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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-Q
(Mark one)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2023
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission File Number 000-09992
KLA CORPORATION
(Exact name of registrant as specified in its charter)
 
Delaware 04-2564110
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
One Technology Drive,Milpitas,California95035
(Address of principal executive offices)(Zip Code)
(408) 875-3000
(Registrant’s telephone number, including area code) 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.001 par value per shareKLACThe Nasdaq Stock Market, LLC
The Nasdaq Global Select Market
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.
Large accelerated filerAccelerated filer 
Non-accelerated filer Smaller reporting company
Emerging growth company
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 January 16, 2024, there were 135,233,651 shares of the registrant’s Common Stock, $0.001 par value per share, outstanding.


Table of Contents
INDEX
 
  Page
Number
PART IFINANCIAL INFORMATION
Item 1.
Condensed Consolidated Statements of Comprehensive Income for the Three Months and Six Months Ended December 31, 2023 and 2022
Condensed Consolidated Statements of Stockholders Equity for the Three Months and Six Months Ended December 31, 2023 and 2022
Item 2.
Item 3.
Item 4.
PART IIOTHER INFORMATION
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.


 
2

Table of Contents
PART I. FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS
KLA CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
 
(In thousands)December 31,
2023
June 30,
2023
ASSETS
Current assets:
Cash and cash equivalents$1,665,054 $1,927,865 
Marketable securities1,677,940 1,315,294 
Accounts receivable, net1,843,878 1,753,361 
Inventories3,038,628 2,876,784 
Other current assets523,221 498,728 
Total current assets8,748,721 8,372,032 
Land, property and equipment, net1,088,824 1,031,841 
Goodwill, net2,086,204 2,278,820 
Deferred income taxes902,163 816,899 
Purchased intangible assets, net786,233 935,303 
Other non-current assets668,356 637,462 
Total assets$14,280,501 $14,072,357 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$376,671 $371,026 
Deferred system revenue884,027 651,720 
Deferred service revenue446,243 416,606 
Short-term debt749,842  
Other current liabilities2,114,214 2,303,490 
Total current liabilities4,570,997 3,742,842 
Long-term debt5,142,884 5,890,736 
Deferred tax liabilities493,968 529,287 
Deferred service revenue221,768 176,681 
Other non-current liabilities807,173 813,058 
Total liabilities11,236,790 11,152,604 
Commitments and contingencies (Notes 9, 14 and 15)
Stockholders’ equity:
Common stock and capital in excess of par value2,154,509 2,107,663 
Retained earnings921,466 848,431 
Accumulated other comprehensive loss(32,264)(36,341)
Total stockholders’ equity3,043,711 2,919,753 
Total liabilities and stockholders’ equity$14,280,501 $14,072,357 
See accompanying notes to Condensed Consolidated Financial Statements (unaudited).
3

