Item 1. FINANCIAL STATEMENTS

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Item 1. FINANCIAL STATEMENTS

KLA CORPORATION

Condensed Consolidated Balance Sheets

(Unaudited)


(In thousands)	March 31, 2022		June 30, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	1,415,172	$	1,434,610
Marketable securities	1,162,724		1,059,912
Accounts receivable, net	1,618,867		1,305,479
Inventories	1,982,297		1,575,380
Other current assets	403,657		320,867
Total current assets	6,582,717		5,696,248
Land, property and equipment, net	808,874		663,027
Goodwill	2,314,471		2,011,172
Deferred income taxes	614,957		270,461
Purchased intangible assets, net	1,255,672		1,185,311
Other non-current assets	441,121		444,905
Total assets	$	12,017,812	$	10,271,124
LIABILITIES, NON-CONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	424,128	$	342,083
Deferred system revenue	428,723		295,192
Deferred service revenue	350,429		284,936
Short-term debt	—		20,000
Other current liabilities	1,625,703		1,161,016
Total current liabilities	2,828,983		2,103,227
Long-term debt	3,699,799		3,422,767
Deferred tax liabilities	660,816		650,623
Deferred service revenue	107,424		87,575
Other non-current liabilities	642,166		631,290
Total liabilities	7,939,188		6,895,482
Commitments and contingencies (Notes 9, 14 and 15)
Stockholders’ equity:
Common stock and capital in excess of par value	2,179,229		2,175,988
Retained earnings	1,972,611		1,277,123
Accumulated other comprehensive loss	(71,533)		(75,557)
Total KLA stockholders’ equity	4,080,307		3,377,554
Non-controlling interest in consolidated subsidiaries	(1,683)		(1,912)
Total stockholders’ equity	4,078,624		3,375,642
Total liabilities and stockholders’ equity	$	12,017,812	$	10,271,124

See accompanying notes to Condensed Consolidated Financial Statements (unaudited).

KLA CORPORATION

Condensed Consolidated Statements of Operations

(Unaudited)


	Three Months Ended March 31,				Nine Months Ended March 31,
(In thousands, except per share amounts)	2022		2021		2022		2021
Revenues:
Product	$	1,800,659	$	1,375,320	$	5,326,316	$	3,758,838
Service	488,017		428,453		1,398,828		1,234,425
Total revenues	2,288,676		1,803,773		6,725,144		4,993,263
Costs and expenses:
Costs of revenues	892,091		709,629		2,613,877		1,999,924
Research and development	285,189		238,957		808,373		687,059
Selling, general and administrative	216,489		183,040		623,229		537,580

Interest expense	39,978		39,092		116,142		117,358

Other expense (income), net	8,644		(7,348)		23,985		(269)
Income before income taxes	846,285		640,403		2,539,538		1,651,611
Provision for income taxes	115,625		73,233		22,876		207,316

Net income	730,660		567,170		2,516,662		1,444,295
Less: Net income (loss) attributable to non-controlling interest	88		(326)		229		(1,019)
Net income attributable to KLA	$	730,572	$	567,496	$	2,516,433	$	1,445,314
Net income per share attributable to KLA
Basic	$	4.87	$	3.69	$	16.64	$	9.36
Diluted	$	4.83	$	3.66	$	16.52	$	9.28
Weighted-average number of shares:
Basic	150,145		153,801		151,250		154,457
Diluted	151,186		155,159		152,346		155,789

See accompanying notes to Condensed Consolidated Financial Statements (unaudited).

KLA CORPORATION

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)


	Three Months Ended March 31,				Nine Months Ended March 31,
(In thousands)	2022		2021		2022		2021
Net income	$	730,660	$	567,170	$	2,516,662	$	1,444,295
Other comprehensive income (loss):
Currency translation adjustments:
Cumulative currency translation adjustments	413		(2,079)		(3,733)		12,262
Income tax (provision) benefit	870		(417)		1,265		(1,607)
Net change related to currency translation adjustments	1,283		(2,496)		(2,468)		10,655
Cash flow hedges:
Net unrealized gains arising during the period	17,777		5,824		25,370		3,550
Reclassification adjustments for net (gains) losses included in net income	(992)		675		(3,122)		1,736
Income tax provision	(4,023)		(1,629)		(5,047)		(1,369)
Net change related to cash flow hedges	12,762		4,870		17,201		3,917
Net change related to unrecognized losses and transition obligations in connection with defined benefit plans	467		872		1,675		(2,626)
Available-for-sale securities:
Net unrealized losses arising during the period	(12,270)		(1,268)		(15,860)		(3,130)
Reclassification adjustments for net (gains) losses included in net income	88		(25)		90		(238)
Income tax benefit	2,616		278		3,386		723
Net change related to available-for-sale securities	(9,566)		(1,015)		(12,384)		(2,645)
Other comprehensive income	4,946		2,231		4,024		9,301
Less: Comprehensive income (loss) attributable to non-controlling interest	88		(326)		229		(1,019)
Total comprehensive income attributable to KLA	$	735,518	$	569,727	$	2,520,457	$	1,454,615

See accompanying notes to Condensed Consolidated Financial Statements (unaudited).

KLA CORPORATION

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)


	Common Stock and Capital in Excess of Par Value			Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total KLA Stockholders’ Equity		Non- Controlling Interest		Total Stockholders’ Equity
(In thousands, except per share amounts)	Shares	Amount
Balances as of June 30, 2021	152,776	$	2,175,988	$	1,277,123	$	(75,557)	$	3,377,554	$	(1,912)	$	3,375,642

Net income attributable to KLA	—	—		1,068,417		—		1,068,417		—		1,068,417




Net income attributable to non-controlling interest	—	—		—		—		—		68		68
Other comprehensive loss	—	—		—		(2,487)		(2,487)		—		(2,487)


Net issuance under employee stock plans	160	(46,532)		—		—		(46,532)		—		(46,532)
Repurchase of common stock	(1,190)	(16,966)		(382,711)		—		(399,677)		—		(399,677)
Cash dividends ($1.05 per share) and dividend equivalents declared	—	—		(161,561)		—		(161,561)		—		(161,561)

Stock-based compensation expense	—	25,216		—		—		25,216		—		25,216
Balances as of September 30, 2021	151,746	2,137,706		1,801,268		(78,044)		3,860,930		(1,844)		3,859,086
Net income attributable to KLA	—	—		717,444		—		717,444		—		717,444




Net income attributable to non-controlling interest	—	—		—		—		—		73		73
Other comprehensive income	—	—		—		1,565		1,565		—		1,565


Net issuance under employee stock plans	205	31,157		—		—		31,157		—		31,157
Repurchase of common stock	(1,104)	(15,604)		(414,270)		—		(429,874)		—		(429,874)
Cash dividends ($1.05 per share) and dividend equivalents declared	—	—		(160,461)		—		(160,461)		—		(160,461)

Stock-based compensation expense	—	27,766		—		—		27,766		—		27,766
Balances as of December 31, 2021	150,847	2,181,025		1,943,981		(76,479)		4,048,527		(1,771)		4,046,756
Net income attributable to KLA	—	—		730,572		—		730,572		—		730,572




Net income attributable to non-controlling interest	—	—		—		—		—		88		88
Other comprehensive income	—	—		—		4,946		4,946		—		4,946


Net issuance under employee stock plans	67	(16,661)		—		—		(16,661)		—		(16,661)
Repurchase of common stock	(1,539)	(22,222)		(542,444)		—		(564,666)		—		(564,666)
Cash dividends ($1.05 per share) and dividend equivalents declared	—	—		(159,498)		—		(159,498)		—		(159,498)

Stock-based compensation expense	—	37,087		—		—		37,087		—		37,087


Balances as of March 31, 2022	149,375	$	2,179,229	$	1,972,611	$	(71,533)	$	4,080,307	$	(1,683)	$	4,078,624


	Common Stock and Capital in Excess of Par Value			Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total KLA Stockholders’ Equity		Non- Controlling Interest		Total Stockholders’ Equity
(In thousands, except per share amounts)	Shares	Amount
Balances as of June 30, 2020	155,461	$	2,090,268	$	654,930	$	(79,774)	$	2,665,424	$	15,586	$	2,681,010
Adoption of ASC 326	—	—		(5,530)		—		(5,530)		—		(5,530)
Net income attributable to KLA	—	—		420,567		—		420,567		—		420,567




Net loss attributable to non-controlling interest	—	—		—		—		—		(425)		(425)
Other comprehensive income	—	—		—		328		328		—		328
Net issuance under employee stock plans	172	(25,145)		—		—		(25,145)		—		(25,145)
Repurchase of common stock	(1,027)	(19,400)		(174,497)		—		(193,897)		—		(193,897)
Cash dividends ($0.90 per share) and dividend equivalents declared	—	—		(141,555)		—		(141,555)		—		(141,555)
Stock-based compensation expense	—	26,992		—		—		26,992		—		26,992
Balances as of September 30, 2020	154,606	2,072,715		753,915		(79,446)		2,747,184		15,161		2,762,345
Net income attributable to KLA	—	—		457,251		—		457,251		—		457,251
Net loss attributable to non-controlling interest	—	—		—		—		—		(268)		(268)
Other comprehensive income	—	—		—		6,742		6,742		—		6,742
Net issuance under employee stock plans	329	15,356		—		—		15,356		—		15,356
Repurchase of common stock	(774)	(10,477)		(167,015)		—		(177,492)		—		(177,492)
Cash dividends ($0.90 per share) and dividend equivalents declared	—	—		(140,455)		—		(140,455)		—		(140,455)
Stock-based compensation expense	—	26,596		—		—		26,596		231		26,827
Balances as of December 31, 2020	154,161	2,104,190		903,696		(72,704)		2,935,182		15,124		2,950,306
Net income attributable to KLA	—	—		567,496		—		567,496		—		567,496
Net loss attributable to non-controlling interest	—	—		—		—		—		(326)		(326)
Other comprehensive income	—	—		—		2,231		2,231		—		2,231


Net issuance under employee stock plans	104	(6,674)		—		—		(6,674)		—		(6,674)
Repurchase of common stock	(906)	(12,431)		(261,010)		—		(273,441)		—		(273,441)
Cash dividends ($0.90 per share) and dividend equivalents declared	—	—		(140,058)		—		(140,058)		—		(140,058)

Stock-based compensation expense	—	30,120		—		—		30,120		207		30,327
Net issuance on exercise of options by non-controlling interest	—	—		—		—		—		127		127
Disposal of non-controlling interest	—	—		—		—		—		(17,124)		(17,124)
Balances as of March 31, 2021	153,359	$	2,115,205	$	1,070,124	$	(70,473)	$	3,114,856	$	(1,992)	$	3,112,864

See accompanying notes to Condensed Consolidated Financial Statements (unaudited).

KLA CORPORATION

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Nine Months Ended March 31,
(In thousands)	2022		2021
Cash flows from operating activities:
Net income	$	2,516,662	$	1,444,295
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization	262,496		248,688

Unrealized foreign exchange (gain) loss and other	14,669		(13,339)
Asset impairment charges	5,962		842
Stock-based compensation expense	90,069		84,146
Gain on sale of business	—		(4,422)

Deferred income taxes	(382,975)		(39,658)
Changes in assets and liabilities, net of assets acquired and liabilities assumed in business acquisitions:
Accounts receivable	(318,271)		(101,134)
Inventories	(396,403)		(146,375)
Other assets	(23,729)		(32,480)
Accounts payable	82,376		30,952
Deferred system revenue	141,122		(3,775)
Deferred service revenue	81,216		10,076
Other liabilities	420,279		241,586
Net cash provided by operating activities	2,493,473		1,719,402
Cash flows from investing activities:
Proceeds from sale of assets	—		1,855
Proceeds from sale of business	—		16,833
Business acquisitions, net of cash acquired	(470,887)		—
Capital expenditures	(234,160)		(176,252)
Purchases of available-for-sale securities	(733,386)		(795,124)
Proceeds from sale of available-for-sale securities	67,505		125,774
Proceeds from maturity of available-for-sale securities	524,677		418,447
Purchases of trading securities	(101,342)		(83,866)
Proceeds from sale of trading securities	95,734		84,919
Proceeds from other investments	795		614
Net cash used in investing activities	(851,064)		(406,800)
Cash flows from financing activities:

Proceeds from issuance of debt, net of issuance costs	—		40,343
Proceeds from revolving credit facility	600,000		—
Repayment of debt	(345,000)		(70,000)
Common stock repurchases	(1,394,217)		(638,830)
Payment of dividends to stockholders	(480,926)		(420,086)

Issuance of common stock	36,912		26,356
Tax withholding payments related to vested and released restricted stock units	(68,948)		(42,819)
Contingent consideration payable and other, net	(1,100)		—


Net cash used in financing activities	(1,653,279)		(1,105,036)
Effect of exchange rate changes on cash and cash equivalents	(8,568)		10,175
Net (decrease) increase in cash and cash equivalents	(19,438)		217,741
Cash and cash equivalents at beginning of period	1,434,610		1,234,409
Cash and cash equivalents at end of period	$	1,415,172	$	1,452,150
Supplemental cash flow disclosures:
Income taxes paid	$	355,176	$	214,606
Interest paid	$	116,791	$	116,976
Non-cash activities:


Contingent consideration (receivable) payable - financing activities	$	15,086	$	(8,570)
Dividends payable - financing activities	$	5,375	$	4,857
Unsettled common stock repurchase - financing activities	$	6,000	$	6,000

Accrued purchases of land, property and equipment - investing activities	$	22,305	$	24,392

See accompanying notes to Condensed Consolidated Financial Statements (unaudited).

