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The Amended Rights and Restrictions Agreement provides, among other things, (1) that so long as no person or group controls more of the Company’s voting power than is controlled by Mr. Harrison, III, trustees under the will of J. Frank Harrison, Jr. and any trust that holds shares of the Company’s stock for the benefit of descendents of J. Frank Harrison, Jr. (collectively, the “Harrison Family”), The Coca-Cola Company will not acquire additional shares of the Company without the Company’s consent and the Company will have a right of first refusal with respect to any proposed sale by The Coca-Cola Company of shares of Company stock; (2) the Company has the right through January 2019 to redeem shares of the Company’s stock to reduce The Coca-Cola Company’s equity ownership to 20% at a price not less than $42.50 per share; (3) registration rights for the shares of Company stock owned by The Coca-Cola Company; and (4) certain rights to The Coca-Cola Company regarding the election of a designee on the Company’s Board of Directors. |
These statements include, among others, statements relating to: • the Company’s belief that the covenants on its $200 million facility will not restrict its liquidity or capital resources; • the Company’s belief that other parties to certain contractual arrangements will perform their obligations; • potential marketing funding support from The Coca-Cola Company and other beverage companies; • the Company’s belief that the risk of loss with respect to funds deposited with banks is minimal; • the Company’s belief that disposition of certain claims and legal proceedings will not have a material adverse effect on its financial condition, cash flows or results of operations and that no material amount of loss in excess of recorded amounts is reasonably possible; • management’s belief that the Company has adequately provided for any ultimate amounts that are likely to result from tax audits; • management’s belief that the Company has sufficient resources available to finance its business plan, meet its working capital requirements and maintain an appropriate level of capital spending; • the Company’s belief that the cooperatives whose debt and lease obligations the Company guarantees have sufficient assets and the ability to adjust selling prices of their products to adequately mitigate the risk of material loss and that the cooperatives will perform their obligations under their debt and lease agreements; • the Company’s ability to issue $190 million of securities under acceptable terms under its shelf registration statement; • the Company’s belief that certain franchise rights are perpetual or will be renewed upon expiration; • the Company’s key priorities which are revenue management, product innovation and beverage portfolio expansion, distribution cost management and productivity; • the Company’s expectation that new product introductions, packaging changes and sales promotions will continue to require substantial expenditures; • the Company’s belief that there is substantial and effective competition in each of the exclusive geographic territories in the United States in which it operates for the purposes of the United States Soft Drink Interbrand Competition Act; • the Company’s hypothetical calculation of the impact of a 1% increase in interest rates on outstanding floating rate debt and capital lease obligations for the next twelve months as of January 3, 2010; • the Company’s belief that it may market and sell nationally certain products it has developed and owns; • the Company’s belief that cash requirements for income taxes will be in the range of $20 million to $25 million in 2010; • the Company’s anticipation that pension expense related to the two Company-sponsored pension plans is estimated to be approximately $6 million in 2010; • the Company’s belief that cash contributions in 2010 to its two Company-sponsored pension plans will be in the range of $5 million to $7 million; • the Company’s belief that postretirement benefit payments are expected to be approximately $2.5 million in 2010; • the Company’s expectation that additions to property, plant and equipment in 2010 will be in the range of $50 million to $60 million; • the Company’s belief that compliance with environmental laws will not have a material adverse effect on its capital expenditures, earnings or competitive position; • the Company’s belief that the demand for sugar sparkling beverages (other than energy products) may continue to decline; • the Company’s belief that the majority of its deferred tax assets will be realized; • the Company’s intention to renew substantially all the Allied Beverage Agreements and Still Beverage Agreements as they expire; • the Company’s beliefs and estimates regarding the impact of the adoption of certain new accounting pronouncements; • the Company’s belief that innovation of new brands and packages will continue to be critical to the Company’s overall revenue; • the Company’s beliefs that the growth prospects of Company-owned or exclusive licensed brands appear promising and the cost of developing, marketing and distributing these brands may be significant; • the Company’s expectation that unrecognized tax benefits may change over the next 12 months as a result of tax audits but will not have a significant impact on the consolidated financial statements; • the Company’s belief that all of the banks participating in the Company’s $200 million facility have the ability to and will meet any funding requests from the Company; • the Company’s belief that it is competitive in its territories with respect to the principal methods of competition in the nonalcoholic beverage industry; and • the Company’s estimate that a 10% increase in the market price of certain commodities over the current market prices would cumulatively increase costs during the next 12 months by approximately $23 million assuming no change in volume. |
The Amended Rights and Restrictions Agreement provides, among other things, (1) that so long as no person or group controls more of the Company’s voting power than is controlled by Mr. Harrison, III, trustees under the will of J. Frank Harrison, Jr. and any trust that holds shares of the Company’s stock for the benefit of descendents of J. Frank Harrison, Jr. (collectively, the “Harrison Family”), The Coca-Cola Company will not acquire additional shares of the Company without the Company’s consent and the Company will have a right of first refusal with respect to any proposed sale by The Coca-Cola Company of shares of Company stock; (2) the Company has the right through January 2019 to redeem shares of the Company’s stock to reduce The Coca-Cola Company’s equity ownership to 20% at a price not less than $42.50 per share; (3) registration rights for the shares of Company stock owned by The Coca-Cola Company; (4) and certain rights of The Coca-Cola Company regarding the election of a designee on the Company’s Board of Directors. |
These statements include, among others, statements relating to: • the Company’s belief that other parties to certain contractual arrangements will perform their obligations; • potential marketing funding support from The Coca-Cola Company and other beverage companies; • the Company’s belief that the risk of loss with respect to funds deposited with banks is minimal; • the Company’s belief that disposition of certain claims and legal proceedings will not have a material adverse effect on its financial condition, cash flows or results of operations and that no material amount of loss in excess of recorded amounts is reasonably possible; • management’s belief that the Company has adequately provided for any ultimate amounts that are likely to result from tax audits; • management’s belief that the Company has sufficient resources available to finance its business plan, meet its working capital requirements and maintain an appropriate level of capital spending; • the Company’s belief that the cooperatives whose debt and lease obligations the Company guarantees have sufficient assets and the ability to adjust selling prices of their products to adequately mitigate the risk of material loss and that the cooperatives will perform their obligations under their debt and lease agreements; • the Company’s ability to issue $300 million of securities under acceptable terms under its shelf registration statement; • the Company’s belief that certain franchise rights are perpetual or will be renewed upon expiration; • the Company’s key priorities which are revenue management, product innovation and beverage portfolio expansion, distribution cost management and productivity; • the Company’s expectation that new product introductions, packaging changes and sales promotions will continue to require substantial expenditures; • the Company’s belief that there is substantial and effective competition in each of the exclusive geographic territories in the United States in which it operates for the purposes of the United States Soft Drink Interbrand Competition Act; • the Company’s hypothetical calculation of the impact of a 1% increase in interest rates on outstanding floating rate debt and capital lease obligations for the next twelve months as of December 28, 2008; • the Company’s belief that it may market and sell nationally certain products it has developed and owns; • the Company’s belief that cash requirements for income taxes will be in the range of $11 million to $16 million in 2009; • the Company’s anticipation that pension expense related to the two Company-sponsored pension plans is estimated to be approximately $11.5 million in 2009; • the Company’s anticipation that the suspension of the Retirement Saving Plan (401(k) plan) will reduce benefit costs by approximately $7 million in 2009; • the Company’s belief that cash contributions in 2009 to its two Company-sponsored pension plans will be in the range of $8 million to $12 million; • the Company’s belief that postretirement benefit payments are expected to be approximately $2.3 million in 2009; • the Company’s expectation that additions to property, plant and equipment in 2009 will be in the range of $45 million to $60 million; • the Company’s belief that compliance with environmental laws will not have a material adverse effect on its capital expenditures, earnings or competitive position; • the Company’s belief that the demand for sugar sparkling beverages (other than energy products) may continue to decline; • the Company’s expectation that its overall bottle/can revenue will be primarily dependent upon continued growth in diet sparkling products, sports drinks, enhanced water and energy products, the introduction of new products and the pricing of brands and packages within channels; • the Company’s belief that the majority of its deferred tax assets will be realized; • the Company’s intention to renew substantially all the Allied Beverage Agreements and Still Beverage Agreements as they expire; • the Company’s beliefs and estimates regarding the impact of the adoption of certain new accounting pronouncements; • the Company’s belief that innovation of new brands and packages will continue to be critical to the Company’s overall revenue; • the Company’s beliefs that the growth prospects of Company-owned or exclusive licensed brands appear promising and the cost of developing, marketing and distributing these brands may be significant; • the Company’s expectation that unrecognized tax benefits may be reduced over the next 12 months as a result of tax audits; • the Company’s expectation that it will use cash flow generated from operations, its $200 million facility and potentially other sources, including bank borrowings or issuance of debentures or equity securities, to repay or refinance debentures maturing in May 2009 and July 2009; • the Company’s belief that all of the banks participating in the Company’s $200 million facility have the ability to and will meet any funding requests from the Company; • the Company’s belief that the reorganization of its operating units and support services and its workforce reduction plan was completed by the end of 2008, that the majority of cash expenditures were incurred in 2008 and the Company’s anticipation of substantial annual savings from the plan; • the Company’s belief that it is competitive in its territories with respect to the principal methods of competition in the nonalcoholic beverage industry; and • the Company’s estimate that a 10% increase in the market price of certain commodities over the current market prices would cumulatively increase costs during the next 12 months by approximately $22 million assuming flat volume. |
The Amended Rights and Restrictions Agreement provides, among other things, (1) that so long as no person or group controls more of the Company’s voting power than is controlled by Mr. Harrison, III, trustees under the will of J. Frank Harrison, Jr. and any trust that holds shares of the Company’s stock for the benefit of descendents of J. Frank Harrison, Jr. (collectively, the “Harrison Family”), The Coca-Cola Company will not acquire additional shares of the Company without the Company’s consent and the Company will have a right of first refusal with respect to any proposed sale by The Coca-Cola Company of shares of Company stock; (2) the Company has the right through January 2019 to redeem shares of the Company’s stock to reduce The Coca-Cola Company’s equity ownership to 20% at a price not less than $42.50 per share; (3) registration rights for the shares of Company stock owned by The Coca-Cola Company; (4) and certain rights of The Coca-Cola Company regarding the election of a designee on the Company’s Board of Directors. |
Events of default by the Company include: • the Company’s insolvency, bankruptcy, dissolution, receivership or similar conditions; • the Company’s disposition of any interest in the securities of any bottling subsidiary without the consent of The Coca-Cola Company; • termination of any agreement regarding the manufacture, packaging, distribution or sale of Coca-Cola Trademark Beverages between The Coca-Cola Company and any person that controls the Company; • any material breach of any obligation arising under the Bottle Contracts (including failure to make timely payment for any concentrate or syrup or of any other debt owing to The Coca-Cola Company, failure to meet sanitary or quality control standards, failure to comply strictly with manufacturing standards and instructions, failure to carry out an approved plan as described above, and failure to cure a violation of the terms regarding imitation products) that remains uncured for 120 days after notice by The Coca-Cola Company; • producing, manufacturing, selling or dealing in any product or any concentrate or syrup which might be confused with those of The Coca-Cola Company; • selling any product under any trade dress, trademark or tradename or in any container that is an imitation of a trade dress or container in which The Coca-Cola Company claims a proprietary interest; and • owning any equity interest in or controlling any entity which performs any of the activities described in the immediately preceding two items. |
These statements include, among others, statements relating to: • anticipated return on pension plan investments; • the Company’s belief that other parties to certain contractual arrangements will perform their obligations; • potential marketing funding support from The Coca-Cola Company and other beverage companies; • the Company’s belief that the risk of loss with respect to funds deposited with banks is minimal; • the Company’s belief that disposition of certain claims and legal proceedings will not have a material adverse effect on its financial condition, cash flows or results of operations and that no material amount of loss in excess of recorded amounts is reasonably possible; • management’s belief that the Company has adequately provided for any ultimate amounts that are likely to result from tax audits; • the Company’s expectation of exercising its option to extend certain lease obligations; • management’s belief that the Company has sufficient financial resources to maintain current operations and provide for its current capital expenditure and working capital requirements, scheduled debt payments, interest and income tax payments and dividends for stockholders; • the Company’s intention to reduce its financial leverage over time; • the Company’s belief that the cooperatives whose debt and lease obligations the Company guarantees have sufficient assets and the ability to adjust selling prices of their products to adequately mitigate the risk of material loss and that the cooperatives will perform their obligations under their debt and lease agreements; • the Company’s intention to renew the lines of credit as they mature; • the Company’s ability to issue $300 million of securities under acceptable terms under its shelf registration statement; • the Company’s belief that certain franchise rights are perpetual or will be renewed upon expiration; • the Company’s intention to provide for Piedmont’s future financing requirements; • the Company’s key priorities which are revenue management, product innovation and beverage portfolio expansion, distribution cost management and productivity; • the Company’s belief that its liquidity or capital resources will not be restricted by certain financial covenants in the Company’s credit agreements; • the Company’s hypothetical calculation of the impact of a 1% increase in interest rates on outstanding floating rate debt and capital lease obligations for the next twelve months as of December 30, 2007; • the Company’s belief that it may market and sell nationally certain products it has developed and owns; • anticipated cash payments for income taxes will be in the range of $10 million to $15 million in 2008; • anticipated additions to property, plant and equipment in 2008 will be in the range of $55 million to $70 million; • the Company’s belief that compliance with environmental laws will not have a material adverse effect on its capital expenditures, earnings or competitive position; • the Company’s belief that demand for sugar sparkling beverages (other than energy products) may continue to decline; • the Company’s belief that, during 2008, raw material costs will increase less than they did in 2007, but will remain above historical averages; • the Company’s belief that contributions to the principal Company-sponsored pension plan in 2008 will be approximately $3.4 million; • the Company’s belief that postretirement benefit payments are expected to be approximately $2.3 million in 2008; • the Company’s beliefs and estimates regarding the impact of the adoption of certain new accounting pronouncements; • the Company’s expectation that its overall bottle/can revenue will be primarily dependent upon continued growth in diet sparkling products, sports drinks, bottled water, enhanced water and energy products, the introduction of new products and the pricing of brands and packages within channels; • the Company’s belief that the implementation of its CooLift® route delivery system will continue over the next several years and will result in significant savings in future years and more efficient delivery of a greater number of products; • the Company’s belief that the majority of its deferred tax assets will be realized; • the Company’s intention to renew substantially all the Allied Bottle Contracts and Noncarbonated Beverage Contracts as they expire; • the Company’s belief that there will not be significant changes in the levels of marketing and advertising by The Coca-Cola Company and Cadbury Schweppes Americas Beverages; • the Company’s belief that there will be no additional restructuring costs in 2008; • the Company’s beliefs that the growth of Company-owned or exclusive licensed brands appear promising and the cost of developing, marketing and distributing these brands may be significant; • the Company’s belief there will not be any material impact on its liquidity and capital resources due to the resolution of income tax positions reserved for as uncertain; • the Company’s belief that changes in unrecognized tax benefits over the next 12 months will not have a significant impact on the consolidated financial statements; • the Company’s expectation that it will use cash flow generated from operations, its revolving credit facility and potentially other sources, including bank borrowings or issuance of debentures under its shelf registration statement, to repay or refinance debentures maturing in May and July 2009; and • the Company’s expectation that concentrate, plastic bottles, aluminum cans and high fructose corn syrup costs will increase in 2008. |
Events of default by the Company include: 1) the Company’s insolvency, bankruptcy, dissolution, receivership or similar conditions; 2) the Company’s disposition of any interest in the securities of any bottling subsidiary without the consent of The Coca-Cola Company; 3) termination of any agreement regarding the manufacture, packaging, distribution or sale of Coca-Cola Trademark Beverages between The Coca-Cola Company and any person that controls the Company; 4) any material breach of any obligation arising under the Bottle Contracts (including, failure to make timely payment for any concentrate or syrup or of any other debt owing to The Coca-Cola Company, failure to meet sanitary or quality control standards, failure to comply strictly with manufacturing standards and instructions, failure to carry out an approved plan as described above, and failure to cure a violation of the terms regarding imitation products) that remains uncured for 120 days after notice by The Coca-Cola Company; 5) producing, manufacturing, selling or dealing in any product or any concentrate or syrup which might be confused with those of The Coca-Cola Company; 6) selling any product under any trade dress, trademark or tradename or in any container that is an imitation of a trade dress or container in which The Coca-Cola Company claims a proprietary interest; and 7) owning any equity interest in or controlling any entity which performs any of the activities described in (5) or (6) above. |
These statements include, among others, statements relating to: • increases in pension expense; • anticipated return on pension plan investments; • the Company’s ability to utilize net operating loss carryforwards; • the Company’s belief that other parties to certain contractual arrangements will perform their obligations; • potential marketing funding support from The Coca-Cola Company and other beverage companies; • the Company’s belief that the risk of loss with respect to funds deposited with banks is minimal; • anticipated additions to property, plant and equipment; • expectations regarding future income tax payments; • the Company’s belief that disposition of certain litigation, tax matters and claims will not have a material adverse effect; • the Company’s expectation of exercising its option to extend certain lease obligations; • the effects of the closings of sales distribution centers; • the Company’s intention to continue to evaluate its distribution system in an effort to optimize the process of distributing products; • the upgrade of its ERP system; • management’s belief that the Company has sufficient financial resources to maintain current operations and provide for its current capital expenditures and working capital requirements, scheduled debt payments, interest and income tax payments and dividends for stockholders; • the Company’s intention to reduce its financial leverage over time; • the Company’s belief that the cooperatives whose debt the Company guarantees have sufficient assets and the ability to adjust selling prices of their products to adequately mitigate the risk of material loss and that the cooperatives will perform their obligations under the agreements; • the Company’s ability to issue $300 million of securities under acceptable terms under its shelf registration statement; • the Company’s belief that certain franchise rights are perpetual or will be renewed upon expiration; • the Company’s intention to provide for Piedmont’s future financing requirements; • the Company’s key priorities for 2004 and the next several years; • the Company’s belief that its liquidity or capital resources will not be restricted by certain financial covenants in the Company’s credit agreements; • the Company’s hypothetical calculation of the impact of a 1% increase in interest rates in 2004; • the Company’s hypothetical calculation of the impact of a 1% increase in interest rates on outstanding floating rate debt and capital lease obligations for the next twelve months as of January 2, 2005; • the Company’s belief that its raw material packaging costs will increase significantly in 2005 and that its cost of sales on a per unit basis will increase by approximately 4% to 5% in 2005; • anticipated contributions to Company-sponsored pension plans of $12 million in 2005; • the Company’s belief that compliance with environmental laws will not have a material adverse effect; • the Company’s belief that soft demand for sugar carbonated soft drinks will continue; • the Company’s belief that it can increase selling prices to offset higher raw material costs; • the Company’s belief that the impact of the American Jobs Creation Act of 2004 will have a modest benefit on future income taxes; • the Company’s beliefs and estimates regarding the impact of the adoption of certain new accounting pronouncements; • the Company’s belief that CCBSS will increase purchasing efficiency and reduce future increases in cost of sales and other operating expenses; • anticipated product innovation in 2005; and • the Company’s expectation that growth in overall bottle/can volume will be primarily dependent upon continued growth in diet products, isotonics and bottled water as well as the introduction of new brands and packages. |
Among the events or uncertainties which could adversely affect future periods are: • lower than expected selling prices resulting from increased marketplace competition; • an inability to meet performance requirements for expected levels of marketing funding support payments from The Coca-Cola Company or other beverage companies; • changes in how significant customers market or promote our products; • reduced advertising and marketing spending by The Coca-Cola Company or other beverage companies; • an inability to meet requirements under bottling contracts with The Coca-Cola Company or other beverage companies; • the inability of our aluminum can or PET bottle suppliers to meet our sales demand; • significant changes from expectations in the cost of raw materials; • higher than expected insurance premiums and fuel costs; • lower than anticipated returns on pension plan assets; • higher than anticipated health care costs; • unfavorable interest rate fluctuations; • higher than anticipated cash payments for income taxes; • unfavorable weather conditions; • significant changes in consumer preferences related to nonalcoholic beverages; • inability to increase selling prices, increase bottle/can volume or reduce expenses to offset higher raw material costs; • reduced brand and packaging innovation; • significant changes in credit ratings impacting the Company’s ability to borrow; • terrorist attacks, war, other civil disturbances or national emergencies; and • changes in financial markets. |
Events of default by the Company include: 1) the Company’s insolvency, bankruptcy, dissolution, receivership or similar conditions; 2) the Company’s disposition of any interest in the securities of any bottling subsidiary without the consent of The Coca-Cola Company; 3) termination of any agreement regarding the manufacture, packaging, distribution or sale of Coca-Cola Trademark Beverages between The Coca-Cola Company and any person that controls the Company; 4) any material breach of any obligation occurring under the Bottle Contracts (including, without limitation, failure to make timely payment for any concentrate or syrup or of any other debt owing to The Coca-Cola Company, failure to meet sanitary or quality control standards, failure to comply strictly with manufacturing standards and instructions, failure to carry out an approved plan as described above, and failure to cure a violation of the terms regarding imitation products) that remains uncured for 120 days after notice by The Coca-Cola Company; 5) producing, manufacturing, selling or dealing in any “Cola Product,” as defined, or any concentrate or syrup which might be confused with those of The Coca-Cola Company; 6) selling any product under any trade dress, trademark or tradename or in any container that is an imitation of a trade dress or container in which The Coca-Cola Company claims a proprietary interest; and 7) owning any equity interest in or controlling any entity which performs any of the activities described in (5) or (6) above. |
These statements include, among others, statements relating to: • increases in pension expense; • anticipated return on pension plan investments; • anticipated costs associated with property and casualty insurance; • the Company’s ability to utilize net operating loss carryforwards; • the Company’s belief that other parties to certain contractual arrangements will perform their obligations; • potential marketing funding support from The Coca-Cola Company; • the Company’s belief that the risk of loss with respect to funds deposited with banks is minimal; • anticipated additions to property, plant and equipment; • expectations regarding future income tax payments; • the Company’s belief that disposition of certain litigation and claims will not have a material adverse effect; • the Company’s expectation of exercising its option to extend certain lease obligations; • the effects of the closings of sales distribution centers; • the Company’s intention to continue to evaluate its distribution system in an effort to optimize the process of distributing products; • the effects of the upgrade of ERP systems; • management’s belief that the Company has sufficient financial resources to maintain current operations and provide for its current capital expenditures and working capital requirements, scheduled debt payments, interest and income tax payments and dividends for stockholders; • the Company’s intention to operate in a manner to maintain its investment grade ratings; • the Company’s belief that the cooperatives whose debt the Company guarantees have sufficient assets and the ability to adjust selling prices of their products to adequately mitigate the risk of material loss and that the cooperatives will perform their obligations under the agreements; • the Company’s belief that FIN 46 will not have any significant impact on the Company’s financial statements at this time; • the Company’s ability to issue $300 million of securities under acceptable terms under its shelf registration statement; • the Company’s belief that CCBSS will increase future purchasing efficiencies; • the Company’s belief that certain franchise rights are perpetual or will be renewed upon expiration; • the Company’s ability to extend its management agreement with SAC on terms comparable to the current agreement; • the Company’s ability to offset increases in raw material costs with selling price increases to maintain gross margins in 2004; • the Company’s intention to provide for Piedmont’s future financing requirements; and • management’s belief that a trigger event will not occur under the Company’s $85 million term loan. |
Among the events or uncertainties which could adversely affect future periods are: • lower than expected net pricing resulting from increased marketplace competition; • an inability to meet performance requirements for expected levels of marketing funding support payments from The Coca-Cola Company or other beverage companies; • changes in how significant customers market or promote our products; • reduced advertising and marketing spending by The Coca-Cola Company or other beverage companies; • an inability to meet requirements under bottling contracts; • the inability of our aluminum can or PET bottle suppliers to meet our sales demand; • significant changes from expectations in the cost of raw materials; • higher than expected insurance premiums and fuel costs; • lower than anticipated returns on pension plan assets; • higher than anticipated health care costs; • unfavorable interest rate fluctuations; • higher than anticipated cash payments for income taxes; • unfavorable weather conditions; • inability to increase selling prices to offset higher raw material costs; • significant changes in debt ratings impacting the Company’s ability to borrow; • terrorist attacks, war or other civil disturbances; • changes in financial markets; and • an inability to meet projections in acquired bottling territories. |
Events of default by the Company include (1) the Company’s insolvency, bankruptcy, dissolution, receivership or similar conditions; (2) the Company’s disposition of any interest in the securities of any bottling subsidiary without the consent of The Coca-Cola Company; (3) termination of any agreement regarding the manufacture, packaging, distribution or sale of Coca-Cola Trademark Beverages between The Coca-Cola Company and any person that controls the Company; (4) any material breach of any obligation occurring under the Bottle Contracts (including, without limitation, failure to make timely payment for any syrup or concentrate or of any other debt owing to The Coca-Cola Company, failure to meet sanitary or quality control standards, failure to comply strictly with manufacturing standards and instructions, failure to carry out an approved plan as described above, and failure to cure a violation of the terms regarding imitation products), that remains uncured for 120 days after notice by The Coca-Cola Company; (5) producing, manufacturing, selling or dealing in any “Cola Product,” as defined, or any concentrate or syrup which might be confused with those of The Coca-Cola Company; (6) selling any product under any trade dress, trademark or tradename or in any container that is an imitation of a trade dress or container in which The Coca-Cola Company claims a proprietary interest; or (7) owning any equity interest in or controlling any entity which performs any of the activities described in (5) or (6) above. |
These statements include, among others, statements relating to: the consolidation of results of operations, financial position and cash flows of Piedmont with those of the Company; the Company’s anticipated purchase of half of The Coca-Cola Company’s remaining interest in Piedmont and financing thereof; increases in pension expense; anticipated return on pension plan investments; the Company’s estimate of interest expense for 2003; anticipated costs associated with nonhealth and health related insurance; the Company’s ability to utilize net operating loss carryforwards; the Company’s belief that other parties to certain contractual arrangements will perform their obligations; potential marketing funding support from The Coca-Cola Company; the Company’s belief that the risk of loss with respect to funds deposited with banks is minimal; sufficiency of financial resources; anticipated additions to property, plant and equipment; expectations regarding future income tax payments; estimated annual purchases under the Company’s aluminum can agreement; the Company’s belief that disposition of certain litigation and claims will not have a material adverse effect; the Company’s expectation of exercising its option to extend certain lease obligations; effects of closing of distribution centers; the Company’s intention to continue to evaluate its distribution system in an effort to optimize the process of distributing products; the effects of the upgrade of ERP systems; management’s belief that the Company has sufficient financial resources to maintain current operations and provide for its current capital expenditures and working capital requirements, scheduled debt payments, interest and income tax payments and dividends for stockholders; the Company’s intention to operate in a manner to maintain its investment grade ratings; the Company’s belief that neither SAC or Southeastern Container will fail to fulfill their commitments under their respective debt and lease agreements; providing for Piedmont’s future financing requirements and management’s belief that a trigger event will not occur under the Company’s $170 million term loan agreement. |
Among the events or uncertainties which could adversely affect future periods are: lower than expected net pricing resulting from increased marketplace competition; changes in how significant customers market our products; an inability to meet performance requirements for expected levels of marketing funding support payments from The Coca-Cola Company or other beverage companies; reduced marketing and advertising spending by The Coca-Cola Company or other beverage companies; an inability to meet requirements under bottling contracts; the inability of our aluminum can or PET bottle suppliers to meet our demand; material changes from expectations in the cost of raw materials; higher than expected insurance premiums; lower than anticipated return on pension plan assets; higher than anticipated health care costs; higher than expected fuel prices; unfavorable interest rate fluctuations; terrorist attacks, war or other civil disturbances; changes in financial markets and an inability to meet projections in acquired bottling territories. |
Events of default by the Company include (1) the Company's insolvency, bankruptcy, dissolution, receivership or similar conditions; (2) the Company's disposition of any interest in the securities of any bottling subsidiary without the consent of The Coca-Cola Company; (3) termination of any agreement regarding the manufacture, packaging, distribution or sale of Coca-Cola Trademark Beverages between The Coca-Cola Company and any person that controls the Company; (4) any material breach of any obligation occurring under the Bottle Contracts (including, without limitation, failure to make timely payment for any syrup or concentrate or of any other debt owing to The Coca-Cola Company, failure to meet sanitary or quality control standards, failure to comply strictly with manufacturing standards and instructions, failure to carry out an approved plan as described above, and failure to cure a violation of the terms regarding imitation products), that remains uncured for 120 days after notice by The Coca-Cola Company; or (5) producing, manufacturing, selling or dealing in any "Cola Product," as defined, or any concentrate or syrup which might be confused with those of The Coca-Cola Company; or (6) selling any product under any trade dress, trademark or tradename or in any container in which The Coca-Cola Company has a proprietary interest; or (7) owning any equity interest in or controlling any entity which performs any of the activities described in (5) or (6) above. |
Events of default by the Company include (1) the Company's insolvency, bankruptcy, dissolution, receivership or similar conditions; (2) the Company's disposition of any interest in the securities of any bottling subsidiary without the consent of The Coca-Cola Company; (3) termination of any agreement regarding the manufacture, packaging, distribution or sale of Coca-Cola Trademark Beverages between The Coca-Cola Company and any person that controls the Company; (4) any material breach of any obligation occurring under the Bottle Contracts (including, without limitation, failure to make timely payment for any syrup or concentrate or of any other debt owing to The Coca-Cola Company, failure to meet sanitary or quality control standards, failure to comply strictly with manufacturing standards and instructions, failure to carry out an approved plan as described above, and failure to cure a violation of the terms regarding imitation products), that remains uncured for 120 days after notice by The Coca-Cola Company; or (5) producing, manufacturing, selling or dealing in any "Cola Product," as defined, or any concentrate or syrup which might be confused with those of The Coca-Cola Company; or (6) selling any product under any trade dress, trademark, or tradename or in any container in which The Coca-Cola Company has a proprietary interest; or (7) owning any equity interest in or controlling any entity which performs any of the activities described in (5) or (6) above. |
Events of default by the Company include (1) the Company's insolvency, bankruptcy, dissolution, receivership or similar conditions; (2) the Company's disposition of any interest in the securities of any bottling subsidiary without the consent of The Coca-Cola Company; (3) termination of any agreement regarding the manufacture, packaging, distribution or sale of Coca-Cola Trademark Beverages between The Coca-Cola Company and any person that controls the Company; (4) any material breach of any obligation occurring under the Bottle Contracts (including, without limitation, failure to make timely payment for any syrup or concentrate or of any other debt owing to The Coca-Cola Company, failure to meet sanitary or quality control standards, failure to comply strictly with manufacturing standards and instructions, failure to carry out an approved plan as described above, and failure to cure a violation of the terms regarding imitation products), that remains uncured for 120 days after notice by The Coca-Cola Company; or (5) producing, manufacturing, selling or dealing in any "Cola Product," as defined, or any concentrate or syrup which might be confused with those of The Coca-Cola Company; or (6) selling any product under any trade dress, trademark, or tradename or in any container that is an imitation of or is confusingly similar to, any trade dress, trademark, or tradename or container in which The Coca-Cola Company has a proprietary interest; or (7) owning any equity interest in or controlling any entity which performs any of the activities described in (5) or (6) above. |
Events of default by the Company include (1) the Company's insolvency, bankruptcy, dissolution, receivership or similar conditions; (2) the Company's disposition of any interest in the securities of any bottling subsidiary without the consent of The Coca-Cola Company; (3) termination of any agreement regarding the manufacture, packaging, distribution or sale of Coca-Cola Trademark Beverages between The Coca-Cola Company and any person that controls the Company; (4) any material breach of any obligation occurring under the Bottle Contracts (including, without limitation, failure to make timely payment for any syrup or concentrate or of any other debt owing to The Coca-Cola Company, failure to meet sanitary or quality control standards, failure to comply strictly with manufacturing standards and instructions, failure to carry out an approved plan as described above, and failure to cure a violation of the terms regarding imitation products), that remains uncured for 120 days after notice by The Coca-Cola Company; or (5) producing, manufacturing, selling or dealing in any "Cola Product," as defined, or any concentrate or syrup which might be confused with those of The Coca-Cola Company; or (6) selling any product under any trade dress, trademark, or tradename or in any container in which The Coca-Cola Company has a proprietary interest; or (7) owning any equity interest in or controlling any entity which performs any of the activities described in (5) or (6) above. |
Events of default by the Company include (1) the Company's insolvency, bankruptcy, dissolution, receivership or similar conditions; (2) the Company's disposition of any interest in the securities of any bottling subsidiary; (3) termination of any agreement regarding the manufacture, packaging, distribution or sale of Coca-Cola Trademark Beverages between The Coca-Cola Company and any person that controls the Company; (4) any material breach of any obligation occurring under the Bottle Contracts (including, without limitation, failure to make timely payment for any syrup or concentrate or of any other debt owing to The Coca-Cola Company, failure to meet sanitary or quality control standards, failure to comply strictly with manufacturing standards and instructions, failure to carry out an approved plan as described above, and failure to cure a violation of the terms regarding imitation products), that remains uncured for 120 days after notice by The Coca-Cola Company; or (5) disposition of voting securities of any subsidiary without the consent of The Coca-Cola Company. |
Some of the risks associated with the pandemic or a worsening of the pandemic in the future include: •cancellation or reduction of routes available from common carriers, which may cause delays in our ability to deliver or service our products or receive components from suppliers necessary to manufacture or service our products; •travel bans or the requirement to quarantine for a lengthy period after entering a jurisdiction, which may delay our ability to install the products we sell or service those products following installation; •governmental orders or employee exposure requiring us, our customers or our suppliers to discontinue manufacturing products at our respective facilities for a period of time; •reduced demand for our products, push-out of deliveries or cancellation of orders by our customers caused by a global recession resulting from the pandemic and the measures implemented by authorities to slow the spread of COVID-19; •increased costs or inability to acquire components necessary for the manufacture of our products due to reduced availability; •absence of liquidity at customers and suppliers caused by disruptions from the pandemic, which may hamper the ability of customers to pay for the products they purchase on time or at all, or hamper the ability of our suppliers to continue to supply components to us in a timely manner or at all; and •loss of efficiencies due to remote working requirements for our employees. |
Some of the trends that our management monitors in operating our business include the following: •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. |
Managing global operations and sites located throughout the world presents a number of challenges, including but not limited to: •global trade issues and changes in and uncertainties with respect to trade policies, including the ability to obtain required import and export licenses, trade sanctions, tariffs, and international trade disputes; •political and social attitudes, laws, rules, regulations and policies within countries that favor domestic companies over non-domestic companies, including customer- or government-supported efforts to promote the development and growth of local competitors; •ineffective or inadequate legal protection of intellectual property rights in certain countries; •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; •existing and potentially new tariffs or other trade restrictions and barriers (including those applied to our products, spare parts, and services 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. |
As a result, risks associated with acquisition transactions may lead to a material adverse effect on our business and financial results for a number of reasons, including: •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. |
Provision for Income Taxes The following table provides details of income taxes: Tax expense was lower as a percentage of income before taxes during the fiscal year ended June 30, 2020 compared to the fiscal year ended June 30, 2019 primarily due to the impact of the following items: •Tax expense decreased by $13.7 million relating to an increase in the Foreign Derived Intangible Income deduction during the fiscal year ended June 30, 2020; •Tax expense decreased by $6.9 million relating to a decrease in the Global Intangible Low Taxed Income during the fiscal year ended June 30, 2020; •Tax expense decreased by $23.6 million relating to the impact of an increase in the proportion of KLA’s earnings +generated in jurisdictions with tax rates lower than the U.S. statutory rate during the fiscal year ended June 30, 2020; and •Tax expense decreased by $34.3 million relating to the impact of an internal restructuring during the fiscal year ended June 30, 2020; partially offset by •Tax expense increased by $53.9 million relating to a $256.6 million goodwill impairment charge, which is non-deductible for income tax. |
Net cash provided by operating activities during the fiscal year ended June 30, 2020 increased by $0.63 billion compared to the fiscal year ended June 30, 2019, from $1.15 billion to $1.78 billion, primarily as a result of the following factors: •An increase in collections of approximately $1.67 billion mainly driven by higher shipments and inclusion of Orbotech during the entire 2020 fiscal year; •Lower merger and acquisition costs of approximately $29.0 million; partially offset by the following: •A decrease in interest income of approximately $16.0 million mainly due to lower average cash balances and interest rates; •An increase in accounts payable payments of approximately $619.0 million mainly due to the inclusion of Orbotech during the entire 2020 fiscal year; •An increase in employee-related payments of approximately $391.0 million mainly due to the inclusion of Orbotech during the entire 2020 fiscal year; •An increase of debt interest payments of approximately $47.0 million related to Senior Notes issued in March 2019 for the Orbotech acquisition and early redemption of 2021 Senior Notes. |
Some of the trends that our management monitors in operating our business include the following: • 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. |
Managing global operations and sites located throughout the world presents a number of challenges, including but not limited to: • 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. |
As a result, risks associated with acquisition transactions may lead to a material adverse effect on our business and financial results for a number of reasons, including: • 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. |
Some of the trends that our management monitors in operating our business include the following: • 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’ 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. |
Managing global operations and sites located throughout the world presents a number of challenges, including but not limited to: • managing cultural diversity and organizational alignment; • exposure to the unique characteristics of each region in the global semiconductor market, which can cause capital equipment investment patterns to vary significantly from period to period; • periodic local or international economic downturns; • potential adverse tax consequences, including withholding tax rules that may limit the repatriation of our earnings, and higher effective income tax rates in foreign countries where we do business; • government controls, either by the United States or other countries, that restrict our business overseas or the import or export of semiconductor products or increase the cost of our operations; • compliance with customs regulations in the countries in which we do business; • tariffs or other trade barriers (including those applied to our products or to parts and supplies that we purchase); • political instability, natural disasters, legal or regulatory changes, acts of war or terrorism in regions where we have operations or where we do business; • fluctuations in interest and currency exchange rates may adversely impact our ability to compete on price with local providers or the value of revenues we generate from our international business. |
As a result, risks associated with acquisition transactions may give rise to a material adverse effect on our business and financial results for a number of reasons, including: • we may have to devote unanticipated financial and management resources to acquired businesses; • the combination of businesses may cause the loss of key personnel or an interruption of, or loss of momentum in, the activities of our company and/or the acquired business; • we may not be able to realize expected operating efficiencies or product integration benefits from our acquisitions; • we may experience challenges in entering into new market segments for which we have not previously manufactured and sold products; • we may face difficulties in coordinating geographically separated organizations, systems and facilities; • the customers, distributors, suppliers, employees and others with whom the companies we acquire have business dealings may have a potentially adverse reaction to the acquisition; • we may have to write-off goodwill or other intangible assets; and • we may incur unforeseen obligations or liabilities in connection with acquisitions. |
Net cash provided by operating activities during the fiscal year ended June 30, 2018 increased by $149.5 million compared to the fiscal year ended June 30, 2017, from $1.08 billion to $1.23 billion primarily as a result of the following key factors: • An increase in collections of approximately $533.0 million during the fiscal year ended June 30, 2018 compared to the fiscal year June 30, 2017, mainly driven by higher shipments; • An increase in interest income of approximately $14.0 million during the fiscal year ended June 30, 2018 compared to the fiscal year ended June 30, 2017, as U.S. dollar interest rates increased; partially offset by ◦ An increase in accounts payable payments of approximately $316.0 million during the fiscal year ended June 30, 2018 compared to the fiscal year ended June 30, 2017; ◦ An increase in income tax payments of $19.1 million during the fiscal year ended June 30, 2018 compared to the fiscal year ended June 30, 2017; and ◦ An increase in payroll and employee expenses of approximately $57.0 million during the fiscal year ended June 30, 2018 compared to the fiscal year ended June 30, 2017. |
Fiscal Year 2017 Compared to Fiscal Year 2016 Cash Flows from Operating Activities: Net cash provided by operating activities during the fiscal year ended June 30, 2017 increased compared to the fiscal year ended June 30, 2016, from $759.7 million to $1.08 billion primarily as a result of the following key factors: • An increase in collections of approximately $567.0 million during the fiscal year ended June 30, 2017 compared to the fiscal year June 30, 2016, mainly driven by higher shipments; • The positive impact of our early adoption of the new accounting standard update for share-based payment awards to employees on a prospective basis during the fiscal year ended June 30, 2017, which no longer requires the excess tax benefit from share-based compensation to be shown as a reduction within cash flows from operating activities of $11.9 million compared to the fiscal ended June 30, 2016; • An increase in interest income of approximately $9.0 million during the fiscal year ended June 30, 2017 compared to the fiscal year ended June 30, 2016, as U.S. dollar interest rates increased; partially offset by ◦ An increase in accounts payable payments of approximately $71.0 million during the fiscal year ended June 30, 2017 compared to the fiscal year ended June 30, 2016; ◦ An increase in income tax payments of $129.0 million during the fiscal year ended June 30, 2017 compared to the fiscal year ended June 30, 2016, reflecting higher operating profits; ◦ An increase in payroll and employee expenses of approximately $85.0 million during the fiscal year ended June 30, 2017 compared to the fiscal year ended June 30, 2016, primarily due to a change in the timing of certain variable compensation payments; and ◦ Less unfavorable impacts from currency fluctuations of approximately $19.0 million during the fiscal year ended June 30, 2017 compared to the fiscal year ended June 30, 2016. |
Some of the trends that our management monitors in operating our business include the following: • 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’ 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. |
Managing global operations and sites located throughout the world presents a number of challenges, including but not limited to: • managing cultural diversity and organizational alignment; • exposure to the unique characteristics of each region in the global semiconductor market, which can cause capital equipment investment patterns to vary significantly from period to period; • periodic local or international economic downturns; • potential adverse tax consequences, including withholding tax rules that may limit the repatriation of our earnings, and higher effective income tax rates in foreign countries where we do business; • government controls, either by the United States or other countries, that restrict our business overseas or the import or export of semiconductor products or increase the cost of our operations; • compliance with customs regulations in the countries in which we do business; • tariffs or other trade barriers (including those applied to our products or to parts and supplies that we purchase); • political instability, natural disasters, legal or regulatory changes, acts of war or terrorism in regions where we have operations or where we do business; • fluctuations in interest and currency exchange rates may adversely impact our ability to compete on price with local providers or the value of revenues we generate from our international business. |
As a result, risks associated with acquisition transactions may give rise to a material adverse effect on our business and financial results for a number of reasons, including: • we may have to devote unanticipated financial and management resources to acquired businesses; • the combination of businesses may cause the loss of key personnel or an interruption of, or loss of momentum in, the activities of our company and/or the acquired business; • we may not be able to realize expected operating efficiencies or product integration benefits from our acquisitions; • we may experience challenges in entering into new market segments for which we have not previously manufactured and sold products; • we may face difficulties in coordinating geographically separated organizations, systems and facilities; • the customers, distributors, suppliers, employees and others with whom the companies we acquire have business dealings may have a potentially adverse reaction to the acquisition; • we may have to write-off goodwill or other intangible assets; and • we may incur unforeseen obligations or liabilities in connection with acquisitions. |
A number of factors may adversely impact our future effective tax rates, such as the jurisdictions in which our profits are determined to be earned and taxed; changes in the tax rates imposed by those jurisdictions; expiration of tax holidays in certain jurisdictions that are not renewed; the resolution of issues arising from tax audits with various tax authorities; changes in the valuation of our deferred tax assets and liabilities; adjustments to estimated taxes upon finalization of various tax returns; increases in expenses not deductible for tax purposes, including write-offs of acquired in-process research and development and impairment of goodwill in connection with acquisitions; changes in available tax credits; changes in stock-based compensation expense; changes in tax laws or the interpretation of such tax laws (for example, proposals for fundamental United States international tax reform); changes in generally accepted accounting principles; and the repatriation of earnings from outside the United States for which we have not previously provided for United States taxes. |
Net cash provided by operating activities during the fiscal year ended June 30, 2017 increased compared to the fiscal year ended June 30, 2016, from $759.7 million to $1.08 billion primarily as a result of the following key factors: • An increase in collections of approximately $567.0 million during the fiscal year ended June 30, 2017 compared to the fiscal year June 30, 2016, mainly driven by higher shipments; • The positive impact of our early adoption of the new accounting standard update for share-based payment awards to employees on a prospective basis during the fiscal year ended June 30, 2017, which no longer requires the excess tax benefit from share-based compensation to be shown as a reduction within cash flows from operating activities of $11.9 million compared to the fiscal ended June 30, 2016; • An increase in interest income of approximately $9.0 million during the fiscal year ended June 30, 2017 compared to the fiscal year ended June 30, 2016, as U.S. dollar interest rates increased; partially offset by ◦ An increase in accounts payable payments of approximately $71.0 million during the fiscal year ended June 30, 2017 compared to the fiscal year ended June 30, 2016; ◦ An increase in income tax payments of $129.0 million during the fiscal year ended June 30, 2017 compared to the fiscal year ended June 30, 2016, reflecting higher operating profits; ◦ An increase in payroll and employee expenses of approximately $85.0 million during the fiscal year ended June 30, 2017 compared to the fiscal year ended June 30, 2016, primarily due to a change in the timing of certain variable compensation payments; and ◦ Less unfavorable impacts from currency fluctuations of approximately $19.0 million during the fiscal year ended June 30, 2017 compared to the fiscal year ended June 30, 2016. |
Fiscal Year 2016 Compared to Fiscal Year 2015 Cash Flows from Operating Activities: Net cash provided by operating activities during the fiscal year ended June 30, 2016 increased compared to the fiscal year ended June 30, 2015, from $605.9 million to $759.7 million primarily as a result of the following key factors: • An increase in collections of approximately $294.0 million mostly due to higher shipments during the fiscal year ended June 30, 2016 compared to the fiscal year ended June 30, 2015; • A decrease in payroll and employee-related payments of approximately $34.0 million during the fiscal year ended June 30, 2016 compared to the fiscal year ended June 30, 2015; partially offset by ◦ An increase in vendor payments of approximately $65.0 million during the fiscal year ended June 30, 2016 mainly due to higher inventory purchases compared to the fiscal year ended June 30, 2015; ◦ A net increase of realized foreign exchange hedge losses of approximately $48.0 million during the fiscal year ended June 30, 2016 compared to the fiscal year ended June 30, 2015, mainly due to the substantial foreign exchange fluctuations in Japanese Yen during these periods; ◦ An increase in debt interest payments of approximately $27.0 million during the fiscal year ended June 30, 2016 due to higher average outstanding debt balances compared to the fiscal year ended June 30, 2015; ◦ An increase in income tax and other tax payments net of tax refunds of approximately $22.0 million during the fiscal year ended June 30, 2016 compared to the fiscal year ended June 30, 2015; and ◦ An increase in cash LTI payments of approximately $13.0 million during the fiscal year ended June 30, 2016 compared to the fiscal year ended June 30, 2015. |
There are numerous risks related to the Merger, including the following: • Various conditions to the closing of the Merger may not be satisfied or waived; • If the Merger does not close on or before October 20, 2016, subject to certain limitations, either party will have the right to terminate the Merger Agreement; • The Merger may not be consummated, which among other things may cause our share price to decline to the extent that the current price of our common stock reflects an assumption that the Merger will be completed; • The failure to consummate the Merger may result in negative publicity and a negative impression of us in the investment community; • Required regulatory approvals from governmental entities may delay the Merger or result in the imposition of conditions that could cause Lam Research to abandon the Merger; • The Merger Agreement may be terminated in circumstance that would require us to pay Lam Research a termination fee of $290.0 million; • We will have incurred significant costs in connection with the acquisition that we may be unable to recover; • Our ability to attract, recruit, retain and motivate current and prospective employees may be adversely affected; • The attention of our employees and management may be diverted due to activities related to the Merger; • We may forego opportunities we might otherwise pursue absent the Merger Agreement, and may not be able to take advantage of alternative business opportunities or effectively respond to competitive pressures; and • The Merger Agreement restricts us from engaging in certain actions without Lam Research’s approval, which could prevent us from pursuing certain business opportunities outside the ordinary course of business that arise prior to the closing of the Merger. |
Some of the trends that our management monitors in operating our business include the following: • the trend of increasing cost per transistor for leading edge technology transitions below the 28 nanometer node, a reversal of the historical trend of declining cost per transistor with each new generation of technological advancement within the semiconductor industry, and the adverse impact that such reversal may have upon our business; • the increasing cost of building and operating fabrication facilities and the impact of such increases on our customers’ investment decisions; • differing market growth rates and capital requirements for different applications, such as memory, logic and foundry; • lower level of process control adoption by our memory customers compared to our foundry and logic customers; • our customers’ reuse of existing and installed products, which may decrease their need to purchase new products or solutions at more advanced technology nodes; • the emergence of disruptive technologies that change the prevailing semiconductor manufacturing processes (or the economics associated with semiconductor manufacturing) and, as a result, also impact the inspection and metrology requirements associated with such processes; • the higher design costs for the most advanced integrated circuits, which could economically constrain leading-edge manufacturing technology customers to focus their resources on only the large, technologically advanced products and applications; • the possible introduction of integrated products by our larger competitors that offer inspection and metrology functionality in addition to managing other semiconductor manufacturing processes; • changes in semiconductor manufacturing processes that are extremely costly for our customers to implement and, accordingly, our customers could reduce their available budgets for process control equipment by reducing inspection and metrology sampling rates for certain technologies; • the bifurcation of the semiconductor manufacturing industry into (a) leading edge manufacturers driving continued research and development into next-generation products and technologies and (b) other manufacturers that are content with existing (including previous generation) products and technologies; • the ever escalating cost of next-generation product development, which may result in joint development programs between us and our customers or government entities to help fund such programs that could restrict our control of, ownership of and profitability from the products and technologies developed through those programs; • the potential industry transition from 300mm to 450mm wafers; and • the entry by some semiconductor manufacturers into collaboration or sharing arrangements for capacity, cost or risk with other manufacturers, as well as increased outsourcing of their manufacturing activities, and greater focus only on specific markets or applications, whether in response to adverse market conditions or other market pressures. |
Managing global operations and sites located throughout the world presents a number of challenges, including but not limited to: • managing cultural diversity and organizational alignment; • exposure to the unique characteristics of each region in the global semiconductor market, which can cause capital equipment investment patterns to vary significantly from period to period; • periodic local or international economic downturns; • potential adverse tax consequences, including withholding tax rules that may limit the repatriation of our earnings, and higher effective income tax rates in foreign countries where we do business; • government controls, either by the United States or other countries, that restrict our business overseas or the import or export of semiconductor products or increase the cost of our operations; • compliance with customs regulations in the countries in which we do business; • tariffs or other trade barriers (including those applied to our products or to parts and supplies that we purchase); • political instability, natural disasters, legal or regulatory changes, acts of war or terrorism in regions where we have operations or where we do business; • fluctuations in interest and currency exchange rates may adversely impact our ability to compete on price with local providers or the value of revenues we generate from our international business. |
As a result, risks associated with acquisition transactions may give rise to a material adverse effect on our business and financial results for a number of reasons, including: • we may have to devote unanticipated financial and management resources to acquired businesses; • the combination of businesses may cause the loss of key personnel or an interruption of, or loss of momentum in, the activities of our company and/or the acquired business; • we may not be able to realize expected operating efficiencies or product integration benefits from our acquisitions; • we may experience challenges in entering into new market segments for which we have not previously manufactured and sold products; • we may face difficulties in coordinating geographically separated organizations, systems and facilities; • the customers, distributors, suppliers, employees and others with whom the companies we acquire have business dealings may have a potentially adverse reaction to the acquisition; • we may have to write-off goodwill or other intangible assets; and • we may incur unforeseen obligations or liabilities in connection with acquisitions. |
Net cash provided by operating activities during the fiscal year ended June 30, 2016 increased compared to the fiscal year ended June 30, 2015, from $605.9 million to $759.7 million primarily as a result of the following key factors: • An increase in collections of approximately $294.0 million mostly due to higher shipments during the fiscal year ended June 30, 2016 compared to the fiscal year ended June 30, 2015; • A decrease in payroll and employee-related payments of approximately $34.0 million during the fiscal year ended June 30, 2016 compared to the fiscal year ended June 30, 2015; partially offset by • An increase in vendor payments of approximately $65.0 million during the fiscal year ended June 30, 2016 mainly due to higher inventory purchases compared to the fiscal year ended June 30, 2015; • A net increase of realized foreign exchange hedge losses of approximately $48.0 million during the fiscal year ended June 30, 2016 compared to the fiscal year ended June 30, 2015, mainly due to the substantial foreign exchange fluctuations in Japanese Yen during these periods; • An increase in debt interest payments of approximately $27.0 million during the fiscal year ended June 30, 2016 due to higher average outstanding debt balances compared to the fiscal year ended June 30, 2015; • An increase in income tax and other tax payments net of tax refunds of approximately $22.0 million during the fiscal year ended June 30, 2016 compared to the fiscal year ended June 30, 2015; and • An increase in cash LTI payments of approximately $13.0 million during the fiscal year ended June 30, 2016 compared to the fiscal year ended June 30, 2015. |
Fiscal Year 2015 Compared to Fiscal Year 2014 Cash Flows from Operating Activities: Net cash provided by operating activities during the fiscal year ended June 30, 2015 decreased compared to the fiscal year ended June 30, 2014, from $778.9 million to $605.9 million primarily as a result of the following key factors: • A decrease of cash collections by approximately $270.0 million during the fiscal year ended June 30, 2015 compared to the fiscal year ended June 30, 2014, • An increase of debt-related interest payments of approximately $40.0 million during the fiscal year ended June 30, 2015 compared to the fiscal year ended June 30, 2014, • An increase in payments of approximately $15.0 million upon vesting of cash-based long-term incentive (“Cash LTI”) awards during the fiscal year ended June 30, 2015 under our Cash LTI employee compensation plan, compared to the fiscal year ended June 30, 2014, • An increase in payroll payments of approximately $15.0 million during the fiscal year ended June 30, 2015 compared to the fiscal year ended June 30, 2014, partially offset by • A decrease in accounts payable payments of approximately $143.0 million during the fiscal year ended June 30, 2015 compared to the fiscal year ended June 30, 2014, and • A decrease in income tax and other tax payments net of tax refunds of approximately $30.0 million during the fiscal year ended June 30, 2015 compared to the fiscal year ended June 30, 2014. |
Cash Flows from Financing Activities: Net cash used in financing activities during the fiscal year ended June 30, 2015 increased compared to the fiscal year ended June 30, 2014, from $458.9 million to $1.30 billion, primarily as a result of the following key factors: • An increase in dividend payments of $2.74 billion during the fiscal year ended June 30, 2015 compared to the fiscal year ended June 30, 2014, reflecting the payments for the special cash dividend during the fiscal year ended June 30, 2015 and an increase in our quarterly dividend payout amount from $0.45 to $0.50 per share that was instituted during the three months ended September 30, 2014, • Payments for redemption of the 2018 Senior Notes and payments for the term loans, including prepayment for the principal amount for the term loans, aggregating to $916.0 million during the fiscal year ended June 30, 2015, whereas no such payments were made during the fiscal year ended June 20, 2014, • An increase in common stock repurchases of $362.0 million during the fiscal year ended June 30, 2015 compared to the fiscal year ended June 30, 2014 and • A decrease in proceeds from the exercise of stock options of $65.0 million during the fiscal year ended June 30, 2015 compared to the fiscal year ended June 30, 2014, partially offset by • Net proceeds of $3.22 billion from issuance of Senior Notes and the term loans during the fiscal year ended June 30, 2015. |
Some of the trends that our management monitors in operating our business include the following: • the increasing cost of building and operating fabrication facilities and the impact of such increases on our customers’ investment decisions; • differing market growth rates and capital requirements for different applications, such as memory, logic and foundry; • lower level of process control adoption by our memory customers compared to our foundry and logic customers; • our customers’ reuse of existing and installed products, which may decrease their need to purchase new products or solutions at more advanced technology nodes; • the emergence of disruptive technologies that change the prevailing semiconductor manufacturing processes (or the economics associated with semiconductor manufacturing) and, as a result, also impact the inspection and metrology requirements associated with such processes; • the higher design costs for the most advanced integrated circuits, which could economically constrain leading-edge manufacturing technology customers to focus their resources on only the large, technologically advanced products and applications; • the possible introduction of integrated products by our larger competitors that offer inspection and metrology functionality in addition to managing other semiconductor manufacturing processes; • changes in semiconductor manufacturing processes that are extremely costly for our customers to implement and, accordingly, our customers could reduce their available budgets for process control equipment by reducing inspection and metrology sampling rates for certain technologies; • the reversal of the historical trend of declining cost per transistor with each new generation of technological advancement within the semiconductor industry, and the adverse impact that such reversal would have upon our business; • the bifurcation of the semiconductor manufacturing industry into (a) leading edge manufacturers driving continued research and development into next-generation products and technologies and (b) other manufacturers that are content with existing (including previous generation) products and technologies; • the ever escalating cost of next-generation product development, which may result in joint development programs between us and our customers or government entities to help fund such programs that could restrict our control of, ownership of and profitability from the products and technologies developed through those programs; • the potential industry transition from 300mm to 450mm wafers; and • the entry by some semiconductor manufacturers into collaboration or sharing arrangements for capacity, cost or risk with other manufacturers, as well as increased outsourcing of their manufacturing activities, and greater focus only on specific markets or applications, whether in response to adverse market conditions or other market pressures. |
Managing global operations and sites located throughout the world presents a number of challenges, including but not limited to: • managing cultural diversity and organizational alignment; • exposure to the unique characteristics of each region in the global semiconductor market, which can cause capital equipment investment patterns to vary significantly from period to period; • periodic local or international economic downturns; • potential adverse tax consequences, including withholding tax rules that may limit the repatriation of our earnings, and higher effective income tax rates in foreign countries where we do business; • government controls, either by the United States or other countries, that restrict our business overseas or the import or export of semiconductor products or increase the cost of our operations; • compliance with customs regulations in the countries in which we do business; • tariffs or other trade barriers (including those applied to our products or to parts and supplies that we purchase); • political instability, natural disasters, legal or regulatory changes, acts of war or terrorism in regions where we have operations or where we do business; • fluctuations in interest and currency exchange rates. |
As a result, risks associated with acquisition transactions may give rise to a material adverse effect on our business and financial results for a number of reasons, including: • we may have to devote unanticipated financial and management resources to acquired businesses; • the combination of businesses may cause the loss of key personnel or an interruption of, or loss of momentum in, the activities of our company and/or the acquired business; • we may not be able to realize expected operating efficiencies or product integration benefits from our acquisitions; • we may experience challenges in entering into new market segments for which we have not previously manufactured and sold products; • we may face difficulties in coordinating geographically separated organizations, systems and facilities; • the customers, distributors, suppliers, employees and others with whom the companies we acquire have business dealings may have a potentially adverse reaction to the acquisition; • we may have to write-off goodwill or other intangible assets; and • we may incur unforeseen obligations or liabilities in connection with acquisitions. |
Net cash provided by operating activities during the fiscal year ended June 30, 2015 decreased compared to the fiscal year ended June 30, 2014, from $779 million to $606 million primarily as a result of the following key factors: • A decrease of cash collections by approximately $270 million during the fiscal year ended June 30, 2015 compared to the fiscal year ended June 30, 2014, • An increase of debt-related interest payments of approximately $40 million during the fiscal year ended June 30, 2015 compared to the fiscal year ended June 30, 2014, • An increase in payments of approximately $15 million upon vesting of cash-based long-term incentive ("Cash LTI") awards during the fiscal year ended June 30, 2015 under our Cash LTI employee compensation plan, compared to the fiscal year ended June 30, 2014, • An increase in payroll payments of approximately $15 million during the fiscal year ended June 30, 2015 compared to the fiscal year ended June 30, 2014, partially offset by • A decrease in accounts payable payments of approximately $143 million during the fiscal year ended June 30, 2015 compared to the fiscal year ended June 30, 2014, and • A decrease in income tax and other tax payments net of tax refunds of approximately $30 million during the fiscal year ended June 30, 2015 compared to the fiscal year ended June 30, 2014. |
Cash Flows from Financing Activities: Net cash used in financing activities during the fiscal year ended June 30, 2015 increased compared to the fiscal year ended June 30, 2014, from $459 million to $1.30 billion, primarily as a result of the following key factors: • An increase in dividend payments of $2.74 billion during the fiscal year ended June 30, 2015 compared to the fiscal year ended June 30, 2014, reflecting the payments for the special cash dividend during the fiscal year ended June 30, 2015 and an increase in our quarterly dividend payout amount from $0.45 to $0.50 per share that was instituted during the three months ended September 30, 2014, • Payments for redemption of the 2018 Senior Notes and payments for the term loans, including prepayment for the principal amount for the term loans, aggregating to $916 million during the fiscal year ended June 30, 2015, whereas no such payments were made during the fiscal year ended June 20, 2014, • An increase in common stock repurchases of $362 million during the fiscal year ended June 30, 2015 compared to the fiscal year ended June 30, 2014 and • A decrease in proceeds from the exercise of stock options of $65 million during the fiscal year ended June 30, 2015 compared to the fiscal year ended June 30, 2014, partially offset by • Net proceeds of $3.22 billion from issuance of Senior Notes and the term loans during the fiscal year ended June 30, 2015. |
Fiscal Year 2014 Compared to Fiscal Year 2013 Cash Flows from Operating Activities: Net cash provided by operating activities during the fiscal year ended June 30, 2014 decreased compared to the fiscal year ended June 30, 2013, from $913 million to $779 million primarily as a result of the following key factors: • An increase in payroll of approximately $44 million during the fiscal year ended June 30, 2014 compared to the fiscal year ended June 30, 2013, • An increase in accounts payable payments of approximately $39 million during the fiscal year ended June 30, 2014 compared to the fiscal year ended June 30, 2013, • An increase in income tax and other tax payments of approximately $19 million during the fiscal year ended June 30, 2014 compared to the fiscal year ended June 30, 2013 and • Payments of approximately $15 million upon vesting of Cash LTI awards during the fiscal year ended June 30, 2014 under our Cash LTI employee compensation plan, whereas no such payments occurred during the fiscal year ended June 30, 2013. |
Some of the trends that our management monitors in operating our business include the following: • the increasing cost of building and operating fabrication facilities and the impact of such increases on our customers’ investment decisions; • differing market growth rates and capital requirements for different applications, such as memory, logic and foundry; • 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 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, impact the amount of their budgets that are available for process control equipment; • the possibility that next-generation technological advances within the semiconductor manufacturing industry could actually reverse the historical trend of declining cost per transistor, and the impact that such reversal would have upon our industry and business; • the bifurcation of the semiconductor manufacturing industry into (a) leading edge manufacturers driving continued research and development into next-generation products and technologies and (b) other manufacturers that are content with existing (including previous generation) products and technologies; • the ever escalating cost of next-generation product development, which may result in joint development programs between us and our customers or government entities to help fund such programs that could restrict our control of, ownership of and profitability from the products and technologies developed through those programs; • the potential industry transition from 300mm to 450mm wafers; and • the entry by some semiconductor manufacturers into collaboration or sharing arrangements for capacity, cost or risk with other manufacturers, as well as increased outsourcing of their manufacturing activities, and greater focus only on specific markets or applications, whether in response to adverse market conditions or other market pressures. |
Managing global operations and sites located throughout the world presents a number of challenges, including but not limited to: • managing cultural diversity and organizational alignment; • exposure to the unique characteristics of each region in the global semiconductor market, which can cause capital equipment investment patterns to vary significantly from period to period; • periodic local or international economic downturns; • potential adverse tax consequences, including withholding tax rules that may limit the repatriation of our earnings, and higher effective income tax rates in foreign countries where we do business; • government controls, either by the United States or other countries, that restrict our business overseas or the import or export of semiconductor products or increase the cost of our operations; • compliance with customs regulations in the countries in which we do business; • tariffs or other trade barriers (including those applied to our products or to parts and supplies that we purchase); • political instability, natural disasters, legal or regulatory changes, acts of war or terrorism in regions where we have operations or where we do business; • fluctuations in interest and currency exchange rates. |
As a result, risks associated with acquisition transactions may give rise to a material adverse effect on our business and financial results for a number of reasons, including: • we may have to devote unanticipated financial and management resources to acquired businesses; • the combination of businesses may cause the loss of key personnel or an interruption of, or loss of momentum in, the activities of our company and/or the acquired business; • we may not be able to realize expected operating efficiencies or product integration benefits from our acquisitions; • we may experience challenges in entering into new market segments for which we have not previously manufactured and sold products; • we may face difficulties in coordinating geographically separated organizations, systems and facilities; • the customers, distributors, suppliers, employees and others with whom the companies we acquire have business dealings may have a potentially adverse reaction to the acquisition; • we may have to write-off goodwill or other intangible assets; and • we may incur unforeseen obligations or liabilities in connection with acquisitions. |
Some of the trends that our management monitors in operating our business include the following: • the increasing cost of building and operating fabrication facilities and the impact of such increases on our customers’ investment decisions; • differing market growth rates and capital requirements for different applications, such as memory, logic and foundry; • 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 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, impact the amount of their budgets that are available for process control equipment; • 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 to help fund such programs that could restrict our control of, ownership of and profitability from the products and technologies developed through those programs; • the potential industry transition from 300mm to 450mm wafers; and • the entry by some semiconductor manufacturers into collaboration or sharing arrangements for capacity, cost or risk with other manufacturers, as well as increased outsourcing of their manufacturing activities, and greater focus only on specific markets or applications, whether in response to adverse market conditions or other market pressures. |
