1
EXHIBIT 13
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
FISCAL 1994 FISCAL 1995
QUARTER ENDED SEPT. 30 DEC. 31 MARCH 31 JUNE 30 SEPT. 30 DEC. 31 MARCH 31 JUNE 30
- ---------------------------------------------------------------------------------------------------------------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Net sales $ 51.9 $ 57.1 $ 62.6 $ 72.1 $ 83.2 $104.7 $118.1 $136.4
Gross profit 20.7 24.7 29.4 35.9 42.6 56.3 63.9 75.0
(% of net sales) 39.9% 43.3% 47.0% 49.8% 51.2% 53.8% 54.1% 55.0%
Engineering, research and
development expense 4.9 4.8 5.5 7.2 8.2 8.8 12.3 16.0
(% of net sales) 9.4% 8.4% 8.8% 10.0% 9.9% 8.4% 10.4% 11.7%
Selling, general and
administrative expense 9.9 11.3 12.0 15.0 16.5 21.7 21.6 25.5
(% of net sales) 19.1% 19.8% 19.2% 20.8% 19.8% 20.7% 18.3% 18.7%
Net income 4.2 6.3 9.0 10.7 12.8 1.0(a) 20.8 24.0
(% of net sales) 8.1% 11.0% 14.4% 14.8% 15.4% 1.0% 17.6% 17.6%
Net income per share $ 0.20 $ 0.30 $ 0.40 $ 0.45 $ 0.54 $ 0.04(a) $ 0.86 $ 0.94
Shares used in computing
net income per share 20.8 20.9 22.7 23.7 23.9 24.1 24.3 25.5
- ---------------------------------------------------------------------------------------------------------------
(A) Includes a net charge of $16.2 million or $0.66 per share, for writeoff of
acquired in-process technology.
2
Management's Financial Commentary
Last year we described fiscal 1994 as a breakthrough year that resulted in a
sharp improvement in earnings. This year we can describe fiscal 1995 as a year
of rapid advance on all fronts. For the first time in many years, all of KLA's
major businesses were growing at the same time. Earnings per share of $3.06
(prior to the write-off resulting from the acquisition of Metrologix) were more
than double the prior year's record of $1.37 in fiscal 1994. This improvement
was the result of a number of factors. First and foremost, semiconductor
manufacturers continued to find new uses for the KLA 2100 series, and adoption
of KLA's methodologies became more pervasive. The top ten manufacturing plants
using KLA's approach now average seven KLA 2100 systems per fab, and more than
88 fabs have multiple systems installed or on order. The second factor was the
continued strength of capital spending by the industry on new submicron
manufacturing capabilities. The electronic components in greatest demand, such
as microprocessors, memories and custom ASICs, require facilities capable of
manufacturing circuits with 0.5-micron features or below. The shortage of these
advanced facilities has resulted in a strong cycle of spending by semiconductor
manufacturers. This spending strength has driven demand for all of KLA's
products, including the metrology and test division systems. A third
consideration was the recovery of the reticle and photomask business, reflecting
the industry's enthusiasm for the new capabilities of the KLA 331. The system
employs a new KLA technology, Simultaneous Transmitted and Reflected Light
("STARlight"), which finds many new classes of defects not previously thought to
exist on masks and reticles. As a result, both mask makers and mask users are
interested in this new verification technology.
As a result of these factors, KLA's bookings grew 80% in fiscal 1995, and
backlog doubled from about $125 million at June 30, 1994, to about $250 million
at June 30, 1995. To accommodate this continuing growth, KLA increased cleanroom
manufacturing space during the fiscal year by over 100%, entered into an
agreement to lease a 105,000 square-foot facility being constructed at its main
campus site, and leased an additional 73,000 square feet of office and
manufacturing space adjacent to the campus. In August of 1995, KLA also entered
into leases for 134,000 square feet in three buildings adjacent to the KLA
campus.
During fiscal 1995, KLA expanded the product offering of the metrology
business by acquiring Metrologix, a manufacturer of scanning electron
microscope(SEM) products used to measure the linewidths of very advanced
devices. As these linewidths became smaller, the optical technology of the KLA
5100 was less able to resolve the images for linewidth measurement. As a result,
the KLA 5100 is now employed primarily for overlay alignment applications, and
it continues to have a majority share of that market. The acquisition resulted
in an after-tax charge of $16.2 million attributable to the write-off of
in-process technology; this charge reduced earnings in the second quarter by
$0.66 per share.
ANNUAL RESULTS OF OPERATIONS
Sales increased 82% in fiscal 1995 compared with increases of 46% and 7% in
fiscal 1994 and 1993, respectively. The dollar sales increase in fiscal 1995 was
primarily attributable to the continued success of the 2100 series product line
manufactured by the Wafer Inspection Business Unit (WISARD). However, comparable
percentage increases were also recorded by the Reticle and Photomask Inspection
Business Unit (RAPID) for the reasons described earlier and by the Optical
Metrology Business Unit, which continued to achieve the majority share of its
overlay metrology market. Smaller percentage gains were seen in the ATS
Division, which benefited from the introduction of a new prober model, and the
Customer Service Division (CSD), which benefited from the growing installed base
of KLA equipment worldwide. The 46% sales increase in fiscal 1994 was again
primarily attributable to rising demand for WISARD's 2100 series product. The
Metrology Business Unit recorded a similar percentage increase to that of
WISARD. Revenue increases were also recorded in the RAPID and ATS divisions. The
7% sales increase in fiscal 1993 reflected strength in the ATS and Metrology
divisions, which slightly offset a decline in RAPID caused by a delay in
completing all the features of its new 300 Series.
International sales as a percent of total sales were 69%, 65% and 62% in
fiscal years 1995, 1994 and 1993, respectively. The increase in international
sales in fiscal 1995 was due to continued strong demand from Korea, to an
upsurge in orders from Taiwan in the second half of the year, and to a
continuation of the recovery of the Japanese semiconductor industry to more
traditional levels of profitability and investment.
Gross margins were 54%, 45% and 36% in fiscal years 1995, 1994 and 1993,
respectively. The improvement in fiscal 1995 was due to manufacturing
efficiencies in WISARD, the rise in WISARD's share of KLA's total revenues, the
absorption of fixed overhead costs by higher sales volumes and the favorable
impact of a stronger yen. The gross margin improvement in fiscal 1994 was driven
by the same considerations as in fiscal 1995. Gross margins in fiscal 1993 were
adversely impacted by new product transitions in all divisions, which generated
large scrap, rework and overhead variance costs. In RAPID, these transitions,
unlike others in KLA's history, involved redesigns of every significant
subsystem.
Engineering, research and development expenses were 10%, 9% and 10% of
revenue in fiscal 1995, 1994 and 1993, respectively. In absolute dollars, these
expenses doubled to $45.3 million in fiscal 1995. As the Company increasingly
concentrates on the broad opportunities in yield management, including the
networking of all measurement tools in the fab, it is increasingly identifying
opportunities to develop and market new systems and measurement tools, as well
as applications and the related software for using these tools. Many such
opportunities occurred in the WISARD Division during fiscal 1995, and R&D
spending increased accordingly. Increases in R&D were also recorded in RAPID,
Metrology and the new PRISM division. The decline in the percent of revenue for
R&D in fiscal 1994 to 9% was due to the efficiency of developing new models with
less extensive redesign of many subsystems than normal.
Engineering, research and development expenses are shown net of funds KLA
receives
14
3
from customers, industry groups and government sources and also net of any
capitalization of software costs. KLA's gross R&D expenses were reduced by 1%,
2% and 4% by these sources in fiscal years 1995, 1994 and 1993, respectively.
KLA did not capitalize any software costs in fiscal years 1995 and 1994.
Selling, general and administrative costs were 19%, 20% and 20% in fiscal
years 1995, 1994 and 1993, respectively. In fiscal 1995, decreases in sales and
administration expenses as a percentage of sales were partially offset by
increases in profit-sharing expenses resulting directly from the continued
improvement in KLA's financial performance. In fiscal 1994, representative
commissions and profit-sharing expenses increased slightly, and were offset by a
decline in sales and administrative expenses, all as a percent of revenues.
"Interest income and other, net," increased in fiscal 1995 because the
Company had higher balances of cash, cash equivalents and marketable securities.
These balances increased primarily because of the secondary public offerings of
stock of $68.6 million in February 1994 and $91 million in May 1995. Interest
expense was $2.4, $2.0 and $3.4 million in fiscal years 1995, 1994 and 1993,
respectively. The decline in fiscal 1994 was due primarily to an interest rate
adjustment in August 1993 on KLA's mortgage loan from 10.3% to 5.63%.
The provision for income taxes on pretax income was 34%, 25% and 25% in
fiscal 1995, 1994 and 1993, respectively. In fiscal 1995, the income tax rate
was lower than the statutory U.S. tax rate primarily due to the benefits
generated by KLA's foreign sales corporation and the realization of deferred tax
assets which were previously reserved. KLA's tax rate increased from 1994 to
1995 as a result of a greater percentage of worldwide earnings being taxable in
the U.S. in 1995 than in prior years. In fiscal 1993 and 1994, the income tax
rate was lower than the statutory U.S. tax rate primarily due to tax advantages
in Switzerland that resulted in a lower net foreign tax rate and as a result of
the realization of deferred tax assets previously reserved. Additionally, the
fiscal 1994 rate was reduced by the utilization of $1.9 million in foreign tax
credits.
The IRS is currently auditing the Company's federal income tax returns for
fiscal years 1985-1992. Management believes sufficient taxes have been provided
in prior years and that the ultimate outcome of the IRS audit will not have a
material adverse impact on the Company's financial position or results of
operations.
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents and marketable securities increased by $105.6 million in
fiscal 1995 with $22.3 million from operations, $91 million from a secondary
public offering in May 1995, and $24.7 million from the after-tax impact of
stock option and stock purchase plans. This was partially offset by a $14.2
million cash payment to purchase Metrologix, and $19 million in capital
expenditures. Cash provided by operations was substantially less than reported
earnings due to the working capital investment required to support the rise in
revenues.
Capital expenditures of $19 million in fiscal 1995 compared with
depreciation charges of approximately $11 million and were about triple the
fiscal 1994 amount. The major uses of capital were the facility expansion at
KLA's main campus and the facility expansions at KLA Israel and Japan. Capital
expenditures for fiscal 1996 are expected to be greater than depreciation but
less than the fiscal 1995 amount; however, this assessment could change if
demand continues to exceed estimates and additional manufacturing capacity is
required. No estimate can be made of the size or cost of any such additional
capacity.
The Company has entered into lease agreements to occupy three buildings
beginning in fiscal 1996. In total, the lessor has committed to fund up to $27.9
million to construct or acquire and improve the three buildings located at KLA's
main campus site. KLA may, at its option, purchase the properties during the
term of the leases at approximately the amount expended by the lessor to
acquire, construct and improve the properties. If the Company does not purchase
the buildings at the end of the leases, the Company will guarantee the lessor
85% of the residual values of the properties as determined at the inception of
the leases.
KLA believes that its current level of liquid assets, borrowing facilities,
working capital and cash expected to be generated from operations will be
sufficient to fund its growth through at least fiscal 1996. The current policy
of KLA is not to pay dividends. Management believes that it is in the best
interests of the stockholders to continue to reinvest KLA's earnings in the
business.
[PHOTO OF ROBERT J. BOEHLKE, VICE PRESIDENT, FINANCE AND ADMINISTRATION AND
CHIEF FINANCIAL OFFICER]
BUSINESS RISKS AND UNCERTAINTIES
The Company's future results will depend on its ability to continuously
introduce new products and enhancements to its customers as demands for higher
productivity and specifications of semiconductor test equipment change or
increase. Due to the risks inherent in transitioning to new products, the
Company must accurately forecast demand in both volume and configuration and
also manage the transition from older products. The Company's results could be
affected by the ability of competitors to introduce new products that have
technological and/or pricing advantages. Results also will be affected by
strategic decisions made by management regarding whether to continue particular
product lines, and by volume, mix and timing of orders received during a period,
fluctuations in foreign exchange rates, and changing conditions in both the
semiconductor industry and key semiconductor markets around the world. As a
result, the Company's operating results may fluctuate, especially when measured
on a quarterly basis.
