014
|
||||
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Net income
|
$
|
104,897
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$
|
72,233
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|
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Other comprehensive income (loss):
|
|
|
|
||||
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Currency translation adjustments:
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||||
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Change in currency translation adjustments
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(6,124
|
)
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(7,736
|
)
|
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Change in income tax benefit or expense
|
1,384
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|
|
2,872
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|
||
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Net change related to currency translation adjustments
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(4,740
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)
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(4,864
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)
|
||
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Cash flow hedges:
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|
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||||
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Change in net unrealized gains or losses
|
(1,861
|
)
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|
2,033
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|
||
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Reclassification adjustments for net gains or losses included in net income
|
(402
|
)
|
|
(228
|
)
|
||
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Change in income tax benefit or expense
|
814
|
|
|
(650
|
)
|
||
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Net change related to cash flow hedges
|
(1,449
|
)
|
|
1,155
|
|
||
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Net change related to unrecognized losses and transition obligations in connection with defined benefit plans
|
230
|
|
|
733
|
|
||
|
Available-for-sale securities:
|
|
|
|
||||
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Change in net unrealized gains or losses
|
481
|
|
|
(2,735
|
)
|
||
|
Reclassification adjustments for gains or losses included in net income
|
(17
|
)
|
|
(1,635
|
)
|
||
|
Change in income tax benefit or expense
|
(69
|
)
|
|
1,415
|
|
||
|
Net change related to available-for-sale securities
|
395
|
|
|
(2,955
|
)
|
||
|
Other comprehensive income (loss)
|
(5,564
|
)
|
|
(5,931
|
)
|
||
|
Total comprehensive income
|
$
|
99,333
|
|
|
$
|
66,302
|
|
|
|
Three months ended
September 30, |
||||||
|
(In thousands)
|
2015
|
|
2014
|
||||
|
Cash flows from operating activities:
|
|
|
|
||||
|
Net income
|
$
|
104,897
|
|
|
$
|
72,233
|
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
|
Depreciation and amortization
|
19,735
|
|
|
21,159
|
|
||
|
Non-cash stock-based compensation expense
|
12,248
|
|
|
15,483
|
|
||
|
Excess tax benefit from equity awards
|
(10,159
|
)
|
|
(14,223
|
)
|
||
|
Net gain on sales of marketable securities and other investments
|
(1,233
|
)
|
|
(1,635
|
)
|
||
|
Changes in assets and liabilities:
|
|
|
|
||||
|
Decrease in accounts receivable, net
|
124,925
|
|
|
39,261
|
|
||
|
Increase in inventories
|
(31,243
|
)
|
|
(23,445
|
)
|
||
|
Decrease (increase) in other assets
|
34,381
|
|
|
(2,732
|
)
|
||
|
Increase in accounts payable
|
4,158
|
|
|
5,276
|
|
||
|
Decrease in deferred system profit
|
(14,504
|
)
|
|
(59,122
|
)
|
||
|
Decrease in other liabilities
|
(49,423
|
)
|
|
(17,329
|
)
|
||
|
Net cash provided by operating activities
|
193,782
|
|
|
34,926
|
|
||
|
Cash flows from investing activities:
|
|
|
|
||||
|
Capital expenditures, net
|
(7,341
|
)
|
|
(13,445
|
)
|
||
|
Purchases of available-for-sale securities
|
(343,358
|
)
|
|
(624,860
|
)
|
||
|
Proceeds from sale of available-for-sale securities
|
200,353
|
|
|
732,337
|
|
||
|
Proceeds from maturity of available-for-sale securities
|
184,973
|
|
|
135,097
|
|
||
|
Purchases of trading securities
|
(18,267
|
)
|
|
(22,567
|
)
|
||
|
Proceeds from sale of trading securities
|
15,540
|
|
|
18,986
|
|
||
|
Net cash provided by investing activities
|
31,900
|
|
|
225,548
|
|
||
|
Cash flows from financing activities:
|
|
|
|
||||
|
Repayment of debt
|
(40,000
|
)
|
|
—
|
|
||
|
Issuance of common stock
|
—
|
|
|
4,677
|
|
||
|
Tax withholding payments related to vested and released restricted stock units
|
(21,526
|
)
|
|
(27,168
|
)
|
||
|
Common stock repurchases
|
(142,592
|
)
|
|
(124,839
|
)
|
||
|
Payment of dividends to stockholders
|
(101,674
|
)
|
|
(82,413
|
)
|
||
|
Excess tax benefit from equity awards
|
10,159
|
|
|
14,223
|
|
||
|
Net cash used in financing activities
|
(295,633
|
)
|
|
(215,520
|
)
|
||
|
Effect of exchange rate changes on cash and cash equivalents
|
(4,377
|
)
|
|
(6,132
|
)
|
||
|
Net increase (decrease) in cash and cash equivalents
|
(74,328
|
)
|
|
38,822
|
|
||
|
Cash and cash equivalents at beginning of period
|
838,025
|
|
|
630,861
|
|
||
|
Cash and cash equivalents at end of period
|
$
|
763,697
|
|
|
$
|
669,683
|
|
|
Supplemental cash flow disclosures:
|
|
|
|
||||
|
Income taxes paid, net
|
$
|
7,844
|
|
|
$
|
20,361
|
|
|
Interest paid
|
$
|
3,149
|
|
|
$
|
136
|
|
|
Non-cash activities:
|
|
|
|
||||
|
Purchase of land, property and equipment - investing activities
|
$
|
1,490
|
|
|
$
|
3,571
|
|
|
Unsettled common stock repurchase - financing activities
|
$
|
9,610
|
|
|
$
|
5,844
|
|
|
Dividends payable - financing activities
|
$
|
20,892
|
|
|
$
|
—
|
|
|
•
|
When the customer fab has previously accepted the same tool, with the same specifications, and when the Company can objectively demonstrate that the tool meets all of the required acceptance criteria.
|
|
•
|
When system sales to independent distributors have no installation requirement, contain no acceptance agreement, and 100% payment is due based upon shipment.
|
|
•
|
When the installation of the system is deemed perfunctory.
|
|
•
|
When the customer withholds acceptance due to issues unrelated to product performance, in which case revenue is recognized when the system is performing as intended and meets predetermined specifications.
|
|
Level 1
|
|
Valuations based on quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.
|
|
|
|
|
|
Level 2
|
|
Valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.
|
|
|
|
|
|
Level 3
|
|
Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
|
|
As of September 30, 2015 (In thousands)
|
Total
|
|
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
||||||
|
Assets
|
|
|
|
|
|
||||||
|
Cash equivalents:
|
|
|
|
|
|
||||||
|
U.S. Government agency securities
|
$
|
19,824
|
|
|
$
|
19,824
|
|
|
$
|
—
|
|
|
Corporate debt securities
|
9,997
|
|
|
—
|
|
|
9,997
|
|
|||
|
Money market and other
|
512,891
|
|
|
512,891
|
|
|
—
|
|
|||
|
Marketable securities:
|
|
|
|
|
|
||||||
|
U.S. Treasury securities
|
254,526
|
|
|
254,526
|
|
|
—
|
|
|||
|
U.S. Government agency securities
|
460,329
|
|
|
460,329
|
|
|
—
|
|
|||
|
Municipal securities
|
11,681
|
|
|
—
|
|
|
11,681
|
|
|||
|
Corporate debt securities
|
730,162
|
|
|
—
|
|
|
730,162
|
|
|||
|
Sovereign securities
|
42,103
|
|
|
8,962
|
|
|
33,141
|
|
|||
|
Total cash equivalents and marketable securities
(1)
|
2,041,513
|
|
|
1,256,532
|
|
|
784,981
|
|
|||
|
Other current assets:
|
|
|
|
|
|
||||||
|
Derivative assets
|
1,182
|
|
|
—
|
|
|
1,182
|
|
|||
|
Other non-current assets:
|
|
|
|
|
|
||||||
|
Executive Deferred Savings Plan
|
157,904
|
|
|
88,448
|
|
|
69,456
|
|
|||
|
Total financial assets
(1)
|
$
|
2,200,599
|
|
|
$
|
1,344,980
|
|
|
$
|
855,619
|
|
|
Liabilities
|
|
|
|
|
|
||||||
|
Other current liabilities:
|
|
|
|
|
|
||||||
|
Derivative liabilities
|
$
|
(5,512
|
)
|
|
$
|
—
|
|
|
$
|
(5,512
|
)
|
|
Total financial liabilities
|
$
|
(5,512
|
)
|
|
$
|
—
|
|
|
$
|
(5,512
|
)
|
|
As of June 30, 2015 (In thousands)
|
Total
|
|
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
||||||
|
Assets
|
|
|
|
|
|
||||||
|
Cash equivalents:
|
|
|
|
|
|
||||||
|
U.S. Government agency securities
|
$
|
7,500
|
|
|
$
|
7,500
|
|
|
$
|
—
|
|
|
Corporate debt securities
|
13,099
|
|
|
—
|
|
|
13,099
|
|
|||
|
