SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One):
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996].
For the fiscal year ended June 30, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED].
For the transition period from _____to _____
Commission file number: _________
A. Full title of the plan and the address of the plan, if different
from that of the issuer named below:
KLA-Tencor 401(k) