FORM 10-Q
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(Mark one)
|
||||
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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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
|
|
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
|
|
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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(Do not check if a smaller reporting company)
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Smaller reporting company
¨
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|
|
|
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Emerging growth company
¨
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Common Stock, $0.001 par value per share
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KLAC
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The Nasdaq Stock Market, LLC
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|
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The Nasdaq Global Select Market
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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)
|
March 31,
2019 |
|
June 30,
2018 |
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
1,092,163
|
|
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$
|
1,404,382
|
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Marketable securities
|
805,105
|
|
|
1,475,936
|
|
||
Accounts receivable, net
|
958,021
|
|
|
651,678
|
|
||
Inventories
|
1,317,260
|
|
|
931,845
|
|
||
Other current assets
|
270,079
|
|
|
85,159
|
|
||
Total current assets
|
4,442,628
|
|
|
4,549,000
|
|
||
Land, property and equipment, net
|
411,852
|
|
|
286,306
|
|
||
Goodwill
|
2,172,902
|
|
|
354,698
|
|
||
Deferred income taxes
|
205,820
|
|
|
193,200
|
|
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Purchased intangible assets, net
|
1,694,313
|
|
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19,333
|
|
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Other non-current assets
|
260,090
|
|
|
236,082
|
|
||
Total assets
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$
|
9,187,605
|
|
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$
|
5,638,619
|
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LIABILITIES, NON-CONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY
|
|
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|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
206,248
|
|
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$
|
169,354
|
|
Deferred system revenue
|
228,745
|
|
|
—
|
|
||
Deferred service revenue
|
182,119
|
|
|
69,255
|
|
||
Deferred system profit
|
—
|
|
|
279,581
|
|
||
Current portion of long-term debt
|
249,997
|
|
|
—
|
|
||
Other current liabilities
|
833,747
|
|
|
696,080
|
|
||
Total current liabilities
|
1,700,856
|
|
|
1,214,270
|
|
||
Non-current liabilities:
|
|
|
|
||||
Long-term debt
|
3,172,649
|
|
|
2,237,402
|
|
||
Deferred tax liability
|
762,303
|
|
|
1,197
|
|
||
Deferred service revenue
|
90,610
|
|
|
71,997
|
|
||
Other non-current liabilities
|
575,599
|
|
|
493,242
|
|
||
Total liabilities
|
6,302,017
|
|
|
4,018,108
|
|
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Commitments and contingencies (Note 13 and Note 14)
|
|
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Stockholders’ equity:
|
|
|
|
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Common stock and capital in excess of par value
|
1,989,914
|
|
|
617,999
|
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Retained earnings
|
928,086
|
|
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1,056,445
|
|
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Accumulated other comprehensive income (loss)
|
(68,907
|
)
|
|
(53,933
|
)
|
||
Total KLA-Tencor stockholders’ equity
|
2,849,093
|
|
|
1,620,511
|
|
||
Non-controlling interest in consolidated subsidiaries
|
36,495
|
|
|
—
|
|
||
Total stockholders’ equity
|
2,885,588
|
|
|
1,620,511
|
|
||
Total liabilities and stockholders’ equity
|
$
|
9,187,605
|
|
|
$
|
5,638,619
|
|
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Three months ended
|
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Nine months ended
|
||||||||||||
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March 31,
|
|
March 31,
|
||||||||||||
(In thousands, except per share amounts)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Revenues:
|
|
|
|
|
|
|
|
||||||||
Product
|
$
|
793,224
|
|
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$
|
797,797
|
|
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$
|
2,474,652
|
|
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$
|
2,320,171
|
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Service
|
304,087
|
|
|
223,497
|
|
|
835,817
|
|
|
646,526
|
|
||||
Total revenues
|
1,097,311
|
|
|
1,021,294
|
|
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3,310,469
|
|
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2,966,697
|
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Costs and expenses:
|
|
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Costs of revenues
|
486,945
|
|
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368,356
|
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1,276,592
|
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1,068,475
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||||
Research and development
|
184,887
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|
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153,239
|
|
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504,320
|
|
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456,626
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|
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Selling, general and administrative
|
182,184
|
|
|
113,237
|
|
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409,084
|
|
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325,934
|
|
||||
Interest expense
|
31,187
|
|
|
28,119
|
|
|
84,087
|
|
|
86,067
|
|
||||
Other expense (income), net
|
(9,282
|
)
|
|
(7,640
|
)
|
|
(28,535
|
)
|
|
(19,847
|
)
|
||||
Income before income taxes
|
221,390
|
|
|
365,983
|
|
|
1,064,921
|
|
|
1,049,442
|
|
||||
Provision for income taxes
|
28,745
|
|
|
59,102
|
|
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107,232
|
|
|
595,944
|
|
||||
Net income
|
192,645
|
|
|
306,881
|
|
|
957,689
|
|
|
453,498
|
|
||||
Less: Net loss attributable to non-controlling interest
|
(83
|
)
|
|
—
|
|
|
(83
|
)
|
|
—
|
|
||||
Net income attributable to KLA-Tencor
|
$
|
192,728
|
|
|
$
|
306,881
|
|
|
$
|
957,772
|
|
|
$
|
453,498
|
|
Net income per share attributable to KLA-Tencor
|
|
|
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|
|
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||||||||
Basic
|
$
|
1.23
|
|
|
$
|
1.96
|
|
|
$
|
6.20
|
|
|
$
|
2.90
|
|
Diluted
|
$
|
1.23
|
|
|
$
|
1.95
|
|
|
$
|
6.17
|
|
|
$
|
2.88
|
|
Weighted-average number of shares:
|
|
|
|
|
|
|
|
||||||||
Basic
|
156,349
|
|
|
156,221
|
|
|
154,561
|
|
|
156,547
|
|
||||
Diluted
|
157,182
|
|
|
157,201
|
|
|
155,310
|
|
|
157,539
|
|
|
Three months ended
|
|
Nine months ended
|
||||||||||||
|
March 31,
|
|
March 31,
|
||||||||||||
(In thousands)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Net income
|
$
|
192,645
|
|
|
$
|
306,881
|
|
|
$
|
957,689
|
|
|
$
|
453,498
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
||||||||
Currency translation adjustments:
|
|
|
|
|
|
|
|
||||||||
Change in currency translation adjustments
|
(1,031
|
)
|
|
4,238
|
|
|
(5,104
|
)
|
|
10,617
|
|
||||
Change in income tax benefit or expense
|
442
|
|
|
(667
|
)
|
|
442
|
|
|
(3,006
|
)
|
||||
Net change related to currency translation adjustments
|
(589
|
)
|
|
3,571
|
|
|
(4,662
|
)
|
|
7,611
|
|
||||
Cash flow hedges:
|
|
|
|
|
|
|
|
||||||||
Change in net unrealized gains or losses
|
(1,379
|
)
|
|
(581
|
)
|
|
(6,567
|
)
|
|
560
|
|
||||
Reclassification adjustments for net gains or losses included in net income
|
(946
|
)
|
|
(694
|
)
|
|
(3,719
|
)
|
|
(3,775
|
)
|
||||
Change in income tax benefit or expense
|
461
|
|
|
369
|
|
|
1,641
|
|
|
1,045
|
|
||||
Net change related to cash flow hedges
|
(1,864
|
)
|
|
(906
|
)
|
|
(8,645
|
)
|
|
(2,170
|
)
|
||||
Net change related to unrecognized losses and transition obligations in connection with defined benefit plans
|
438
|
|
|
(28
|
)
|
|
993
|
|
|
(121
|
)
|
||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
||||||||
Change in net unrealized gains or losses
|
3,922
|
|
|
(5,723
|
)
|
|
8,681
|
|
|
(10,919
|
)
|
||||
Reclassification adjustments for net gains or losses included in net income
|
313
|
|
|
(2
|
)
|
|
1,263
|
|
|
61
|
|
||||
Change in income tax benefit or expense
|
(680
|
)
|
|
1,333
|
|
|
(1,759
|
)
|
|
2,584
|
|
||||
Net change related to available-for-sale securities
|
3,555
|
|
|
(4,392
|
)
|
|
8,185
|
|
|
(8,274
|
)
|
||||
Other comprehensive income (loss)
|
1,540
|
|
|
(1,755
|
)
|
|
(4,129
|
)
|
|
(2,954
|
)
|
||||
Comprehensive loss attributable to non-controlling interest
|
(83
|
)
|
|
—
|
|
|
(83
|
)
|
|
—
|
|
||||
Total comprehensive income attributable to KLA-Tencor
|
$
|
194,268
|
|
|
$
|
305,126
|
|
|
$
|
953,643
|
|
|
$
|
450,544
|
|
|
Common Stock and
Capital in Excess of
Par Value
|
|
Retained
Earnings
(Accumulated Deficit)
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Total KLA-Tencor
Stockholders’
Equity
|
|
Non-controlling interest
|
|
Total Stockholders' Equity
|
|||||||||||||||
(In thousands, except per share amounts)
|
Shares
|
|
Amount
|
|
||||||||||||||||||||||
Balance as of June 30, 2018
|
156,048
|
|
|
$
|
617,999
|
|
|
$
|
1,056,445
|
|
|
$
|
(53,933
|
)
|
|
$
|
1,620,511
|
|
|
$
|
—
|
|
|
$
|
1,620,511
|
|
Adoption of ASC 606
|
—
|
|
|
—
|
|
|
(21,215
|
)
|
|
75
|
|
|
(21,140
|
)
|
|
—
|
|
|
(21,140
|
)
|
||||||
Reclassification of stranded tax effects
|
—
|
|
|
—
|
|
|
10,920
|
|
|
(10,920
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Balance as of July 1, 2018
|
156,048
|
|
|
617,999
|
|
|
1,046,150
|
|
|
(64,778
|
)
|
|
1,599,371
|
|
|
—
|
|
|
1,599,371
|
|
||||||
Net income
|
—
|
|
|
—
|
|
|
395,944
|
|
|
—
|
|
|
395,944
|
|
|
—
|
|
|
395,944
|
|
||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
8,611
|
|
|
8,611
|
|
|
—
|
|
|
8,611
|
|
||||||
Net issuance under employee stock plans
|
332
|
|
|
(26,961
|
)
|
|
—
|
|
|
—
|
|
|
(26,961
|
)
|
|
—
|
|
|
(26,961
|
)
|
||||||
Repurchase of common stock
|
(2,781
|
)
|
|
(11,010
|
)
|
|
(296,777
|
)
|
|
—
|
|
|
(307,787
|
)
|
|
—
|
|
|
(307,787
|
)
|
||||||
Cash dividends ($0.75 per share) and dividend equivalents declared
|
—
|
|
|
—
|
|
|
(117,947
|
)
|
|
—
|
|
|
(117,947
|
)
|
|
—
|
|
|
(117,947
|
)
|
||||||
Stock-based compensation expense
|
—
|
|
|
16,138
|
|
|
—
|
|
|
—
|
|
|
16,138
|
|
|
—
|
|
|
16,138
|
|
||||||
Balance as of September 30, 2018
|
153,599
|
|
|
596,166
|
|
|
1,027,370
|
|
|
(56,167
|
)
|
|
1,567,369
|
|
|
—
|
|
|
1,567,369
|
|
||||||
Net income
|
—
|
|
|
—
|
|
|
369,100
|
|
|
—
|
|
|
369,100
|
|
|
—
|
|
|
369,100
|
|
||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
(14,280
|
)
|
|
(14,280
|
)
|
|
|
|
(14,280
|
)
|
|||||||
Net issuance under employee stock plans
|
321
|
|
|
17,323
|
|
|
—
|
|
|
—
|
|
|
17,323
|
|
|
—
|
|
|
17,323
|
|
||||||
Repurchase of common stock
|
(2,556
|
)
|
|
(9,919
|
)
|
|
(232,482
|
)
|
|
—
|
|
|
(242,401
|
)
|
|
—
|
|
|
(242,401
|
)
|
||||||
Cash dividends ($0.75 per share) and dividend equivalents declared
|
—
|
|
|
—
|
|
|
(115,184
|
)
|
|
—
|
|
|
(115,184
|
)
|
|
—
|
|
|
(115,184
|
)
|
||||||
Stock-based compensation expense
|
—
|
|
|
15,695
|
|
|
—
|
|
|
—
|
|
|
15,695
|
|
|
—
|
|
|
15,695
|
|
||||||
Balance as of December 31, 2018
|
151,364
|
|
|
619,265
|
|
|
1,048,804
|
|
|
(70,447
|
)
|
|
1,597,622
|
|
|
—
|
|
|
1,597,622
|
|
||||||
Net income attributable to KLA-Tencor
|
—
|
|
|
—
|
|
|
192,728
|
|
|
—
|
|
|
192,728
|
|
|
—
|
|
|
192,728
|
|
||||||
Net loss attributable to non-controlling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(83
|
)
|
|
(83
|
)
|
||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
1,540
|
|
|
1,540
|
|
|
—
|
|
|
1,540
|
|
||||||
Assumption of stock-based compensation plan awards in connection with the acquisition of Orbotech
|
—
|
|
|
13,281
|
|
|
—
|
|
|
—
|
|
|
13,281
|
|
|
—
|
|
|
13,281
|
|
||||||
Common stock issued upon the acquisition of Orbotech
|
12,292
|
|
|
1,330,786
|
|
|
—
|
|
|
—
|
|
|
1,330,786
|
|
|
—
|
|
|
1,330,786
|
|
||||||
Net issuance under employee stock plans
|
26
|
|
|
(371
|
)
|
|
—
|
|
|
—
|
|
|
(371
|
)
|
|
—
|
|
|
(371
|
)
|
||||||
Repurchase of common stock
|
(1,770
|
)
|
|
(7,240
|
)
|
|
(198,777
|
)
|
|
—
|
|
|
(206,017
|
)
|
|
—
|
|
|
(206,017
|
)
|
||||||
Cash dividends ($0.75 per share) and dividend equivalents declared
|
—
|
|
|
—
|
|
|
(114,669
|
)
|
|
—
|
|
|
(114,669
|
)
|
|
—
|
|
|
(114,669
|
)
|
||||||
Non-controlling interest in connection with the acquisition of Orbotech
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
36,578
|
|
|
36,578
|
|
||||||
Stock-based compensation expense
|
—
|
|
|
34,193
|
|
|
—
|
|
|
—
|
|
|
34,193
|
|
|
—
|
|
|
34,193
|
|
||||||
Balance as of March 31, 2019
|
161,912
|
|
|
$
|
1,989,914
|
|
|
$
|
928,086
|
|
|
$
|
(68,907
|
)
|
|
$
|
2,849,093
|
|
|
$
|
36,495
|
|
|
$
|
2,885,588
|
|
|
Common Stock and
Capital in Excess of
Par Value
|
|
Retained
Earnings
(Accumulated Deficit)
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Total KLA-Tencor
Stockholders’
Equity
|
|||||||||||
(In thousands, except per share amounts)
|
Shares
|
|
Amount
|
|
||||||||||||||
Balance as of June 30, 2017
|
156,840
|
|
|
$
|
529,283
|
|
|
$
|
848,457
|
|
|
$
|
(51,323
|
)
|
|
$
|
1,326,417
|
|
Net income
|
—
|
|
|
—
|
|
|
280,936
|
|
|
—
|
|
|
280,936
|
|
||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
542
|
|
|
542
|
|
||||
Net issuance under employee stock plans
|
334
|
|
|
(23,628
|
)
|
|
—
|
|
|
—
|
|
|
(23,628
|
)
|
||||
Repurchase of common stock
|
(433
|
)
|
|
(1,463
|
)
|
|
(39,312
|
)
|
|
—
|
|
|
(40,775
|
)
|
||||
Cash dividends ($0.59 per share) and dividend equivalents declared
|
—
|
|
|
—
|
|
|
(93,567
|
)
|
|
—
|
|
|
(93,567
|
)
|
||||
Stock-based compensation expense
|
—
|
|
|
14,031
|
|
|
—
|
|
|
—
|
|
|
14,031
|
|
||||
Balance as of September 30, 2017
|
156,741
|
|
|
518,223
|
|
|
996,514
|
|
|
(50,781
|
)
|
|
1,463,956
|
|
||||
Net loss
|
—
|
|
|
—
|
|
|
(134,319
|
)
|
|
—
|
|
|
(134,319
|
)
|
||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,741
|
)
|
|
(1,741
|
)
|
||||
Net issuance under employee stock plans
|
309
|
|
|
18,012
|
|
|
—
|
|
|
—
|
|
|
18,012
|
|
||||
Repurchase of common stock
|
(388
|
)
|
|
(1,283
|
)
|
|
(39,585
|
)
|
|
—
|
|
|
(40,868
|
)
|
||||
Cash dividends ($0.59 per share) and dividend equivalents declared
|
—
|
|
|
—
|
|
|
(93,154
|
)
|
|
—
|
|
|
(93,154
|
)
|
||||
Stock-based compensation expense
|
—
|
|
|
13,739
|
|
|
—
|
|
|
—
|
|
|
13,739
|
|
||||
Balance as of December 31, 2017
|
156,662
|
|
|
548,691
|
|
|
729,456
|
|
|
(52,522
|
)
|
|
1,225,625
|
|
||||
Net income
|
—
|
|
|
—
|
|
|
306,881
|
|
|
—
|
|
|
306,881
|
|
||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,755
|
)
|
|
(1,755
|
)
|
||||
Net issuance under employee stock plans
|
6
|
|
|
(437
|
)
|
|
—
|
|
|
—
|
|
|
(437
|
)
|
||||
Repurchase of common stock
|
(796
|
)
|
|
(2,787
|
)
|
|
(80,648
|
)
|
|
—
|
|
|
(83,435
|
)
|
||||
Cash dividends ($0.59 per share) and dividend equivalents declared
|
—
|
|
|
—
|
|
|
(92,946
|
)
|
|
—
|
|
|
(92,946
|
)
|
||||
Stock-based compensation expense
|
—
|
|
|
16,210
|
|
|
—
|
|
|
—
|
|
|
16,210
|
|
||||
Balance as of March 31, 2018
|
155,872
|
|
|
$
|
561,677
|
|
|
$
|
862,743
|
|
|
$
|
(54,277
|
)
|
|
$
|
1,370,143
|
|
|
Nine months ended
March 31, |
||||||
(In thousands)
|
2019
|
|
2018
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income
|
$
|
957,689
|
|
|
$
|
453,498
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
105,338
|
|
|
47,695
|
|
||
Loss (gains) on unrealized foreign exchange and other
|
4,863
|
|
|
(1,221
|
)
|
||
Stock-based compensation expense
|
66,026
|
|
|
43,980
|
|
||
Changes in assets and liabilities, net of assets acquired and liabilities assumed in business acquisitions:
|
|
|
|
||||
Accounts receivable
|
(92,586
|
)
|
|
(78,128
|
)
|
||
Inventories
|
(72,740
|
)
|
|
(104,921
|
)
|
||
Other assets
|
15,057
|
|
|
16,276
|
|
||
Accounts payable
|
(17,795
|
)
|
|
21,375
|
|
||
Deferred system revenue
|
(67,428
|
)
|
|
—
|
|
||
Deferred service revenue
|
(16,485
|
)
|
|
—
|
|
||
Deferred system profit
|
—
|
|
|
79,147
|
|
||
Other liabilities
|
(54,768
|
)
|
|
377,906
|
|
||
Net cash provided by operating activities
|
827,171
|
|
|
855,607
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Acquisition of non-marketable securities
|
(630
|
)
|
|
(3,377
|
)
|
||
Business acquisitions, net of cash acquired
|
(1,818,283
|
)
|
|
(5,490
|
)
|
||
Capital expenditures
|
(74,652
|
)
|
|
(44,119
|
)
|
||
Purchases of available-for-sale securities
|
(2,686
|
)
|
|
(438,673
|
)
|
||
Proceeds from sale of available-for-sale securities
|
239,528
|
|
|
165,030
|
|
||
Proceeds from maturity of available-for-sale securities
|
443,107
|
|
|
489,569
|
|
||
Purchases of trading securities
|
(62,428
|
)
|
|
(65,160
|
)
|
||
Proceeds from sale of trading securities
|
64,623
|
|
|
67,063
|
|
||
Net cash (used in) provided by investing activities
|
(1,211,421
|
)
|
|
164,843
|
|
||
Cash flows from financing activities:
|
|
|
|
||||
Proceeds from issuance of debt, net of issuance costs
|
1,186,263
|
|
|
—
|
|
||
Proceeds from revolving credit facility, net of debt issuance costs
|
900,000
|
|
|
248,693
|
|
||
Repayment of debt
|
(902,474
|
)
|
|
(721,250
|
)
|
||
Common stock repurchases
|
(750,216
|
)
|
|
(165,078
|
)
|
||
Payment of dividends to stockholders
|
(350,900
|
)
|
|
(285,030
|
)
|
||
Issuance of common stock
|
20,556
|
|
|
20,571
|
|
||
Tax withholding payments related to vested and released restricted stock units
|
(30,575
|
)
|
|
(26,623
|
)
|
||
Payment of contingent consideration payable
|
(513
|
)
|
|
—
|
|
||
Net cash provided by (used in) financing activities
|
72,141
|
|
|
(928,717
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(110
|
)
|
|
10,898
|
|
||
Net (decrease) increase in cash and cash equivalents
|
(312,219
|
)
|
|
102,631
|
|
||
Cash and cash equivalents at beginning of period
|
1,404,382
|
|
|
1,153,051
|
|
||
Cash and cash equivalents at end of period
|
$
|
1,092,163
|
|
|
$
|
1,255,682
|
|
Supplemental cash flow disclosures:
|
|
|
|
||||
Income taxes paid
|
$
|
164,701
|
|
|
$
|
221,797
|
|
Interest paid
|
$
|
55,529
|
|
|
$
|
61,028
|
|
Non-cash activities:
|
|
|
|
||||
Issuance of common stock for the acquisition of Orbotech Ltd. - financing activities
|
$
|
1,330,786
|
|
|
$
|
—
|
|
Contingent consideration payable - financing activities
|
$
|
6,740
|
|
|
$
|
—
|
|
Dividends payable - financing activities
|
$
|
6,494
|
|
|
$
|
8,408
|
|
Unsettled common stock repurchase - financing activities
|
$
|
5,988
|
|
|
$
|
—
|
|
Accrued debt issuance costs - financing activities
|
$
|
2,530
|
|
|
$
|
—
|
|
Accrued purchases of land, property and equipment - investing activities
|
$
|
6,370
|
|
|
$
|
9,728
|
|
•
|
whether we have a present right to payment;
|
•
|
the customer has legal title;
|
•
|
the customer has physical possession;
|
•
|
the customer has significant risk and rewards of ownership; and
|
•
|
the customer has accepted the product, or whether customer acceptance is considered a formality based on history of acceptance of similar products (for example, when the customer 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, and when the installation of the system is deemed perfunctory).
|
•
|
A decrease of approximately
$97.0 million
in retained earnings related to the deferral of estimated fair value of the warranty services provided with our products for which revenue will be recognized in future periods under ASC 606. Further, upon adoption of ASC 606, we will recognize the standard warranty for a majority of products as a separate performance obligation, while in prior periods, we accounted for the estimated warranty cost as a charge to costs of sales when revenue was recognized. This was partially offset by an increase in retained earnings of approximately
$37.0 million
related to reversal of standard warranty expense, which was charged to cost of revenues in prior periods.
|
•
|
An increase in retained earnings of approximately
$26.0 million
due to a change in the timing of transfer of control over products to the customers.
|
March 31, 2019 (In thousands)
|
As reported under
ASC 606
|
|
Prior to
adoption of
ASC 606
|
|
Effect of changes
|
||||||
ASSETS
|
|
|
|
|
|
||||||
Accounts receivable, net
|
$
|
958,021
|
|
|
$
|
1,064,002
|
|
|
$
|
(105,981
|
)
|
Other current assets
|
270,079
|
|
|
130,172
|
|
|
139,907
|
|
|||
Deferred income taxes
|
205,820
|
|
|
197,392
|
|
|
8,428
|
|
|||
LIABILITIES
|
|
|
|
|
|
||||||
Deferred system revenue
|
$
|
228,745
|
|
|
$
|
—
|
|
|
$
|
228,745
|
|
Deferred service revenue
|
182,119
|
|
|
97,190
|
|
|
84,929
|
|
|||
Deferred system profit
|
—
|
|
|
323,107
|
|
|
(323,107
|
)
|
|||
Other current liabilities
|
833,747
|
|
|
866,870
|
|
|
(33,123
|
)
|
|||
Deferred service revenue, non-current
|
90,610
|
|
|
82,176
|
|
|
8,434
|
|
|||
STOCKHOLDERS
’
EQUITY
|
|
|
|
|
|
||||||
Retained earnings
|
$
|
928,086
|
|
|
$
|
851,740
|
|
|
$
|
76,346
|
|
Accumulated other comprehensive income (loss)
|
(68,907
|
)
|
|
(69,038
|
)
|
|
131
|
|
Three months ended March 31, 2019 (In thousands, except per share amounts)
|
As reported under
ASC 606
|
|
Prior to
adoption of
ASC 606
|
|
Effect of changes
|
||||||
Revenues:
|
|
|
|
|
|
||||||
Product
|
$
|
793,224
|
|
|
$
|
854,393
|
|
|
$
|
(61,169
|
)
|
Service
|
304,087
|
|
|
266,333
|
|
|
37,754
|
|
|||
Costs and expenses:
|
|
|
|
|
|
||||||
Costs of revenues
|
486,945
|
|
|
499,209
|
|
|
(12,264
|
)
|
|||
Other expense (income), net
|
(9,282
|
)
|
|
(9,041
|
)
|
|
(241
|
)
|
|||
Provision for income taxes
|
28,745
|
|
|
29,755
|
|
|
(1,010
|
)
|
|||
Net income attributable to KLA-Tencor
|
192,728
|
|
|
202,627
|
|
|
(9,899
|
)
|
|||
Net income per share attributable to KLA-Tencor
|
|
|
|
|
|
||||||
Basic
|
$
|
1.23
|
|
|
$
|
1.30
|
|
|
$
|
(0.07
|
)
|
Diluted
|
$
|
1.23
|
|
|
$
|
1.29
|
|
|
$
|
(0.06
|
)
|
Nine months ended March 31, 2019 (In thousands, except per share amounts)
|
As reported under
ASC 606
|
|
Prior to
adoption of
ASC 606
|
|
Effect of changes
|
||||||
Revenues:
|
|
|
|
|
|
||||||
Product
|
$
|
2,474,652
|
|
|
$
|
2,430,481
|
|
|
$
|
44,171
|
|
Service
|
835,817
|
|
|
726,976
|
|
|
108,841
|
|
|||
Costs and expenses:
|
|
|
|
|
|
||||||
Costs of revenues
|
1,276,592
|
|
|
1,233,999
|
|
|
42,593
|
|
|||
Other expense (income), net
|
(28,535
|
)
|
|
(28,253
|
)
|
|
(282
|
)
|
|||
Provision for income taxes
|
107,232
|
|
|
94,090
|
|
|
13,142
|
|
|||
Net income attributable to KLA-Tencor
|
957,772
|
|
|
860,212
|
|
|
97,560
|
|
|||
Net income per share attributable to KLA-Tencor:
|
|
|
|
|
|
||||||
Basic
|
$
|
6.20
|
|
|
$
|
5.57
|
|
|
$
|
0.63
|
|
Diluted
|
$
|
6.17
|
|
|
$
|
5.54
|
|
|
$
|
0.63
|
|
|
As of
|
|
As of
|
|
|
|
|
|||||||
(In thousands, except for percentage)
|
March 31, 2019
|
|
July 1, 2018
|
|
$ Change
|
|
% Change
|
|||||||
Accounts receivable, net
|
$
|
958,021
|
|
|
$
|
635,878
|
|
|
$
|
322,143
|
|
|
51
|
%
|
Contract assets
|
$
|
91,518
|
|
|
$
|
14,727
|
|
|
$
|
76,791
|
|
|
521
|
%
|
Contract liabilities
|
$
|
501,474
|
|
|
$
|
556,691
|
|
|
$
|
(55,217
|
)
|
|
(10
|
)%
|
•
|
We account for shipping and handling costs as activities to fulfill the promise to transfer the goods, instead of a promised service to our customer.
