KLA 10-Q 2022-09-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

For the quarterly period ended September 30, 2022

or

For the transition period from to

Commission File Number 000-09992

(408) 875-3000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 17, 2022, there were 141,718,327 shares of the registrant’s Common Stock, $0.001 par value per share, outstanding.

INDEX

PART I. FINANCIAL INFORMATION

KLA CORPORATION

Condensed Consolidated Balance Sheets

(Unaudited)

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

KLA CORPORATION

Condensed Consolidated Statements of Operations

(Unaudited)

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

KLA CORPORATION

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact may be forward-looking statements. You can identify these and other forward-looking statements by the use of words such as “may,” “will,” “could,” “would,” “should,” “expects,” “plans,” “anticipates,” “relies,” “believes,” “estimates,” “predicts,” “intends,” “potential,” “continues,” “thinks,” “seeks,” or the negative of such terms, or other comparable terminology. Forward-looking statements also include the assumptions underlying or relating to any of the foregoing statements. Such forward-looking statements include those regarding, among others: the future impacts of the COVID-19 pandemic; forecasts of the future results of our operations, including profitability; orders for our products and capital equipment generally; sales of semiconductors; the investments by our customers in advanced technologies and new materials; growth of revenue in the semiconductor industry, the semiconductor capital equipment industry and our business; technological trends in the semiconductor industry; future developments or trends in the global capital and financial markets; our future product offerings and product features; the success and market acceptance of new products; timing of shipment of order backlog; our future product shipments and product and service revenues; our future gross margins; our future research and development (“R&D”) expenses and selling, general and administrative (“SG&A”) expenses; international sales and operations; our ability to maintain or improve our existing competitive position; success of our product offerings; creation and funding of programs for R&D; results of our investment in leading edge technologies; the effects of hedging transactions; the effect of the sale of trade receivables and promissory notes from customers; the effect of future compliance with laws and regulations; our future effective income tax rate; our recognition of tax benefits; the effects of any audits or litigation; future payments of dividends to our stockholders; the completion of any acquisitions of third parties, or the technology or assets thereof; benefits received from any acquisitions and development of acquired technologies; sufficiency of our existing cash balance, investments, cash generated from operations and the unfunded portion of our Revolving Credit Facility (as defined below) to meet our operating and working capital requirements, including debt service and payment thereof; future dividends, and stock repurchases; our compliance with the financial covenants under the Credit Agreement (as defined below) for our Revolving Credit Facility; the adoption of new accounting pronouncements; our repayment of our outstanding indebtedness; and our environmental, social and governance (“ESG”) related targets, goals and commitments.

Our actual results may differ significantly from those projected in the forward-looking statements in this report. Factors that might cause or contribute to such differences include, but are not limited to:

*•*The impact of the COVID-19 pandemic on the global economy and on our business, financial condition and results of operations, including the supply chain constraints we are experiencing as a result of the pandemic;

• Economic, political and social conditions in the countries in which we, our customers and our suppliers operate, including rising inflation and interest rates, Russia’s invasion of Ukraine, and global trade policies;

*•*Disruption to our manufacturing facilities or other operations, or the operations of our customers, due to natural catastrophic events, health epidemics or terrorism;

• Ongoing changes in the technology industry, and the semiconductor industry in particular, including future growth rates, pricing trends in end-markets, or changes in customer capital spending patterns;

• Our ability to timely develop new technologies and products that successfully anticipate or address changes in the semiconductor industry;

• Our ability to maintain our technology advantage and protect our proprietary rights;

• Our ability to compete with new products introduced by our competitors;

• Our ability to attract, onboard and retain key personnel;

• Cybersecurity threats, cyber incidents affecting our and our customers, suppliers and other service providers’ systems and networks and our and their ability to access critical information systems for daily business operations;

• Liability to our customers under indemnification provisions if our products fail to operate properly or contain defects or our customers are sued by third parties due to our products;

• Exposure to a highly concentrated customer base;

• Availability and cost of the wide range of materials used in the production of our products;

• Our ability to operate our business in accordance with our business plan;

• Legal, regulatory and tax environments in which we perform our operations and conduct our business and our ability to comply with relevant laws and regulations;

*•*Increasing attention to ESG Matters and the resulting costs, risks and impact on our business;

*•*Our ability to pay interest and repay the principal of our current indebtedness is dependent upon our ability to manage our business operations, our credit rating and the ongoing interest rate environment, among other factors;

• Our ability or the ability of our customers to obtain licenses for the sale of certain products or provision of certain services to customers in the People’s Republic of China (“China”), pursuant to regulations recently issued (the “New BIS Rules”) by the Bureau of Industry and Security (“BIS”) of the U.S. Department of Commerce (“Commerce”), which could impact our business, financial condition and results of operations;

• Instability in the global credit and financial markets;

• Our exposure to currency exchange rate fluctuations, or declining economic conditions in those countries where we conduct our business;

• Changes in our effective tax rate resulting from changes in the tax rates imposed by jurisdictions where our profits are determined to be earned and taxed, expiration of tax holidays in certain jurisdictions, resolution of issues arising from tax audits with various authorities or changes in tax laws or the interpretation of such tax laws;

• Our ability to identify suitable acquisition targets and successfully integrate and manage acquired businesses; and

*•*Unexpected delays, difficulties and expenses in executing against our environmental, climate, inclusion and diversity or other ESG targets, goals and commitments.

For a more detailed discussion of these and other risk factors that might cause or contribute to differences from the forward-looking statements in this report, see Part II, Item 1A, “Risk Factors” in this report as well as Part I, Item 1, “Business” and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended June 30, 2022. You should carefully review these risks and also review the risks described in other documents we file from time to time with the Securities and Exchange Commission (“SEC”). You are cautioned not to place undue reliance on these forward-looking statements, and we expressly assume no obligation and do not intend to update the forward-looking statements in this report after the date hereof.