Table of Contents
KLA CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
 
Three Months Ended December 31,Six Months Ended December 31,
(In thousands, except per share amounts)2023202220232022
Revenues:
Product$1,921,809 $2,463,408 $3,758,473 $4,659,017 
Service564,917 520,479 1,125,209 1,049,294 
Total revenues2,486,726 2,983,887 4,883,682 5,708,311 
Costs and expenses:
Costs of revenues976,746 1,208,786 1,923,637 2,250,012 
Research and development320,418 332,826 631,632 651,341 
Selling, general and administrative237,244 243,096 476,889 497,076 
Impairment of goodwill and purchased intangible assets219,000  219,000  
Interest expense74,202 74,280 148,436 148,675 
Loss on extinguishment of debt   13,286 
Other expense (income), net(32,154)(18,074)(58,893)(65,080)
Income before income taxes691,270 1,142,973 1,542,981 2,213,001 
Provision for income taxes108,736 164,178 219,072 208,141 
Net income582,534 978,795 1,323,909 2,004,860 
Less: Net income attributable to non-controlling interest   74 
Net income attributable to KLA$582,534 $978,795 $1,323,909 $2,004,786 
Net income per share attributable to KLA
Basic$4.30 $6.93 $9.74 $14.16 
Diluted$4.28 $6.89 $9.69 $14.09 
Weighted-average number of shares:
Basic135,539 141,299 135,976 141,564 
Diluted136,254 141,966 136,684 142,268 
See accompanying notes to Condensed Consolidated Financial Statements (unaudited).
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KLA CORPORATION
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
Three Months Ended December 31,Six Months Ended December 31,
(In thousands)2023202220232022
Net income $582,534 $978,795 $1,323,909 $2,004,860 
Other comprehensive income (loss):
Currency translation adjustments:
Cumulative currency translation adjustments3,272 7,462 (3,581)(12,250)
Income tax (provision) benefit(878)279 (618)279 
Net change related to currency translation adjustments2,394 7,741 (4,199)(11,971)
Cash flow hedges:
Net unrealized gains arising during the period9,806 8,239 8,325 10,007 
Reclassification adjustments for net gains included in net income(8,953)(12,961)(16,061)(23,136)
Income tax benefit2,675 3,275 3,531 4,463 
Net change related to cash flow hedges3,528 (1,447)(4,205)(8,666)
Net change related to unrecognized losses and transition obligations in connection with defined benefit plans(395)(416)(153)475 
Available-for-sale securities:
Net unrealized gains (losses) arising during the period14,760 4,511 16,004 (2,453)
Reclassification adjustments for net losses included in net income61 407 73 581 
Income tax (provision) benefit(3,174)(1,057)(3,443)403 
Net change related to available-for-sale securities11,647 3,861 12,634 (1,469)
Other comprehensive income (loss)17,174 9,739 4,077 (21,631)
Less: Comprehensive income attributable to non-controlling interest   74 
Total comprehensive income attributable to KLA$599,708 $988,534 $1,327,986 $1,983,155 
See accompanying notes to Condensed Consolidated Financial Statements (unaudited).
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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)SharesAmount
Balances as of June 30, 2023136,750 $2,107,663 $848,431 $(36,341)$2,919,753 $ $2,919,753 
Net income— — 741,375 — 741,375 — 741,375 
Other comprehensive loss— — — (13,097)(13,097)— (13,097)
Net issuance under employee stock plans173 (68,237)— — (68,237)— (68,237)
Repurchase of common stock(956)(14,722)(444,371)— (459,093)— (459,093)
Cash dividends ($1.30 per share) and dividend equivalents declared
— — (179,256)— (179,256)— (179,256)
Stock-based compensation expense— 48,772 — — 48,772 — 48,772 
Balances as of September 30, 2023135,967 2,073,476 966,179 (49,438)2,990,217  2,990,217 
Net income— — 582,534 — 582,534 — 582,534 
Other comprehensive income— — — 17,174 17,174 — 17,174 
Net issuance under employee stock plans141 45,427 — — 45,427 — 45,427 
Repurchase of common stock(848)(13,014)(428,549)— (441,563)— (441,563)
Cash dividends ($1.45 per share) and dividend equivalents declared
— — (198,698)— (198,698)— (198,698)
Stock-based compensation expense— 48,620 — — 48,620 — 48,620 
Balances as of December 31, 2023135,260 $2,154,509 $921,466 $(32,264)$3,043,711 $ $3,043,711 