15
4
5
SELECTED FINANCIAL DATA (UNAUDITED)
1991 1992 1993 1994 1995
- -------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share amounts)
YEARS ENDED JUNE 30,
Net sales $ 148,432 $ 155,963 $ 167,236 $ 243,737 $ 442,416
Restructuring charges (recovery) - 8,158 (718) - -
Income (loss) from continuing operations 2,415 (16,610) 6,961 30,188 58,618
Net income (loss) (10,585) (13,810) 6,961 30,188 58,618
Income (loss) per share from continuing operations 0.13 (0.90) 0.35 1.37 2.40
Net income (loss) per share (0.57) (0.75) 0.35 1.37 2.40
Shares used in computing net income per share 18,552 18,451 19,707 22,044 24,435
AT JUNE 30,
Cash, cash equivalents and marketable securities 31,254 23,711 52,362 139,126 244,753
Working capital 91,116 83,961 93,611 212,873 228,026
Total assets 198,023 188,457 199,089 321,570 546,296
Long-term debt 24,000 24,000 20,000 20,000 -
Stockholders' equity 113,161 103,032 114,050 227,382 403,969
CONSOLIDATED STATEMENT OF OPERATIONS
YEARS ENDED JUNE 30, 1993 1994 1995
- -----------------------------------------------------------------------------------------
(In thousands, except per share amounts)
Net sales $ 167,236 $ 243,737 $ 442,416
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Costs and expenses:
Cost of sales 107,466 133,028 204,618
Engineering, research and development 16,314 22,435 45,252
Selling, general and administrative 32,684 48,192 85,255
Write-off of acquired in-process technology - - 25,240
Restructuring recovery (718) - -
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155,746 203,655 360,365
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Income from operations 11,490 40,082 82,051
Interest income and other, net 1,217 2,174 9,127
Interest expense (3,426) (2,005) (2,364)
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Income before income taxes 9,281 40,251 88,814
Provision for income taxes 2,320 10,063 30,196
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Net income $ 6,961 $ 30,188 $ 58,618
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Net income per share $ 0.35 $ 1.37 $ 2.40
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Shares used in computing net income per share 19,707 22,044 24,435
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Pro forma net income per share, Note 5 $ 0.18 $ 0.69 $ 1.20
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See accompanying notes to consolidated financial statements.
16 KLA INSTRUMENTS CORPORATION
6
CONSOLIDATED BALANCE SHEET
AT JUNE 30, 1994 1995
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(IN THOUSANDS)
ASSETS
Current assets:
Cash and cash equivalents $139,126 $ 92,059
Short-term investments - 26,681
Accounts receivable, net of allowances of $1,754 and $2,196 74,226 129,274
Inventories 53,265 79,759
Deferred income taxes 7,495 18,155
Other current assets 4,343 14,949
- ---------------------------------------------------------------------------------------------------------------------------
Total current assets 278,455 360,877
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Land, property and equipment, net 37,149 49,004
Marketable securities - 126,013
Other assets 5,966 10,402
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Total assets $321,570 $ 546,296
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 4,673 $ 4,458
Current portion of long-term debt - 20,000
Accounts payable 11,890 19,376
Income taxes payable 12,466 22,797
Other current liabilities 36,553 66,220
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Total current liabilities 65,582 132,851
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Deferred income taxes 8,606 9,476
Long-term debt 20,000 -
Commitments and contingencies, Note 4
Stockholders' equity:
Preferred Stock $.001 par value, 1,000 shares authorized, none issued and outstanding - -
Common shares, $.001 par value, 75,000 shares authorized,
22,864 and 25,080 shares issued and outstanding 23 25
Capital in excess of par value 147,358 263,016
Retained earnings 80,275 138,893
Treasury stock (581) (581)
Net unrealized gain on investments - 1,241
Cumulative translation adjustment 307 1,375
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Total stockholders' equity 227,382 403,969
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Total liabilities and stockholders' equity $321,570 $ 546,296
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See accompanying notes to consolidated financial statements.
KLA INSTRUMENTS CORPORATION 17
7
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
COMMON STOCK AND CAPITAL
IN EXCESS OF PAR VALUE TREASURY STOCK NET UNREALIZED
------------------------ RETAINED ----------------- GAIN ON TRANSLATION
SHARES AMOUNT EARNINGS SHARES AMOUNT INVESTMENTS ADJUSTMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands)
Balance at June 30, 1992 18,696 $ 58,957 $ 43,126 (55) $(581) $ - $ 1,530
- ----------------------------------------------------------------------------------------------------------------------------------
Exercise of stock options 604 4,277
Shares sold in stock purchase plan 203 1,424
Net income 6,961
Translation adjustments (1,644)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1993 19,503 64,658 50,087 (55) (581) - (114)
- ----------------------------------------------------------------------------------------------------------------------------------
Exercise of stock options 854 6,960
Tax benefit on exercise of stock options 5,232
Shares sold in stock purchase plan 207 1,965
Shares sold in stock offering 2,300 68,566
Net income 30,188
Translation adjustments 421
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Balance at June 30, 1994 22,864 147,381 80,275 (55) (581) - 307
- ----------------------------------------------------------------------------------------------------------------------------------
Exercise of stock options 628 5,271
Tax benefit on exercise of stock options 15,427
Shares sold in stock purchase plan 88 3,995
Shares sold in stock offering 1,500 90,967
Net income 58,618
Net unrealized gain on investments 1,241
Translation adjustments 1,068
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Balance at June 30, 1995 25,080 $263,041 $138,893 (55) $(581) $1,241 $1,375
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See accompanying notes to consolidated financial statements.