EXECUTIVE SUMMARY

We are a leading supplier of process control and yield management solutions and services for the semiconductor and related electronics industries. Our broad portfolio of inspection and metrology products, and related service, software and other offerings, support R&D and manufacturing of integrated circuits (“IC”), wafers and reticles. Our products, services and expertise are used by our customers to measure, detect, analyze and resolve critical and nanometric level product defects, helping them to manage manufacturing process challenges and to obtain higher finish product yields at lower cost. We also offer advanced technology solutions to address various manufacturing needs of printed circuit boards (“PCB”), flat panel displays (“FPD”), Specialty Semiconductor Devices and other electronic components, including advanced packaging, light-emitting diodes (“LED”), power devices, compound semiconductor, and data storage industries, as well as general materials research.

Our semiconductor customers generally operate in one or both of the major semiconductor device manufacturing markets: memory and foundry/logic. The pervasive and increasing needs for semiconductors in many consumer and industrial products, the rapid proliferation of new applications for more advanced semiconductor devices, and the increasing complexity associated with leading edge semiconductor manufacturing drives demand for our process control and yield management solutions. Other demand trends include the growth of end-market drivers such as artificial intelligence (“AI”), the deployment of 5G telecommunications technology and associated high-end mobile devices, the electrification and digitalization of the automotive industry, the revival of personal computer (“PC”) demand and associated innovations to support remote work, virtual collaboration, remote learning and entertainment, and the growth of the IoT. The favorable end market dynamics are driving our customers to make increased investments in our process control and yield management solutions as part of their overall capital investment plans. These trends also drive demand for our other products such as those used in the PCB, FPD and Specialty Semiconductor manufacturing, where the increase in technology complexity is expected to continue and further accelerate as more devices become interconnected and dependent on other electronic devices. As a result of these factors, we saw a general strengthening of demand for our products over the last few years. While demand for our products remains strong and we continue to invest in technological innovation, the recent macro-economic uncertainty, expectations of a slowing global economy and resulting impact on consumer demand is a development we are monitoring closely. Some of our customers, particularly in the PC and mobile device end markets, are experiencing market softening in the past few months, and we have seen memory pricing in those markets weaken as well. As a result, some customers have started to postpone capacity expansion plans. Any push out or cancellation of deliveries by our customers could cause earnings volatility, due to increases in risk of inventory related charges as well as the timing of revenue recognition.

We are organized into three reportable segments. Prior to July 1, 2022, we had a fourth segment, Other, but core assets were sold and there are no longer operations. The remaining three segments are as follows:

• Semiconductor Process Control: A comprehensive portfolio of inspection, metrology and data analytics products as well as related service offerings that help IC manufacturers achieve target yields throughout the semiconductor fabrication process, from R&D to final volume production.

• Specialty Semiconductor Process: Advanced vacuum deposition and etching process tools used by a broad range of specialty semiconductor customers.

• PCB, Display and Component Inspection: a range of inspection, testing and measurement, and direct imaging for patterning products used by manufacturers of PCBs, FPDs, advanced packaging, MEMS, and other electronic components.

A majority of our revenues are derived from outside the U.S., and include geographic regions such as China, Taiwan, Korea, Japan, Europe and Israel, and Rest of Asia. China is emerging as a major region for manufacturing of logic and memory chips, adding to its role as the world’s largest consumer of ICs. Additionally, a significant portion of global FPD and PCB manufacturing has migrated to China. Government initiatives are propelling China to expand its domestic manufacturing capacity and attracting investment from semiconductor manufacturers from Taiwan, Korea, Japan and the U.S. Although China is currently seen as an important long-term growth region for the semiconductor and electronics capital equipment sector, Commerce has adopted regulations and added certain China-based entities to the U.S. Entity List, restricting our ability to provide products and services to such entities without a license. In addition, Commerce has imposed export licensing requirements on China-based customers engaged in military end uses, as well as requiring our customers to obtain an export license when they use certain semiconductor capital equipment based on U.S. technology to manufacture products connected to Huawei or its affiliates.

In addition, in October 2022, the BIS issued the New BIS Rules to control the export of U.S. semiconductor and high-performance computing technology (including wafer fab equipment) and to control the provision of support by U.S. persons to China. The New BIS Rules impose export license requirements effectively on all KLA products and services to customers located in China that fabricate:

a.Non-planar integrated circuits (“ICs”) (e.g., FinFet or GaaFeT) or 14/16nm and below logic ICs;

b.NAND ICs at 128 layers and above; and

c.DRAM ICs using a “production” technology node of 18 nanometer half-pitch or less.

KLA is also restricted from providing certain U.S. origin tools, software and technology to certain wafer fab equipment manufacturers and maskshops located in China, absent an export license. We are taking appropriate measures to comply with them and are applying for export licenses, when required, to avoid disruption to our customers’ operations. While some export licenses have been obtained by us or our customers, there can be no assurance that export licenses applied for by either us or our customers will be granted.

The New BIS Rules are complex, and we are working on assessing the their full impact on KLA. The new rules have not significantly impacted our operations to date, but the possible negative effects on our future business of export licenses not being granted could be material and could result in a substantial reduction to our remaining performance obligations (“RPO”) or require us to return substantial deposits received from customers in China for future purchase orders. We are still assessing the aggregate potential impact of the existing regulations and New BIS Rules on our financial results and operations, although our preliminary assessment indicates a potential combined gross direct impact on revenue, based on existing backlog, in the range of approximately $500 million to $900 million in calendar year 2023. However, this estimate does not take into account the likelihood of system reallocation of products to other customers where supply is meaningfully below demand for those products. See Part II, Item 1A, “Risk Factors” in this report for more information regarding how such actions by the U.S. government or another country could significantly impact our ability to provide our products and services to existing and potential customers, especially in China, and adversely affect our business, financial condition and results of operations.