Managing global operations and sites located throughout the world presents a number of challenges, including but not limited to: • managing cultural diversity and organizational alignment; • exposure to the unique characteristics of each region in the global semiconductor market, which can cause capital equipment investment patterns to vary significantly from period to period; • periodic local or international economic downturns; • potential adverse tax consequences, including withholding tax rules that may limit the repatriation of our earnings, and higher effective income tax rates in foreign countries where we do business; • government controls, either by the United States or other countries, that restrict our business overseas or the import or export of semiconductor products or increase the cost of our operations; • 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. |
As a result, risks associated with acquisition transactions may give rise to a material adverse effect on our business and financial results for a number of reasons, including: • we may have to devote unanticipated financial and management resources to acquired businesses; • the combination of businesses may cause the loss of key personnel or an interruption of, or loss of momentum in, the activities of our company and/or the acquired business; • we may not be able to realize expected operating efficiencies or product integration benefits from our acquisitions; • we may experience challenges in entering into new market segments for which we have not previously manufactured and sold products; • we may face difficulties in coordinating geographically separated organizations, systems and facilities; • the customers, distributors, suppliers, employees and others with whom the companies we acquire have business dealings may have a potentially adverse reaction to the acquisition; • we may have to write-off goodwill or other intangible assets; and • we may incur unforeseen obligations or liabilities in connection with acquisitions. |
Some of the trends that our management monitors in operating our business include the following: • the increasing cost of building and operating fabrication facilities and the impact of such increases on our customers’ investment decisions; • differing market growth rates and capital requirements for different applications, such as memory, logic and foundry; • 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 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, impact the amount of their budgets that are available for process control equipment; • 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 to help fund such programs that could restrict our control of, ownership of and profitability from the products and technologies developed through those programs; • the potential industry transition from 300mm to 450mm wafers; and • the entry by some semiconductor manufacturers into collaboration or sharing arrangements for capacity, cost or risk with other manufacturers, as well as increased outsourcing of their manufacturing activities, and greater focus only on specific markets or applications, whether in response to adverse market conditions or other market pressures. |
Managing global operations and sites located throughout the world presents a number of challenges, including but not limited to: • managing cultural diversity and organizational alignment; • exposure to the unique characteristics of each region in the global semiconductor market, which can cause capital equipment investment patterns to vary significantly from period to period; • periodic local or international economic downturns; • potential adverse tax consequences, including withholding tax rules that may limit the repatriation of our earnings, and higher effective income tax rates in foreign countries where we do business; • government controls, either by the United States or other countries, that restrict our business overseas or the import or export of semiconductor products or increase the cost of our operations; • 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 (Although we attempt to manage near-term currency risks through the use of hedging instruments, there can be no assurance that such efforts will be adequate); • longer payment cycles and difficulties in collecting accounts receivable outside of the United States; • difficulties in managing foreign distributors (including monitoring and ensuring our distributors' compliance with all applicable United States and local laws); and • inadequate protection or enforcement of our intellectual property and other legal rights in foreign jurisdictions. |
As a result, risks associated with acquisition transactions may give rise to a material adverse effect on our business and financial results for a number of reasons, including: • we may have to devote unanticipated financial and management resources to acquired businesses; • the combination of businesses may cause the loss of key personnel or an interruption of, or loss of momentum in, the activities of our company and/or the acquired business; • we may not be able to realize expected operating efficiencies or product integration benefits from our acquisitions; • we may experience challenges in entering into new market segments for which we have not previously manufactured and sold products; • we may face difficulties in coordinating geographically separated organizations, systems and facilities; • the customers, distributors, suppliers, employees and others with whom the companies we acquire have business dealings may have a potentially adverse reaction to the acquisition; • we may have to write-off goodwill or other intangible assets; and • we may incur unforeseen obligations or liabilities in connection with acquisitions. |
Fiscal Year 2011 Compared to Fiscal Year 2010 Net cash provided by operating activities during the fiscal year ended June 30, 2011 increased compared to the fiscal year ended June 30, 2010 from $448 million to $823 million, primarily as a result of the following key factors: • An increase in cash collections of approximately $1.4 billion during the fiscal year ended June 30, 2011 compared to the fiscal year ended June 30, 2010, due to higher sales volume, partially offset by • An increase in vendor payments of approximately $580 million during the fiscal year ended June 30, 2011 compared to the fiscal year ended June 30, 2010, to support a higher level of business activities, • An increase in payroll expenses of approximately $170 million during the fiscal year ended June 30, 2011 compared to the fiscal year ended June 30, 2010, mainly due to bonus payments for fiscal year 2010 (which were paid during fiscal year 2011) and higher headcount, and • An increase in tax payments of approximately $270 million during the fiscal year ended June 30, 2011 compared to the fiscal year ended June 30, 2010, due to higher profitability. |
Some of the trends that our management monitors in operating our business include the following: • the increasing cost of building and operating fabrication facilities and the impact of such increases on our customers’ investment decisions; • differing market growth rates and capital requirements for different applications, such as memory, logic and foundry; • 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 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, impact the amount of their budgets that are available for process control equipment; • 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 to help fund such programs that could restrict our control of, ownership of and profitability from the products and technologies developed through those programs; • the potential industry transition from 300mm to 450mm wafers; and • the entry by some semiconductor manufacturers into collaboration or sharing arrangements for capacity, cost or risk with other manufacturers, as well as increased outsourcing of their manufacturing activities, and greater focus only on specific markets or applications, whether in response to adverse market conditions or other market pressures. |
Managing global operations and sites located throughout the world presents a number of challenges, including but not limited to: • managing cultural diversity and organizational alignment; • exposure to the unique characteristics of each region in the global semiconductor market, which can cause capital equipment investment patterns to vary significantly from period to period; • periodic local or international economic downturns; • potential adverse tax consequences, including withholding tax rules that may limit the repatriation of our earnings, and higher effective income tax rates in foreign countries where we do business; • government controls, either by the United States or other countries, that restrict our business overseas or the import or export of semiconductor products or increase the cost of our operations; • 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 (Although we attempt to manage near-term currency risks through the use of hedging instruments, there can be no assurance that such efforts will be adequate); • longer payment cycles and difficulties in collecting accounts receivable outside of the United States; • difficulties in managing foreign distributors (including monitoring and ensuring our distributors' compliance with all applicable United States and local laws); and • inadequate protection or enforcement of our intellectual property and other legal rights in foreign jurisdictions. |
As a result, risks associated with acquisition transactions may give rise to a material adverse effect on our business and financial results for a number of reasons, including: • we may have to devote unanticipated financial and management resources to acquired businesses; • the combination of businesses may cause the loss of key personnel or an interruption of, or loss of momentum in, the activities of our company and/or the acquired business; • we may not be able to realize expected operating efficiencies or product integration benefits from our acquisitions; • we may experience challenges in entering into new market segments for which we have not previously manufactured and sold products; • we may face difficulties in coordinating geographically separated organizations, systems and facilities; • the customers, distributors, suppliers, employees and others with whom the companies we acquire have business dealings may have a potentially adverse reaction to the acquisition; • we may have to write-off goodwill or other intangible assets; and • we may incur unforeseen obligations or liabilities in connection with acquisitions. |
Fiscal Year 2011 Compared to Fiscal Year 2010 Cash provided by operating activities during the fiscal year ended June 30, 2011 increased compared to the fiscal year ended June 30, 2010 from $448 million to $823 million primarily as a result of the following key factors: • An increase in cash collections of approximately $1.4 billion during the fiscal year ended June 30, 2011 compared to the fiscal year ended June 30, 2010, due to higher sales volume, partially offset by • An increase in vendor payments of approximately $580 million during the fiscal year ended June 30, 2011 compared to the fiscal year ended June 30, 2010, to support a higher level of business activities, • An increase in payroll expenses of approximately $170 million during the fiscal year ended June 30, 2011 compared to the fiscal year ended June 30, 2010, mainly due to bonus payments for fiscal year 2010 (which were paid during fiscal year 2010 and higher headcount), and • An increase in tax payments of approximately $270 million during the fiscal year ended June 30, 2011 compared to the fiscal year ended June 30, 2010, due to higher profitability. |
Fiscal Year 2010 Compared to Fiscal Year 2009 Cash provided by operating activities during the fiscal year ended June 30, 2010 increased compared to the fiscal year ended June 30, 2009 from $196 million to $448 million primarily as a result of the following key factors: • Lower operating expenses during the fiscal year ended June 30, 2010, reduced by approximately $165 million compared to the fiscal year ended June 30, 2009, resulting primarily from our cost cutting measures initiated during the fiscal year ended June 30, 2009, the benefits of which were fully realized in the fiscal year ended June 30, 2010, • No material cash payments in the settlement of litigation during the fiscal year ended June 30, 2010, compared to a cash payment of $65 million during the fiscal year ended June 30, 2009 in connection with the settlement of the stockholder class action litigation related to our historical stock option practices, and • An increase in customer collections of approximately $58 million during the fiscal year ended June 30, 2010 compared to the fiscal year ended June 30, 2009, partially offset by • An increase in taxes paid of approximately $26 million during the fiscal year ended June 30, 2010 compared to the fiscal year ended June 30, 2009. |
In accordance with the terms of a Severance and Consulting Agreement entered into between the Company and Mr. Kispert dated August 28, 2008, Mr. Kispert received, in addition to certain cash payments and benefits, the following benefits related to his outstanding equity awards: (i) accelerated, pro-rated vesting of the unvested portion (as of the date that his employment with the Company terminated) of all of his outstanding restricted stock units, such that a percentage of the unvested portion of each such restricted stock unit grant, representing the portion of the entire service vesting period under such grant that had been served by Mr. Kispert as of the date that he ceased to be an employee of the Company, was accelerated; (ii) the acceleration of the delivery of all restricted stock units for which vesting was accelerated in accordance with the provisions of the Severance and Consulting Agreement; and (iii) the extension of the post-termination exercise period of each of Mr. Kispert’s stock options so that each such option remained exercisable for twelve months following the date Mr. Kispert ceased to be an employee of the Company, but in no event beyond the original term of the award. |
As a result, risks associated with acquisition transactions may give rise to a material adverse effect on our business and financial results for a number of reasons, including: • we may have to devote unanticipated financial and management resources to acquired businesses; • the combination of businesses may cause the loss of key personnel or an interruption of, or loss of momentum in, the activities of our company and/or the acquired business; • we may not be able to realize expected operating efficiencies or product integration benefits from our acquisitions; • we may experience challenges in entering into new market segments for which we have not previously manufactured and sold products; • we may face difficulties in coordinating geographically separated organizations, systems and facilities; • the customers, distributors, suppliers, employees and others with whom the companies we acquire have business dealings may have a potentially adverse reaction to the acquisition; • we may have to write-off goodwill or other intangible assets; and • we may incur unforeseen obligations or liabilities in connection with acquisitions. |
As set forth more fully in the Stipulation, under the Settlement, among other things, (i) we received cash payments totaling $24 million from insurers; (ii) we received additional cash payments of approximately $9.2 million from certain of the settling defendants; (iii) certain of the settling defendants relinquished compensation and other benefits of approximately $9.4 million; (iv) we paid attorneys’ fees to plaintiffs’ counsel in the amount of $8 million in cash, in addition to $8 million in shares of our common stock; (v) the Federal Derivative Action was dismissed with prejudice; (vi) the Company, settling defendants, related parties, and plaintiffs and their counsel have been released from claims related to the Federal Derivative Action and the matters that were or could have been alleged therein, and further litigation on such claims is barred; and (vii) we committed to maintain certain corporate governance enhancements, including certain previously implemented policies, procedures and guidelines relating to our board of directors composition, stock option granting practices and procedures, and internal controls and procedures. |
Cash provided by operating activities during the fiscal year ended June 30, 2010 increased compared to the fiscal year ended June 30, 2009 from $196 million to $448 million primarily as a result of the following key factors: • Lower operating expenses during the fiscal year ended June 30, 2010, reduced by approximately $165 million as compared to the fiscal year ended June 30, 2009, resulting primarily from our cost cutting measures initiated during the fiscal year ended June 30, 2009, the benefits of which were fully realized in the fiscal year ended June 30, 2010, • No material cash payments in the settlement of litigation during the fiscal year ended June 30, 2010, as compared to a cash payment of $65 million during the fiscal year ended June 30, 2009 in connection with the settlement of the shareholder class action litigation related to our historical stock option practices, • Increase in customer collections by approximately $58 million during the fiscal year ended June 30, 2010 as compared to the fiscal year ended June 30, 2009, and • Increase in taxes paid of approximately $26 million during the fiscal year ended June 30, 2010 as compared to the fiscal year ended June 30, 2009. |
