KLA (KLAC) 10-K risk factor changes: FY2020 vs FY2019

[removed: Risks] [added: Risks] Associated with Our [removed: Industry][added: Industry]

[removed: Ongoing] [added: Ongoing] changes in the technology industry, as well as the semiconductor industry in particular, could expose our business to significant [removed: risks.][added: risks.]

In addition, we face a number of risks specific to ongoing changes in the semiconductor industry, as [added: a] significant majority of our sales are our process control and yield management products sold to semiconductor manufacturers.

[removed: | • |] [added: -] 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; [removed: |]

[removed: | • |] [added: -] the increasing cost of building and operating fabrication facilities and the impact of such increases on our customers’ capital equipment investment decisions; [removed: |]

[removed: | • |] [added: -] differing market growth rates and capital requirements for different applications, such as memory, logic and foundry; [removed: |]

[removed: | • |] [added: -] lower level of process control adoption by our memory customers compared to our foundry and logic customers; [removed: |]

[removed: | • |] [added: -] our customers’ reuse of existing and installed products, which may decrease their need to purchase new products or solutions at more advanced technology nodes; [removed: |]

[removed: | • |] [added: -] 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; [removed: |]

[removed: | • |] [added: -] 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; [removed: |]

[removed: | • |] [added: -] the possible introduction of integrated products by our larger competitors that offer inspection and metrology functionality in addition to managing other semiconductor manufacturing processes; [removed: |]

[removed: | • |] [added: -] 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; [removed: |]

[removed: | • |] [added: -] 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; [removed: |]

[removed: | • |] [added: -] the [removed: ever escalating] [added: 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 [removed: |]

[removed: | • |] [added: -] 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. [removed: |]

[removed: We] [added: We] are exposed to risks associated with a highly concentrated customer [removed: base.][added: base.]

[removed: | • |] [added: -] The mix and type of customers, and sales to any single customer, may vary significantly from quarter to quarter and from year to year, which exposes our business and operating results to increased volatility tied to individual customers. [removed: |]

[removed: | • | New orders from our foundry customers in the past several years have constituted a significant portion of our total orders.] This concentration increases the impact that future business or technology changes within the foundry industry may have on our business, financial condition and operating results. [removed: |]

[removed: | • | In a highly concentrated business environment, if a particular customer does not place an order, or if they delay or cancel orders, we may not be able to replace the business.] Furthermore, because our process control and yield management products are configured to each customer’s specifications, any changes, delays or cancellations of orders may result in significant, non-recoverable costs. [removed: |]

[removed: | • | As a result of this consolidation, the customers that survive the consolidation represent a greater portion of our sales and, consequently, have greater commercial negotiating leverage.] Many of our large customers have more aggressive policies regarding engaging alternative, second-source suppliers for the products we offer and, in addition, may seek and, on occasion, receive pricing, payment, intellectual property-related or other commercial terms that may have an adverse impact on our business. [removed: Any of these changes could negatively impact our prices, customer orders, revenues and gross margins. |]

[removed: | • |] [added: -] Certain customers have undergone significant ownership changes, created alliances with other companies, experienced management changes or have outsourced manufacturing activities, any of which may result in additional complexities in managing customer relationships and transactions. [removed: Any future change in ownership or management of our existing customers may result in similar challenges, including the possibility of the successor entity or new management deciding to select a competitor’s products. |]

[removed: | • | The highly concentrated business environment also increases our exposure to risks related to the financial condition of each of our customers. For example, as a result of the challenging economic environment during fiscal year 2009, we were (and in some cases continue to be) exposed to additional risks related to the continued financial viability of certain of our customers. To the extent our customers experience liquidity issues in the future, we may be required to incur additional bad debt expense with respect to receivables owed to us by those customers.] In addition, customers with liquidity issues may be forced to reduce purchases of our equipment, delay deliveries of our products, discontinue operations or may be acquired by one of our customers, and in either case such event would have the effect of further consolidating our customer base. [removed: |]

[removed: | • | Semiconductor manufacturers generally must commit significant resources to qualify, install and integrate process control and yield management equipment into a semiconductor production line.] We believe that once a semiconductor manufacturer selects a particular supplier’s process control and yield management equipment, the manufacturer generally relies upon that equipment for that specific production line application for an extended period of time. [removed: Accordingly, we expect it to be more difficult to sell our products to a given customer for that specific production line application and other similar production line applications if that customer initially selects a competitor’s equipment. Similarly, we expect it to be challenging for a competitor to sell its products to a given customer for a specific production line application if that customer initially selects our equipment. |]

[removed: | • | Prices differ among the products we offer for different applications due to differences in features offered or manufacturing costs. If there is a shift in demand by our customers from our higher-priced to lower-priced products, our gross margin and revenue would decrease.] In addition, when products are initially introduced, they tend to have higher costs because of initial development costs and lower production volumes relative to the previous product generation, which can impact gross margin. [removed: |]

[removed: We] [added: We] operate in industries that have historically been cyclical, including the semiconductor industry.

If we fail to respond to industry cycles, our business could be seriously [removed: harmed.][added: harmed.]

[removed: This is because order delays and cancellations may lead not only to lower revenues, but also, due to the] advance work we must do in anticipation of receiving a product order to meet the expected lead times, to significant inventory write-offs and manufacturing inefficiencies that decrease our gross margin.

[removed: Risks] [added: Risks] Related to Our Business Model and Capital [removed: Structure][added: Structure]

[removed: If] [added: If] we do not develop and introduce new products and technologies in a timely manner in response to changing market conditions or customer requirements, our business could be seriously [removed: harmed.][added: harmed.]

[removed: Our] [added: Our] success is dependent in part on our technology and other proprietary rights.

If we are unable to maintain our lead or protect our proprietary technology, we may lose valuable [removed: assets.][added: assets.]

The process of seeking patent protection is lengthy and expensive, and we cannot be certain that pending or future applications will actually result in issued patents or that issued patents will be of sufficient scope or strength to provide meaningful protection or [removed: commercial advantage to us.]

[removed: Our] [added: Our] future performance depends, in part, upon our ability to continue to compete successfully [removed: worldwide.][added: worldwide.]

[removed: Our] [added: Our] business would be harmed if we do not receive parts sufficient in number and performance to meet our production requirements and product specifications in a timely and cost-effective [removed: manner.][added: manner.]

Our operating results and business may be adversely impacted if we are unable to obtain parts to meet our [removed: production requirements and product specifications, or if we are only able to do so on unfavorable terms.]

[removed: If] [added: If] we fail to operate our business in accordance with our business plan, our operating results, business and stock price may be significantly and adversely [removed: impacted.][added: impacted.]

[removed: We] [added: We] have a leveraged capital [removed: structure.][added: structure.]

For example, at the same time we announced our intention to acquire Orbotech, we also announced a new stock repurchase program authorizing the repurchase up to [removed: $2.00] [added: $3.00] billion of our common stock, a large portion of which would be financed with new indebtedness.

[removed: If we fail to repurchase that series of notes as] required by the terms of such notes, it would constitute an event of default under the indenture governing that series of notes which, in turn, may also constitute an event of default under other of our obligations.

Additionally, under our Revolving Credit Facility, we are required to comply with affirmative and negative covenants, which include the maintenance of certain financial ratios, the details of which can be found in Note [removed: 8,] [added: 8] “Debt,” [added: in the Notes] to [removed: our] Consolidated Financial Statements.

Risks Related to the COVID-19 Pandemic

The current COVID-19 pandemic and the potential aftereffects from it could materially harm our business, financial condition and results of operations.

The COVID-19 pandemic has caused substantial global disruptions, including in the jurisdictions where we conduct business and may cause additional disruptions in the future, which are impossible to predict.

Local, regional and national authorities in numerous jurisdictions have implemented a variety of measures designed to slow the spread of the virus, including social distancing guidelines, quarantines, banning of non-essential travel and requiring the cessation of non-essential activities on the premises of businesses.

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.

If any of the foregoing risks occur or intensify during this pandemic, our business, financial condition and results of operations could be materially adversely affected.

- New orders from our foundry customers in the past several years have constituted a significant portion of our total orders.

- In a highly concentrated business environment, if a particular customer does not place an order, or if they delay or cancel orders, we may not be able to replace the business.

- As a result of this consolidation, the customers that survive the consolidation represent a greater portion of our sales and, consequently, have greater commercial negotiating leverage.

Any of these changes could negatively impact our prices, customer orders, revenues and gross margins.

Any future change in ownership or management of our existing customers may result in similar challenges, including the possibility of the successor entity or new management deciding to select a competitor’s products.

- The highly concentrated business environment also increases our exposure to risks related to the financial condition of each of our customers.

For example, as a result of the challenging economic environment during fiscal year 2009, we were (and in some cases continue to be) exposed to additional risks related to the continued financial viability of certain of our customers.

To the extent our customers experience liquidity issues in the future, we may be required to incur additional bad debt expense with respect to receivables owed to us by those customers.

- Semiconductor manufacturers generally must commit significant resources to qualify, install and integrate process control and yield management equipment into a semiconductor production line.

Accordingly, we expect it to be more difficult to sell our products to a given customer for that specific production line application and other similar production line applications if that customer initially selects a competitor’s equipment.

Similarly, we expect it to be challenging for a competitor to sell its products to a given customer for a specific production line application if that customer initially selects our equipment.

- Prices differ among the products we offer for different applications due to differences in features offered or manufacturing costs.

If there is a shift in demand by our customers from our higher-priced to lower-priced products, our gross margin and revenue would decrease.

This is because order delays and cancellations may lead not only to lower revenues, but also, due to the

commercial advantage to us.

production requirements and product specifications, or if we are only able to do so on unfavorable terms.

As of June 30, 2020, we had $3.50 billion aggregate principal amount of outstanding indebtedness, consisting of $3.45 billion aggregate principal amount of senior, unsecured long-term notes and $50.0 million borrowed under our Revolving Credit Facility, and an additional $950.0 million in unfunded commitments.

If we fail to repurchase that series of notes as

- 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;

Although we attempt to manage some of our near-term currency risks through the use of hedging instruments, there can be no assurance that such efforts will be adequate;

- receiving prepayments for certain of our products and services sold in certain jurisdictions.

These prepayments increase our cash flows for the quarter in which they are received.

If our practice of requiring prepayments in those jurisdictions changes or deteriorates, our cash flows would be harmed.

In addition, the U.S. Department of Commerce has imposed new export licensing requirements on China-based customers engaged in military end uses, as well as requiring our customers to obtain an export license when they use certain semiconductor capital equipment based on U.S. technology to manufacture custom products for Huawei or its affiliates.

To date, these new rules have not significantly impacted our operations, but we are continually monitoring their impact..

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As of June 30, 2019, we had $3.45 billion aggregate principal amount of senior, unsecured long-term notes.

Additionally, we have commitments for an unfunded Revolving Credit Facility of $1.00 billion under the Credit Agreement.

In addition, the interest rates of the senior, unsecured long-term notes may be subject to adjustments from time to time if Moody’s Investors Service, Inc. (“Moody’s”), Standard & Poor’s Ratings Services (“S&P”) or, under certain circumstances, a substitute rating agency selected by us as a replacement for Moody’s or S&P, as the case may be (a “Substitute Rating Agency”), downgrades (or subsequently upgrades) its rating assigned to the respective series of notes such that the adjusted rating is below investment grade.

Accordingly, changes by Moody’s, S&P, or a Substitute Rating Agency to the rating of any series of notes, our outlook or credit rating could require us to pay additional interest, which may negatively affect the value and liquidity of our debt and the market price of our common stock could decline.

Factors that can affect our credit rating include changes in our operating performance, the economic environment, conditions in the industries we serve, our financial position, including the incurrence of additional indebtedness, and our business strategy.

As a result, unless JHICC is subsequently removed from the entity list, we will be unable to fulfill orders JHICC has made for our products, accept future orders placed by JHICC for our products, and provide services for any of our products already installed at JHICC.

For example, in February 2016, the FASB issued an accounting standard update which amends the existing accounting standards for leases.

Pursuant to the FAST Act Modernization and Simplification of Regulation S-K, discussions related to the changes in results of operations from fiscal year [removed: 2018] [added: 2019] to fiscal year [removed: 2017] [added: 2018] have been omitted.