The following table sets forth some of our key quarterly unaudited financial information:

(1)Our net income attributable to KLA increased to $1,026.0 million in the three months ended September 30, 2022 compared to the three months ended September 30, 2021. The increase from the first quarter of fiscal 2022 was primarily due to higher revenues partially offset by higher operating expenses as well as a lower income tax benefit. Refer to the sections below for further information.

(2)Diluted net income per share is computed independently for each of the quarters presented based on the weighted-average fully diluted shares outstanding for each quarter. Therefore, the sum of quarterly diluted net income per share information may not equal annual (or other multiple-quarter calculations of) diluted net income per share.

Impact of COVID-19

Events surrounding the ongoing COVID-19 pandemic had resulted in a reduction in economic activity across the globe in calendar year 2020 and early 2021. Vaccinations and pandemic containment measures have now created an environment that is driving economic growth and higher levels of inflation, even as the pace of economic recovery remains uneven in various geographies. On one hand, the semiconductor and capital equipment industry has experienced multiple growth drivers, including acceleration of the pace of virtual engagement and digitization driven by COVID-19 related travel restrictions and quarantines. On the other hand, the war in Ukraine and resumption of growth has caused us to experience new constraints and challenges. Supply chain lead times are extended and shortages have sometimes required us to plan further ahead and increase our purchase commitments to secure critical components on a timely basis. We continue to monitor our supply chain and work with our suppliers to identify and mitigate potential gaps to ensure continuity of supply.

While all of our global manufacturing sites are currently operational, any local pandemic outbreaks or introduction of new variants have required and could in the future require us to temporarily curtail production levels or temporarily cease operations based on government mandates or due to outbreaks affecting our manufacturing employees. We remain committed to the health and safety of our employees, contractors, suppliers, customers and communities, and are following government policies and recommendations designed to slow the spread of COVID-19.

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

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

CRITICAL ACCOUNTING ESTIMATES AND POLICIES

The preparation of our Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions in applying our accounting policies that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base these estimates and assumptions on historical experience and evaluate them on an ongoing basis to ensure that they remain reasonable under current conditions. Actual results could differ from those estimates. We discuss the development and selection of the critical accounting estimates with the Audit Committee of our Board of Directors on a quarterly basis, and the Audit Committee has reviewed our related disclosure in this Quarterly Report on Form 10-Q.

There have been no material changes in our critical accounting estimates and policies since our Annual Report on Form 10-K for the fiscal year ended June 30, 2022. Refer to Note 1 “Basis of Presentation” to our Condensed Consolidated Financial Statements for additional details. In addition, please refer to “Management’s Discussion and Analysis of Financial Condition

and Results of Operations” contained in Part II, Item 7 of our Annual Report on Form 10-K for our fiscal year ended June 30, 2022 for a complete description of our critical accounting policies and estimates.

Recent Accounting Pronouncements

For a description of recent accounting pronouncements, including those recently adopted and the expected dates of adoption as well as estimated effects, if any, on our Condensed Consolidated Financial Statements of those not yet adopted, see Note 1 “Basis of Presentation” to our Condensed Consolidated Financial Statements.

RESULTS OF OPERATIONS

Revenues and Gross Margin

Revenues

Our business is affected by the concentration of our customer base and our customers’ capital equipment procurement schedules as a result of their investment plans. Our product revenues in any particular period are significantly impacted by the amount of new orders we receive during that period and, depending upon the duration of manufacturing and installation cycles, in the preceding period. Revenue is also impacted by average customer pricing, customer revenue deferrals associated with volume purchase agreements, and the effect of fluctuations in foreign currency exchange rates.

Service revenues are generated from product maintenance and support services, as well as billable time and material service calls made to our customers. The amount of our service revenues is typically a function of the number of systems installed at our customers’ sites and the utilization of those systems, but it is also impacted by other factors, such as our rate of service contract renewals, the types of systems being serviced and fluctuations in foreign currency exchange rates.

Product revenues during the three months ended September 30, 2022 increased compared to the three months ended September 30, 2021 primarily due to strong demand for many of our products, especially our metrology and inspection portfolios, as well as increases from continued growth in the advanced packaging and specialty semiconductor markets.

Service revenues during the three months ended September 30, 2022 increased compared to the three months ended September 30, 2021 primarily due to an increase in our installed base.

Revenues by segment**(1)**

(1)Segment revenues exclude corporate allocations and the effects of changes in foreign currency exchange rates. For additional details, refer to Note 18 “Segment Reporting and Geographic Information” to our Condensed Consolidated Financial Statements.

Revenues from our Semiconductor Process Control segment during the three months ended September 30, 2022 increased compared to the three months ended September 30, 2021 primarily due to strong demand for many of our products especially from our metrology and inspection portfolios. Revenues in the Specialty Semiconductor Process segment during the three months ended September 30, 2022 increased compared to the three months ended September 30, 2021 primarily due to continued growth in the specialty semiconductor market. Revenues in the PCB, Display and Component Inspection segment during the three months ended September 30, 2022 remained relatively flat compared to the three months ended September 30, 2021.

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

A significant portion of our revenues continues to be generated in Asia, where a substantial portion of the world’s semiconductor manufacturing capacity is located, and we expect that trend to continue.