Money market and other
|
611,385
|
|
|
611,385
|
|
|
—
|
|
|||
|
Marketable securities:
|
|
|
|
|
|
||||||
|
U.S. Treasury securities
|
275,555
|
|
|
275,555
|
|
|
—
|
|
|||
|
U.S. Government agency securities
|
564,768
|
|
|
556,019
|
|
|
8,749
|
|
|||
|
Municipal securities
|
31,816
|
|
|
—
|
|
|
31,816
|
|
|||
|
Corporate debt securities
|
612,862
|
|
|
—
|
|
|
612,862
|
|
|||
|
Sovereign securities
|
57,093
|
|
|
8,976
|
|
|
48,117
|
|
|||
|
Total cash equivalents and marketable securities
(1)
|
2,174,078
|
|
|
1,459,435
|
|
|
714,643
|
|
|||
|
Other current assets:
|
|
|
|
|
|
||||||
|
Derivative assets
|
3,064
|
|
|
—
|
|
|
3,064
|
|
|||
|
Other non-current assets:
|
|
|
|
|
|
||||||
|
Executive Deferred Savings Plan
|
165,655
|
|
|
91,203
|
|
|
74,452
|
|
|||
|
Total financial assets
(1)
|
$
|
2,342,797
|
|
|
$
|
1,550,638
|
|
|
$
|
792,159
|
|
|
Liabilities
|
|
|
|
|
|
||||||
|
Other current liabilities:
|
|
|
|
|
|
||||||
|
Derivative liabilities
|
$
|
(3,106
|
)
|
|
$
|
—
|
|
|
$
|
(3,106
|
)
|
|
Total financial liabilities
|
$
|
(3,106
|
)
|
|
$
|
—
|
|
|
$
|
(3,106
|
)
|
|
(In thousands)
|
As of
September 30, 2015 |
|
As of
June 30, 2015 |
||||
|
Accounts receivable, net:
|
|
|
|
||||
|
Accounts receivable, gross
|
$
|
482,497
|
|
|
$
|
607,157
|
|
|
Allowance for doubtful accounts
|
(21,684
|
)
|
|
(21,663
|
)
|
||
|
|
$
|
460,813
|
|
|
$
|
585,494
|
|
|
Inventories:
|
|
|
|
||||
|
Customer service parts
|
$
|
212,945
|
|
|
$
|
209,726
|
|
|
Raw materials
|
221,393
|
|
|
194,218
|
|
||
|
Work-in-process
|
163,909
|
|
|
156,820
|
|
||
|
Finished goods
|
52,249
|
|
|
57,140
|
|
||
|
|
$
|
650,496
|
|
|
$
|
617,904
|
|
|
Other current assets:
|
|
|
|
||||
|
Prepaid expenses
|
$
|
36,273
|
|
|
$
|
37,006
|
|
|
Income tax related receivables
|
14,878
|
|
|
32,850
|
|
||
|
Other current assets
|
11,529
|
|
|
7,958
|
|
||
|
|
$
|
62,680
|
|
|
$
|
77,814
|
|
|
Land, property and equipment, net:
|
|
|
|
||||
|
Land
|
$
|
40,388
|
|
|
$
|
40,397
|
|
|
Buildings and leasehold improvements
|
316,486
|
|
|
316,566
|
|
||
|
Machinery and equipment
|
510,727
|
|
|
510,642
|
|
||
|
Office furniture and fixtures
|
21,505
|
|
|
21,411
|
|
||
|
Construction-in-process
|
4,927
|
|
|
3,152
|
|
||
|
|
894,033
|
|
|
892,168
|
|
||
|
Less: accumulated depreciation and amortization
|
(591,165
|
)
|
|
(577,577
|
)
|
||
|
|
$
|
302,868
|
|
|
$
|
314,591
|
|
|
Other non-current assets:
|
|
|
|
||||
|
Executive Deferred Savings Plan
(1)
|
$
|
157,904
|
|
|
$
|
165,655
|
|
|
Deferred tax assets – long-term
|
76,470
|
|
|
78,648
|
|
||
|
Other non-current assets
|
15,203
|
|
|
15,384
|
|
||
|
|
$
|
249,577
|
|
|
$
|
259,687
|
|
|
Other current liabilities:
|
|
|
|
||||
|
Warranty
|
$
|
35,892
|
|
|
$
|
36,413
|
|
|
Executive Deferred Savings Plan
(1)
|
160,437
|
|
|
167,886
|
|
||
|
Compensation and benefits
|
162,445
|
|
|
196,682
|
|
||
|
Income taxes payable
|
16,400
|
|
|
15,582
|
|
||
|
Interest payable
|
46,207
|
|
|
19,395
|
|
||
|
Customer credits and advances
|
93,947
|
|
|
93,212
|
|
||
|
Other accrued expenses
|
94,662
|
|
|
132,244
|
|
||
|
|
$
|
609,990
|
|
|
$
|
661,414
|
|
|
Other non-current liabilities:
|
|
|
|
||||
|
Pension liabilities
|
$
|
55,481
|
|
|
$
|
55,696
|
|
|
Income taxes payable
|
62,892
|
|
|
69,018
|
|
||
|
Other non-current liabilities
|
47,252
|
|
|
57,516
|
|
||
|
|
$
|
165,625
|
|
|
$
|
182,230
|
|
|
(1)
|
KLA-Tencor has a non-qualified deferred compensation plan (known as “Executive Deferred Savings Plan”) under which certain executives and non-employee directors may defer a portion of their compensation. Participants are credited with returns based on their allocation of their account balances among measurement funds. The Company controls the investment of these funds, and the participants remain general creditors of the Company. The Company invests these funds in certain mutual funds and such investments are classified as trading securities on the condensed consolidated balance sheets. Distributions from the Executive Deferred Savings Plan commence following a participant’s retirement or termination of employment or on a specified date allowed per the Executive Deferred Savings Plan provisions, except in cases where such distributions are required to be delayed in order to avoid a prohibited distribution under Internal Revenue Code Section 409A. Participants can generally elect the distributions to be paid in lump sum or quarterly cash payments over a scheduled period for up to
15 years
and are allowed to make subsequent changes to their existing elections as permissible under the Executive Deferred Savings Plan provisions. Changes in the Executive Deferred Savings Plan liability is recorded in selling, general and administrative expense in the condensed consolidated statements of operations. The changes in the liability included in selling, general and administrative expense were
$10.2 million
and
$1.9 million
for the three months ended
September 30, 2015
and
2014
, respectively. Changes in the Executive Deferred Savings Plan assets are recorded as gains (losses), net in selling, general and administrative expense in the condensed consolidated statements of operations. The amount of gains (losses), net included in selling, general and administrative expense were
($10.0) million
and
($1.9) million
for the three months ended
September 30, 2015
and
2014
, respectively.
|
|
(In thousands)
|
Currency Translation Adjustments
|
|
Unrealized Gains (Losses) on Available-for-Sale Securities
|
|
Unrealized Gains (Losses) on Cash Flow Hedges
|
|
Unrealized Gains (Losses) on Defined Benefit Plans
|
|
Total
|
||||||||||
|
Balance as of September 30, 2015
|
$
|
(34,665
|
)
|
|
$
|
1,129
|
|
|
$
|
3,104
|
|
|
$
|
(15,705
|
)
|
|
$
|
(46,137
|
)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Balance as of June 30, 2015
|
$
|
(29,925
|
)
|
|
$
|
734
|
|
|
$
|
4,553
|
|
|
$
|
(15,935
|
)
|
|
$
|
(40,573
|
)
|
|
|
|
Location in the Condensed Consolidated
|
|
Three months ended
September 30, |
||||||
|
Accumulated OCI Components
|
|
Statements of Operations
|
|
2015
|
|
2014
|
||||
|
Unrealized gains (losses) on cash flow hedges from foreign exchange and interest rate contracts
|
|
Revenues
|
|
$
|
685
|
|
|
$
|
269
|
|
|
|
|
Costs of revenues
|
|
(472
|
)
|
|
(41
|
)
|
||
|
|
|
Interest expense
|
|
189
|
|
|
—
|
|
||
|
|
|
Net gains reclassified from accumulated OCI
|
|
$
|
402
|
|
|
$
|
228
|
|
|
|
|
|
|
|
|
|
||||
|
Unrealized gains on available-for-sale securities
|
|
Other expense (income), net
|
|
$
|
17
|
|
|
$
|
1,635
|
|
|
As of September 30, 2015 (In thousands)
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
||||||||
|
U.S. Treasury securities
|
$
|
253,781
|
|
|
$
|
746
|
|
|
$
|
(1
|
)
|
|
$
|
254,526
|
|
|
U.S. Government agency securities
|
479,544
|
|
|
664
|
|
|
(55
|
)
|
|
480,153
|
|
||||
|
Municipal securities
|
11,672
|
|
|
9
|
|
|
—
|
|
|
11,681
|
|
||||
|
Corporate debt securities
|
740,063
|
|
|
681
|
|
|
(585
|
)
|
|
740,159
|
|
||||
|
Money market and other
|
512,891
|
|
|
—
|
|
|
—
|
|
|
512,891
|
|
||||
|
Sovereign securities
|
42,087
|
|
|
26
|
|
|
(10
|
)
|
|
42,103
|
|
||||
|
Subtotal
|
2,040,038
|
|
|
2,126
|
|
|
(651
|
)
|
|
2,041,513
|
|
||||
|
Add: Time deposits
(1)
|
31,095
|
|
|
—
|
|
|
—
|
|
|
31,095
|
|
||||
|
Less: Cash equivalents
|
566,858
|
|
|
—
|
|
|
—
|
|
|
566,858
|
|
||||
|
Marketable securities
|
$
|
1,504,275
|
|
|
$
|
2,126
|
|
|
$
|
(651
|
)
|
|
$
|
1,505,750
|
|
|
As of June 30, 2015 (In thousands)
|
Amortized
Cost |
|
Gross
Unrealized Gains |
|
Gross
Unrealized Losses |
|
Fair
Value |
||||||||
|
U.S. Treasury securities
|
$
|
274,965
|
|
|
$
|
605
|
|
|
$
|
(15
|
)
|
|
$
|
275,555
|
|
|
U.S. Government agency securities
|
571,843
|
|
|
551
|
|
|
(126
|
)
|
|
572,268
|
|
||||
|
Municipal securities
|
31,819
|
|
|
7
|
|
|
(10
|
)
|
|
31,816
|
|
||||
|
Corporate debt securities
|
625,965
|
|
|
511
|
|
|
(515
|
)
|
|
625,961
|
|
||||
|
Money market and other
|
611,385
|
|
|
—
|
|
|
—
|
|
|
611,385
|
|
||||
|
Sovereign securities
|
57,091
|
|
|
33
|
|
|
(31
|
)
|
|
57,093
|
|
||||
|
Subtotal
|
2,173,068
|
|
|
1,707
|
|
|
(697
|
)
|
|
2,174,078
|
|
||||
|
Add: Time deposits
(1)
|
29,941
|
|
|
—
|
|
|
—
|
|
|
29,941
|
|
||||
|
Less: Cash equivalents
|
654,933
|
|
|
—
|
|
|
—
|
|
|
654,933
|
|
||||
|
Marketable securities
|
$
|
1,548,076
|
|
|
$
|
1,707
|
|
|
$
|
(697
|
)
|
|
$
|
1,549,086
|
|
|
(1)
|
Time deposits excluded from fair value measurements.