Cash provided by operating activities during the fiscal year ended June 30, 2009 decreased compared to the fiscal year ended June 30, 2008 from $663 million to $196 million primarily as a result of the following key factors: • Lower customer collections as a result of a decline in revenue during the fiscal year ended June 30, 2009, reduced by approximately $862 million as compared to the fiscal year ended June 30, 2008, • Decrease of $78 million in interest income during the fiscal year ended June 30, 2009 as compared to fiscal year ended June 30, 2008, primarily due to lower market interest rates, • Cash payments of $65 million in the settlement of litigation in connection with the settlement of the shareholder class action litigation related to our historical stock option practices during the fiscal year ended June 30, 2009, as compared to no such payments during the fiscal year ended June 30, 2008, • Interest payments of $52 million on the $750 million of our outstanding senior notes during the fiscal year ended June 30, 2009, as compared to no such payments during the fiscal year ended June 30, 2008, partially offset by • Reduced operating expenses by approximately $346 million during the fiscal year ended June 30, 2009 as compared to the fiscal year ended June 30, 2008, primarily from our cost reduction measures, and • Lower tax payments of $238 million during the fiscal year ended June 30, 2009, as compared to the fiscal year ended June 30, 2008. |
Cash flow from investing activities during the fiscal year ended June 30, 2009 declined compared to the fiscal year ended June 30, 2008 from $58 million of cash provided by investing activities to $485 million of cash used in investing activities, primarily as a result of the following key factors: • Increase in the use of cash for purchases of available-for-sale and trading securities, net of sales and maturities, of approximately $884 million during the fiscal year ended June 30, 2009 as compared to the fiscal year ended June 30, 2008, • Decrease in cash collections by approximately $47 million during the fiscal year ended June 30, 2009 from sale of real estate assets, as compared to the fiscal year ended June 30, 2008, partially offset by • Decrease of $353 million in acquisition expenses during the fiscal year ended June 30, 2009 as compared to the fiscal year ended June 30, 2008, primarily driven by our acquisition of ICOS for net cash consideration of approximately $489 million during the fiscal year ended June 30, 2008 and our acquisition of the MIE business unit of Vistec Semiconductor Systems for net cash consideration of approximately $141 million during the fiscal year ended June 30, 2009, and • Lower capital expenditures during the fiscal year ended June 30, 2009 by approximately $35 million, as compared to the fiscal year ended June 20, 2008. |
KLA-TENCOR CORPORATION Notes to Consolidated Financial Statements-(Continued) Financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2010 were as follows: Financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2009 were as follows: KLA-TENCOR CORPORATION Notes to Consolidated Financial Statements-(Continued) Assets and liabilities measured at fair value on a recurring basis were presented on the Company’s Consolidated Balance Sheet as of June 30, 2010 as follows: Assets and liabilities measured at fair value on a recurring basis were presented on the Company’s Consolidated Balance Sheet as of June 30, 2009 as follows: Changes in our Level 3 securities for the fiscal year ended June 30, 2010 and 2009 were as follows: KLA-TENCOR CORPORATION Notes to Consolidated Financial Statements-(Continued) NOTE 3-FINANCIAL STATEMENT COMPONENTS Consolidated Balance Sheets KLA-TENCOR CORPORATION Notes to Consolidated Financial Statements-(Continued) As of June 30, 2010 and 2009, the net book value of property and equipment includes assets held for sale of $19.3 million and $4.7 million, respectively. |
In accordance with the terms of a Severance and Consulting Agreement entered into between the Company and Mr. Kispert dated August 28, 2008, Mr. Kispert received, in addition to certain cash payments and benefits, the following benefits related to his outstanding equity awards: (i) accelerated, pro-rated vesting of the unvested portion (as of the date that his employment with the Company terminated) of all of his outstanding restricted stock units, such that a percentage of the unvested portion of each such restricted stock unit grant, representing the portion of the entire service vesting period under such grant that had been served by Mr. Kispert as of the date that he ceased to be an employee of the Company, was accelerated; (ii) the acceleration of the delivery of all restricted stock units for which vesting was accelerated in accordance with the provisions of the Severance and Consulting Agreement; and (iii) the extension of the post-termination exercise period of each of Mr. Kispert’s stock options so that each such option remained exercisable for twelve months following the date Mr. Kispert ceased to be an employee of the Company, but in no event beyond the original term of the award. |
As set forth more fully in the Stipulation, under the Settlement, among other things, (i) the Company received cash payments totaling $24 million from insurers; (ii) the Company received additional cash payments of approximately $9.2 million from certain of the settling defendants; (iii) certain of the settling defendants relinquished compensation and other benefits of approximately $9.4 million; (iv) the Company paid attorneys’ fees to plaintiffs’ counsel in the amount of $8 million in cash, in addition to $8 million in shares of Company common stock; (v) the Federal Derivative Action was dismissed with prejudice; (vi) the Company, settling defendants, related parties, and plaintiffs and their counsel have been released from claims related to the Federal Derivative Action and the matters that were or could have been alleged therein, and further litigation on such claims is barred; and (vii) the Company committed to maintain certain corporate governance enhancements, including certain previously implemented policies, procedures and guidelines relating to the Company’s board of directors composition, stock option granting practices and procedures, and internal controls and procedures. |
KLA-TENCOR CORPORATION Notes to Consolidated Financial Statements-(Continued) Derivatives in Cash Flow Hedging Relationships: Foreign Exchange Contracts The location and amounts of designated and non-designated derivative instruments’ gains and losses in the consolidated financial statements for the fiscal years ended June 30, 2010 and 2009 are as follows: The U.S. and equivalent of all outstanding notional amounts of hedge contracts, with maximum maturity of 18 months, were as follows: KLA-TENCOR CORPORATION Notes to Consolidated Financial Statements-(Continued) The location and fair value amounts of the Company’s derivative instruments reported in its Consolidated Balance Sheet as of June 30, 2010 were as follows: The following table provides the balances and changes in the accumulated other comprehensive income (loss) related to derivative instruments for the fiscal year ended June 30, 2010: NOTE 17-SEGMENT REPORTING AND GEOGRAPHIC INFORMATION KLA-Tencor reports one reportable segment in accordance with the authoritative guidance for segment reporting. |
As a result, risks associated with acquisition transactions may give rise to a material adverse effect on our business and financial results for a number of reasons, including: • we may have to devote unanticipated financial and management resources to acquired businesses; • the combination of businesses may cause the loss of key personnel or an interruption of, or loss of momentum in, the activities of our company and/or the acquired business; • we may not be able to realize expected operating efficiencies or product integration benefits from our acquisitions; • we may experience challenges in entering into new market segments for which we have not previously manufactured and sold products; • we may face difficulties in coordinating geographically separated organizations, systems and facilities; • the customers, suppliers, employees and others with whom the companies we acquire have business dealings may have a potentially adverse reaction to the acquisition; • we may have to write-off goodwill or other intangible assets; and • we may incur unforeseen obligations or liabilities in connection with acquisitions. |
In accordance with the terms of a Severance and Consulting Agreement entered into between the Company and Mr. Kispert dated August 28, 2008, Mr. Kispert is entitled to receive, in addition to certain cash payments and benefits, the following benefits related to his outstanding equity awards: (i) accelerated, pro-rated vesting of the unvested portion (as of the date that his employment with the Company terminates) of all of his outstanding restricted stock units, such that a percentage of the unvested portion of each such restricted stock unit grant, representing the portion of the entire service vesting period under such grant that will have been served by Mr. Kispert as of the date that he ceases to be an employee of the Company, will be accelerated; (ii) the acceleration of the delivery of all restricted stock units for which vesting is accelerated in accordance with the provisions of the Severance and Consulting Agreement; and (iii) the extension of the post-termination exercise period of each of Mr. Kispert’s stock options so that each such option will remain exercisable for twelve months following the date Mr. Kispert ceases to be an employee of the Company, but in no event beyond the original term of the award. |
As a result, risks associated with acquisition transactions may give rise to a material adverse effect on our business and financial results for a number of reasons, including: • we may have to devote unanticipated financial and management resources to acquired businesses; • the combination of businesses may cause an interruption of, or loss of momentum in, the activities of our company and/or the acquired business and the loss of key personnel; • 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; • difficulties in coordinating geographically separated organizations, systems and facilities; • the customers, suppliers, employees and others with whom the companies we acquire have business dealings may have a potentially adverse reaction to the acquisition; • we may have to write-off goodwill or other intangible assets; and • we may incur unforeseen obligations or liabilities in connection with acquisitions. |
The increase in R&D expenses during the fiscal year ended June 30, 2007 compared to the fiscal year ended June 30, 2006 primarily reflects additional expenses related to the following charges recorded in the fiscal year ended June 30, 2007: • $16.6 million for IPR&D charges associated with the acquisitions that we had completed as of June 30, 2007, of which $12.0 million was recorded in the fourth quarter of the fiscal year ended June 30, 2007; • $1.3 million for amortization of intangibles related to the acquisitions, of which $0.3 million was recorded in fourth quarter of the fiscal year ended June 30, 2007; • $10.0 million for impairment of certain patents, all of which was recorded in the fourth quarter of the fiscal year ended June 30, 2007; • An aggregate of $5.8 million for reimbursement of taxes to employees, including management, related to IRC Section 409A and cash payments to employees to compensate them for lost benefits resulting from the suspension of the Company’s ESPP, which $5.8 million amount was recorded primarily in the second and third quarters of the fiscal year ended June 30, 2007; and • $4.3 million for severance and benefits related to an employee workforce reduction, of which $2.2 million was recorded in the fourth quarter of the fiscal year ended June 30, 2007. |
The increase in SG&A expenses during the fiscal year ended June 30, 2007 compared to the fiscal year ended June 30, 2006 primarily reflects additional charges recorded in SG&A as follows: • $56.8 million for impairment charges related to the write-down of buildings, which was recorded in the second quarter of the fiscal year ended June 30, 2007; • $11.3 million for severance and related benefits related to an employee workforce reduction, of which $6.1 million was recorded in the fourth quarter of the fiscal year ended June 30, 2007; • $12.3 million for amortization of intangibles related to the acquisitions that we had completed as of June 30, 2007, of which $1.7 million was recorded in the fourth quarter of the fiscal year ended June 30, 2007; • $15.8 million for legal and other expenses related to the stock options investigation, shareholder litigation and related matters, which charges were primarily recorded in the first three quarters of the fiscal year ended June 30, 2007; and • $8.0 million for reimbursement of taxes to employees, including management, related to IRC Section 409A and cash payments to employees to compensate them for lost benefits from the suspension of the Company’s ESPP, which $8.0 million amount was recorded primarily in the second and third quarters of fiscal year ended June 30, 2007. |
We believe the factors that could make our results fluctuate and difficult to predict include: • the cyclical nature of the semiconductor equipment industry; • global economic uncertainty; • competitive pressures; • our ability to develop and implement new technologies and introduce new products; • our ability to maintain supply of key components; • our ability to manage our manufacturing requirements; • our reliance on services provided by third parties; • our customers’ acceptance and adoption of our new products and technologies; • our ability to protect our intellectual property; • litigation regarding intellectual property and other business matters; • our ability to attract, retain and replace key employees; • our ability to manage risks associated with acquisitions and alliances; • the amount of resources we are required to devote to compliance with securities laws and listing requirements; • worldwide political instability; • earthquake and other uninsured risks; • future changes in accounting and tax standards or practices; • changing legal and regulatory environment; • our exposure to fluctuations in foreign currency exchange rates; • our ability to successfully modify new systems and guard against computer viruses; and • our ability to continue to successfully address and resolve all issues arising from the discovery that we had retroactively priced stock options (primarily from July 1, 1997 to June 30, 2002) and had not accounted for them correctly. |
The Special Committee concluded that (1) there was retroactive pricing of stock options granted to all employees who received options, primarily during the periods from July 1, 1997 to June 30, 2002 (less than 15% of these options were granted to executive officers), (2) the retroactively priced options were not accounted for correctly in our previously issued financial statements, (3) the retroactive pricing of options was intentional, not inadvertent or through administrative error, (4) the retroactive pricing of options involved the selection of fortuitously low exercise prices by certain former executive officers, and other former executives may have been aware of this conduct, (5) the retroactive pricing of options involved the falsification of Company records, resulting in erroneous statements being made in financial and other reports previously filed with the SEC, as well as in information previously provided to our independent registered public accounting firm, and (6) in most instances, the retroactive pricing of options violated the terms of our stock option plans. |
Our actual results could differ materially from those anticipated in the forward-looking statements as a result of certain factors, including but not limited to those discussed in Item 1A, “Risk Factors” and elsewhere in this Annual Report on Form 10-K. (See “Special Note Regarding Forward-Looking Statements.”) Restatements of Prior Period Consolidated Financial Statements in Previous Filings In our Annual Report on Form 10-K for the fiscal year ended June 30, 2006 (filed on January 29, 2007) and our quarterly reports on Form 10-Q for the quarters ended September 30, 2006, December 31, 2006 and March 31, 2007 (filed on January 29, 2007, February 9, 2007 and May 7, 2007, respectively), we restated (1) our consolidated financial statements as of and for the fiscal years ended June 30, 2005 and 2004; (2) our selected consolidated financial data as of and for our fiscal years ended June 30, 2005, 2004, 2003 and 2002; and (3) our unaudited quarterly financial data for the first three quarters in our fiscal year ended June 30, 2006 and for all quarters in our fiscal year ended June 30, 2005. |