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)SharesAmount
Balances as of June 30, 2022141,804 $1,061,940 $366,882 $(27,471)$1,401,351 $(2,261)$1,399,090 
Net income attributable to KLA— — 1,025,991 — 1,025,991 — 1,025,991 
Net income attributable to non-controlling interest— — — — — 74 74 
Other comprehensive loss — — — (31,370)(31,370)— (31,370)
Net issuance under employee stock plans171 (54,950)— — (54,950)— (54,950)
Repurchase of common stock(257)(1,926)(87,690)— (89,616)— (89,616)
Cash dividends ($1.30 per share) and dividend equivalents declared
— — (186,216)— (186,216)— (186,216)
Stock-based compensation expense— 34,982 — — 34,982 — 34,982 
Purchase of non-controlling interest— 1,902 — — 1,902 (6,196)(4,294)
Disposal of non-controlling interest— — — — — 8,383 8,383 
Balances as of September 30, 2022141,718 1,041,948 1,118,967 (58,841)2,102,074  2,102,074 
Net income— — 978,795 — 978,795 — 978,795 
Other comprehensive income— — — 9,739 9,739 — 9,739 
Net issuance under employee stock plans170 31,196 — — 31,196 — 31,196 
Repurchase of common stock(3,429)870,811 (1,241,793)— (370,982)— (370,982)
Cash dividends ($1.30 per share) and dividend equivalents declared
— — (185,967)— (185,967)— (185,967)
Stock-based compensation expense— 38,405 — — 38,405 — 38,405 
Balances as of December 31, 2022138,459 $1,982,360 $670,002 $(49,102)$2,603,260 $ $2,603,260 
See accompanying notes to Condensed Consolidated Financial Statements (unaudited).
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KLA CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 Six Months Ended December 31,
(In thousands)20232022
Cash flows from operating activities:
Net income$1,323,909 $2,004,860 
Adjustments to reconcile net income to net cash provided by operating activities:
Impairment of goodwill and purchased intangible assets219,000  
Depreciation and amortization201,466 205,446 
Loss on extinguishment of debt 13,286 
Unrealized foreign exchange gain and other(24,376)(18,896)
Asset impairment charges 9,905 
Disposal of non-controlling interest 8,270 
Stock-based compensation expense97,392 73,387 
Gain on sale of business (29,687)
Deferred income taxes(136,480)(255,116)
Changes in assets and liabilities, net of assets acquired and liabilities assumed in business acquisitions:
Accounts receivable(53,247)(495,720)
Inventories(159,608)(393,177)
Other assets(112,392)30,546 
Accounts payable11,037 80,789 
Deferred system revenue232,307 34,587 
Deferred service revenue74,722 30,219 
Other liabilities(167,748)401,136 
Net cash provided by operating activities1,505,982 1,699,835 
Cash flows from investing activities:
Proceeds from sale of assets5,079  
Net proceeds from sale of business 75,358 
Business acquisitions, net of cash acquired (27,144)
Capital expenditures(144,846)(177,994)
Purchases of available-for-sale securities(982,642)(558,165)
Proceeds from sale of available-for-sale securities15,235 36,755 
Proceeds from maturity of available-for-sale securities628,277 353,391 
Purchases of trading securities(66,007)(37,583)
Proceeds from sale of trading securities64,757 39,482 
Proceeds from other investments 1,020 
Net cash used in investing activities(480,147)(294,880)
Cash flows from financing activities:
Payment of debt issuance costs (6,515)
Proceeds from revolving credit facility 300,000 
Repayment of debt (862,250)
Common stock repurchases(893,229)(444,853)
Payment of dividends to stockholders(378,366)(372,192)
Issuance of common stock48,433 33,908 
Tax withholding payments related to vested and released restricted stock units(71,242)(57,550)
Contingent consideration payable and other, net(1,676)(2,500)
Purchase of non-controlling interest (4,295)
Net cash used in financing activities(1,296,080)(1,416,247)
Effect of exchange rate changes on cash and cash equivalents7,434 (2,139)
Net decrease in cash and cash equivalents(262,811)(13,431)
Cash and cash equivalents at beginning of period1,927,865 1,584,908 
Cash and cash equivalents at end of period$1,665,054 $1,571,477 
Supplemental cash flow disclosures:
Income taxes paid, net$605,434 $394,464 
Interest paid$138,054 $73,851 
Non-cash activities:
Contingent consideration payable - financing activities$(765)$(1,774)
Dividends payable - financing activities$3,985 $3,941 
Unsettled common stock repurchase - financing activities$10,999 $15,975 
Accrued purchases of land, property and equipment - investing activities$18,312 $30,590 
See accompanying notes to Condensed Consolidated Financial Statements (unaudited).
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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, 2023 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, 2023, 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, 2023.
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 six months ended December 31, 2023 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, 2024.
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 dates of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during 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, 2023.
Recent Accounting Pronouncements
Recently Adopted
In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The new guidance 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 prior business combination guidance, such assets and liabilities were recognized by the acquirer at fair value on the acquisition date. We adopted this update beginning in the first quarter of our fiscal year ending June 30, 2024 on a prospective basis. The impact of adopting this update will depend on the magnitude of contract assets and contract liabilities acquired in future acquisitions.

Updates Not Yet Effective
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures. The new guidance requires enhanced disclosures about significant segment expenses. This standard update is effective for our annual reports beginning in the fiscal year ending June 30, 2025 and interim period reports beginning in the first quarter of the fiscal year ending June 30, 2026. Early adoption is permitted on a retrospective basis. We are currently evaluating the impact of this ASU on our segment disclosures.
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In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures. The new guidance requires enhanced disclosures about income tax expenses. This standard update is effective for our annual reports beginning in the fiscal year ending June 30, 2026. Early adoption is permitted on a prospective basis. We are currently evaluating the impact of this ASU on our annual income tax disclosures.
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 ofAs of
(Dollar amounts in thousands)December 31, 2023June 30, 2023$ Change% Change
Accounts receivable, net$1,843,878 $1,753,361 $90,517 5 %
Contract assets$100,944 $117,137 $(16,193)(14)%
Contract liabilities$1,552,038 $1,245,007 $307,031 25 %
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 six months ended December 31, 2023 was mainly due to $85.6 million of contract assets reclassified to accounts receivable, net, as our right to consideration for these contract assets became unconditional, partially offset by $69.5 million of revenue recognized for which the payment is subject to conditions other than passage of time. Contract assets are included in other current assets on our Condensed Consolidated Balance Sheets.
The change in contract liabilities during the six months ended December 31, 2023 was mainly due to an increase in the value of products and services billed to customers for which control of the products and services has not transferred to the customers, partially offset by recognition in revenue of $771.2 million that was included in contract liabilities as of June 30, 2023. Contract liabilities are included in current and non-current liabilities on our Condensed Consolidated Balance Sheets.

Remaining Performance Obligations

As of December 31, 2023, we had $10.65 billion of remaining performance obligations, which represents our obligation to deliver products and services, and primarily consists of sales orders where written customer requests have been received. This amount includes customer deposits of $781.3 million as disclosed in Note 4 “Financial Statement Components” and excludes contract liabilities of $1.55 billion as described above. We expect to recognize approximately 45% to 50% of these performance obligations as revenue beyond the next 12 months, but this estimate is subject to constant change. The supply chain disruptions caused by the pandemic as well as elevated demand levels in recent years have led to customers agreeing to purchase equipment from us with lead times that are longer than our historical experience. More recently, we have seen the macro-driven slowdown has impacted general semiconductor demand, causing the semiconductor industry to rebalance its supply chain and reduce inventory levels. In response to this slowdown, some of our customers have been adjusting their capacity expansion-focused capital expenditure plans. As customers try to balance the evolution of their technological, production or market needs with the timing and content of orders placed with us, there is elevated risk of order modifications, pushouts, or cancellations.