Gross margin

Our gross margin fluctuates with revenue levels and product mix and is affected by variations in costs related to manufacturing and servicing our products, including our ability to scale our operations efficiently and effectively in response to prevailing business conditions.

The following table summarizes the major factors that contributed to the changes in gross margin:

Changes in gross margin, which are driven by the revenue volume of products and services, reflect our ability to leverage existing infrastructure to generate higher revenues. Changes in gross margin from the mix of products and services sold reflect the impact of changes within the composition of product and service offerings. Changes in gross margin from manufacturing labor, overhead and efficiencies reflect our ability to manage costs and drive productivity as we scale our manufacturing activity to respond to customer requirements, and amortization of intangible assets. Changes in gross margin from other service and manufacturing costs include the impact of customer support costs, including the efficiencies with which we deliver services to our customers, and the effectiveness with which we manage our production plans and inventory risk.

The increase in our gross margin during the comparative periods presented is primarily due to a more profitable mix and a higher revenue volume of products and services sold, partially offset by an increase in service and manufacturing costs including higher shipping costs.

Segment gross profit**(1)**

(1) Segment gross profit is calculated as segment revenues less segment costs of revenues and excludes corporate allocations, amortization of intangible assets, inventory fair value adjustments, acquisition related costs, and the effects of changes in foreign currency exchange rates. For additional details, refer to Note 18 “Segment Reporting and Geographic Information” to our Condensed Consolidated Financial Statements.

Gross profit in the Semiconductor Process Control segment during the three months ended September 30, 2022 increased compared to the three months ended September 30, 2021 primarily due to a higher revenue volume of products and services sold, partially offset by an increase in other service and manufacturing costs. Gross profit in the Specialty Semiconductor Process segment during the three months ended September 30, 2022 increased compared to the three months ended September 30, 2021 primarily due to a higher revenue volume, partially offset by a less favorable mix of products and services sold as well as an increase in other service and manufacturing costs. Gross profit in the PCB, Display and Component Inspection segment during the three months ended September 30, 2022 decreased compared to the three months ended September 30, 2021 primarily due to a lower revenue volume of products and services sold and an increase in other service and manufacturing costs, partially offset by a more favorable mix of products and services sold.

Research and Development

R&D expenses may fluctuate with product development phases and project timing as well as our R&D efforts. As technological innovation is essential to our success, we may incur significant costs associated with R&D projects, including compensation for engineering talent, engineering material costs and other expenses.

R&D expenses during the three months ended September 30, 2022 increased compared to the three months ended September 30, 2021 primarily due to an increase in employee-related expenses of $32.1 million as a result of additional engineering headcount contributing to higher employee compensation and benefit costs, an increase in engineering project material costs of $20.2 million and increased depreciation expense of $5.5 million.

Our future operating results will depend significantly on our ability to produce products and provide services that have a competitive advantage in our marketplace. To do this, we believe we must continue to make substantial and focused investments in our R&D. We remain committed to product development in new and emerging technologies.

Selling, General and Administrative

SG&A expenses during the three months ended September 30, 2022 increased compared to the three months ended September 30, 2021 primarily due to $16.8 million of compensation-related expense from the sale of Orbograph Ltd. (“Orbograph”) along with increases in the following: depreciation expense of $11.3 million, facilities-related expense of $9.0 million, employee travel expenses of $6.6 million, allowance for credit losses of $6.4 million and consulting costs of $4.6 million.

Restructuring Charges

Restructuring charges were $16.2 million and $0.5 million for the three months ended September 30, 2022 and 2021, respectively. As of September 30, 2022, the accrual for restructuring charges was $5.4 million.

For additional information refer to Note 19 “Restructuring Charges” to our Condensed Consolidated Financial Statements.

Interest Expense and Other Expense (Income), Net

Other expense (income), net is comprised primarily of realized gains or losses on sales of marketable securities, gains or losses from revaluations of certain foreign currency denominated assets and liabilities as well as foreign currency contracts, interest-related accruals (such as interest and penalty accruals related to our tax obligations) and interest income earned on our invested cash, cash equivalents and marketable securities.

Interest expense during the three months ended September 30, 2022 increased compared to the three months ended September 30, 2021 primarily due to additional interest expense on the $3.0 billion Senior Notes issued in June 2022.

Other expense (income), net during the three months ended September 30, 2022 decreased compared to the three months ended September 30, 2021 primarily due to the following: a gain of $29.7 million from the sale of our interest in Orbograph to a private equity firm, a higher net fair value gain of $13.3 million from an equity security compared to the prior fiscal year, and decreases in accruals related to uncertain tax positions of $10.4 million.

Loss on Extinguishment of Debt

For the three months ended September 30, 2022, loss on extinguishment of debt reflected a pre-tax net loss of $13.3 million associated with the redemption of $500.0 million of the Senior Notes due 2024, including associated redemption premiums, accrued interest and other fees and expenses. We had no loss on extinguishment of debt in the three months ended September 30, 2021.

Provision for Income Taxes

The following table provides details of income taxes:

The effective tax rate during the three months ended September 30, 2022 was higher compared to the three months ended September 30, 2021 primarily due to the impact of the following items:

• Tax expense decreased by $394.5 million during the three months ended September 30, 2021 relating to a non-recurring tax benefit resulting from the intra-entity transfers of certain intellectual property (“IP”) rights. During the three months ended September 30, 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; and

• Tax expense increased by $11.7 million during the three months ended September 30, 2022 relating to the sale of an Orbotech Ltd. subsidiary; partially offset by

• Tax expense decreased by $31.8 million during the three months ended September 31, 2022 relating to a decrease in our unrecognized tax benefits from the settlement of income tax examinations; and

• Tax expense decreased by $62 million during the three months ended September 31, 2022 relating to a decrease in our deferred tax liabilities on unremitted earnings and unrealized gains.