|
•
|
We have elected to not adjust the promised amount of consideration for the effects of a significant financing component as we expect, at contract inception, that the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will generally be one year or less.
|
•
|
We have elected to expense costs to obtain a contract as incurred because the expected amortization period is one year or less.
|
•
|
We have elected to reflect the aggregate effect of all modifications that occurred before
July 1, 2018
in determining the transaction price, identifying the satisfied and unsatisfied performance obligations, and allocating the transaction price to the performance obligations.
|
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 March 31, 2019 (In thousands)
|
Total
|
|
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Little or no market activity
Inputs
(Level 3)
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Money market funds and other
|
$
|
592,141
|
|
|
$
|
592,141
|
|
|
$
|
—
|
|
|
$
|
—
|
|
U.S. Treasury securities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Marketable securities:
|
|
|
|
|
|
|
|
||||||||
Corporate debt securities
|
439,246
|
|
|
—
|
|
|
439,246
|
|
|
—
|
|
||||
Sovereign securities
|
10,991
|
|
|
—
|
|
|
10,991
|
|
|
—
|
|
||||
U.S. Government agency securities
|
166,092
|
|
|
166,092
|
|
|
—
|
|
|
—
|
|
||||
U.S. Treasury securities
|
187,080
|
|
|
187,080
|
|
|
—
|
|
|
—
|
|
||||
Total cash equivalents and marketable securities
(1)
|
1,395,550
|
|
|
945,313
|
|
|
450,237
|
|
|
—
|
|
||||
Other current assets:
|
|
|
|
|
|
|
|
||||||||
Derivative assets
|
4,246
|
|
|
—
|
|
|
4,246
|
|
|
—
|
|
||||
Other non-current assets:
|
|
|
|
|
|
|
|
||||||||
Executive Deferred Savings Plan
|
203,286
|
|
|
153,528
|
|
|
49,758
|
|
|
—
|
|
||||
Total financial assets
(1)
|
$
|
1,603,082
|
|
|
$
|
1,098,841
|
|
|
$
|
504,241
|
|
|
$
|
—
|
|
Liabilities
|
|
|
|
|
|
|
|
||||||||
Derivative liabilities
|
$
|
(1,816
|
)
|
|
$
|
—
|
|
|
$
|
(1,816
|
)
|
|
$
|
—
|
|
Deferred payments
|
(8,800
|
)
|
|
—
|
|
|
—
|
|
|
(8,800
|
)
|
||||
Contingent consideration payable
|
(13,840
|
)
|
|
—
|
|
|
—
|
|
|
(13,840
|
)
|
||||
Total financial liabilities
|
$
|
(24,456
|
)
|
|
$
|
—
|
|
|
$
|
(1,816
|
)
|
|
$
|
(22,640
|
)
|
As of June 30, 2018 (In thousands)
|
Total
|
|
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
||||||
Assets
|
|
|
|
|
|
||||||
Cash equivalents:
|
|
|
|
|
|
||||||
Corporate debt securities
|
$
|
4,995
|
|
|
$
|
—
|
|
|
$
|
4,995
|
|
Money market funds and other
|
863,115
|
|
|
863,115
|
|
|
—
|
|
|||
U.S. Government agency securities
|
7,675
|
|
|
—
|
|
|
7,675
|
|
|||
U.S. Treasury securities
|
1,996
|
|
|
—
|
|
|
1,996
|
|
|||
Marketable securities:
|
|
|
|
|
|
||||||
Corporate debt securities
|
735,408
|
|
|
—
|
|
|
735,408
|
|
|||
Sovereign securities
|
17,142
|
|
|
—
|
|
|
17,142
|
|
|||
U.S. Government agency securities
|
316,022
|
|
|
299,501
|
|
|
16,521
|
|
|||
U.S. Treasury securities
|
405,654
|
|
|
364,574
|
|
|
41,080
|
|
|||
Total cash equivalents and marketable securities
(1)
|
2,352,007
|
|
|
1,527,190
|
|
|
824,817
|
|
|||
Other current assets:
|
|
|
|
|
|
||||||
Derivative assets
|
5,385
|
|
|
—
|
|
|
5,385
|
|
|||
Other non-current assets:
|
|
|
|
|
|
||||||
Executive Deferred Savings Plan
|
197,213
|
|
|
143,580
|
|
|
53,633
|
|
|||
Total financial assets
(1)
|
$
|
2,554,605
|
|
|
$
|
1,670,770
|
|
|
$
|
883,835
|
|
Liabilities
|
|
|
|
|
|
||||||
Derivative liabilities
|
$
|
(6,828
|
)
|
|
$
|
—
|
|
|
$
|
(6,828
|
)
|
Total financial liabilities
|
$
|
(6,828
|
)
|
|
$
|
—
|
|
|
$
|
(6,828
|
)
|
(In thousands)
|
As of
March 31, 2019 |
|
As of
June 30, 2018 |
||||
Accounts receivable, net:
|
|
|
|
||||
Accounts receivable, gross
|
$
|
970,291
|
|
|
$
|
663,317
|
|
Allowance for doubtful accounts
|
(12,270
|
)
|
|
(11,639
|
)
|
||
|
$
|
958,021
|
|
|
$
|
651,678
|
|
Inventories:
|
|
|
|
||||
Customer service parts
|
$
|
337,720
|
|
|
$
|
253,639
|
|
Raw materials
|
466,133
|
|
|
331,065
|
|
||
Work-in-process
|
314,480
|
|
|
280,208
|
|
||
Finished goods
|
198,927
|
|
|
66,933
|
|
||
|
$
|
1,317,260
|
|
|
$
|
931,845
|
|
Other current assets:
|
|
|
|
||||
Contract assets
|
$
|
91,518
|
|
|
$
|
—
|
|
Deferred costs of revenue
(1)
|
48,389
|
|
|
—
|
|
||
Prepaid expenses
|
76,507
|
|
|
47,088
|
|
||
Prepaid income and other taxes
|
34,479
|
|
|
23,452
|
|
||
Other current assets
|
19,186
|
|
|
14,619
|
|
||
|
$
|
270,079
|
|
|
$
|
85,159
|
|
Land, property and equipment, net:
|
|
|
|
||||
Land
|
$
|
41,422
|
|
|
$
|
40,599
|
|
Buildings and leasehold improvements
|
389,270
|
|
|
335,647
|
|
||
Machinery and equipment
|
662,025
|
|
|
577,077
|
|
||
Office furniture and fixtures
|
28,475
|
|
|
22,171
|
|
||
Construction-in-process
|
27,766
|
|
|
9,180
|
|
||
|
1,148,958
|
|
|
984,674
|
|
||
Less: accumulated depreciation
|
(737,106
|
)
|
|
(698,368
|
)
|
||
|
$
|
411,852
|
|
|
$
|
286,306
|
|
Other non-current assets:
|
|
|
|
||||
Executive Deferred Savings Plan
(2)
|
$
|
203,286
|
|
|
$
|
197,213
|
|
Other non-current assets
|
56,804
|
|
|
38,869
|
|
||
|
$
|
260,090
|
|
|
$
|
236,082
|
|
Other current liabilities:
|
|
|
|
||||
Compensation and benefits
|
$
|
246,429
|
|
|
$
|
173,774
|
|
Executive Deferred Savings Plan
(2)
|
204,349
|
|
|
199,505
|
|
||
Other accrued expenses
|
176,677
|
|
|
123,869
|
|
||
Customer credits and advances
|
148,389
|
|
|
116,440
|
|
||
Interest payable
|
44,046
|
|
|
16,947
|
|
||
Warranty
|
6,740
|
|
|
42,258
|
|
||
Income taxes payable
|
7,117
|
|
|
23,287
|
|
||
|
$
|
833,747
|
|
|
$
|
696,080
|
|
Other non-current liabilities:
|
|
|
|
||||
Income taxes payable
|
$
|
390,904
|
|
|
$
|
371,665
|
|
Pension liabilities
|
67,103
|
|
|
66,786
|
|
||
Other non-current liabilities
|
117,592
|
|
|
54,791
|
|
||
|
$
|
575,599
|
|
|
$
|
493,242
|
|
(1)
|
Deferred costs of revenue were previously included under deferred system profit prior to the adoption of ASC 606.
|
(2)
|
We have a non-qualified deferred compensation plan (known as “Executive Deferred Savings Plan” or “EDSP”) under which certain employees and non-employee directors may defer a portion of their compensation. The expense (benefit) associated with changes in the EDSP liability included in selling, general and administrative expense was
$19.3 million
and
$0.9 million
during the
three months ended
March 31, 2019
and
2018
, respectively and was
$7.0 million
and
$14.7 million
during the
nine
months ended
March 31, 2019
and
2018
, respectively. The amount of net gains (losses) associated with changes in the EDSP assets included in selling, general and administrative expense was
$19.7 million
and
$0.5 million
during the
three months ended
March 31, 2019
and
2018
, respectively and was
$7.7 million
and
$14.4 million
the
nine
months ended
March 31, 2019
and
2018
, respectively. For additional details, refer to Note 1, “Description of Business and Summary of Significant Accounting Policies,” of the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended
June 30, 2018
.
|
(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 March 31, 2019
|
$
|
(43,630
|
)
|
|
$
|
(3,181
|
)
|
|
$
|
(6,266
|
)
|
|
$
|
(15,830
|
)
|
|
$
|
(68,907
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Balance as of June 30, 2018
|
$
|
(29,974
|
)
|
|
$
|
(11,032
|
)
|
|
$
|
1,932
|
|
|
$
|
(14,859
|
)
|
|
$
|
(53,933
|
)
|
|
|
Location in the Condensed Consolidated
|
|
Three months ended
March 31, |
|
Nine months ended
March 31, |
||||||||||||
Accumulated OCI Components
|
|
Statements of Operations
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Unrealized gains (losses) on cash flow hedges from foreign exchange and interest rate contracts
(1)
|
|
Revenues
|
|
$
|
655
|
|
|
$
|
(65
|
)
|
|
$
|
3,343
|
|
|
$
|
1,300
|
|
|
|
Costs of revenues
|
|
(17
|
)
|
|
570
|
|
|
(309
|
)
|
|
1,908
|
|
||||
|
|
Interest expense
|
|
150
|
|
|
189
|
|
|
527
|
|
|
567
|
|
||||
|
|
Other expense (income), net
|
|
158
|
|
|
—
|
|
|
158
|
|
|
—
|
|
||||
|
|
Net gains (losses) reclassified from accumulated OCI
|
|
$
|
946
|
|
|
$
|
694
|
|
|
$
|
3,719
|
|
|
$
|
3,775
|
|
Unrealized gains (losses) on available-for-sale securities
|
|
Other expense (income), net
|
|
$
|
(313
|
)
|
|
$
|
2
|
|
|
$
|
(1,263
|
)
|
|
$
|
(61
|
)
|
(1)
|
Reflects the adoption of the new accounting guidance for hedge accounting in the second quarter of fiscal year 2019. For additional details, refer to Note 15, “Derivative Instruments and Hedging Activities.”
|
As of March 31, 2019 (In thousands)
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
||||||||
Corporate debt securities
|
$
|
441,279
|
|
|
$
|
43
|
|
|
$
|
(2,076
|
)
|
|
$
|
439,246
|
|
Money market funds and other
|
592,141
|
|
|
—
|
|
|
—
|
|
|
592,141
|
|
||||
Sovereign securities
|
11,037
|
|
|
—
|
|
|
(46
|
)
|
|
10,991
|
|
||||
U.S. Government agency securities
|
166,867
|
|
|
1
|
|
|
(776
|
)
|
|
166,092
|
|
||||
U.S. Treasury securities
|
188,283
|
|
|
—
|
|
|
(1,203
|
)
|
|
187,080
|
|
||||
Subtotal
|
1,399,607
|
|
|
44
|
|
|
(4,101
|
)
|
|
1,395,550
|
|
||||
Add: Time deposits
(1)
|
54,986
|
|
|
—
|
|
|
—
|
|
|
54,986
|
|
||||
Less: Cash equivalents
|
645,431
|
|
|
—
|
|
|
—
|
|
|
645,431
|
|
||||
Marketable securities
|
$
|
809,162
|
|
|
$
|
44
|
|
|
$
|
(4,101
|
)
|
|
$
|
805,105
|
|
As of June 30, 2018 (In thousands)
|
Amortized
Cost |
|
Gross
Unrealized Gains |
|
Gross
Unrealized Losses |
|
Fair
Value |
||||||||
Corporate debt securities
|
$
|
747,763
|
|
|
$
|
148
|
|
|
$
|
(7,508
|
)
|
|
$
|
740,403
|
|
Money market funds and other
|
863,115
|
|
|
—
|
|
|
—
|
|
|
863,115
|
|
||||
Sovereign securities
|
17,293
|
|
|
—
|
|
|
(151
|
)
|
|
17,142
|
|
||||
U.S. Government agency securities
|
326,508
|
|
|
16
|
|
|
(2,827
|
)
|
|
323,697
|
|
||||
U.S. Treasury securities
|
411,329
|
|
|
3
|
|
|
(3,682
|
)
|
|
407,650
|
|
||||
Subtotal
|
2,366,008
|
|
|
167
|
|
|
(14,168
|
)
|
|
2,352,007
|
|
||||
Add: Time deposits
(1)
|
54,537
|
|
|
—
|
|
|
—
|
|
|
54,537
|
|
||||
Less: Cash equivalents
|
930,608
|
|
|
—
|
|
|
—
|
|
|
930,608
|
|
||||
Marketable securities
|
$
|
1,489,937
|
|
|
$
|
167
|
|
|
$
|
(14,168
|
)
|
|
$
|
1,475,936
|
|
As of March 31, 2019 (In thousands)
|
Fair Value
|
|
Gross
Unrealized
Losses
(1)
|
||||
Corporate debt securities
|
$
|
397,009
|
|
|
$
|
(2,076
|
)
|
U.S. Treasury securities
|
187,080
|
|
|
(1,203
|
)
|
||
U.S. Government agency securities
|
163,445
|
|
|
(776
|
)
|
||
Sovereign securities
|
10,991
|
|
|
(46
|
)
|
||
Total
|
$
|
758,525
|
|
|
$
|
(4,101
|
)
|
As of March 31, 2019 (In thousands)
|
Amortized Cost
|
|
Fair Value
|
||||
Due within one year
|
$
|
606,043
|
|
|
$
|
603,536
|
|
Due after one year through three years
|
203,119
|
|
|
201,569
|
|
||
|
$
|
809,162
|
|
|
$
|
805,105
|
|
Purchase Price
|
|
||
Cash for outstanding Orbotech shares
(1)
|
$
|
1,901,948
|
|
Fair value of KLA-Tencor common stock issued for outstanding Orbotech shares
(2)
|
1,324,657
|
|
|
Cash for Orbotech equity awards
(3)
|
9,543
|
|
|
Fair value of KLA-Tencor common stock issued to settle Orbotech equity awards
(4)
|
6,129
|
|
|
Stock options and RSUs assumed
(5)
|
13,281
|
|
|
Total purchase consideration
|
3,255,558
|
|
|
Less: cash acquired
|
(215,640
|
)
|
|
Total purchase consideration, net of cash acquired
|
$
|
3,039,918
|
|
|
|
||
Allocation
|
|
||
Total current assets
|
$
|
694,143
|
|
Property, plant and equipment
|
94,290
|
|
|
Goodwill
|
1,773,544
|
|
|
Intangible assets
|
1,629,070
|
|
|
Other non-current assets
|
77,780
|
|
|
Total current liabilities
(6)
|
(301,090
|
)
|
|
Deferred tax liability
|
(825,341
|
)
|
|
Total non-current liabilities
(6)
|
(65,896
|
)
|
|
Non-controlling interest
|
(36,582
|
)
|
|
|
$
|
3,039,918
|
|
(1)
|
Represents the total cash paid to settle
48.9 million
outstanding Orbotech Shares as of February 20, 2019 at
$38.86
per Orbotech share.
|
(2)
|
Represents the fair value of
12.2 million
shares of our common stock issued to settle
48.9 million
outstanding Orbotech shares. KLA issued
0.25
shares for each Orbotech share. The fair value of KLA’s common stock was $
108.26
per share on the Acquisition Date.
|
(3)
|
Represents primarily cash consideration for the settlement of the vested stock options and restricted stock units for which services were rendered by the employees of Orbotech prior to the closing, and a small portion for the settlement of fractional shares.
|
(4)
|
Represents the fair value of share of
56,614
shares of KLA common stock issued to settle the vested Orbotech stock options. The fair value of KLA’s common stock was
$108.26
per share on the Acquisition Date.
|
(5)
|
Represents the fair value of the assumed stock options and RSUs to the extent those related to services provided by the employee of Orbotech prior to closing. Also refer to Note 9, “Equity, Long-Term Incentive Compensation Plans and Non-Controlling Interest” for additional information about assumed stock options and RSUs.
|
(6)
|
On December 24, 2018, Orbotech, as part of its strategy to invest in the high growth area of the software business within the Printed Circuit Boards (“PCB”) industry, acquired the remaining
50%
shares of Frontline, which was prior to that accounted as an equity investee, from Mentor Graphics Development Services (Israel) Ltd. Orbotech acquired all of the joint venture interests it did not previously own for
$85.0 million
in cash on hand and agreed to pay an additional
$10.0 million
in cash over
four years
plus a cash earn-out of not less than
$5.0 million
and up to
$20.0 million
. The earn out amounts are based on revenues from a Frontline product currently under development. As of February 20, 2019, the estimated fair market values of the
four
-year cash payment and the earn-out are
$8.8 million
and
$7.1 million
, respectively. As of February 20, 2019, these amounts have been included in current and non-current liabilities at
$4.3 million
and
$11.6 million
respectively.
|
(In thousands)
|
Fair Value
|
|
Weighted Average Useful Lives
|
|||
Existing technology
(1)
|
$
|
1,023,000
|
|
|
8
|
|
Customer-related assets
(2)
|
299,000
|
|
|
8
|
||
Backlog
(3)
|
29,000
|
|
|
1
|
||
Trade name
(4)
|
92,500
|
|
|
7
|
||
Off market leases
(5)
|
2,070
|
|
2,070
|
|
7
|
|
Total identified finite-lived intangible assets
|
1,445,570
|
|
|
|
||
In-process research and development
(6)
|
183,500
|
|
|
N/A
|
||
Total identified intangible assets
|
$
|
1,629,070
|
|
|
|
(1)
|
Existing technology was identified from the products of Orbotech and its fair value was determined using the Relief-from-Royalty Method under the income approach, which estimates the cost savings generated by a company related to the ownership of an asset for which it would otherwise have had to pay royalties or license fees on revenues earned through the use of the asset. The discount rate used was determined at the time of measurement based on an analysis of the implied internal rate of return of the transaction, weighted average cost of capital and weighted average return on assets. The economic useful life was determined based on the technology cycle related to each developed technology, as well as the cash flows over the forecast period.
|
(2)
|
Customer contracts and related relationships represent the fair value of the existing relationships with the Orbotech customers and its fair value was determined using the Multi-Period Excess Earning Method which involves isolating the net earnings attributable to the asset being measured based on present value of the incremental after-tax cash flows (excess earnings) attributable solely to the intangible asset over its remaining useful life. The economic useful life was determined based on historical customer turnover rates.
|
(3)
|
Backlog primarily relates to the dollar value of purchase arrangements with customers, effective, as of a given point in time, that are based on mutually agreed terms which, in some cases, may still be subject to completion of written documentation and may be changed or cancelled by the customer, often without penalty. Orbotech’s backlog consists of these arrangements with assigned shipment dates expected, in most cases, within three to twelve months. The fair value was determined using the Multi-Period Excess Earning Method. The economic useful life is based on the time to fulfill the outstanding order backlog obligation.
|
(4)
|
Trade name primarily relates to the “Orbotech” trade name. The fair value was determined by applying the relief-from-royalty method under the income approach. The economic useful life was determined based on the expected life of the trade name.
|
(5)
|
The favorable / unfavorable components of the acquired leases were determined using the Income Approach which involves present valuing the difference in future cash flows between the contracted lease payments and the rent payable to a market participant over the lease terms. The economic useful life is based on the remaining lease term.
|
(6)
|
The fair value of in-process research and development (“IPR&D”) was determined using the relief-from-royalty method under the income approach, which estimates the cost savings generated by a company related to the ownership of an asset for which it would otherwise have had to pay royalties or license fees on revenues earned through the use of the asset.
|
(In thousands)
|
Fair Value
|
||
Net tangible assets (including Cash and cash equivalents of $2.6 million)
|
$
|
13,468
|
|
Identifiable intangible assets
|
76,630
|
|
|
Goodwill
|
43,357
|
|
|
Total
|
$
|
133,455
|
|
|
Three months ended
|
|
Nine months ended
|
||||||||||||
|
March 31,
|
|
March 31,
|
||||||||||||
Non-recurring Adjustments
(In thousands)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Decrease/ (increase) to revenue as a result of deferred revenue fair value adjustment
|
$
|
—
|
|
|
$
|
(536
|
)
|
|
$
|
—
|
|
|
$
|
5,625
|
|
(Decrease) / increase to expense as a result of inventory fair value adjustment
|
$
|
78
|
|
|
$
|
468
|
|
|
$
|
1,029
|
|
|
$
|
85,904
|
|
(Decrease) / increase to expense as a result of transaction costs
|
$
|
(53,342
|
)
|
|
$
|
(8,615
|
)
|
|
$
|
(61,378
|
)
|
|
$
|
65,535
|
|
(Decrease) / increase to expense as a result of compensation costs
|
$
|
1,724
|
|
|
$
|
3,009
|
|
|
$
|
7,918
|
|
|
$
|
39,820
|
|
|
Pro Forma
|
|
Pro Forma
|
||||||||||||
|
Three months ended
|
|
Nine months ended
|
||||||||||||
|
March 31,
|
|
March 31,
|
||||||||||||
(In thousands)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Revenues
|
$
|
1,160,678
|
|
|
$
|
1,271,326
|
|
|
$
|
4,165,268
|
|
|
$
|
3,730,272
|
|
Net income attributable to KLA-Tencor
|
$
|
192,577
|
|
|
$
|
293,593
|
|
|
$
|
1,033,653
|
|
|
$
|
260,537
|
|
(In thousands)
|
|
Wafer Inspection
|
|
Patterning
|
|
GSS
|
|
Others
|
|
Orbotech
|
|
Total
|
||||||||||||
Balance as of June 30, 2018
|
|
$
|
281,005
|
|
|
$
|
53,255
|
|
|
$
|
8,039
|
|
|
$
|
12,399
|
|
|
$
|
—
|
|
|
$
|
354,698
|
|
Acquired goodwill
|
|
—
|
|
|
24,863
|
|
|
17,318
|
|
|
1,176
|
|
|
1,773,544
|
|
|
1,816,901
|
|
||||||
Foreign currency and other adjustments
|
|
(14
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,317
|
|
|
1,303
|
|
||||||
Balance as of March 31, 2019
|
|
$
|
280,991
|
|
|
$
|
78,118
|
|
|
$
|
25,357
|
|
|
$
|
13,575
|
|
|
$
|
1,774,861
|
|
|
$
|
2,172,902
|
|
(In thousands)
|
|
|
As of
March 31, 2019 |
|
As of
June 30, 2018 |
||||||||||||||||||||
Category
|
Range of
Useful Lives
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization,
Impairment, and Other
|
|
Net
Amount
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
and
Impairment
|
|
Net
Amount
|
||||||||||||
Existing technology
|
4-8 years
|
|
$
|
1,238,037
|
|
|
$
|
161,827
|
|
|
$
|
1,076,210
|
|
|
$
|
160,859
|
|
|
$
|
144,202
|
|
|
$
|
16,657
|
|
Trade name/Trademark
|
5-7 years
|
|
115,573
|
|
|
21,638
|
|
|
93,935
|
|
|
20,993
|
|
|
20,060
|
|
|
933
|
|
||||||
Customer relationships
|
4-9 years
|
|
370,665
|
|
|
59,740
|
|
|
310,925
|
|
|
56,680
|
|
|
55,136
|
|
|
1,544
|
|
||||||
Backlog and other
|
<1-8.5 years
|
|
35,437
|
|
|
5,267
|
|
|
30,170
|
|
|
660
|
|
|
461
|
|
|
199
|
|
||||||
Intangible assets subject to amortization
|
|
|
1,759,712
|
|
|
248,472
|
|
|
1,511,240
|
|
|
239,192
|
|
|
219,859
|
|
|
19,333
|
|
||||||
In-process research and development
|
|
|
183,500
|
|
|
427
|
|
|
183,073
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total
|
|
|
$
|
1,943,212
|
|
|
$
|
248,899
|
|
|
$
|
1,694,313
|
|
|
$
|
239,192
|
|
|
$
|
219,859
|
|
|
$
|
19,333
|
|
|
Three months ended
|
|
Nine months ended
|
||||||||||||
|
March 31,
|
|
March 31,
|
||||||||||||
(In thousands)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Amortization expense- Cost of revenues
|
$
|
15,770
|
|
|
$
|
1,122
|
|
|
$
|
17,628
|
|
|
$
|
3,366
|
|
Amortization expense- Selling, general and administrative
|
10,086
|
|
|
65
|
|
|
10,973
|
|
|
220
|
|
||||
Amortization expense- Research and development
|
12
|
|
|
—
|
|
|
12
|
|
|
—
|
|
||||
Total
|
$
|
25,868
|
|
|
$
|
1,187
|
|
|
$
|
28,613
|
|
|
$
|
3,586
|
|
Fiscal year ending June 30:
|
Amortization
(In thousands)
|
||
2019 (remaining 3 months)
|
$
|
59,114
|
|
2020
|
216,956
|
|
|
2021
|
196,915
|
|
|
2022
|
196,915
|
|
|
2023
|
195,691
|
|
|
Thereafter
|
645,649
|
|
|
Total
|
$
|
1,511,240
|
|
|
As of March 31, 2019
|
|
As of June 30, 2018
|
||||||||||
|
Amount
(In thousands)
|
|
Effective
Interest Rate
|
|
Amount
(In thousands) |
|
Effective
Interest Rate
|
||||||
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
|
1,250,000
|
|
|
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
|
%
|
||
Fixed-rate 4.1000% Senior Notes due on March 15, 2029
|
800,000
|
|
|
4.159
|
%
|
|
—
|
|
|
—
|
%
|
||
Fixed-rate 5.000% Senior Notes due on March 15, 2049
|
400,000
|
|
|
5.047
|
%
|
|
—
|
|
|
—
|
%
|
||
Total
|
3,450,000
|
|
|
|
|
2,250,000
|
|
|
|
||||
Unamortized discount
|
(8,948
|
)
|
|
|
|
(2,523
|
)
|
|
|
||||
Unamortized debt issuance costs
|
(18,406
|
)
|
|
|
|
(10,075
|
)
|
|
|
||||
Total
|
$
|
3,422,646
|
|
|
|
|
$
|
2,237,402
|
|
|
|
||
Reported as:
|
|
|
|
|
|
|
|
||||||
Current portion of long-term debt
|
$
|
249,997
|
|
|
|
|
$
|
—
|
|
|
|
||
Long-term debt
|
3,172,649
|
|
|
|
|
2,237,402
|
|
|
|
||||
Total
|
$
|
3,422,646
|
|
|
|
|
$
|
2,237,402
|
|
|
|
a)
|
Each award of Orbotech’s stock options and RSUs that was outstanding and vested immediately prior to the Acquisition Date (collectively the “Vested Equity Awards”) was canceled and terminated and converted into the right to receive the purchase consideration in respect of such Vested Equity Awards as of the Acquisition Date, and in the case of stock options, less the exercise price.
|
b)
|
Each award of Orbotech’s stock options and RSUs that was outstanding and unvested immediately prior to the Acquisition Date was assumed by us (each, an “Assumed Option” and “Assumed RSU”, and collectively the “Assumed Equity Awards”) and converted to stock options and RSUs exercisable for the number of shares of our common stock equal to the product of (i) the number of Orbotech shares underlying such Assumed Equity Awards as of immediately prior to the Acquisition Date multiplied by (ii) the exchange ratio defined in the Acquisition Agreement. The Assumed Equity Awards generally retain all of the rights, terms and conditions of the respective plans under which they were originally granted, including the same service-based vesting schedule, applicable thereto.
|
(In thousands)
|
Available
For Grant
(1) (5)
|
|
Balance as of June 30, 2018
|
3,680
|
|
Plan shares increased
|
12,000
|
|
Restricted stock units granted
(2)(3)
|
(2,209
|
)
|
Restricted stock units granted adjustment
(4)
|
5
|
|
Restricted stock units canceled
|
20
|
|
Plan shares expired (1998 Director Plan)
|
(1,660
|
)
|
Balance as of March 31, 2019
|
11,836
|
|
(1)
|
The number of RSUs reflects the application of the award multiplier (
1.8
x or
2.0
x depending on the grant date of the applicable award).
|
(2)
|
Includes RSUs granted to senior management during the
nine
months ended
March 31, 2019
with performance-based vesting criteria (in addition to service-based vesting criteria for any of such RSUs that are deemed to have been earned) (“performance-based RSUs”). As of
March 31, 2019
, it had not yet been determined the extent to which (if at all) the performance-based vesting criteria had been satisfied. Therefore, this line item includes all such performance-based RSUs granted during the
nine
months ended
March 31, 2019
, reported at the maximum possible number of shares that may ultimately be issuable if all applicable performance-based criteria are achieved at their maximum levels and all applicable service-based criteria are fully satisfied (
0.7 million
shares for the
nine
months ended
March 31, 2019
reflects the application of the multiplier described above).
|
(3)
|
Includes RSUs granted to executive management during the three months ended
March 31, 2019
with both a market condition and a service condition (“market-based RSUs”). Under the award agreements, the vesting of the market-based RSUs is contingent on achieving total stockholder return (including stock price appreciation and cash dividends) objectives on a per share basis of equal to or greater than
150%
,
175%
and
200%
multiplied by the measurement price of
$116.39
during the
five
-year period ending March 20, 2024. The awards are split into three tranches and, to the extent that total stockholder return targets have been met, one-third of the maximum number of shares available under these awards will vest on each of the third, fourth, and fifth anniversaries of the grant date. This line item includes all such market-based RSUs granted during the
three months ended
March 31, 2019
reported at the maximum possible number of shares that may ultimately be issuable if all applicable market-based criteria are met at their maximum levels and all applicable service-based criteria are fully satisfied (
0.5 million
shares for the nine months ended
March 31, 2019
reflects the application of the multiplier described above).
|
(4)
|
Represents the portion of RSUs granted with performance-based vesting criteria and reported at the actual number of shares issued upon achievement of the performance vesting criteria during the
nine
months ended
March 31, 2019
.
|
(5)
|
No additional stock options, RSUs or other awards will be granted under the Assumed Equity Plans.
|
|
Three months ended
March 31, |
|
Nine months ended
March 31, |
||||||||||||
(In thousands)
|
2019
(1)
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Stock-based compensation expense by:
|
|
|
|
|
|
|
|
||||||||
Costs of revenues
|
$
|
3,105
|
|
|
$
|
2,386
|
|
|
$
|
6,759
|
|
|
$
|
5,458
|
|
Research and development
|
4,986
|
|
|
3,185
|
|
|
9,988
|
|
|
7,631
|
|
||||
Selling, general and administrative
|
26,102
|
|
|
10,639
|
|
|
49,279
|
|
|
30,891
|
|
||||
Total stock-based compensation expense
|
$
|
34,193
|
|
|
$
|
16,210
|
|
|
$
|
66,026
|
|
|
$
|
43,980
|
|
(1)
|
Includes
$10.9 million
of stock-based compensation expense acceleration for certain equity awards for Orbotech employees.
|
(In thousands)
|
As of
March 31, 2019 |
|
As of
June 30, 2018 |
||||
Inventory
|
$
|
4,943
|
|
|
$
|
4,580
|
|
|
Shares
(1)
(In thousands)
|
|
Weighted-Average
Grant Date
Fair Value
|
|||
Outstanding restricted stock units as of June 30, 2018
(2)
|
2,014
|
|
|
$
|
76.50
|
|
Granted
(2)
|
1,104
|
|
|
$
|
103.59
|
|
Granted adjustments
(3)
|
(2
|
)
|
|
$
|
50.88
|
|
Assumed upon Orbotech Acquisition
(4)
|
519
|
|
|
$
|
104.49
|
|
Vested and released
|
(409
|
)
|
|
$
|
68.73
|
|
Withheld for taxes
|
(285
|
)
|
|
$
|
68.73
|
|
Forfeited
|
(10
|
)
|
|
$
|
81.55
|
|
Outstanding restricted stock units as of March 31, 2019
(2)
|
2,931
|
|
|
$
|
93.46
|
|
(1)
|
Share numbers reflect actual shares subject to awarded RSUs. 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 performance-based and market-based RSUs. As of
March 31, 2019
, it had not yet been determined the extent to which (if at all) the performance-based or market-based vesting criteria had been satisfied. Therefore, this line item includes all such RSUs reported at the maximum possible number of shares (
42 thousand
shares for the fiscal year ended June 30, 2017,
0.2 million
shares for the fiscal year ended June 30, 2018 and
0.6 million
shares for the
nine
months ended
March 31, 2019
) that may ultimately be issuable if all applicable performance-based and market-based criteria are achieved at their maximum and all applicable service-based criteria are fully satisfied.
|
(3)
|
Represents the portion of RSUs granted with performance-based vesting criteria and reported at the actual number of shares issued upon achievement of the performance vesting criteria during
nine
months ended
March 31, 2019
.
|
(4)
|
Represents Assumed RSUs under the Assumed Equity Plans. Since the Assumed RSUs do not have “dividend equivalent” rights, the fair value was calculated using the closing price of our common stock on the Acquisition Date, adjusted to exclude the present value of dividends.
|
|
Three months ended
March 31, |
|
Nine months ended
March 31, |
||||||||||||
(In thousands, except for weighted-average grant date fair value)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Weighted-average grant date fair value per unit
|
$
|
97.60
|
|
|
$
|
109.80
|
|
|
$
|
103.59
|
|
|
$
|
91.84
|
|
Weighted-average fair value per unit assumed upon Orbotech Acquisition
|
$
|
104.49
|
|
|
$
|
—
|
|
|
$
|
104.49
|
|
|
$
|
—
|
|
Grant date fair value of vested restricted stock units
|
$
|
4,740
|
|
|
$
|
745
|
|
|
$
|
47,674
|
|
|
$
|
42,601
|
|
Tax benefits realized by us in connection with vested and released restricted stock units
|
$
|
170
|
|
|
$
|
249
|
|
|
$
|
10,900
|
|
|
$
|
16,731
|
|
|
Three months ended
March 31, |
|
Nine months ended
March 31, |
||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||
Stock purchase plan:
|
|
|
|
|
|
|
|
||||
Expected stock price volatility
|
36.3
|
%
|
|
31.5
|
%
|
|
33.2
|
%
|
|
28.7
|
%
|
Risk-free interest rate
|
2.4
|
%
|
|
1.3
|
%
|
|
2.1
|
%
|
|
1.1
|
%
|
Dividend yield
|
3.3
|
%
|
|
2.4
|
%
|
|
3.1
|
%
|
|
2.5
|
%
|
Expected life (in years)
|
0.5
|
|
|
0.5
|
|
|
0.5
|
|
|
0.5
|
|
(In thousands, except for weighted-average fair value per share)
|
Three months ended
March 31, |
|
Nine months ended
March 31, |
||||||||||||
2019
|
|
2018
|
|
2019
|
|
2018
|
|||||||||
Total cash received from employees for the issuance of shares under the ESPP
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
20,556
|
|
|
$
|
20,579
|
|
Number of shares purchased by employees through the ESPP
|
—
|
|
|
—
|
|
|
270
|
|
|
264
|
|
||||
Tax benefits realized by us in connection with the disqualifying dispositions of shares purchased under the ESPP
|
$
|
444
|
|
|
$
|
787
|
|
|
$
|
1,047
|
|
|
$
|
1,681
|
|
Weighted-average fair value per share based on Black-Scholes model
|
$
|
21.25
|
|
|
$
|
23.61
|
|
|
$
|
21.67
|
|
|
$
|
21.89
|
|
|
Three months ended
March 31, |
|
Nine months ended
March 31, |
||||||||||||
(In thousands)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Number of shares of common stock repurchased
|
1,770
|
|
|
796
|
|
|
7,107
|
|
|
1,618
|
|
||||
Total cost of repurchases
|
$
|
206,017
|
|
|
$
|
83,435
|
|
|
$
|
756,204
|
|
|
$
|
165,078
|
|
(In thousands, except per share amounts)
|
Three months ended
March 31, |
|
Nine months ended
March 31, |
||||||||||||
2019
|
|
2018
|
|
2019
|
|
2018
|
|||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net income attributable to KLA-Tencor
|
$
|
192,728
|
|
|
$
|
306,881
|
|
|
$
|
957,772
|
|
|
$
|
453,498
|
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Weighted-average shares-basic, excluding unvested restricted stock units
|
156,349
|
|
|
156,221
|
|
|
154,561
|
|
|
156,547
|
|
||||
Effect of dilutive restricted stock units and options
|
833
|
|
|
980
|
|
|
749
|
|
|
992
|
|
||||
Weighted-average shares-diluted
|
157,182
|
|
|
157,201
|
|
|
155,310
|
|
|
157,539
|
|
||||
Basic net income per share attributable to KLA-Tencor
|
$
|
1.23
|
|
|
$
|
1.96
|
|
|
$
|
6.20
|
|
|
$
|
2.90
|
|
Diluted net income per share attributable to KLA-Tencor
|
$
|
1.23
|
|
|
$
|
1.95
|
|
|
$
|
6.17
|
|
|
$
|
2.88
|
|
Anti-dilutive securities excluded from the computation of diluted net income per share
|
100
|
|
|
—
|
|
|
313
|
|
|
2
|
|
|
Three months ended
March 31, |
|
Nine months ended
March 31, |
||||||||||||
(Dollar amounts in thousands)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Income before income taxes
|
$
|
221,390
|
|
|
$
|
365,983
|
|
|
$
|
1,064,921
|
|
|
$
|
1,049,442
|
|
Provision for income taxes
|
$
|
28,745
|
|
|
$
|
59,102
|
|
|
$
|
107,232
|
|
|
$
|
595,944
|
|
Effective tax rate
|
13.0
|
%
|
|
16.1
|
%
|
|
10.1
|
%
|
|
56.8
|
%
|
(Dollar amounts in thousands)
|
Unrecognized Tax Benefits
|
||
Balance on December 31, 2018
|
$
|
69,779
|
|
Addition related to acquisitions
|
61,483
|
|
|
Addition for tax positions related to current year
|
10,935
|
|
|
Addition for tax positions related to prior years
|
1,273
|
|
|
Reduction for tax positions related to prior years
|
(10,144
|
)
|
|
Balance on March 31, 2019
|
133,326
|
|
|
Three months ended
March 31, |
|
Nine months ended
March 31, |
||||||||||||
(In thousands)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Receivables sold under factoring agreements
|
$
|
48,243
|
|
|
$
|
69,390
|
|
|
$
|
149,597
|
|
|
$
|
148,523
|
|
Proceeds from sales of LCs
|
$
|
40,303
|
|
|
$
|
—
|
|
|
$
|
59,534
|
|
|
$
|
5,571
|
|
Fiscal year ending June 30,
|
Amount
(In thousands)
|
||
2019 (remaining 3 months)
|
$
|
7,360
|
|
2020
|
26,427
|
|
|
2021
|
18,394
|
|
|
2022
|
12,845
|
|
|
2023
|
7,668
|
|
|
2024 and thereafter
|
14,574
|
|
|
Total minimum lease payments
|
$
|
87,268
|
|
|
Three months ended
|
|
Nine months ended
|
||||||||||||
|
March 31,
|
|
March 31,
|
||||||||||||
(In thousands)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Derivatives Designated as Hedging Instruments:
|
|
|
|
|
|
|
|
||||||||
Rate lock agreements:
|
|
|
|
|
|
|
|
||||||||
Amounts included in the assessment of effectiveness
|
$
|
(3,252
|
)
|
|
$
|
—
|
|
|
$
|
(8,649
|
)
|
|
$
|
—
|
|
Foreign exchange contracts:
|
|
|
|
|
|
|
|
||||||||
Amounts included in the assessment of effectiveness
|
$
|
1,925
|
|
|
$
|
(581
|
)
|
|
$
|
2,163
|
|
|
$
|
560
|
|
Amounts excluded from the assessment of effectiveness
|
$
|
(53
|
)
|
|
$
|
—
|
|
|
$
|
(82
|
)
|
|
$
|
—
|
|
(In thousands)
|
As of
March 31, 2019 |
|
As of
June 30, 2018 |
||||
Cash flow hedge contracts - foreign currency
|
|
|
|
||||
Purchase
|
$
|
66,713
|
|
|
$
|
8,116
|
|
Sell
|
$
|
164,955
|
|
|
$
|
115,032
|
|
Other foreign currency hedge contracts
|
|
|
|
||||
Purchase
|
$
|
231,765
|
|
|
$
|
130,442
|
|
Sell
|
$
|
289,502
|
|
|
$
|
154,442
|
|
|
Asset Derivatives
|
|
Liability Derivatives
|
||||||||||||||||
|
Balance Sheet
Location
|
|
As of
March 31, 2019 |
|
As of
June 30, 2018 |
|
Balance Sheet
Location
|
|
As of
March 31, 2019 |
|
As of
June 30, 2018 |
||||||||
(In thousands)
|
|
Fair Value
|
|
|
Fair Value
|
||||||||||||||
Derivatives designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Rate lock contracts
|
Other current assets
|
|
$
|
—
|
|
|
$
|
219
|
|
|
Other current liabilities
|
|
$
|
—
|
|
|
$
|
5,158
|
|
Foreign exchange contracts
|
Other current assets
|
|
1,957
|
|
|
3,259
|
|
|
Other current liabilities
|
|
254
|
|
|
312
|
|
||||
Total derivatives designated as hedging instruments
|
|
|
1,957
|
|
|
3,478
|
|
|
|
|
254
|
|
|
5,470
|
|
||||
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Foreign exchange contracts
|
Other current assets
|
|
2,289
|
|
|
1,907
|
|
|
Other current liabilities
|
|
1,562
|
|
|
1,358
|
|
||||
Total derivatives not designated as hedging instruments
|
|
|
2,289
|
|
|
1,907
|
|
|
|
|
1,562
|
|
|
1,358
|
|
||||
Total derivatives
|
|
|
$
|
4,246
|
|
|
$
|
5,385
|
|
|
|
|
$
|
1,816
|
|
|
$
|
6,828
|
|
|
Three months ended
March 31, |
|
Nine months ended
March 31, |
||||||||||||
(In thousands)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Beginning balance
|
$
|
(5,615
|
)
|
|
$
|
6,186
|
|
|
$
|
2,346
|
|
|
$
|
8,126
|
|
Amount reclassified to earnings
|
(946
|
)
|
|
(694
|
)
|
|
(3,719
|
)
|
|
(3,775
|
)
|
||||
Net change in unrealized gains or losses
|
(1,379
|
)
|
|
(581
|
)
|
|
(6,567
|
)
|
|
560
|
|
||||
Ending balance
|
$
|
(7,940
|
)
|
|
$
|
4,911
|
|
|
$
|
(7,940
|
)
|
|
$
|
4,911
|
|
As of March 31, 2019
|
|
|
|
|
|
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
|
|
$
|
4,246
|
|
|
$
|
—
|
|
|
$
|
4,246
|
|
|
$
|
(1,209
|
)
|
|
$
|
—
|
|
|
$
|
3,037
|
|
Derivatives - Liabilities
|
|
$
|
(1,816
|
)
|
|
$
|
—
|
|
|
$
|
(1,816
|
)
|
|
$
|
1,209
|
|
|
$
|
—
|
|
|
$
|
(607
|
)
|
As of June 30, 2018
|
|
|
|
|
|
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
|
|
$
|
5,385
|
|
|
$
|
—
|
|
|
$
|
5,385
|
|
|
$
|
(1,888
|
)
|
|
$
|
—
|
|
|
$
|
3,497
|
|
Derivatives - Liabilities
|
|
$
|
(6,828
|
)
|
|
$
|
—
|
|
|
$
|
(6,828
|
)
|
|
$
|
1,888
|
|
|
$
|
—
|
|
|
$
|
(4,940
|
)
|
|
Three months ended
March 31, |
|
Nine months ended
March 31, |
||||||||||||
(In thousands)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Total revenues
|
$
|
1,972
|
|
|
$
|
6
|
|
|
$
|
1,985
|
|
|
$
|
463
|
|
Total purchases
(1)
|
$
|
354
|
|
|
$
|
594
|
|
|
$
|
2,560
|
|
|
$
|
1,840
|
|
(1)
|
During the
three
months ended
June 30, 2018
, we acquired a product line from Keysight Technologies, Inc. (“Keysight”) and entered into a transition services agreement pursuant to which Keysight provides certain manufacturing services to us. For additional details refer to Note 6, “Business Combinations”. We recorded the manufacturing services fees under the transition services agreement with Keysight within cost of revenues, which was immaterial for the
three
and
nine
months ended
March 31, 2019
.
|
|
Three months ended March 31,
|
|
Nine months ended March 31,
|
||||||||||||||||||||||||
(Dollar amounts in thousands)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Taiwan
|
$
|
275,507
|
|
|
25
|
%
|
|
$
|
156,428
|
|
|
15
|
%
|
|
$
|
796,478
|
|
|
24
|
%
|
|
$
|
511,778
|
|
|
17
|
%
|
China
|
206,164
|
|
|
19
|
%
|
|
143,761
|
|
|
14
|
%
|
|
816,176
|
|
|
25
|
%
|
|
378,560
|
|
|
13
|
%
|
||||
Korea
|
196,490
|
|
|
18
|
%
|
|
314,062
|
|
|
31
|
%
|
|
476,959
|
|
|
14
|
%
|
|
858,924
|
|
|
29
|
%
|
||||
North America
|
156,824
|
|
|
14
|
%
|
|
113,477
|
|
|
11
|
%
|
|
409,066
|
|
|
12
|
%
|
|
391,769
|
|
|
13
|
%
|
||||
Japan
|
146,069
|
|
|
13
|
%
|
|
199,066
|
|
|
19
|
%
|
|
461,930
|
|
|
14
|
%
|
|
500,263
|
|
|
17
|
%
|
||||
Europe and Israel
|
76,054
|
|
|
7
|
%
|
|
53,043
|
|
|
6
|
%
|
|
228,341
|
|
|
7
|
%
|
|
218,706
|
|
|
7
|
%
|
||||
Rest of Asia
|
40,203
|
|
|
4
|
%
|
|
41,457
|
|
|
4
|
%
|
|
121,519
|
|
|
4
|
%
|
|
106,697
|
|
|
4
|
%
|
||||
Total
|
$
|
1,097,311
|
|
|
100
|
%
|
|
$
|
1,021,294
|
|
|
100
|
%
|
|
$
|
3,310,469
|
|
|
100
|
%
|
|
$
|
2,966,697
|
|
|
100
|
%
|
|
Three months ended March 31,
|
|
Nine months ended March 31,
|
||||||||||||||||||||||||
(Dollar amounts in thousands)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Wafer Inspection
|
$
|
334,070
|
|
|
30
|
%
|
|
$
|
486,662
|
|
|
48
|
%
|
|
$
|
1,312,261
|
|
|
40
|
%
|
|
$
|
1,276,666
|
|
|
43
|
%
|
Patterning
|
285,815
|
|
|
26
|
%
|
|
251,253
|
|
|
25
|
%
|
|
884,021
|
|
|
27
|
%
|
|
820,471
|
|
|
28
|
%
|
||||
Global Service and Support
(1)
|
287,116
|
|
|
26
|
%
|
|
262,389
|
|
|
26
|
%
|
|
855,309
|
|
|
26
|
%
|
|
796,692
|
|
|
27
|
%
|
||||
Orbotech
|
161,344
|
|
|
15
|
%
|
|
—
|
|
|
—
|
%
|
|
161,344
|
|
|
5
|
%
|
|
—
|
|
|
—
|
%
|
||||
Other
|
28,966
|
|
|
3
|
%
|
|
20,990
|
|
|
1
|
%
|
|
97,534
|
|
|
2
|
%
|
|
72,868
|
|
|
2
|
%
|
||||
Total
|
$
|
1,097,311
|
|
|
100
|
%
|
|
$
|
1,021,294
|
|
|
100
|
%
|
|
$
|
3,310,469
|
|
|
100
|
%
|
|
$
|
2,966,697
|
|
|
100
|
%
|
(In thousands)
|
As of
March 31, 2019 |
|
As of
June 30, 2018 |
||||
Long-lived assets:
|
|
|
|
||||
United States
|
$
|
222,444
|
|
|
$
|
187,352
|
|
Singapore
|
49,764
|
|
|
47,009
|
|
||
Israel
|
65,113
|
|
|
26,980
|
|
||
Europe
|
57,096
|
|
|
12,924
|
|
||
Rest of Asia
|
17,435
|
|
|
12,041
|
|
||
Total
|
$
|
411,852
|
|
|
$
|
286,306
|
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
(In thousands, except net income (loss) per share)
|
Three months ended
|
||||||||||||||||||||||||||
March 31,
2019 |
|
December 31,
2018 |
|
September 30,
2018 |
|
June 30,
2018 |
|
March 31,
2018 |
|
December 31,
2017 |
|
September 30,
2017 |
|||||||||||||||
Total revenues
|
$
|
1,097,311
|
|
|
$
|
1,119,898
|
|
|
$
|
1,093,260
|
|
|
$
|
1,070,004
|
|
|
$
|
1,021,294
|
|
|
$
|
975,822
|
|
|
$
|
969,581
|
|
Gross margin
|
$
|
610,366
|
|
|
$
|
711,638
|
|
|
$
|
711,873
|
|
|
$
|
692,438
|
|
|
$
|
652,938
|
|
|
$
|
628,820
|
|
|
$
|
616,464
|
|
Net income (loss) attributable to KLA-Tencor
(2)
|
$
|
192,728
|
|
|
$
|
369,100
|
|
|
$
|
395,944
|
|
|
$
|
348,767
|
|
|
$
|
306,881
|
|
|
$
|
(134,319
|
)
|
|
$
|
280,936
|
|
Diluted net income (loss) per share attributable to KLA-Tencor
(3)
|
$
|
1.23
|
|
|
$
|
2.42
|
|
|
$
|
2.54
|
|
|
$
|
2.22
|
|
|
$
|
1.95
|
|
|
$
|
(0.86
|
)
|
|
$
|
1.78
|
|
(1)
|
On
July 1, 2018
, we adopted ASC 606 using the modified retrospective transition approach. Results for reporting periods beginning after June 30, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with the previous revenue guidance in ASC 605.
|
(2)
|
Our net income (loss) decreased to a loss of $134.3 million during the three months ended December 31, 2017, primarily as a result of the income tax effects from the enacted tax reform legislation through the Tax Cuts and Jobs Act, which was signed into law on December 22, 2017.
|
(3)
|
Diluted net income (loss) per share are computed independently for each of the quarters presented based on the weighted-average fully diluted shares outstanding for each quarter. Therefore, the sum of quarterly diluted net income (loss) per share information may not equal annual (or other multiple-quarter calculations of) diluted net income (loss) per share.
|
|
Three months ended
|
|
|
|
|
||||||||||||||||||||
(Dollar amounts in thousands)
|
March 31,
2019 |
|
December 31, 2018
|
|
March 31,
2018 |
|
Q3 FY19
vs. Q2 FY19 |
|
Q3 FY19
vs. Q3 FY18 |
||||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Product
|
$
|
793,224
|
|
|
$
|
852,201
|
|
|
$
|
797,797
|
|
|
$
|
(58,977
|
)
|
|
(7
|
)%
|
|
$
|
(4,573
|
)
|
|
(1
|
)%
|
Service
|
304,087
|
|
|
267,697
|
|
|
223,497
|
|
|
36,390
|
|
|
14
|
%
|
|
80,590
|
|
|
36
|
%
|
|||||
Total revenues
|
$
|
1,097,311
|
|
|
$
|
1,119,898
|
|
|
$
|
1,021,294
|
|
|
$
|
(22,587
|
)
|
|
(2
|
)%
|
|
$
|
76,017
|
|
|
7
|
%
|
Costs of revenues
|
$
|
486,945
|
|
|
408,260
|
|
|
$
|
368,356
|
|
|
$
|
78,685
|
|
|
19
|
%
|
|
$
|
118,589
|
|
|
32
|
%
|
|
Gross margin percentage
|
56
|
%
|
|
64
|
%
|
|
64
|
%
|
|
|
|
|
|
|
|
|
|
Nine months ended
|
|
|
|||||||||||
(Dollar amounts in thousands)
|
March 31,
2019 |
|
March 31,
2018 |
|
Q3 FY19 YTD vs.
Q3 FY18 YTD |
|||||||||
Revenues:
|
|
|
|
|
|
|||||||||
Product
|
$
|
2,474,652
|
|
|
$
|
2,320,171
|
|
|
$
|
154,481
|
|
|
7
|
%
|
Service
|
835,817
|
|
|
646,526
|
|
|
189,291
|
|
|
29
|
%
|
|||
Total revenues
|
$
|
3,310,469
|
|
|
$
|
2,966,697
|
|
|
$
|
343,772
|
|
|
12
|
%
|
Costs of revenues
|
$
|
1,276,592
|
|
|
$
|
1,068,475
|
|
|
$
|
208,117
|
|
|
19
|
%
|
Gross margin percentage
|
61
|
%
|
|
64
|
%
|
|
|
|
|
|
Three months ended
|
|||||||||||||||||||
(Dollar amounts in thousands)
|
March 31, 2019
|
|
December 31, 2018
|
|
March 31, 2018
|
|||||||||||||||
Taiwan
|
$
|
275,507
|
|
|
25
|
%
|
|
$
|
266,534
|
|
|
24
|
%
|
|
$
|
156,428
|
|
|
15
|
%
|
China
|
206,164
|
|
|
19
|
%
|
|
269,878
|
|
|
24
|
%
|
|
143,761
|
|
|
14
|
%
|
|||
Korea
|
196,490
|
|
|
18
|
%
|
|
126,968
|
|
|
11
|
%
|
|
314,062
|
|
|
31
|
%
|
|||
North America
|
156,824
|
|
|
14
|
%
|
|
150,113
|
|
|
13
|
%
|
|
113,477
|
|
|
11
|
%
|
|||
Japan
|
146,069
|
|
|
13
|
%
|
|
180,283
|
|
|
16
|
%
|
|
199,066
|
|
|
19
|
%
|
|||
Europe and Israel
|
76,054
|
|
|
7
|
%
|
|
80,618
|
|
|
7
|
%
|
|
53,043
|
|
|
6
|
%
|
|||
Rest of Asia
|
40,203
|
|
|
4
|
%
|
|
45,504
|
|
|
5
|
%
|
|
41,457
|
|
|
4
|
%
|
|||
Total
|
$
|
1,097,311
|
|
|
100
|
%
|
|
$
|
1,119,898
|
|
|
100
|
%
|
|
$
|
1,021,294
|
|
|
100
|
%
|
|
Gross Margin Percentage
|
|
|
Gross Margin Percentage
|
||||
|
Three months ended
|
|
|
Three months ended
|
Nine months ended
|
|||
December 31, 2018
|
63.5
|
%
|
|
March 31, 2018
|
63.9
|
%
|
64.0
|
%
|
Revenue volume of products and services
|
(1.9
|
)%
|
|
Revenue volume of products and services
|
(2.5
|
)%
|
(0.8
|
)%
|
Mix of products and services sold
|
0.2
|
%
|
|
Mix of products and services sold
|
0.6
|
%
|
1.3
|
%
|
Manufacturing labor, overhead and efficiencies
|
(2.2
|
)%
|
|
Manufacturing labor, overhead and efficiencies
|
(2.3
|
)%
|
(1.0
|
)%
|
Other service and manufacturing costs
|
0.2
|
%
|
|
Other service and manufacturing costs
|
0.1
|
%
|
(0.5
|
)%
|
Impact from acquisition of Orbotech
|
(4.2
|
)%
|
|
Impact from acquisition of Orbotech
|
(4.2
|
)%
|
(1.6
|
)%
|
March 31, 2019
|
55.6
|
%
|
|
March 31, 2019
|
55.6
|
%
|
61.4
|
%
|
(Dollar amounts in thousands)
|
Three months ended
|
|
|
|
|
|
|
|
|
|||||||||||||
March 31,
2019 |
|
December 31,
2018 |
|
March 31,
2018 |
|
Q3 FY19
vs. Q2 FY19 |
|
Q3 FY19
vs. Q3 FY18 |
||||||||||||||
R&D expenses
|
184,887
|
|
|
165,903
|
|
|
153,239
|
|
|
$
|
18,984
|
|
|
11
|
%
|
|
$
|
31,648
|
|
|
21
|
%
|
R&D expenses as a percentage of total revenues
|
17
|
%
|
|
15
|
%
|
|
15
|
%
|
|
|
|
|
|
|
|
|
(Dollar amounts in thousands)
|
Nine months ended
|
|
|
|
|
|||||||||
March 31,
2019 |
|
March 31,
2018 |
|
Q3 FY19 YTD vs.
Q3 FY18 YTD |
||||||||||
R&D expenses
|
$
|
504,320
|
|
|
$
|
456,626
|
|
|
$
|
47,694
|
|
|
10
|
%
|
R&D expenses as a percentage of total revenues
|
15
|
%
|
|
15
|
%
|
|
|
|
|
|
Three months ended
|
|
|
|
|
|
|
|
|
|||||||||||||
(Dollar amounts in thousands)
|
March 31,
2019 |
|
December 31,
2018 |
|
March 31,
2018 |
|
Q3 FY19
vs. Q2 FY19 |
|
Q3 FY19
vs. Q3 FY18 |
|||||||||||||
SG&A expenses
|
182,184
|
|
|
112,462
|
|
|
113,237
|
|
|
$
|
69,722
|
|
|
62
|
%
|
|
$
|
68,947
|
|
|
61
|
%
|
SG&A expenses as a percentage of total revenues
|
17
|
%
|
|
10
|
%
|
|
11
|
%
|
|
|
|
|
|
|
|
|
|
Nine months ended
|
|
|
|
|
|||||||||
(Dollar amounts in thousands)
|
March 31,
2019 |
|
March 31,
2018 |
|
Q3 FY19 YTD vs.
Q3 FY18 YTD |
|||||||||
SG&A expenses
|
$
|
409,084
|
|
|
$
|
325,934
|
|
|
$
|
83,150
|
|
|
26
|
%
|
SG&A expenses as a percentage of total revenues
|
12
|
%
|
|
11
|
%
|
|
|
|
|
(Dollar amounts in thousands)
|
Three months ended
|
||||||||
March 31, 2019
|
|
December 31, 2018
|
|
March 31, 2018
|
|||||
Interest expense
|
$
|
31,187
|
|
|
26,538
|
|
|
28,119
|
|
Other expense (income), net
|
$
|
(9,282
|
)
|
|
(9,228
|
)
|
|
(7,640
|
)
|
Interest expense as a percentage of total revenues
|
3
|
%
|
|
2
|
%
|
|
3
|
%
|
|
Other expense (income), net as a percentage of total revenues
|
1
|
%
|
|
1
|
%
|
|
1
|
%
|
(Dollar amounts in thousands)
|
Nine months ended
|
||||||
March 31, 2019
|
|
March 31, 2018
|
|||||
Interest expense
|
$
|
84,087
|
|
|
$
|
86,067
|
|
Other expense (income), net
|
$
|
(28,535
|
)
|
|
$
|
(19,847
|
)
|
Interest expense as a percentage of total revenues
|
3
|
%
|
|
3
|
%
|
||
Other expense (income), net as a percentage of total revenues
|
1
|
%
|
|
1
|
%
|
|
Three months ended
March 31, |
|
Nine months ended
March 31, |
||||||||||||
(Dollar amounts in thousands)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Income before income taxes
|
$
|
221,390
|
|
|
$
|
365,983
|
|
|
$
|
1,064,921
|
|
|
$
|
1,049,442
|
|
Provision for income taxes
|
$
|
28,745
|
|
|
$
|
59,102
|
|
|
$
|
107,232
|
|
|
$
|
595,944
|
|
Effective tax rate
|
13.0
|
%
|
|
16.1
|
%
|
|
10.1
|
%
|
|
56.8
|
%
|
•
|
Tax expense decreased by
$4.1 million
during the
three
months ended
March 31, 2019
relating to a non-taxable increase in the value of the assets held within our Executive Deferred Savings Plan;
|
•
|
Tax expense decreased by
$7.7 million
during the three months ended
March 31, 2019
relating to the reduction of the U.S. federal tax rate from 28.1% to 21% for the fiscal year ending June 30, 2019;
|
•
|
Tax expense decreased by
$4.1 million
during the three months ended
March 31, 2019
relating to an increase in the proportion of our earnings generated in jurisdictions with tax rates lower than the U.S. statutory rate;
|
•
|
Tax expense decreased by
$9.7 million
during the
three
months ended
March 31, 2019
relating to the Foreign-Derived Intangible Income deduction; partially offset by
|
•
|
Tax expense increased by
$7.8 million
during the
three
months ended
March 31, 2019
relating to the Global Intangible Low-Taxed Income (“GILTI”); and
|
•
|
Tax expense increased by
$10.0 million
during the
three
months ended
March 31, 2019
relating to the Orbotech acquisition.
|
•
|
Tax expense increased by
$446.1 million
during the
nine
months ended
March 31, 2018
due to enactment of the Tax Cuts and Jobs Act (“the Act”) on December 22, 2017;
|
•
|
Tax expense decreased by
$18.7 million
during the
nine
months ended
March 31, 2019
relating to an increase in the proportion of our earnings generated in jurisdictions with tax rates lower than the U.S. statutory rate during the
nine
months ended
March 31, 2019
;
|
•
|
Tax expense decreased by
$34.7 million
during the
nine
months ended
March 31, 2019
relating to the reduction of the U.S. federal tax rate from 28.1% to 21% for the fiscal year ending June 30, 2019;
|
•
|
Tax expense decreased by
$43.7 million
during the
nine
months ended
March 31, 2019
relating to the Foreign-Derived Intangible Income deduction; partially offset by
|
•
|
Tax expense increased by
$35.3 million
during the
nine
months ended
March 31, 2019
relating to the GILTI; and
|
•
|
Tax expense increased by
$10.0 million
during the
nine
months ended
March 31, 2019
relating to the Orbotech acquisition.
|
(Dollar amounts in thousands)
|
As of
March 31, 2019 |
|
As of
June 30, 2018 |
||||
Cash and cash equivalents
|
$
|
1,092,163
|
|
|
$
|
1,404,382
|
|
Marketable securities
|
805,105
|
|
|
1,475,936
|
|
||
Total cash, cash equivalents and marketable securities
|
$
|
1,897,268
|
|
|
$
|
2,880,318
|
|
Percentage of total assets
|
21
|
%
|
|
51
|
%
|
||
|
|
|
|
||||
|
Nine months ended March 31,
|
||||||
(In thousands)
|
2019
|
|
2018
|
||||
Cash flows:
|
|
|
|
||||
Net cash provided by operating activities
|
$
|
827,171
|
|
|
$
|
855,607
|
|
Net cash (used in) provided by investing activities
|
(1,211,421
|
)
|
|
164,843
|
|
||
Net cash provided by (used in) financing activities
|
72,141
|
|
|
(928,717
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(110
|
)
|
|
10,898
|
|
||
Net (decrease) increase in cash and cash equivalents
|
$
|
(312,219
|
)
|
|
$
|
102,631
|
|
•
|
An increase in accounts payable payments of approximately $94.0 million;
|
•
|
An increase in payments for employee-related expenses of approximately $22.0 million;
|
•
|
An increase in payments for merger and acquisition related expenses, mostly related to the Orbotech acquisition of approximately $55.0 million.
|
◦
|
An increase in collections of approximately $55.0 million mainly driven by higher shipments;
|
◦
|
An increase in interest income of approximately $5.0 million mainly driven by higher interest rates;
|
◦
|
A decrease in income tax payments of approximately $62.0 million;
|
◦
|
A decrease in cash-long term incentives of approximately $11.0 million;
|
◦
|
A decrease in debt interest payments of approximately $5.0 million; and
|
◦
|
A decrease in net other tax payments of approximately $3.0 million.
|
◦
|
An increase in common stock repurchases of
$585.1 million
;
|
◦
|
An increase in dividend and dividend equivalent payments of
$65.9 million
due to an increase in our quarterly dividend from
$0.59
to
$0.75
per share; and
|
|
Fiscal year ending June 30,
|
||||||||||||||||||||||||||||||
(In thousands)
|
Total
|
|
2019
(2)
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
2024 and thereafter
|
|
Other
|
||||||||||||||||
Debt obligations
(1)
|
$
|
3,450,000
|
|
|
$
|
—
|
|
|
$
|
250,000
|
|
|
$
|
—
|
|
|
$
|
500,000
|
|
|
$
|
—
|
|
|
$
|
2,700,000
|
|
|
$
|
—
|
|
Interest payment associated with all debt obligations
(3)
|
1,578,428
|
|
|
50,972
|
|
|
152,925
|
|
|
146,942
|
|
|
136,630
|
|
|
126,317
|
|
|
964,642
|
|
|
—
|
|
||||||||
Purchase commitments
(4)
|
603,347
|
|
|
419,998
|
|
|
181,176
|
|
|
912
|
|
|
807
|
|
|
197
|
|
|
257
|
|
|
—
|
|
||||||||
Income taxes
payable
(5)
|
136,587
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
136,587
|
|
||||||||
Operating leases
|
87,268
|
|
|
7,360
|
|
|
26,427
|
|
|
18,394
|
|
|
12,845
|
|
|
7,668
|
|
|
14,574
|
|
|
—
|
|
||||||||
Cash long-term incentive program
(6)
|
130,141
|
|
|
24,804
|
|
|
49,511
|
|
|
39,736
|
|
|
16,080
|
|
|
10
|
|
|
—
|
|
|
—
|
|
||||||||
Pension obligations
(7)
|
25,092
|
|
|
371
|
|
|
1,668
|
|
|
1,481
|
|
|
2,194
|
|
|
1,945
|
|
|
17,433
|
|
|
—
|
|
||||||||
Executive Deferred
Savings Plan
(8)
|
204,349
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
204,349
|
|
||||||||
Transition tax payable
(9)
|
300,643
|
|
|
26,143
|
|
|
26,143
|
|
|
26,143
|
|
|
26,143
|
|
|
49,018
|
|
|
147,053
|
|
|
—
|
|
||||||||
Liability for employee rights upon retirement
(10)
|
56,179
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
56,179
|
|
||||||||
Other
(11)
|
6,494
|
|
|
532
|
|
|
3,458
|
|
|
1,381
|
|
|
883
|
|
|
240
|
|
|
—
|
|
|
—
|
|
||||||||
Total obligations
|
$
|
6,578,528
|
|
|
$
|
530,180
|
|
|
$
|
691,308
|
|
|
$
|
234,989
|
|
|
$
|
695,582
|
|
|
$
|
185,395
|
|
|
$
|
3,843,959
|
|
|
$
|
397,115
|
|
(1)
|
Represents
$3.45 billion
aggregate principal amount of Senior Notes due from fiscal year 2020 to fiscal year 2035.
|
(2)
|
For the remaining three months of fiscal year
2019
.
|
(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 interest 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 payment under the Revolving Credit Facility for the undrawn balance is payable at
12.5 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 Revolving Credit Facility is subject to change due to 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 goods, services and other assets 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
$106.0 million
.
|
(7)
|
Represents an estimate of expected benefit payments up to fiscal year 2028 that was actuarially determined and excludes the minimum cash required to contribute to the plan. As of
March 31, 2019
, our defined benefit pension plans do not have material required minimum cash contribution obligations.
|
(8)
|
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.
|
(9)
|
Represents the tax amount for the transition tax liability associated with our deemed repatriation of accumulated foreign earnings as a result from the enactment of the Tax Cuts and Jobs-Act into law on December 22, 2017.
|
(10)
|
Represents severance payments due upon dismissal of an employee or upon termination of employment in certain other circumstances as required under Israeli law.
|
(11)
|
Represents amounts committed for accrued dividends payable for quarterly cash dividends for unvested restricted stock units granted with dividend equivalent rights. For additional details, refer to Note 9, “Equity, Long-term Incentive Compensation Plans and Non-Controlling Interest,” to the condensed consolidated financial statements.
|
|
Three months ended
March 31, |
|
Nine months ended
March 31, |
||||||||||||
(In thousands)
|
2019
|
|
2018
|
|
2018
|
|
2017
|
||||||||
Receivables sold under factoring agreements
|
$
|
48,243
|
|
|
$
|
69,390
|
|
|
$
|
149,597
|
|
|
$
|
148,523
|
|
Proceeds from sales of LCs
|
$
|
40,303
|
|
|
$
|
—
|
|
|
$
|
59,534
|
|
|
$
|
5,571
|
|
Rating Agency
|
Rating
|
Fitch
|
BBB+
|
Moody’s
|
Baa1
|
Standard & Poor’s
|
BBB
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 4
|
CONTROLS AND PROCEDURES
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
ITEM 1A.
|
RISK FACTORS
|
•
|
the potential for reversal of the long-term 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 may have upon our business;
|
•
|
the increasing cost of building and operating fabrication facilities and the impact of such increases on our customers’ capital equipment 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 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; 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 process control and yield management 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 8, “Debt,” to our condensed consolidated financial statements.
|
•
|
managing cultural diversity and organizational alignment;
|
•
|
exposure to the unique characteristics of each region in the global 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;
|
•
|
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 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 applicable 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 result in 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 difficulty implementing a cohesive framework of internal controls over the entire organization;
|
•
|
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
|
|
Average Price Paid
per Share
|
|
Approximate Dollar Value that May Yet Be Purchased Under the Plans or Programs
(1)
|
|||||
January 1, 2019 to January 31, 2019
|
—
|
|
|
$
|
—
|
|
|
$
|
411,707,942
|
|
February 1, 2019 to February 28, 2019
|
542,900
|
|
|
$
|
114.88
|
|
|
$
|
1,349,341,805
|
|
March 1, 2019 to March 31, 2019
|
1,227,300
|
|
|
$
|
117.05
|
|
|
$
|
1,205,690,809
|
|
Total
|
1,770,200
|
|
|
$
|
116.38
|
|
|
|
(1)
|
The stock repurchase program has no expiration date and may be suspended at any time. Future repurchases of our common stock under our repurchase program may be effected through various different repurchase transaction structures, including isolated open market transactions or systematic repurchase plans.
|
ITEM 3.
|
DEFAULTS UPON SENIOR SECURITIES
|
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
ITEM 6.
|
EXHIBITS
|
|
|
|
Incorporated by Reference
|
|||
Exhibit
Number
|
|
Exhibit Description
|
Form
|
File
Number
|
Exhibit
Number
|
Filing
Date
|
|
|
|
|
|
|
|
|
8-K
|
000-09992
|
4.1
|
11/7/2014
|
||
|
|
|
|
|
|
|
|
8-K
|
000-09992
|
4.2
|
3/20/2019
|
||
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
S-8
|
333-230112
|
10.1
|
3/7/2019
|
||
|
|
|
|
|
|
|
|
S-8
|
333-230112
|
10.2
|
3/7/2019
|
||
|
|
|
|
|
|
|
|
S-8
|
333-230112
|
10.3
|
3/7/2019
|
||
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
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)
|
|
|
|
||
May 8, 2019
|
|
|
|
/s/ RICHARD P. WALLACE
|
(Date)
|
|
|
|
Richard P. Wallace
|
|
|
|
|
President and Chief Executive Officer
(Principal Executive Officer)
|
|
|
|
||
May 8, 2019
|
|
|
|
/s/ BREN D. HIGGINS
|
(Date)
|
|
|
|
Bren D. Higgins
|
|
|
|
|
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
|
|
|
|
||
May 8, 2019
|
|
|
|
/s/ VIRENDRA A. KIRLOSKAR
|
(Date)
|
|
|
|
Virendra A. Kirloskar
|
|
|
|
|
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)
|
|
|
|
Incorporated by Reference
|
|||
Exhibit
Number
|
|
Exhibit Description
|
Form
|
File
Number
|
Exhibit
Number
|
Filing
Date
|
|
|
|
|
|
|
|
|
8-K
|
000-09992
|
4.1
|
11/7/2014
|
||
|
|
|
|
|
|
|
|
8-K
|
000-09992
|
4.2
|
3/20/2019
|
||
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
S-8
|
333-230112
|
10.1
|
3/7/2019
|
||
|
|
|
|
|
|
|
|
S-8
|
333-230112
|
10.2
|
3/7/2019
|
||
|
|
|
|
|
|
|
|
S-8
|
333-230112
|
10.3
|
3/7/2019
|
||
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
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
|
|
|
|
|
1.
|
Employment
|
1.1
|
Contingent upon the consummation of the Merger, this Agreement will commence and become effective on the Closing Date.
|
1.2
|
On the Closing Date, Employee shall continue to be employed and will from that date be employed in the position of President and Chief Operating Officer of the Company; provided, however, that Employee’s title shall change to Chief Executive Officer of the Company (the “
Position
”) at such time as Asher Levy transitions to Senior Advisor of the Company, which transition by Asher is expected to occur on the later of (i) March 1, 2019 and (ii) the first day of the second month following the month in which Closing occurs. On the earlier of: (i) 18 months following the Closing Date, or (ii) July 1, 2020 (the earlier of such two dates, the “
Transition Date
”), Employee’s Position will transition to Senior Advisor of the Company. Employee’s supervisor will be Asher Levy, the Chief Executive Officer of the Company for as long as Mr. Levy serves as Chief Executive Officer of the Company. Following Mr. Levy ceasing to hold the position of Chief Executive Officer of the Company, Employee’s supervisor will be the President and Chief Executive Officer of KLA, Richard P. Wallace, or his successor holding such position. For the avoidance of any doubt, it is hereby clarified that for any and all purposes, Employee’s seniority shall be calculated as of November 1, 1992.
|
1.3
|
Employee shall perform the duties, undertake the responsibilities and exercise the authority as determined from time to time by the Company or KLA and as customarily performed, undertaken and exercised by persons situated in the applicable similar capacity. Employee’s duties and responsibilities hereunder may also include other services performed for affiliates of the Company.
|
1.4
|
During the course of employment with the Company, Employee shall honestly, diligently, skillfully and faithfully serve the Company. Employee undertakes to devote his professional
efforts and the best of Employee’s
qualifications and skills to promoting the business and affairs of the Company on a full-time basis or otherwise, in each case, as described herein, and further undertakes to loyally and fully comply with the decisions of the Board of Directors. Employee shall at all times act in a manner suitable of Employee’s position and status in the Company.
|
1.5
|
Employee promises to promptly notify the Company regarding any matter or subject in respect of which he has a personal interest which might create a conflict of interest with his position in the Company.
|
1.6
|
Employee shall be employed on a full time basis, regularly 5 days a week (Sunday to Thursday), 42 hours a week. Saturday shall be the weekly day of rest of Employee. Employee will also work outside of regular working hours and outside of regular working days, as may be reasonably required by the Company from time to time. Following the Transition Date, the Employee shall be employed as a Senior Advisor on a part time basis, one day a week, eight hours per week.
|
1.7
|
It is agreed that the Employee’s position is a management one and/or which requires a special degree of personal trust, as defined in the Working Hours and Rest Law, 1951 (the
“Working Hours and Rest Law”
). Therefore, Employee shall not be granted any other compensation or payment other than expressly specified in this Agreement. Employee undertakes not to claim that the Working Hours and Rest Law applies to Employee’s employment with the Company. Employee acknowledges the legitimacy of the Company’s requirement to work “overtime” or during “weekly rest-hours” without being entitled to “overtime compensation” or “weekly rest-hour compensation” (as these terms are defined in the Working Hours and Rest Law), and Employee undertakes to reasonably comply with such requirements of the Company. Employee acknowledges that the compensation to which Employee is entitled pursuant to this Agreement constitutes adequate compensation for Employee’s work during “overtime” or “weekly rest-hours”.
|
1.8
|
Employee may be required to travel abroad from time to time, as part of Employee’s position, and without entitlement to additional compensation for such traveling. All travel outside of Israel will be at least business class, to the extent such service is offered on such flight.
|
1.9
|
Employee hereby represents to the Company that there are no other undertakings or agreements preventing, restricting or limiting Employee from making the commitments described herein and performing the obligations under this Agreement, and Employee confirms that he is qualified and able to perform these obligations.
|
1.10
|
During the term of this Agreement, Employee shall not be engaged in any other employment nor directly or indirectly engage in any other business activities in any capacity for any other person, firm or company whether or not for consideration, without the express prior written consent of KLA; provided, however, that Employee may continue to (i) serve as a passive investor in the equity of any business, provided that Employee is not otherwise involved in running such business and (ii) act in any advisory capacity with respect to any business for which Employee currently serves in such role as of the Closing Date, or serve in any similar role with respect to any similar business, provided that no such business is a Competitor (as defined below). Notwithstanding the foregoing, during the period during which Employee holds the Position, he may serve as a director on the board of directors of up to two public or private companies, provided the applicable company is not a Competitor. Following the Transition Date, Employee may serve as a director on any number of public or private companies without the need to obtain the Company’s or KLA’s consent.
|
1.11
|
For purposes of this Agreement, “
Competitor
” means any entity that through one or more direct or indirect parent companies or subsidiaries, derives revenue primarily from developing, manufacturing, designing, selling, reselling, licensing, leasing, servicing or distributing a Competing Product. A “
Competing Product
” means (i) inspection, metrology, defect review or process monitoring or control solutions for customers engaged in integrated circuit manufacturing, wafer manufacturing, reticle production, advanced semiconductor packaging, light emitting diode production, power device production, development of compound semiconductors, data storage media/head manufacturing, or microelectromechanical systems (“
MEMS
”) manufacturing, (ii) inspection, test, measurement or process monitoring or control solutions for customers engaged in the production of printed circuit boards or flat panel displays, and (iii) etch, physical vapor deposition, chemical vapor deposition or molecular vapor deposition
|
1.12
|
Subject to section 4 below and unless Employee and the Company agree otherwise in writing, this Agreement and Employee’s employment with the Company shall terminate on December 31, 2020 (the “
Termination Date
”). Nothing contained herein shall bind the Company to continue to employ the Employee or bind the Employee to continue to work for the Company until the Termination Date.
|
2.
|
Salary
|
2.1
|
Immediately following the Closing Date, the Company agrees to pay or cause to be paid to Employee during the term of this Agreement a gross salary of NIS 157,464 (one hundred and fifty-seven thousand four hundred and sixty-four New Israeli Shekels) per month (the “
Salary
”). On the Transition Date, the Salary will be changed to $15,000 (fifteen thousand United States Dollars) per month, payable in New Israeli Shekels at the representative rate of exchange published by the Bank of Israel (the “
Representative Rate of Exchange
”) as last published prior to the Transition Date.
|
2.2
|
The Salary will be paid no later than the 9
th
day of each month, one month in arrears, subject to deduction of any and all taxes and charges applicable to Employee. Employee shall notify the Company of any change which may affect Employee’s tax liability.
|
3.
|
Employee Benefits
|
3.1
|
Pension Plan
.
|
3.1.1
|
Managers’ Insurance Policy
:
|
3.1.1.1
|
Disability Insurance - The Company, at its own discretion and expense, shall purchase a disability insurance, under normal and acceptable conditions, which would insure 75% of the Salary (the “
Disability
Insurance
”). The Company’s contribution for Disability Insurance shall, in no circumstances, exceed the amount of 2½% of the Salary.
|
3.1.1.2
|
Severance - an amount equal to 8⅓% of the Salary;
|
3.1.1.3
|
Company’s contribution towards pension - the difference between 6.5% of the Salary and the actual percentage of the Salary contributed towards Disability Insurance, provided that the Company’s contribution towards pension shall not be lesser than 5% of the Salary.
|
3.1.1.4
|
Employee’s contribution towards pension – 6% of the Salary.
|
3.1.2
|
Pension Fund
: Severance - an amount equal to 8⅓% of the Salary; Pension - an amount equal to 6.5% of the Salary. In addition, the Company will deduct from Employee’s monthly paycheck a sum equal to 6% of the Salary as Employee’s contribution.
|
3.2
|
Employee shall be entitled to instruct the Company to change Employee's contributions for pension to up to 7%.
|
3.3
|
Employee hereby agrees and acknowledges that the payments that the Company shall make to the abovementioned Managers’ Insurance Policy and/or Pension Fund shall be in addition to the severance payments under Section 4.6 below but instead of any other severance pay to which Employee or Employee’s heirs shall be entitled to receive from the Company with respect to the Salary from which these payments were made and the period during which they were made, in accordance with Section 14 of the Severance Pay Law 5723-1963, in accordance with the directives of the expansion order regarding pension insurance in the industry field. The Employee shall be entitled to all amounts accrued in such insurance policies and/or pension funds, including on account of severance, in the event of termination of employment, however arising.
|
3.4
|
Sick Leave
. Employee will be entitled to sick leave as provided by law, provided however, that the Employee shall be entitled to full pay for any sick leave from the first day (inclusive). In the event that Employee receives payment of Disability Insurance, Employee will not be entitled to sick leave payments for the same time period.
|
3.5
|
Annual Recreation Allowance (
Dme'i Havra'a
)
. Employee shall be entitled to an annual recreation allowance, according to the applicable expansion order, but not less than NIS 7,200 (seven thousand two hundred and seven New Israeli Shekels) per year, which amount shall be paid to Employee in cash.
|
3.6
|
Vacation
. Employee shall be entitled to an annual vacation of 24 working days at full pay, in addition to national holidays in Israel. The dates of vacation will be coordinated between Employee and the Company. Subject to the provision of due and reasonable prior notice, the Company may require Employee to take vacation leave in accordance with applicable law. Employee may accrue vacation time up to the maximum permitted by the Company's policy as the policy may be amended from time to time. All accumulated vacation days will be redeemed in cash upon termination of employment.
|
3.7
|
Educational Fund (
Keren Hishtalmut
)
. The Company will contribute to a recognized educational fund an amount equal to 7.5% of the Salary and will deduct from each monthly payment and contribute to such education fund an additional amount equal to 2.5% of the Salary. Employee shall bear all taxes resulting from contributions made to the educational fund in excess of the recognized ceiling for tax purposes.
|
3.8
|
Company Car
.
|
3.8.1
|
The Company shall provide Employee with a motor vehicle of a make, model, and class no less than the current motor vehicle at his disposal, which shall be leased by the Company for use by Employee in accordance with Company policy in effect at the Closing Date. The Company will bear all expenses relating to the use of the motor vehicle, including maintenance, fuel and repairs in accordance with Company policy in effect at the Closing Date. Employee shall be responsible for payment of all fines, penalties and tickets relating to the use of the motor vehicle during the period it had been put at Employee's disposal, but will not be responsible, where applicable, for any penalties incurred as a result of the early return of the motor vehicle to the leasing company in connection with the termination of the Employee's employment for any reason whatsoever. Employee shall not have any lien with respect to the motor vehicle or any document or property relating thereto.
|
3.8.2
|
Any expenses, payments or other benefits that are borne by the Company in connection with the provision or use of the motor vehicle shall not be regarded as part of the Salary, for any purpose or matter, including without limitation for calculation of rights and entitlements that are derived from Salary or wages. . Employee shall take good care of the motor vehicle and ensure that the provisions of the insurance policy and the Company’s rules relating to the motor vehicle are strictly, lawfully and carefully observed. Employee is aware that in order to provide him with the motor vehicle the Company shall lease the motor vehicle from a leasing company, and Employee undertakes to strictly comply with the provisions of the leasing agreement.
|
3.8.3
|
The provision of the leased motor vehicle under this section 3.8 is in lieu of payment of a travel allowance.
|
3.8.4
|
Employee will have continued use of the motor vehicle during the 6-month advance notice period referred to in Section 4.1 below, even if the Company terminates the employment relationship with immediate effect and pays the Employee the Advanced Notice Payment and for a further period thereafter until the earlier of: (i) 6 months following termination of the 6-month advance notice period, and (ii) Employee beginning full time employment with another employer. The current leasing arrangement of the Company enables continued leasing and use of the leased vehicle following termination of employment and the Company shall take all steps necessary to ensure that any future arrangement will similarly permit such continued use.
|
3.9
|
Health and Dental Insurance
. Employee will be entitled to participate in Company's health insurance and dental insurance plans, subject to Company’s policy as will be updated from time to time during the period of employment.
|
3.10
|
Bonus/Incentive Programs
.
|
3.10.1
|
Subject to Section 3.10.2, in calendar years 2019 and 2020, Employee’s target bonus opportunity shall be equal to 100% of his annual Salary, calculated on the basis of a full year, in each instance as in effect prior to the Transition Date (the “
Annual Bonus
”). The amount of the Annual Bonus, if any, will depend on the achievement of the objectives set forth in
Exhibit A
(the “
Annual Bonus Objectives
”). The Annual Bonus Objectives for calendar year 2020 will be based in part on achievement of financial objectives for the Company established at a date following the date hereof and approved by the Compensation Committee of the Board of Directors of KLA (the “
Compensation Committee
”) within 45 days following the end of calendar year 2019, which Annual Bonus Objectives will be incorporated into
Exhibit A
as of the date of such approval. KLA shall determine the achievement of the Annual Bonus Objectives, the entitlement to the Annual Bonus as well as the amount of the Annual Bonus in its sole and absolute discretion. The Annual Bonus shall be paid (if any) as soon as practicable after the Company determines that the Annual Bonus has been earned, subject to deduction of any and all taxes and charges applicable to Employee, but not later than March 31, 2020, with respect to the 2019 Annual Bonus and March 31, 2021 with respect to the 2020 Annual Bonus. The 2019 Annual Bonus and the 2020 Annual Bonus will be paid to the Employee even if at the time of payment he is no longer an employee of the Company, provided he remains an employee through December 31, 2019, with respect to the 2019 Annual Bonus, and through December 31, 2020, with respect to the 2020 Annual Bonus.
|
3.10.2
|
In the event the Merger has not occurred as of December 31, 2018, Employee will be entitled to payment of his annual bonus amount for calendar year 2019, as established by the Company prior to the Closing Date, based on the Company’s achievement of the applicable performance metrics as determined by reference to the period from January 1, 2019 until the end of the Company’s fiscal period in which the Closing Date occurs, taken as one period (the “
Closing Fiscal Period
”), with such payment prorated based on the number of days during the period beginning on January 1, 2019 and ending on the Closing Date (such pro-rated payment, the “
Interim Annual Bonus
”). For purposes of determining the applicable Interim Annual Bonus, the Company will prepare unaudited financial statements with respect to the Closing Fiscal Period, which shall be prepared on a basis consistent with the Company’s pre-closing financial statements without giving effect to purchase accounting (the “
Interim Financial Statements
”) and shall be subject to the review and final approval of KLA which review and approval shall not be unreasonably withheld, conditioned or delayed. The
|
3.10.3
|
Upon closing of the Merger Agreement, but in no event later than 10 business days following the Closing Date, the Company will pay Employee a cash bonus in an amount in NIS equivalent to USD 1,783,333.33 (one million seven hundred eighty three thousand three hundred and thirty three United States Dollars and thirty three United States Cents) calculated at the Representative Rate of Exchange last published prior to the date of payment, subject to deduction of any and all taxes and charges applicable to Employee (the “Closing Bonus”).
|
3.10.4
|
To avoid doubt, no disbursements shall be made under Section 3.1 above with respect to any bonus or incentive payments, including the Annual Bonus and Closing Bonus, and bonus and incentive payments shall not be deemed a portion of Employee’s Salary for any purpose, including without limitation, for calculation of rights and entitlements that are derived from Salary or wages.
|
3.11
|
Cellular Phone
. Employee shall be entitled to receive a cellular phone from the Company, subject to Company's policy as shall be amended from time to time. The cellular phone (together with its accessories and phone number) will become the property of the Employee upon termination of employment, however arising.
|
3.12
|
Performance-Based RSUs
.
|
3.12.1
|
The Company hereby represents that KLA has, by its authorized corporate bodies, approved the grant to the Employee, no later than and effective as of immediately following the closing of the Merger, pursuant to KLA’s 2004 Equity Incentive Plan (as amended, the “
Plan
”), of an award of performance-based restricted stock units settled in shares of KLA common stock (the “
Performance-Based RSUs
”). The target number of restricted stock units covered by the Performance-Based RSUs equals the quotient obtained by dividing (i) USD 3,430,000 (three million four hundred and thirty thousand United States Dollars) (the “
Performance-Based RSU Value
”) by (ii) the per share adjusted closing stock price of KLA common stock on the date of the closing of the Merger (the “
Target
”). The Performance-Based RSUs may vest at up to 200% of Target, as described in Section 3.12.3.
|
3.12.2
|
The Performance-Based RSUs are subject to vesting as follows: (i) A percentage of one half of the Target restricted stock units subject to the Performance-Based RSUs (such portion of the Target number of restricted stock units, the “
2019 Performance Units
”) as determined in Section 3.12.3 will vest on the earlier of (A) 12 months following the Closing Date or (B) December 31, 2019, subject to Employee’s continuing employment or service through such date, and (ii) a percentage of one half of the Target restricted stock units subject to the Performance-Based RSUs (such portion of the Target number of restricted stock units, the “
2020 Performance Units
”) will vest on the earlier of (X) 24 months following the Closing Date or (Y) the Termination Date, subject to Employee’s continuing employment or service (including as a Senior Advisor) through such date, except as provided in Sections 3.12.4 and 3.12.5 (the percentage of the
|
3.12.3
|
The Vesting Percentage with respect to the 2019 Performance Units and the 2020 Performance Units shall be determined based on the Company’s achievement of the objectives (each an “
Objective
”) in calendar years 2019 and 2020, respectively, as set forth in
Exhibit B
.
|
3.12.4
|
If, prior to the applicable vesting date of the 2019 Performance Units, Employee is terminated by the Company without Cause (as defined below), and Employee executes and delivers a release agreement in the form of
Exhibit C
, the 2019 Performance Units and 2020 Performance Units will be canceled and in lieu thereof, the Company will pay Employee an amount in NIS equivalent to 100% of the Performance-Based RSU Value, calculated at the Representative Rate of Exchange last published prior to the date of payment, subject to deduction of any and all taxes and charges applicable to Employee.
|
3.12.6
|
The Compensation Committee will review, determine, and approve the level of achievement of the Objectives and the applicable Vesting Percentage with respect to the Performance-Based RSUs. All determinations of Vesting Percentage and degree of achievement of Objectives will be made on or prior to March 31 of the year following the year with respect to which the Objectives are based. Employee will receive notification of the grant of the Performance-Based RSUs promptly following the date it is effective. The Performance-Based RSUs will be subject to the terms of the applicable grant document and the Plan and will be granted in accordance with Section 102 of the Israel Income Tax Ordinance through a trustee approved for such purposes by the Israel Income Tax Authority and pursuant to the “capital gains route” thereunder.
|
3.13
|
Time-Based RSUs
.
|
3.13.1
|
The Company hereby represents that KLA has, by its authorized corporate bodies, approved the grant to the Employee, no later than and effective as of immediately following the closing of the Merger, pursuant to the Plan, of an award of restricted stock units settled in shares of KLA common stock (the “
Time-Based RSUs
”). The number of restricted stock units covered by the Time-Based RSUs equals the quotient obtained by dividing (i) USD 2,286,666.67 (two million two hundred and eighty six thousand six hundred and sixty six United States Dollars and sixty seven United States Cents) (the “
Time-Based RSU Value
”) by (ii) the per share adjusted closing stock price of KLA common stock on the date of the closing of the Merger.
|
3.13.2
|
The Time-Based RSUs are subject to vesting as follows: (i) 50% of the Time-Based RSUs will vest on the earlier of (A) 12 months following the Closing Date, or (B) December 31, 2019, subject to Employee’s continuing employment or service through such date, and (ii) 50% of the Time-Based RSUs will vest on the earlier of (X) 24 months following the Closing Date, or (Y) the Termination Date, subject to Employee’s continuing employment or service (including as a Senior Advisor) through such date, except as provided in Section 3.13.3.
|
3.13.3
|
If Employee is terminated by the Company without Cause (as defined below), and Employee executes and delivers a release agreement in the form of
Exhibit C
, the Time-Based RSUs will be canceled and in lieu thereof, the Company will pay Employee an amount in NIS equivalent to (i) 50% of the Time-Based RSU Value if 50% of the Time-Based RSUs are vested as of the date of termination, or (ii) 100% of the Time-Based RSU Value if none of the Time-Based RSUs are vested as of the date of termination, in each instance, calculated at the Representative Rate of Exchange last published prior to the date of payment, subject to deduction of any and all taxes and charges applicable to Employee.
|
3.13.4
|
Employee will receive notification of the grant of the Time-Based RSUs promptly following the date it is effective. The Time-Based RSUs will be subject to the terms of the applicable grant document and the Plan and will be granted in accordance with Section 102 of the Israel Income Tax Ordinance through a trustee approved for such purposes by the Israel Income Tax Authority and pursuant to the “capital gains route” thereunder.
|
4.
|
Term and Termination
|
4.1
|
The term of employment under this Agreement will begin as of the Closing Date and will continue until the Termination Date unless either party provides the other party with a 6 month prior written notice, subject to sections 4.2 and 4.3. For avoidance of doubt, in the event the Company provides the Employee with a prior written notice of termination less than 6 months prior to the Termination Date, the Company shall pay to Employee an Advanced Notice Payment (as such term is defined below) with respect to a period of time that is equal to the difference between 6 months and the period of time prior to the Termination Date in which the notice was given.
|
4.2
|
Notwithstanding anything contained herein to the contrary, the Company at its sole discretion shall have the right to terminate the employment relationship with immediate effect or prior to the end of the notice period set forth above and pay Employee in lieu of advance notice or the remainder thereof the Employee’s Salary and the value of all benefits (excluding bonuses or equity-related benefits referenced in Sections 3.10, 3.12 and 3.13) for such period (such payment, the “
Advanced Notice Payment
”).
|
4.3
|
In addition, the Company shall have the right to terminate this Agreement at any time without a notice period or payment in lieu thereof in the event of termination for Cause (as defined below).
|
4.4
|
The term “Cause” shall mean (a) Employee’s conviction of, or plea of nolo contendre to, a felony; (b) the Employee’s gross misconduct; (c) any material act of personal dishonesty taken by the Employee in connection with his responsibilities as an employee or service provider of the Company or its subsidiaries; or (d) the Employee’s willful and continued failure to perform the duties and responsibilities of his position after there has been delivered to the Employee a written demand for performance from the Company or the applicable subsidiary which describes the basis for the belief that the Employee has not substantially performed his duties and provides the Employee with 30 days to take corrective action.
|
4.5
|
In any event of termination of this Agreement, or otherwise upon the Company's request, except as otherwise provided herein, Employee shall immediately return, in proper form and working order, all Company and customer of the Company property, equipment, materials, documents, and data (without retaining copies, other than copies of any data and other information, including contact information, stored on Employee’s cellular phone), to the extent that any such property, equipment, materials, documents, or data is material to the business of the Company or its affiliates and which, for the avoidance of doubt, shall not include any personal items in Employee’s office; and Employee shall cooperate with the Company and use Employee’s reasonable best efforts to assist with the transition of work as directed. At the option of the Company, Employee shall during such period either continue with Employee’s duties or remain absent from the premises of the Company. Under no circumstances will Employee have a lien
|
4.6
|
(A) Upon any termination of employment, including any termination of employment by Employee, Employee will be entitled: (i) to a lump sum payment equal to the product of 200% of the Salary (based on Employee’s most recent Salary prior to transitioning to Senior Advisor) multiplied by the number of years, including partial years, from November 1, 1992 until the Closing Date, less any amounts contributed by the Company and accumulated on account of severance pay with respect to such period in any Manager’s Insurance Policy or Pension Fund maintained by the Company for the Employee and which are released to the Employee upon termination of employment (the “
Vested Retirement Payment Benefits
”), and (ii) to a lump sum payment equal to 6 months' Salary (based on Employee’s most recent Salary prior to transitioning to Senior Advisor) (the “
Adjustment Period Benefits
”); (B) in addition to the Vested Retirement Payment Benefits and the Adjustment Period Benefits, upon any termination of employment by Employee, Employee will be entitled to the following benefits: (i) a lump sum retirement payment equal to the product of 200% of Employee’s Salary, based on Employee’s most recent Salary prior to transitioning to Senior Advisor, multiplied by the number of years, including partial years, of his employment with the Company since the Closing Date until the date of termination, less any amounts contributed by the Company and accumulated on account of severance pay with respect to such period in any Manager’s Insurance Policy or Pension Fund maintained by the Company for the Employee and which are released to the Employee upon termination of employment (the “
Retirement Payment Benefits
”), and (ii) vesting acceleration termination benefits as provided for in
Annex
A to the Original Employment Agreement as if the Employee had resigned due to an adverse change in his position within 12 months of a “Significant Event” (as defined in such
Annex A
), even if such resignation occurs more than 12 months following the approval by the Company’s shareholders of the Merger, with respect to Employee’s outstanding equity awards to purchase or receive shares of common stock of KLA (including those resulting from the assumption by KLA of equity awards granted by the Company prior to the closing of the Merger, but excluding the Performance-Based RSUs and the Time-Based RSUs with respect to which the provisions of Sections 3.12.4, 3.12.5 and 3.13.3 above will apply); (the “
Assumed Equity Award Acceleration Benefit
”); (C) in addition to the Vested Retirement Payment Benefits and the Adjustment Period Benefits, (i) upon any involuntary termination of Employment, other than by the Company for Cause, Employee will be entitled to receive the Retirement Payment Benefits; and (ii) upon any involuntary termination of Employment for any reason Employee will be entitled to receive the Assumed Equity Award Acceleration Benefit; (D) if Employee remains in continuous employment with the Company until 24 months following approval by the Company’s shareholders of the Merger, Employee will be entitled to the Assumed Equity Award Acceleration; and (E) if Employee remains in continuous employment with the Company through the Termination Date and Employee’s employment terminates on such date, Employee will be entitled to receive the Adjustment Period Benefits, the Vested Retirement Payment Benefits, the Retirement Payment Benefits, the Assumed Equity Award Acceleration Benefit (to the extent not previously received pursuant to (D) above), and the Advanced Notice Payment.
|
5.
|
Confidentiality; Proprietary Rights
|
5.1
|
Employee has executed and agrees to be bound by the provisions governing confidentiality, proprietary rights and non-competition contained in
Exhibit D
to this Agreement, which provisions will survive termination of this Agreement for any reason.
|
5.2
|
All of Employee’s confidentiality, proprietary rights, non-solicitation, and non-competition obligations pursuant to the Employee’s previous undertakings in favor of the Company will remain in full force and effect, except that all non-competition undertakings will expire upon
|
6.
|
Successors and Assigns
|
6.1
|
This Agreement shall be binding upon and shall inure to the benefit of the Company, its successors and assigns.
|
6.2
|
Neither this Agreement nor any right or interest hereunder shall be assignable or transferable by Employee, Employee’s beneficiaries or legal representatives, except by will or by the laws of descent and distribution.
|
7.
|
Prevention of Sexual Harassment
|
7.1
|
The Company views violations of the Law for Prevention of Sexual Harassment (the
“Law”
) in a severe light. Employee acknowledges being informed of the Company's policy regarding sexual harassment, including the existence of Company guidelines for the prevention of sexual harassment that may be received at any time from the employee in charge of enforcing the Law in the Company.
|
8.
|
Data and Privacy
|
8.1
|
The use of the Company's (and Company affiliates’) devices and equipment, including computers, e-mail accounts, phones, and so on, is intended for professional use and for executing Employee's duties in the Company and for reasonable personal use. The Company hereby notifies Employee that it uses its right to conduct inspections within the Company’s offices and on the Company’s and Company affiliates’ equipment, including computers, cellular phones, and other devices, and, with respect to electronic mail, inspections of electronic mail transmissions sent or received through the e-mail account provided by the Company (the “
Company’s E-Mail Account
”), and including internet usage and inspections of their content, inspections of phone usage and cellular company's bills and reports, all while safeguarding Employee’s privacy and subject to applicable law. For the avoidance of doubt, subject to applicable law, any such examination’s findings, except for Employee’s personal matters, shall be the Company’s sole property, and may be presented by the Company to third parties. Employee hereby consents to any reasonable use, transfer and disclosure of all work related messages and data contained or sent via the Company’s computer and communications systems, including the Company’s E-Mail Account. Employee shall fully comply with the Company's policies regarding use of electronic devices and networks, as may be in effect from time to time
|
8.2
|
Employee grants consent to the Company and its affiliates, and its/their employees, wherever they may be located, to utilize and process Employee’s personal information, including data collected by the Company for purposes related to Employee’s employment. This may include transfer of Employee’s personnel records outside of Israel and further transfers thereafter. All personnel records are considered confidential and access will be limited and restricted to individuals with need to know or process that information for purposes relating to Employee’s employment only, such as management teams and human resource personnel. The Company may share personnel records as needed solely for such purposes with third parties assisting with human resources administration.
|
9.
|
Miscellaneous
|
9.1
|
All payments set forth in this Agreement are subject to withholding of applicable taxes, including national insurance payments. The Performance-Based RSUs and Time-Based RSUs have been or will be granted with dividend equivalent rights and in accordance with Section 102 of the Israel Income Tax Ordinance through a trustee approved for such purposes by the Israel Income Tax Authority and pursuant to the “capital gains route” thereunder.
|
9.2
|
No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by Employee and the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance
|
9.3
|
This Agreement constitutes the entire agreement between the parties hereto and supersedes all prior agreements, understandings and arrangements, oral or written, between the parties hereto with respect to the subject matter hereof (including, for the avoidance of doubt, the Original Employment Agreement), except as expressly set forth herein. No new agreements or arrangements shall apply unless a written agreement containing such agreements or arrangements was executed by both parties.
|
9.4
|
Employee will be subject to Company's policies, as set and updated from time to time;
provided
that, in accordance with the terms of the Merger Agreement, during the one-year period following the Merger such policies shall be no less favorable, in the aggregate, than those in effect as of immediately prior to the Merger.
|
9.5
|
This Agreement is personal and its terms are confidential, and, other than as otherwise disclosed in any public filings by the Company or KLA with the U.S. Securities and Exchange Commission, Employee undertakes to keep them as such;
provided
,
however
, that Employee may disclose such information to his legal counsel, tax advisors or financial planners on the condition that Employee shall first instruct such counsel, advisors or planners, as applicable, not to disclose such information to anyone or otherwise make use of such information outside the scope of their retention by Employee.
|
9.6
|
This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Israel.
|
9.7
|
In the event that any provision of this Agreement is held invalid or unenforceable in any circumstances by a court of competent jurisdiction, the remainder of this Agreement and the application of such provision in any other circumstances shall not be affected thereby, and the unenforceable provision shall be enforced to the maximum extent permissible under law or otherwise shall be replaced by an enforceable provision that most nearly approximates the intent of the unenforceable provision.
|
9.8
|
This Agreement and its annexes and exhibits constitute notice to Employee pursuant to the Notice to Employee (Employment Terms) Law – 2002. Nothing contained in this Agreement is meant to derogate from Employee's right according to any applicable law or agreement.
|
Company:
|
Employee:
|
Orbotech Ltd.