|
|
As of September 30, 2015 (In thousands)
|
Fair Value
|
|
Gross
Unrealized
Losses
(1)
|
||||
|
U.S. Treasury securities
|
$
|
10,412
|
|
|
$
|
(1
|
)
|
|
U.S. Government agency securities
|
55,314
|
|
|
(55
|
)
|
||
|
Municipal securities
|
2,655
|
|
|
—
|
|
||
|
Corporate debt securities
|
345,648
|
|
|
(585
|
)
|
||
|
Sovereign securities
|
22,718
|
|
|
(10
|
)
|
||
|
Total
|
$
|
436,747
|
|
|
$
|
(651
|
)
|
|
(1)
|
As of
September 30, 2015
, the amount of total gross unrealized losses related to investments that had been in a continuous loss position for
12
months or more was immaterial.
|
|
As of September 30, 2015 (In thousands)
|
Amortized Cost
|
|
Fair Value
|
||||
|
Due within one year
|
$
|
451,698
|
|
|
$
|
451,986
|
|
|
Due after one year through three years
|
1,052,577
|
|
|
1,053,764
|
|
||
|
|
$
|
1,504,275
|
|
|
$
|
1,505,750
|
|
|
(In thousands)
|
|
Wafer Inspection
|
|
Patterning
|
|
Others
|
|
Total
|
||||||||
|
Balance as of June 30, 2015
|
|
$
|
332,783
|
|
(1)
|
$
|
2,480
|
|
(2)
|
$
|
—
|
|
|
$
|
335,263
|
|
|
Goodwill allocation
|
|
(51,671
|
)
|
(3)
|
50,775
|
|
(3)
|
896
|
|
(3)
|
—
|
|
||||
|
Goodwill adjustment
|
|
(45
|
)
|
|
—
|
|
|
—
|
|
|
(45
|
)
|
||||
|
Balance as of September 30, 2015
|
|
$
|
281,067
|
|
|
$
|
53,255
|
|
|
$
|
896
|
|
|
$
|
335,218
|
|
|
(1)
|
The balance as of
June 30, 2015
, reflects goodwill for the Defect Inspection reporting unit under the old reporting structure which was renamed as Wafer Inspection under the new reporting structure after certain components were allocated out.
|
|
(2)
|
The balance as of
June 30, 2015
, reflects goodwill for the Metrology reporting unit under the old reporting structure which was renamed as Patterning under the new reporting structure after certain components were allocated in.
|
|
(3)
|
The reorganization resulted in certain goodwill balances to be reallocated as noted above.
|
|
(In thousands)
|
|
|
As of
September 30, 2015 |
|
As of
June 30, 2015 |
||||||||||||||||||||
|
Category
|
Range of
Useful Lives
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
and
Impairment
|
|
Net
Amount
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
and
Impairment
|
|
Net
Amount
|
||||||||||||
|
Existing technology
|
4-7 years
|
|
$
|
141,659
|
|
|
$
|
136,660
|
|
|
$
|
4,999
|
|
|
$
|
141,659
|
|
|
$
|
134,664
|
|
|
$
|
6,995
|
|
|
Patents
|
6-13 years
|
|
57,648
|
|
|
57,648
|
|
|
—
|
|
|
57,648
|
|
|
56,998
|
|
|
650
|
|
||||||
|
Trade name/Trademark
|
4-10 years
|
|
19,893
|
|
|
19,260
|
|
|
633
|
|
|
19,893
|
|
|
18,899
|
|
|
994
|
|
||||||
|
Customer relationships
|
6-7 years
|
|
54,980
|
|
|
52,370
|
|
|
2,610
|
|
|
54,980
|
|
|
51,724
|
|
|
3,256
|
|
||||||
|
Total
|
|
|
$
|
274,180
|
|
|
$
|
265,938
|
|
|
$
|
8,242
|
|
|
$
|
274,180
|
|
|
$
|
262,285
|
|
|
$
|
11,895
|
|
|
Fiscal year ending June 30:
|
Amortization
(In thousands)
|
||
|
2016 (remaining 9 months)
|
$
|
3,911
|
|
|
2017
|
2,806
|
|
|
|
2018
|
1,525
|
|
|
|
Total
|
$
|
8,242
|
|
|
|
As of September 30, 2015
|
|
As of June 30, 2015
|
||||||||||
|
|
Amount
(in thousands)
|
|
Effective
Interest Rate
|
|
Amount
(in thousands) |
|
Effective
Interest Rate
|
||||||
|
Fixed-rate 2.375% Senior notes due on November 1, 2017
|
$
|
250,000
|
|
|
2.396
|
%
|
|
$
|
250,000
|
|
|
2.396
|
%
|
|
Fixed-rate 3.375% Senior notes due on November 1, 2019
|
250,000
|
|
|
3.377
|
%
|
|
250,000
|
|
|
3.377
|
%
|
||
|
Fixed-rate 4.125% Senior notes due on November 1, 2021
|
500,000
|
|
|
4.128
|
%
|
|
500,000
|
|
|
4.128
|
%
|
||
|
Fixed-rate 4.650% Senior notes due on November 1, 2024
(1)
|
1,250,000
|
|
|
4.682
|
%
|
|
1,250,000
|
|
|
4.682
|
%
|
||
|
Fixed-rate 5.650% Senior notes due on November 1, 2034
|
250,000
|
|
|
5.670
|
%
|
|
250,000
|
|
|
5.670
|
%
|
||
|
Term loans
|
671,250
|
|
|
|
|
711,250
|
|
|
|
||||
|
Total debt
|
3,171,250
|
|
|
|
|
3,211,250
|
|
|
|
||||
|
Unamortized discount
|
(3,621
|
)
|
|
|
|
(3,723
|
)
|
|
|
||||
|
Unamortized debt issuance costs
|
(16,583
|
)
|
|
|
|
(17,111
|
)
|
|
|
||||
|
Total debt
|
$
|
3,151,046
|
|
|
|
|
$
|
3,190,416
|
|
|
|
||
|
|
|
|
|
|
|
|
|
||||||
|
Reported as:
|
|
|
|
|
|
|
|
||||||
|
Current portion of long-term debt
|
$
|
—
|
|
|
|
|
$
|
16,981
|
|
|
|
||
|
Long-term debt
|
3,151,046
|
|
|
|
|
3,173,435
|
|
|
|
||||
|
Total debt
|
$
|
3,151,046
|
|
|
|
|
$
|
3,190,416
|
|
|
|
||
|
(1)
|
The effective interest rate disclosed above for this series of Senior Notes excludes the impact of the treasury rate lock hedge discussed below. The effective interest rate including the impact of the treasury rate lock hedge was
4.626%
.
|
|
Fiscal year ending June 30:
|
Amount
(In thousands)
|
||
|
2016 (remaining 9 months)
|
$
|
—
|
|
|
2017 (remaining 6 months of scheduled payments)
|
24,375
|
|
|
|
2018
|
315,625
|
|
|
|
2019
|
75,000
|
|
|
|
2020
|
756,250
|
|
|
|
Thereafter
|
2,000,000
|
|
|
|
Total payments
|
$
|
3,171,250
|
|
|
Fiscal Quarters Ending
|
|
Quarterly Payment
(in thousands)
|
||
|
September 30, 2015 through December 31, 2016
|
|
$
|
9,375
|
|
|
March 31, 2017 through December 31, 2017
|
|
$
|
14,063
|
|
|
March 31, 2018 through September 30, 2019
|
|
$
|
18,750
|
|
|
December 31, 2019
|
|
$
|
487,500
|
|
|
Fiscal Quarters Ending
|
|
Maximum Leverage Ratio
|
|
September 30, 2015 and December 31, 2015
|
|
4.00:1.00
|
|
March 31, 2016 through September 30, 2016
|
|
3.75:1.00
|
|
December 31, 2016 and March 31, 2017
|
|
3.50:1.00
|
|
Thereafter
|
|
3.00:1.00
|
|
(In thousands)
|
Available
For Grant
|
|
|
Balance as of June 30, 2015
(1)(2)
|
7,810
|
|
|
Restricted stock units granted
(3)(2)
|
(1,477
|
)
|
|
Restricted stock units canceled
(2)
|
286
|
|
|
Balance as of September 30, 2015
(1)(2)
|
6,619
|
|
|
(1)
|
The Company has granted only restricted stock units under its equity incentive program since October 2007, except during the three months ended
December 31, 2014
, the Company adjusted the number of shares subject to outstanding options under the 2004 Plan by an aggregate of
4,245
shares pursuant to a proportionate and equitable adjustment for the effect of the special cash dividend, as required by the 2004 Plan. The total number of outstanding options under the 2004 Plan, as well as the associated exercise prices were adjusted to ensure the aggregate intrinsic value remained the same after considering the effect of the special cash dividend. As the adjustment was required by the 2004 Plan, under the authoritative guidance, the adjustment to the outstanding awards did not result in any incremental compensation expense. Additionally, the adjustment did not have an impact on the shares available for future issuance under the 2004 Plan.
|
|
(2)
|
The number of restricted stock units provided in this row reflects the application of the award multiplier as described above (
1.8
x or
2.0
x depending on the grant date of the applicable award).
|
|
(3)
|
Includes restricted stock units granted to senior management during the
three
months ended
September 30, 2015
with performance-based vesting criteria (in addition to service-based vesting criteria for any of such restricted stock units that are deemed to have been earned). As of
September 30, 2015
, it had not yet been determined the extent to which (if at all) the performance-based vesting criteria of such restricted stock units had been satisfied. Therefore, this line item includes all such performance-based restricted stock units granted during the
three
months ended
September 30, 2015
, reported at the maximum possible number of shares that may ultimately be issuable under such restricted stock units if all applicable performance-based criteria are achieved at their maximum levels and all applicable service-based criteria are fully satisfied.