18 KLA INSTRUMENTS CORPORATION
8
CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED JUNE 30, 1993 1994 1995
- ---------------------------------------------------------------------------------------------------------------------------
(In thousands)
Cash flows from operating activities:
Net income $ 6,961 $30,188 $ 58,618
Adjustments required to reconcile net income
to cash provided by operations:
Depreciation and amortization 9,646 10,734 10,642
Write-off of acquired in-process technology - - 16,154
Deferred income taxes (466) (2,053) (9,591)
Changes in assets and liabilities:
Accounts receivable 947 (26,149) (54,462)
Inventories 6,048 (10,776) (23,112)
Other assets 1,570 (139) (18,313)
Accounts payable 3,375 2,937 6,509
Income taxes payable (429) 3,063 11,199
Other current liabilities 2,655 3,483 24,692
- ---------------------------------------------------------------------------------------------------------------------------
Cash provided by operations 30,307 11,288 22,336
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Cash flows from investing activities:
Capital expenditures (3,226) (5,809) (19,009)
Purchases of short and long-term available for sale securities - - (329,729)
Sales and maturities of short and long-term available for sale securities - - 178,276
Investment in Metrologix - - (14,182)
Other (357) - -
- ---------------------------------------------------------------------------------------------------------------------------
Cash used for investing activities (3,583) (5,809) (184,644)
- ---------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Short-term borrowings, net (2,881) 2,141 (1,487)
Payment of current portion of long-term debt - (4,000) -
Sales of common stock/tax benefit of options exercised 5,701 82,723 115,660
- ---------------------------------------------------------------------------------------------------------------------------
Cash provided by financing activities 2,820 80,864 114,173
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Effect of exchange rate changes (893) 421 1,068
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Increase (decrease) in cash and cash equivalents 28,651 86,764 (47,067)
Cash and cash equivalents at beginning of year 23,711 52,362 139,126
- ---------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 52,362 $139,126 $ 92,059
- ---------------------------------------------------------------------------------------------------------------------------
Cash paid during the year for:
Interest $ 3,515 $ 2,007 $ 2,361
Income taxes 1,914 3,369 22,715
- ---------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
KLA INSTRUMENTS CORPORATION 19
9
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the
accounts of the Company and all of its subsidiaries. All significant
intercompany accounts and transactions have been eliminated. Subsidiaries with
accounts denominated in foreign currencies have been translated principally
using the local currencies as the functional currencies. Accordingly, the assets
and liabilities of these subsidiaries are translated at the rates of exchange on
the balance sheet date, income and expense items are translated at average rates
of exchange for the year, and the resulting translation gains or losses are
included in stockholders' equity. Foreign currency transaction gains and losses
have not been material and are included in interest income and other, net.
CASH EQUIVALENTS - Cash equivalents consist of highly liquid investments with a
maturity date at acquisition of three months or less. Cash and cash equivalents
are stated at cost, plus accrued interest, which approximates market value.
Effective July 1, 1994, the Company adopted Statement of Financial Accounting
Standards No. 115 (FAS 115) "Accounting for Certain Investments in Debt and
Equity Securities," which requires the Company to classify debt and equity
securities into one of three categories: held to maturity, trading or available
for sale. The Company's investments are classified as available for sale.
Investments classified as available for sale are measured at market value, and
net unrealized gains and losses are recorded as a separate component of
stockholders' equity until realized. Any gains or losses on sales of investments
are computed by specific identification. As of June 30, 1995, net unrealized
gains on investments available for sale were $1.2 million.
CONCENTRATION OF CREDIT RISK - Financial instruments that potentially subject
the Company to significant concentrations of credit risk consist principally of
investments, trade accounts receivable and financial instruments used in hedging
activities.
The Company invests in a variety of financial instruments such as certificates
of deposit, commercial paper, municipal debt and U.S. Government debt. The
Company, by policy, limits the amount of credit exposure to any one financial
institution or commercial issuer.
The Company sells its systems to semiconductor manufacturers throughout the
world. The Company performs ongoing credit evaluations of its customers'
financial condition and, generally, requires no collateral from its customers.
The Company maintains an allowance for uncollectible accounts receivable based
upon expected collectibility of all accounts receivable. The write-off of
uncollectible amounts has been insignificant.
The Company is exposed to credit loss in the event of nonperformance by
counterparties on the foreign exchange contracts used in hedging activities. The
Company does not anticipate nonperformance by these counterparties.
FOREIGN EXCHANGE HEDGING - The Company enters into forward contracts to hedge
against currency fluctuations that affect certain foreign currency denominated
sales and purchase transactions. Because the impact of movements in currency
exchange rates on forward contracts offsets the related impact on the underlying
items being hedged, these financial instruments do not subject the Company to
speculative risk that would otherwise result from changes in currency exchange
rates. Unrealized gains and losses on these contracts are deferred and accounted
for as part of the hedged transactions. Cash flows from these contracts are
classified in the Statement of Cash Flows in the same category as the hedged
transactions.
At June 30, 1994, the Company had forward contracts maturing throughout fiscal
1995 to sell approximately $48.1 million in foreign currency, primarily Japanese
yen, and to purchase approximately $5.8 million of Japanese yen. At June 30,
1995, the Company had forward contracts maturing throughout fiscal 1996 to sell
approximately $147.9 million in foreign currency, primarily Japanese yen, and to
purchase approximately $19.1 million in foreign currency, primarily Japanese
yen. Of these contracts, approximately $70.5 million of contracts hedge foreign
currency receivables and payables carried on the balance sheet as of June 30,
1995, and consequently the financial statements reflect the fair market value of
the contracts and their underlying transactions. Approximately $90.6 million and
$5.9 million of the contracts hedge firm commitments for future sales and
purchases, respectively, denominated in foreign currency. The fair market value
of these contracts on June 30, 1995, based upon prevailing market rates on that
date, was approximately $88.3 million and $5.8 million, respectively.
INVENTORIES - Inventories are stated at the lower of cost or market. Cost is
determined using standard costs, which approximate actual costs on a first-in,
first-out basis.
PROPERTY AND EQUIPMENT - Property and equipment are recorded at cost.
Depreciation and amortization are computed using the straight-line method over
the estimated useful lives of the assets, which are 30 years for buildings and
building improvements, five years for furniture and fixtures, and range from
three to five years for machinery and equipment. The life of the lease or the
useful life, whichever is shorter, is used for the amortization of leasehold
improvements.
REVENUE RECOGNITION - The Company recognizes sales of wafer inspection,
metrology, reticle and photomask inspection systems upon acceptance at the
Company's plant, which is when title transfers. Customers may observe and
approve satisfactory completion of the tests. Sales of other systems are
recognized upon shipment. A provision for the estimated future cost of system
installation and warranty is recorded at the time revenue is recognized.
Revenues from software licenses are recognized upon delivery of the software,
provided that the Company does not have any significant obligations. Revenues
from service contracts are recognized during the terms of the contracts on a
straight-line basis.
20 KLA INSTRUMENTS CORPORATION
10
NOTE 1 (CONTINUED)
RESEARCH AND DEVELOPMENT - The Company is actively engaged in significant
product improvement and new product development efforts. Research and
development expenses relating to possible future products aggregated
approximately $13.4, $16.8 and $28.4 million for fiscal 1993, 1994 and 1995,
respectively.
INCOME TAXES - The Company accounts for income taxes under the liability method,
which requires an adjustment to the provision for income taxes for the effect of
changes in corporate tax rates.