Our future effective income tax rate depends on various factors, such as tax legislation, the geographic composition of our pre-tax income, the amount of our pre-tax income as business activities fluctuate, non-deductible expenses incurred in connection with acquisitions, R&D credits as a percentage of aggregate pre-tax income, non-taxable or non-deductible increases or decreases in the assets held within our Executive Deferred Savings Plan, the tax effects of employee stock activity and the effectiveness of our tax planning strategies.

For discussions on tax examinations, assessments and certain related proceedings, see Note 13 “Income Taxes” to our Condensed Consolidated Financial Statements.

Liquidity and Capital Resources

Cash, Cash Equivalents and Marketable Securities

As of September 30, 2022, our cash, cash equivalents and marketable securities totaled $2.95 billion, which represents an increase of $245.5 million from June 30, 2022. The increase is due to net cash provided by operating activities of $1.01 billion and net proceeds from the sale of a business of $75.4 million, partially offset by net repayments of debt of $368.8 million, cash used for payment of dividends and dividend equivalents of $188.0 million, stock repurchases of $89.8 million, capital expenditures of $84.4 million and $55.0 million of tax withholding payments related to vested and released restricted stock units (“RSU”).

As of September 30, 2022, $1.24 billion of our $2.95 billion of cash, cash equivalents and marketable securities were held by our foreign subsidiaries and branch offices. We currently intend to indefinitely reinvest $88.5 million of the cash, cash equivalents and marketable securities held by our foreign subsidiaries for which we assert that earnings are permanently reinvested. If, however, a portion of these funds were to be repatriated to the United States, we would be required to accrue and pay state and foreign taxes of approximately 1% - 22% of the funds repatriated. The amount of taxes due will depend on the amount and manner of the repatriation, as well as the location from which the funds are repatriated. We have accrued state and foreign tax on the remaining cash of $1.15 billion of the $1.24 billion held by our foreign subsidiaries and branch offices. As such, these funds can be returned to the U.S. without accruing any additional U.S. tax expense.

Cash Dividends

During the three months ended September 30, 2022, our Board of Directors declared a regular quarterly cash dividend of

$1.30 per share on our outstanding common stock, which was paid on September 1, 2022 to our stockholders of record as of the close of business on August 15, 2022. During the same period in fiscal year ended June 30, 2022, our Board of Directors declared and paid a regular quarterly cash dividend of $1.05 per share on our outstanding common stock. The total amount of regular quarterly cash dividends and dividend equivalents paid during the three months ended September 30, 2022 and 2021 was $188.0 million and $162.8 million, respectively. The amount of accrued dividend equivalents payable for regular quarterly cash dividends on unvested RSUs with dividend equivalent rights as of September 30, 2022 and June 30, 2022 was $9.4 million and $11.2 million, respectively. These amounts will be paid upon vesting of the underlying unvested RSUs as described in Note 10 “Equity, Long-term Incentive Compensation Plans and Non-Controlling Interest” to our Condensed Consolidated Financial Statements.

Stock Repurchases

The shares repurchased under our stock repurchase program have reduced our basic and diluted weighted-average shares outstanding for the three months ended September 30, 2022 and 2021. The stock repurchase program is intended, in part, to mitigate the potential dilutive impact related to our equity incentive plans and shares issued in connection with our Employee Stock Purchase Program as well as to return excess cash to our stockholders.

Cash Flows Provided by Operating Activities

Historically, we have financed our liquidity requirements through cash generated from our operations. Net cash provided by operating activities during the three months ended September 30, 2022 was $1.01 billion compared to $0.86 billion during the three months ended September 30, 2021. This increase of $147.7 million resulted primarily from the following:

• An increase in collections of approximately $605 million mainly driven by higher shipments and prepayments during the three months ended September 30, 2022; partially offset by

• An increase in accounts payable payments of approximately $298 million during the three months ended September 30, 2022;

• An increase in employee-related payments of approximately $105 million during the three months ended September 30, 2022;

• An increase in income tax payments of approximately $44 million during the three months ended September 30, 2022; and

• An increase in other tax payments of approximately $31 million during the three months ended September 30, 2022.

Cash Flows Used in Investing Activities

Net cash used in investing activities during the three months ended September 30, 2022 was $53.5 million compared to $175.3 million during the three months ended September 30, 2021. This decrease in cash used was mainly due to an increase in proceeds from the sale of a business of $75.4 million and a decrease in net purchases of available-for-sale and trading securities of $50.0 million.

Cash Flows Used in Financing Activities

Net cash used in financing activities during the three months ended September 30, 2022 was $0.71 billion compared to net cash used in financing activities of $0.61 billion during the three months ended September 30, 2021. This increase was mainly due to increases in repayment of debt of $362.3 million and cash paid for dividends and dividend equivalents of $25.2 million, partially offset by a decrease in cash used for common stock repurchases of $309.8 million.

Senior Notes

In June 2022, we issued $3.00 billion aggregate principal amount of senior, unsecured notes (the “2022 Senior Notes”) as follows: $1.00 billion of 4.650% senior, unsecured notes due July 15, 2032; $1.20 billion of 4.950% senior, unsecured notes due July 15, 2052; and $800.0 million of 5.250% senior, unsecured notes due July 15, 2062. A portion of the net proceeds of the 2022 Senior Notes was used to complete a tender offer in July 2022 for $500.0 million of our 2014 Senior Notes, as defined below, including associated redemption premiums, accrued interest and other fees and expenses. The transaction resulted in pre-tax net loss on extinguishment of debt of $13.3 million for the three months ended September 30, 2022. The remainder of the net proceeds were used for share repurchases and for general corporate purposes.