|
|
|
Three months ended
September 30, |
||||||
|
(In thousands)
|
2015
|
|
2014
|
||||
|
Stock-based compensation expense by:
|
|
|
|
||||
|
Costs of revenues
|
$
|
1,464
|
|
|
$
|
2,237
|
|
|
Engineering, research and development
|
2,492
|
|
|
3,740
|
|
||
|
Selling, general and administrative
|
8,292
|
|
|
9,506
|
|
||
|
Total stock-based compensation expense
|
$
|
12,248
|
|
|
$
|
15,483
|
|
|
(In thousands)
|
As of
September 30, 2015 |
|
As of
June 30, 2015 |
||||
|
Inventory
|
$
|
3,429
|
|
|
$
|
3,242
|
|
|
|
Three months ended
September 30, |
||||||
|
(In thousands)
|
2015
|
|
2014
|
||||
|
Total intrinsic value of options exercised
|
$
|
—
|
|
|
$
|
3,478
|
|
|
Total cash received from employees and non-employee Board members as a result of stock option exercises
|
$
|
—
|
|
|
$
|
4,677
|
|
|
Tax benefits realized by the Company in connection with these exercises
|
$
|
—
|
|
|
$
|
1,617
|
|
|
Restricted Stock Units
|
Shares
(1)
(In thousands)
|
|
Weighted-Average
Grant Date
Fair Value
|
|||
|
Outstanding restricted stock units as of June 30, 2015
|
2,674
|
|
|
$
|
49.36
|
|
|
Granted
(2)
|
738
|
|
|
$
|
50.44
|
|
|
Vested and released
|
(773
|
)
|
|
$
|
37.88
|
|
|
Withheld for taxes
|
(434
|
)
|
|
$
|
37.88
|
|
|
Forfeited
|
(152
|
)
|
|
$
|
54.68
|
|
|
Outstanding restricted stock units as of September 30, 2015
|
2,053
|
|
|
$
|
56.11
|
|
|
(1)
|
Share numbers reflect actual shares subject to awarded restricted stock units. As described above, under the terms of the 2004 Plan, the number of shares subject to each award reflected in this number is multiplied by either
1.8
x or
2.0
x (depending on the grant date of the award) to calculate the impact of the award on the share reserve under the 2004 Plan.
|
|
(2)
|
Includes restricted stock units granted to senior management during the
three
months ended
September 30, 2015
with performance-based vesting criteria (in addition to service-based vesting criteria for any of such restricted stock units that are deemed to have been earned). As of
September 30, 2015
, it had not yet been determined the extent to which (if at all) the performance-based vesting criteria of such restricted stock units had been satisfied. Therefore, this line item includes all such performance-based restricted stock units, reported at the maximum possible number of shares (i.e.,
0.3 million
shares during the
three
months ended
September 30, 2015
) that may ultimately be issuable under such restricted stock units if all applicable performance-based criteria are achieved at their maximum and all applicable service-based criteria are fully satisfied.
|
|
|
Three months ended
September 30, |
||||||
|
(In thousands, except for weighted-average grant date fair value)
|
2015
|
|
2014
|
||||
|
Weighted-average grant date fair value per unit
|
$
|
50.44
|
|
|
$
|
74.26
|
|
|
Tax benefits realized by the Company in connection with vested and released restricted stock units
|
$
|
23,517
|
|
|
$
|
23,301
|
|
|
|
Three months ended
September 30, |
||||
|
|
2015
|
|
2014
|
||
|
Stock purchase plan:
|
|
|
|
||
|
Expected stock price volatility
|
23.9
|
%
|
|
23.5
|
%
|
|
Risk-free interest rate
|
0.1
|
%
|
|
0.1
|
%
|
|
Dividend yield
|
3.7
|
%
|
|
2.7
|
%
|
|
Expected life (in years)
|
0.5
|
|
|
0.5
|
|
|
(In thousands, except for weighted-average fair value per share)
|
Three months ended
September 30, |
||||||
|
2015
|
|
2014
|
|||||
|
Tax benefits realized by the Company in connection with the disqualifying dispositions of shares purchased under the ESPP
|
$
|
380
|
|
|
$
|
1,083
|
|
|
Weighted-average fair value per share based on Black-Scholes model
|
$
|
11.34
|
|
|
$
|
14.66
|
|
|
|
Three months ended
September 30, |
||||||
|
(In thousands)
|
2015
|
|
2014
|
||||
|
Number of shares of common stock repurchased
|
2,877
|
|
|
1,742
|
|
||
|
Total cost of repurchases
|
$
|
146,234
|
|
|
$
|
130,683
|
|
|
(In thousands, except per share amounts)
|
Three months ended
September 30, |
||||||
|
2015
|
|
2014
|
|||||
|
Numerator:
|
|
|
|
||||
|
Net income
|
$
|
104,897
|
|
|
$
|
72,233
|
|
|
Denominator:
|
|
|
|
||||
|
Weighted-average shares-basic, excluding unvested restricted stock units
|
156,820
|
|
|
164,845
|
|
||
|
Effect of dilutive options and restricted stock units
|
1,164
|
|
|
1,735
|
|
||
|
Weighted-average shares-diluted
|
157,984
|
|
|
166,580
|
|
||
|
Basic net income per share
|
$
|
0.67
|
|
|
$
|
0.44
|
|
|
Diluted net income per share
|
$
|
0.66
|
|
|
$
|
0.43
|
|
|
Anti-dilutive securities excluded from the computation of diluted net income per share
|
307
|
|
|
73
|
|
||
|
|
Three months ended
September 30, |
||||||
|
(Dollar amounts in thousands)
|
2015
|
|
2014
|
||||
|
Income before income taxes
|
$
|
134,299
|
|
|
$
|
99,007
|
|
|
Provision for income taxes
|
$
|
29,402
|
|
|
$
|
26,774
|
|
|
Effective tax rate
|
21.9
|
%
|
|
27.0
|
%
|
||
|
•
|
Tax expense was decreased by
$8.2 million
during the
three
months ended
September 30, 2015
related to a decrease in the Company’s unrecognized tax benefits from the expiration of the statute of limitations; partially offset by
|
|
•
|
Tax expense was increased by
$3.0 million
during the
three
months ended
September 30, 2015
related to a non-deductible decrease in the value of the assets held within the Company’s Executive Deferred Savings Plan.
|
|
|
Three months ended
September 30, |
||||||
|
(In thousands)
|
2015
|
|
2014
|
||||
|
Receivables sold under factoring agreements
|
$
|
33,844
|
|
|
$
|
25,620
|
|
|
Proceeds from sales of LCs
|
$
|
—
|
|
|
$
|
6,920
|
|
|
Fiscal year ending June 30,
|
Amount
(In thousands)
|
||
|
2016 (remaining 9 months)
|
$
|
5,989
|
|
|
2017
|
5,934
|
|
|
|
2018
|
4,027
|
|
|
|
2019
|
1,867
|
|
|
|
2020
|
1,260
|
|
|
|
2021 and thereafter
|
553
|
|
|
|
Total minimum lease payments
|
$
|
19,630
|
|
|
|
Three months ended
September 30, |
||||||
|
(In thousands)
|
2015
|
|
2014
|
||||
|
Beginning balance
|
$
|
36,413
|
|
|
$
|
37,746
|
|
|
Accruals for warranties issued during the period
|
9,039
|
|
|
6,979
|
|
||
|
Changes in liability related to pre-existing warranties
|
(183
|
)
|
|
(1,470
|
)
|
||
|
Settlements made during the period
|
(9,377
|
)
|
|
(10,196
|
)
|
||
|
Ending balance
|
$
|
35,892
|
|
|
$
|
33,059
|
|
|
|
Three months ended
September 30, |
||||||
|
(In thousands)
|
2015
|
|
2014
|
||||
|
Beginning balance
|
$
|
24,887
|
|
|
$
|
2,329
|
|
|
Restructuring costs
|
7,066
|
|
|
3,881
|
|
||
|
Adjustments
|
373
|
|
|
144
|
|
||
|
Cash payments
|
(19,265
|
)
|
|
(1,399
|
)
|
||
|
Ending balance
|
$
|
13,061
|
|
|
$
|
4,955
|
|
|
|
|
Three months ended
September 30, |
||||||
|
(In thousands)
|
Location in Financial Statements
|
2015
|
|
2014
|
||||
|
Derivatives Designated as Hedging Instruments
|
|
|
|
|
||||
|
Gains (losses) in accumulated OCI on derivatives (effective portion)
|
Accumulated OCI
|
$
|
(1,861
|
)
|
|
$
|
2,033
|
|
|
Gains reclassified from accumulated OCI into income (effective portion):
|
Revenues
|
$
|
685
|
|
|
$
|
269
|
|
|
|
Costs of revenues
|
(472
|
)
|
|
(41
|
)
|
||
|
|
Interest expense
|
189
|
|
|
—
|
|
||
|
|
Net gains reclassified from accumulated OCI into income (effective portion)
|
$
|
402
|
|
|
$
|
228
|
|
|
Gains
(losses) r
ecognized in income on derivatives (ineffective portion and amount excluded from effectiveness testing)
|
Other expense (income), net
|
$
|
(126
|
)
|
|
$
|
43
|
|
|
Derivatives Not Designated as Hedging Instruments
|
|
|
|
|
||||
|
Gains (losses) recognized in income
|
Other expense (income), net
|
$
|
(6,382
|
)
|
|
$
|
3,925
|
|
|
(In thousands)
|
As of
September 30, 2015 |
|
As of
June 30, 2015 |
||||
|
Cash flow hedge contracts
|
|
|
|
||||
|
Purchase
|
$
|
23,941
|
|
|
$
|
32,775
|
|
|
Sell
|
$
|
119,843
|
|
|
$
|
88,800
|
|
|
Other foreign currency hedge contracts
|
|
|
|
||||
|
Purchase
|
$
|
120,739
|
|
|
$
|
64,012
|
|
|
Sell
|
$
|
119,869
|
|
|
$
|
123,091
|
|
|
|
Asset Derivatives
|
|
Liability Derivatives
|
||||||||||||||||