Undistributed earnings of certain of the Company's foreign subsidiaries, for
which no U.S. income taxes have been provided, aggregated approximately $6.3
million at June 30, 1995. The amount of the unrecognized deferred tax liability
related to this investment is estimated at approximately $2.3 million at June
30, 1995.
NET INCOME PER SHARE - Net income per share is computed using the weighted
average number of common and common equivalent shares outstanding during the
respective periods, including the assumed net shares issuable upon exercise of
stock options, when dilutive.
NOTE 2 DETAILS OF FINANCIAL STATEMENT COMPONENTS
1994 1995
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(In thousands)
Inventories:
Customer service spares $ 12,220 $ 13,050
Systems raw materials 12,597 18,944
Work-in-process 13,348 26,863
Demonstration equipment 15,100 20,902
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$ 53,265 $ 79,759
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Land, property and equipment:
Land $ 10,502 $ 10,502
Buildings and improvements 21,928 27,483
Machinery and equipment 33,143 41,203
Furniture and fixtures 4,549 5,542
Leasehold improvements 4,029 3,913
- ----------------------------------------------------------------------------------
74,151 88,643
Less accumulated depreciation and amortization (37,002) (39,639)
- ----------------------------------------------------------------------------------
$ 37,149 $ 49,004
- ----------------------------------------------------------------------------------
Other current liabilities:
Accrued compensation and benefits $ 16,328 $ 27,574
Accrued warranty and installation 14,367 22,229
Unearned revenue 3,054 4,867
Other 2,804 11,550
- ----------------------------------------------------------------------------------
$ 36,553 $ 66,220
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NOTE 3 INVESTMENTS
The amortized cost and estimated fair value of securities available for sale as
of June 30, 1995, are as follows:
Gross Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
- --------------------------------------------------------------------------------------------------
(In thousands)
U.S. Treasuries $ 47,720 $ 455 $ 36 $ 48,139
Municipal bonds 83,983 693 100 84,576
Corporate debt securities 43,638 705 - 44,343
Other 45,324 368 59 45,633
- --------------------------------------------------------------------------------------------------
220,665 2,221 195 222,691
Less cash equivalents (70,021) (12) (36) (69,997)
Less short-term investments (26,614) (77) (10) (26,681)
- --------------------------------------------------------------------------------------------------
Long-term investments $ 124,030 $ 2,132 $ 149 $ 126,013
KLA INSTRUMENTS CORPORATION 21
11
NOTE 3 (continued)
Gross unrealized gains and losses are presented in stockholders' equity, net of
the tax effect. The contractual maturities of securities classified as available
for sale as of June 30, 1995, regardless of the consolidated balance sheet
classification, are as follows:
Estimated
Fair Value
- ---------------------------------------------------------------------------------------------------------------------------
(In thousands)
Due within one year $ 69,997
Due after one year through five years 72,518
Due after five years 80,176
- ---------------------------------------------------------------------------------------------------------------------------
$222,691
- ---------------------------------------------------------------------------------------------------------------------------
Actual maturities may differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or prepayment
penalties. The realized gains and losses for the year ended June 30, 1995 were
not material to the Company's financial position or results of operations.
NOTE 4 COMMITMENTS AND CONTINGENCIES
The Company leases several facilities under operating leases expiring at various
dates through fiscal 2025 with renewal options at fair market value for
additional periods ranging up to ten years. In June 1995, the Company entered
into an agreement to lease a building being constructed on land owned by the
Company in San Jose, California. The lessor of the building has committed to
fund up to $12.5 million (subject to reductions based on certain conditions in
the lease) for the construction of the building, with the portion of the
committed amount actually utilized to be determined by the Company. In August
1995, the Company entered into a lease agreement to occupy two buildings in San
Jose, California. The lessor has committed to fund up to $15.4 million for the
acquisition of the land and buildings and for the completion of improvements to
the buildings. Rent obligations for the buildings will commence upon the
Company's occupation of the buildings in fiscal 1996. The Company may, at its
option, purchase the properties during the term of the leases at approximately
the amount expended by the lessor to acquire, construct and improve the
properties. If the Company does not purchase the buildings at the end of the
leases, the Company will guarantee the lessor 85% of the residual value of the
properties as determined at the inception of the leases. In addition, the lease
agreements require the Company to maintain, among other items, minimum quick
ratio, tangible net worth and profitability.
The aggregate minimum rental commitments under these lease agreements as of June
30, 1995, and including the facilities leased in August 1995, excluding property
taxes, insurance and certain other costs to be paid by the Company, are
approximately $4.7, $4.8, $3.6, $3.0, $2.5 and $26.4 million in fiscal 1996
through 2000 and thereafter, respectively. Total rental expense under all
operating leases was $2.9, $2.5 and $3.5 million in fiscal 1993, 1994 and 1995,
respectively.
The Company is party to several claims and lawsuits arising in the ordinary
course of business. While the outcome of these matters is not presently
determinable, in the opinion of management, they are not expected to have a
material effect on the financial position or the results of operations of the
Company.
NOTE 5 STOCKHOLDERS' EQUITY
A two-for-one stock split was declared by the Board of Directors on July 24,
1995. The stock split will be in the form of a 100% stock dividend. The dividend
will be paid on September 29, 1995, to stockholders of record on August 31,
1995. Financial information in this report has not been adjusted to reflect the
impact of the proposed common stock split.
In May 1995, the Company raised approximately $91 million, net of offering
costs, in a public offering of 1,500,000 shares of common stock at $63.50 per
share.
In February 1994, the Company sold 2,300,000 shares of common stock at $31.50
per share in a public offering resulting in $68.6 million of proceeds to the
Company, net of offering expenses.
In March 1989, the Company implemented a plan to protect stockholders' rights in
the event of a proposed takeover of the Company. Under the plan, each share of
the Company's outstanding common stock carries one Common Stock Purchase Right
(Right). The Right entitles the holder, under certain circumstances, to purchase
common stock of the Company or its acquirer at a discounted price. The Rights
are redeemable by the Company and expire in 1999.
22 KLA INSTRUMENTS CORPORATION
12
NOTE 6 EMPLOYEE BENEFIT PLANS
The Company has a profit sharing program, wherein a percentage of pretax
profits, as determined by the Board of Directors, is accumulated and distributed
quarterly to all employees who have completed a stipulated employment period. In
addition, the Board may approve matching contributions to the Company's savings
and investment plan, a qualified salary reduction plan under section 401(k) of
the Internal Revenue Code. The total charge to operations under the profit
sharing and 401(k) programs aggregated approximately $0.7, $3.3 and $16.6
million in fiscal 1993, 1994 and 1995, respectively.