KLA CORPORATION

Notes to Condensed Consolidated Financial Statements

(Unaudited)

NOTE 1 – BASIS OF PRESENTATION

Basis of Presentation. For purposes of this report, “KLA,” the “Company,” “we,” “our,” “us,” or similar references mean KLA Corporation and its majority-owned subsidiaries unless the context requires otherwise. The Condensed Consolidated Financial Statements have been prepared by us pursuant to the rules and regulations of the U.S. Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to such rules and regulations.

The unaudited interim Condensed Consolidated Financial Statements do not include all of the information and footnotes required by GAAP for audited financial statements. The balance sheet as of June 30, 2021 was derived from the Company’s audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021 but does not include all disclosures required by GAAP for audited financial statements. The unaudited interim Condensed Consolidated Financial Statements reflect all adjustments (consisting only of normal, recurring adjustments) necessary for a fair statement of the financial position, results of operations, comprehensive income, stockholders’ equity and cash flows for the periods indicated. These Condensed Consolidated Financial Statements and notes, however, should be read in conjunction with Item 8 “Financial Statements and Supplementary Data” included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021.

The Condensed Consolidated Financial Statements include the accounts of KLA and its majority-owned subsidiaries. All significant intercompany balances and transactions have been eliminated.

The results of operations for the three and nine months ended March 31, 2022 are not necessarily indicative of the results that may be expected for any other interim period or for the full fiscal year ending June 30, 2022.

Management Estimates. The preparation of the Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions in applying our accounting policies that affect the reported amounts of assets and liabilities (and related disclosure of contingent assets and liabilities) at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses for the reporting periods. Actual results could differ from those estimates.

Significant Accounting Policies. There have been no material changes to our significant accounting policies summarized in Note 1 “Description of Business and Summary of Significant Accounting Policies” to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021.

Recent Accounting Pronouncements

In October 2021, Financial Accounting Standards Board (“FASB”) issued authoritative guidance that requires companies to apply revenue guidance to recognize and measure contract assets and contract liabilities from contracts with customers acquired in a business combination at carrying value. Under the current business combination guidance, such assets and liabilities are recognized by the acquirer at fair value on the acquisition date. This update is effective for us in the first quarter of our fiscal year ending June 30, 2024 and should be applied on a prospective basis. Early adoption is permitted. We are currently evaluating the impact of this guidance on our condensed consolidated financial statements.

Recently Adopted

In December 2019, the FASB issued an Accounting Standards Update (“ASU”) to simplify the accounting for income taxes in Accounting Standards Codification (“ASC”) 740, Income Taxes (“ASC 740”). This amendment removes certain exceptions and improves consistent application of accounting principles for certain areas in ASC 740. We adopted this update beginning in the first quarter of our fiscal year ending June 30, 2022 on a prospective basis and the adoption had no material impact on our Condensed Consolidated Financial Statements.

In August 2020, the FASB issued an ASU to simplify the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The standard eliminates beneficial conversion features and cash conversion models resulting in more convertible instruments being accounted for as a single unit, and modifies the guidance on the computation of earnings per share for convertible instruments and contracts on an

entity’s own equity. We adopted this update beginning in the first quarter of our fiscal year ending June 30, 2022 on a modified retrospective basis and the adoption had no material impact on our Condensed Consolidated Financial Statements.

NOTE 2 – REVENUE

Contract Balances

The following table represents the opening and closing balances of accounts receivable, net, contract assets and contract liabilities as of the indicated dates.


	As of		As of
(Dollar amounts in thousands)	March 31, 2022		June 30, 2021		$ Change		% Change
Accounts receivable, net	$	1,618,867	$	1,305,479	$	313,388	24	%
Contract assets	$	104,838	$	91,052	$	13,786	15	%
Contract liabilities	$	886,576	$	667,703	$	218,873	33	%

Our payment terms and conditions vary by contract type, although the terms generally include a requirement of payment of 70% to 90% of total contract consideration within 30 to 60 days of product shipment, with the remainder payable within 30 days of acceptance.

The change in contract assets during the nine months ended March 31, 2022 was mainly due to $80.3 million of revenue recognized for which the payment is subject to conditions other than passage of time, partially offset by $66.9 million of contract assets reclassified to net accounts receivable as our right to consideration for these contract assets became unconditional. Contract assets are included in Other current assets on our Condensed Consolidated Balance Sheets.

The change in contract liabilities during the nine months ended March 31, 2022 was mainly due to an increase for the value of products and services billed to customers for which control of the products and service has not transferred to the customers, partially offset by the recognition in revenue of $495.8 million that was included in contract liabilities as of June 30, 2021. The change in contract liabilities during the nine months ended March 31, 2021 was mainly due to an increase for the value of products and services billed to customers for which control of the products and service has not transferred to the customers, partially offset by the recognition in revenue of $498.7 million that was included in contract liabilities as of June 30, 2020. Contract liabilities are included in current and non-current liabilities on our Condensed Consolidated Balance Sheets.

Remaining Performance Obligations

As of March 31, 2022, we had $10.55 billion of remaining performance obligations, which represents our obligation to deliver products and services, and consists primarily of sales orders where written customer requests have been received. We expect to recognize approximately 30% to 45% of these performance obligations as revenue beyond the next 12 months, but this estimate is subject to constant change depending upon supply chain constraints, customer slot change requests and potential elevated demand levels, which could require even longer lead times.

Refer to Note 18 “Segment Reporting and Geographic Information” to our Condensed Consolidated Financial Statements for information related to revenues by geographic region as well as significant product and service offerings.

NOTE 3 – FAIR VALUE MEASUREMENTS

Our financial assets and liabilities are measured and recorded at fair value, except for our debt and certain equity investments in privately held companies. Equity investments without a readily available fair value are accounted for using the measurement alternative. The measurement alternative is calculated as cost minus impairment, if any, plus or minus changes resulting from observable price changes. See Note 8 “Debt” to our Condensed Consolidated Financial Statements for disclosure of the fair value of our Senior Notes.

Our non-financial assets, such as goodwill, intangible assets, and land, property and equipment, are assessed for impairment when an event or circumstance indicates that an other-than-temporary decline in value may have occurred.

Fair Value of Financial Instruments. We have evaluated the estimated fair value of financial instruments using available market information and valuations as provided by third-party sources. The use of different market assumptions and/or estimation methodologies could have a significant effect on the estimated fair value amounts. The fair value of our cash equivalents, accounts receivable, accounts payable and other current assets and liabilities approximate their carrying amounts due to the relatively short maturity of these items.

Fair Value Hierarchy. The authoritative guidance for fair value measurements establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:


Level 1						Valuations based on quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.

Level 2						Valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.

Level 3						Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Besides the transfer listed in the table below, there were no other transfers between Level 1, Level 2 and Level 3 fair value measurements during the nine months ended March 31, 2022.

The types of instruments valued based on quoted market prices in active markets include money market funds, certain U.S. Treasury securities, U.S. Government agency securities and equity securities. Such instruments are generally classified within Level 1 of the fair value hierarchy.

The types of instruments valued based on other observable inputs include corporate debt securities, sovereign securities, municipal securities, and certain U.S. Treasury securities. The market inputs used to value these instruments generally consist of market yields, reported trades and broker/dealer quotes. Such instruments are generally classified within Level 2 of the fair value hierarchy.

The principal market in which we execute our foreign currency contracts is the institutional market in an over-the-counter environment with a relatively high level of price transparency. The market participants generally are large financial institutions. Our foreign currency contracts’ valuation inputs are based on quoted prices and quoted pricing intervals from public data sources and do not involve management judgment. These contracts are typically classified within Level 2 of the fair value hierarchy.

The fair values of deferred payments and contingent consideration payable, the majority of which were recorded in connection with business combinations, were classified as Level 3 and estimated using significant inputs that were not observable in the market. See Note 6 “Business Combinations and Dispositions” to our Condensed Consolidated Financial Statements for additional information.

Financial assets (excluding cash held in operating accounts and time deposits) and liabilities measured at fair value on a recurring basis, as of the date indicated below, were presented on our Condensed Consolidated Balance Sheets as follows:


			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Little or No Market Activity Inputs
As of March 31, 2022 (In thousands)	Total		(Level 1)		(Level 2)		(Level 3)
Assets
Cash equivalents:
Corporate debt securities	$	858	$	—	$	858	$	—
Money market funds and other	734,466		734,466		—		—

U.S. Treasury securities	1,500		—		1,500		—




Marketable securities:
Corporate debt securities	470,153		—		470,153		—
Municipal securities	65,703		—		65,703		—
Sovereign securities	6,000		—		6,000		—
U.S. Government agency securities	114,249		114,249		—		—
U.S. Treasury securities	347,318		332,298		15,020		—

Equity securities(1)	15,796		15,796		—		—

Total cash equivalents and marketable securities(2)	1,756,043		1,196,809		559,234		—
Other current assets:
Derivative assets	44,762		—		44,762		—
Other non-current assets:
Executive Deferred Savings Plan	260,634		199,933		60,701		—
Total financial assets(2)	$	2,061,439	$	1,396,742	$	664,697	$	—
Liabilities
Derivative liabilities	$	(8,887)	$	—	$	(8,887)	$	—
Deferred payments	(2,275)		—		—		(2,275)
Contingent consideration payable	(22,501)		—		—		(22,501)


Total financial liabilities	$	(33,663)	$	—	$	(8,887)	$	(24,776)

(1) Transfer from Level 2 to Level 1 as the security specific restriction expired during the first quarter of the fiscal year ending June 30, 2022.

(2) Excludes cash of $551.6 million held in operating accounts and time deposits of $270.3 million (of which $126.8 million were cash equivalents) as of March 31, 2022.


			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Little or No Market Activity Inputs
As of June 30, 2021 (In thousands)	Total		(Level 1)		(Level 2)		(Level 3)
Assets
Cash equivalents:


Money market funds and other	$	691,375	$	691,375	$	—	$	—





Marketable securities:
Corporate debt securities	468,746		—		468,746		—
Municipal securities	70,228		—		70,228		—
Sovereign securities	3,052		—		3,052		—
U.S. Government agency securities	145,921		145,921		—		—
U.S. Treasury securities	233,064		205,055		28,009		—

Equity securities	29,930		—		29,930		—

Total cash equivalents and marketable securities(1)	1,642,316		1,042,351		599,965		—
Other current assets:
Derivative assets	8,252		—		8,252		—
Other non-current assets:
Executive Deferred Savings Plan	266,199		200,925		65,274		—
Total financial assets(1)	$	1,916,767	$	1,243,276	$	673,491	$	—
Liabilities
Derivative liabilities	$	(2,807)	$	—	$	(2,807)	$	—
Deferred payments	(4,550)		—		—		(4,550)
Contingent consideration payable	(8,514)		—		—		(8,514)

Total financial liabilities	$	(15,871)	$	—	$	(2,807)	$	(13,064)

(1) Excludes cash of $641.6 million held in operating accounts and time deposits of $210.6 million (of which $101.7 million were cash equivalents) as of June 30, 2021.