|
|
Balance Sheet Location
|
|
As of
September 30, 2015 |
|
As of
June 30, 2015 |
|
Balance Sheet Location
|
|
As of
September 30, 2015 |
|
As of
June 30, 2015 |
||||||||
|
(In thousands)
|
|
Fair Value
|
|
|
Fair Value
|
||||||||||||||
|
Derivatives designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Foreign exchange contracts
|
Other current assets
|
|
$
|
478
|
|
|
$
|
1,722
|
|
|
Other current liabilities
|
|
$
|
2,869
|
|
|
$
|
1,920
|
|
|
Total derivatives designated as hedging instruments
|
|
|
$
|
478
|
|
|
$
|
1,722
|
|
|
|
|
$
|
2,869
|
|
|
$
|
1,920
|
|
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Foreign exchange contracts
|
Other current assets
|
|
$
|
704
|
|
|
$
|
1,342
|
|
|
Other current liabilities
|
|
$
|
2,643
|
|
|
$
|
1,186
|
|
|
Total derivatives not designated as hedging instruments
|
|
|
$
|
704
|
|
|
$
|
1,342
|
|
|
|
|
$
|
2,643
|
|
|
$
|
1,186
|
|
|
Total derivatives
|
|
|
$
|
1,182
|
|
|
$
|
3,064
|
|
|
|
|
$
|
5,512
|
|
|
$
|
3,106
|
|
|
|
Three months ended
September 30, |
||||||
|
(In thousands)
|
2015
|
|
2014
|
||||
|
Beginning balance
|
$
|
7,110
|
|
|
$
|
(20
|
)
|
|
Amount reclassified to income
|
(402
|
)
|
|
(228
|
)
|
||
|
Net change in unrealized gains or losses
|
(1,861
|
)
|
|
2,033
|
|
||
|
Ending balance
|
$
|
4,847
|
|
|
$
|
1,785
|
|
|
As of September 30, 2015
|
|
|
|
|
|
Gross Amounts of Derivatives Not Offset in the Condensed Consolidated Balance Sheets
|
|
|
||||||||||||||||
|
Description
|
|
Gross Amounts of Derivatives
|
|
Gross Amounts of Derivatives Offset in the Condensed Consolidated Balance Sheets
|
|
Net Amount of Derivatives Presented in the Condensed Consolidated Balance Sheets
|
|
Financial Instruments
|
|
Cash Collateral Received
|
|
Net Amount
|
||||||||||||
|
Derivatives - Assets
|
|
$
|
1,182
|
|
|
$
|
—
|
|
|
$
|
1,182
|
|
|
$
|
(1,182
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Derivatives - Liabilities
|
|
$
|
(5,512
|
)
|
|
$
|
—
|
|
|
$
|
(5,512
|
)
|
|
$
|
1,182
|
|
|
$
|
—
|
|
|
$
|
(4,330
|
)
|
|
As of June 30, 2015
|
|
|
|
|
|
Gross Amounts of Derivatives Not Offset in the Condensed Consolidated Balance Sheets
|
|
|
||||||||||||||||
|
Description
|
|
Gross Amounts of Derivatives
|
|
Gross Amounts of Derivatives Offset in the Condensed Consolidated Balance Sheets
|
|
Net Amount of Derivatives Presented in the Condensed Consolidated Balance Sheets
|
|
Financial Instruments
|
|
Cash Collateral Received
|
|
Net Amount
|
||||||||||||
|
Derivatives - Assets
|
|
$
|
3,064
|
|
|
$
|
—
|
|
|
$
|
3,064
|
|
|
$
|
(2,809
|
)
|
|
$
|
—
|
|
|
$
|
255
|
|
|
Derivatives - Liabilities
|
|
$
|
(3,106
|
)
|
|
$
|
—
|
|
|
$
|
(3,106
|
)
|
|
$
|
2,809
|
|
|
$
|
—
|
|
|
$
|
(297
|
)
|
|
|
Three months ended
September 30, |
||||||
|
(In thousands)
|
2015
|
|
2014
|
||||
|
Total revenues
|
$
|
—
|
|
|
$
|
482
|
|
|
Total purchases
|
$
|
404
|
|
|
$
|
278
|
|
|
|
Three months ended September 30,
|
||||||||||||
|
(Dollar amounts in thousands)
|
2015
|
|
2014
|
||||||||||
|
Revenues:
|
|
|
|
|
|
|
|
||||||
|
North America
|
$
|
109,208
|
|
|
17
|
%
|
|
$
|
195,370
|
|
|
30
|
%
|
|
Taiwan
|
254,047
|
|
|
40
|
%
|
|
126,577
|
|
|
20
|
%
|
||
|
Japan
|
71,618
|
|
|
11
|
%
|
|
112,224
|
|
|
17
|
%
|
||
|
Europe & Israel
|
39,846
|
|
|
6
|
%
|
|
55,176
|
|
|
9
|
%
|
||
|
Korea
|
73,433
|
|
|
11
|
%
|
|
69,287
|
|
|
11
|
%
|
||
|
Rest of Asia
|
94,492
|
|
|
15
|
%
|
|
84,267
|
|
|
13
|
%
|
||
|
Total
|
$
|
642,644
|
|
|
100
|
%
|
|
$
|
642,901
|
|
|
100
|
%
|
|
|
Three months ended September 30,
|
||||||||||||
|
(Dollar amounts in thousands)
|
2015
|
|
2014
|
||||||||||
|
Revenues:
|
|
|
|
|
|
|
|
||||||
|
Wafer Inspection
|
$
|
227,783
|
|
|
35
|
%
|
|
$
|
294,482
|
|
|
46
|
%
|
|
Patterning
|
198,085
|
|
|
31
|
%
|
|
152,898
|
|
|
24
|
%
|
||
|
Global Service and Support
(1)
|
199,871
|
|
|
31
|
%
|
|
171,958
|
|
|
27
|
%
|
||
|
Other
|
16,905
|
|
|
3
|
%
|
|
23,563
|
|
|
3
|
%
|
||
|
Total
|
$
|
642,644
|
|
|
100
|
%
|
|
$
|
642,901
|
|
|
100
|
%
|
|
(In thousands)
|
As of
September 30, 2015 |
|
As of
June 30, 2015 |
||||
|
Long-lived assets:
|
|
|
|
||||
|
United States
|
$
|
199,159
|
|
|
$
|
207,779
|
|
|
Europe
|
16,099
|
|
|
16,536
|
|
||
|
Singapore
|
43,847
|
|
|
45,444
|
|
||
|
Israel
|
32,723
|
|
|
33,841
|
|
||
|
Rest of Asia
|
11,040
|
|
|
10,991
|
|
||
|
Total
|
$
|
302,868
|
|
|
$
|
314,591
|
|
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
(In thousands, except net income per share)
|
Three months ended
|
||||||||||||||||||
|
September 30,
2015 |
|
June 30,
2015 |
|
March 31,
2015 |
|
December 31,
2014 |
|
September 30,
2014 |
|||||||||||
|
Total revenues
|
$
|
642,644
|
|
|
$
|
756,332
|
|
|
$
|
738,459
|
|
|
$
|
676,357
|
|
|
$
|
642,901
|
|
|
Total costs and operating expenses
|
$
|
481,850
|
|
|
$
|
553,845
|
|
|
$
|
543,473
|
|
|
$
|
521,643
|
|
|
$
|
533,748
|
|
|
Gross margin
|
$
|
372,400
|
|
|
$
|
433,065
|
|
|
$
|
418,177
|
|
|
$
|
393,144
|
|
|
$
|
354,434
|
|
|
Income from operations
|
$
|
160,794
|
|
|
$
|
202,487
|
|
|
$
|
194,986
|
|
|
$
|
154,714
|
|
|
$
|
109,153
|
|
|
Net income
|
$
|
104,897
|
|
|
$
|
142,019
|
|
|
$
|
131,638
|
|
|
$
|
20,268
|
|
|
$
|
72,233
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Basic
(1)
|
$
|
0.67
|
|
|
$
|
0.90
|
|
|
$
|
0.81
|
|
|
$
|
0.12
|
|
|
$
|
0.44
|
|
|
Diluted
(1)
|
$
|
0.66
|
|
|
$
|
0.89
|
|
|
$
|
0.81
|
|
|
$
|
0.12
|
|
|
$
|
0.43
|
|
|
(1)
|
Basic and diluted earnings per share are computed independently for each of the quarters presented based on the weighted-average basic and fully diluted shares outstanding for each quarter. Therefore, the sum of quarterly basic and diluted per share information may not equal annual (or other multiple-quarter calculations of) basic and diluted earnings per share.
|
|
•
|
Revenue Recognition
|
|
•
|
Inventories
|
|
•
|
Warranty
|
|
•
|
Allowance for Doubtful Accounts
|
|
•
|
Equity and Cash-Based Long-Term Incentive Compensation Plans
|
|
•
|
Contingencies and Litigation
|
|
•
|
Goodwill and Intangible Assets
|
|
•
|
Income Taxes
|
|
•
|
Valuation of Marketable Securities
|
|
(In thousands)
|
|
Wafer Inspection
|
|
Patterning
|
|
Others
|
|
Total
|
||||||||
|
Balance as of June 30, 2015
|
|
$
|
332,783
|
|
(1)
|
$
|
2,480
|
|
(2)
|
$
|
—
|
|
|
$
|
335,263
|
|
|
Goodwill allocation
|
|
(51,671
|
)
|
(3)
|
50,775
|
|
(3)
|
896
|
|
(3)
|
—
|
|
||||
|
Goodwill adjustment
|
|
(45
|
)
|
|
—
|
|
|
—
|
|
|
(45
|
)
|
||||
|
Balance as of September 30, 2015
|
|
$
|
281,067
|
|
|
$
|
53,255
|
|
|
$
|
896
|
|
|
$
|
335,218
|
|
|
(1)
|
The balance as of
June 30, 2015
, reflects goodwill for the Defect Inspection reporting unit under the old reporting structure which was renamed as Wafer Inspection under the new reporting structure after certain components were allocated out.
|
|
(2)
|
The balance as of
June 30, 2015
, reflects goodwill for the Metrology reporting unit under the old reporting structure which was renamed as Patterning under the new reporting structure after certain components were allocated in.
|
|
(3)
|
The reorganization resulted in certain goodwill balances to be reallocated as noted above.
|
|
•
|
When the customer fab has previously accepted the same tool, with the same specifications, and when we can objectively demonstrate that the tool meets all of the required acceptance criteria.
|
|
•
|
When system sales to independent distributors have no installation requirement, contain no acceptance agreement, and 100% payment is due based upon shipment.
|
|
•
|
When the installation of the system is deemed perfunctory.
|
|
•
|
When the customer withholds acceptance due to issues unrelated to product performance, in which case revenue is recognized when the system is performing as intended and meets predetermined specifications.
|
|
|
Three months ended
|
|
|
|
|
||||||||||||||||||||
|
(Dollar amounts in thousands)
|
September 30,
2015 |
|
June 30,
2015 |
|
September 30,
2014 |
|
Q1 FY16 vs.
Q4 FY15
|
|
Q1 FY16 vs.