Under the 1982 Stock Option Plan, as amended, 6,350,000 shares have been
reserved for issuance to eligible employees and directors as either Incentive
Stock Options (ISO's) or nonqualified options. Options under this plan are
granted at prices determined by the Board of Directors, but not less than the
fair market value on the date of grant, and expire ten years after the date of
grant. Generally, options become exercisable within five years of the date of
grant, vesting monthly after a waiting period of six to thirty months.
In October 1990, the Company adopted the 1990 Outside Directors Stock Option
Plan to grant options to non-employee directors. This plan calls for an annual
grant of 2,500 options, at fair market value, to each outside director. The
options become exercisable at one fifty-fourth per month beginning six months
from date of grant and expire ten years from grant date. A total of 100,000
shares has been reserved for issuance under this plan. These options carry
exercise prices ranging from $7.00 to $49.50 per share, with 48,737 shares
outstanding at June 30, 1995.
In August 1992, the Company allowed all holders of outstanding options, with the
exception of holders who were officers or directors of the Company during all of
fiscal 1992, to exchange higher priced options for new non-qualified options at
$7.50 per share, the fair market value on the date of the Board's action;
412,000 options were exchanged.
Following is a summary of stock option and outside director plan transactions:
Stock Reserved
Options Shares
Option Price Outstanding Available
- -----------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1992 $ 6.13-21.25 2,938,592 874,901
Options granted 7.50-12.38 1,048,246 (1,048,246)
Options cancelled 6.13-20.50 (594,311) 594,311
Options exercised 6.13-14.00 (603,912)
- -----------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1993 $ 7.00-21.25 2,788,615 420,966
Options granted 19.13-41.63 235,050 (235,050)
Options cancelled 7.00-31.75 (113,749) 113,749
Options exercised 7.00-31.75 (853,509)
- -----------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1994 $ 7.00-41.63 2,056,407 299,665
Options granted 4.69-61.25 1,329,768 (1,326,539)
Options cancelled 4.69-52.38 (196,246) 196,246
Options exercised 4.69-41.63 (628,288)
Increase in reserved shares 1,600,000
- -----------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1995 $ 4.69-61.25 2,561,641 769,372
- -----------------------------------------------------------------------------------------------------------------------------
At June 30, 1995, options to purchase 598,497 shares of stock were exercisable
under all option plans.
The Company has reserved 2,000,000 shares of common stock to be issued under the
1981 Employee Stock Purchase Plan, as amended. The Plan permits eligible
employees to purchase common stock, through payroll deductions, at 85% of the
lower of the fair market value of the common stock on the date at the beginning
of the two-year offering period or the last day of the purchase period.
Substantially all employees are eligible to participate in the Plan. At June 30,
1995, shares totaling 356,910 were available for future issuance under the Plan.
NOTE 7 FINANCING ARRANGEMENTS
At June 30, 1995, the Company had a $20 million interest-only mortgage on its
principal facility due August 1995, bearing interest of 7.62% per annum through
August 1995. The mortgage is secured by the underlying asset. The Company
intends to repay the mortgage in full in August 1995.
As of June 30, 1995, the Company had a $10 million multicurrency line of credit
with a bank, expiring December 31, 1995. The line of credit has a facility fee
of 0.20% per annum. Interest on domestic and foreign borrowings is charged at
the bank's reference rate and at the bank's offshore reference rate plus 0.75%,
respectively. The agreement requires the Company to maintain, among other items,
minimum quick ratio, tangible net worth and profitability. The agreement also
restricts the amount of dividends that may be declared. At June 30, 1995, the
Company was in compliance with all of these covenants. As of June 30, 1995,
approximately $0.5 million had been borrowed at the related offshore interest
rate of 8.34% per annum.
In addition, certain of the Company's foreign subsidiaries had short-term local
currency borrowings of approximately $4.0 million at an average interest rate of
3.04% at June 30, 1995.
Based upon interest rates available to the Company for issuance of debt with
similar terms and remaining maturities, the fair values of the long-term
mortgage debt and notes payable were approximately equal to the recorded values.
KLA INSTRUMENTS CORPORATION 23
13
NOTE 8 RESEARCH AND DEVELOPMENT ARRANGEMENTS
The Company has entered into research and development arrangements with certain
key customers and other entities to partially fund the development of new
technology on a best efforts basis. In fiscal 1993, 1994 and 1995, revenues of
$6.8, $5.7 and $2.3 million, respectively, have been recognized on these
research and development contracts on the percentage of completion basis. These
revenues are offset against gross engineering, research and development
expenses.
NOTE 9 METROLOGIX INC. ACQUISITION
In December 1994, the Company acquired Metrologix Inc. (Metrologix), a
manufacturer of advanced electron beam measurement equipment, for $14.2 million
in cash. This acquisition was accounted for as a purchase and the total
acquisition cost of $16.1 million has been allocated to assets acquired and
liabilities assumed. A significant portion of the acquisition cost was allocated
to acquired in-process technology which was written off at the time of the
acquisition, because further substantial research and development investments
were necessary to complete the new product development then underway. This
resulted in an after-tax charge of $16.2 million ($25.2 million pre-tax). The
results of operations for Metrologix from the date of the acquisition to June
30, 1995, were immaterial.