Such omitted discussion can be found under Item 7 of our [removed: annual] Form 10-K for the fiscal year ended June 30, [removed: 2018,] [added: 2019,] filed with the SEC.

[removed: EXECUTIVE SUMMARY][added: EXECUTIVE SUMMARY]

We are a leading supplier of process control and yield management solutions [added: and services] for the [removed: semiconductor] [added: semiconductor, PCB] and [removed: related nanoelectronics industries.][added: Display markets.]

We provide leading edge equipment, software and [removed: support] [added: services] that enable IC manufacturers to identify, resolve and manage significant advanced technology manufacturing process challenges and obtain higher finished product yields at lower overall cost.

In addition to serving the [removed: semiconductor] [added: semiconductor, PCB and Display] industry, we also provide a range of technology solutions to a number of other high technology industries, including advanced packaging, light emitting diode (“LED”), power devices, compound semiconductor, and data storage industries, as well as general materials research.

Although capital spending in all three semiconductor markets has historically been [removed: very] cyclical, the demand for more advanced and lower cost chips used in a growing number of consumer electronics, communications, data processing, and industrial and automotive products has resulted over the long term in a favorable demand environment for our process control and yield management solutions, particularly in the foundry and logic markets, which have higher levels of process control adoption than the memory market.

We believe that, over the long term, our customers will continue to invest in advanced technologies and new materials to enable smaller design rules and higher density applications that fuel demand for process control [removed: equipment, although the growth for such equipment may be adversely impacted by higher design costs for advanced ICs, reuse of installed products, and delays in production ramps by our customers in response to higher costs and technical challenges at more advanced technology nodes.][added: equipment.]

The demand for our products and our revenue levels are driven by our customers’ needs to solve the process challenges that they face as they adopt new technologies required to fabricate advanced ICs that are incorporated into sophisticated [removed: mobile] devices.

| | [removed: Year] [added: | | Year] ended June [removed: 30,] [added: 30,] | | | | | | | | | | | [added: | | | | | | | | | | | | | | | |]

| [removed: (Dollar] [added: (Dollar] amounts in thousands, except diluted net income per [removed: share)] [added: share)] | [removed: 2019] | | [added: 2020] | | [removed: 2018] | | | | [removed: 2017] [added: 2019] | | | [added: | | | 2018 | | | | | | | | | | | | | | |]

| Total revenues | [added: | |] $ | [added: 5,806,424 | | | | | $ |] 4,568,904 | | | [added: | |] $ | 4,036,701 | | | [removed: $] | [removed: 3,480,014] | | [added: | | | | | | | |]

| Costs of revenues | [added: | |] $ | [added: 2,449,561 | | | | | $ |] 1,869,377 | | | [added: | |] $ | 1,446,041 | | | [removed: $] | [removed: 1,286,215] | | [added: | | | | | | | |]

| Gross margin percentage | [added: | | 58 | | % | | | |] 59 | | % | | [added: | |] 64 | | % | | [removed: 63] | | [removed: %] | [added: | | | | | | | |]

| Net income attributable to KLA(2) | [added: | |] $ | [added: 1,216,785 | | | | | $ |] 1,175,617 | | | [added: | |] $ | 802,265 | | | [removed: $] | [removed: 926,076] | | [added: | | | | | | | |]

| Diluted net income per share attributable to KLA | [added: | |] $ | [added: 7.70 | | | | | $ |] 7.49 | | | [added: | |] $ | 5.10 | | | [removed: $] | [removed: 5.88] | | [added: | | | | | | | |]

[removed: On] [added: (1)On] February 20, 2019, we completed the acquisition of Orbotech for total [removed: purchase] consideration of approximately $3.26 billion.

For additional [removed: details on the financial statement impacts of the Orbotech acquisition,] [added: details,] refer to Note 6 “Business Combinations” [added: in the Notes] to our Consolidated Financial Statements.

For additional details, refer to Note [removed: 8, “Debt”,] [added: 19 “Segment Reporting] and [removed: Note 10, “Stock Repurchase Program”] [added: Geographic Information”] to our Consolidated Financial Statements.

[removed: CRITICAL] [added: CRITICAL] ACCOUNTING ESTIMATES AND [removed: POLICIES][added: POLICIES]

[added: Revenue Recognition.] We primarily derive revenue from the sale of process control and yield management solutions for the semiconductor and related nanoelectronics industries, maintenance and support of all these products, installation and training services and the sale of spare parts.

[removed: The acquisition of Orbotech enabled us to broaden our] [added: Our] portfolio [removed: to include the] [added: also includes] yield enhancement and production solutions used by manufacturers of printed circuit boards, flat panel displays, advanced packaging, [removed: micro-electro-mechanical] [added: microelectromechanical] systems and other electronic components.

Management considers a variety of factors to determine the SSP, such [removed: as,] [added: as] historical standalone sales of products and services, discounting strategies and other observable data.

[removed: Product Revenue][added: *Product Revenue*]

[removed: | • |] [added: -] whether we have a present right to payment; [removed: |]

[removed: | • |] [added: -] the customer has legal title; [removed: |]

[removed: | • |] [added: -] the customer has physical possession; [removed: |]

[removed: | • |] [added: -] the customer has significant risk and rewards of ownership; and [removed: |]

[removed: | • |] [added: -] the customer has accepted the product, or whether customer acceptance is considered a formality based on history of acceptance of similar products (for example, when the customer has previously accepted the same tool, with the same specifications, and when we can objectively demonstrate that the tool meets all of the required acceptance criteria, and when the installation of the system is deemed perfunctory). [removed: |]

We offer perpetual and term licenses for [removed: defects and data analysis software.][added: software products.]

[removed: Services] [added: *Services] and Spare Parts [removed: Revenue][added: Revenue*]

We have concluded that the standard 12-month warranty as well as any extended warranty periods included in the initial product sales are separate performance [removed: obligations.][added: obligations for most of our products.]

[removed: Significant Judgments][added: *Significant Judgments*]

[removed: Contract Assets/Liabilities][added: *Contract Assets/Liabilities*]

[removed: Contract assets primarily relate to the value of] products and services transferred to the customer for which the right to payment is not just dependent on the passage of time.

Contract assets are transferred to [added: accounts] receivable when rights to payment become unconditional.

[added: Business Combinations.] Accounting for business combinations requires management to make significant estimates and assumptions to determine the fair values of assets acquired and liabilities assumed at the acquisition date.

[added: Inventories.] Inventories are stated at the lower of cost (on a first-in, first-out basis) or net realizable value.

[added: Allowance for Doubtful Accounts.] A majority of our accounts receivable are derived from sales to large multinational semiconductor manufacturers throughout the world.

[removed: We take into consideration (1) any circumstances of] which we are aware of a customer’s inability to meet its financial obligations; and (2) our judgments as to prevailing economic conditions in the industry and their impact on our customers.

We are a global leader in process control and a supplier of process-enabling solutions and services for the data era.

The Data Era is creating multiple drivers for growth, with increased demand for advanced and lower cost chips for Artificial Intelligence ("AI"), 5G connectivity, virtual interaction, electric cars, advanced driver assistance automotive systems ("ADAS"), Internet of Things ("IoT") and mobile devices.

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The operating results of Orbotech have been included in our Condensed Consolidated Financial Statements from the Acquisition Date.

(2)Our net income attributable to KLA for the year ended June 30, 2020 includes a pre-tax goodwill impairment charge of $256.6 million and a pre-tax charge of $22.5 million as a result of the extinguishment of debt.

For additional details, refer to Note 7 "Goodwill and Purchased Intangible Assets" and Note 8 "Debt" in the Notes to our Consolidated Financial Statements.

Impact of COVID-19

Events surrounding the ongoing COVID-19 pandemic have resulted in a reduction in economic activity across the globe.

The severity and duration of these economic repercussions remain largely unknown and ultimately will depend on many factors, including the speed and effectiveness of the containment efforts throughout the world.

The extent to which the COVID-19 pandemic will impact demand for our products depends on future developments, which are highly uncertain and very difficult to predict, including new information that may emerge concerning the severity of the virus and actions to contain and treat its impacts.

While all of our global sites are currently operational, our facilities could be required to temporarily curtail production levels or temporarily cease operations based on government mandates.

From the start of the COVID-19 pandemic, we proactively implemented preventative protocols intended to safeguard our employees, contractors, suppliers, customers, and communities, and ensure business continuity in the event government restrictions or severe outbreaks impact our operations at certain sites.

We remain committed to the health and safety of our employees, contractors, suppliers, customers, and communities, and are following government policies and recommendations designed to slow the spread of COVID-19.

Our efforts to respond to the COVID-19 pandemic include the following:

- We have put health screenings in place, required social distancing, and have established employee separation protocols at our facilities.

We have also suspended non-essential business travel and require team members to work from home to the extent possible.

Where work from home is not possible, all on-site team members must pass through thermal scanning equipment to ensure they do not have an elevated body temperature and must wear a mask at all times.

- We have developed strategies to address our responsiveness and ability to send engineers into customer facilities to provide support services.

- We have evaluated our supply chain and communicated with our suppliers to identify supply gaps and taken steps to ensure continuity.

We continue to monitor the supply chain and work with our suppliers to identify and mitigate potential gaps to ensure continuity of supply.

- We are evaluating all our construction projects across our global operations and enacting protocols to enhance the safety of our employees, suppliers, and contractors.

- We have developed strategies and are implementing measures to respond to a variety of potential economic scenarios, such as limitations on new hiring and reductions in discretionary spending.

- We are working with government authorities in the jurisdictions where we operate, and continuing to monitor our operations in an effort to ensure we follow government requirements, relevant regulations, industry standards, and best practices to help safeguard our team members, while safely continuing operations to the extent possible at our sites across the globe.

We believe these actions are appropriate and prudent to safeguard our employees, contractors, suppliers, customers, and communities, while allowing us to safely continue operations, but we cannot predict how the steps we, our team members, government entities, suppliers, or customers take in response to the COVID-19 pandemic will impact our business, outlook, or results of operations.

We will continue to actively monitor the situation and may take further actions altering our business operations that we determine are in the best interests of our employees, customers, partners, suppliers, and stakeholders, or as required by federal, state, or local authorities.

The COVID-19 pandemic has resulted in an increase in freight costs due in large part to reduced air traffic, which impacts gross margin, as well as decreases in travel costs which reduce our cost structure.

As of the date of this report, we cannot predict with certainty any other effects the COVID-19 pandemic may have on our business, including the effects on our customers, employees, or on our financial results for the remainder of calendar 2020.

Contract assets primarily relate to the value of

We take into consideration (1) any circumstances of

Accounting for Stock-Based Compensation Plans. We account for share-based awards in accordance with the provisions of the authoritative accounting guidance, which requires the measurement and recognition of compensation expense for all share-based payment awards made to our employees and directors.

Goodwill and Purchased Intangible Assets - Impairment Assessments. We review goodwill for impairment annually during our third fiscal quarter as well as whenever events or changes in circumstances indicate the carrying value may not be fully recoverable.

Pursuant to the authoritative guidance, we make certain judgments and assumptions to determine our reporting units and in allocating shared assets and liabilities to those reporting units, which determines the carrying values for each reporting unit.

When assessing goodwill for impairment, an initial assessment of qualitative factors determines whether the existence of events and circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying value.

Judgments related to qualitative factors include macroeconomic conditions; industry and market considerations; cost factors; overall financial performance; relevant entity-specific events; a sustained decrease in share price; and other events affecting the reporting units.

If we determine it is more likely than not that the fair value of a reporting unit is less than its carrying value, a quantitative test is then performed by estimating the fair value of the reporting unit and comparing it to its carrying value including goodwill.

If the former is lower, goodwill is written down by the excess amount, limited to the amount of goodwill allocated to that reporting unit.

We determine the fair value of a reporting unit using the market approach when deemed appropriate and the necessary information is available, or the income approach which uses discounted cash flow ("DCF") analysis, or a combination of both.

If multiple valuation methodologies are used, the results are weighted.

Determining fair value requires the exercise of significant judgment, including judgments about appropriate discount rates, revenue growth rates and the amount and timing of expected future cash flows.