Q1 FY15
|
||||||||||||||||
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Product
|
$
|
460,739
|
|
|
$
|
579,733
|
|
|
$
|
476,598
|
|
|
$
|
(118,994
|
)
|
|
(21
|
)%
|
|
$
|
(15,859
|
)
|
|
(3
|
)%
|
|
Service
|
181,905
|
|
|
176,599
|
|
|
166,303
|
|
|
5,306
|
|
|
3
|
%
|
|
15,602
|
|
|
9
|
%
|
|||||
|
Total revenues
|
$
|
642,644
|
|
|
$
|
756,332
|
|
|
$
|
642,901
|
|
|
$
|
(113,688
|
)
|
|
(15
|
)%
|
|
$
|
(257
|
)
|
|
—
|
%
|
|
Costs of revenues
|
$
|
270,244
|
|
|
$
|
323,267
|
|
|
$
|
288,467
|
|
|
$
|
(53,023
|
)
|
|
(16
|
)%
|
|
$
|
(18,223
|
)
|
|
(6
|
)%
|
|
Gross margin percentage
|
58
|
%
|
|
57
|
%
|
|
55
|
%
|
|
|
|
|
|
|
|
|
|||||||||
|
|
Three months ended
|
|||||||||||||||||||
|
(Dollar amounts in thousands)
|
September 30, 2015
|
|
June 30, 2015
|
|
September 30, 2014
|
|||||||||||||||
|
North America
|
$
|
109,208
|
|
|
17
|
%
|
|
$
|
206,107
|
|
|
27
|
%
|
|
$
|
195,370
|
|
|
30
|
%
|
|
Taiwan
|
254,047
|
|
|
40
|
%
|
|
234,896
|
|
|
31
|
%
|
|
126,577
|
|
|
20
|
%
|
|||
|
Japan
|
71,618
|
|
|
11
|
%
|
|
99,710
|
|
|
13
|
%
|
|
112,224
|
|
|
17
|
%
|
|||
|
Europe & Israel
|
39,846
|
|
|
6
|
%
|
|
57,564
|
|
|
8
|
%
|
|
55,176
|
|
|
9
|
%
|
|||
|
Korea
|
73,433
|
|
|
11
|
%
|
|
81,340
|
|
|
11
|
%
|
|
69,287
|
|
|
11
|
%
|
|||
|
Rest of Asia
|
94,492
|
|
|
15
|
%
|
|
76,716
|
|
|
10
|
%
|
|
84,267
|
|
|
13
|
%
|
|||
|
Total
|
$
|
642,644
|
|
|
100
|
%
|
|
$
|
756,333
|
|
|
100
|
%
|
|
$
|
642,901
|
|
|
100
|
%
|
|
|
Gross Margin Percentage
|
|
|
Gross Margin Percentage
|
||
|
|
Three months ended
|
|
|
Three months ended
|
||
|
June 30, 2015
|
57.3
|
%
|
|
September 30, 2014
|
55.1
|
%
|
|
Revenue volume of products and service
|
(2.5
|
)%
|
|
Revenue volume of products and service
|
(0.7
|
)%
|
|
Mix of products and services sold
|
1.8
|
%
|
|
Mix of products and services sold
|
3.3
|
%
|
|
Manufacturing labor, overhead and efficiencies
|
(0.6
|
)%
|
|
Manufacturing labor, overhead and efficiencies
|
0.7
|
%
|
|
Other service and manufacturing costs
|
1.9
|
%
|
|
Other service and manufacturing costs
|
(0.5
|
)%
|
|
September 30, 2015
|
57.9
|
%
|
|
September 30, 2015
|
57.9
|
%
|
|
(Dollar amounts in thousands)
|
Three months ended
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
September 30,
2015 |
|
June 30,
2015 |
|
September 30,
2014 |
|
Q1 FY16 vs.
Q4 FY15 |
|
Q1 FY16 vs.
Q1 FY15 |
|||||||||||||||||
|
R&D expenses
|
$
|
119,943
|
|
|
$
|
128,839
|
|
|
$
|
143,637
|
|
|
$
|
(8,896
|
)
|
|
(7
|
)%
|
|
$
|
(23,694
|
)
|
|
(16
|
)%
|
|
R&D expenses as a percentage of total revenues
|
19
|
%
|
|
17
|
%
|
|
22
|
%
|
|
|
|
|
|
|
|
|
|||||||||
|
|
Three months ended
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
(Dollar amounts in thousands)
|
September 30,
2015 |
|
June 30,
2015 |
|
September 30,
2014 |
|
Q1 FY16 vs.
Q4 FY15 |
|
Q1 FY16 vs.
Q1 FY15 |
||||||||||||||||
|
SG&A expenses
|
$
|
91,663
|
|
|
$
|
101,739
|
|
|
$
|
101,644
|
|
|
$
|
(10,076
|
)
|
|
(10
|
)%
|
|
$
|
(9,981
|
)
|
|
(10
|
)%
|
|
SG&A expenses as a percentage of total revenues
|
14
|
%
|
|
13
|
%
|
|
16
|
%
|
|
|
|
|
|
|
|
|
|||||||||
|
(In thousands)
|
Three months ended
September 30, 2015
|
||
|
Beginning Balance
|
$
|
24,887
|
|
|
Restructuring costs
|
7,066
|
|
|
|
Adjustments
|
373
|
|
|
|
Cash payments
|
(19,265
|
)
|
|
|
Ending Balance
|
$
|
13,061
|
|
|
(Dollar amounts in thousands)
|
Three months ended
|
||||||||||
|
September 30, 2015
|
|
June 30, 2015
|
|
September 30, 2014
|
|||||||
|
Interest expense
|
$
|
30,564
|
|
|
$
|
30,679
|
|
|
$
|
13,521
|
|
|
Other expense (income), net
|
$
|
(4,069
|
)
|
|
$
|
(3,130
|
)
|
|
$
|
(3,375
|
)
|
|
Interest expense as a percentage of total revenues
|
5
|
%
|
|
4
|
%
|
|
2
|
%
|
|||
|
Other expense (income), net as a percentage of total revenues
|
1
|
%
|
|
—
|
%
|
|
1
|
%
|
|||
|
|
Three months ended
September 30, |
||||||
|
(Dollar amounts in thousands)
|
2015
|
|
2014
|
||||
|
Income before income taxes
|
$
|
134,299
|
|
|
$
|
99,007
|
|
|
Provision for income taxes
|
$
|
29,402
|
|
|
$
|
26,774
|
|
|
Effective tax rate
|
21.9
|
%
|
|
27.0
|
%
|
||
|
•
|
Tax expense was decreased by
$8.2 million
during the
three
months ended
September 30, 2015
related to a decrease in our unrecognized tax benefits from the expiration of the statute of limitations; and
|
|
•
|
Tax expense was increased by
$3.0 million
during the
three
months ended
September 30, 2015
related to a non-deductible decrease in the value of the assets held within our Executive Deferred Savings Plan.
|
|
(Dollar amounts in thousands)
|
As of
September 30, 2015 |
|
As of
June 30, 2015 |
||||
|
Cash and cash equivalents
|
$
|
763,697
|
|
|
$
|
838,025
|
|
|
Marketable securities
|
1,505,750
|
|
|
1,549,086
|
|
||
|
Total cash, cash equivalents and marketable securities
|
$
|
2,269,447
|
|
|
$
|
2,387,111
|
|
|
Percentage of total assets
|
50
|
%
|
|
49
|
%
|
||
|
|
|
|
|
||||
|
|
Three months ended September 30,
|
||||||
|
(In thousands)
|
2015
|
|
2014
|
||||
|
Cash flows:
|
|
|
|
||||
|
Net cash provided by operating activities
|
$
|
193,782
|
|
|
$
|
34,926
|
|
|
Net cash provided by investing activities
|
31,900
|
|
|
225,548
|
|
||
|
Net cash used in financing activities
|
(295,633
|
)
|
|
(215,520
|
)
|
||
|
Effect of exchange rate changes on cash and cash equivalents
|
(4,377
|
)
|
|
(6,132
|
)
|
||
|
Net increase (decrease) in cash and cash equivalents
|
$
|
(74,328
|
)
|
|
$
|
38,822
|
|
|
•
|
An increase in collections of approximately $135 million mostly due to higher shipments during the
three
months ended
September 30, 2015
compared to the
three
months ended
September 30, 2014
;
|
|
•
|
A decrease in payroll and employee-related payments of approximately $12 million during the
three
months ended
September 30, 2015
compared to the
three
months ended
September 30, 2014
; and
|
|
•
|
A decrease in net income tax payments of approximately $13 million during the
three
months ended
September 30, 2015
compared to the
three
months ended
September 30, 2014
.
|
|
•
|
Prepayment for the term loans principal of $40.0 million;
|
|
•
|
Payments of special dividends with respect to fully vested restricted stock units with dividend equivalent rights of
$20.0 million
during the
three
months ended
September 30, 2015
compared to no such payment during the
three
months ended
September 30, 2014
; and
|
|
•
|
An increase in common stock repurchases of
$17.8 million
during the
three
months ended
September 30, 2015
compared to the
three
months ended
September 30, 2014
.