NOTE 10 GEOGRAPHIC REPORTING
The Company is a leading manufacturer of yield monitoring and process control
systems for the semiconductor manufacturing industry. For geographic reporting,
sales are attributed to the geographic location of the sales and service
organizations, and costs directly and indirectly incurred in generating sales
are similarly assigned. During fiscal 1993, one customer accounted for 11% of
net sales. During fiscal 1994 and 1995, no customer accounted for more than 10%
of sales. The following is a summary of operations by geographical territories:
1993 1994 1995
- ---------------------------------------------------------------------------------------------------------------------------
(In thousands)
Net sales to unaffiliated customers:
United States $ 62,802 $ 84,493 $138,926
Western Europe 34,141 37,854 47,862
Japan 46,914 79,820 159,253
Asia Pacific 23,379 41,570 96,375
- ---------------------------------------------------------------------------------------------------------------------------
167,236 243,737 442,416
- ---------------------------------------------------------------------------------------------------------------------------
Intercompany sales between geographic areas:
United States 28,942 39,998 60,861
Western Europe 4,751 7,595 12,178
Asia Pacific 3,212 6,832 9,846
- ---------------------------------------------------------------------------------------------------------------------------
36,905 54,425 82,885
- ---------------------------------------------------------------------------------------------------------------------------
Consolidation eliminations (36,905) (54,425) (82,885)
- ---------------------------------------------------------------------------------------------------------------------------
Net sales $167,236 $243,737 $442,416
- ---------------------------------------------------------------------------------------------------------------------------
Operating results:
United States $ 7,558 $ 15,407 $ 31,777
Western Europe 6,262 9,234 8,567
Japan (1,783) 11,166 46,583
Asia Pacific 3,896 14,544 39,463
- ---------------------------------------------------------------------------------------------------------------------------
15,933 50,351 126,390
General corporate expenses (4,443) (10,269) (44,339)
- ---------------------------------------------------------------------------------------------------------------------------
Operating profit $ 11,490 $ 40,082 $ 82,051
- ---------------------------------------------------------------------------------------------------------------------------
Identifiable assets:
United States $ 96,383 $ 95,041 $147,557
Western Europe 22,631 19,853 24,361
Japan 18,627 38,444 71,854
Asia Pacific 13,487 24,264 45,380
- ---------------------------------------------------------------------------------------------------------------------------
151,128 177,602 289,152
General corporate assets 47,961 143,968 257,144
- ---------------------------------------------------------------------------------------------------------------------------
Total assets $199,089 $321,570 $546,296
- ---------------------------------------------------------------------------------------------------------------------------
Intercompany transfers of products are based on the cost of products
transferred. Corporate assets consist primarily of cash and cash equivalents
and other investments. Corporate expenses consist primarily of general,
administrative and other expenses not attributable to geographical regions.
Capital expenditures and depreciation expense have been primarily in the
United States.
NOTE 11 INCOME TAXES
The components of income before income taxes are comprised of the following:
1993 1994 1995
- ---------------------------------------------------------------------------------------------------------------------------
(In thousands)
Domestic $ 1,828 $ 31,515 $ 77,157
Foreign 7,453 8,736 11,657
- ---------------------------------------------------------------------------------------------------------------------------
$ 9,281 $ 40,251 $ 88,814
- ---------------------------------------------------------------------------------------------------------------------------
24 KLA INSTRUMENTS CORPORATION
14
NOTE 11 (continued)
The provisions for income taxes are comprised of the following:
1993 1994 1995
- ---------------------------------------------------------------------------------------------------------------------------
(In thousands)
Federal:
Currently payable $ 495 $ 7,587 $ 35,390
Deferred - (2,195) (13,414)
- ---------------------------------------------------------------------------------------------------------------------------
495 5,392 21,976
- ---------------------------------------------------------------------------------------------------------------------------
State:
Currently payable 321 2,222 6,094
Deferred - - (1,337)
- ---------------------------------------------------------------------------------------------------------------------------
321 2,222 4,757
- ---------------------------------------------------------------------------------------------------------------------------
Foreign:
Currently payable 2,679 2,307 2,245
Deferred (1,175) 142 1,218
- ---------------------------------------------------------------------------------------------------------------------------
1,504 2,449 3,463
- ---------------------------------------------------------------------------------------------------------------------------
Provision for income taxes $ 2,320 $10,063 $ 30,196
- ---------------------------------------------------------------------------------------------------------------------------
Actual current tax liabilities are lower than reflected above for fiscal years
1993, 1994 and 1995 by none, $5.2 and $15.4 million, respectively, due to the
stock option deduction benefits recorded as credits to capital in excess of par
value.
The following is a reconciliation of the effective income tax rates and the
United States statutory federal income tax rate:
1993 1994 1995
- ---------------------------------------------------------------------------------------------------------------------------
Statutory federal income tax rate 34.0% 35.0% 35.0%
State income taxes, net of federal tax benefits 2.3 3.6 3.5
Effect of foreign operations at lower tax rates (11.1) (1.7) (0.7)
Non-taxable FSC income - (1.5) (2.6)
Foreign tax credit - (4.8) (0.1)
Realized deferred tax assets previously reserved (3.8) (5.8) (2.7)
Other 3.6 0.2 1.6
- ---------------------------------------------------------------------------------------------------------------------------
Effective tax rate 25.0% 25.0% 34.0%
- ---------------------------------------------------------------------------------------------------------------------------
Deferred tax assets (liabilities) at June 30, 1993, 1994 and 1995 are comprised
of the following:
1993 1994 1995
- ---------------------------------------------------------------------------------------------------------------------------
(In thousands)
Deferred tax assets:
Federal and state loss and credit carryforwards $ 4,816 $ 4,696 $ 2,804
State tax - - 1,096
Nondeductible reserves and other 15,733 18,651 24,611
- ---------------------------------------------------------------------------------------------------------------------------
20,549 23,347 28,511
- ---------------------------------------------------------------------------------------------------------------------------
Deferred tax liabilities:
Depreciation (4,317) (5,157) (3,559)
Unremitted earnings of foreign subsidiaries not permanently reinvested (2,726) (6,327) (8,319)
Other (3,275) (1,896) (2,101)
- ---------------------------------------------------------------------------------------------------------------------------
(10,318) (13,380) (13,979)
- ---------------------------------------------------------------------------------------------------------------------------
Deferred tax assets valuation allowance (13,395) (11,078) (5,853)
- ---------------------------------------------------------------------------------------------------------------------------
Total net deferred tax assets (liabilities) $ (3,164) $(1,111) $ 8,679
- ---------------------------------------------------------------------------------------------------------------------------
The Company's newly acquired subsidiary, Metrologix, has a federal net operating
loss carryforward of approximately $6 million as of June 30, 1995. It also has
research and development tax credit carryovers of approximately $0.7 million
that will expire primarily in fiscal 2005 through 2008. These tax assets are
subject to limitation as to their utilization under Internal Revenue Code
Section 382 and other provisions.
The deferred tax assets valuation allowance at June 30, 1993, 1994 and 1995 is
attributed to U.S. federal and state deferred tax assets. Management believes
sufficient uncertainty exists with regard to the realizability of the Metrologix
and certain other tax assets such that a valuation allowance of $5.9 million has
been provided at June 30, 1995. During fiscal 1993, 1994 and 1995, the Company
realized $0.4, $2.3 and $7.5 million, respectively, of deferred tax assets
previously reserved, reducing the valuation allowance by corresponding amounts.