Prior to June 2022, the following aggregate principal amounts of senior, unsecured long-term notes were issued in the following periods: $750.0 million in February 2020 (the “2020 Senior Notes”), $1.20 billion in March 2019 (the “2019 Senior Notes”) and $2.50 billion in November 2014 (the “2014 Senior Notes”). These, along with the 2022 Senior Notes, are collectively referred to as the “Senior Notes.”

The original discounts on the Senior Notes are being amortized over the life of the debt. Interest is payable as follows: semi-annually on January 15 and July 15 of each year for the 2022 Senior Notes; 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 relevant indentures for the Senior Notes (collectively, the “Indenture”) include covenants that limit our ability to grant liens on our facilities and enter into sale and leaseback transactions.

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 (“Moody’s”), S&P Global Ratings (“S&P”) and Fitch Inc. (“Fitch”), 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 (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.

As of September 30, 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 (“Credit Agreement”) for an unsecured Revolving Credit Facility (“Revolving Credit Facility”) with a maturity date of June 8, 2027 that allows us to borrow up to $1.50 billion. Subject to the terms of the Credit Agreement, the Revolving Credit Facility may be increased by an amount up to $250.0 million in the aggregate. In the first quarter of fiscal 2023, we borrowed $300.0 million and repaid $150.0 million, leaving $425.0 million aggregate principal amount outstanding at September 30, 2022.

We may borrow, repay and reborrow funds under the Revolving Credit Facility until the maturity date, at which time we may exercise two one-year extension options with the consent of the lenders. We may prepay outstanding borrowings under the Revolving Credit Facility at any time without a prepayment penalty.

Borrowings under the Revolving Credit Facility can be made as Term Secured Overnight Financing Rate (“SOFR”) Loans or Alternate Base Rate (“ABR”) Loans, at the Company’s option. In the event that Term SOFR is unavailable, any Term SOFR elections will be converted to Daily Simple SOFR, as long as it is available. Each Term SOFR Loan will bear interest at a rate per annum equal to the applicable Adjusted Term SOFR rate, which is equal to the applicable Term SOFR rate plus 10 bps that shall not be less than zero, plus a spread ranging from 75 bps to 125 bps, as determined by the Company’s credit ratings at the time. Each ABR Loan will bear interest at a rate per annum equal to the ABR plus a spread ranging from 0 bps to 25 bps, as determined by the Company’s credit ratings at the time. We are also obligated to pay an annual commitment fee on the daily undrawn balance of the Revolving Credit Facility, which ranges from 4.5 bps to 12.5 bps, subject to an adjustment in conjunction with changes to our credit rating. The applicable interest rates and commitment fees are also subject to adjustment based on the Company’s performance against certain environmental sustainability key performance indicators related to greenhouse gas (“GHG”) emissions and renewable electricity usage. As of September 30, 2022, the all-in interest rate of the $425.0 million outstanding Term SOFR loans reflected the applicable Adjusted Term SOFR plus a spread of 100 bps and the applicable commitment fee on the daily undrawn balance of the Revolving Credit Facility was 9 bps.

Under the Credit Agreement, the maximum leverage ratio, on a quarterly basis, is 3.50 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 September 30, 2022, our maximum allowed leverage ratio was 3.50 to 1.00.

We were in compliance with all covenants under the Credit Agreement as of September 30, 2022 (the leverage ratio was 1.41 to 1.00). Considering our current liquidity position, short-term financial forecasts and ability to prepay the Revolving Credit Facility, if necessary, we expect to continue to be in compliance with our financial covenants at the end of our fiscal year ending June 30, 2023.

Material Cash Requirements

There have been no material changes outside the ordinary course of business to our material cash requirements as disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2022. For additional details regarding our debt and commitments, refer to Note 8 “Debt” and Note 15 “Commitments and Contingencies,” respectively, to our Condensed Consolidated Financial Statements. For additional details regarding our material cash requirements, refer to our Annual Report Form on 10-K for the fiscal year ended June 30, 2022.

Working Capital

Working capital was $4.50 billion as of September 30, 2022, which represents an increase of $206.7 million compared to our working capital of $4.30 billion as of June 30, 2022. As of September 30, 2022, our principal sources of liquidity consisted of $2.95 billion of cash, cash equivalents and marketable securities. Our liquidity may be affected by many factors, some of which are based on the normal ongoing operations of the business, spending for business acquisitions, and other factors such as uncertainty in the global and regional economies and the semiconductor, semiconductor-related and electronic device industries. Although cash requirements will fluctuate based on the timing and extent of these factors, we believe that cash generated from operations, together with the liquidity provided by existing cash and cash equivalents balances and our $1.50 billion Revolving Credit Facility, will be sufficient to satisfy our liquidity requirements associated with working capital needs, capital expenditures, cash dividends, stock repurchases and other contractual obligations, including repayment of outstanding debt, for at least the next 12 months.

Our credit ratings as of September 30, 2022 are summarized below:

In June 2022, S&P upgraded our senior unsecured credit rating from BBB+ to A-. Factors that can affect our credit ratings include changes in our operating performance, the economic environment, conditions in the semiconductor and semiconductor equipment industries, our financial position, material acquisitions and changes in our business strategy.

Off-Balance Sheet Arrangements

As of September 30, 2022, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K, that have or are reasonably likely to have a current or future effect on our financial position, changes in financial condition, revenues and expenses, results of operations, liquidity, capital expenditures, or capital resources that are material to investors. Refer to Note 15 “Commitments and Contingencies” to our Condensed Consolidated Financial Statements for information related to indemnification obligations.