Signature: /s/ Bren D. Higgins
By: Bren D. Higgins
Title: Director
Date: February 20, 2019
|
Amichai Steimberg
Signature: /s/ Amichai Steimberg
ID#:
Date: February 20, 2019
|
|
|
Orbotech CY19 Annual Bonus Payout Table
for Orbotech CEO & President/COO Only 1 |
|||||||||
Balanced Scorecard Performance (“BSc”)
|
BSc Score
|
BSc Multiplier
|
CY19 Non-GAPP Operating Margin ($M) Performance
|
||||||
<$[**]
|
$[**]
|
$[**]
|
$[**]
|
$[**]
2
|
$[**]
|
$[**]
|
|||
Far Exceeds Expectations
|
5
|
1.2
|
0%
|
[**]%
|
[**]%
|
[**]%
|
[**]%
|
[**]%
|
[**]%
3
|
Exceeds Expectations
|
4
|
1.1
|
0%
|
[**]%
|
[**]%
|
[**]%
|
[**]%
|
[**]%
|
[**]%
3
|
Primarily Meets Expectations
|
3
2
|
1.0
2
|
0%
|
[**]%
|
[**]%
|
[**]%
|
[**]%
2
|
[**]%
|
[**]%
3
|
Below Expectations
|
2
|
.9
|
0%
|
[**]%
|
[**]%
|
[**]%
|
[**]%
|
[**]%
|
[**]%
3
|
Far Below Expectations
|
1
|
.8
|
0%
|
[**]%
|
[**]%
|
[**]%
|
[**]%
|
[**]%
|
[**]%
3
|
% of Plan
|
|
[**]%
|
[**]%
|
[**]%
|
[**]%
|
[**]%
|
[**]%
|
1-
|
Far Below Expectations
|
A
|
Failure to have a Plan in place within six (6) months post-Closing with specific actions identified (to be taken both by KLA and Orbotech) which would achieve at least a
[**]
run rate cost savings within the two (2) years post-Closing; or
|
B
|
Achieving less than 100% retention of the "Top 5" senior executives other than the CEO and the President/COO (specifically,
[**]
) through CY19; or
|
C
|
Achieving less than 85% retention of the "Next 21" senior executives other than the CEO and the President/COO (specifically,
[**]
) through CY19.
|
2-
|
Below Expectations
|
A
|
Failure to have a Plan in place within four (4) months post-Closing with specific actions identified (to be taken both by KLA and Orbotech) which would achieve at least a
[**]
run rate cost savings within the two (2) years post-Closing; or
|
B
|
Achieving less than 100% retention of the "Top 5" senior executives other than the CEO and the President/COO (specifically,
[**]
) through CY19; or
|
C
|
Achieving less than 90% retention of the "Next 21" senior executives other than the CEO and the President/COO (specifically,
[**]
) through CY19.
|
3-
|
Primarily Meets Expectations
|
A
|
Having a Plan in place within four (4) months post-Closing with specific actions identified (to be taken both by KLA and Orbotech) to achieve a
[**]
run rate cost savings within the two (2) years post-Closing; and
|
B
|
Achieving 100% retention of the "Top 5" senior executives other than the CEO and the President/COO (specifically,
[**]
) through CY19; and
|
C
|
Achieving 90% or greater retention of the "Next 21" senior executives other than the CEO and President/COO (specifically,
[**]
) through CY19.
|
4-
|
Exceeds Expectations
|
A
|
Having a Plan in place within four (4) months post-Closing with specific actions identified (to be taken both by KLA and Orbotech) to achieve a
[**]
or greater run rate cost savings within two and one-half (2.5) years post-Closing, or a Plan with specific actions identified to achieve at least a
[**]
run rate cost savings within two (2) years post-Closing while also identifying specific actions to achieve at least
[**]
of such a run rate savings in CY2020; and
|
B
|
Achieving 100% retention of the "Top 5" senior executives other than the CEO and President/COO (specifically,
[**]
) through CY19; and
|
C
|
Achieving 95% retention or greater of the "Next 21" senior executives other than the CEO and President/COO (specifically,
[**]
) through CY19.
|
5-
|
Far Exceeds Expectations
|
A
|
Having a Plan in place within six (6) months post-Closing with specific actions identified (to be taken both by KLA and Orbotech) to achieve an
[**]
or greater run rate cost savings within two and one-half (2.5) years post-Closing, or a Plan with specific actions identified to achieve at least a
[**]
run rate cost savings within two and one-half (2.5) years post-Closing while also
|
B
|
Achieving 100% retention of "Top 5" senior executives other than the CEO and President/COO (specifically,
[**]
) through CY19; and
|
C
|
Achieving 100% retention of "Next 21" senior executives other than the CEO and President/COO (specifically,
[**]
) through CY19.
|
1)
|
Within each BSc level, 70% weight is to be given to criteria "A", 20% weight to criteria "B", and 10% weight to criteria "C” as set forth in the descriptions set forth directly above.
|
2)
|
KLA-Tencor ("KLA") agrees to cooperate in the synergy process and make it a priority.
|
3)
|
Accounting and business model changes will be limited to those necessary to achieve synergy objectives and/or to align with KLA's existing control environment; to the extent such changes might impact the achievement of OM$ and resultant PRSU payout, payout levels will be adjusted accordingly and correspondingly.
|
4)
|
Orbotech organizational changes will be kept to a minimum through CY2020 and be limited to those necessary and aligned upon to achieve synergy objectives, and/or those necessary to align with KLA's existing control environment.
|
3 – Primarily Meets
|
|
|||||||||
A
|
Plan in place within four (4) months post-close with specific actions identified (to be taken both by KT and Orbotech) to achieve [**] run rate cost savings within two (2) years post-close.
|
|||||||||
B
|
100% retention of “Top 5” senior executives (other than CEO and President/COO; specifically [**]) through CY 19.
|
|||||||||
C
|
90% retention or greater of “Next 20” senior executives (other than CEO and President/COO; to be identified by ORBK) through CY 19.
|
|||||||||
4 – Exceeds
|
|
|
||||||||
A
|
Plan in place within
four (4)
months post-close with specific actions identified (to be taken both by KT and Orbotech) to achieve [**] or greater in run rate cost savings within
two and one-half (2.5)
years post-close while also identifying specific actions to achieve at least [**] of such run rate savings in CY2020.
|
|||||||||
A
|
If applicable, successful execution/implementation against Orbotech specific actions in support of the [**] run rate savings identified above by end of CY19.
|
|||||||||
B
|
100% retention of “Top 5” senior executives (other than CEO and President/COO; specifically [**]) through CY 19.
|
|||||||||
C
|
95% retention or greater of “Next 20” senior executives (other than CEO and President/COO; to be identified by ORBK) through CY 19.
|
|||||||||
5 – Far Exceeds
|
|
|||||||||
A
|
Plan in place within
six (6)
months post-close with specific actions identified (to be taken both by KT and Orbotech) to achieve [**] or greater in run rate cost savings within
two and one-half (2.5)
years post-close while also identifying specific actions to achieve at least [**] of such run rate savings in CY2020.
|
|||||||||
A
|
If applicable, successful execution/implementation against Orbotech specific actions in support of the [**] or greater run rate savings identified above by end of CY19.
|
|||||||||
B
|
100% retention of “Top 5” senior executives (other than CEO and President/COO; specifically [**]) through CY 19.
|
C
|
100% retention or greater of “Next 20” senior executives (other than CEO and President/COO; to be identified by ORBK) through CY 19.
|
|||||||||
|
1)
|
Within each BSc level, 70% weight to be given to “A”, 20% weight to “B”, and 10% weight to “C”
|
||||||||
|
2)
|
KLA-Tencor (“KLAT”) agrees to cooperate in the synergy process and make it a priority
|
||||||||
|
3)
|
Accounting and business model changes will be limited to those necessary to achieve synergy objectives and/or to align with KLAT’s existing control environment; to the extent such changes might impact the achievement of OM$ and resultant PRSU payout, payout levels will be adjusted accordingly and correspondingly.
|
||||||||
|
4)
|
Orbotech organizational changes will be kept to a minimum through CY2020 and be limited to those necessary and aligned upon to achieve synergy objectives, and/or those necessary to align with KLAT’s existing control environment.
|
||||||||
|
5)
|
For purposes of defining retention, loss of an executive resulting from a death or due to a termination of an executive by Orbotech will not counted as a failure to retain.
|
1.
|
Dates of Employment
: I began employment with [
Orbotech Ltd.
] or a predecessor in interest thereto (“
My Employer
”) effective as of November 1, 1992. By mutual agreement, my employment with My Employer terminated effective [●] (the “
Termination Date
”). Capitalized terms not otherwise defined in this Termination and Release Agreement will have the meaning set forth in the Employment Agreement between me and the Orbotech Ltd. dated [
_______
] (the “
Employment Agreement
”).
|
2.
|
Final Payments
: I acknowledge and agree that the payments and entitlements set forth in the attached
List of Final Payments
are the sole consideration to which I am entitled from My Employer and all of its respective affiliated, associated, parent, related and successor organizations (collectively, the “
Company
”) relating to any matters arising out of my employment with My Employer or during the time of my employment with My Employer or the termination of said employment, and that there is no further obligation, financial or otherwise, owing to me by the Company. I further acknowledge and agree that the attached List of Final Payments includes certain benefits to which, pursuant to the Employment Agreement, I would not be entitled unless I enter into this Termination and Release Agreement.
|
3.
|
Confirmation of No Claims
: I confirm that upon receipt of the payments and entitlements listed in the attached List of Final Payments, I will have received all that I am entitled to for my work with My Employer and in connection with the termination of such employment (including but not limited to wages, overtime pay, annual leave and vacation pay, recuperation pay, remuneration of work on weekly rest, bonuses, royalties, intellectual property rights, options, stocks, pension, notice pay, severance pay, and other compensation in connection with my employment and the termination of that employment) and that upon such receipt, I will have no claim or demand for any payment, benefit or rights of any kind in connection with my employment and the termination of that employment. I agree that, subject to such receipt and compliance by My Employer with the terms hereof, I will not commence any complaint, claim, or proceeding under any applicable law or agreement with respect to any aspect of my employment with My Employer or the cessation of that employment or alleging breach of any of the provisions of any employment agreement or law, except as otherwise provided herein.
|
4.
|
Release of Claims
: I RELEASE AND FOREVER DISCHARGE, the Company, its parent, subsidiaries, and affiliates and all of their respective agents, directors, employees, officers, owners and shareholders, administrators, and assigns (both individually and in their official capacities with the Company) (collectively, the “
Released Parties
”) of and from any and all actions, causes of action, claims, complaints, debts, demands, liabilities and penalties, of every nature and kind which I or any of my heirs, executors, administrators or assigns has now or may have against any Released Parties, by reason of or arising out of any cause or matter existing up to the present time, whether legal or equitable and arising in contract, tort, or statute including without limitation, negligence, whether arising pursuant to Israeli law or otherwise, relating to any matters arising out of my employment or during the time of my employment or the cessation of said employment. Notwithstanding anything to the contrary in this Termination and Release Agreement or the Employment Agreement, nothing herein shall release any Released Parties from any claims or damages based on (a) any rights arising under, or preserved by, this Termination and Release Agreement, (b) any right or claim that arises after I execute this Termination and Release Agreement, (c) any right that is not waivable under applicable law, (d) any right to be insured, indemnified, exculpated or held harmless under the Company’s articles of association and other similar organizational documents, any applicable agreement or undertaking or otherwise and (e) any continuing obligations of the Company under the Employment Agreement or under any agreements, plans, contracts, documents or programs described or referenced in the Employment Agreement. Without derogating in any way from the above, I acknowledge that this release is a “Settlement and Acknowledgement of Discharge” as defined in Section 29 of the Severance Pay Law, 5723 - 1963.
|
5.
|
Confidentiality Commitment
: I confirm that I have continuing obligations not to disclose or make use of proprietary and confidential information as set forth in the Employee Proprietary Information and Invention Assignment Agreement between me and the Company dated as of ______
(the “
PIIA
”)
(including such other confidentiality and proprietary rights undertakings which I entered into during and in connection with my employment that, in accordance with the terms of the PIIA, continue after the termination of my employment), and I agree to honor those continuing obligations. I further acknowledge that I have continuing obligations pursuant to the PIIA to assist the Company or its nominee with respect to Assignable Inventions (as such term is defined in the PIIA), and I agree to honor those continuing obligations as well.
|
6.
|
Timing of Payments
: All payments and all letters of release referred to in the attached List of Final Payments will be paid or delivered to me, as applicable, within seven (7) days of the date hereof or such later date as contemplated by my Employment Agreement.
|
7.
|
Agreement Not to Disparage; Tortious Interference
: I agree to refrain from any disparagement or slander of the Company or tortious interference with the contracts and relationships of the Company.
|
8.
|
Return of Property
: I confirm that I have returned Company information and property to the extent required by Section 9 of the PIIA.
|
9.
|
Return of Company Car
: I confirm that I will have continued use of the motor vehicle that the Company provided to me during the six (6) month advance notice period referred to in the Employment Agreement and thereafter until the earlier of (i) six (6) months following termination of the six (6) month advance notice period; and (ii) my beginning full time employment with another employer; and I will return and deliver the motor vehicle to the Company’s facilities at the earlier of such times, and the Company will continue to bear all expenses relating to the use of the motor vehicle, including maintenance, fuel and repairs through such time. I acknowledge that I am solely responsible for all fines, penalties and tickets associated with the use of such Company motor vehicle in accordance with the terms of my Employment Agreement through the date of actual return to the Company and that the Company is entitled to transfer any such citations to my name and to offset from any amounts payable to me any such fines, penalties and tickets that are not paid in full by me, provided that I will not be responsible, where applicable, for any penalties incurred as a result of the early return of the motor vehicle to the leasing company in connection with my termination of employment for any reason whatsoever.
|
10.
|
Legal Obligations
: I understand that my and the Company’s obligations under this Termination and Release Agreement are in addition to those obligations under applicable law and do not derogate therefrom.
|
11.
|
Miscellaneous
: I confirm that prior to signing this Termination and Release Agreement, I carefully read it and that I understand its terms. I understand that this document, along with my Employment Agreement and the PIIA, constitutes the entire agreement between myself and My Employer with respect to the matters herein and supersedes all other agreements between myself and the Company, except as specifically set forth herein, and I confirm that I have not relied on any statement, written or oral, that is not set forth in this document with respect to the matters herein. I understand that this Termination and Release Agreement may be amended only be written agreement stating the intent to amend it that is signed by both me and an authorized representative of My Employer.
|
1.
|
Last Monthly Salary: Salary and benefits at the current monthly rate through the Termination Date
|
2.
|
Annual Bonus: A lump sum payment representing any earned but unpaid Annual Bonus (as determined in accordance with the Employment Agreement) in the amount of
________
NIS, payable no later than March 31 of the year following the year in which such Annual Bonus was earned.
|
3.
|
Severance Pay (bituach minahalim): Release of all amounts accrued on account of severance pay (including any profits and interest with respect to such amounts) with respect to the period of your employment in the manager’s insurance / pension fund(s) maintained for you. The Company will provide you with an appropriate letter of release addressed to the relevant manager’s insurance / pension fund(s). Payment of Severance Pay will be made only after receiving all data from the funds and Form 161 signed by you and approved by the Israel Tax Authority (which Form 161 will be provided by the Company on or immediately following the Termination Date).
|
4.
|
Vacation Days: Payment for [
_____
] accrued and unused vacation days as of the Termination Date at the rate of NIS
________
per day.
|
5.
|
Annual Recreation Allowance (d’mei havra’ah): NIS
__________
.
|
6.
|
Education Fund (keren hishtalmut): Release of all amounts accrued in your Education Funds (NIS
____________
). The Company will provide you with an appropriate letter of release addressed to the relevant Education Fund(s).
|
7.
|
[Advance Notice Payment: A lump sum payment in the amount of NIS
______
.]
|
8.
|
Vested Retirement Payment Benefits: A lump sum payment in the amount of NIS
______
.
|
9.
|
Adjustment Period Benefits: A lump sum payment in the amount of NIS
______
.
|
10.
|
Retirement Payment Benefits: A lump sum payment in the amount of NIS
______
.
|
11.
|
Assumed Equity Award Acceleration Benefits: Accelerated vesting of _____ KLA-Tencor [equity-based awards].
|
12.
|
Payment in lieu of Performance-Based RSUs: A lump sum payment in the amount of NIS
______
.
|
13.
|
Payment in Lieu of Time-Based RSUs: A lump sum payment in the amount of NIS
______
.
|
14.
|
Cellular Phone: The cellular phone provided to you by the Company (together with its accessories and phone number) will become your property. The Company will provide you with an appropriate letter of release/transfer to the relevant phone company in this regard.
|
1.
|
Confidentiality
.
I understand that during the course of my employment I will have access to various forms of non-public information. I understand that in the context of this Employee Proprietary Information and Inventions Assignment Agreement (“Agreement”), “Confidential Information” means non-public information and know-how which I receive or discover in the course of my employment, including but not limited to that relating to inventions, trade secrets, products and prototypes, technical data, product plans, schematics and other drawings, manufacturing processes, research and development, specifications, designs, software, algorithms, hardware and software configurations, formulas, flow charts, services, test data, check lists, procedures, technical manuals (including those for installation and service), Company- or Affiliate-provided training, tooling, passwords, business strategies and plans, market analysis, marketing, marketing plans, finances, customer lists and information (including names and contact information), supplier and vendor lists and information (including names and contact information), pricing information, financial data, personnel information (including employee lists and responsibilities), organizational structure, and/or proprietary information given to the Company in confidence by others. I acknowledge that although not all such data may have a proprietary legend, the Company considers all such non-public information to be proprietary. Except as the Company may otherwise consent to in a writing signed by a Vice President of the Company or higher level executive, I agree to keep confidential and not to disclose or make any use of any Confidential Information except for the benefit of the Company. This provision shall survive my employment but shall not apply after information has entered the public domain, other than by my breach of this Agreement. I acknowledge and agree that the disclosure or use of any Confidential Information by me, other than for the benefit of the Company, is wrongful and could cause irreparable harm to the Company.
|
2.
|
Assignment of Inventions
.
I hereby assign and transfer to the Company my entire right, title and interest in and to all inventions (as used in this Agreement, “inventions” shall include ideas, works of authorship, improvements, designs and discoveries), whether or not patentable or copyrightable, which during the period of my employment I may conceive, make, develop, work on, or first reduce to practice, either solely or jointly with others, whether or not reduced to practice, drawings, written descriptions, documentation, models or other tangible form. The assignment requirement of the preceding sentence shall not apply to inventions (a) for which no equipment, supplies, facilitates, or trade secret information of the Company or any Affiliate was used, (b) which were developed entirely on my own time, (c) which do not relate to the business of the Company or any Affiliate or to the Company’s or any Affiliate’s actual or demonstrably anticipated research or development, and (d) which do not result from any work performed by me for the Company. If in the course of my employment I incorporate into a Company product, process or machine a Prior Invention (as defined in paragraph 6 below) owned by me or in which I have an interest, then, unless otherwise agreed in writing signed by a Vice President of the Company or higher level executive, the Company is hereby granted and shall have a nonexclusive,
|
3.
|
Disclosure of Inventions; Patents; Publication
.
I agree that in connection with any Assignable Invention:
|
(a)
|
I will disclose such Assignable Invention promptly in writing to my manager, with a copy to the Company’s Legal Department. Such disclosure shall be received in confidence by the Company;
|
(b)
|
I will, at the Company’s request, promptly execute a written assignment of title to the Company for any such Assignable Invention and I will preserve any such Assignable Invention as confidential information of the Company;
|
(c)
|
Upon request, I agree to reasonably assist the Company or its nominee (at its expense) during and at any time subsequent to my employment in every reasonable way to obtain for its own benefit patents, copyrights or other statutory protection for such Assignable Inventions in any and all countries, which inventions shall be and remain the sole and exclusive property of the Company or its nominee whether or not patented, copyrighted, or otherwise protected by statute; and
|
(d)
|
I will not publish or cause to be published information on any such Assignable Invention. I recognize the right of ownership that the Company has to any publication relating to inventions belonging to the Company, and acknowledge my obligation to obtain clearance from the Company in advance of publishing on any such Assignable Invention.
|
4.
|
Execution of Documents
.
In connection with paragraph 3(c) above, I further agree during my employment and thereafter to execute, acknowledge and deliver to the Company or its nominee upon request and at its expense all such documents, including applications for patents, copyrights, or other statutory protection to be issued therefore, as the Company may determine necessary or desirable to apply for and obtain on such assignable inventions in any and all countries and/or to protect the interest of the Company or its nominee in such inventions and to vest title thereto in the Company or its nominee. If the Company is unable because of my mental or physical incapacity or for any other reason to secure my signature to apply for or to pursue any application for any United States or foreign letters patent or copyright registrations covering inventions or original works of authorship assigned to the Company as above, then I hereby irrevocably designate and appoint the Company and its duly authorized officers and agents as my agent and attorney in fact, to act for and in my behalf and stead, to execute and further the prosecution and issuance of letters patent or copyright registrations thereon with the same legal force
|
5.
|
Maintenance of Records
.
I agree to keep and maintain adequate and current written records of all Assignable Inventions made by me (in the form of notes, sketches, drawings and as may be specified by the Company), which records shall at all times be available to and remain the property of the Company.
|
6.
|
Prior Inventions
.
I understand that all inventions, if any, whether or not patented or copyrighted or otherwise protected by statutes, which I made prior to my employment, are excluded from the scope of this agreement. To preclude any possible uncertainty, I have set forth below in
Exhibit A
a complete list of all my prior inventions, including numbers of all patents, patent applications, copyrights registered in my name and mask works. I represent and covenant that the list is complete and that, if no items are on the list, I have no such prior inventions.
|
7.
|
Other Obligations
.
I acknowledge that the Company from time to time may have agreements with other persons or with governmental authorities, or agencies thereof, which impose obligations or restrictions on the Company regarding inventions made during the course of work thereunder or regarding the confidential nature of such work. I agree to be bound by all such obligations and restrictions.
|
8.
|
Trade Secrets of Others
.
I acknowledge and agree that my performance of all the terms of this Agreement does not and will not breach any agreement to keep in confidence proprietary information, knowledge or data acquired by me in confidence or in trust prior to my employment with the Company and I will not use or disclose to the Company, or induce the Company to use, any confidential or proprietary or trade secret information or material belonging to any previous employer or others. I will promptly notify the Company if I am given any assignment that might cause such breach. I also represent that I am not at the present time restricted from being employed by the Company, from performing the duties of my position with the Company, or from entering into this agreement; and I agree not to enter into any agreement, either written or oral, in conflict herewith. I commit that I will not bring onto the premises of the Company any unpublished, confidential, proprietary, or trade secret information, documents, or property belonging to my former employers or other third parties, unless consented to in writing by such employers or third parties. I understand that any misrepresentation, falsification, omission, or deception in this regard may lead to the termination of my employment, and the Company may seek indemnification against me for any damages caused thereby.
|
9.
|
Return of Company Information
.
Subject, in each case, to the Employment Agreement between me and Orbotech Ltd., dated as of [
]
, 20
(the “Employment Agreement”): (a) in the event of the voluntary or involuntary termination of my employment for any reason whatsoever, or at the written request of the Company at any time, I agree that I will deliver to the Company without destruction (and will not keep in my possession or deliver to anyone else) any and all drafts, originals and copies of devices, tooling, records, manuals, procedures, software, data, notes, reports, proposals, lists and sources of customers, lists of employees, proposals, business plans and projections, reports, job notes, correspondence, specifications, drawings, blueprints, sketches, materials, equipment, or any other documents or property obtained or prepared by me in the course of my employment, including materials from Affiliates, successors, assigns, third parties, or any customer of the Company (collectively, “Company Materials”), to the extent that any such Company Materials are material to the business of the Company or any Affiliate; and (b) I further acknowledge and agree that I will not take with me any description containing or pertaining to any Confidential Information, knowledge or data of the Company, to the extent such Confidential Information, knowledge or data is material to the business of the Company or any Affiliate, in each case, which I may produce or obtain during the course of my employment. In the event of the termination of my employment, I agree to sign and deliver a “Termination Certificate,” in the form attached hereto as
Exhibit B
.
|
10.
|
Non-Solicitation
.
During my employment and for a period of one (1) year after the voluntary or involuntary termination of my employment for any reason, in order to protect Confidential Information and enable the Company to maintain a stable work force and operate its business, I agree that I will not solicit nor encourage nor will I permit anyone under my authority or control to solicit or encourage any of the Company’s employees, agents or consults to terminate their relationship with the Company. I understand that I may advertise job openings through media available to the general public and that I may hire Company employees who approach me for jobs on their own initiative. I agree that this provision contains restrictions that are not greater than necessary to protect the interests of the Company.
|
11.
|
Outside Activities During Employment
. Sections 1.10 and 1.11 of the Employment Agreement will apply to my engagement in other employment or business activities during the term of my employment.
|
12.
|
Remedy
.
I acknowledge that the Company will not be reasonably or adequately compensated in damages if I breach my obligations under this Agreement. Therefore, and notwithstanding any arbitration agreements with the Company, if any, I acknowledge and agree that if there is a breach or threatened breach of any provisions of this Agreement that the Company or I shall be entitled to seek specific performance or an injunction without posting a bond restraining us from committing such breach. The parties’ right to an injunction shall not limit its right to any other remedies, including damages.
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13.
|
Modification
.
This Agreement may not be changed, modified, released, discharged, abandoned, or otherwise amended, in whole or in part, except by an instrument in writing, signed by me and a Vice President of the Company or higher level executive.
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14.
|
Severability
.
In the event that any paragraph or provision of this Agreement shall be held to be illegal or unenforceable, such paragraph or provision shall be severed from this Agreement and the entire Agreement shall not fail on account thereof, but shall otherwise remain in full force and effect.
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15.
|
Effective Date.
This Agreement shall be effective as of the date signed below.
|
16.
|
Successors and Assigns
.
This Agreement shall be binding upon my heirs, executors, administrators or other legal representatives and is for the benefit of the Company, its successors and assigns.
|
17.
|
Governing law
.
This Agreement shall be governed by the laws of the State of Israel.
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18.
|
Entire Agreement
.
Except as expressly provided for in this Paragraph 18, I agree that this Agreement sets forth the entire agreement between me and the Company relating to the subject matter herein. I understand that to the extent that I have previously entered, or do hereinafter enter, into agreements with the Company that contain confidentiality, proprietary rights, and/or non-solicitation obligations that do not conflict with the provisions of this Agreement, such agreements shall continue in force, subject to, for the avoidance of doubt, any modification in accordance with the terms of the Employment Agreement. The provisions of this Agreement shall prevail over and supersede the provisions of such other agreements in the event of any conflict of terms.
|
Date: _______________________________
|
Amichai Steimberg
|
|
Printed Name of Employee
|
|
|
|
______________________________
|
|
Signature of Employee
|
TITLE
|
DATE
|
IDENTIFYING NUMBER OR BRIEF DESCRIPTION
|
|
|
|
|
|
|
|
|
|
|
|
|
1.
|
Employment
|
1.1
|
Contingent upon the consummation of the Merger, this Agreement will commence and become effective on the Closing Date.
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1.2
|
On the Closing Date, Employee shall continue to be employed and will from that date be employed in the position of Chief Executive Officer of the Company (the “
Position
”) and shall be under the direct supervision of Richard P. Wallace, President and Chief Executive Officer of KLA, or his successor holding such position. On the later of (i) March 1, 2019 and (ii) the first day of the second month following the month in which Closing occurs (the “
Transition Date
”), Employee’s Position will transition to Senior Advisor of the Company and Employee shall continue to be under the direct supervision of Richard P. Wallace, President and Chief Executive Officer of KLA, or his successor holding such position. For the avoidance of any doubt, it is hereby clarified that for any and all purposes, Employee’s seniority shall be calculated as of November 1, 1990.
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1.3
|
Employee shall perform the duties, undertake the responsibilities and exercise the authority as determined from time to time by the Company or KLA and as customarily performed, undertaken and exercised by persons situated in a similar capacity. Employee’s duties and responsibilities hereunder may also include other services performed for affiliates of the Company.
|
1.4
|
During the course of employment with the Company, Employee shall honestly, diligently, skillfully and faithfully serve the Company. Employee undertakes to devote his professional
efforts and the best of Employee’s
qualifications and skills to promoting the business and affairs of the Company on a full-time basis or otherwise, in each case, as described herein, and further undertakes to loyally and fully comply with the decisions of the Board of Directors. Employee shall at all times act in a manner suitable of Employee’s position and status in the Company.
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1.5
|
Employee promises to promptly notify the Company regarding any matter or subject in respect of which he has a personal interest which might create a conflict of interest with his position in the Company.
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1.6
|
Employee shall be employed on a full time basis, regularly 5 days a week (Sunday to Thursday), 42 hours a week. Saturday shall be the weekly day of rest of Employee. Employee will also work outside of regular working hours and outside of regular working days, as may be reasonably required by the Company from time to time. Following the Transition Date, the Employee shall be employed as a Senior Advisor on a part time basis, eight hours per week.
|
1.7
|
It is agreed that the Employee’s position is a management one and/or which requires a special degree of personal trust, as defined in the Working Hours and Rest Law, 1951 (the
“Working Hours and Rest Law”
). Therefore, Employee shall not be granted any other compensation or payment other than expressly specified in this Agreement. Employee undertakes not to claim that the Working Hours and Rest Law applies to Employee’s employment with the Company. Employee acknowledges the legitimacy of the Company’s requirement to work “overtime” or during “weekly rest-hours” without being entitled to “overtime compensation” or “weekly rest-hour compensation” (as these terms are defined in the Working Hours and Rest Law), and Employee undertakes to reasonably comply with such requirements of the Company. Employee acknowledges that the compensation to which Employee is entitled pursuant to this Agreement constitutes adequate compensation for Employee’s work during “overtime” or “weekly rest-hours”.
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1.8
|
Employee may be required to travel abroad from time to time, as part of Employee’s position, and without entitlement to additional compensation for such traveling. All travel outside of Israel will be at least business class, to the extent such service is offered on such flight.
|
1.9
|
Employee hereby represents to the Company that there are no other undertakings or agreements preventing, restricting or limiting Employee from making the commitments described herein and performing the obligations under this Agreement, and Employee confirms that he is qualified and able to perform these obligations.
|
1.10
|
During the term of this Agreement, prior to the Transition Date, Employee shall not be engaged in any other employment nor directly or indirectly engage in any other business activities in any capacity for any other person, firm or company whether or not for consideration, without the express prior written consent of KLA; provided, however, that Employee may continue to (i) serve as a passive investor in the equity of any business, provided that Employee is not otherwise involved in running such business and (ii) act in any advisory capacity with respect to any business for which Employee currently serves in such role as of the Closing Date, or serve in any similar role with respect to any similar business, provided that no such business is a Competitor (as defined below). Notwithstanding the foregoing, during the period during which Employee holds the Position, he may serve as a director on the board of directors of up to two public or private companies, provided the applicable company is not a Competitor. Following the Transition Date, Employee may serve as a director on any number of public or private companies without the need to obtain the Company’s or KLA’s consent. In addition, on and following the Transition Date, Employee will be permitted to engage in employment with another person, firm or company (including for consideration), provided that such person, firm or company is not a Competitor and such employment does not interfere with Employee’s ability to fulfill his responsibilities hereunder.
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1.11
|
For purposes of this Agreement, “
Competitor
” means any entity that through one or more direct or indirect parent companies or subsidiaries, derives revenue primarily from developing, manufacturing, designing, selling, reselling, licensing, leasing, servicing or distributing a Competing Product. A “
Competing Product
” means (i) inspection, metrology, defect review or process monitoring or control solutions for customers engaged in integrated circuit manufacturing, wafer manufacturing, reticle production, advanced semiconductor packaging, light emitting diode production, power device production, development of compound semiconductors, data storage media/head manufacturing, or microelectromechanical systems (“
MEMS
”) manufacturing, (ii) inspection, test, measurement or process monitoring or control
|
1.12
|
Subject to section 4 below and unless Employee and the Company agree otherwise in writing, this Agreement and Employee’s employment with the Company shall terminate on December 31, 2019 (the “
Termination Date
”). Nothing contained herein shall bind the Company to continue to employ the Employee or bind the Employee to continue to work for the Company until the Termination Date.
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2.
|
Salary
|
2.1
|
Immediately following the Closing Date, the Company agrees to pay or cause to be paid to Employee during the term of this Agreement a gross salary of NIS 174,960 (one hundred and seventy-four thousand, nine hundred and sixty New Israeli Shekels)) per month (the “
Salary
”). On the Transition Date, the Salary will be changed to $15,000 (fifteen thousand United States Dollars) per month, payable in New Israeli Shekels at the representative rate of exchange published by the Bank of Israel (the “
Representative Rate of Exchange
”) as last published prior to the Transition Date.
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2.2
|
The Salary will be paid no later than the 9
th
day of each month, one month in arrears, subject to deduction of any and all taxes and charges applicable to Employee. Employee shall notify the Company of any change which may affect Employee’s tax liability.
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3.
|
Employee Benefits
|
3.1
|
Pension Plan
.
|
3.1.1
|
Managers’ Insurance Policy
:
|
3.1.1.1
|
Disability Insurance - The Company, at its own discretion and expense, shall purchase a disability insurance, under normal and acceptable conditions, which would insure 75% of the Salary (the “
Disability
Insurance
”). The Company’s contribution for Disability Insurance shall, in no circumstances, exceed the amount of 2½% of the Salary.
|
3.1.1.2
|
Severance - an amount equal to 8⅓% of the Salary;
|
3.1.1.3
|
Company’s contribution towards pension - the difference between 6.5% of the Salary and the actual percentage of the Salary contributed towards Disability Insurance, provided that the Company’s contribution towards pension shall not be lesser than 5% of the Salary.
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3.1.1.4
|
Employee’s contribution towards pension – 6% of the Salary.
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3.1.2
|
Pension Fund
: Severance - an amount equal to 8⅓% of the Salary; Pension - an amount equal to 6.5% of the Salary. In addition, the Company will deduct from Employee’s monthly paycheck a sum equal to 6% of the Salary as Employee’s contribution.
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3.2
|
Employee shall be entitled to instruct the Company to change Employee's contributions for pension to up to 7%.
|
3.3
|
Employee hereby agrees and acknowledges that the payments that the Company shall make to the abovementioned Managers’ Insurance Policy and/or Pension Fund shall be in addition to the severance payments under Section 4.6 below but instead of any other severance pay to which Employee or Employee’s heirs shall be entitled to receive from the Company with respect to the Salary from which these payments were made and the period during which they were made, in accordance with Section 14 of the Severance Pay Law 5723-1963, in accordance with the directives of the expansion order regarding pension insurance in the industry field. The Employee shall be entitled to all amounts accrued in such insurance policies and/or pension funds, including on account of severance, in the event of termination of employment, however arising.
|
3.4
|
Sick Leave
. Employee will be entitled to sick leave as provided by law, provided however, that the Employee shall be entitled to full pay for any sick leave from the first day (inclusive). In the event that Employee receives payment of Disability Insurance, Employee will not be entitled to sick leave payments for the same time period.
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3.5
|
Annual Recreation Allowance (
Dme'i Havra'a
)
. Employee shall be entitled to an annual recreation allowance, according to the applicable expansion order, but not less than NIS 7,200 (seven thousand two hundred and seven New Israeli Shekels) per year, which amount shall be paid to Employee in cash.
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3.6
|
Vacation
. Employee shall be entitled to an annual vacation of 24 working days at full pay, in addition to national holidays in Israel. The dates of vacation will be coordinated between Employee and the Company. Subject to the provision of due and reasonable prior notice, the Company may require Employee to take vacation leave in accordance with applicable law. Employee may accrue vacation time up to the maximum permitted by the Company's policy as the policy may be amended from time to time. All accumulated vacation days will be redeemed in cash upon termination of employment.
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3.7
|
Educational Fund (
Keren Hishtalmut
)
. The Company will contribute to a recognized educational fund an amount equal to 7.5% of the Salary and will deduct from each monthly payment and contribute to such education fund an additional amount equal to 2.5% of the Salary. Employee shall bear all taxes resulting from contributions made to the educational fund in excess of the recognized ceiling for tax purposes.
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3.8
|
Company Car
.
|
3.8.1
|
The Company shall provide Employee with a motor vehicle of a make, model, and class no less than the current motor vehicle at his disposal, which shall be leased by the Company for use by Employee in accordance with Company policy in effect at the Closing Date. The Company will bear all expenses relating to the use of the motor vehicle, including maintenance, fuel and repairs in accordance with Company policy in effect at the Closing Date. Employee shall be responsible for payment of all fines, penalties and tickets relating to the use of the motor vehicle during the period it had been put at Employee's disposal, but will not be responsible, where applicable, for any penalties incurred as a result of the early return of the motor vehicle to the leasing company in connection with the termination of the Employee's employment for any reason whatsoever. Employee shall not have any lien with respect to the motor vehicle or any document or property relating thereto.
|
3.8.2
|
Any expenses, payments or other benefits that are borne by the Company in connection with the provision or use of the motor vehicle shall not be regarded as part of the Salary, for any purpose or matter, including without limitation for calculation of rights and entitlements that are derived from Salary or wages. Employee shall take good care of the motor vehicle and ensure that the provisions of the insurance policy and the Company’s rules relating to the motor vehicle are strictly, lawfully and carefully observed. Employee is aware that in order to provide him with the motor vehicle the Company shall lease the motor vehicle from a leasing company, and Employee undertakes to strictly comply with the provisions of the leasing agreement.
|
3.8.3
|
The provision of the leased motor vehicle under this section 3.8 is in lieu of payment of a travel allowance.
|
3.8.4
|
Employee will have continued use of the motor vehicle during the 6-month advance notice period referred to in Section 4.1 below, even if the Company terminates the employment relationship with immediate effect and pays the Employee the Advanced Notice Payment and for a further period thereafter until the earlier of: (i) 6 months following termination of the 6-month advance notice period, and (ii) Employee beginning full time employment with another employer. The current leasing arrangement of the Company enables continued leasing and use of the leased vehicle following termination of employment and the Company shall take all steps necessary to ensure that any future arrangement will similarly permit such continued use.
|
3.9
|
Health and Dental Insurance
. Employee will be entitled to participate in Company's health insurance and dental insurance plans, subject to Company's policy as will be updated from time to time during the period of employment.
|
3.10
|
Bonus/Incentive Programs
.
|
3.10.1
|
Subject to Section 3.10.2, in calendar year 2019, Employee’s target bonus opportunity shall be equal to 100% of his annual Salary, calculated on the basis of a full year, as in effect prior to the Transition Date (the “
Annual Bonus
”). The amount of the Annual Bonus, if any, will depend on the achievement of the objectives set forth in
Exhibit A
(the “
Annual Bonus Objectives
”). KLA shall determine the achievement of the Annual Bonus Objectives, the entitlement to the Annual Bonus as well as the amount of the Annual Bonus in its sole and absolute discretion. The Annual Bonus shall be paid (if any) as soon as practicable after the Company determines that the Annual Bonus has been earned, subject to deduction of any and all taxes and charges applicable to Employee, but not later than March 31, 2020. The Annual Bonus will be paid to the Employee even if at the time of payment he is no longer an employee of the Company, provided he remains an employee through December 31, 2019.
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3.10.2
|
In the event the Merger has not occurred as of December 31, 2018, Employee will be entitled to payment of his annual bonus amount for calendar year 2019, as established by the Company prior to the Closing Date, based on the Company’s achievement of the applicable performance metrics as determined by reference to the period from January 1, 2019 until the end of the Company’s fiscal period in which the Closing Date occurs, taken as one period (the “
Closing Fiscal Period
”), with such payment prorated based on the number of days during the period beginning on January 1, 2019 and ending on the Closing Date (such pro-rated payment, the “
Interim Annual Bonus
”). For purposes of determining the applicable Interim Annual Bonus, the Company will prepare unaudited financial statements with respect to the Closing Fiscal Period, which shall be prepared on a basis consistent with the Company’s pre-closing financial statements without giving effect to purchase accounting (the “
Interim Financial
|
3.10.3
|
Upon closing of the Merger Agreement, but in no event later than 10 business days following the Closing Date, the Company will pay Employee a cash bonus in an amount in NIS equivalent to USD 2,283,333.33 (two million two hundred eighty three thousand three hundred thirty three United States dollars and thirty three United States cents) calculated at the Representative Rate of Exchange last published prior to the date of payment, subject to deduction of any and all taxes and charges applicable to Employee (the “
Closing Bonus
”).
|
3.10.4
|
To avoid doubt, no disbursements shall be made under Section 3.1 above with respect to any bonus or incentive payments, including the Annual Bonus and Closing Bonus, and bonus and incentive payments shall not be deemed a portion of Employee’s Salary for any purpose, including without limitation, for calculation of rights and entitlements that are derived from Salary or wages.
|
3.11
|
Cellular Phone
. Employee shall be entitled to receive a cellular phone from the Company, subject to Company's policy as shall be amended from time to time. The cellular phone (together with its accessories and phone number)will become the property of the Employee upon termination of employment, however arising.
|
3.12
|
Performance-Based RSUs
.
|
3.12.1
|
The Company hereby represents that KLA has, by its authorized corporate bodies, approved the grant to the Employee, no later than and effective as of immediately following the closing of the Merger, pursuant to KLA’s 2004 Equity Incentive Plan (as amended, the “
Plan
”), of an award of performance-based restricted stock units settled in shares of KLA common stock (the “
Performance-Based RSUs
”). The target number of restricted stock units covered by the Performance-Based RSUs equals the quotient obtained by dividing (i) USD 2,830,000 (two million eight hundred and thirty thousand United States Dollars) (the “
Performance-Based RSU Value
”) by (ii) the per share adjusted closing stock price of KLA common stock on the date of the closing of the Merger (the “
Target
”). The Performance-Based RSUs may vest at up to 200% of Target, as described in Section 3.12.3.
|
3.12.2
|
The Performance-Based RSUs are subject to vesting as follows: A percentage of the Target restricted stock units subject to the Performance-Based RSUs as determined in Section 3.12.3 below (the “
Vesting Percentage
”) will vest on the earlier of (i) 12 months following the Closing Date, or (ii) the Termination Date, subject to Employee’s continuing employment or service (including as a Senior Advisor) through such date, except as provided in Section 3.12.4.
|
3.12.3
|
The Vesting Percentage shall be determined based on the Company’s achievement of the objectives (each an “
Objective
”) in calendar year 2019, as set forth in
Exhibit B
.
|
3.12.4
|
If, prior to the applicable vesting date, Employee is terminated by the Company without Cause (as defined below), and Employee executes and delivers a release agreement in the form of
Exhibit C
, the Performance-Based RSUs will be canceled and in lieu thereof, the Company will pay Employee an amount in NIS equivalent to 100% of the Performance-Based RSU Value calculated at the Representative Rate of Exchange last published prior to the date of payment, subject to deduction of any and all taxes and charges applicable to Employee.
|
3.12.5
|
The Compensation Committee of the Board of Directors of KLA will review, determine, and approve the level of achievement of the Objectives and the applicable Vesting Percentage with respect to the Performance-Based RSUs. All determinations of Vesting Percentage and degree of achievement of Objectives will be made on or prior to March 31 of the year following the year with respect to which the Objectives are based. Employee will receive notification of the grant of the Performance-Based RSUs promptly following the date it is effective. The Performance-Based RSUs will be subject to the terms of the applicable grant document and the Plan and will be granted in accordance with Section 102 of the Israel Income Tax Ordinance through a trustee approved for such purposes by the Israel Income Tax Authority and pursuant to the “capital gains route” thereunder.
|
3.13.1
|
The Company hereby represents that KLA has, by its authorized corporate bodies, approved the grant to the Employee, no later than and effective as of immediately following the closing of the Merger, pursuant to the Plan, of an award of restricted stock units settled in shares of KLA common stock (the “
Time-Based RSUs
”). The number of restricted stock units covered by the Time-Based RSUs equals the quotient obtained by dividing (i) USD 1,886,666.67 (one million eight hundred and eighty six thousand six hundred and sixty six United States Dollars and sixty seven United States Cents) (the “
Time-Based RSU Value
”) by (ii) the per share adjusted closing stock price of KLA common stock on the date of the closing of the Merger.
|
3.13.2
|
The Time-Based RSUs are subject to vesting as follows: (i) 50% of the Time-Based RSUs will vest on the earlier of (A) 6 months following the Closing Date, or (B) July 1, 2019, subject to Employee’s continuing employment or service (including as a Senior Advisor) through such date, and (ii) 50% of the Time-Based RSUs will vest on the earlier of (X) 12 months following the Closing Date, or (Y) the Termination Date, subject to Employee’s continuing employment or service (including as a Senior Advisor) through such date, except as provided in Section 3.13.3.
|
3.13.3
|
If Employee is terminated by the Company without Cause (as defined below), and Employee executes and delivers a release agreement in the form of
Exhibit C
, the Time-Based RSUs will be canceled and in lieu thereof, the Company will pay Employee an amount in NIS equivalent to (i) 50% of the Time-Based RSU Value if 50% of the Time-Based RSUs are vested as of the date of termination, or (ii) 100% of the Time-Based RSU Value if none of the Time-Based RSUs are vested as of the date of termination, in each instance, calculated at the Representative Rate of Exchange last published prior to the date of payment, subject to deduction of any and all taxes and charges applicable to Employee.
|
3.13.4
|
Employee will receive notification of the grant of the Time-Based RSUs promptly following the date it is effective. The Time-Based RSUs will be subject to the terms of the applicable grant document and the Plan and will be granted in accordance with Section 102 of the Israel Income Tax Ordinance through a trustee approved for such purposes by the Israel Income Tax Authority and pursuant to the “capital gains route” thereunder.
|
4.
|
Term and Termination
|
4.1
|
The term of employment under this Agreement will begin as of the Closing Date and will continue until the Termination Date unless either party provides the other party with a 6 month prior written notice, subject to sections 4.2 and 4.3. For avoidance of doubt, in the event the Company provides the Employee with a prior written notice of termination less than 6 months prior to the Termination Date, the Company shall pay to Employee an Advanced Notice Payment (as such term is defined below) with respect to a period of time that is equal to the difference between 6 months and the period of time prior to the Termination Date in which the notice was given.
|
4.2
|
Notwithstanding anything contained herein to the contrary, the Company at its sole discretion shall have the right to terminate the employment relationship with immediate effect or prior to the end of the notice period set forth above and pay Employee in lieu of advance notice or the remainder thereof the Employee’s Salary and the value of all benefits (excluding bonuses or equity-related benefits referenced in Sections 3.10, 3.12 and 3.13) for such period (such payment, the “
Advanced Notice Payment
”).
|
4.3
|
In addition, the Company shall have the right to terminate this Agreement at any time without a notice period or payment in lieu thereof in the event of termination for Cause (as defined below).
|
4.4
|
The term “Cause” shall mean (a) Employee’s conviction of, or plea of nolo contendre to, a felony; (b) the Employee’s gross misconduct; (c) any material act of personal dishonesty taken by the Employee in connection with his responsibilities as an employee or service provider of the Company or its subsidiaries; or (d) the Employee’s willful and continued failure to perform the duties and responsibilities of his position after there has been delivered to the Employee a written demand for performance from the Company or the applicable subsidiary which describes the basis for the belief that the Employee has not substantially performed his duties and provides the Employee with 30 days to take corrective action.
|
4.5
|
In any event of termination of this Agreement, or otherwise upon the Company's request, except as otherwise provided herein, Employee shall immediately return, in proper form and working order, all Company and customer of the Company property, equipment, materials, documents, and data (without retaining copies, other than copies of any data and other information, including contact information, stored on Employee’s cellular phone), to the extent that any such property, equipment, materials, documents, or data is material to the business of the Company or its affiliates and which, for the avoidance of doubt, shall not include any personal items in Employee’s office; and Employee shall cooperate with the Company and use Employee’s reasonable best efforts to assist with the transition of work as directed. At the option of the Company, Employee shall during such period either continue with Employee’s duties or remain absent from the premises of the Company. Under no circumstances will Employee have a lien over any property (including data) provided by or belonging to the Company or customer of the Company.
|
4.6
|
(A) Upon any termination of employment, including any termination of employment by Employee, Employee will be entitled: (i) to a lump sum payment equal to the product of 200% of the Salary (based on Employee’s most recent Salary prior to transitioning to Senior Advisor), multiplied by the number of years, including partial years, from November 1, 1990 until the Closing Date, less any amounts contributed by the Company and accumulated on account of severance pay with respect to such period in any Manager’s Insurance Policy or Pension Fund
|
5.
|
Confidentiality; Proprietary Rights
|
5.1
|
Employee has executed and agrees to be bound by the provisions governing confidentiality, proprietary rights and non-competition contained in
Exhibit D
to this Agreement, which provisions will survive termination of this Agreement for any reason.
|
5.2
|
All of Employee’s confidentiality, proprietary rights, non-solicitation, and non-competition obligations pursuant to the Employee’s previous undertakings in favor of the Company will remain in full force and effect, except that all non-competition undertakings will expire upon termination of Employee’s employment with the Company. In case of contradiction, between such previous undertakings and
Exhibit D
,
Exhibit D
will override.
|
6.
|
Successors and Assigns
|
6.1
|
This Agreement shall be binding upon and shall inure to the benefit of the Company, its successors and assigns.
|
6.2
|
Neither this Agreement nor any right or interest hereunder shall be assignable or transferable by Employee, Employee’s beneficiaries or legal representatives, except by will or by the laws of descent and distribution.
|
7.
|
Prevention of Sexual Harassment
|
7.1
|
The Company views violations of the Law for Prevention of Sexual Harassment (the
“Law”
) in a severe light. Employee acknowledges being informed of the Company's policy regarding sexual harassment, including the existence of Company guidelines for the prevention of sexual harassment that may be received at any time from the employee in charge of enforcing the Law in the Company.