|
|
Fiscal Quarters Ending
|
|
Quarterly Payment
(in thousands)
|
||
|
September 30, 2015 through December 31, 2016
|
|
$
|
9,375
|
|
|
March 31, 2017 through December 31, 2017
|
|
$
|
14,063
|
|
|
March 31, 2018 through September 30, 2019
|
|
$
|
18,750
|
|
|
December 31, 2019
|
|
$
|
487,500
|
|
|
Fiscal Quarters Ending
|
|
Maximum Leverage Ratio
|
|
September 30, 2015 and December 31, 2015
|
|
4.00:1.00
|
|
March 31, 2016 through September 30, 2016
|
|
3.75:1.00
|
|
December 31, 2016 and March 31, 2017
|
|
3.50:1.00
|
|
Thereafter
|
|
3.00:1.00
|
|
|
Fiscal year ending June 30,
|
||||||||||||||||||||||||||||||
|
(In thousands)
|
Total
|
|
2016
(2)
|
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
2021 and thereafter
|
|
Other
|
||||||||||||||||
|
Debt obligations
(1)
|
$
|
3,171,250
|
|
|
$
|
—
|
|
|
$
|
24,375
|
|
|
$
|
315,625
|
|
|
$
|
75,000
|
|
|
$
|
756,250
|
|
|
$
|
2,000,000
|
|
|
$
|
—
|
|
|
Interest payment associated with all
debt obligations
(3)
|
1,061,290
|
|
|
118,884
|
|
|
118,722
|
|
|
115,049
|
|
|
110,936
|
|
|
100,386
|
|
|
497,313
|
|
|
—
|
|
||||||||
|
Purchase commitments
(4)
|
316,789
|
|
|
306,270
|
|
|
10,059
|
|
|
344
|
|
|
55
|
|
|
—
|
|
|
61
|
|
|
—
|
|
||||||||
|
Income taxes
payable
(5)
|
70,230
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
70,230
|
|
||||||||
|
Operating leases
|
19,630
|
|
|
5,989
|
|
|
5,934
|
|
|
4,027
|
|
|
1,867
|
|
|
1,260
|
|
|
553
|
|
|
—
|
|
||||||||
|
Cash long-term incentive program
(6)
|
119,291
|
|
|
38,390
|
|
|
39,043
|
|
|
27,442
|
|
|
14,352
|
|
|
64
|
|
|
—
|
|
|
—
|
|
||||||||
|
Pension obligations
|
20,788
|
|
|
2,276
|
|
|
1,348
|
|
|
1,570
|
|
|
1,559
|
|
|
1,413
|
|
|
12,622
|
|
|
—
|
|
||||||||
|
Executive Deferred
Savings Plan
(7)
|
160,437
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
160,437
|
|
||||||||
|
Other
(8)
|
20,892
|
|
|
2,071
|
|
|
9,009
|
|
|
6,580
|
|
|
3,174
|
|
|
58
|
|
|
—
|
|
|
—
|
|
||||||||
|
Total contractual cash obligations
|
$
|
4,960,597
|
|
|
$
|
473,880
|
|
|
$
|
208,490
|
|
|
$
|
470,637
|
|
|
$
|
206,943
|
|
|
$
|
859,431
|
|
|
$
|
2,510,549
|
|
|
$
|
230,667
|
|
|
(1)
|
In November 2014, we issued
$750 million
aggregate principal amount of term loans due in 2020 (outstanding balance of
$671.3 million
as of
September 30, 2015
) and
$2.50 billion
aggregate principal amount of Senior Notes due from fiscal year 2018 to fiscal year 2035. During the first quarter of fiscal year ended
September 30, 2015
, the Company prepaid additional principal of
$40.0 million
for the term loans.
|
|
(2)
|
For remaining nine months of fiscal year 2016.
|
|
(3)
|
The interest payments associated with the Senior Notes obligations included in the table above are based on the principal amount multiplied by the applicable coupon rate for each series of Senior Notes. Our future interest payments are subject to change if our then effective credit rating is below investment grade as discussed above. The interest payments under the term loans are payable on the borrowed amounts at the LIBOR plus 125 bps. As of
September 30, 2015
, we utilized the existing interest rates to project our estimated term loans interest payments for the next five years. The interest payment under the revolving credit facility for the undrawn balance is payable at 15 bps as a commitment fee based on the daily undrawn balance and we utilized the existing rate for the projected interest payments included in the table above. Our future interest payments for the term loans and the revolving credit facility are subject to change due to future fluctuations in the LIBOR rates as well as any upgrades or downgrades to our then effective credit rating.
|
|
(4)
|
Represents an estimate of significant commitments to purchase inventory from our suppliers as well as an estimate of significant purchase commitments associated with other goods and services in the ordinary course of business. Our liability under these purchase commitments is generally restricted to a forecasted time-horizon as mutually agreed upon between the parties. This forecasted time-horizon can vary among different suppliers. Actual expenditures will vary based upon the volume of the transactions and length of contractual service provided. In addition, the amounts paid under these arrangements may be less in the event the arrangements are renegotiated or canceled. Certain agreements provide for potential cancellation penalties.
|
|
(5)
|
Represents the estimated income tax payable obligation related to uncertain tax positions as well as related accrued interest. We are unable to make a reasonably reliable estimate of the timing of payments in individual years due to uncertainties in the timing of tax audit outcomes.
|
|
(6)
|
Represents the amount committed under our cash long-term incentive program. The expected payment after estimated forfeitures is approximately
$97.2 million
.
|
|
(7)
|
Represents the amount committed under our non-qualified executive deferred compensation plan. We are unable to make a reasonably reliable estimate of the timing of payments in individual years due to the uncertainties in the timing around participant’s separation and any potential changes that participants may decide to make to the previous distribution elections.
|
|
(8)
|
Represents the amount committed for accrued dividends payable, substantially all of which are for the special cash dividend for the unvested restricted stock units as of the dividend record date as well as restricted stock units granted with dividend equivalent rights. For additional details, refer to Note 7, “Equity and Long-term Incentive Compensation Plans”.
|
|
|
Three months ended
September 30, |
||||||
|
(In thousands)
|
2015
|
|
2014
|
||||
|
Receivables sold under factoring agreements
|
$
|
33,844
|
|
|
$
|
25,620
|
|
|
Proceeds from sales of LCs
|
$
|
—
|
|
|
$
|
6,920
|
|
|
Rating Agency
|
Rating
|
|
Outlook
|
|
Fitch
|
BBB-
|
|
Stable
|
|
Moody’s
|
Baa2
|
|
Stable
|
|
Standard & Poor’s
|
BBB
|
|
Stable
|
|
(In thousands)
|
As of
September 30, 2015 |
|
As of
June 30, 2015 |
||||
|
Cash flow hedge contracts
|
|
|
|
||||
|
Purchase
|
$
|
23,941
|
|
|
$
|
32,775
|
|
|
Sell
|
$
|
119,843
|
|
|
$
|
88,800
|
|
|
Other foreign currency hedge contracts
|
|
|
|
||||
|
Purchase
|
$
|
120,739
|
|
|
$
|
64,012
|
|
|
Sell
|
$
|
119,869
|
|
|
$
|
123,091
|
|
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
|
ITEM 4
|
CONTROLS AND PROCEDURES
|
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
|
ITEM 1A.
|
RISK FACTORS
|
|
•
|
Various conditions to the closing of the Mergers may not be satisfied or waived;
|
|
•
|
The Mergers may not be consummated, which among other things may cause our share price to decline to the extent that the current price of our common stock reflects an assumption that the Mergers will be completed;
|
|
•
|
The failure to consummate the Mergers may result in negative publicity and a negative impression of us in the investment community;
|
|
•
|
Required regulatory approvals from governmental entities may delay the Mergers or result in the imposition of conditions that could cause Lam to abandon the Mergers;
|
|
•
|
The Merger Agreement may be terminated in circumstance that would require us to pay Lam a termination fee of $290.0 million;
|
|
•
|
We will have incurred significant costs in connection with the acquisition that we may be unable to recover;
|
|
•
|
Our ability to attract, recruit, retain and motivate current and prospective employees may be adversely affected;
|
|
•
|
The attention of our employees and management may be diverted due to activities related to the Mergers;
|
|
•
|
We may forego opportunities we might otherwise pursue absent the Merger Agreement, and may not be able to take advantage of alternative business opportunities or effectively respond to competitive pressures;
|
|
•
|
Disruptions from the Mergers, whether or not it is completed, may harm our relationships with our employees, customers, distributors, suppliers or other business partners, and may result in a loss of or a substantial decrease in purchases by our customers; and
|
|
•
|
The Merger Agreement restricts us from engaging in certain actions without Lam's approval, which could prevent us from pursuing certain business opportunities outside the ordinary course of business that arise prior to the closing of the Mergers.
|
|
•
|
the increasing cost of building and operating fabrication facilities and the impact of such increases on our customers’ investment decisions;
|
|
•
|
differing market growth rates and capital requirements for different applications, such as memory, logic and foundry;
|
|
•
|
lower level of process control adoption by our memory customers compared to our foundry and logic customers;
|
|
•
|
our customers’ reuse of existing and installed products, which may decrease their need to purchase new products or solutions at more advanced technology nodes;
|
|
•
|
the emergence of disruptive technologies that change the prevailing semiconductor manufacturing processes (or the economics associated with semiconductor manufacturing) and, as a result, also impact the inspection and metrology requirements associated with such processes;
|
|
•
|
the higher design costs for the most advanced integrated circuits, which could economically constrain leading-edge manufacturing technology customers to focus their resources on only the large, technologically advanced products and applications;
|
|
•
|
the possible introduction of integrated products by our larger competitors that offer inspection and metrology functionality in addition to managing other semiconductor manufacturing processes;
|
|
•
|
changes in semiconductor manufacturing processes that are extremely costly for our customers to implement and, accordingly, our customers could reduce their available budgets for process control equipment by reducing inspection and metrology sampling rates for certain technologies;
|
|
•
|
the reversal of the historical trend of declining cost per transistor with each new generation of technological advancement within the semiconductor industry, and the adverse impact that such reversal would have upon our business;
|
|
•
|
the bifurcation of the semiconductor manufacturing industry into (a) leading edge manufacturers driving continued research and development into next-generation products and technologies and (b) other manufacturers that are content with existing (including previous generation) products and technologies;
|
|
•
|
the ever escalating cost of next-generation product development, which may result in joint development programs between us and our customers or government entities to help fund such programs that could restrict our control of, ownership of and profitability from the products and technologies developed through those programs;
|
|
•
|
the potential industry transition from 300mm to 450mm wafers; and
|
|
•
|
the entry by some semiconductor manufacturers into collaboration or sharing arrangements for capacity, cost or risk with other manufacturers, as well as increased outsourcing of their manufacturing activities, and greater focus only on specific markets or applications, whether in response to adverse market conditions or other market pressures.
|
|
•
|
The mix and type of customers, and sales to any single customer, may vary significantly from quarter to quarter and from year to year, which exposes our business and operating results to increased volatility tied to individual customers.
|
|
•
|
New orders from our foundry customers in the past several years have constituted a significant portion of our total orders. This concentration increases the impact that future business or technology changes within the foundry industry may have on our business, financial condition and operating results.
|
|
•
|
In a highly concentrated business environment, if a particular customer does not place an order, or if they delay or cancel orders, we may not be able to replace the business. Furthermore, because our products are configured to each customer’s specifications, any changes, delays or cancellations of orders may result in significant, non-recoverable costs.