We are exposed to financial market risks, including changes in interest rates, foreign currency exchange rates and marketable equity security prices. To mitigate these risks, we utilize derivative financial instruments such as foreign currency hedges. All of the potential changes noted below are based on sensitivity analyses performed on our financial position as of September 30, 2022. Actual results may differ materially.

As of September 30, 2022, we had an investment portfolio of fixed income securities of $1.05 billion. These securities, as with all fixed income instruments, are subject to interest rate risk and will decline in value if market interest rates increase. If market interest rates were to increase immediately and uniformly by 100 bps from levels as of September 30, 2022, the fair value of the portfolio would have declined by $9.8 million.

The fair market value of our long-term fixed interest rate Senior Notes is subject to interest rate risk. Generally, the fair market value of fixed interest rate notes will increase as market interest rates fall and decrease as market interest rates rise. As of September 30, 2022, our fixed rate Senior Notes had a principal amount, fair value and book value of $5.95 billion, $5.44 billion and $5.89 billion, respectively, due in various fiscal years ranging from 2025 to 2063.

As of September 30, 2022, we had outstanding $425.0 million aggregate principal amount of borrowings under our Revolving Credit Facility. Each Term SOFR Loan will bear interest at a rate per annum equal to the applicable Adjusted Term SOFR, which is equal to the applicable Term SOFR plus 10 bps that shall not be less than zero, plus a spread ranging from 75 bps to 125 bps, as determined by the Company’s credit ratings at the time. The fair value of the borrowings under the Revolving Credit Facility is subject to interest rate and credit risk due to the timing of the rate resets and changes in the market’s assessment of risk of default, respectively. As of September 30, 2022, if the SOFR-based interest rate increased by 100 bps, the change would increase our annual interest expense by approximately $4 million as it relates to our borrowings under the Revolving Credit Facility. Pursuant to the terms of the Credit Agreement, we are also obligated to pay an annual commitment fee on the daily undrawn balance of the Revolving Credit Facility at a rate that ranges from 4.5 bps to 12.5 bps, depending upon the Company’s then prevailing credit rating. As of September 30, 2022 the annual commitment fee was 9 bps. Additionally, as of September 30, 2022, if our credit ratings were downgraded to be below investment grade, the maximum potential increase to our annual commitment fee for the Revolving Credit Facility, using the highest range of the ranges discussed above, is estimated to be approximately $1 million.

Our equity investment in a publicly traded company is subject to market price risk, which we typically do not attempt to reduce or eliminate through hedging activities. As of September 30, 2022, the fair value of our investment in the marketable equity security, which began publicly trading on the Tokyo Stock Exchange on April 5, 2021, was $13.1 million. Assuming a decline of 50% in market prices, the aggregate value of our investment in the marketable equity security could decrease by approximately $7 million, based on the value as of September 30, 2022.

See Note 5 “Marketable Securities” to our Condensed Consolidated Financial Statements in Part I, Item 1 and “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q for additional details and risks that may affect the value of the investments in our portfolio as of September 30, 2022.

As of September 30, 2022, we had net forward and option contracts to sell $45.8 million in foreign currency in order to hedge certain currency exposures (see Note 16 “Derivative Instruments and Hedging Activities” to our Condensed Consolidated Financial Statements for additional details). If we had entered into these contracts on September 30, 2022, the U.S. dollar equivalent would have been $43.9 million. A 10% adverse move in all currency exchange rates affecting the contracts would decrease the fair value of the contracts by $85.4 million. However, if this occurred, the fair value of the underlying exposures hedged by the contracts would increase by a similar amount. Accordingly, we believe that, as a result of the hedging of certain of our foreign currency exposure, changes in most relevant foreign currency exchange rates should have no material impact on our results of operations or cash flows.

Evaluation of Disclosure Controls and Procedures and Related CEO and CFO Certifications

Evaluation of Disclosure Controls and Procedures

We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (“Disclosure Controls”) as of the end of the period covered by this Quarterly Report on Form 10-Q (this “Report”) required by Exchange Act Rules 13a-15(b) or 15d-15(b). The Disclosure Controls evaluation was conducted under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”). Based on this evaluation, the CEO and CFO have concluded that, as of the end of the period covered by this Report, our Disclosure Controls were effective at a reasonable assurance level.

Attached as exhibits to this Report are certifications of the CEO and CFO, that are required in accordance with Rule 13a-14 of the Exchange Act. This Controls and Procedures section includes the information concerning the controls evaluation referred to in the certifications, and it should be read in conjunction with the certifications for a more complete understanding of the topics presented.

Definition of Disclosure Controls

Disclosure Controls are controls and procedures designed to reasonably ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act, such as this Report, is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms. Disclosure Controls are also designed to provide reasonable assurance that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. Our Disclosure Controls include components of our internal control over financial reporting, which consists of control processes designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles in the United States of America. To the extent that components of our internal control over financial reporting are included within our Disclosure Controls, they are included in the scope of our annual controls evaluation.

Limitations on the Effectiveness of Disclosure Controls

Our management, including our CEO and CFO, does not expect that our Disclosure Controls or internal control over financial reporting will prevent all error and fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple errors or mistakes. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving our stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the most recent fiscal quarter covered by this Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The information set forth above under Note 14 “Litigation and Other Legal Matters” to our Condensed Consolidated Financial Statements in Item 1 of Part 1 is incorporated herein by reference.

A description of factors that could materially affect our business, financial condition or operating results is provided below.

Risk Factors Summary

The following summarizes the most material risks that make an investment in our securities risky or speculative. If any of the following risks occur or persist, our business, financial condition and results of operations could be materially harmed and the price of our common stock could significantly decline.