|
8.
|
Data and Privacy
|
8.1
|
The use of the Company's (and Company affiliates’) devices and equipment, including computers, e-mail accounts, phones, and so on, is intended for professional use and for executing Employee's duties in the Company and for reasonable personal use. The Company hereby notifies Employee that it uses its right to conduct inspections within the Company’s offices and on the Company’s and Company affiliates’ equipment, including computers, cellular phones, and other devices, and, with respect to electronic mail, inspections of electronic mail transmissions sent or received through the e-mail account provided by the Company (the “
Company’s E-Mail Account
”), and including internet usage and inspections of their content, inspections of phone usage and cellular company's bills and reports, all while safeguarding Employee’s privacy and subject to applicable law. For the avoidance of doubt, subject to applicable law, any such examination’s findings, except for Employee’s personal matters, shall be the Company’s sole property, and may be presented by the Company to third parties. Employee hereby consents to any reasonable use, transfer and disclosure of all work related messages and data contained or sent via the Company’s computer and communications systems, including the Company’s E-Mail Account. Employee shall fully comply with the Company's policies regarding use of electronic devices and networks, as may be in effect from time to time
|
8.2
|
Employee grants consent to the Company and its affiliates, and its/their employees, wherever they may be located, to utilize and process Employee’s personal information, including data collected by the Company for purposes related to Employee’s employment. This may include transfer of Employee’s personnel records outside of Israel and further transfers thereafter. All personnel records are considered confidential and access will be limited and restricted to individuals with need to know or process that information for purposes relating to Employee’s employment only, such as management teams and human resource personnel. The Company may share personnel records as needed solely for such purposes with third parties assisting with human resources administration.
|
9.
|
Miscellaneous
|
9.1
|
All payments set forth in this Agreement are subject to withholding of applicable taxes, including national insurance payments. The Performance-Based RSUs and Time-Based RSUs have been or will be granted with dividend equivalent rights and, in accordance with Section 102 of the Israel Income Tax Ordinance through a trustee approved for such purposes by the Israel Income Tax Authority and pursuant to the “capital gains route” thereunder.
|
9.2
|
No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by Employee and the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent
|
9.3
|
This Agreement constitutes the entire agreement between the parties hereto and supersedes all prior agreements, understandings and arrangements, oral or written, between the parties hereto with respect to the subject matter hereof (including, for the avoidance of doubt, the Original Employment Agreement), except as expressly set forth herein. No new agreements or arrangements shall apply unless a written agreement containing such agreements or arrangements was executed by both parties.
|
9.4
|
Employee will be subject to Company's policies, as set and updated from time to time, provided that, in accordance with the terms of the Merger Agreement, during the one-year period following the Merger such policies shall be no less favorable, in the aggregate, than those in effect as of immediately prior to the Merger.
|
9.5
|
This Agreement is personal and its terms are confidential, and, other than as otherwise disclosed in any public filings by the Company or KLA with the U.S. Securities and Exchange Commission, Employee undertakes to keep them as such; provided, however, that Employee may disclose such information to his legal counsel, tax advisors or financial planners on the condition that Employee shall first instruct such counsel, advisors or planners, as applicable, not to disclose such information to anyone or otherwise make use of such information outside the scope of their retention by Employee.
|
9.6
|
This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Israel.
|
9.7
|
In the event that any provision of this Agreement is held invalid or unenforceable in any circumstances by a court of competent jurisdiction, the remainder of this Agreement and the application of such provision in any other circumstances shall not be affected thereby, and the unenforceable provision shall be enforced to the maximum extent permissible under law or otherwise shall be replaced by an enforceable provision that most nearly approximates the intent of the unenforceable provision.
|
9.8
|
This Agreement and its annexes and exhibits constitute notice to Employee pursuant to the Notice to Employee (Employment Terms) Law – 2002. Nothing contained in this Agreement is meant to derogate from Employee's right according to any applicable law or agreement.
|
Company:
|
Employee:
|
Orbotech Ltd.
Signature: /s/ Bren D. Higgins
By: Bren D. Higgins
Title: Director
Date: February 20, 2019
|
Asher Levy
Signature: /s/ Asher Levy
ID#:
____
Date: February 20, 2019
|
Orbotech CY19 Annual Bonus Payout Table
for Orbotech CEO & President/COO Only 1 |
|||||||||
Balanced Scorecard Performance (“BSc”)
|
BSc Score
|
BSc Multiplier
|
CY19 Non-GAPP Operating Margin ($M) Performance
|
||||||
<$[**]
|
$[**]
|
$[**]
|
$[**]
|
$[**]
2
|
$[**]
|
$[**]
|
|||
Far Exceeds Expectations
|
5
|
1.2
|
0%
|
[**]%
|
[**]%
|
[**]%
|
[**]%
|
[**]%
|
[**]%
3
|
Exceeds Expectations
|
4
|
1.1
|
0%
|
[**]%
|
[**]%
|
[**]%
|
[**]%
|
[**]%
|
[**]%
3
|
Primarily Meets Expectations
|
3
2
|
1.0
2
|
0%
|
[**]%
|
[**]%
|
[**]%
|
[**]%
2
|
[**]%
|
[**]%
3
|
Below Expectations
|
2
|
.9
|
0%
|
[**]%
|
[**]%
|
[**]%
|
[**]%
|
[**]%
|
[**]%
3
|
Far Below Expectations
|
1
|
.8
|
0%
|
[**]%
|
[**]%
|
[**]%
|
[**]%
|
[**]%
|
[**]%
3
|
% of Plan
|
|
[**]%
|
[**]%
|
[**]%
|
[**]%
|
[**]%
|
[**]%
|
1-
|
Far Below Expectations
|
A
|
Failure to have a Plan in place within six (6) months post-Closing with specific actions identified (to be taken both by KLA and Orbotech) which would achieve at least a
[**]
run rate cost savings within the two (2) years post-Closing; or
|
B
|
Achieving less than 100% retention of the "Top 5" senior executives other than the CEO and the President/COO (specifically,
[**]
) through CY19; or
|
C
|
Achieving less than 85% retention of the "Next 21" senior executives other than the CEO and the President/COO (specifically,
[**]
) through CY19.
|
2-
|
Below Expectations
|
A
|
Failure to have a Plan in place within four (4) months post-Closing with specific actions identified (to be taken both by KLA and Orbotech) which would achieve at least a
[**]
run rate cost savings within the two (2) years post-Closing; or
|
B
|
Achieving less than 100% retention of the "Top 5" senior executives other than the CEO and the President/COO (specifically,
[**]
) through CY19; or
|
C
|
Achieving less than 90% retention of the "Next 21" senior executives other than the CEO and the President/COO (specifically,
[**]
) through CY19.
|
3-
|
Primarily Meets Expectations
|
A
|
Having a Plan in place within four (4) months post-Closing with specific actions identified (to be taken both by KLA and Orbotech) to achieve a
[**]
run rate cost savings within the two (2) years post-Closing; and
|
B
|
Achieving 100% retention of the "Top 5" senior executives other than the CEO and the President/COO (specifically,
[**]
) through CY19; and
|
C
|
Achieving 90% or greater retention of the "Next 21" senior executives other than the CEO and President/COO (specifically,
[**]
) through CY19.
|
4-
|
Exceeds Expectations
|
A
|
Having a Plan in place within four (4) months post-Closing with specific actions identified (to be taken both by KLA and Orbotech) to achieve a
[**]
or greater run rate cost savings within two and one-half (2.5) years post-Closing, or a Plan with specific actions identified to achieve at least a
[**]
run rate cost savings within two (2) years post-Closing while also identifying specific actions to achieve at least
[**]
of such a run rate savings in CY2020; and
|
B
|
Achieving 100% retention of the "Top 5" senior executives other than the CEO and President/COO (specifically,
[**]
) through CY19; and
|
C
|
Achieving 95% retention or greater of the "Next 21" senior executives other than the CEO and President/COO (specifically,
[**]
) through CY19.
|
5-
|
Far Exceeds Expectations
|
A
|
Having a Plan in place within six (6) months post-Closing with specific actions identified (to be taken both by KLA and Orbotech) to achieve an
[**]
or greater run rate cost savings within two and one-half (2.5) years post-Closing, or a Plan with specific actions identified to achieve at least a
[**]
run rate cost savings within two and one-half (2.5) years post-Closing while also
|
B
|
Achieving 100% retention of "Top 5" senior executives other than the CEO and President/COO (specifically,
[**]
) through CY19; and
|
C
|
Achieving 100% retention of "Next 21" senior executives other than the CEO and President/COO (specifically,
[**]
) through CY19.
|
1)
|
Within each BSc level, 70% weight is to be given to criteria "A", 20% weight to criteria "B", and 10% weight to criteria "C” as set forth in the descriptions set forth directly above.
|
2)
|
KLA-Tencor ("KLA") agrees to cooperate in the synergy process and make it a priority.
|
3)
|
Accounting and business model changes will be limited to those necessary to achieve synergy objectives and/or to align with KLA's existing control environment; to the extent such changes might impact the achievement of OM$ and resultant PRSU payout, payout levels will be adjusted accordingly and correspondingly.
|
4)
|
Orbotech organizational changes will be kept to a minimum through CY2020 and be limited to those necessary and aligned upon to achieve synergy objectives, and/or those necessary to align with KLA's existing control environment.
|
5)
|
For purposes of defining retention, loss of an executive resulting from a death or due to a termination of an executive by Orbotech will not counted as a failure to retain.
|
C
|
Less than 90% retention of “Next 20” senior executives (other than CEO and President/COO; to be identified by ORBK) through CY 19.
|
|||||||||
3 – Primarily Meets
|
|
|||||||||
A
|
Plan in place within four (4) months post-close with specific actions identified (to be taken both by KT and Orbotech) to achieve [**] run rate cost savings within two (2) years post-close.
|
|||||||||
B
|
100% retention of “Top 5” senior executives (other than CEO and President/COO; specifically [**]) through CY 19.
|
|||||||||
C
|
90% retention or greater of “Next 20” senior executives (other than CEO and President/COO; to be identified by ORBK) through CY 19.
|
|||||||||
4 – Exceeds
|
|
|
||||||||
A
|
Plan in place within
four (4)
months post-close with specific actions identified (to be taken both by KT and Orbotech) to achieve [**] or greater in run rate cost savings within
two and one-half (2.5)
years post-close while also identifying specific actions to achieve at least [**] of such run rate savings in CY2020.
|
|||||||||
A
|
If applicable, successful execution/implementation against Orbotech specific actions in support of the [**] run rate savings identified above by end of CY19.
|
|||||||||
B
|
100% retention of “Top 5” senior executives (other than CEO and President/COO; specifically [**]) through CY 19.
|
|||||||||
C
|
95% retention or greater of “Next 20” senior executives (other than CEO and President/COO; to be identified by ORBK) through CY 19.
|
|||||||||
5 – Far Exceeds
|
|
|||||||||
A
|
Plan in place within
six (6)
months post-close with specific actions identified (to be taken both by KT and Orbotech) to achieve [**] or greater in run rate cost savings within
two and one-half (2.5)
years post-close while also identifying specific actions to achieve at least [**] of such run rate savings in CY2020.
|
|||||||||
A
|
If applicable, successful execution/implementation against Orbotech specific actions in support of the [**] or greater run rate savings identified above by end of CY19.
|
B
|
100% retention of “Top 5” senior executives (other than CEO and President/COO; specifically [**]) through CY 19.
|
|||||||||
C
|
100% retention or greater of “Next 20” senior executives (other than CEO and President/COO; to be identified by ORBK) through CY 19.
|
|||||||||
|
1)
|
Within each BSc level, 70% weight to be given to “A”, 20% weight to “B”, and 10% weight to “C”
|
||||||||
|
2)
|
KLA-Tencor (“KLAT”) agrees to cooperate in the synergy process and make it a priority
|
||||||||
|
3)
|
Accounting and business model changes will be limited to those necessary to achieve synergy objectives and/or to align with KLAT’s existing control environment; to the extent such changes might impact the achievement of OM$ and resultant PRSU payout, payout levels will be adjusted accordingly and correspondingly.
|
||||||||
|
4)
|
Orbotech organizational changes will be kept to a minimum through CY2020 and be limited to those necessary and aligned upon to achieve synergy objectives, and/or those necessary to align with KLAT’s existing control environment.
|
||||||||
|
5)
|
For purposes of defining retention, loss of an executive resulting from a death or due to a termination of an executive by Orbotech will not counted as a failure to retain.
|
1.
|
Last Monthly Salary: Salary and benefits at the current monthly rate through the Termination Date
|
2.
|
Annual Bonus: A lump sum payment representing any earned but unpaid Annual Bonus (as determined in accordance with the Employment Agreement) in the amount of
________
NIS, payable no later than March 31 of the year following the year in which such Annual Bonus was earned.
|
3.
|
Severance Pay (bituach minahalim): Release of all amounts accrued on account of severance pay (including any profits and interest with respect to such amounts) with respect to the period of your employment in the manager’s insurance / pension fund(s) maintained for you. The Company will provide you with an appropriate letter of release addressed to the relevant manager’s insurance / pension fund(s). Payment of Severance Pay will be made only after receiving all data from the funds and Form 161 signed by you and approved by the Israel Tax Authority (which Form 161 will be provided by the Company on or immediately following the Termination Date).
|
4.
|
Vacation Days: Payment for [
_____
] accrued and unused vacation days as of the Termination Date at the rate of NIS
________
per day.
|
5.
|
Annual Recreation Allowance (d’mei havra’ah): NIS
__________
.
|
6.
|
Education Fund (keren hishtalmut): Release of all amounts accrued in your Education Funds (NIS
____________
). The Company will provide you with an appropriate letter of release addressed to the relevant Education Fund(s).
|
7.
|
[Advance Notice Payment: A lump sum payment in the amount of NIS
______
.]
|
8.
|
Vested Retirement Payment Benefits: A lump sum payment in the amount of NIS
______
.
|
9.
|
Adjustment Period Benefits: A lump sum payment in the amount of NIS
______
.
|
10.
|
Retirement Payment Benefits: A lump sum payment in the amount of NIS
______
.
|
11.
|
Assumed Equity Award Acceleration Benefits: Accelerated vesting of _____ KLA-Tencor [equity-based awards].
|
12.
|
Payment in lieu of Performance-Based RSUs: A lump sum payment in the amount of NIS
______
.
|
13.
|
Payment in Lieu of Time-Based RSUs: A lump sum payment in the amount of NIS
______
.
|
14.
|
Cellular Phone: The cellular phone provided to you by the Company (together with its accessories and phone number) will become your property. The Company will provide you with an appropriate letter of release/transfer to the relevant phone company in this regard.
|
1.
|
Confidentiality
.
I understand that during the course of my employment I will have access to various forms of non-public information. I understand that in the context of this Employee Proprietary Information and Inventions Assignment Agreement (“Agreement”), “Confidential Information” means non-public information and know-how which I receive or discover in the course of my employment, including but not limited to that relating to inventions, trade secrets, products and prototypes, technical data, product plans, schematics and other drawings, manufacturing processes, research and development, specifications, designs, software, algorithms, hardware and software configurations, formulas, flow charts, services, test data, check lists, procedures, technical manuals (including those for installation and service), Company- or Affiliate-provided training, tooling, passwords, business strategies and plans, market analysis, marketing, marketing plans, finances, customer lists and information (including names and contact information), supplier and vendor lists and information (including names and contact information), pricing information, financial data, personnel information (including employee lists and responsibilities), organizational structure, and/or proprietary information given to the Company in confidence by others. I acknowledge that although not all such data may have a proprietary legend, the Company considers all such non-public information to be proprietary. Except as the Company may otherwise consent to in a writing signed by a Vice President of the Company or higher level executive, I agree to keep confidential and not to disclose or make any use of any Confidential Information except for the benefit of the Company. This provision shall survive my employment but shall not apply after information has entered the public domain, other than by my breach of this Agreement. I acknowledge and agree that the disclosure or use of any Confidential Information by me, other than for the benefit of the Company, is wrongful and could cause irreparable harm to the Company.
|
2.
|
Assignment of Inventions
.
I hereby assign and transfer to the Company my entire right, title and interest in and to all inventions (as used in this Agreement, “inventions” shall include ideas, works of authorship, improvements, designs and discoveries), whether or not patentable or copyrightable, which during the period of my employment I may conceive, make, develop, work on, or first reduce to practice, either solely or jointly with others, whether or not reduced to practice, drawings, written descriptions, documentation, models or other tangible form. The assignment requirement of the preceding sentence shall not apply to inventions (a) for which no equipment, supplies, facilitates, or trade secret information of the Company or any Affiliate was used, (b) which were developed entirely on my own time, (c) which do not relate to the business of the Company or any Affiliate or to the Company’s or any Affiliate’s actual or demonstrably anticipated research or development, and (d) which do not result from any work performed by me for the Company. If in the course of my employment I incorporate into a Company product, process or machine a Prior Invention (as defined in paragraph 6 below) owned by me or in which I have an interest, then, unless otherwise agreed in writing signed by a Vice President of the Company or higher level executive, the Company is hereby granted and shall have a nonexclusive,
|
3.
|
Disclosure of Inventions; Patents; Publication
.
I agree that in connection with any Assignable Invention:
|
(a)
|
I will disclose such Assignable Invention promptly in writing to my manager, with a copy to the Company’s Legal Department. Such disclosure shall be received in confidence by the Company;
|
(b)
|
I will, at the Company’s request, promptly execute a written assignment of title to the Company for any such Assignable Invention and I will preserve any such Assignable Invention as confidential information of the Company;
|
(c)
|
Upon request, I agree to reasonably assist the Company or its nominee (at its expense) during and at any time subsequent to my employment in every reasonable way to obtain for its own benefit patents, copyrights or other statutory protection for such Assignable Inventions in any and all countries, which inventions shall be and remain the sole and exclusive property of the Company or its nominee whether or not patented, copyrighted, or otherwise protected by statute; and
|
(d)
|
I will not publish or cause to be published information on any such Assignable Invention. I recognize the right of ownership that the Company has to any publication relating to inventions belonging to the Company, and acknowledge my obligation to obtain clearance from the Company in advance of publishing on any such Assignable Invention.
|
4.
|
Execution of Documents.
In connection with paragraph 3(c) above, I further agree during my employment and thereafter to execute, acknowledge and deliver to the Company or its nominee upon request and at its expense all such documents, including applications for patents, copyrights, or other statutory protection to be issued therefore, as the Company may determine necessary or desirable to apply for and obtain on such assignable inventions in any and all countries and/or to protect the interest of the Company or its nominee in such inventions and to vest title thereto in the Company or its nominee. If the Company is unable because of my mental or physical incapacity or for any other reason to secure my signature to apply for or to pursue any application for any United States or foreign letters patent or copyright registrations covering inventions or original works of authorship assigned to the Company as above, then I hereby irrevocably designate and appoint the Company and its duly authorized officers
|
5.
|
Maintenance of Records
.
I agree to keep and maintain adequate and current written records of all Assignable Inventions made by me (in the form of notes, sketches, drawings and as may be specified by the Company), which records shall at all times be available to and remain the property of the Company.
|
6.
|
Prior Inventions
.
I understand that all inventions, if any, whether or not patented or copyrighted or otherwise protected by statutes, which I made prior to my employment, are excluded from the scope of this agreement. To preclude any possible uncertainty, I have set forth below in
Exhibit A
a complete list of all my prior inventions, including numbers of all patents, patent applications, copyrights registered in my name and mask works. I represent and covenant that the list is complete and that, if no items are on the list, I have no such prior inventions.
|
7.
|
Other Obligations.
I acknowledge that the Company from time to time may have agreements with other persons or with governmental authorities, or agencies thereof, which impose obligations or restrictions on the Company regarding inventions made during the course of work thereunder or regarding the confidential nature of such work. I agree to be bound by all such obligations and restrictions.
|
8.
|
Trade Secrets of Others
.
I acknowledge and agree that my performance of all the terms of this Agreement does not and will not breach any agreement to keep in confidence proprietary information, knowledge or data acquired by me in confidence or in trust prior to my employment with the Company and I will not use or disclose to the Company, or induce the Company to use, any confidential or proprietary or trade secret information or material belonging to any previous employer or others. I will promptly notify the Company if I am given any assignment that might cause such breach. I also represent that I am not at the present time restricted from being employed by the Company, from performing the duties of my position with the Company, or from entering into this agreement; and I agree not to enter into any agreement, either written or oral, in conflict herewith. I commit that I will not bring onto the premises of the Company any unpublished, confidential, proprietary, or trade secret information, documents, or property belonging to my former employers or other third parties, unless consented to in writing by such employers or third parties. I understand that any misrepresentation, falsification, omission, or deception in this regard may lead to the termination of my employment, and the Company may seek indemnification against me for any damages caused thereby.
|
9.
|
Return of Company Information
.
Subject, in each case, to the Employment Agreement between me and Orbotech Ltd., dated as of [
]
, 20
(the “Employment Agreement”): (a) in the event of the voluntary or involuntary termination of my employment for any reason whatsoever, or at the written request of the Company at any time, I agree that I will deliver to the Company without destruction (and will not keep in my possession or deliver to anyone else) any and all drafts, originals and copies of devices, tooling, records, manuals, procedures, software, data, notes, reports, proposals, lists and sources of customers, lists of employees, proposals, business plans and projections, reports, job notes, correspondence, specifications, drawings, blueprints, sketches, materials, equipment, or any other documents or property obtained or prepared by me in the course of my employment, including materials from Affiliates, successors, assigns, third parties, or any customer of the Company (collectively, “Company Materials”), to the extent that any such Company Materials are material to the business of the Company or any Affiliate; and (b) I further acknowledge and agree that I will not take with me any description containing or pertaining to any Confidential Information, knowledge or data of the Company, to the extent such Confidential Information, knowledge or data is material to the business of the Company or any Affiliate, in each case, which I may produce or obtain during the course of my employment. In
|
10.
|
Non-Solicitation
.
During my employment and for a period of one (1) year after the voluntary or involuntary termination of my employment for any reason, in order to protect Confidential Information and enable the Company to maintain a stable work force and operate its business, I agree that I will not solicit nor encourage nor will I permit anyone under my authority or control to solicit or encourage any of the Company’s employees, agents or consults to terminate their relationship with the Company. I understand that I may advertise job openings through media available to the general public and that I may hire Company employees who approach me for jobs on their own initiative. I agree that this provision contains restrictions that are not greater than necessary to protect the interests of the Company.
|
11.
|
Outside Activities During Employment
. Sections 1.10 and 1.11 of the Employment Agreement will apply to my engagement in other employment or business activities during the term of my employment.
|
12.
|
Remedy.
I acknowledge that the Company will not be reasonably or adequately compensated in damages if I breach my obligations under this Agreement. Therefore, and notwithstanding any arbitration agreements with the Company, if any, I acknowledge and agree that if there is a breach or threatened breach of any provisions of this Agreement that the Company or I shall be entitled to seek specific performance or an injunction without posting a bond restraining us from committing such breach. The parties’ right to an injunction shall not limit its right to any other remedies, including damages.
|
13.
|
Modification
.
This Agreement may not be changed, modified, released, discharged, abandoned, or otherwise amended, in whole or in part, except by an instrument in writing, signed by me and a Vice President of the Company or higher level executive.
|
14.
|
Severability.
In the event that any paragraph or provision of this Agreement shall be held to be illegal or unenforceable, such paragraph or provision shall be severed from this Agreement and the entire Agreement shall not fail on account thereof, but shall otherwise remain in full force and effect.
|
15.
|
Effective Date.
This Agreement shall be effective as of the date signed below.
|
16.
|
Successors and Assigns
.
This Agreement shall be binding upon my heirs, executors, administrators or other legal representatives and is for the benefit of the Company, its successors and assigns.
|
17.
|
Governing law.
This Agreement shall be governed by the laws of the State of Israel.
|
18.
|
Entire Agreement.
Except as expressly provided for in this Paragraph 18, I agree that this Agreement sets forth the entire agreement between me and the Company relating to the subject matter herein. I understand that to the extent that I have previously entered, or do hereinafter enter, into agreements with the Company that contain confidentiality, proprietary rights, and/or non-solicitation obligations that do not conflict with the provisions of this Agreement, such agreements shall continue in force, subject to, for the avoidance of doubt, any modification in accordance with the terms of the Employment Agreement. The provisions of this Agreement shall prevail over and supersede the provisions of such other agreements in the event of any conflict of terms.
|
Date: _______________________________
|
______________________________
|
|
Printed Name of Employee
|
|
|
|
______________________________
|
|
Signature of Employee
|
TITLE
|
DATE
|
IDENTIFYING NUMBER OR BRIEF DESCRIPTION
|
|
|
|
|
|
|
|
|
|
|
|
|
CY19 Target BSc and Non-GAAP Operating Margin Performance
|
Multiple cannot exceed 200% regardless of performance
|
1
|
I have reviewed this Quarterly Report on Form 10-Q of KLA-Tencor Corporation;
|
2
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
5
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
May 8, 2019
|
|
|
|
/s/ RICHARD P. WALLACE
|
(Date)
|
|
|
|
Richard P. Wallace
|
|
|
|
|
President and Chief Executive Officer
|
|
|
|
|
(Principal Executive Officer)
|
1
|
I have reviewed this Quarterly Report on Form 10-Q of KLA-Tencor Corporation;
|
2
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
5
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
May 8, 2019
|
|
|
|
/s/ BREN D. HIGGINS
|
(Date)
|
|
|
|
Bren D. Higgins
|
|
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
|
|
(Principal Financial Officer)
|
May 8, 2019
|
|
|
|
By:
|
|
/s/ RICHARD P. WALLACE
|
(Date)
|
|
|
|
Name:
|
|
Richard P. Wallace
|
|
|
|
|
Title:
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President and Chief Executive Officer
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May 8, 2019
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By:
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/s/ BREN D. HIGGINS
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(Date)
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Name:
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Bren D. Higgins
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Title:
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Executive Vice President and Chief Financial Officer
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