NOTE 4 – FINANCIAL STATEMENT COMPONENTS

Condensed Consolidated Balance Sheets


	As of		As of
(In thousands)	March 31, 2022		June 30, 2021
Accounts receivable, net:
Accounts receivable, gross	$	1,637,904	$	1,323,515
Allowance for credit losses	(19,037)		(18,036)
	$	1,618,867	$	1,305,479
Inventories:
Customer service parts	$	393,215	$	349,743
Raw materials	900,069		595,151
Work-in-process	441,563		453,432
Finished goods	247,450		177,054
	$	1,982,297	$	1,575,380
Other current assets:
Contract assets	$	104,838	$	91,052
Deferred costs of revenues	90,584		59,953
Prepaid expenses	84,073		76,649
Prepaid income and other taxes	46,126		68,847
Other current assets	78,036		24,366
	$	403,657	$	320,867
Land, property and equipment, net:
Land	$	67,857	$	67,862
Buildings and leasehold improvements	631,467		458,605
Machinery and equipment	782,070		743,710
Office furniture and fixtures	42,617		32,856
Construction-in-process	156,315		182,320
	1,680,326		1,485,353
Less: accumulated depreciation	(871,452)		(822,326)
	$	808,874	$	663,027
Other non-current assets:
Executive Deferred Savings Plan(1)	$	260,634	$	266,199

Operating lease right of use assets	101,240		102,883
Other non-current assets	79,247		75,823
	$	441,121	$	444,905
Other current liabilities:
Customer credits and advances	$	558,487	$	250,784
Compensation and benefits	420,803		305,445
Executive Deferred Savings Plan(1)	262,907		268,028
Other accrued expenses	196,919		180,982

Income taxes payable	120,803		87,320
Interest payable	34,626		36,135
Operating lease liabilities	31,158		32,322
	$	1,625,703	$	1,161,016
Other non-current liabilities:
Income taxes payable	$	346,516	$	333,866
Pension liabilities	81,102		87,602
Operating lease liabilities	62,053		70,739
Other non-current liabilities	152,495		139,083
	$	642,166	$	631,290

(1)We have a non-qualified deferred compensation plan (known as “Executive Deferred Savings Plan” or “EDSP”) under which certain employees and non-employee directors may defer a portion of their compensation. The expense (benefit) associated with changes in the EDSP liability included in selling, general and administrative (“SG&A”) expense was $(18.8) million and $5.7 million during the three months ended March 31, 2022 and 2021, respectively, and was $(7.8) million and $41.0 million during the nine months ended March 31, 2022 and 2021, respectively. The amount of net gains (losses) associated with changes in the EDSP assets included in SG&A expense was $(18.7) million and $5.8 million during the three months ended March 31, 2022 and 2021, respectively and was $(8.0) million and $41.3 million during the nine months ended March 31, 2022 and 2021, respectively. For additional details, refer to Note 1 “Description of Business and Summary of Significant Accounting Policies” to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021.

Accumulated Other Comprehensive Income (Loss)

The components of Accumulated Other Comprehensive Income (Loss) (“AOCI”) as of the dates indicated below were as follows:


(In thousands)	Currency Translation Adjustments		Unrealized Gains (Losses) on Available-for-Sale Securities		Unrealized Gains (Losses) on Derivatives		Unrealized Gains (Losses) on Defined Benefit Plans		Total
Balance as of March 31, 2022	$	(35,031)	$	(11,789)	$	(2,891)	$	(21,822)	$	(71,533)

Balance as of June 30, 2021	$	(32,563)	$	595	$	(20,092)	$	(23,497)	$	(75,557)

The effects on net income (loss) of amounts reclassified from AOCI to the Condensed Consolidated Statements of Operations for the indicated period were as follows (in thousands; amounts in parentheses indicate debits or reductions to earnings):


AOCI Components				Three Months Ended						Nine Months Ended
	Location in the Condensed Consolidated		March 31,						March 31,
	Statement of Operations		2022			2021			2022			2021
Unrealized gains (losses) on cash flow hedges from foreign exchange and interest rate contracts		Revenues		$	1,600		$	(583)		$	4,868		$	(1,511)
		Costs of revenues and operating expenses		(329)			187			(909)			612
		Interest expense		(279)			(279)			(837)			(837)

		Net gains (losses) reclassified from AOCI		$	992		$	(675)		$	3,122		$	(1,736)
Unrealized gains (losses) on available-for-sale securities		Other expense (income), net		$	(88)		$	25		$	(90)		$	238

The amounts reclassified out of AOCI related to our defined benefit pension plans that were recognized as a component of net periodic cost for the three months ended March 31, 2022 and 2021 were $0.4 million and $0.3 million, respectively and for the nine months ended March 31, 2022 and 2021 were $1.1 million and $0.8 million, respectively. For additional details, refer to Note 13 “Employee Benefit Plans” to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021.

NOTE 5 – MARKETABLE SECURITIES

The amortized cost and fair value of marketable securities as of the dates indicated below were as follows:


As of March 31, 2022 (In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Corporate debt securities	$	477,237	$	18	$	(6,244)	$	471,011
Money market funds and other	734,466		—		—		734,466

Municipal securities	66,714		—		(1,011)		65,703
Sovereign securities	6,044		2		(46)		6,000
U.S. Government agency securities	115,223		38		(1,012)		114,249
U.S. Treasury securities	355,576		13		(6,771)		348,818
Equity securities(1)	3,211		12,585		—		15,796

Subtotal	1,758,471		12,656		(15,084)		1,756,043
Add: Time deposits(2)	270,290		—		—		270,290
Less: Cash equivalents	863,609		—		—		863,609
Marketable securities	$	1,165,152	$	12,656	$	(15,084)	$	1,162,724


As of June 30, 2021 (In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Corporate debt securities	$	468,192	$	689	$	(135)	$	468,746
Money market funds and other	691,375		—		—		691,375
Municipal securities	70,155		106		(33)		70,228
Sovereign securities	3,045		7		—		3,052
U.S. Government agency securities	145,810		160		(49)		145,921
U.S. Treasury securities	233,052		129		(117)		233,064
Equity securities(1)	3,211		26,719		—		29,930

Subtotal	1,614,840		27,810		(334)		1,642,316
Add: Time deposits(2)	210,636		—		—		210,636
Less: Cash equivalents	793,040		—		—		793,040
Marketable securities	$	1,032,436	$	27,810	$	(334)	$	1,059,912

(1) Unrealized gains on equity securities included in our portfolio include the initial fair value adjustment recorded upon a security becoming marketable.

(2) Time deposits excluded from fair value measurements.

Our investment portfolio includes both corporate and government securities that have a maximum maturity of three years. The longer the duration of these securities, the more susceptible they are to changes in market interest rates and bond yields. As yields increase, those securities with a lower yield-at-cost show a mark-to-market unrealized loss. Most of our unrealized losses are due to changes in market interest rates and bond yields. We believe that we have the ability to realize the full value of all of these investments upon maturity. As of March 31, 2022, we had 543 investments in a gross unrealized loss position. Our investments that were in a continuous loss position of 12 months or more, as well as the unrealized losses on those investments, were immaterial. The following table summarizes the fair value and gross unrealized losses of our investments that were in an unrealized loss position as of the date indicated below.


As of March 31, 2022 (In thousands)	Fair Value		Gross Unrealized Losses
Corporate debt securities	$	439,540	$	(6,244)
Sovereign securities	2,969		(46)
Municipal securities	65,352		(1,011)
U.S. Government agency securities	75,936		(1,012)
U.S. Treasury securities	333,334		(6,771)
Total	$	917,131	$	(15,084)


As of June 30, 2021 (In thousands)	Fair Value		Gross Unrealized Losses
Corporate debt securities	$	161,012	$	(135)

Municipal securities	21,605		(33)
U.S. Government agency securities	38,904		(49)
U.S. Treasury securities	117,761		(117)
Total	$	339,282	$	(334)

The contractual maturities of securities classified as available-for-sale, regardless of their classification on our Condensed Consolidated Balance Sheets, as of the date indicated below were as follows:


As of March 31, 2022 (In thousands)	Amortized Cost		Fair Value
Due within one year	$	550,125	$	560,500
Due after one year through three years	615,027		602,224
Total	$	1,165,152	$	1,162,724

Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Realized gains and losses on available-for-sale securities for the three and nine months ended March 31, 2022 and 2021 were immaterial.

NOTE 6 - BUSINESS COMBINATIONS AND DISPOSITIONS

On February 28, 2022, we completed the acquisition of 100% of the outstanding shares of ECI Technology, Inc. (“ECI”), a privately held company, for aggregate purchase consideration of $431.5 million, paid in cash. ECI is a provider of chemical management systems for semiconductor, photovoltaic and printed circuit board industries. KLA acquired ECI to extend and enhance our portfolio of products and services.

Preliminary Purchase Price Allocation

The aggregate purchase consideration has been preliminarily allocated as follows (in thousands):


Total purchase consideration	$	443,176
Less: cash acquired	(11,652)
Total purchase consideration, net of cash acquired	$	431,524
Allocation
Accounts receivable	15,044
Inventory	13,552
Goodwill	271,783
Intangible assets	208,400
Other assets	5,188
Accrued officers' bonus	(23,889)
Other liabilities	(12,759)
Deferred tax liabilities	(45,795)
	$	431,524

The purchase price was allocated to tangible and identified intangible assets acquired and liabilities assumed based on their preliminary estimated fair values, which were determined using generally accepted valuation techniques based on estimates and assumptions made by management at the time of the acquisition. These estimates and assumptions are subject to change during the measurement period, which is not expected to exceed one year. The primary tasks that are required to be completed include validation of business-level forecasts and customer attrition rates expected to be derived from the acquisition, including any related tax impacts. Any adjustments to our preliminary purchase price allocation identified during the measurement period will be recognized in the period in which the adjustments are determined.

The operating results of ECI have been included in our Condensed Consolidated Financial Statements for the three and nine months ended March 31, 2022 from the acquisition date. The goodwill was primarily attributable to the assembled workforce of the acquired company and planned growth in new markets. The $271.8 million of goodwill was assigned to the Wafer Inspection and Patterning reporting unit, and the amount recognized was not deductible for tax purposes.

Intangible Assets

The estimated fair value and weighted average useful life of the acquired intangible assets are as follows:


(In thousands)	Fair Value		Weighted Average Useful Lives
Existing technology(1)	$	117,900	8
Customer relationships(2)	52,400		7
Order backlog(3)	35,000		1.5
Trade name / trademark(4)	3,100		3
Total identified intangible assets	$	208,400

(1)Existing technology was identified from the products of ECI and its fair value was determined using the Relief-from-Royalty method under the income approach, which estimates the cost savings generated by a company related to the ownership of an asset for which it would otherwise have had to pay royalties or license fees on revenues earned through the use of the asset. The discount rate used was determined at the time of measurement based on an analysis of the implied internal rate of return of the transaction, weighted average cost of capital and weighted average return on assets. The economic useful life was determined based on the technology cycle related to each developed technology, as well as the cash flows over the forecast period.

(2)Customer relationships represent the fair value of the existing relationships with ECI’s customers and its fair value was determined using the Multi-Period Excess Earning Method which involves isolating the net earnings attributable to the asset being measured based on present value of the incremental after-tax cash flows (excess earnings) attributable solely

to the intangible asset over its remaining useful life. The economic useful life was determined based on historical customer turnover rates.

(3)Order backlog primarily relates to the dollar value of purchase arrangements with customers, effective as of a given point in time, that are based on mutually agreed terms which, in some cases, may still be subject to completion of written documentation and may be changed or cancelled by the customer, often without penalty. ECI’s backlog consists of these arrangements with assigned shipment dates expected, in most cases, within twelve months. The fair value was determined using the Multi-Period Excess Earning Method. The economic useful life is based on the time to fulfill the outstanding order backlog obligation.

(4)Trade name / trademark primarily relates to ECI’s name. The fair value was determined by applying the Relief-from-Royalty Method under the income approach. The economic useful life was determined based on the expected life of the trade names, trademarks and domain names.

We believe the amounts of purchased intangible assets recorded above represent the fair values and approximate the amounts a market participant would pay for these intangible assets as of the acquisition date.

Our statement of operations for the three and nine months ended March 31, 2022 included revenue of $8.1 million and a net loss of $0.4 million from ECI.

Other Fiscal 2022 Acquisitions

On July 1, 2021, we acquired Anchor Semiconductor Inc. (the “Anchor acquisition”), a privately-held company, primarily to expand our products and services offerings, for a total purchase consideration of $81.7 million, including a post-closing working capital adjustments, as well as the fair value of the promise to pay an additional consideration up to $35.0 million contingent on the achievement of certain revenue milestones. As of March 31, 2022, the estimated fair value of the additional consideration was $13.2 million, which was classified as a current liability on the Condensed Consolidated Balance Sheet. The total purchase consideration was allocated as follows: $31.7 million to identifiable intangible assets, $26.4 million to net tangible assets, $8.0 million to deferred tax liabilities, and $31.5 million to goodwill. The total purchase consideration is preliminary, and as additional information becomes available, we may further revise it during the remainder of the measurement period, which will not exceed 12 months from the closing of the acquisition. The $31.5 million of goodwill was assigned to the Wafer Inspection and Patterning reporting unit, and the amount recognized was not deductible for tax purposes. We have included the financial results of the acquisition in our Condensed Consolidated Financial Statements from the date of acquisition. These results were not material to our Condensed Consolidated Financial Statements.