Through the acquisition of Orbotech, Ltd. (“Orbotech”), we have expanded our reach in the electronics value chain to include technologically advanced, yield-enhancing and process-enabling solutions to address various manufacturing stages of Printed Circuit Boards (“PCB”), Flat Panel Displays (“FPD”), Specialty Semiconductor Devices (“SD”) and other electronic components.

The products include Automated Optical Inspection (“AOI”), Automated Optical Shaping (“AOS”), Direct Imaging (“DI”), additive printing, laser drilling, laser plotters, Computer aided manufacturing (“CAM”) and engineering solutions for PCB and additional adjacent electronics component manufacturing, as well as AOI, test, repair and process monitoring systems for FPD manufacturing and vacuum process tools for etch, Physical Vapor Deposition (“PVD”), Molecular Vapor Deposition (“MVD”) and Chemical Vapor Deposition (“CVD”) solutions for SD manufacturing.

In our newly acquired Orbotech business, consumer end markets have been experiencing a fundamental shift in technology complexity, driven primarily by the proliferation of high-end mobile devices and automotive devices, as well as by the demand for large area FPDs such as large-size LCD televisions and OLED displays.

The shift towards 5G connectivity and the fast-paced growth of the Internet of Things (“IoT”) services is expected to continue to further accelerate this shift as more devices become connected and dependent upon other electronic devices.

As a supplier to the global semiconductor, semiconductor-related and electronics industries, our customer base continues to become more highly concentrated over time, thereby increasing the potential impact of a sudden change in capital spending by a major customer on our revenues and profitability.

As our customer base becomes increasingly more concentrated, large orders from a relatively limited number of customers account for a substantial portion of our sales, which potentially exposes us to more volatility for revenues and earnings.

In the global semiconductor and electronics related industries, China is emerging as a major region for manufacturing of logic and memory chips, adding to its role as the world’s largest consumer of ICs.

Additionally, a significant portion of global FPD and PCB manufacturing has migrated to China.

Government initiatives are propelling China to expand its domestic manufacturing capacity and attracting semiconductor manufacturers from Taiwan, Korea, Japan and the US.

China is currently seen as an important long-term growth region for the semiconductor and electronics capital equipment sector.

We are also subject to the cyclical capital spending that has historically characterized the semiconductor, semiconductor-related and electronics industries.

The timing, length, intensity and volatility of the capacity-oriented capital spending cycles of our customers are unpredictable.

Currently, there are multiple drivers for growth in the industry with increased demand for chips providing computation power and connectivity for Artificial Intelligence (“AI”) applications and support for mobile devices at the leading edge of foundry and logic chip manufacturing.

Qualification of early extreme ultraviolet (“EUV”) lithography processes and equipment is driving growth at leading logic/foundry and dynamic random-access memory (“DRAM”) manufacturers.

Expansion of IoT together with increasing acceptance of advanced driver assistance systems (“ADAS”) in anticipation of the introduction of autonomous cars have begun to accelerate legacy-node technology conversions and capacity expansions.

Intertwined in these areas, spurred by data storage and connectivity needs, is the growth in demand for memory chips.

On the other hand, higher design costs for the most advanced ICs could economically constrain leading-edge manufacturing technology customers to focus their resources on only the large technologically advanced products and applications.

Additionally, current trends in smart mobile devices, 5G connectivity, automotive electronics, smart vehicles, flexible displays, AR/VR and wearable devices, high-performance computing, large size televisions and the IoT are expected to drive the need for production, inspection, test and repair solutions that are able to address the cutting-edge technology embedded in these types of electronic products.

Subsequent to the Orbotech Acquisition, we changed our organizational structure resulting in four reportable segments: Semiconductor Process Control, Specialty Semiconductor Process, PCB, Display and Component Inspection, and Other.

Prior period results have been recast to conform to the current presentation.

Our view of the current wafer fab equipment demand climate is aligned with consensus industry analyst expectations for the calendar year 2019, which reflects a decline in capital equipment spending by memory customers.

In contrast to the memory business, capital equipment spending by foundry and logic customers at the leading edge has begun to ramp up, and the momentum is expected to continue in calendar year 2019.

We have already seen our mix of business begin to shift toward increased purchases by logic and foundry customers as a percentage of total sales, and we expect spending from these customers to continue to remain strong.

Because of a more diversified semiconductor device-end demand, and disciplined capacity planning by wafer fab equipment customers, we believe the long-term growth dynamics for the industry remain strong.

While manufacturers of PCBs, FPDs, SDs and other electronic components create different products for diverse end-markets, they share similar production challenges in an increasingly competitive environment.

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| (1) | On July 1, 2018, we adopted ASC 606 using the modified retrospective transition approach. Results for reporting periods beginning after June 30, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with the previous revenue guidance in ASC 605. |

| (2) | Our net income attributable to KLA decreased to $802.3 million in the fiscal year ended June 30, 2018, primarily as a result of the income tax effects from the enacted tax reform legislation through the Tax Cuts and Jobs Act, which was signed into law on December 22, 2017. |

Total revenues during the fiscal year ended June 30, 2019 increased by 13% compared to the fiscal year ended June 30, 2018.

Our year over year revenue growth reflected strong demand in the semiconductor process control market, growth in service revenues, and additional revenues from the Orbotech business which was acquired in the fiscal year ended June 30, 2019.

Acquisition of Orbotech, Ltd.

Orbotech’s core business enables electronic device manufacturers to inspect, test and measure printed circuit boards and flat panel displays to verify their quality; pattern electronic circuitry on substrate and perform three-dimensional shaping of metalized circuits on multiple surfaces; and utilize advanced vacuum deposition and etching process in semiconductor device and semiconductor manufacturing and to perform laser drilling of electronic substrates.

In addition, our Board of Directors has authorized a share repurchase of up to $2.00 billion of our common stock, reflecting an increase from $1.00 billion upon the close of the Orbotech Acquisition.

We raised approximately $1.20 billion in new long-term debt financing to partially refinance our existing debt, to repurchase shares and for general corporate purposes.

Revenue Recognition.

With the acquisition of Orbotech we offer computer-aided manufacturing and engineering software solutions for the printed circuit boards production.

Upon the adoption of ASC 606, deferred costs of revenue are included in other current assets while under the legacy guidance deferred costs of revenue was included in deferred system profit.

All of the potential changes noted below are based on sensitivity analysis performed on our financial position as of June 30, [removed: 2019.][added: 2020.]

As of June 30, [removed: 2019,] [added: 2020,] we had an investment portfolio of fixed income securities of [removed: $813.5] [added: $717.5] million These securities, as with all fixed income instruments, are subject to interest rate risk and will decline in value if market interest rates increase.

If market interest rates were to increase immediately and uniformly by 100 bps from levels as of June 30, [removed: 2019,] [added: 2020,] the fair value of the portfolio would have declined by [removed: $4.3] [added: $4.7] million.

In [added: February 2020,] March 2019 and November 2014, we issued [added: $750.0 million,] $1.20 billion and $2.50 billion, respectively, (each, a [added: “2020 Senior Notes”,] “2019 Senior Notes”, a “2014 Senior Notes”, and collectively the “Senior Notes”) aggregate principal amount of fixed rate senior, unsecured long-term notes.

As of June 30, [removed: 2019,] [added: 2020,] the fair value and the book value of our Senior Notes were [removed: $3.70] [added: $4.01] billion and $3.45 billion, respectively, due in various fiscal years ranging from [removed: 2020] [added: 2024] to [removed: 2049.][added: 2050.]

[removed: Additionally, the] [added: The] interest expense for the 2014 Senior Notes [removed: is] [added: was] subject to interest rate adjustments following [removed: a] downgrade of our credit ratings below investment grade by the credit rating agencies.

[removed: Refer to] [added: See] Note [removed: 8, “Debt”] [added: 5 “Marketable Securities”] to our Consolidated Financial Statements in Part II, Item [removed: 8 and] [added: 8;] Management’s Discussion and Analysis of Financial Condition and Results of Operations, “Liquidity and Capital Resources,” in Part II, Item [removed: 7] [added: 7; and Risk Factors in Part I, Item 1A of this Annual Report on Form 10-K] for [removed: additional details.][added: a description of recent market events that may affect the value of the investments in our portfolio that we held as of June 30, 2020.]

Unlike the 2014 Senior Notes, the interest rate for each series of the 2019 Senior Notes [removed: will] [added: are] not [removed: be] subject to such adjustments.

We are [added: also] obligated to pay an annual commitment fee of 12.5 bps on the daily undrawn balance of the Revolving Credit Facility which is subject to an adjustment in conjunction with our credit rating downgrades or upgrades.

The annual commitment fee ranges from 10 bps to 25 bps on the daily undrawn balance of the Revolving Credit Facility, depending upon the [removed: then effective] [added: then-effective] credit rating.

[removed: As] [added: Additionally as] of June 30, [removed: 2019,] [added: 2020,] if our credit ratings were downgraded to be below investment grade, the maximum potential increase to our annual commitment fee for the Revolving Credit Facility, using the highest range of the ranges discussed above, is estimated to be approximately [removed: $0.8] [added: $0.9] million.

As of June 30, [removed: 2019,] [added: 2020,] we had net forward and option contracts to sell [removed: $97.6] [added: $89.4] million in foreign currency in order to hedge certain currency exposures (see Note [removed: 16,] [added: 17] “Derivative Instruments and Hedging Activities” to our Consolidated Financial Statements for additional details).

If we had entered into these contracts on June 30, [removed: 2019,] [added: 2020,] the U.S. dollar equivalent would have been [removed: $98.3] [added: $88.7] million.

A 10% adverse move in all currency exchange rates affecting the contracts would decrease the fair value of the contracts by [removed: $48.3] [added: $39.0] million.

In February 2020, S&P upgraded its credit rating of the Company to “BBB+” and revised its outlook to stable, which permanently removed interest rate adjustments and the interest rate on the 2014 Senior Notes became fixed.

As of June 30, 2020, we had outstanding $50.0 million aggregate principal amount of borrowings under the Revolving Credit Facility.

As of June 30, 2020, we elected to pay interest on the borrowed amount under the Revolving Credit Facility at the London Interbank Offered Rate (“LIBOR”) plus a spread.

The spread ranges from 100 bps to 175 bps based on the adjusted credit rating.

The fair value of the borrowings under the Revolving Credit Facility is subject to interest rate risk only to the extent of the fixed spread portion of the interest rates which does not fluctuate with changes in interest rates.

As of June 30, 2020, if LIBOR-based interest rates increased by 100 bps, the change would increase our annual interest expense annually by approximately $0.5 million as it relates to our borrowings under the Revolving Credit Facility.

Following a rating change below investment grade, the stated interest rate for each series of the 2014 Senior Notes may increase between 25 bps to 100 bps based on the adjusted credit rating.

Factors that can affect our credit ratings include changes in our operating performance, the economic environment, conditions in the semiconductor, semiconductor-related, and electronics industries, our financial position, and changes in our business strategy.

As of June 30, 2019, if our credit rating was downgraded below investment grade by Moody’s and S&P, the maximum potential increase to our annual interest expense on the 2014 Senior Notes, considering a 200 bps increase to the stated interest rate for each series of our 2014 Senior Notes, is estimated to be approximately $41.7 million.

As of June 30, 2019, we do not have any outstanding floating rate debts that are subject to an increase in interest rates.

See Note 5, “Marketable Securities” to our Consolidated Financial Statements in Part II, Item 8; Management’s Discussion and Analysis of Financial Condition and Results of Operations, “Liquidity and Capital Resources,” in Part II, Item 7; and Risk Factors in Part I, Item 1A of this Annual Report on Form 10-K for a description of recent market events that may affect the value of the investments in our portfolio that we held as of June 30, 2019.

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[removed: The Company][added: The Company]

KLA Corporation (“KLA” or the “Company” and also referred to as “we” or “our”) is a [removed: leading supplier of process equipment,] [added: global leader in] process control [removed: equipment,] and [removed: data analytics products] [added: a supplier of process-enabling solutions] for a broad range of industries, including semiconductors, printed circuit boards [added: ("PCBs")] and displays.

We [removed: provide advanced] [added: focus on providing comprehensive resources for the full breadth of] process [removed: control and] [added: control,] process-enabling [added: and yield management] solutions for manufacturing and testing wafers and reticles, integrated [removed: circuits (“IC” or “chip”),] [added: circuits,] packaging, light emitting diodes, power devices, compound semiconductor devices, microelectromechanical systems, data storage, printed circuit boards and flat and flexible panel displays, as well as general materials research.