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In addition, in October 2022, the U.S. government issued regulations that imposed new export licensing requirements for certain U.S. semiconductor and high-performance computing technology (including wafer fab equipment), for the use of such technology for certain end uses in the People’s Republic of China (“China”), and for the provision of support by U.S. Persons to certain advanced integrated circuit (“IC”) fabs located in China. The regulations impose export license requirements effectively on all KLA products and services to customers located in China that fabricate certain advanced logic, NAND and DRAM ICs. KLA is also restricted from providing certain U.S. origin tools, software and technology to certain wafer fab equipment manufacturers located in China, absent an export license. In October 2023, the U.S. government issued additional regulations that went into effect in November 2023. These additional rules are designed to update export controls on advanced computing semiconductors and semiconductor manufacturing equipment, as well as items that support supercomputing applications and end-uses, to arms embargoed countries, including China. They adjust the parameters included in the existing regulations that determine whether an advanced computing chip is restricted and impose new measures to address risks of circumvention of the controls established in October 2022. The regulations are very complex and, in January 2024, KLA, among other companies, submitted comments to the government regarding these regulations. We are taking appropriate measures to comply with all government regulations, and will continue to apply 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, now or in the future, will be granted.
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, as defined in that Note.
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 1Valuations based on quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.
Level 2Valuations 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 3Valuations 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. There were no transfers between Level 1, Level 2 and Level 3 fair value measurements during the six months ended December 31, 2023.
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, 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.
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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 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 dates indicated below, were presented on our Condensed Consolidated Balance Sheets as follows:
Quoted Prices in Active Markets for Identical AssetsSignificant Other Observable InputsLittle or No Market Activity Inputs
As of December 31, 2023 (In thousands)Total (Level 1) (Level 2) (Level 3)
Assets
Cash equivalents:
Money market funds and other$959,851 $959,851 $ $ 
U.S. Treasury securities42,001  42,001  
Marketable securities:
Corporate debt securities743,650  743,650  
Municipal securities38,582  38,582  
U.S. Government agency securities110,261 110,261   
U.S. Treasury securities546,370 432,791 113,579  
Equity securities15,017 15,017   
Total cash equivalents and marketable securities(1)
2,455,732 1,517,920 937,812  
Other current assets:
Derivative assets38,937  38,937  
Other non-current assets:
Executive Deferred Savings Plan272,709 245,683 27,026  
Total financial assets(1)
$2,767,378 $1,763,603 $1,003,775 $ 
Liabilities
Derivative liabilities$(21,923)$ $(21,923)$ 
Contingent consideration payable(2,507)  (2,507)
Total financial liabilities$(24,430)$ $(21,923)$(2,507)
________________
(1) Excludes cash of $430.1 million held in operating accounts and time deposits of $457.2 million (of which $233.1 million were cash equivalents) as of December 31, 2023.
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Quoted Prices in Active Markets for Identical AssetsSignificant Other Observable InputsLittle or No Market Activity Inputs
As of June 30, 2023 (In thousands)Total(Level 1)(Level 2)(Level 3)
Assets
Cash equivalents:
Money market funds and other$1,257,223 $1,257,223 $ $ 
U.S. Government agency securities3,788  3,788  
U.S. Treasury securities11,500  11,500  
Marketable securities:
Corporate debt securities502,650  502,650  
Municipal securities31,788  31,788  
U.S. Government agency securities129,784 127,715 2,069  
U.S. Treasury securities518,215 425,234 92,981  
Equity securities18,159 18,159   
Total cash equivalents and marketable securities(1)
2,473,107 1,828,331 644,776  
Other current assets:
Derivative assets35,712  35,712  
Other non-current assets:
Executive Deferred Savings Plan256,846 198,639 58,207  
Total financial assets(1)
$2,765,665 $2,026,970 $738,695 $ 
Liabilities
Derivative liabilities$(12,106)$ $(12,106)$ 
Contingent consideration payable(6,447)  (6,447)
Total financial liabilities$(18,553)$ $(12,106)$(6,447)
________________
(1) Excludes cash of $298.6 million held in operating accounts and time deposits of $471.4 million (of which $356.7 million were cash equivalents) as of June 30, 2023.