As of March 31, 2022, we have $22.5 million of contingent consideration recorded for the Anchor acquisition and other acquisitions from the fiscal year ended June 30, 2019, of which $16.1 million is classified as a current liability and $6.4 million as a non-current liability on the Condensed Consolidated Balance Sheet.

For additional details, please refer to Note 6 “Business Combinations” to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021.

Assets Held for Sale

In the third quarter of fiscal 2022, management committed to a plan to sell Orbograph Ltd. (“Orbograph”), a non-core business engaged in the development and marketing of character recognition solutions to banks, financial and other payment processing institutions and healthcare providers, of which we own approximately 94% as of March 31, 2022. We determined that all of the criteria for held-for-sale accounting were met and, consequently, we designated the net assets and liabilities of Orbograph, which is in our PCB, Display and Component Inspection segment, as held for sale. We expect to complete the sale in the next 12 months. In addition, based on available information, we determined that the carrying value of net assets held for sale did not exceed fair value less costs to sell; therefore, no impairment was recorded in the three months ended March 31, 2022.

As of March 31, 2022 the balances of Orbograph's net assets held for sale were as follows (in thousands):


Cash	$	7,674
Trade and other receivables, net	20,109
Fixed assets	1,639
Intangible assets	18,588
Goodwill	42,622
Other long-term assets	1,665
Trade and other payables	(4,099)
Other liabilities	(7,776)
Minority interest	(540)
	$	79,882

NOTE 7 – GOODWILL AND PURCHASED INTANGIBLE ASSETS

Goodwill

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in the current and prior quarters’ business combinations. We have four reportable segments and six operating segments. The operating segments are determined to be the same as reporting units. For additional details, refer to Note 18 “Segment Reporting and Geographic Information” to our Condensed Consolidated Financial Statements. The following table presents changes in goodwill carrying value during the nine months ended March 31, 2022(1):


(In thousands)	Wafer Inspection and Patterning		Global Service and Support (“GSS”)		Specialty Semiconductor Process		PCB and Display		Component Inspection		Total
Balance as of June 30, 2021	$	416,860	$	25,908	$	681,858	$	872,971	$	13,575	$	2,011,172
Acquired goodwill	303,324		—		—		—		—		303,324



Foreign currency adjustments	(25)		—		—		—		—		(25)
Balance as of March 31, 2022	$	720,159	$	25,908	$	681,858	$	872,971	$	13,575	$	2,314,471

(1)No goodwill was assigned to the Other reporting unit and, accordingly, it was excluded from the table above.

Goodwill is not subject to amortization but is tested for impairment annually during the third fiscal quarter, as well as whenever events or changes in circumstances indicate that the carrying value may not be recoverable. In testing goodwill for impairment, we utilize a qualitative assessment to evaluate whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. When performing the qualitative assessment, we consider the following factors: stock price or market capitalization, changes in the industry and competitive environment, budget-to-actual revenue and profitability performance from the prior year and projected revenue and profitability trends for future years at our reporting units. If our qualitative assessment indicates that goodwill impairment is more likely than not, we perform a quantitative assessment by comparing the carrying value of net assets to the fair value of the reporting units. If the fair value is determined to be less than the carrying value, the amount of impairment is computed as the excess of the carrying value over the estimated fair value, not to exceed the carrying value of goodwill. Any impairment charges could have a material adverse effect on our operating results and net asset value in the quarter in which we recognize the impairment charge.

We performed the required annual goodwill impairment testing for all reporting units as of February 28, 2022, and concluded that goodwill was not impaired. As a result of our qualitative assessment, we determined that it was not necessary to perform the quantitative assessment at this time. The next annual goodwill impairment assessment by reporting unit is scheduled to be performed in the third quarter of the fiscal year ending June 30, 2023.

Purchased Intangible Assets

The components of purchased intangible assets as of the dates indicated below were as follows:


(In thousands)		As of March 31, 2022						As of June 30, 2021
Category	Range of Useful Lives (in years)	Gross Carrying Amount		Accumulated Amortization and Impairment		Net Amount		Gross Carrying Amount		Accumulated Amortization and Impairment		Net Amount
Existing technology	4-8	$	1,521,291	$	623,834	$	897,457	$	1,382,612	$	499,219	$	883,393
Customer relationships	4-9	365,717		157,608		208,109		305,817		131,386		174,431
Trade name / Trademark	4-7	121,083		64,400		56,683		117,383		53,493		63,890
Order backlog and other	<1-9	87,836		52,807		35,029		50,403		49,962		441
Intangible assets subject to amortization		2,095,927		898,649		1,197,278		1,856,215		734,060		1,122,155
In-process research and development		64,456		6,062		58,394		63,256		100		63,156
Total		$	2,160,383	$	904,711	$	1,255,672	$	1,919,471	$	734,160	$	1,185,311

Purchased intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be fully recoverable. The impairment indicator primarily includes the declines in our operating cash flows from the use of these assets. If the impairment indicators are present, we are required to perform a recoverability test by comparing the sum of the estimated undiscounted future cash flows attributable to these long-lived assets to their carrying value.

As of March 31, 2022, there were no impairment indicators for purchased intangible assets.

Amortization expense for purchased intangible assets for the periods indicated below was as follows:


	Three Months Ended March 31,				Nine Months Ended March 31,
(In thousands)	2022		2021		2022		2021
Amortization expense - Costs of revenues	$	42,586	$	40,309	$	124,834	$	116,087
Amortization expense - SG&A	15,102		12,063		39,880		37,793
Amortization expense - Research and development	31		32		93		94
Total	$	57,719	$	52,404	$	164,807	$	153,974

Based on the purchased intangible assets gross carrying amount recorded as of March 31, 2022, the remaining estimated annual amortization expense is expected to be as follows:


Fiscal year ending June 30:	Amortization (In thousands)
2022 (remaining three months)	$	65,342
2023	259,649
2024	237,210
2025	220,908
2026	204,894
2027 and thereafter	209,275
Total	$	1,197,278

NOTE 8 – DEBT

The following table summarizes our debt as of March 31, 2022 and June 30, 2021:


	As of March 31, 2022				As of June 30, 2021
	Amount (In thousands)		Effective Interest Rate		Amount (In thousands)		Effective Interest Rate
Fixed-rate 4.650% Senior Notes due on November 1, 2024	$	1,250,000	4.682	%	$	1,250,000	4.682	%
Fixed-rate 5.650% Senior Notes due on November 1, 2034	250,000		5.670	%	250,000		5.670	%
Fixed-rate 4.100% Senior Notes due on March 15, 2029	800,000		4.159	%	800,000		4.159	%
Fixed-rate 5.000% Senior Notes due on March 15, 2049	400,000		5.047	%	400,000		5.047	%
Fixed-rate 3.300% Senior Notes due on March 1, 2050	750,000		3.302	%	750,000		3.302	%
Revolving Credit Facility	275,000		1.210	%	—		—	%
Fixed-rate 3.590% Note Payable due on February 20, 2022	—		—	%	20,000		2.300	%
Total	3,725,000				3,470,000
Unamortized discount/premium, net	(6,709)				(7,168)
Unamortized debt issuance costs	(18,492)				(20,065)
Total	$	3,699,799			$	3,442,767
Reported as:
Short-term debt	$	—			$	20,000
Long-term debt	3,699,799				3,422,767
Total	$	3,699,799			$	3,442,767

As of March 31, 2022, future minimum principal payments for our debt are as follows: $1.25 billion in fiscal year 2025 and $2.20 billion after fiscal year 2026.

Senior Notes and Debt Redemption

In February 2020, we issued $750.0 million aggregate principal amount of senior, unsecured long-term notes (the “2020 Senior Notes”). In March 2019 and November 2014, we issued $1.20 billion (the “2019 Senior Notes”) and $2.50 billion (the “2014 Senior Notes,” and, together with the 2019 Senior Notes and the 2020 Senior Notes, the “Senior Notes”), respectively, aggregate principal amount of senior, unsecured long-term notes. In each of the second quarters of fiscal 2018 and 2020, we repaid $250.0 million of the 2014 Senior Notes and in the third quarter of fiscal 2020 we repaid another $500.0 million of the 2014 Senior Notes using the proceeds from the issuance of the 2020 Senior Notes, bringing the outstanding aggregate principal amount of the 2014 Senior Notes to $1.50 billion as of March 31, 2022.

The interest rates for our Senior Notes are not subject to adjustment. Interest is payable as follows: semi-annually on March 1 and September 1 of each year for the 2020 Senior Notes; semi-annually on March 15 and September 15 of each year for the 2019 Senior Notes; and semi-annually on May 1 and November 1 of each year for the 2014 Senior Notes. The indenture for the Senior Notes (the “Indenture”) includes covenants that limit our ability to grant liens on our facilities and enter into sale and leaseback transactions, subject to certain allowances under which certain sale and leaseback transactions are not restricted.

In certain circumstances involving a change of control followed by a downgrade of the rating of a series of Senior Notes by at least two of Moody’s Investors Service, S&P Global Ratings and Fitch Inc., unless we have exercised our rights to redeem the Senior Notes of such series, we will be required to make an offer to repurchase all or, at the holder’s option, any part, of each holder’s Senior Notes of that series pursuant to the offer described below (the “Change of Control Offer”). In the Change of Control Offer, we will be required to offer payment in cash equal to 101% of the aggregate principal amount of Senior Notes repurchased plus accrued and unpaid interest, if any, on the Senior Notes repurchased, up to, but not including, the date of repurchase.

Based on the trading prices of the Senior Notes on the applicable dates, the fair value of the Senior Notes as of March 31, 2022 and June 30, 2021 was $3.61 billion and $3.98 billion, respectively. While the Senior Notes are recorded at cost, the fair value of the long-term debt was determined based on quoted prices in markets that are not active; accordingly, the long-term debt is categorized as Level 2 for purposes of the fair value measurement hierarchy.

As of March 31, 2022, we were in compliance with all of our covenants under the Indenture associated with the Senior Notes.

Revolving Credit Facility

We have in place a Credit Agreement (the “Credit Agreement”) providing for a $1.00 billion unsecured Revolving Credit Facility (the “Revolving Credit Facility”) with a maturity date of November 30, 2023. During the first quarter of the fiscal year ending June 30, 2022, we borrowed $300.0 million from the Revolving Credit Facility, which was paid in full in the same quarter. During the quarter ended March 31, 2022, we borrowed $300.0 million from the Revolving Credit Facility, of which $25.0 million was repaid in the same quarter and $275.0 million of aggregate principal amount of borrowings remained outstanding at March 31, 2022.

We may borrow, repay and reborrow funds under the Revolving Credit Facility until the maturity date, at which time such Revolving Credit Facility will terminate, and all outstanding loans under such facility, together with all accrued and unpaid interest, must be repaid. We may prepay outstanding borrowings under the Revolving Credit Facility at any time without a prepayment penalty.

Borrowings under the Revolving Credit Facility will bear interest, at our option, at either: (i) the Alternative Base Rate (“ABR”) plus a spread, which ranges from 0 bps to 75 bps, or (ii) the London Interbank Offered Rate (“LIBOR”) plus a spread, which ranges from 100 bps to 175 bps. The spreads under ABR and LIBOR are subject to adjustment in conjunction with credit rating downgrades or upgrades. We are also obligated to pay an annual commitment fee on the daily undrawn balance of the Revolving Credit Facility, which ranges from 10 bps to 25 bps, subject to an adjustment in conjunction with changes to our credit rating. As of March 31, 2022, we elected to pay interest on the borrowed amount under the Revolving Credit Facility at LIBOR plus a spread of 100 bps, and we pay an annual commitment fee of 10 bps on the daily undrawn balance of the Revolving Credit Facility.

The Revolving Credit Facility requires us to maintain an interest expense coverage ratio as described in the Credit Agreement, on a quarterly basis, covering the trailing four consecutive fiscal quarters of no less than 3.50 to 1.00. In addition, we are required to maintain the maximum leverage ratio as described in the Credit Agreement, on a quarterly basis of 3.00 to 1.00, covering the trailing four consecutive fiscal quarters for each fiscal quarter, which can be increased to 4.00 to 1.00 for a period of time in connection with a material acquisition or a series of material acquisitions. As of March 31, 2022, our maximum allowed leverage ratio was 3.00 to 1.00.

We were in compliance with all covenants under the Credit Agreement as of March 31, 2022.

Notes Payable

In December 2020 we sold promissory notes to a financial institution, borrowing an aggregate principal amount of $40.0 million (“Notes Payable”). Of the aggregate amount borrowed, $20.0 million matured and was paid on February 20, 2021 and the balance of $20.0 million matured and was paid on February 22, 2022. The premium of $0.3 million from the sale of the Notes Payable was amortized over the life of the debt. The net proceeds from the sale of the Notes Payable were used for general corporate purposes.

For additional details, refer to Note 8 “Debt” to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021.

NOTE 9 – LEASES

We have operating leases for facilities, vehicles and other equipment. Our facility leases are primarily used for administrative functions, research and development (“R&D”), manufacturing, and storage and distribution. Our finance leases are not material.

Our existing leases do not contain significant restrictive provisions or residual value guarantees; however, certain leases contain provisions for the payment of maintenance, real estate taxes or insurance costs by us. Our leases have remaining lease terms ranging from less than one year to 15 years, including periods covered by options to extend the lease when it is reasonably certain that the option will be exercised.

Lease expense was $9.2 million and $27.5 million for the three and nine months ended March 31, 2022, respectively, and $9.7 million and $29.3 million for the three and nine months ended March 31, 2021, respectively. Expense related to short-term leases, which are not recorded on the Condensed Consolidated Balance Sheets, was not material for three and nine months ended March 31, 2022 and 2021. As of March 31, 2022 and June 30, 2021, the weighted-average remaining lease term was 4.5 years and 4.6 years, respectively, and the weighted-average discount rate for operating leases was 1.58% and 1.64%, respectively.

Supplemental cash flow information related to leases was as follows:


	Nine Months Ended March 31,
In thousands	2022		2021
Operating cash outflows from operating leases	$	28,680	$	28,778
Right of use assets obtained in exchange for new operating lease liabilities	$	20,698	$	29,155

Maturities of lease liabilities as of March 31, 2022 were as follows:


Fiscal Year Ending June 30:	(In thousands)
2022 (remaining three months)	$	9,270
2023	29,251
2024	19,231
2025	13,389
2026	10,027
2027 and thereafter	15,840
Total lease payments	97,008
Less imputed interest	(3,797)
Total	$	93,211

As of March 31, 2022, the aggregate amount of future obligations for lease agreements that had not yet commenced was $22.1 million.

NOTE 10 – EQUITY, LONG-TERM INCENTIVE COMPENSATION PLANS AND NON-CONTROLLING INTEREST

Equity Incentive Program

As of March 31, 2022, 9.9 million shares remained available for issuance under our 2004 Equity Incentive Plan (the “2004 Plan”). For details of the 2004 Plan refer to Note 10 “Equity, Long-Term Incentive Compensation Plans and Non-Controlling Interest” to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021.

Assumed Equity Plans

As part of the acquisition of Orbotech Ltd. (“Orbotech”) in February 2019, we assumed outstanding equity incentive awards under the following Orbotech equity incentive plans: (i) Equity Remuneration Plan for Key Employees of Orbotech and its Affiliates and Subsidiaries (as Amended and Restated in 2005), (ii) 2010 Equity-Based Incentive Plan, and (iii) 2015 Equity-Based Incentive Plan (the “Assumed Equity Plans”).

As of March 31, 2022, there were 22,620 shares of our common stock underlying the outstanding assumed restricted stock units (“RSUs”) under the Assumed Equity Plans. For details on the Assumed Equity Plans refer to Note 10 “Equity, Long-Term Incentive Compensation Plans and Non-Controlling Interest” to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021.

Equity Incentive Plans - General Information

The following table summarizes the combined activity under our equity incentive plans:


(In thousands)			Available For Grant(1) (2)
Balance as of June 30, 2021			10,253

RSUs granted(3)			(498)
RSUs granted adjustment(4)			39
RSUs canceled			75

Balance as of March 31, 2022			9,869

(1)The number of RSUs reflects the application of the award multiplier of 2.0x to calculate the impact of the award on the shares reserved under the 2004 Plan.

(2)No additional stock options, RSUs or other awards will be granted under the Assumed Equity Plans.

(3)Includes RSUs granted to senior management during the nine months ended March 31, 2022 with performance-based vesting criteria (in addition to service-based vesting criteria for any of such RSUs that are deemed to have been earned) (“performance-based RSUs”). This line item includes all such performance-based RSUs granted during the nine months ended March 31, 2022 reported at the maximum possible number of shares that may ultimately be issuable if all applicable performance-based criteria are achieved at their maximum levels and all applicable service-based criteria are fully satisfied (0.2 million shares for the nine months ended March 31, 2022 reflects the application of the multiplier described above).

(4)Represents the portion of RSUs granted with performance-based vesting criteria and reported at the actual number of shares issued upon achievement of the performance-based vesting criteria during the nine months ended March 31, 2022.

The fair value of stock-based awards is measured at the grant date and is recognized as an expense over the employee’s requisite service period. For RSUs granted without “dividend equivalent” rights, fair value is calculated using the closing price of our common stock on the grant date, adjusted to exclude the present value of dividends which are not accrued on those RSUs. The fair value for RSUs granted with “dividend equivalent” rights is determined using the closing price of our common stock on the grant date. Compensation expense for RSUs with performance metrics is calculated based upon expected achievement of the metrics specified in the grant, or when a grant contains a market condition, the grant date fair value using a Monte Carlo simulation.

The following table shows stock-based compensation expense for the indicated periods:


	Three Months Ended March 31,				Nine Months Ended March 31,
(In thousands)	2022		2021		2022		2021
Stock-based compensation expense by:
Costs of revenues	$	6,543	$	4,779	$	14,475	$	12,550
R&D	8,482		6,518		18,077		17,214
SG&A	22,062		19,030		57,517		54,382
Total stock-based compensation expense	$	37,087	$	30,327	$	90,069	$	84,146

Stock-based compensation capitalized as inventory as of March 31, 2022 and June 30, 2021 was $8.0 million on each date.

Restricted Stock Units

The following table shows the activity and weighted-average grant date fair values for RSUs during the nine months ended March 31, 2022:


	Shares(1) (In thousands)	Weighted-Average Grant Date Fair Value
Outstanding RSUs as of June 30, 2021(2)	1,710	$	133.76
Granted(3)	249	$	358.38
Granted adjustments	(19)	$	118.47


Vested and released	(293)	$	118.04
Withheld for taxes	(194)	$	118.04
Forfeited	(42)	$	141.90
Outstanding RSUs as of March 31, 2022(2)	1,411	$	179.53

(1)Share numbers reflect actual shares subject to awarded RSUs.

(2)Includes performance-based RSUs.

(3)This line item includes performance-based RSUs granted during the nine months ended March 31, 2022 reported at the maximum possible number of shares that may ultimately be issuable if all applicable performance-based criteria are achieved at their maximum levels and all applicable service-based criteria are fully satisfied (0.1 million shares for the nine months ended March 31, 2022).

The RSUs granted by us generally vest as follows: with respect to awards with only service-based vesting criteria, over periods ranging from two to four years; with respect to awards with both performance-based and service-based vesting criteria, in two equal installments on the third and fourth anniversaries of the grant date; and with respect to awards with both market-based and service-based vesting criteria, in three equal installments on the third, fourth and fifth anniversaries of the grant date, in each case subject to the recipient remaining employed by us as of the applicable vesting date. The RSUs granted to the independent members of the Board of Directors vest annually.

The following table shows the weighted-average grant date fair value per unit for the RSUs granted, vested, and tax benefits realized by us in connection with vested and released RSUs for the indicated periods:


	Three Months Ended March 31,				Nine Months Ended March 31,
(In thousands, except for weighted-average grant date fair value)	2022		2021		2022		2021
Weighted-average grant date fair value per unit	$	388.03	$	302.26	$	358.38	$	203.19

Grant date fair value of vested RSUs	$	10,150	$	14,436	$	57,453	$	65,005
Tax benefits realized by us in connection with vested and released RSUs	$	3,993	$	4,332	$	17,914	$	17,763

As of March 31, 2022, the unrecognized stock-based compensation expense balance related to RSUs was $162.0 million, excluding the impact of estimated forfeitures, and will be recognized over a weighted-average remaining contractual term and an estimated weighted-average amortization period of 1.2 years. The intrinsic value of outstanding RSUs as of March 31, 2022 was $516.7 million.

Cash-Based Long-Term Incentive Compensation

We have adopted a cash-based long-term incentive (“Cash LTI”) program (“Cash LTI Plan”) for many of our employees as part of our employee compensation program. Executives and non-employee members of the Board of Directors do not participate in the Cash LTI Plan. During the nine months ended March 31, 2022 and 2021, we approved Cash LTI awards of $15.7 million and $9.4 million, respectively. Cash LTI awards issued to employees under the Cash LTI Plan will vest in three or four equal installments, with one-third or one-fourth of the aggregate amount of the Cash LTI award vesting on each anniversary of the grant date over a three or four-year period. In order to receive payments under a Cash LTI award, participants must remain employed by us as of the applicable award vesting date. During the three months ended March 31, 2022 and 2021 we recognized $21.6 million and $17.7 million, respectively, in compensation expense under the Cash LTI Plan. During the nine months ended March 31, 2022 and 2021, we recognized $65.6 million and $54.4 million, respectively, in compensation expense under the Cash LTI Plan. As of March 31, 2022, the unrecognized compensation balance (excluding the impact of estimated forfeitures) related to the Cash LTI Plan was $160.8 million. For details, refer to Note 10 “Equity, Long-Term

Incentive Compensation Plans and Non-Controlling Interest” to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021.

Employee Stock Purchase Plan

Our Employee Stock Purchase Plan (“ESPP”) provides that eligible employees may contribute up to 15% of their eligible earnings toward the semi-annual purchase of our common stock. The ESPP is qualified under Section 423 of the Internal Revenue Code. The employee’s purchase price is derived from a formula based on the closing price of the common stock on the first day of the offering period versus the closing price on the date of purchase (or, if not a trading day, on the immediately preceding trading day).

The offering period (or length of the look-back period) under the ESPP has a duration of six months, and the purchase price with respect to each offering period, until otherwise amended, equal to 85% of the lesser of (i) the fair market value of our common stock at the commencement of the applicable six-month offering period or (ii) the fair market value of our common stock on the purchase date. We estimate the fair value of purchase rights under the ESPP using a Black-Scholes model.

The fair value of each purchase right under the ESPP was estimated on the date of grant using the Black-Scholes model and the straight-line attribution approach with the following weighted-average assumptions:


	Three Months Ended March 31,				Nine Months Ended March 31,
	2022		2021		2022		2021
Stock purchase plan:
Expected stock price volatility	41.5	%	42.1	%	38.2	%	47.0	%
Risk-free interest rate	0.1	%	0.1	%	0.1	%	0.4	%
Dividend yield	1.0	%	1.4	%	1.2	%	1.6	%
Expected life (in years)	0.5		0.5		0.5		0.5

The following table shows total cash received from employees for the issuance of shares under the ESPP, the number of shares purchased by employees through the ESPP, the tax benefits realized by us in connection with the disqualifying dispositions of shares purchased under the ESPP and the weighted-average fair value per share for the indicated periods:


(In thousands, except for weighted-average fair value per share)	Three Months Ended March 31,						Nine Months Ended March 31,
2022			2021			2022			2021
Total cash received from employees for the issuance of shares under the ESPP	$	—		$	—		$	36,912		$	26,356
Number of shares purchased by employees through the ESPP	—			—			139			161
Tax benefits realized by us in connection with the disqualifying dispositions of shares purchased under the ESPP	$	488		$	722		$	1,686		$	1,886
Weighted-average fair value per share based on Black-Scholes model	$	107.45		$	64.42		$	94.91		$	59.86

The ESPP shares are replenished annually on the first day of each fiscal year by virtue of an evergreen provision. The provision allows for share replenishment equal to the lesser of 2.0 million shares or the number of shares which we estimate will be required to be issued under the ESPP during the forthcoming fiscal year. As of March 31, 2022, a total of 2.1 million shares were reserved and available for issuance under the ESPP.

Quarterly Cash Dividends

On March 1, 2022, we paid a quarterly cash dividend of $1.05 per share to stockholders of record as of the close of business on February 14, 2022. The total amount of regular quarterly cash dividends and dividend equivalents paid during the three months ended March 31, 2022 and 2021 was $159.0 million and 139.3 million, respectively. The total amount of regular quarterly cash dividends and dividend equivalents paid during the nine months ended March 31, 2022 and 2021 was $480.9 million and $420.1 million, respectively. The amount of accrued dividend equivalents payable for regular quarterly cash dividends on unvested RSUs with dividend equivalent rights as of March 31, 2022 and June 30, 2021 was $10.9 million and $10.3 million, respectively. These amounts will be paid upon vesting of the underlying RSUs.

Non-Controlling Interest

We have consolidated the results of Orbograph, in which we own approximately 94% of the outstanding equity interest as of March 31, 2022. Orbograph is engaged in the development and marketing of character recognition solutions to banks, financial and other payment processing institutions and healthcare providers. For information regarding the designation of Orbograph's net assets as held for sale during the quarter ended March 31, 2022, refer to Note 6 “Business Combinations and Dispositions” to our Condensed Consolidated Financial Statements.

During the fourth quarter of fiscal 2020, we entered into an Asset Purchase Agreement to sell certain core assets of Orbotech LT Solar, LLC (“OLTS”), which was engaged in the research, development and marketing of products for the deposition of thin film coating of various materials on crystalline silicon photovoltaic wafers for solar energy panels through plasma-enhanced chemical vapor deposition. The sale was completed in the first quarter of fiscal 2021 and the proceeds were not material. We consolidate the results of OLTS, which is considered a non-strategic business, of which we own 97% of the outstanding equity interest as of March 31, 2022.

NOTE 11 – STOCK REPURCHASE PROGRAM

Our Board of Directors has authorized a program that permits us to repurchase our common stock. As of June 30, 2021, there was an aggregate of approximately $93 million remaining available for repurchase under previous authorizations, and on July 29, 2021, the Board of Directors authorized an additional $2.00 billion. The intent of this program is to offset the dilution from our equity incentive plans, shares issued in connection with purchases under our ESPP, as well as to return excess cash to our stockholders. Subject to market conditions, applicable legal requirements and other factors, the repurchases were made in the open market in compliance with applicable securities laws, including the Securities Exchange Act of 1934 and the rules promulgated thereunder, such as Rule 10b-18 and, if pursuant to a written plan, Rule 10b5-1. This stock repurchase program has no expiration date and may be suspended at any time. As of March 31, 2022, an aggregate of $0.70 billion was available for repurchase under the stock repurchase program.

Share repurchases for the indicated periods (based on the trade date of the applicable repurchase) were as follows:


	Three Months Ended March 31,				Nine Months Ended March 31,
(In thousands)	2022		2021		2022		2021
Number of shares of common stock repurchased	1,539		906		3,833		2,707
Total cost of repurchases	$	564,666	$	273,441	$	1,394,217	$	644,830

NOTE 12 – NET INCOME PER SHARE

Basic net income per share is calculated by dividing net income available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net income per share is calculated by using the weighted-average number of common shares outstanding during the period, increased to include the number of additional shares of common stock that would have been outstanding if the shares of common stock underlying our outstanding dilutive RSUs had been issued. The dilutive effect of outstanding RSUs is reflected in diluted net income per share by application of the treasury stock method.

The following table sets forth the computation of basic and diluted net income per share attributable to KLA:


(In thousands, except per share amounts)	Three Months Ended March 31,						Nine Months Ended March 31,
2022			2021			2022			2021
Numerator:
Net income attributable to KLA	$	730,572		$	567,496		$	2,516,433		$	1,445,314
Denominator:
Weighted-average shares - basic, excluding unvested RSUs	150,145			153,801			151,250			154,457
Effect of dilutive RSUs and options	1,041			1,358			1,096			1,332
Weighted-average shares - diluted	151,186			155,159			152,346			155,789
Basic net income per share attributable to KLA	$	4.87		$	3.69		$	16.64		$	9.36
Diluted net income per share attributable to KLA	$	4.83		$	3.66		$	16.52		$	9.28
Anti-dilutive securities excluded from the computation of diluted net income per share	10			—			9			—

NOTE 13 – INCOME TAXES

The following table provides details of income taxes:


	Three Months Ended March 31,						Nine Months Ended March 31,
(Dollar amounts in thousands)	2022			2021			2022			2021
Income before income taxes	$	846,285		$	640,403		$	2,539,538		$	1,651,611
Provision for income taxes	$	115,625		$	73,233		$	22,876		$	207,316
Effective tax rate	13.7		%	11.4		%	0.9		%	12.6		%

Our effective tax rate is lower than the U.S. federal statutory rate during the three months ended March 31, 2022 primarily due to the proportion of earnings generated in jurisdictions with tax rates lower than the U.S. statutory rate and the proportion of U.S. earnings eligible for the Foreign Derived Intangible Income deduction.

Our effective tax rate is lower than the U.S. federal statutory rate during the nine months ended March 31, 2022 primarily due to a non-recurring tax benefit resulting from the intra-entity transfers of certain intellectual property rights (“IP rights”). During the six months ended December 31, 2021, we completed intra-entity transfers of IP rights to one of our Singapore subsidiaries in order to better align the ownership of these rights with how our business operates. The transfers did not result in taxable gains; however, our Singapore subsidiary recognized deferred tax assets for the book and tax basis difference of the eligible transferred IP rights. As a result of these transactions, we recorded deferred tax assets and related tax benefits of $394.5 million, based on the fair value of the eligible IP rights transferred in September 2021. The tax-deductible amortization related to the eligible transferred IP rights will be recognized over 15 years as allowed under Singapore tax law.

In the normal course of business, we are subject to examination by tax authorities throughout the world. We are subject to U.S. federal income tax examinations for all years beginning from the fiscal year ended June 30, 2018 and are under United States income tax examination for the fiscal years ended June 30, 2018, June 30, 2019 and June 30, 2020. We are subject to state income tax examinations for all years beginning from the fiscal year ended June 30, 2017. We are also subject to examinations in other major foreign jurisdictions, including Singapore and Israel, for all years beginning from the calendar year ended December 31, 2012. We are under audit in Germany related to Orbotech for the calendar years ended December 31, 2013 to December 31, 2015.

It is possible that certain examinations may be concluded in the next 12 months. The timing and resolution of income tax examinations is uncertain. Given the uncertainty around the timing of the resolution of these ongoing examinations, we are unable to estimate the full range of possible adjustments to our unrecognized tax benefits within the next 12 months.

In May 2017, Orbotech received an assessment from the Israel Tax Authority (“ITA”) with respect to its fiscal years 2012 through 2014 (the “Assessment”), for an aggregate amount of tax, after offsetting all net operating losses (“NOL”) available through the end of 2014, of approximately NIS 229 million (equivalent to approximately $66 million which includes related interest and linkage differentials to the Israeli consumer price index as of the date of the issuance of the Tax Decrees, as defined below).

On August 31, 2018, Orbotech filed an objection in respect of the Assessment (the “Objection”). The ITA completed the second stage of the audit, in which the claims Orbotech raised in the Objection were examined by different personnel at the ITA. In addition, the ITA examined additional items during this second stage of the audit. As Orbotech and the ITA did not reach an agreement during the second stage, the ITA issued Tax Decrees to Orbotech on August 28, 2019 (“Tax Decrees”) for an aggregate amount of tax, after offsetting all NOLs available through the end of 2014, of approximately NIS 257 million (equivalent to approximately $73 million which includes related interest and linkage differentials to the Israeli consumer price index as of the date of the issuance of the Tax Decrees). These Tax Decrees replaced the Assessment. We believe that our recorded unrecognized tax benefits are sufficient to cover the resolution of these Tax Decrees.

Orbotech filed a notice of appeal with respect to the above Tax Decrees with the District Court of Tel Aviv on September 26, 2019. On February 27, 2020 the ITA filed its arguments in support of the Tax Decrees. Orbotech filed the grounds of appeal with respect to the above Tax Decrees on July 30, 2020. We are currently in the pre-trial hearing stage of the process. The ITA and Orbotech are continuing discussions in an effort to resolve this matter in a mutually agreeable manner.

In connection with the above, there was an ongoing criminal investigation in Israel against Orbotech, certain of its employees and a tax consultant. On April 11, 2018, Orbotech received a “suspect notification letter” (dated March 28, 2018) from the Tel Aviv District Attorney’s Office (Fiscal and Financial). In the letter, it was noted that the investigation file was transferred from the Assessment Investigation Officer to the District Attorney’s Office. The letter further stated that the District Attorney’s Office has not yet made a decision regarding submission of an indictment against Orbotech; and that if after studying the case, a decision is made to consider prosecuting Orbotech, Orbotech will receive an additional letter and, within 30 days, Orbotech may present its arguments to the District Attorney’s Office as to why it should not be indicted. On October 27, 2019, we received a request for additional information from the District Attorney**’**s Office. On March 23, 2022, Orbotech received a letter from the Assessment Investigation Officer that the investigation was closed due to lack of evidence. In addition, the Orbotech employees and its tax consultant also received letters in March 2022 noting the investigation against them had been closed.

In December 2020, Orbotech received an assessment from the ITA with respect to its fiscal years 2015 through 2018 (the “Second Assessment”) for an aggregate amount of tax, after offsetting all NOLs available through the end of 2018, of approximately NIS 227 million (equivalent to approximately $68 million which includes related interest and linkage differentials to the Israeli consumer price index as of the date of the issuance of the Second Assessment). We filed an objection to the Second Assessment with the ITA in March 2021. The objection moved the 2015-2018 audit to the second stage, in which the ITA will review the objections. The ITA has completed the second stage review for 2015 and 2016 of the Second Assessment and issued Tax Decrees to Orbotech on March 3, 2022 for 2015-2016 in the amount of approximately NIS 63 million (equivalent to approximately $19 million which includes related interest and linkage differentials to the Israeli consumer price index as of the date of the issuance of the Tax Decrees). These Tax Decrees replaced the Second Assessment for 2015 and 2016. The second stage review for fiscal 2017 and 2018 has not been completed. The Second Assessment for 2017 and 2018 remains at approximately NIS 114 million (equivalent to approximately $34 million which includes related interest and linkage differentials to the Israeli consumer price index as of the date of the issuance of the Second Assessment). We believe that our recorded unrecognized tax benefits are sufficient to cover the resolution of the Second Assessment.

NOTE 14 – LITIGATION AND OTHER LEGAL MATTERS

We are named from time to time as a party to lawsuits and other types of legal proceedings and claims in the normal course of our business. Actions filed against us include commercial, intellectual property, customer, and labor and employment related claims, including complaints of alleged wrongful termination and potential class action lawsuits regarding alleged violations of federal and state wage and hour and other laws. In general, legal proceedings and claims, regardless of their merit, and associated internal investigations (especially those relating to intellectual property or confidential information disputes) are often expensive to prosecute, defend or conduct and may divert management’s attention and other Company resources. Moreover, the results of legal proceedings are difficult to predict, and the costs incurred in litigation can be substantial, regardless of outcome. We believe the amounts provided in our Condensed Consolidated Financial Statements are adequate in light of the probable and estimated liabilities. However, because such matters are subject to many uncertainties and the ultimate outcomes are not predictable, there can be no assurances that the actual amounts required to satisfy alleged liabilities from the matters described above will not exceed the amounts reflected in our Condensed Consolidated Financial Statements or will not have a material adverse effect on our results of operations, financial condition or cash flows.

NOTE 15 – COMMITMENTS AND CONTINGENCIES

Factoring. We have factoring agreements with financial institutions to sell certain of our trade receivables and promissory notes from customers without recourse. We do not believe we are at risk for any material losses as a result of these agreements. In addition, we periodically sell certain letters of credit (“LC”), without recourse, received from customers in payment for goods and services.

The following table shows total receivables sold under factoring agreements and proceeds from sales of LC for the indicated periods:


	Three Months Ended March 31,				Nine Months Ended March 31,
(In thousands)	2022		2021		2022		2021
Receivables sold under factoring agreements	$	63,094	$	100,475	$	210,130	$	239,037
Proceeds from sales of LC	$	74,267	$	19,458	$	115,433	$	60,297

Factoring and LC fees for the sale of certain trade receivables were recorded in other expense (income), net and were not material for the periods presented.

Purchase Commitments. We maintain commitments to purchase inventory from our suppliers as well as goods, services and other assets in the ordinary course of business. Our liability under these purchase commitments is generally restricted to a forecasted time-horizon as mutually agreed upon between the parties. This forecasted time-horizon can vary among different suppliers. Our estimate of our significant purchase commitments primarily for material, services, supplies and asset purchases is approximately $3.4 billion as of March 31, 2022, which are primarily due within the next 12 months. Actual expenditures will vary based upon the volume of the transactions and length of contractual service provided. In addition, the amounts paid under these arrangements may be less in the event that the arrangements are renegotiated or canceled. Certain agreements provide for potential cancellation penalties.