[removed: Orbotech’s core business] [added: In the PCB, Display and Component Inspection segment, KLA] enables electronic device manufacturers to inspect, test and measure [removed: printed circuit boards and] [added: PCBs,] flat panel displays [added: (“FPDs”) and ICs] to verify their [removed: quality;] [added: quality,] pattern [added: the desired] electronic circuitry on [added: the relevant] substrate and perform three-dimensional shaping of metalized circuits on multiple [removed: surfaces; and utilize advanced vacuum deposition and etching process in semiconductor device and semiconductor manufacturing and to perform laser drilling of electronic substrates.][added: surfaces.]

[removed: Subsequent to] [added: In February 2019, KLA completed] the acquisition of Orbotech, [removed: we changed our] [added: Ltd. (“Orbotech”) and transformed its] organizational [removed: structure, resulting in] [added: structure into] four reportable segments: Semiconductor Process Control; Specialty Semiconductor Process; PCB, Display and Component Inspection; and Other.

Within the Semiconductor Process Control segment, our comprehensive portfolio of inspection, metrology and data analytics products, and related service [removed: helps] [added: help] integrated circuit manufacturers achieve target yield throughout the entire semiconductor fabrication process—from research and development (“R&D”) to final volume production.

[removed: Our] [added: KLA’s] differentiated products and services are designed to provide comprehensive solutions [removed: that] [added: to] help [removed: our] customers accelerate development and production ramp cycles, achieve higher and more stable semiconductor die yields and improve their overall profitability.

In the Specialty Semiconductor Process segment, [removed: we develop] [added: KLA develops] and [removed: sell] [added: sells] advanced vacuum deposition and etching process tools, which are used by a broad range of specialty semiconductor customers, including manufacturers of microelectromechanical systems (“MEMS”), radio frequency (“RF”) communication chips, and power semiconductors for automotive and industrial applications.

[removed: Our] [added: KLA’s suite of] advanced products, coupled with [removed: our] [added: its] unique yield management [added: software and] services, allow us to deliver the solutions our semiconductor, printed circuit board and display customers need to achieve their productivity [removed: goals,] [added: goals] by significantly reducing their risks and [removed: costs.][added: costs and improving their overall profitability and returns on investment.]

KLA [removed: (then KLA-Tencor)] was formed [added: as KLA-Tencor] in April 1997 through the merger of KLA Instruments Corporation and Tencor Instruments, two long-time leaders in the semiconductor equipment industry that began operations in 1975 and 1976, respectively.

Additional information about KLA is available [removed: on our website] at www.kla.com.

[removed: Our] [added: The] Annual Report on Form 10-K, [removed: our] Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge on [removed: our] [added: the] website as soon as reasonably practicable after [removed: we] [added: they are] electronically [removed: file them] [added: filed] with or [removed: furnish them] [added: furnished] to the Securities and Exchange Commission (“SEC”).

Information contained on [removed: our] [added: KLA’s] website is not part of this Annual Report on Form 10-K or [removed: our] [added: KLA’s] other filings with the SEC.

Investors and others should note that [removed: we announce] [added: KLA announces] material financial information to [removed: our] investors using [removed: our] [added: an] investor relations [removed: web site] [added: website] (ir.kla.com), [added: including] SEC filings, press releases, public [removed: conference] [added: earnings] calls and [added: conference] webcasts.

[removed: We use these] [added: These] channels [removed: as well as social media] [added: are used] to communicate with the public about [removed: our] [added: the] company, [removed: our products and] [added: products,] services and other matters.

[removed: Industry][added: Industry]

[removed: General Background][added: *General Background*]

The process of manufacturing wafers is highly [removed: sophisticated, involving] [added: sophisticated and involves] the creation of large ingots of silicon by pulling them [removed: out of a vat of molten silicon.]

[removed: Most] [added: The majority of] chips consist of two main structures: the lower structure, typically consisting of transistors or capacitors which perform the “smart” [removed: functions of the chip;] [added: functions;] and the upper “interconnect” structure, typically consisting of circuitry which connects the components in the lower structure.

Packaged chips are [added: then] mounted onto [removed: printed circuit boards (“PCBs”)] [added: PCBs] for connection to the [removed: outside world.][added: rest of the electronic system.]

The semiconductor equipment industry is currently experiencing [removed: growth from] multiple [removed: drivers, such as] [added: growth drivers bolstered by] demand for chips [removed: providing computational power and connectivity for Artificial Intelligence (“AI”) applications and continued need for chips] from leading edge foundry and logic [removed: chip] manufacturers [removed: that] [added: to] support [removed: mobile devices.][added: computational power and connectivity for markets such as artificial intelligence (“AI”) and 5G wireless technology.]

Intertwined in these areas, spurred by [removed: data storage and connectivity needs,] [added: the requirements of big data,] is the growth in demand for memory chips.

Finally, China [removed: is emerging] [added: continues to emerge] as a major region for manufacturing of logic and memory chips, adding to its role as the world’s largest consumer of ICs.

Government initiatives are propelling China to expand its domestic manufacturing [removed: capacity and attracting semiconductor manufacturers from Taiwan, Korea, Japan and the US.][added: capacity.]

[removed: Supporting this multi-segmented market growth, the] [added: The] semiconductor industry [removed: continues to introduce] [added: continually introduces] numerous technology [removed: changes.][added: changes to support this multi-segmented market growth.]

KLA’s inspection, metrology and data analytics technologies play key roles in enabling our customers to develop and manufacture advanced semiconductor devices to support [added: and innovate around] these trends.

Ramping to [removed: high volume] [added: high-volume] production ahead of competitors can dramatically increase the revenue an IC manufacturer realizes for a given product.

[removed: Today, leading] [added: Leading] semiconductor manufacturers are investing in simultaneous production integration of multiple new process technologies, some requiring new substrate and film materials, new geometries, advanced multi-patterning and EUV [removed: lithography] [added: lithography,] and [added: advanced] packaging techniques.

While many of these technologies have been adopted at the development and pilot production stages of chip manufacturing, significant challenges and risks associated with each technology have affected the adoption of these technologies into [removed: full volume] [added: full-volume] production.

[added: For example, as design rules decrease,] yields become more sensitive to the size and density of defects, and device performance characteristics (namely speed, capacity or power management) become more sensitive to parameters such as linewidth and film thickness variation.

The continuing evolution of [removed: semiconductor devices] [added: semiconductors] to smaller geometries and more complex multi-level circuitry has significantly increased the performance and cost requirements of the capital equipment used to manufacture these devices.

Construction of an advanced wafer fabrication facility today can cost well above [removed: $5.00] [added: $10.00] billion, substantially more than previous-generation facilities.

By developing new process control and yield management tools that help chipmakers accelerate the adoption [added: and production] of these new technologies [removed: into volume production, we enable our] [added: at scale, KLA enables] customers to better leverage [removed: these] increasingly expensive facilities and improve [removed: their] return on investment (“ROI”).

Once customers’ production lines are operating at high volume, [removed: our] [added: KLA’s] systems [removed: help] [added: monitor to] ensure [removed: that] yields are stable and process excursions are identified for quick resolution.

In addition, [removed: the move to] each new generation’s smaller design rules, coupled with new materials and device innovation, [removed: has] increased in-process variability, which requires [removed: an] [added: a subsequent] increase in inspection and metrology sampling.

KLA systems not only analyze defectivity and metrology issues at critical points in the wafer, reticle and IC manufacturing processes, but also provide information to our customers so [removed: that] they can identify and address the underlying process [removed: problems.]

The ability to locate the source of defects and resolve the underlying process issues enables [removed: our] [added: KLA] customers to improve control over [removed: their] [added: the] manufacturing [removed: processes.][added: processes, increasing their yield of high-performance parts and delivering products to market faster—thus maximizing profits.]

With [removed: our] [added: a] broad portfolio of application-focused technologies and [removed: our] dedicated yield technology expertise, [removed: we are] [added: KLA is] in position to be a key supplier of comprehensive yield management solutions for customers’ next-generation [removed: products, helping our customers respond to the challenges posed by shrinking device sizes, the transition to new production materials, new device and circuit architectures, more demanding lithography processes, and new packaging techniques.][added: products.]

[added: KLA’s] SPTS [added: group, a semiconductor processing business from the Orbotech acquisition,] develops and sells differentiated custom deposition and etching solutions for fast-growing markets, such as power and analog devices, RF communication chips and MEMS.

These devices, which are often built on non-traditional [removed: substrates,] [added: substrates] like SiC and GaN, have become critical to accelerating some of the secular trends in automotive, industrial and communication industries.

out of a vat of molten silicon.

Growth of the virtual interaction driven by COVID-19 related travel restrictions and quarantines as well as work from home requirements, advances in healthcare and industrial application together with the increasing adoption of electrical vehicles and intelligence in automobiles are powering leading-edge node technology investments and capacity expansions.

problems.

SPTS’s wafer processing equipment supports customers in Advanced Packaging Manufacturing and manufacturing of semiconductor devices such as MEMS, high speed RF ICs, power semiconductors and LEDs.

Fabs rely on our high sensitivity reticle inspection systems to identify defects on

Our eSL10 electron-beam (“e-beam”) patterned wafer defect inspection system was launched during the fiscal year ending June 30, 2020.

The eSL10 detects very small defects, including those at the bottom of deep trenches and contact holes, helping chipmakers accelerate development and ramp of advanced logic and memory devices.

For unpatterned wafer inspection, we provide our Surfscan SP7, Surfscan SP5 and Surfscan SP3 inspectors.

These Surfscan Series systems find defects on bare wafers, smooth films and rough films.

We also offer our SURFmonitor technology for surface quality measurements and capture of low-contrast defects.

These systems also play a critical role in determining outgoing substrate quality.

For original equipment manufacturers (“OEMs”) and materials suppliers, the Surfscan Series support process development and process tool qualification.

These systems include the Archer 750, launched during the fiscal year ended June 30, 2020, which utilizes wavelength tunability to produce accurate overlay measurements.

The OVALiS Software Suite joined our data analytics product portfolio through the acquisition of Qoniac GmbH during the fiscal year ending June 30, 2020.

OVALiS supports on-product process optimization, diagnostics, monitoring and control for lithography and other patterning steps that are critical to IC manufacturing.

Introduced in the fiscal year ended June 30, 2020, the EtchTemp-HD in situ wafer temperature measurement system enables across-wafer temperature monitoring that strongly correlates with CD uniformity control for conductor etch applications, while the MaskTemp 2 in situ reticle temperature measurement system is used by reticle manufacturers for qualification and monitoring of e-beam writers and high temperature reticle process steps.

*Packaging Process Control on Wafer*

*Packaging Process Control After Singulation*

After wafer test and dicing, the detection of hairline cracks in bare dies or in fan-in wafer-level packages is achieved with the ICOS™ F160 die sorting and inspection system.

Once the ICs are fully packaged, ICOS™ T3/T7/T8 series and MV series of component inspection systems provide automated inspection and metrology capabilities across all different types of packages for detection of issues that affect final package quality.

Modular tool architecture allows for inspection solutions to be customized to meet the requirements of different package types with varying size and interconnect styles, while allowing for either tray or tape output.

To achieve these goals, they are implementing solutions for characterizing yield-limiting defects and processes including full-surface, high sensitivity defect inspection and profiler metrology systems that provide accurate process feedback, thus improving SiC substrate and epitaxy wafer quality and yield.

KLA offers tools and

Unlike conventional dicing techniques, plasma dicing does not chip or crack die, does not generate localized hot-spots, and produces fewer defects.

The Sigma® systems deposit conducting and insulating layers by physical vapor deposition (PVD), sometimes referred to as “sputtering”.

Because of the complexity of each step in the process of PCB manufacturing, sophisticated equipment is required in order to enable manufacturing, especially of high complexity boards where high accuracy is required.

Dimensions of PCB boards change during the manufacturing process and digital printing is required in order to compensate for these changes and meet demand for high accuracy.

Orbotech Diamond is a high capacity, high throughput DI series for a wide variety of solder mask applications.