In fiscal 1995, $5.1 of the $7.5 million that was realized was related to stock
option deductions and accordingly was credited to capital in excess of par
value.
The valuation allowance is allocated pro-rata to federal and state current and
non-current deferred tax assets. Net deferred tax assets at June 30, 1995, of
$8.7 million, reflect net U.S. assets of $13.2 million offset by $4.5 million of
net foreign liabilities. Net deferred tax liabilities at June 30, 1994, of $1.1
million reflect foreign liabilities of $3.3 million offset by $2.2 million of
net U.S. assets. The net deferred tax liability at June 30, 1993, relates to
foreign operations.
The Company's manufacturing operations in Switzerland are exempt from taxes
through 2001. The effect of this tax exemption was to increase net income in
fiscal 1993, 1994 and 1995 by approximately $0.6, $0.6 and $0.1 million,
respectively.
The IRS is currently auditing the Company's federal income tax returns for
fiscal years 1985 to 1992. The Company has not yet received a notice of proposed
tax deficiency. However, it anticipates a notice will be received in fiscal
1996. Management believes sufficient taxes have been provided in prior years and
that the ultimate outcome of the IRS audit will not have a material adverse
impact on the Company's financial position or results of operations.
KLA INSTRUMENTS CORPORATION 25
15
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and
Board of Directors of
KLA Instruments Corporation
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, stockholders' equity and cash flows
present fairly, in all material respects, the financial position of KLA
Instruments Corporation and its subsidiaries at June 30, 1994 and 1995, and the
results of their operations and their cash flows for each of the three years in
the period ended June 30, 1995, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
San Jose, California
July 26, 1995
Common Stock
1994 1995
High Low High Low
- ---------------------------------------------------------------------------------------------------------------------------
First Quarter 26 1/2 17 51 3/4 37 1/4
Second Quarter 28 19 53 44 3/4
Third Quarter 43 25 7/8 65 46 1/2
Fourth Quarter 43 1/4 32 1/4 79 1/4 60
- ---------------------------------------------------------------------------------------------------------------------------
The Company's common stock is traded on the Nasdaq National Market System under
the symbol "KLAC."
The Company has not paid cash dividends on its common stock and does not plan to
pay cash dividends to its stockholders in the near future. The Company presently
intends to retain its earnings to finance further growth of its business. As of
June 30, 1995, the Company had approximately 983 stockholders of record.
26 KLA INSTRUMENTS CORPORATION
16
CORPORATE DIRECTORY
OFFICERS DIRECTORS
Kenneth Levy Kenneth Levy KLA Instruments Malaysia
Chairman of the Board Chairman of the Board 60 Jalan Timah 7
Chief Executive Officer Chief Executive Officer Tarman Sri Putri
81300 Skudal
Kenneth L. Schroeder Kenneth L. Schroeder Johor Bahru, Malaysia
President President 607-557-1946
Chief Operating Officer Chief Operating Officer
KLA Japan, Ltd.
Robert J. Boehlke Edward W. Barnholt YBP Hi-Tech Center
Vice President, Finance Senior Vice President 134 Godo-Cho
and Administration Hewlett-Packard Hodogaya-ku
Chief Financial Officer Yokohama City
Leo J. Chamberlain Kanagawa 240, Japan
Frank Brienzo Private Investor 81-453-35-8200
Vice President
Robert E. Lorenzini KLA Acrotec Company, Ltd.
Virginia DeMars Private Investor 20-16 Hikawadai
Vice President, Nerima-Ku 3-Cborne
Human Resources Yoshio Nishi, Ph.D. Tokyo 179, Japan
Vice President 81-359-20-3611
Gary E. Dickerson Texas Instruments
Vice President KLA Instruments, S.A.
Samuel Rubinovitz Chernin de Buchaux 38
Samuel Harrell, Ph.D. Retired CH-2022 Bevaix, Switzerland
Senior Vice President Executive Vice President 41-38-462090
EG&G, Inc.
Neil Richardson, Ph.D. KLA Instruments Korea
Vice President Dag Tellefsen Third Floor Lucky Security Building
General Partner 184-1, Bangi-dong, Songpa-ku
Magnus O.W. Ryde Glenwood Venture Management Seoul, South Korea 138-150
Vice President 822-415-0552
CORPORATE OFFICE
Arthur P. Schnitzer KLA Instruments Coporation KLA Instruments Taiwan
Vice President 160 Rio Robles Fifth Floor
P.O. Box 49055 115 Ming Sheng Road
Christopher Stoddart San Jose, California 95161-9055 Hsinchu City, Taiwan
Treasurer (408) 468-4200 Republic of China
886-35-335163
Bin-Ming Ben Tsai, Ph.D. INTERNATIONAL OFFICES
Vice President KLA Instruments Ltd. INDEPENDENT ACCOUNTANTS
Chief Technical Officer 4 The Business Center Price Waterhouse LLP
Molly Millars Lane San Jose, California
William Turner Wokingham, Berkshire
Vice President, RG11 2QZ, United Kingdom GENERAL LEGAL COUNSEL
Controller 44-1734-890666 Gray Cary Ware & Freldenrich
Palo Alto, California
Paul E. Kreutz, Esq. KLA Instruments GmbH
Secretary Leonrodstrasse 58 REGISTRAR AND TRANSFER AGENT
80636 Muenchen, Germany First National Bank of Boston
49-89-121561-0 Boston, Massachusetts
KLA Instruments France, S.A. ADDITIONAL COPIES OF THIS REPORT, AS WELL
25 Rue Michael Faraday AS COPIES OF SEC FORM 10K, FOR THE YEAR
78180 Montlgny-le-Bretonneux ENDED JUNE 30, 1995, MAY BE OBTAINED
France FROM THE COMPANY WITHOUT CHARGE BY
33.1.30.45.30.03 WRITING TO:
KLA Instruments, SLR KLA Instruments Corporation
Via Gabrio Serbelloni 1 Attn: Investor Relations
20122 Milan, Italy P.O. Box 49055
San Jose, CA 95161-9055
KLA Instruments Israel
4 Science Avenue
North Industrial Center
P.O. Box 143
Migdal Ha'Emek 23100, Israel
972-6-449449