Cash LTI Plan. As of March 31, 2022, we have committed $241.8 million for future payment obligations under our Cash LTI Plan. The calculation of compensation expense related to the Cash LTI Plan includes estimated forfeiture rate assumptions. Cash LTI awards issued to employees under the Cash LTI Plan vest in three or four equal installments, with one-third or one-fourth of the aggregate amount of the Cash LTI award vesting on each anniversary of the grant date over a three- or four-year period. In order to receive payments under a Cash LTI award, participants must remain employed by us as of the applicable award vesting date.

Guarantees and Contingencies. We maintain guarantee arrangements available through various financial institutions for up to $87.5 million, of which $58.1 million had been issued as of March 31, 2022, primarily to fund guarantees to customs authorities for value-added tax and other operating requirements of our consolidated subsidiaries in Europe, Israel and Asia.

Indemnification Obligations. Subject to certain limitations, we are obligated to indemnify our current and former directors, officers and employees with respect to certain litigation matters and investigations that arise in connection with their service to us. These obligations arise under the terms of our certificate of incorporation, our bylaws, applicable contracts, and Delaware and California law. The obligation to indemnify generally means that we are required to pay or reimburse the individuals’ reasonable legal expenses and possibly damages and other liabilities incurred by several of our current and former directors, officers and employees in connection with these matters. For example, we have paid or reimbursed legal expenses incurred in connection with the investigation of our historical stock option practices and the related litigation and government inquiries. Although the maximum potential amount of future payments we could be required to make under the indemnification obligations generally described in this paragraph is theoretically unlimited, we believe the fair value of this liability, to the extent estimable, is appropriately considered within the reserve we have established for currently pending legal proceedings.

We are a party to a variety of agreements pursuant to which we may be obligated to indemnify the other party with respect to certain matters. Typically, these obligations arise in connection with contracts and license agreements or the sale of assets, under which we customarily agree to hold the other party harmless against losses arising therefrom, or provide customers with other remedies to protect against, bodily injury or damage to personal property caused by our products, non-compliance with our product performance specifications, infringement by our products of third-party intellectual property rights and a breach of warranties, representations and covenants related to matters such as title to assets sold, validity of certain intellectual property rights, non-infringement of third-party rights, and certain income tax-related matters. In each of these circumstances, payment by us is typically subject to the other party making a claim to and cooperating with us pursuant to the procedures specified in the particular contract. This usually allows us to challenge the other party’s claims or, in case of breach of intellectual property representations or covenants, to control the defense or settlement of any third-party claims brought against the other party. Further, our obligations under these agreements may be limited in terms of amounts, activity (typically

at our option to replace or correct the products or terminate the agreement with a refund to the other party), and duration. In some instances, we may have recourse against third parties and/or insurance covering certain payments made by us.

In addition, we may in limited circumstances enter into agreements that contain customer-specific commitments on pricing, tool reliability, spare parts stocking levels, response time and other commitments. Furthermore, we may give these customers limited audit or inspection rights to enable them to confirm that we are complying with these commitments. If a customer elects to exercise its audit or inspection rights, we may be required to expend significant resources to support the audit or inspection, as well as to defend or settle any dispute with a customer that could potentially arise out of such audit or inspection. To date, we have made no significant accruals in our Condensed Consolidated Financial Statements for this contingency. While we have not in the past incurred significant expenses for resolving disputes regarding these types of commitments, we cannot make any assurance that we will not incur any such liabilities in the future.

It is not possible to predict the maximum potential amount of future payments under these or similar agreements due to the conditional nature of our obligations and the unique facts and circumstances involved in each particular agreement. Historically, payments made by us under these agreements have not had a material effect on our business, financial condition, results of operations or cash flows.

NOTE 16 – DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The authoritative guidance requires companies to recognize all derivative instruments and hedging activities, including foreign currency exchange contracts and interest rate lock agreements, (collectively, “derivatives”) as either assets or liabilities at fair value on the Condensed Consolidated Balance Sheets. In accordance with the accounting guidance, we designate foreign currency exchange contracts and interest rate lock agreements as cash flow hedges of certain forecasted foreign currency denominated sales, purchase and spending transactions, and the benchmark interest rate of the corresponding debt financing, respectively. In accordance with the accounting guidance, we also designate foreign currency exchange contracts to hedge a portion of our investment in a foreign denominated subsidiary.

Our foreign subsidiaries operate and sell our products in various global markets. As a result, we are exposed to risks relating to changes in foreign currency exchange rates. We utilize foreign currency forward exchange contracts and option contracts to hedge against future movements in foreign currency exchange rates that affect certain existing and forecasted foreign currency denominated sales and purchase transactions, such as the Japanese yen, the euro, the pound sterling and the Israeli new shekel. We routinely hedge our exposures to certain foreign currencies with various financial institutions in an effort to minimize the impact of certain currency exchange rate fluctuations. These currency forward exchange contracts and options, designated as cash flow hedges, generally have maturities of less than 18 months. Cash flow hedges are evaluated for effectiveness monthly, based on changes in total fair value of the derivatives. If a financial counterparty to any of our hedging arrangements experiences financial difficulties or is otherwise unable to honor the terms of the foreign currency hedge, we may experience material losses.

Since fiscal 2015, we have entered into three series of forward contracts to lock the benchmark interest rate on portions of our Senior Notes prior to issuance (“Rate Lock Agreements”). Upon issuance of the associated debt, the Rate Lock Agreements were settled and their fair values were recorded within AOCI, amortizing to interest expense over the lives of the associated debt. We recognized net expenses of $0.3 million and $0.8 million for the three and nine months ended March 31, 2022, respectively, and net expenses of $0.3 million and $0.8 million for the three and nine months ended March 31, 2021, respectively, for the amortization of the net of the Rate Lock Agreements, which increased the interest expense on a net basis. As of March 31, 2022, the aggregate unamortized portion of the fair value of the forward contracts for the Rate Lock Agreements was $28.2 million.

For derivatives that are designated and qualify as cash flow hedges, the effective portion of the gains or losses is reported in AOCI and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Prior to adopting the new accounting guidance for hedge accounting, time value was excluded from the assessment of effectiveness for derivatives designated as cash flow hedges. Time value was amortized on a mark-to-market basis and recognized in earnings over the life of the derivative contract. For derivative contracts executed after adopting the new accounting guidance, the election to include time value for the assessment of effectiveness is made on all forward contracts designated as cash flow hedges. The change in fair value of the derivative is recorded in AOCI until the hedged item is recognized in earnings. The assessment of effectiveness of options contracts designated as cash flow hedges continues to exclude time value after adopting the new accounting guidance. The initial value of the component excluded from the assessment of effectiveness is recognized in earnings over the life of the derivative contract. Any difference between change in the fair value of the excluded components and the amounts recognized in earnings are recorded in AOCI.

For derivatives that are designated and qualify as a net investment hedge in a foreign operation and that meet the effectiveness requirements, the net gains or losses attributable to changes in spot exchange rates are recorded in cumulative translation within AOCI. The remainder of the change in value of such instruments is recorded in earnings using the mark-to-market approach. Recognition in earnings of amounts previously recorded in cumulative translation is limited to circumstances such as complete or substantially complete liquidation or sale of the net investment in the hedged foreign operations.

For derivatives that are not designated as hedges, gains and losses are recognized in other expense (income), net. We use foreign currency forward contracts to hedge certain foreign currency denominated assets or liabilities. The gains and losses on these derivative instruments are largely offset by the changes in the fair value of the assets or liabilities being hedged.

Derivatives Designated in Hedging Relationships: Foreign Exchange and Interest Rate Contracts

The gains (losses) on derivatives in cash flow and net investment hedging relationships recognized in other comprehensive income for the indicated periods were as follows:


	Three Months Ended March 31,				Nine Months Ended March 31,
(In thousands)	2022		2021		2022		2021
Derivatives Designated as Cash Flow Hedging Instruments:
Rate lock agreements:
Amounts included in the assessment of effectiveness	$	10,069	$	—	$	10,069	$	—
Foreign exchange contracts:
Amounts included in the assessment of effectiveness	$	7,733	$	5,878	$	15,335	$	3,696
Amounts excluded from the assessment of effectiveness	$	(25)	$	(54)	$	(34)	$	(146)
Derivatives Designated as Net Investment Hedging Instruments:
Foreign exchange contracts(1):	$	1,850	$	1,094	$	1,386	$	1,094

(1)No amounts were reclassified from AOCI into earnings related to the sale of a subsidiary, as there were no such sales during the periods presented.

The locations and amounts of designated and non-designated derivatives’ gains and losses reported in the Condensed Consolidated Statements of Operations for the indicated periods were as follows:


	Three Months Ended March 31,								Three Months Ended March 31,
	2022								2021
(In thousands)	Revenues		Costs of Revenues and Operating Expenses		Interest Expense		Other Expense (Income), Net		Revenues		Costs of Revenues and Operating Expenses		Interest Expense		Other Expense (Income), Net
Total amounts presented in the Condensed Consolidated Statements of Operations in which the effects of cash flow hedges are recorded	$	2,288,676	$	1,393,769	$	39,978	$	8,644	$	1,803,773	$	1,131,626	$	39,092	$	(7,348)
Gains (Losses) on Derivatives Designated as Hedging Instruments:
Rate lock agreements:
Amount of gains (losses) reclassified from AOCI to earnings	$	—	$	—	$	(279)	$	—	$	—	$	—	$	(279)	$	—

Foreign exchange contracts:
Amount of gains (losses) reclassified from AOCI to earnings	$	1,711	$	(329)	$	—	$	—	$	(441)	$	187	$	—	$	—
Amount excluded from the assessment of effectiveness recognized in earnings	$	(111)	$	—	$	—	$	568	$	(142)	$	—	$	—	$	699

Gains (Losses) on Derivatives Not Designated as Hedging Instruments:
Amount of gains (losses) recognized in earnings	$	—	$	—	$	—	$	(2,802)	$	—	$	—	$	—	$	3,420


	Nine Months Ended March 31,								Nine Months Ended March 31,
	2022								2021
(In thousands)	Revenues		Costs of Revenues and Operating Expenses		Interest Expense		Other Expense (Income), Net		Revenues		Costs of Revenues and Operating Expenses		Interest Expense		Other Expense (Income), Net
Total amounts presented in the Condensed Consolidated Statements of Operations in which the effects of cash flow hedges are recorded	$	6,725,144	$	4,045,479	$	116,142	$	23,985	$	4,993,263	$	3,224,563	$	117,358	$	(269)
Gains (Losses) on Derivatives Designated as Hedging Instruments:
Rate lock agreements:
Amount of gains (losses) reclassified from AOCI to earnings	$	—	$	—	$	(837)	$	—	$	—	$	—	$	(837)	$	—

Foreign exchange contracts:
Amount of gains (losses) reclassified from AOCI to earnings	$	5,197	$	(909)	$	—	$	—	$	(1,091)	$	612	$	—	$	—
Amount excluded from the assessment of effectiveness recognized in earnings	$	(329)	$	—	$	—	$	1,883	$	(420)	$	—	$	—	$	699

Gains (Losses) on Derivatives Not Designated as Hedging Instruments:
Amount of gains (losses) recognized in earnings	$	—	$	—	$	—	$	4,261	$	—	$	—	$	—	$	483

The U.S. dollar equivalent of all outstanding notional amounts of foreign currency hedge contracts and rate lock agreements, with maximum remaining maturities of approximately eleven months as of the dates indicated below, were as follows:


	As of		As of
(In thousands)	March 31, 2022		June 30, 2021
Cash flow hedge contracts - foreign currency
Purchase	$	133,194	$	12,550
Sell	$	193,447	$	134,845
Net investment hedge contracts - foreign currency

Sell	$	66,436	$	66,848
Other foreign currency hedge contracts
Purchase	$	713,497	$	264,292
Sell	$	482,401	$	278,635
Rate lock agreements	$	400,000	$	—

The locations and fair value of our derivatives reported in our Condensed Consolidated Balance Sheets as of the dates indicated below were as follows:


	Asset Derivatives						Liability Derivatives
	Balance Sheet		As of		As of		Balance Sheet	As of		As of
	Location		March 31, 2022		June 30, 2021		Location	March 31, 2022		June 30, 2021
(In thousands)		Fair Value					Fair Value
Derivatives designated as hedging instruments
Rate lock agreements	Other current assets		$	10,242	$	—	Other current liabilities	$	(173)	$	—
Foreign exchange contracts	Other current assets		15,221		3,940		Other current liabilities	(2,642)		272
Total derivatives designated as hedging instruments			25,463		3,940			(2,815)		272
Derivatives not designated as hedging instruments
Foreign exchange contracts	Other current assets		19,299		4,312		Other current liabilities	(6,072)		2,535
Total derivatives not designated as hedging instruments			19,299		4,312			(6,072)		2,535
Total derivatives			$	44,762	$	8,252		$	(8,887)	$	2,807

The changes in AOCI, before taxes, related to derivatives for the indicated periods were as follows:


	Three Months Ended March 31,				Nine Months Ended March 31,
(In thousands)	2022		2021		2022		2021
Beginning AOCI	$	(20,831)	$	(30,816)	$	(25,830)	$	(29,602)
Amount reclassified to earnings as net (gains) losses	(992)		675		(3,122)		1,736
Net change in unrealized gains (losses)	19,627		6,919		26,756		4,644
Ending AOCI	$	(2,196)	$	(23,222)	$	(2,196)	$	(23,222)

Offsetting of Derivative Assets and Liabilities

We present derivatives at gross fair values in the Condensed Consolidated Balance Sheets. We have entered into arrangements with each of our counterparties, which reduce credit risk by permitting net settlement of transactions with the same counterparty under certain conditions. The information related to the offsetting arrangements for the periods indicated was as follows:


As of March 31, 2022							Gross Amounts of Derivatives Not Offset in the Condensed Consolidated Balance Sheets
(In thousands)	Gross Amounts of Derivatives		Gross Amounts of Derivatives Offset in the Condensed Consolidated Balance Sheets		Net Amount of Derivatives Presented in the Condensed Consolidated Balance Sheets		Financial Instruments		Cash Collateral Received		Net Amount
Derivatives - Assets	$	44,762	$	—	$	44,762	$	(8,017)	$	—	$	36,745
Derivatives - Liabilities	$	(8,887)	$	—	$	(8,887)	$	8,017	$	—	$	(870)


As of June 30, 2021							Gross Amounts of Derivatives Not Offset in the Condensed Consolidated Balance Sheets
(In thousands)	Gross Amounts of Derivatives		Gross Amounts of Derivatives Offset in the Condensed Consolidated Balance Sheets		Net Amount of Derivatives Presented in the Condensed Consolidated Balance Sheets		Financial Instruments		Cash Collateral Received		Net Amount
Derivatives - Assets	$	8,252	$	—	$	8,252	$	(2,492)	$	—	$	5,760
Derivatives - Liabilities	$	(2,807)	$	—	$	(2,807)	$	2,492	$	—	$	(315)

NOTE 17– RELATED PARTY TRANSACTIONS

During the three and nine months ended March 31, 2022 and 2021, we purchased from, or sold to, several entities where one or more of our executive officers or members of our Board of Directors or their immediate family members were, during the periods presented, an executive officer or a board member of a subsidiary, or in the case of The Vanguard Group, Inc., together with its affiliates, beneficially owns more than 10% of our outstanding stock, including Ansys, Inc., Citrix Systems, Inc., HP Inc., Keysight Technologies, Inc., Advanced Micro Devices, Inc., and for the nine months ended March 31, 2021 Proofpoint, Inc. The following table provides the transactions with these parties for the indicated periods (for the portion of such period that they were considered related):


	Three Months Ended March 31,				Nine Months Ended March 31,
(In thousands)	2022		2021		2022		2021
Total revenues	$	4,485	$	417	$	5,108	$	1,055
Total purchases	$	562	$	545	$	834	$	1,116

Our receivable balances from these parties were $1.1 million and $1.1 million as of March 31, 2022 and June 30, 2021, respectively. Our payable balances to these parties were immaterial as of March 31, 2022 and June 30, 2021.

NOTE 18 – SEGMENT REPORTING AND GEOGRAPHIC INFORMATION

ASC 280, Segment Reporting, establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. Our CODM is our Chief Executive Officer.

We have four reportable segments: Semiconductor Process Control (“SPC”); Specialty Semiconductor Process; Printed Circuit Board (“PCB”), Display and Component Inspection; and Other. The reportable segments are determined based on several factors including, but not limited to, customer base, homogeneity of products, technology, delivery channels and similar economic characteristics.

Semiconductor Process Control

The SPC segment offers a comprehensive portfolio of inspection, metrology and data analytics products, and related service, which helps integrated circuit (“IC”) manufacturers achieve target yield throughout the entire semiconductor fabrication process – from R&D to final volume production. Our differentiated products and services are designed to provide comprehensive solutions that help our customers accelerate development and production ramp cycles, achieve higher and more stable semiconductor die yields and improve their overall profitability. This reportable segment is composed of two operating segments, Wafer Inspection and Patterning and GSS.

Specialty Semiconductor Process

The Specialty Semiconductor Manufacturing segment develops and sells advanced vacuum deposition and etching process tools, which are used by a broad range of specialty semiconductor customers, including manufacturers of microelectromechanical systems, radio frequency communication chips and power semiconductors for automotive and industrial applications. This reportable segment is composed of one operating segment.

PCB, Display and Component Inspection

The PCB, Display and Component Inspection segment enables electronic device manufacturers to inspect, test and measure PCBs, flat panel displays 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. This segment also engages in the development and marketing of character recognition solutions to banks, financial and other payment processing institutions and healthcare providers. This reportable segment is composed of two operating segments, PCB and Display and Component Inspection.

Other

The Other segment is composed of one operating segment. During the fourth quarter of fiscal 2020, we entered into an Asset Purchase Agreement to sell certain core assets of our non-strategic solar energy business, which accounted for the majority of our Other reportable segment. The sale was completed in the first quarter of fiscal 2021.

The CODM assesses the performance of each operating segment and allocates resources to those segments based on total revenues and segment gross profit and does not evaluate the segments using discrete asset information. Segment gross profit excludes corporate allocations and effects of foreign currency exchange rates, amortization of intangible assets, amortization of inventory fair value adjustments, and transaction costs associated with our acquisitions related to costs of revenues.

The following is a summary of results for each of our four reportable segments for the indicated periods:


	Three Months Ended March 31,				Nine Months Ended March 31,
(In thousands)	2022		2021		2022		2021
SPC:
Revenues	$	1,979,295	$	1,506,140	$	5,810,580	$	4,154,278
Segment gross profit	1,284,450		982,511		3,789,316		2,681,411
Specialty Semiconductor Process:
Revenues	117,253		91,724		332,020		271,264
Segment gross profit	61,521		51,720		176,516		152,819
PCB, Display and Component Inspection:
Revenues	192,533		205,202		583,318		565,646
Segment gross profit	93,298		100,311		270,096		275,064
Other:
Revenues	—		149		—		739
Segment gross profit	—		40		—		(68)
Totals:
Revenues for reportable segments	$	2,289,081	$	1,803,215	$	6,725,918	$	4,991,927
Segment gross profit	$	1,439,269	$	1,134,582	$	4,235,928	$	3,109,226

The following table reconciles total revenues for reportable segments to total revenues for the indicated periods:


	Three Months Ended March 31,				Nine Months Ended March 31,
(In thousands)	2022		2021		2022		2021
Total revenues for reportable segments	$	2,289,081	$	1,803,215	$	6,725,918	$	4,991,927
Corporate allocations and effects of changes in foreign currency exchange rates	(405)		558		(774)		1,336
Total revenues	$	2,288,676	$	1,803,773	$	6,725,144	$	4,993,263

The following table reconciles total segment gross profit to total income before income taxes for the indicated periods:


	Three Months Ended March 31,				Nine Months Ended March 31,
(In thousands)	2022		2021		2022		2021
Total segment gross profit	$	1,439,269	$	1,134,582	$	4,235,928	$	3,109,226
Acquisition-related charges, corporate allocations, and effects of changes in foreign currency exchange rates(1)	42,684		40,438		124,661		115,887
R&D	285,189		238,957		808,373		687,059
SG&A	216,489		183,040		623,229		537,580

Interest expense	39,978		39,092		116,142		117,358

Other expense (income), net	8,644		(7,348)		23,985		(269)
Income before income taxes	$	846,285	$	640,403	$	2,539,538	$	1,651,611

(1)Acquisition-related charges primarily include amortization of intangible assets and amortization of inventory fair value adjustments presented as part of costs of revenues.

Our significant operations outside the United States include manufacturing facilities in China, Germany, Israel and Singapore and sales, marketing and service offices in Japan, the rest of the Asia Pacific region and Europe. For geographical revenue reporting, revenues are attributed to the geographic location in which the customer is located. Long-lived assets consist of land, property and equipment, net, and are attributed to the geographic region in which they are located.

The following is a summary of revenues by geographic region, based on ship-to location, for the indicated periods:


(Dollar amounts in thousands)	Three Months Ended March 31,										Nine Months Ended March 31,
2022					2021					2022					2021
Revenues:
China	$	709,502	31	%		$	353,393	20	%		$	1,939,195	29	%		$	1,221,639	24	%
Taiwan	515,097		22	%		401,797		22	%		1,918,623		29	%		1,151,683		23	%
Korea	474,019		21	%		557,514		31	%		1,036,297		16	%		1,094,979		22	%
North America	219,267		10	%		174,728		10	%		668,601		10	%		559,712		11	%
Europe and Israel	164,246		7	%		95,080		5	%		426,881		6	%		278,398		6	%
Japan	132,829		6	%		161,190		9	%		504,278		7	%		482,330		10	%
Rest of Asia	73,716		3	%		60,071		3	%		231,269		3	%		204,522		4	%
Total	$	2,288,676	100	%		$	1,803,773	100	%		$	6,725,144	100	%		$	4,993,263	100	%

The following is a summary of revenues by major product categories for the indicated periods:


(Dollar amounts in thousands)	Three Months Ended March 31,										Nine Months Ended March 31,
2022					2021					2022					2021
Revenues:
Wafer Inspection	$	919,072	40	%		$	714,990	40	%		$	2,910,616	43	%		$	1,921,571	38	%
Patterning	610,821		27	%		399,533		22	%		1,559,197		23	%		1,077,977		22	%
Specialty Semiconductor Process	105,832		5	%		76,852		4	%		303,884		5	%		222,857		4	%
PCB, Display and Component Inspection	123,384		5	%		141,539		8	%		383,021		6	%		377,990		8	%
Services	488,017		21	%		428,453		24	%		1,398,828		21	%		1,234,425		25	%
Other	41,550		2	%		42,406		2	%		169,598		2	%		158,443		3	%
Total	$	2,288,676	100	%		$	1,803,773	100	%		$	6,725,144	100	%		$	4,993,263	100	%

Wafer Inspection and Patterning products are offered in the SPC segment. Services are offered in multiple segments. Other includes primarily refurbished systems, remanufactured legacy systems, and enhancements and upgrades for previous-generation products that are part of the SPC segment.

In the three months ended March 31, 2022, two customers accounted for approximately 17% and 16% of total revenues. In the three months ended March 31, 2021, two customers accounted for approximately 24% and 16% of total revenues. In the nine months ended March 31, 2022, two customers accounted for approximately 22% and 12% of total revenues. In the nine months ended March 31, 2021, two customers accounted for approximately 17% and 15% of total revenues. Two customers and one customer on an individual basis accounted for greater than 10% of net accounts receivable at March 31, 2022 and at June 30, 2021, respectively.

Land, property and equipment, net by geographic region as of the dates indicated below were as follows:


	As of		As of
(In thousands)	March 31, 2022		June 30, 2021
Land, property and equipment, net:
United States	$	530,852	$	447,359
Singapore	128,640		76,882
Israel	65,238		57,403
Europe	55,000		56,895
Rest of Asia	29,144		24,488
Total	$	808,874	$	663,027

NOTE 19 – RESTRUCTURING CHARGES

From time to time, management approves restructuring plans including workforce reductions in an effort to streamline operations.

Restructuring charges were zero and $2.9 million for the three months ended March 31, 2022 and 2021, respectively. Restructuring charges were $0.9 million and $11.1 million for the nine months ended March 31, 2022 and 2021, respectively. Restructuring charges for the three and nine months ended March 31, 2021, included $1.0 million and $3.0 million, respectively, of non-cash charges for accelerated depreciation related to certain right-of-use assets and fixed assets to be abandoned. As of March 31, 2022 and June 30, 2021, the accrual for restructuring charges was $3.1 million and $3.3 million, respectively.

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