The

*Computer Aided Engineering/Manufacturing*

*Automated Optical Inspection (*“*AOI*”*)*

*Software Platform - Orbotech OASIS (Orbotech Advanced Software Integrated Solution)*

Orbotech OASIS is an artificial intelligence-driven software platform for increased operational efficiency and yield enhancement of panel display manufacturing.

Orbotech OASIS™ delivers actionable manufacturing intelligence to customers, enabling them to make faster and smarter operational and process control decisions by leveraging advanced algorithms and machine learning of the data generated by their systems.

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| | | | | | | Inspection and Metrology Data Analysis | | | Klarity® product family 5D Analyzer® RDC FabVision® ProDATA™ Qoniac OVALiS | | | | | | | | | | | |

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| SEGMENT | | | MARKETS | | | APPLICATIONS | | | PRODUCTS | | | | | | | | | |

On February 20, 2019, we completed the acquisition of Orbotech, Ltd. (“Orbotech”) for a total purchase consideration of approximately $3.26 billion.

For additional details, refer to Note 6 “Business Combinations” to our Consolidated Financial Statements.

In the PCB, Display and Component Inspection segment, we enable electronic device manufacturers to inspect, test and measure printed circuit boards (“PCBs”) and flat panel displays (“FPDs”) and ICs to verify their quality, pattern the desired electronic circuitry on the relevant substrate and perform three-dimensional shaping of metalized circuits on multiple surfaces.

It is possible that the information we post on social media could be deemed to be material information.

Therefore, we encourage investors, the media, and others interested in our company to review the information we post on the social media channels listed on our investor relations website.

Qualification of early extreme ultraviolet (“EUV”) lithography processes and equipment is driving growth at leading logic/foundry and dynamic random-access memory (“DRAM”) manufacturers.

Expansion of the Internet of Things (“IoT”) together with the increasing adoption of electrical vehicles and the need for automobile connectivity are accelerating trailing-edge node technology conversions and capacity expansions.

New techniques and architectures in production today include three dimensional finFET transistors; three dimensional flash memory (“3D NAND”); design technology co-optimization (“DTCO”); advanced patterning technologies, including self-aligned multiple patterning and EUV lithography; and advanced packaging methods.

During past industry cycles, semiconductor manufacturers generally contended with a few key new technologies or market trends, such as a specific design rule shrink.

For example, as design rules decrease,

This helps them increase their yield of high-performance parts and deliver their products to market faster—thus maximizing their profits.

With the Orbotech acquisition, KLA has expanded its presence in the semiconductor capital equipment market, leveraging products and technologies of Orbotech’s SPTS semiconductor processing business.

In the field of unpatterned wafer and surface inspection, the Surfscan SP7 unpatterned wafer defect inspection system provides high sensitivity on bare wafers, smooth films and rough films, supporting development and production of advanced substrates, processes and devices at wafer shops, original equipment manufacturers (“OEMs”) and IC fabs.

In addition, we offer the Surfscan SP5 Series and Surfscan SP3 Series (wafer defect inspection systems for process tool qualification and monitoring using blanket films and bare wafers); and SURFmonitor, which enables surface quality measurements and capture of low-contrast defects.

The Teron SL655 reticle inspection system enables IC manufacturers to assess incoming reticle quality, monitor reticle degradation and detect yield-critical reticle defects.

The Teron SL655 introduced STARlightGold technology, which provides a golden reference to maximize detection of defects critical to the mask requalification process.

These sensor wafers and reticles provide insight into critical process parameters, such as thermal uniformity, profile temperature and light intensity, under real production conditions.

For example, the EtchTemp in situ wafer temperature measurement systems measure the effect of the plasma etch process environment on production wafers.

By characterizing thermal conditions that closely represent product wafer conditions, the EtchTemp SE wireless wafer assists process engineers with tuning of the etch process conditions and the qualification, matching and post-PM verification of front end of line plasma etch chambers.

The AMW product (Automation Metrology Wafer) enables fab-wide automated wafer handling monitoring.

The SensArray Automation package provides fast automated collection of parametric measurement within the process tool chamber.

SensArray products are used for many semiconductor and flat panel display fabrication processes, including lithography, etch and deposition, and for reticle manufacturing, including e-beam mask writer qualification and process monitoring.

The LMS IPRO7 reticle registration metrology system accurately measures on-device reticle pattern placement error with fast cycle time, enabling comprehensive reticle qualification for e-beam mask writer corrections and reduction of reticle-related contributions to device overlay errors in the IC fab.

KLA offers standalone and cluster inspection and metrology systems for various applications in the field of semiconductor packaging.

Wafer-Level Packaging Inspection/Metrology

Used for packaging applications associated with LEDs, MEMS, image sensors and flip-chip packaging, our WI-2280 products focus on front side wafer inspection and provide feedback on wafer surface quality, quality of the wafer dicing, or quality of wafer bumps, pads, pillars and interconnects.

To achieve these goals, they are implementing solutions for characterizing yield-limiting defects and processes.

Full-surface, high sensitivity defect inspection and profiler metrology systems provide accurate process feedback, enabling improvements in SiC substrate quality and optimal epitaxial growth yields on both SiC epi and GaN-on-silicon processes.

KLA offers inspection and metrology systems to support power device manufacturing.

Data Storage Media/Head Manufacturing

Plasma dicing does not degrade silicon strength and produces fewer defects than conventional dicing techniques.

The Magna system uses inkjet technology for three-dimensional printing of underfill dam structures and thick isolating layers in defined areas of a chip, for volume production applications.

JEText is the latest generation inkjet system for semiconductor package marking.

Orbotech Diamond is a high capacity, high throughput DI series to address challenging surface topographies.

Pre-Production

For packaged IC component inspection, the ICOS F160 system performs inspection and die sorting after wafer-level packages are tested and diced.

Our packaged IC component inspector products, including the ICOS T890, inspect various semiconductor components that are handled in a tray, such as microprocessors or memory chips.

The ICOS T3 and T7 Series tools provide high performance, fully automated optical inspection of packaged IC components, with either tray (T3) or tape (T7) output capability.

Both incorporate the SPECTRUM and SIGMA modules, which produce increased 2D and 3D measurement sensitivity for improved detection of issues that affect final package quality.

The MV Series provides several configurations to support fully automated or portable optical inspection of packaged integrated circuit components with tape or tray output.

The information set forth below under Note [removed: 15,] [added: 15] “Litigation and Other Legal Matters” to the Consolidated Financial Statements is incorporated herein by reference.

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[removed: UNITED STATES][added: UNITED STATES]

[removed: SECURITIES] [added: SECURITIES] AND EXCHANGE [removed: COMMISSION][added: COMMISSION]

[removed: Washington,] [added: Washington,] D.C. [removed: 20549][added: 20549]

| [removed: FORM 10-K] [added: FORM 10-K] | [added: | |]

[removed: (Mark One)][added: (Mark One)]

| [removed: x] [added: ☒] | [removed: ANNUAL] [added: | | ANNUAL] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934] [added: 1934] | [added: | | | | | | | |]

| | [removed: For] [added: | | For] the Fiscal Year [removed: Ended June] [added: Ended | | | June] 30, [removed: 2019] [added: 2020] | [added: | | | | |]

| [removed: o] [added: ☐] | [removed: TRANSITION] [added: | | TRANSITION] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934] [added: 1934] | [added: | |]

| | [removed: For] [added: | | For] the Transition Period from [removed: to] [added: to] | [added: | |]

[removed: Commission] [added: Commission] File Number [removed: 000-09992][added: 000-09992]

[removed: KLA CORPORATION][added: KLA CORPORATION]

[removed: (Exact] [added: (Exact] name of registrant as specified in its [removed: charter)][added: charter)]

| [removed: Delaware] [added: Delaware] | | [removed: 04-2564110] | [added: | | | | | | | | | | | | | | | 04-2564110 | | |]

| [removed: (State] [added: (State] or other jurisdiction of incorporation or [removed: organization)] [added: organization)] | | [removed: (I.R.S.] [added: | | | | | | | | | | | | | | | | (I.R.S.] Employer Identification [removed: Number)] [added: No.)] | [added: | |]

| [removed: One] [added: One] Technology [removed: Drive, Milpitas, California] [added: Drive,] | | [removed: 95035] | [added: Milpitas, | | | California | | | | | | 95035 | | | | | | | | |]

| [removed: (Address] [added: (Address] of Principal Executive [removed: Offices)] [added: Offices)] | | [removed: (Zip Code)] | [added: | | | | | | | | | | | | | | | (Zip Code) | | |]

[removed: Registrant’s] [added: Registrant’s] Telephone Number, Including Area Code: (408) [removed: 875-3000][added: 875-3000]

[removed: Securities] [added: Securities] Registered Pursuant to Section 12(b) of the [removed: Act:][added: Act:]

| [removed: Title] [added: Title] of Each [removed: Class] [added: Class] | [removed: Trading Symbol(s)] | [removed: Name] [added: | Trading Symbol(s) | | | Name] of Each Exchange on Which [removed: Registered] [added: Registered] | [added: | |]

| [removed: Common] [added: Common] Stock, $0.001 par value per [removed: share] [added: share] | [removed: KLAC] | [removed: The] [added: | KLAC | | | The] Nasdaq Stock Market, [removed: LLC] [added: LLC] | [added: | |]

| | | [removed: The] [added: | | | | The] NASDAQ Global Select [removed: Market] [added: Market] | [added: | |]

| | [removed: Securities] [added: | | Securities] Registered Pursuant to Section 12(g) of the [removed: Act:] [added: Act:] | | [added: | | | |]

| | [removed: None] | | [added: None | | | | | |]

| | [removed: (Title] [added: | | (Title] of [removed: Class)] [added: Class)] | | [added: | | | |]

Yes [removed: o] [added: ☐] No x

| Large [removed: accelerated filer] [added: Accelerated Filer] x | | | | [added: | | | | | | | |] Accelerated filer o | [added: | |]

| Non-accelerated filer o | | [added: | | | |] (Do not check if a smaller reporting company) | | [added: | | | |] Smaller reporting company [removed: o] [added: ☐] | [added: | |]

| | | | | [added: | | | | | | | |] Emerging growth [removed: companyo] [added: company ☐] | [added: | |]

The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant based upon the closing price of the registrant’s stock, as of December 31, [removed: 2018,] [added: 2019,] was approximately [removed: $13.53] [added: $27.90] billion.

The registrant had [removed: 159,255,950] [added: 155,461,444] shares of common stock outstanding as of July [removed: 19, 2019.][added: 20, 2020.]

[removed: DOCUMENTS] [added: DOCUMENTS] INCORPORATED BY [removed: REFERENCE][added: REFERENCE]

Portions of the Proxy Statement for the [removed: 2019] [added: 2020] Annual Meeting of Stockholders (“Proxy Statement”), and to be filed pursuant to Regulation 14A within 120 days after the registrant’s fiscal year ended June 30, [removed: 2019,] [added: 2020,] are incorporated by reference into Part III of this report.

[removed: INDEX][added: INDEX]

[removed: | | | [Special Note Regarding Forward-Looking Statements](#s0F2CCE5373BF5EFD88E102D83C6D3206) | [ii](#s0F2CCE5373BF5EFD88E102D83C6D3206) |][added: SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS]

| [removed: PART I] [added: PART I] | | | | [added: | | | | | | | | | | | | | | | | |]

| Item 1. | | [removed: [Business](#s2B502D8A05A15886ADCCD612ED09E049)] | [removed: [1](#s2B502D8A05A15886ADCCD612ED09E049)] | [added: | | [Business](#icfc6141545384cc4921c04f73dba6092_16) | | | [1](#icfc6141545384cc4921c04f73dba6092_16) | | | | | | | | | | | |]

| Item 1A. | | [added: | | | |] [Risk [removed: Factors](#s8CE4610DD0C15B8E93BBA9427C49BDC2)] [added: Factors](#icfc6141545384cc4921c04f73dba6092_19)] | [removed: [20](#s8CE4610DD0C15B8E93BBA9427C49BDC2)] | [added: | [21](#icfc6141545384cc4921c04f73dba6092_19) | | | | | | | | | | | |]

| Item 1B. | | [added: | | | |] [Unresolved Staff [removed: Comments](#sD53E9C69054D5CDDA19D3B2442FD568B)] [added: Comments](#icfc6141545384cc4921c04f73dba6092_22)] | [removed: [36](#sD53E9C69054D5CDDA19D3B2442FD568B)] | [added: | [37](#icfc6141545384cc4921c04f73dba6092_22) | | | | | | | | | | | |]

| Item 2. | | [removed: [Properties](#s4B4855A6899A5AD0B50AA035371C6B3F)] | [removed: [37](#s4B4855A6899A5AD0B50AA035371C6B3F)] | [added: | | [Properties](#icfc6141545384cc4921c04f73dba6092_25) | | | [37](#icfc6141545384cc4921c04f73dba6092_25) | | | | | | | | | | | |]

| Item 3. | | [added: | | | |] [Legal [removed: Proceedings](#sB728AA09BD945BEFABD42B995F9ED149)] [added: Proceedings](#icfc6141545384cc4921c04f73dba6092_28)] | [removed: [37](#sB728AA09BD945BEFABD42B995F9ED149)] | [added: | [37](#icfc6141545384cc4921c04f73dba6092_28) | | | | | | | | | | | |]

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OR

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Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b) by the registered public accounting firm that prepared or issued its audit report.