Engineering, Research and Development (“R&D”) The increase in R&D expenses during the fiscal year ended June 30, 2007 primarily reflects additional expenses related to the following charges recorded in the fiscal year ended June 30, 2007: • $17.9 million for in-process research and development (“IPR&D”) charges and amortization of intangibles associated with the acquisitions that we completed as of June 30, 2007, of which $12.3 million was recorded in fourth quarter of the fiscal year ended June 30, 2007; • $10.0 million for impairment of certain patents recorded in the fourth quarter of the fiscal year ended June 30, 2007; • An aggregate of $5.8 million for reimbursement of taxes to employees, including management, related to IRC Section 409A and cash payments to employees to compensate them for lost benefits resulting from the suspension of the Company’s ESPP, which $5.8 million amount was recorded primarily in the second and third quarters of the fiscal year ended June 30, 2007; and • $4.3 million for severance and benefits related to an employee workforce reduction, of which $2.2 million was recorded in the fourth quarter of the fiscal year ended June 30, 2007. |
Selling, General and Administrative (“SG&A”) The increase in SG&A expenses during the fiscal year ended June 30, 2007 primarily reflects additional charges recorded in SG&A as follows: • $56.8 million for impairment charges related to the write-down of buildings which was recorded in the second quarter of the fiscal year ended June 30, 2007; • $11.3 million for severance and related benefits related to an employee workforce reduction, of which $6.1 million was recorded in the fourth quarter of the fiscal year ended June 30, 2007; • $12.3 million for additional amortization of intangibles related to the acquisitions that we completed as of June 30, 2007, of which $1.7 million is recorded in the fourth quarter of the fiscal year ended June 30, 2007; • $15.8 million for legal and other expenses related to the stock options investigation, shareholder litigation and related matters which was primarily recorded in the first three quarters of the fiscal year ended June 30, 2007; and • $8.0 million for reimbursement of taxes to employees, including management, related to IRC Section 409A and cash payments to employees to compensate them for lost benefits from the suspension of the Company’s ESPP, which $8.0 million amount was recorded primarily in the second and third quarters of fiscal year ended June 30, 2007. |
We believe the factors that could make our results fluctuate and difficult to predict include: • our ability to successfully address and resolve all issues arising from the discovery that we had retroactively priced stock options (primarily from July 1, 1997 to June 30, 2002) and had not accounted for them correctly; • the cyclical nature of the semiconductor industry; • global economic uncertainty; • competitive pressure; • our ability to develop and implement new technologies and introduce new products; • our ability to maintain supply of key components; • our ability to manage our manufacturing requirements; • our reliance on services provided by third parties; • our customers’ acceptance and adoption of our new products and technologies; • our ability to protect our intellectual property; • our ability to attract, retain, and replace key employees; • our ability to manage risks associated with acquisitions; • litigation regarding IP and other business matters; • worldwide political instability; • earthquake and other uninsured risks; • our ability to comply with recently enacted and proposed changes in securities laws and regulations; • future changes in accounting and tax standards or practices; • changing regulatory environment; • our exposure to fluctuations in foreign currency exchange rates; and • our ability to successfully modify new systems and guard against computer viruses. |
The Special Committee concluded that (1) there was retroactive pricing of stock options granted to all employees who received options, primarily during the periods from July 1, 1997 to June 30, 2002 (less than 15% of these options were granted to executive officers), (2) the retroactively priced options were not accounted for correctly in our previously issued financial statements, (3) the retroactive pricing of options was intentional, not inadvertent or through administrative error, (4) the retroactive pricing of options involved the selection of fortuitously low exercise prices by certain former executive officers, and other former executives may have been aware of this conduct, (5) the retroactive pricing of options involved the falsification of Company records, resulting in erroneous statements being made in financial and other reports previously filed with the SEC, as well as in information previously provided to our independent registered public accounting firm, and (6) in most instances, the retroactive pricing of options violated the terms of our stock option plans. |
The Special Committee concluded that (1) there was retroactive pricing of stock options granted to all employees who received options, primarily during the periods from July 1, 1997 to June 30, 2002 (less than 15% of these options were granted to executive officers), (2) the retroactively priced options were not accounted for correctly in our previously issued financial statements, (3) the retroactive pricing of options was intentional, not inadvertent or through administrative error, (4) the retroactive pricing of options involved the selection of fortuitously low exercise prices by certain former executive officers, and other former executives may have been aware of this conduct, (5) the retroactive pricing of options involved the falsification of Company records, resulting in erroneous statements being made in financial and other reports previously filed with the SEC, as well as in information previously provided to our independent registered public accounting firm, and (6) in most instances, the retroactive pricing of options violated the terms of our stock option plans. |
The Special Committee concluded that (1) there was retroactive pricing of stock options granted to all employees who received options, primarily during the periods from July 1, 1997 to June 30, 2002 (less than 15% of these options were granted to executive officers), (2) the retroactively priced options were not accounted for correctly in the Company’s previously issued financial statements, (3) the retroactive pricing of options was intentional, not inadvertent or through administrative error, (4) the retroactive pricing of options involved the selection of fortuitously low exercise prices by certain former executive officers, and other former executives may have been aware of this conduct, (5) the retroactive pricing of options involved the falsification of Company records, resulting in erroneous statements being made in financial and other reports previously filed with the SEC, as well KLA-TENCOR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) as in information previously provided to the Company’s independent registered public accounting firm, and (6) in most instances, the retroactive pricing of options violated the terms of the Company’s stock option plans. |
The Special Committee concluded that (1) there was retroactive pricing of stock options granted to all employees who received options, primarily during the periods from July 1, 1997 to June 30, 2002 (less than 15% of these options were granted to executive officers), (2) the retroactively priced options were not accounted for correctly in the Company’s previously issued financial statements, (3) the retroactive pricing of options was intentional, not inadvertent or through administrative error, (4) the retroactive pricing of options involved the selection of fortuitously low exercise prices by certain former executive officers, and other former executives may have been aware of this conduct, (5) the retroactive pricing of options involved the falsification of Company records, resulting in erroneous statements being made in financial and other reports previously filed with the SEC, as well as in information previously provided to the Company’s independent registered public accounting firm, and (6) in most instances, the retroactive pricing of options violated the terms of the Company’s stock option plans. |
PROPERTIES Information regarding our principal properties at June 30, 2005 is set forth below: Location Type Principal use Square Footage Ownership Chandler, AZ (Phoenix) Office Sales and Service 5,914 Leased Hayward, CA Plant Manufacturing 14,150 Leased Livermore, CA Office and plant Training, Service and Engineering 241,252 Owned Milpitas, CA Office, plant and warehouse Research, Engineering, Marketing, Manufacturing, Service and Sales Administration 727,302 Owned San Diego, CA Office, plant and warehouse Research, Engineering, Marketing, Manufacturing and Service 15,600 Leased San Jose, CA Office and plant Research, Engineering and Manufacturing 17,060 Leased San Jose, CA Office, plant and warehouse Corporate Headquarters, Research, Engineering, Marketing, 47,114 Leased Manufacturing, Service and Sales Administration 603,325 Owned Fremont, CA Office, plant and warehouse Research, Engineering, Marketing, Manufacturing and Service 15,755 Leased Sunnyvale, CA Office, plant and warehouse Research, Engineering, Marketing, Manufacturing and Service 20,000 Leased Colorado Springs, CO Office Sales and Service 4,002 Leased Portsmouth, NH Office Sales and Service 2,100 Leased Beaverton, OR Office Sales and Service 13,075 Leased Location Type Principal use Square Footage Ownership Austin, TX Office Sales, Service and Research 28,415 Leased Richardson, TX Office Sales and Service 14,989 Leased Boise, ID Office Sales and Service 5,965 Leased Albuquerque, NM Office Sales and Service 5,210 Leased Hopewell Junction, NY Office Sales and Service 8,736 Leased Essex Junction, VT Office Sales and Service 5,704 Leased Slough and Basingstoke, England Vacant Marketing to sub-lease 9,602 Leased Wokingham, England (Molly Millar property sub-let) Office Sales and Service 8,925 (2,200 sub-let) Leased Livingston, Scotland Sub-Let Premises are occupied by sub-tenant under contract with KLA-Tencor 5,712 Leased Rousset, France Office Sales and Service 6,189 Leased Grenoble, France Office Sales and Service 7,674 Leased Dresden, Germany Office Sales and Service, Warehouse 12,909 Leased Puchheim, Germany Office Sales and Service 5,240 Leased Migdal Ha’Emek and Herzliya, Israel Office and plant Research, Engineering, Marketing, Manufacturing and Service and Sales Administration 64,584 Owned Milan, Italy Office Sales and Service 5,705 Leased Yokohama, Japan Office Sales, Service, and Warehouse 49,361 Leased Kumamoto, Japan Office Sales and Service 5,038 Leased Singapore Office Sales and Service 23,465 Leased Kiheung, South Korea Office Sales and Service 11,759 Leased Bundang, South Korea Office Sales and Service 7,508 Leased Hsinchu, Taiwan Office Sales and Service 95,601 Leased Tainan, Taiwan Office Sales and Service 7,294 Leased Taipei, Taiwan Office Sales and Service 6,914 Leased Shanghai, China Office and R&D Sales, Service, Engineering and Warehouse 58,886 Leased Chennai, India Office Engineering 18,880 Leased We also lease office space for other, smaller sales and service offices in several locations throughout the world. |
We believe the factors that could make our results fluctuate and difficult to predict include: • our ability to successfully implement new systems; • the cyclical nature of the semiconductor industry; • global economic uncertainty; • changing international economic conditions; • competitive pressure; • our ability to develop and implement new technologies and introduce new products; • our ability to comply with internal controls evaluations and attestation requirements; • our customers’ acceptance and adoption of our new products and technologies; • our ability to maintain supply of key components; • our ability to manage our manufacturing requirements; • our reliance on services provided by third parties; • our ability to protect our intellectual property; • our ability to attract, retain, and replace key employees; • our ability to manage risks associated with acquisitions; • litigation; • worldwide political instability; • recently enacted and proposed changes in securities laws and regulations; • earthquake and other uninsured risks; • future changes in accounting and tax standards or practices; • changing regulatory environment; • our exposure to fluctuations in foreign currency exchange rates; and • our ability to guard against computer viruses Operating results also could be affected by sudden changes in customer requirements, currency exchange rate fluctuations and other economic conditions affecting customer demand and the cost of operations in one or more of the global markets in which we do business. |
Signature Title Date /s/ KENNETH LEVY Chairman of the Board and Director September 2, 2005 Kenneth Levy /s/ KENNETH L. SCHROEDER Chief Executive Officer and Director (Principal Executive Officer) September 2, 2005 Kenneth L. Schroeder /s/ JOHN H. KISPERT Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) September 2, 2005 John H. Kispert /s/ EDWARD W. BARNHOLT Director September 2, 2005 Edward W. Barnholt /s/ H. RAYMOND BINGHAM Director September 2, 2005 H. Raymond Bingham /s/ ROBERT T. BOND Director September 2, 2005 Robert T. Bond /s/ RICHARD J. ELKUS, Jr. Director September 2, 2005 Richard J. Elkus, Jr. /s/ STEPHEN P. KAUFMAN Director September 2, 2005 Stephen P. Kaufman /s/ MICHAEL E. MARKS Director September 2, 2005 Michael E. Marks /s/ JON D. TOMPKINS Director September 2, 2005 Jon D. Tompkins /s/ LIDA URBANEK Director September 2, 2005 Lida Urbanek SCHEDULE II Valuation and Qualifying Accounts KLA-TENCOR CORPORATION EXHIBIT INDEX 10.7 Form of Indemnification Agreement* 10-K No. |
Signature Title Date /s/ KENNETH LEVY Chairman of the Board and Director August 30, 2004 Kenneth Levy /s/ KENNETH L. SCHROEDER President, Chief Executive Officer and Director (Principal Executive Officer) August 30, 2004 Kenneth L. Schroeder /s/ JOHN H. KISPERT Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) August 30, 2004 John H. Kispert /s/ EDWARD W. BARNHOLT Director August 30, 2004 Edward W. Barnholt /s/ H. RAYMOND BINGHAM Director August 30, 2004 H. Raymond Bingham /s/ ROBERT T. BOND Director August 30, 2004 Robert T. Bond /s/ RICHARD J. ELKUS, Jr. Director August 30, 2004 Richard J. Elkus, Jr. /s/ STEPHEN P. KAUFMAN Director August 30, 2004 Stephen P. Kaufman /s/ MICHAEL E. MARKS August 30, 2004 Michael E. Marks /s/ JON D. TOMPKINS Director August 30, 2004 Jon D. Tompkins /s/ LIDA URBANEK Director August 30, 2004 Lida Urbanek SCHEDULE II Valuation and Qualifying Accounts EXHIBIT As required under Item 15, “Exhibits, Financial Statement Schedules and Reports on Form 8-K,” the exhibits filed as part of this report are provided in this separate section. |
NOTE 2 - FINANCIAL STATEMENT COMPONENTS Balance Sheets June 30, (in thousands) 2002 2001 - -------------------------------------------------------------------------------- Accounts receivable, net Accounts receivable, gross $ 290,397 $ 417,025 Allowance for doubtful accounts (13,391) (15,012) - -------------------------------------------------------------------------------- $ 277,006 $ 402,013 ================================================================================ Inventories: Customer service parts $ 123,074 $ 99,099 Raw materials 76,238 140,765 Work-in-process 54,143 61,453 Demonstration equipment 48,564 60,228 Finished goods 20,997 32,861 - -------------------------------------------------------------------------------- $ 323,016 $ 394,406 ================================================================================ Property and equipment: Land $ 28,103 $ 28,103 Buildings and improvements 48,683 49,102 Machinery and equipment 218,977 235,846 Office furniture and fixtures 36,951 35,571 Leasehold improvements 116,787 103,359 Construction in process 74,843 31,184 - -------------------------------------------------------------------------------- 524,344 483,165 Less: accumulated depreciation and amortization (223,784) (192,911) - -------------------------------------------------------------------------------- $ 300,560 $ 290,254 ================================================================================ Other current liabilities: Warranty, installation and retrofit $ 54,441 $ 85,300 Compensation and benefits 175,282 186,699 Income taxes payable 84,024 91,239 Restructuring accrual 405 2,235 Other accrued expenses 71,612 64,844 - -------------------------------------------------------------------------------- $ 385,764 $ 430,317 ================================================================================ Statements of Operations NOTE 3 - NON-RECURRING ACQUISITION, RESTRUCTURING AND OTHER CHARGES The following is summary of non-recurring acquisition, restructuring and other charges. |
The Agreement includes the Form of Right Certificate as Exhibit A and the Summary of Terms of Rights as Exhibit B (4) 10.1 1998 Outside Director Option Plan (5) 10.2 1990 Outside Directors Stock Option Plan (6) 10.3 Tencor Instruments 1993 Nonemployee Directors Stock Option Plan (7) 10.4 1997 Employee Stock Purchase Plan (8) 10.5 Second Amended and Restated 1981 Employee Stock Purchase Plan (9) 10.6 Tencor Instruments Amended and Restated 1993 Equity Incentive Plan (10) 10.7 1993 Employee Incentive Stock Option Plan of Prometrix Corporation (11) 10.8 Tencor Instruments Second Amended and Restated 1984 Stock Option Plan (12) 10.9 1983 Employee Incentive Stock Option Plan of Prometrix Corporation (13) 10.10 Restated 1982 Stock Option Plan, as amended November 18, 1996 (14) 10.11 Excess Profit Stock Plan (15) 10.12 Form of KLA-Tencor Corporation Corporate Officers Retention Plan (16) 10.13 Form of Retention and Non-Competition Agreement (17) 10.14 Form of Indemnification Agreement (18) 10.15 Livermore Land Purchase and Sale Agreement (19) 21.1 List of Subsidiaries 23.1 Consent of Independent Accountants 99.1 Certification by Chief Executive Officer Pursuant to 18 U.S.C. |
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