|
|
•
|
As a result of this consolidation, the customers that survive the consolidation represent a greater portion of our sales and, consequently, have greater commercial negotiating leverage. Many of our large customers have more aggressive policies regarding engaging alternative, second-source suppliers for the products we offer and, in addition, may seek and, on occasion, receive pricing, payment, intellectual property-related or other commercial terms that may have an adverse impact on our business. Any of these changes could negatively impact our prices, customer orders, revenues and gross margins.
|
|
•
|
Certain customers have undergone significant ownership changes, created alliances with other companies, experienced management changes or have outsourced manufacturing activities, any of which may result in additional complexities in managing customer relationships and transactions. Any future change in ownership or management of our existing customers may result in similar challenges, including the possibility of the successor entity or new management deciding to select a competitor’s products.
|
|
•
|
The highly concentrated business environment also increases our exposure to risks related to the financial condition of each of our customers. For example, as a result of the challenging economic environment during fiscal year 2009, we were (and in some cases continue to be) exposed to additional risks related to the continued financial viability of certain of our customers. To the extent our customers experience liquidity issues in the future, we may be required to incur additional bad debt expense with respect to receivables owed to us by those customers. In addition, customers with liquidity issues may be forced to reduce purchases of our equipment, delay deliveries of our products, discontinue operations or may be acquired by one of our customers, and in either case such event would have the effect of further consolidating our customer base.
|
|
•
|
Semiconductor manufacturers generally must commit significant resources to qualify, install and integrate process control and yield management equipment into a semiconductor production line. We believe that once a semiconductor manufacturer selects a particular supplier’s process control and yield management equipment, the manufacturer generally relies upon that equipment for that specific production line application for an extended period of time. Accordingly, we expect it to be more difficult to sell our products to a given customer for that specific production line application and other similar production line applications if that customer initially selects a competitor’s equipment. Similarly, we expect it to be challenging for a competitor to sell its products to a given customer for a specific production line application if that customer initially selects our equipment.
|
|
•
|
Prices differ among the products we offer for different applications due to differences in features offered or manufacturing costs. If there is a shift in demand by our customers from our higher-priced to lower-priced products, our gross margin and revenue would decrease. In addition, when products are initially introduced, they tend to have higher costs because of initial development costs and lower production volumes relative to the previous product generation, which can impact gross margin.
|
|
•
|
a negative impact on our ability to satisfy our future obligations;
|
|
•
|
an increase in the portion of our cash flows that may have to be dedicated to increased interest and principal payments that may not be available for operations, working capital, capital expenditures, acquisitions, investments, dividends, stock repurchases, general corporate or other purposes;
|
|
•
|
an impairment of our ability to obtain additional financing in the future; and
|
|
•
|
obligations to comply with restrictive and financial covenants as noted in the above risk factor and Note 6, “Debt.”
|
|
•
|
managing cultural diversity and organizational alignment;
|
|
•
|
exposure to the unique characteristics of each region in the global semiconductor market, which can cause capital equipment investment patterns to vary significantly from period to period;
|
|
•
|
periodic local or international economic downturns;
|
|
•
|
potential adverse tax consequences, including withholding tax rules that may limit the repatriation of our earnings, and higher effective income tax rates in foreign countries where we do business;
|
|
•
|
government controls, either by the United States or other countries, that restrict our business overseas or the import or export of semiconductor products or increase the cost of our operations;
|
|
•
|
compliance with customs regulations in the countries in which we do business;
|
|
•
|
tariffs or other trade barriers (including those applied to our products or to parts and supplies that we purchase);
|
|
•
|
political instability, natural disasters, legal or regulatory changes, acts of war or terrorism in regions where we have operations or where we do business;
|
|
•
|
fluctuations in interest and currency exchange rates. Fluctuations in currency exchange rates may adversely impact our ability to compete on price with local providers or the value of revenues we generate from our international business. Although we attempt to manage some of our near-term currency risks through the use of hedging instruments, there can be no assurance that such efforts will be adequate;
|
|
•
|
longer payment cycles and difficulties in collecting accounts receivable outside of the United States;
|
|
•
|
difficulties in managing foreign distributors (including monitoring and ensuring our distributors’ compliance with all applicable United States and local laws); and
|
|
•
|
inadequate protection or enforcement of our intellectual property and other legal rights in foreign jurisdictions.
|
|
•
|
we may have to devote unanticipated financial and management resources to acquired businesses;
|
|
•
|
the combination of businesses may cause the loss of key personnel or an interruption of, or loss of momentum in, the activities of our company and/or the acquired business;
|
|
•
|
we may not be able to realize expected operating efficiencies or product integration benefits from our acquisitions;
|
|
•
|
we may experience challenges in entering into new market segments for which we have not previously manufactured and sold products;
|
|
•
|
we may face difficulties in coordinating geographically separated organizations, systems and facilities;
|
|
•
|
the customers, distributors, suppliers, employees and others with whom the companies we acquire have business dealings may have a potentially adverse reaction to the acquisition;
|
|
•
|
we may have to write-off goodwill or other intangible assets; and
|
|
•
|
we may incur unforeseen obligations or liabilities in connection with acquisitions.
|
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
|
Period
|
Total Number of
Shares
Purchased
(2)
|
|
Average Price Paid
per Share
|
|
Maximum Number of
Shares that May
Yet Be Purchased Under
the Plans or Programs
|
||||
|
July 1, 2015 to July 31, 2015
|
758,664
|
|
|
$
|
53.79
|
|
|
8,602,749
|
|
|
August 1, 2015 to August 31, 2015
|
939,232
|
|
|
$
|
50.15
|
|
|
7,663,517
|
|
|
September 1, 2015 to September 30, 2015
|
1,179,386
|
|
|
$
|
49.45
|
|
|
6,484,131
|
|
|
Total
|
2,877,282
|
|
|
$
|
50.82
|
|
|
|
|
|
(1)
|
Our Board of Directors has authorized a program for us to repurchase shares of our common stock. The total number and dollar amount of shares repurchased for the
three
months ended
September 30, 2015
and fiscal years ended June 30, 2015, 2014 and 2013 were
2.9 million
shares (
$146.2 million
),
9.3 million
shares (
$608.9 million
),
3.8 million
shares (
$240.8 million
) and
5.4 million
shares (
$273.3 million
), respectively. In connection with entering into the Merger Agreement, we suspended further repurchases under our repurchase program on
October 21, 2015
.
|
|
(2)
|
All shares were purchased pursuant to the publicly announced repurchase program described in footnote 1 above. Shares are reported based on the trade date of the applicable repurchase.
|
|
ITEM 3.
|
DEFAULTS UPON SENIOR SECURITIES
|
|
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
|
ITEM 5.
|
OTHER INFORMATION
|
|
ITEM 6.
|
EXHIBITS
|
|
|
|
|
Incorporated by Reference
|
|||
|
Exhibit
Number
|
|
Exhibit Description
|
Form
|
File
Number
|
Exhibit
Number
|
Filing
Date
|
|
|
|
|
|
|
|
|
|
2.1
|
|
Agreement and Plan of Merger and Reorganization, dated as of October 20, 2015, by and among Lam Research Corporation, Topeka Merger Sub 1, Inc., Topeka Merger Sub 2, Inc. and KLA-Tencor Corporation
|
8-K
|
000-09992
|
2.1
|
10/21/15
|
|
|
|
|
|
|
|
|
|
10.44
|
|
Fiscal Year 2016 Executive Incentive Plan *+
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.45
|
|
Executive Severance Plan, as amended and restated *
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.46
|
|
2010 Executive Severance Plan, as amended and restated *
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.1
|
|
Certification of Chief Executive Officer Under Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.2
|
|
Certification of Chief Financial Officer Under Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32
|
|
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.INS
|
|
XBRL Instance Document
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
|
|
|
|
|
|
KLA-Tencor Corporation
|
|
|
|
|
|
(Registrant)
|
|
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October 22, 2015
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/s/ RICHARD P. WALLACE
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(Date)
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Richard P. Wallace
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President and Chief Executive Officer
(Principal Executive Officer)
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October 22, 2015
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/s/ BREN D. HIGGINS
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(Date)
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Bren D. Higgins
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Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
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October 22, 2015
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/s/ VIRENDRA A. KIRLOSKAR
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(Date)
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Virendra A. Kirloskar
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Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)
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Incorporated by Reference
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Exhibit
Number
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Exhibit Description
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Form
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File
Number
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Exhibit
Number
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Filing
Date
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2.1
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Agreement and Plan of Merger and Reorganization, dated as of October 20, 2015, by and among Lam Research Corporation, Topeka Merger Sub 1, Inc., Topeka Merger Sub 2, Inc. and KLA-Tencor Corporation
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8-K
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000-09992
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2.1
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10/21/2015
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10.44
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Fiscal Year 2016 Executive Incentive Plan*+
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10.45
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Executive Severance Plan, as amended and restated *
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10.46
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2010 Executive Severance Plan, as amended and restated *
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31.1
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Certification of Chief Executive Officer under Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934
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31.2
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Certification of Chief Financial Officer under Rule 13a-14(a) /15d-14(a) of the Securities Exchange Act of 1934
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32
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Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350
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101.INS
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XBRL Instance Document
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101.SCH
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XBRL Taxonomy Extension Schema Document
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101.CAL
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XBRL Taxonomy Extension Calculation Linkbase Document
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101.DEF
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XBRL Taxonomy Extension Definition Linkbase Document
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101.LAB
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XBRL Taxonomy Extension Label Linkbase Document
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101.PRE
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XBRL Taxonomy Extension Presentation Linkbase Document
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No information found
* THE VALUE IS THE MARKET VALUE AS OF THE LAST DAY OF THE QUARTER FOR WHICH THE 13F WAS FILED.
| FUND | NUMBER OF SHARES | VALUE ($) | PUT OR CALL |
|---|
| DIRECTORS | AGE | BIO | OTHER DIRECTOR MEMBERSHIPS |
|---|
No information found
Customers
| Customer name | Ticker |
|---|---|
| Lam Research Corporation | LRCX |
| Texas Instruments Incorporated | TXN |
Suppliers
Price
Yield
| Owner | Position | Direct Shares | Indirect Shares |
|---|