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| | | | | | | [Signatures](#icfc6141545384cc4921c04f73dba6092_232) | | | [120](#icfc6141545384cc4921c04f73dba6092_232) | | | | | | | | | | | |

| | | | | | | [Exhibit Index](#icfc6141545384cc4921c04f73dba6092_238) | | | [123](#icfc6141545384cc4921c04f73dba6092_238) | | | | | | | | | | | |

10-K 1 klac10k2019.htm 10-K

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OR

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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

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| | | [Signatures](#s876085E4AF125E62B91A5553F9120568) | [123](#s876085E4AF125E62B91A5553F9120568) |

| | | [Exhibit Index](#s6021FCC552725A1B87E359C473E0D2D9) | [126](#s6021FCC552725A1B87E359C473E0D2D9) |

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As of June 30, [removed: 2019,] [added: 2020,] we owned or leased a total of approximately 3.4 million square feet of space for research, engineering, marketing, service, sales and administration worldwide primarily in U.S., Israel, China, Singapore, Germany and Taiwan.

Our operating leases expire at various times through [removed: November 7, 2028,] [added: January 4, 2037,] subject to renewal, with some of the leases containing renewal option clauses at the fair market value, for additional periods up to five years.

Additional information regarding these leases is incorporated herein by reference to Note [removed: 14, “Commitments and Contingencies”] [added: 9 “Leases”] to the Consolidated Financial Statements.

Information regarding our principal properties as of June 30, [removed: 2019] [added: 2020] is set forth below:

| [removed: (Square Feet)] [added: (Square Feet)] | [removed: United States] | | [added: United States] | [removed: Other Countries] | | | [removed: Total] | | [added: Other Countries | | | | | | Total | | |]

| Owned(1) | [added: | |] 727,302 | | | [added: | | |] 695,048 | | | [added: | | |] 1,422,350 | | [added: |]

[removed: | (1) | Includes] [added: (1)Includes] 248,155 square feet of property owned at [removed: out] [added: our] location in Serangoon, Singapore, where the land on which this building resides is leased. [removed: |]

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| Leased | | | 414,378 | | | | | | 1,612,319 | | | | | | 2,026,697 | | |

| Total | | | 1,141,680 | | | | | | 2,307,367 | | | | | | 3,449,047 | | |

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| Leased | 426,535 | | | 1,519,614 | | | 1,946,149 | |

| Total | 1,153,837 | | | 2,214,662 | | | 3,368,499 | |

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[removed: PART II][added: PART II]

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On August [removed: 1, 2019,] [added: 6, 2020,] we announced that our Board of Directors had declared a quarterly cash dividend of [removed: $0.75] [added: $0.90] per share to be paid on September [removed: 3, 2019] [added: 1, 2020] to stockholders of record as of the close of business on August [removed: 15, 2019.][added: 17, 2020.]

As of July [removed: 19, 2019,] [added: 20, 2020,] there were [removed: 383] [added: 393] holders of record of our common stock.

[removed: Equity] [added: Equity] Repurchase [removed: Plans][added: Plans]

[removed: | (1) |] Our Board of Directors [added: has] authorized a program which permits us to repurchase up to [removed: $2.00] [added: $3.00] billion of our common stock, reflecting an increase [removed: from] [added: of] $1.00 billion [removed: upon the close of the Orbotech Acquisition. Shares are reported based on the trade date] [added: authorized by our Board] of [added: Directors during] the [removed: applicable repurchase. |][added: fiscal year ended June 30, 2020.]

[removed: Stock] [added: Stock] Performance Graph and Cumulative Total [removed: Return][added: Return]

[removed: Notwithstanding] [added: *Notwithstanding] any statement to the contrary in any of our previous or future filings with the Securities and Exchange Commission, the following information relating to the price performance of our common stock shall not be deemed “filed” with the Commission or “soliciting material” under the Securities Exchange Act of 1934 and shall not be incorporated by reference into any such [removed: filings.][added: filings.*]

The graph tracks the performance of a $100 investment in our common stock and in each of the indices (with the reinvestment of all dividends) from June 30, [removed: 2014] [added: 2015] to June 30, [removed: 2019.][added: 2020.]

[removed: ][added: ]

| | [removed: June 2014] | | [removed: June 2015] [added: June 2015] | | [removed: June 2016] | | [removed: June 2017] | | [removed: June 2018] [added: June 2016] | | [removed: June 2019] | [added: | | | June 2017 | | | | | | June 2018 | | | | | | June 2019 | | | | | | June 2020 | | |]

On August 3, 2020, we announced that our Board of Directors had approved an increase in the quarterly cash dividend level to $0.90 per share.

These repurchases may be effected through various different repurchase transaction structures, including isolated open market transactions or systematic repurchase plans, in all cases, subject to compliance with applicable law.

This repurchase program has no termination date and may be suspended or discontinued at any time.

We did not repurchase any shares under this authorization in the fourth quarter of fiscal year ended June 30, 2020.

As of June 30, 2020, we have approximately $1.04 billion that may yet be purchased under this authorization.

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| KLA Corporation | | | $100.00 | | | | | | $134.78 | | | | | | $172.89 | | | | | | $198.49 | | | | | | $235.36 | | | | | | $395.31 | | |

| S&P 500 | | | $100.00 | | | | | | $103.99 | | | | | | $122.60 | | | | | | $140.23 | | | | | | $154.83 | | | | | | $166.45 | | |

| PHLX Semiconductor | | | $100.00 | | | | | | $103.77 | | | | | | $157.95 | | | | | | $203.93 | | | | | | $231.07 | | | | | | $321.96 | | |

The following is a summary of stock repurchases for each month during the fourth quarter of the fiscal year ended June 30, 2019(1):

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| Period | Total Number of Shares Purchased (1) | | | Average Price Paid per Share | | | | Approximate Dollar Value that May Yet Be Purchased Under the Plans or Programs (2) | | |

| April 1, 2019 to April 30, 2019 | 507,700 | | | $ | 123.81 | | | $ | 1,142,833,354 | |

| May 1, 2019 to May 31, 2019 | 1,693,619 | | | $ | 109.10 | | | $ | 958,067,283 | |

| June 1, 2019 to June 30, 2019 | 899,092 | | | $ | 110.53 | | | $ | 858,692,904 | |

| Total | 3,100,411 | | | $ | 111.92 | | | | | |

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| (2) | The stock repurchase program has no expiration date and may be suspended at any time. Future repurchases of our common stock under our repurchase program may be effected through various different repurchase transaction structures, including isolated open market transactions or systematic repurchase plans. |

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| KLA Corporation | $100.00 | | $99.11 | | $133.57 | | $171.34 | | $196.71 | | $233.26 |

| S&P 500 | $100.00 | | $107.42 | | $111.71 | | $131.70 | | $150.64 | | $166.33 |

| PHLX Semiconductor | $100.00 | | $108.97 | | $113.07 | | $172.12 | | $222.22 | | $251.80 |

This data should be read in conjunction with Item [removed: 8,] [added: 8] “Financial Statements and Supplementary Data,” and Item [removed: 7,] [added: 7] “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report on Form 10-K.

| | [removed: Year] [added: | | Year] ended June [removed: 30,] [added: 30,] | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |]

| [removed: (In] [added: (In] thousands, except per share [removed: amounts)] [added: amounts)] | [removed: 2019] | | [added: 2020] | | [removed: 2018] | | | | [removed: 2017] [added: 2019] | | | | [removed: 2016] | | [added: 2018] | | [removed: 2015] | | | [added: | 2017 | | | | | | 2016 | | | | | | | | | | | | | | | | | | | | | | | | | | |]

| [removed: Consolidated] [added: Consolidated] Statements of [removed: Operations(1)(2):] [added: Operations(1)(2):] | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |]

| Total revenues | [added: | |] $ | [added: 5,806,424 | | | | | $ |] 4,568,904 | | | [added: | |] $ | 4,036,701 | | | [added: | |] $ | 3,480,014 | | | [added: | |] $ | 2,984,493 | | | [removed: $] | [removed: 2,814,049] | | [added: | | | | | | | | | | | | | | | | | | | |]

| Net income attributable to KLA(3) | [added: | |] $ | [added: 1,216,785 | | | | | $ |] 1,175,617 | | | [added: | |] $ | 802,265 | | | [added: | |] $ | 926,076 | | | [added: | |] $ | 704,422 | | | [removed: $] | [removed: 366,158] | | [added: | | | | | | | | | | | | | | | | | | | |]

| Cash dividends declared per share [removed: (including a special cash dividend of $16.50 per share declared during the three months ended December 31, 2014)] | [added: | |] $ | [added: 3.30 | | | | | $ |] 3.00 | | | [added: | |] $ | 2.52 | | | [added: | |] $ | 2.14 | | | [added: | |] $ | 2.08 | | | [removed: $] | [removed: 18.50] | | [added: | | | | | | | | | | | | | | | | | | | |]

| Net income per share attributable to KLA: | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |]

| Basic | [added: | |] $ | [added: 7.76 | | | | | $ |] 7.53 | | | [added: | |] $ | 5.13 | | | [added: | |] $ | 5.92 | | | [added: | |] $ | 4.52 | | | [removed: $] | [removed: 2.26] | | [added: | | | | | | | | | | | | | | | | | | | |]

| Diluted | [added: | |] $ | [added: 7.70 | | | | | $ |] 7.49 | | | [added: | |] $ | 5.10 | | | [added: | |] $ | 5.88 | | | [added: | |] $ | 4.49 | | | [removed: $] | [removed: 2.24] | | [added: | | | | | | | | | | | | | | | | | | | |]

| | [removed: As] [added: | | As] of June [removed: 30,] [added: 30,] | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |]

| | [removed: 2019] | | [added: 2020] | | [removed: 2018] | | | | [removed: 2017] [added: 2019] | | | | [removed: 2016] | | [added: 2018] | | [removed: 2015] | | | [added: | 2017 | | | | | | 2016 | | | | | | | | | | | | | | | | | | | | | | | | | | |]

| [removed: Consolidated] [added: Consolidated] Balance [removed: Sheets(1)(2):] [added: Sheets(1)(2):] | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |]

| Cash, cash equivalents and marketable securities | [added: | |] $ | [added: 1,980,472 | | | | | $ |] 1,739,385 | | | [added: | |] $ | 2,880,318 | | | [added: | |] $ | 3,016,740 | | | [added: | |] $ | 2,491,294 | | | [removed: $] | [removed: 2,387,111] | | [added: | | | | | | | | | | | | | | | | | | | |]

| Working [removed: capital(4)] [added: capital(4)(5)] | [added: | |] $ | [added: 3,023,759 | | | | | $ |] 2,546,589 | | | [added: | |] $ | 3,334,730 | | | [added: | |] $ | 3,102,094 | | | [added: | |] $ | 2,868,062 | | | [removed: $] | [removed: 2,904,758] | | [added: | | | | | | | | | | | | | | | | | | | |]

| Total assets | [added: | |] $ | [added: 9,279,960 | | | | | $ |] 9,008,516 | | | [added: | |] $ | 5,638,619 | | | [added: | |] $ | 5,550,334 | | | [added: | |] $ | 4,977,076 | | | [removed: $] | [removed: 4,841,023] | | [added: | | | | | | | | | | | | | | | | | | | |]

| Long-term [removed: debt(5)] [added: debt(6)] | [added: | |] $ | [added: 3,469,670 | | | | | $ |] 3,173,383 | | | [added: | |] $ | 2,237,402 | | | [added: | |] $ | 2,680,474 | | | [added: | |] $ | 3,057,936 | | | [removed: $] | [removed: 3,173,435] | | [added: | | | | | | | | | | | | | | | | | | | |]

| Total KLA stockholders’ [removed: equity(5)] [added: equity(6)] | [added: | |] $ | [added: 2,665,424 | | | | | $ |] 2,659,108 | | | [added: | |] $ | 1,620,511 | | | [added: | |] $ | 1,326,417 | | | [added: | |] $ | 689,114 | | | [removed: $] | [removed: 421,439] | | [added: | | | | | | | | | | | | | | | | | | | |]

[removed: | (1) | On July 1, 2018, we adopted ASC 606 using the modified retrospective transition approach.] Results for reporting periods beginning after June 30, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with the previous revenue guidance in ASC 605. [removed: Refer to Note 2, “Revenue” to our Consolidated Financial Statements for additional details. |]

[removed: | (3) | Our] [added: (3)Our] net income decreased to $802.3 million in the fiscal year ended June 30, 2018, primarily as a result of the income tax effects from the enacted tax reform legislation through the Tax Cuts and Jobs Act, which was signed into law on December 22, 2017. [removed: Our net income was $366.2 million in the fiscal year ended June 30, 2015, primarily as a result of the impact of the pre-tax net loss of $131.7 million for the loss on extinguishment of debt and certain one-time expenses of $2.5 million associated with the leveraged recapitalization that was completed during the three months ended December 31, 2014. |]

[removed: | (4) | We] [added: (4)We] adopted the accounting standards update regarding classification of deferred taxes on a prospective basis at the beginning of the fourth quarter of fiscal year ended 2016. [removed: Upon adoption, approximately $218.0 million in net current deferred tax assets were reclassified to noncurrent. No prior periods were retrospectively adjusted. |]

[removed: | (5) |] Our long-term debt increased to $3.17 billion at the end of fiscal year ended June 30, [removed: 2019,] [added: 2019] because we issued $1.20 billion aggregate principal amount of senior, unsecured long-term notes. [removed: Refer to Note 8, “Debt” to our Consolidated Financial Statements for additional details. Our total stockholders’ equity decreased to $421.4 million at the end of fiscal year ended June 30, 2015, because, as part of our leveraged recapitalization plan, we declared a special cash dividend of approximately $2.76 billion. Refer to Note 9, “Equity, Long-term Incentive Compensation Plans and Non-Controlling Interest” to the Consolidated Financial Statements for additional details. |]

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(1)On July 1, 2018, we adopted Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers ("ASC 606") using the modified retrospective transition approach.

(2)On February 20, 2019, we completed the acquisition of Orbotech for total purchase consideration of approximately $3.26 billion.

The operating results of Orbotech have been included in our Consolidated Financial Statements from the Acquisition Date in 2019.

For additional details, refer to Note 6 “Business Combinations” to our Consolidated Financial Statements.

Upon adoption, approximately $218.0 million in net current deferred tax assets were reclassified to non-current.

No prior periods were retrospectively adjusted.

(5)On July 1, 2019, we adopted ASC 842, Leases ("ASC 842") on a prospective basis.

The adoption of ASC 842 resulted in the balance sheet recognition of additional lease assets and lease liabilities of $110.7 million and $108.7 million, respectively.

Refer to Note 1 "Description of Business and Summary of Significant Accounting Policies" to our Consolidated Financial Statements for additional details.

(6)Our long-term debt increased to $3.47 billion at the end of fiscal year ended June 30, 2020 because we issued $750.0 million aggregate principal amount of senior, unsecured long-term notes and prepaid $500.0 million of senior notes including payment of accrued interest and other costs.

Refer to Note 8 “Debt” to our Consolidated Financial Statements for additional details.

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| --- | --- |

| (2) | On February 20, 2019, we completed the acquisition of Orbotech for total purchase consideration of approximately $3.26 billion. The operating results of Orbotech have been included in our Consolidated Financial Statements for the fiscal year ended June 30, 2019 from the Acquisition Date. For additional details, refer to Note 6 “Business Combinations” to our Consolidated Financial Statements. |

| [Consolidated Balance Sheets as of June 30, [removed: 2019] [added: 2020] and [removed: 2018](#s813814BC73DF5692BE7D8F65D7DBA45C)] [added: 2019](#icfc6141545384cc4921c04f73dba6092_85)] | [removed: [62](#s813814BC73DF5692BE7D8F65D7DBA45C)] | [added: | [61](#icfc6141545384cc4921c04f73dba6092_85) | | |]

| [Consolidated Statements of Operations for each of the three years in the period ended June 30, [removed: 2019](#sACDC7199BAE5545FB4EF1136E04B9D23)] [added: 2020](#icfc6141545384cc4921c04f73dba6092_91)] | [removed: [63](#sACDC7199BAE5545FB4EF1136E04B9D23)] | [added: | [62](#icfc6141545384cc4921c04f73dba6092_91) | | |]

| [Consolidated Statements of Comprehensive Income for each of the three years in the period ended June 30, [removed: 2019](#sDDB429BFD9B6545BB52A3F64C8B2F4E7)] [added: 2020](#icfc6141545384cc4921c04f73dba6092_94)] | [removed: [64](#sDDB429BFD9B6545BB52A3F64C8B2F4E7)] | [added: | [63](#icfc6141545384cc4921c04f73dba6092_94) | | |]

| [Consolidated Statements of Stockholders’ Equity for each of the three years in the period ended June 30, [removed: 2019](#s4CEBB987C4265A0A948458498F68812E)] [added: 2020](#icfc6141545384cc4921c04f73dba6092_97)] | [removed: [65](#s4CEBB987C4265A0A948458498F68812E)] | [added: | [64](#icfc6141545384cc4921c04f73dba6092_97) | | |]

| [Consolidated Statements of Cash Flows for each of the three years in the period ended June 30, [removed: 2019](#s8EB76A93713457CC9FE6D9978AB46A2C)] [added: 2020](#icfc6141545384cc4921c04f73dba6092_103)] | [removed: [66](#s8EB76A93713457CC9FE6D9978AB46A2C)] | [added: | [65](#icfc6141545384cc4921c04f73dba6092_103) | | |]

[removed: | [Notes] [added: Notes] to Consolidated Financial [removed: Statements](#s55E7F2DA7FAA5C5981B4815D162F3ABD) | [67](#s55E7F2DA7FAA5C5981B4815D162F3ABD) |][added: Statements]

[removed: | [Report] [added: Report] of Independent Registered Public Accounting [removed: Firm](#sA0771C1005F45C40976CBABB0CD81B48) | [116](#sA0771C1005F45C40976CBABB0CD81B48) |][added: Firm]

[removed: KLA CORPORATION][added: KLA CORPORATION]

[removed: (formerly known as KLA-TENCOR CORPORATION)][added: KLA CORPORATION]

[removed: Consolidated] [added: Consolidated] Balance [removed: Sheets][added: Sheets]

| | [removed: As] [added: | | As] of June [removed: 30,] [added: 30,] | | | | | | | [added: | | | | | | | |]

| [removed: (In] [added: (In] thousands, except par [removed: value)] [added: value)] | [removed: 2019] | | [added: 2020] | | [removed: 2018] | | | [added: | 2019 | | | | | | | | |]

| ASSETS | | | | | | | | [added: | | | | | | | | | |]

| Current assets: | | | | | | | | [added: | | | | | | | | | |]

| Cash and cash equivalents [added: at beginning of period] | [removed: $] | [added: |] 1,015,994 | | | [removed: $] | [added: | |] 1,404,382 | | [added: | | | | 1,153,051 | | | | | | | | | | | | | | |]

| Marketable securities | [added: | | 746,063 | | | | | |] 723,391 | | | | [removed: 1,475,936] | | | [added: | |]

| Accounts receivable, net | [added: | | 1,107,413 | | | | | |] 990,113 | | | | [removed: 651,678] | | | [added: | |]

| Inventories | [added: | | 1,310,985 | | | | | |] 1,262,500 | | | | [removed: 931,845] | | | [added: | |]

| Other current assets | [added: | | 324,675 | | | | | |] 323,077 | | | | [removed: 85,159] | | | [added: | |]

| Total current assets | [added: | | 4,723,545 | | | | | |] 4,315,075 | | | | [removed: 4,549,000] | | | [added: | |]

| Land, property and equipment, net | [added: | | 519,824 | | | | | |] 448,799 | | | | [removed: 286,306] | | | [added: | |]

| Goodwill | [added: | | 2,045,402 | | | | | |] 2,211,858 | | | | [removed: 354,698] | | | [added: | |]

| Deferred income taxes | [added: | | 236,797 | | | | | |] 206,141 | | | | [removed: 193,200] | | | [added: | |]

| Purchased intangible assets, net | [added: | | 1,391,413 | | | | | |] 1,560,670 | | | | [removed: 19,333] | | | [added: | |]

| Other non-current assets | [added: | | 362,979 | | | | | |] 265,973 | | | | [removed: 236,082] | | | [added: | |]

| Total assets | [added: | |] $ | [removed: 9,008,516] [added: 9,279,960] | | | [added: | |] $ | [removed: 5,638,619] [added: 9,008,516] | | [added: | | | | | |]

| LIABILITIES, NON-CONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY | | | | | | | | [added: | | | | | | | | | |]

| Current liabilities: | | | | | | | | [added: | | | | | | | | | |]

| Accounts payable | [added: | |] $ | [removed: 202,416] [added: 264,280] | | | [added: | |] $ | [removed: 169,354] [added: 202,416] | | [added: | | | | | |]

| Deferred system revenue | [added: | | 336,237 | | | | | |] 282,348 | | | | [removed: —] | | | [added: | |]

| Deferred service revenue | [added: | | 233,493 | | | | | |] 206,669 | | | | [removed: 69,255] | | | [added: | |]

| Deferred system profit | [added: | |] — | | | | [removed: 279,581] | | [added: —] | [added: | | | | | 99,457 | | | | | | | | | | | | | | |]

| Current portion of long-term debt | [added: | | — | | | | | |] 249,999 | | | | [removed: —] | | | [added: | |]

| Other current liabilities | [added: | | 865,776 | | | | | |] 827,054 | | | | [removed: 696,080] | | | [added: | |]

| Total current liabilities | [added: | | 1,699,786 | | | | | |] 1,768,486 | | | | [removed: 1,214,270] | | | [added: | |]

| Non-current liabilities: | | | | | | | | [added: | | | | | | | | | |]

| Long-term debt | [added: | | 3,469,670 | | | | | |] 3,173,383 | | | | [removed: 2,237,402] | | | [added: | |]

| Deferred tax liabilities | [added: | | 660,885 | | | | | |] 702,285 | | | | [removed: 1,197] | | | [added: | |]

| Deferred service revenue | [added: | | 96,325 | | | | | |] 98,772 | | | | [removed: 71,997] | | | [added: | |]

| Other non-current liabilities | [added: | | 672,284 | | | | | |] 587,897 | | | | [removed: 493,242] | | | [added: | |]

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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Cash and cash equivalents | | | $ | 1,234,409 | | | | | $ | 1,015,994 | | | | | | | |

| | | | | | | | | | | | | | | | | | |

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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Goodwill impairment | | | 256,649 | | | | | | — | | | | | | — | | | | | | | | | | | | | | |

| Loss on extinguishment of debt | | | 22,538 | | | | | | — | | | | | | — | | | | | | | | | | | | | | |

KLA CORPORATION

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KLA CORPORATION

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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Net loss attributable to non-controlling interest | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | (1,760) | | | | | | (1,760) | | | | | | | | |

| Repurchase of common stock | | | (5,327) | | | | | | (67,799) | | | | | | (753,284) | | | | | | — | | | | | | (821,083) | | | | | | — | | | | | | (821,083) | | | | | | | | |

| Dividend to non-controlling interest | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | (1,239) | | | | | | (1,239) | | | | | | | | |

| Balances as of June 30, 2020 | | | 155,461 | | | | | | $ | 2,090,268 | | | | | $ | 654,930 | | | | | $ | (79,774) | | | | | $ | 2,665,424 | | | | | $ | 15,586 | | | | | $ | 2,681,010 | | | | | | | |