COVID-19 Pandemic Risks

• Shortages or disruption in the supply chain could affect our ability to timely process components for our products;

• Travel bans, lockdowns, or quarantine requirements could delay our ability to install or service our products;

• Governmental orders or employee exposure could cause manufacturing stoppages for us or our customers or suppliers;

• Continued volatility and uncertainty in customer demand for our products, delivery pushouts or cancellations of orders by our customers;

• Increased costs or inability to acquire components necessary for the manufacture of our products;

• Absence of liquidity at customers and suppliers; and

• Loss of efficiencies and increased cybersecurity risks due to remote working requirements for our employees.

Commercial, Operational, Financial and Regulatory Risks

• Risks related to our international operations, such as tariffs or similar trade impairments, and longer payment cycles or collection difficulties associated with international sales;

• Our vulnerability to a weakening in the condition of the financial markets and the global economy;

• IP disputes can be expensive and could result in an inability to sell our products in certain jurisdictions;

• Laws, rules, regulations or other orders that may limit our ability to sell our products or provide service on products previously sold to certain customers;

• Increasing attention to ESG matters, including any targets or other ESG initiatives, could result in additional costs or risks or adversely impact our business;

• We may be unable to attract, onboard and retain key personnel;

• Reliance on third-party service providers could result in disruptions if such third parties cannot perform services for us in a timely manner;

• Cybersecurity incidents could result in the loss of valuable information or assets or subject us to costly disruption, remediation, regulatory investigations, litigation and reputational damage;

• We may face disruptions if we cannot access critical information in a timely manner due to system failures;

• We may not find suitable acquisition candidates or fail to successfully integrate our acquisitions;

• Natural disasters, such as earthquakes, health epidemics, acts of terrorism or war or other catastrophic events, and the lack of insurance thereof, could significantly disrupt our operations for lengthy periods of time;

• We are exposed to fluctuations in foreign currency exchange rates, interest rates and the market values of our portfolio investments;

• We are subject to tax and regulatory compliance audits;

• Economic, political or other conditions in the jurisdictions where we earn profits can impact the tax laws and taxes we pay in those jurisdictions, subsequently impacting our effective tax rate, cash flows and results of operations;

• Increased compliance costs with federal securities laws, rules, and regulations, as well as NASDAQ requirements; and

• Changes in accounting pronouncements and laws could have unforeseen effects.

Industry Risks

• We may not be able to keep pace with trends and technological changes in the industries in which we operate;

• We have a highly concentrated customer base; and

• Prevailing local and global economic conditions may negatively affect the purchasing decisions of our customers.

Business Model and Capital Structure Risks

• We may not be able to maintain our technology advantage or protect our proprietary rights;

• We may not be able to compete with new products introduced by our competitors;

• We may not receive components necessary to build our products in a timely manner;

• We may fail to operate our business in a manner consistent with our business plan;

• We may fail to comply with the covenants in our Revolving Credit Facility and Senior Notes, which could impair our ability to borrow needed funds, or require us to repay debt sooner than we planned;

• We may not have sufficient financial resources to repay our indebtedness when it becomes due and our leveraged capital structure may divert resources from operations and other corporate uses;

• We may not be able to declare cash dividends at all or in any particular amounts;

• Risks related to our commercial terms and conditions, including our indemnification of third parties, as well as the performance of our products;

• Our government funding for R&D is subject to termination, audit and any further penalties;

• We may incur significant restructuring charges or other asset impairment charges or inventory write-offs; and

• We are subject to risks related to receivables factoring arrangements, and compliance risk of certain settlement agreements with the government.

For a more complete discussion of the material risks facing our business, see below.

Risks Related to the COVID-19 Pandemic

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

The COVID-19 pandemic has caused substantial global disruptions, including in the jurisdictions where we conduct business and may cause additional disruptions in the future, which are impossible to predict. Local, regional and national authorities in numerous jurisdictions have implemented a variety of measures designed to slow the spread of the virus, including social distancing guidelines, quarantines, banning of non-essential travel and requiring the cessation of non-essential activities on the premises of businesses. In 2022, the Chinese government implemented lockdowns in two of its larger economic hubs, Shenzhen and Shanghai. Lockdowns in major economic hubs could cause delays in the delivery of goods in or around impacted areas, which could both harm our ability to obtain components for our products in a timely manner, delay the delivery of our products in and around those areas, delay installation of our products in those areas or affect customer acceptance processes due to resource mobility restrictions. Any delays in delivering or installing our products could adversely impact the timing of our revenue recognition. While all of our global manufacturing sites are currently operational, any local pandemic outbreaks or the introduction of new variants could require us to temporarily curtail production levels or temporarily cease operations based on government mandates.

Despite the wide availability of COVID-19 vaccines in the U.S. and other parts of the world, we are unable to predict how effective they will continue to be in preventing the spread of COVID-19 (including its variant strains). In addition, although there has been improvement in the global economy since the severe effects of the COVID-19 pandemic at its onset, many macroeconomic variables remain dynamic and we continue to experience constraints in our supply chain as discussed below.

Some of the risks associated with the pandemic or a worsening of the pandemic in the future include:

• Cancellation or reduction of routes available from common carriers, which may cause delays in our ability to deliver or service our products or receive components from suppliers necessary to manufacture or service our products;

• Shortages or disruption in the supply chain could affect our ability to procure components for our products on a timely basis or at all, or could require us to commit to increased purchases and provide longer lead times to secure critical components, which could increase inventory obsolescence

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None.

• Denotes a management contract, plan or arrangement.

+ Certain portions of this document that constitute confidential information have been redacted in accordance with Item 601(b)(10) of Regulation S-K.

^ Furnished herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.