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NOTE 4 – FINANCIAL STATEMENT COMPONENTS
Condensed Consolidated Balance Sheets
As ofAs of
(In thousands)December 31, 2023June 30, 2023
Accounts receivable, net:
Accounts receivable, gross$1,879,295 $1,786,993 
Allowance for credit losses(35,417)(33,632)
$1,843,878 $1,753,361 
Inventories:
Customer service parts$586,232 $524,096 
Raw materials1,560,293 1,559,202 
Work-in-process621,406 578,864 
Finished goods270,697 214,622 
$3,038,628 $2,876,784 
Other current assets:
Deferred costs of revenues$166,385 $133,067 
Prepaid expenses125,638 121,204 
Contract assets100,944 117,137 
Prepaid income and other taxes53,269 64,901 
Other current assets76,985 62,419 
$523,221 $498,728 
Land, property and equipment, net:
Land$78,261 $72,287 
Buildings and leasehold improvements872,520 825,975 
Machinery and equipment1,076,052 1,016,713 
Office furniture and fixtures61,092 58,036 
Construction-in-process201,446 168,817 
2,289,371 2,141,828 
Less: accumulated depreciation(1,200,547)(1,109,987)
$1,088,824 $1,031,841 
Other non-current assets:
Executive Deferred Savings Plan(1)
$272,709 $256,846 
Operating lease right of use assets235,101 208,706 
Other non-current assets160,546 171,910 
$668,356 $637,462 
Other current liabilities:
Customer deposits$607,998 $769,000 
Compensation and benefits517,076 370,536 
Other liabilities and accrued expenses402,906 383,407 
Executive Deferred Savings Plan(1)
273,937 258,223 
Income taxes payable164,101 383,012 
Interest payable112,757 105,270 
Operating lease liabilities35,439 34,042 
$2,114,214 $2,303,490 
Other non-current liabilities:
Income taxes payable$274,747 $322,113 
Customer deposits173,279 156,874 
Operating lease liabilities156,040 138,354 
Pension liabilities62,124 63,672 
Other non-current liabilities140,983 132,045 
$807,173 $813,058 
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________________
(1)We have a non-qualified deferred compensation plan (known as the “Executive Deferred Savings Plan” or “EDSP”) under which certain employees and non-employee directors may defer a portion of their compensation. The expense associated with changes in the EDSP liability included in selling, general and administrative (“SG&A”) expense was $25.8 million and $11.9 million in the three months ended December 31, 2023 and 2022, respectively, and was $16.5 million and $1.6 million during the six months ended December 31, 2023 and 2022, respectively. The amount of net gains associated with changes in the EDSP assets included in SG&A expense was $25.7 million and $11.9 million in the three months ended December 31, 2023 and 2022, respectively, and was $16.2 million and $1.6 million during the six months ended December 31, 2023 and 2022, respectively. For additional details, refer to Note 1 “Description of Business and Summary of Significant Accounting Policies” to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023.
Accumulated Other Comprehensive Income (Loss)
The components of Accumulated Other Comprehensive Income (Loss) (“AOCI”) as of the dates indicated below were as follows:
(In thousands)Currency Translation AdjustmentsUnrealized Gains (Losses) on Available-for-Sale SecuritiesUnrealized Gains (Losses) on DerivativesUnrealized Gains (Losses) on Defined Benefit PlansTotal
Balance as of December 31, 2023$(68,826)$(163)$55,739 $(19,014)$(32,264)
Balance as of June 30, 2023$(64,627)$(12,797)$59,944 $(18,861)$(36,341)
The effects on net income of amounts reclassified from AOCI to the Condensed Consolidated Statements of Operations for the indicated periods were as follows (in thousands; amounts in parentheses indicate debits or reductions to earnings):
AOCI ComponentsThree Months EndedSix Months Ended
Location in the Condensed Consolidated Statement of OperationsDecember 31,December 31,
2023202220232022
Unrealized gains on cash flow hedges from foreign exchange and interest rate contractsRevenues$8,036 $15,928 $11,432 $30,533 
Costs of revenues and operating expenses(20)(3,904)2,755 (9,271)
Interest expense937 937 1,874 1,874 
Net gains reclassified from AOCI$8,953 $12,961 $16,061 $23,136 
Unrealized losses on available-for-sale securitiesOther expense (income), net$(61)$(407)$(73)$(581)

The amount reclassified out of AOCI related to our defined benefit pension plans that was recognized as a component of net periodic cost for the three months ended December 31, 2023 and 2022 was $0.3 million and $0.4 million, respectively, and for the six months ended December 31, 2023 and 2022 was $0.5 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, 2023.
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NOTE 5 – MARKETABLE SECURITIES
The amortized cost and fair value of marketable securities as of the dates indicated below were as follows:
As of December 31, 2023 (In thousands)Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
Corporate debt securities$742,409 $3,233 $(1,992)$743,650 
Money market funds and other959,851 — — 959,851 
Municipal securities38,669 156 (243)38,582 <