KLA CORPORATION

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Net income | | | $ | 1,215,025 | | | | | $ | 1,175,017 | | | | | $ | 802,265 | | | | | | | | | | | | | |

| Goodwill impairment | | | 256,649 | | | | | | — | | | | | | — | | | | | | | | | | | | | | |

| Loss on extinguishment of debt | | | 22,538 | | | | | | — | | | | | | — | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Other impairment charges | | | 13,341 | | | | | | 221 | | | | | | — | | | | | | | | | | | | | | |

| Settlement of treasury lock agreement | | | (21,518) | | | | | | — | | | | | | — | | | | | | | | | | | | | | |

| Proceeds from disposition of non-marketable securities | | | 1,086 | | | | | | — | | | | | | — | | | | | | | | | | | | | | |

| Payment of dividends to subsidiary's non-controlling interest holders | | | (1,239) | | | | | | — | | | | | | — | | | | | | | | | | | | | | |

| Contingent consideration payable and other, net | | | 2,936 | | | | | | (1,162) | | | | | | — | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Balances as of June 30, 2016 | 155,995 | | | $ | 452,974 | | | $ | 284,825 | | | $ | (48,685 | ) | | $ | 689,114 | | | $ | — | | | $ | 689,114 | |

| Net income | — | | | — | | | | 926,076 | | | | — | | | | 926,076 | | | | — | | | | 926,076 | | |

| Repurchase of common stock | (243 | ) | | (766 | | ) | | (24,236 | | ) | | — | | | | (25,002 | | ) | | — | | | | (25,002 | | ) |

| Deferred system profit | — | | | | 99,457 | | | | 6,310 | | |

| Proceeds from sale of assets | — | | | | — | | | | 2,947 | | |

| Cash and cash equivalents at beginning of period | 1,404,382 | | | | 1,153,051 | | | | 1,108,488 | | |

Description of Business and Principles of Consolidation.

On July 15, 2019, we changed our corporate name from “KLA-Tencor Corporation” to “KLA Corporation”.

Prior period results have been recast to conform to the current presentation.

Comparability.

Management Estimates.

impairment is other than temporary.

Non-Marketable Equity Securities.

Variable Interest Entities.

Inventories.

Property and Equipment.

Effective May 1, 2019, with the change in our reportable segments, we have determined there are now six reporting units, to which goodwill is allocated using an acquisition accounting method.

We perform either a qualitative or quantitative analysis when testing a reporting unit’s goodwill for impairment.

Otherwise, we are required to conduct a quantitative impairment test for each reporting unit and estimates the fair value of each reporting unit using a combination of a discounted cash flow analysis and a market approach based on market multiples.

In addition, as a result of the Orbotech Acquisition, during the fourth quarter of the fiscal year ended June 30, 2019 we updated our organizational structure and performed a qualitative assessment of the goodwill for our reporting units, which were impacted by the organizational change, and concluded that there were no impairment indicators affecting the valuation of goodwill subsequent to our annual impairment test.

The next annual evaluation of the goodwill by reporting unit will be performed in the third quarter of the fiscal year ending June 30, 2020.

Concentration of Credit Risk.

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| --- | --- | --- | --- | --- |

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| --- | --- | --- |

| | | Taiwan Semiconductor Manufacturing Company Limited |

| | | SK Hynix, Inc. |

Foreign Currency.

Derivative Financial Instruments.

Revenue Recognition.

With the acquisition of Orbotech we offer computer-aided manufacturing and engineering software solutions for the printed circuit boards production.

Upon the adoption of ASC 606, deferred costs of revenue are included in other current assets while under the legacy guidance deferred costs of revenue was included in deferred system profit.

Research and development costs are expensed as incurred.

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| --- | --- |

[removed: Evaluation] [added: *Evaluation] of Disclosure Controls and [removed: Procedures][added: Procedures*]

The [removed: controls] evaluation [added: of our disclosure controls and procedures] was conducted under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”).

Based on this evaluation, the CEO and CFO have concluded that as of [added: June 30, 2020,] the end of the period covered by this [removed: Report] [added: Report,] our Disclosure Controls were effective at a reasonable assurance level.

[removed: Definition] [added: *Definition] of Disclosure [removed: Controls][added: Controls*]

Disclosure Controls are controls and procedures designed to reasonably assure that information required to be disclosed in our reports filed [added: or submitted] under the Exchange Act, such as this Report, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

[removed: Management’s] [added: *Management’s] Report on Internal Control over Financial [removed: Reporting][added: Reporting*]

Under the supervision and with the participation of our management, including our CEO and CFO, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on criteria established in the framework in [removed: Internal] [added: *Internal] Control—Integrated Framework [removed: (2013)] [added: (2013)*] issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of June 30, [removed: 2019.][added: 2020.]

The effectiveness of our internal control over financial reporting as of June 30, [removed: 2019] [added: 2020] has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears in Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.

[removed: Limitations] [added: *Limitations] on the Effectiveness of [removed: Controls][added: Controls*]

[removed: Changes] [added: *Changes] in Internal Control over Financial [removed: Reporting][added: Reporting*]

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the fourth quarter of the fiscal year ended June 30, [removed: 2019] [added: 2020] that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management excluded Orbotech, Ltd (“Orbotech”), which was acquired by us on February 20, 2019, from its assessment of internal control over financial reporting as of June 30, 2019.

Total assets and revenues of Orbotech excluded from our assessment of internal control over financial reporting, were $917.6 million as of June 30, 2019, and $388.9 million for the year ended June 30, 2019, respectively.

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[removed: PART III][added: PART III]

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| --- | --- |

For the information required by this Item, see “Information About the Directors and the Nominees,” “Information About Executive Officers,” “Security Ownership of Certain Beneficial Owners and [removed: Management—Section] [added: Management—Delinquent Section] 16(a) [added: Reports] Beneficial Ownership Reporting Compliance,” “Our Corporate Governance Practices—Standards of Business Conduct; Whistleblower Hotline and Website” and “Information About the Board of Directors and Its Committees—Audit Committee” in the Proxy Statement, which is incorporated herein by reference.

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For the information required by this Item, see “Proposal Two: Ratification of Appointment of PricewaterhouseCoopers LLP as Our Independent Registered Public Accounting Firm for the Fiscal Year Ending June 30, [removed: 2020”] [added: 2021”] in the Proxy Statement, which is incorporated herein by reference.

[removed: PART IV][added: PART IV]

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| --- | --- |

| [Consolidated Balance Sheets as of June 30, [removed: 2019] [added: 2020] and June 30, [removed: 2018](#s813814BC73DF5692BE7D8F65D7DBA45C)] [added: 2019](#icfc6141545384cc4921c04f73dba6092_85)] | [removed: [62](#s813814BC73DF5692BE7D8F65D7DBA45C)] | [added: | [61](#icfc6141545384cc4921c04f73dba6092_85) | | |]

| [Consolidated Statements of Operations for each of the three years in the period ended June 30, [removed: 2019](#sACDC7199BAE5545FB4EF1136E04B9D23)] [added: 2020](#icfc6141545384cc4921c04f73dba6092_91)] | [removed: [63](#sACDC7199BAE5545FB4EF1136E04B9D23)] | [added: | [62](#icfc6141545384cc4921c04f73dba6092_91) | | |]

| [Consolidated Statements of Comprehensive Income for each of the three years in the period ended June 30, [removed: 2019](#sDDB429BFD9B6545BB52A3F64C8B2F4E7)] [added: 2020](#icfc6141545384cc4921c04f73dba6092_94)] | [removed: [64](#sDDB429BFD9B6545BB52A3F64C8B2F4E7)] | [added: | [63](#icfc6141545384cc4921c04f73dba6092_94) | | |]

| [Consolidated Statements of Stockholders’ Equity for each of the three years in the period ended June 30, [removed: 2019](#s4CEBB987C4265A0A948458498F68812E)] [added: 2020](#icfc6141545384cc4921c04f73dba6092_97)] | [removed: [65](#s4CEBB987C4265A0A948458498F68812E)] | [added: | [64](#icfc6141545384cc4921c04f73dba6092_97) | | |]

| [Consolidated Statements of Cash Flows for each of the three years in the period ended June 30, [removed: 2019](#s8EB76A93713457CC9FE6D9978AB46A2C)] [added: 2020](#icfc6141545384cc4921c04f73dba6092_103)] | [removed: [66](#s8EB76A93713457CC9FE6D9978AB46A2C)] | [added: | [65](#icfc6141545384cc4921c04f73dba6092_103) | | |]

| [Notes to Consolidated Financial [removed: Statements](#s55E7F2DA7FAA5C5981B4815D162F3ABD)] [added: Statements](#icfc6141545384cc4921c04f73dba6092_106)] | [removed: [67](#s55E7F2DA7FAA5C5981B4815D162F3ABD)] | [added: | [67](#icfc6141545384cc4921c04f73dba6092_106) | | |]

| [Report of Independent Registered Public Accounting [removed: Firm](#sA0771C1005F45C40976CBABB0CD81B48)] [added: Firm](#icfc6141545384cc4921c04f73dba6092_196)] | [removed: [116](#sA0771C1005F45C40976CBABB0CD81B48)] | [added: | [114](#icfc6141545384cc4921c04f73dba6092_196) | | |]

| [Schedule II—Valuation and Qualifying [removed: Accounts](#s8831D33445945678A89EAC6EDA9ED2AE)] [added: Accounts] for the years ended June 30, [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017] [added: 2018](#icfc6141545384cc4921c04f73dba6092_235)] | [removed: [125](#s8831D33445945678A89EAC6EDA9ED2AE)] | [added: | [122](#icfc6141545384cc4921c04f73dba6092_235) | | |]

[removed: SIGNATURES][added: SIGNATURES]

| | | | | [added: | | | | | | | |] KLA Corporation | [added: | |]

| August [removed: 16, 2019] [added: 6, 2020] | | [added: | | | |] By: | | [added: | | | |] /S/ RICHARD P. WALLACE | [added: | |]

| (Date) | | | | [removed: Richard] [added: | | | | | | | | Richard] P. [removed: Wallace] [added: Wallace] | [added: | |]

| | | | | [removed: President] [added: | | | | | | | | President] and Chief Executive [removed: Officer] [added: Officer] | [added: | |]

| [removed: Signature] [added: Signature] | | [removed: Title] | | [removed: Date] | [added: | Title | | | | | | Date | | |]

| /s/ RICHARD P. WALLACE | | [added: | | | |] President, Chief Executive Officer and Director (principal executive officer) | | [added: | | | |] August [removed: 16, 2019] [added: 6, 2020] | [added: | |]

| [removed: Richard] [added: Richard] P. [removed: Wallace] [added: Wallace] | | | | | [added: | | | | | | | | | |]

| /s/ BREN D. HIGGINS | | [added: | | | |] Executive Vice President and Chief Financial Officer (principal financial officer) | | [added: | | | |] August [removed: 16, 2019] [added: 6, 2020] | [added: | |]

| [removed: Bren] [added: Bren] D. [removed: Higgins] [added: Higgins] | | | | | [added: | | | | | | | | | |]

| /s/ VIRENDRA A. KIRLOSKAR | | [added: | | | |] Senior Vice President and Chief Accounting Officer (principal accounting officer) | | [added: | | | |] August [removed: 16, 2019] [added: 6, 2020] | [added: | |]

| [removed: Virendra] [added: Virendra] A. [removed: Kirloskar] [added: Kirloskar] | | | | | [added: | | | | | | | | | |]

| /s/ EDWARD W. BARNHOLT | | [added: | | | |] Chairman of the Board and Director | | [added: | | | |] August [removed: 15, 2019] [added: 6, 2020] | [added: | |]

| [removed: Edward] [added: Edward] W. [removed: Barnholt] [added: Barnholt] | | | | | [added: | | | | | | | | | |]

| /s/ ROBERT M. CALDERONI | | [added: | | | |] Director | | [added: | | | |] August [removed: 14, 2019] [added: 6, 2020] | [added: | |]

| [removed: Robert] [added: Robert] M. [removed: Calderoni] [added: Calderoni] | | | | | [added: | | | | | | | | | |]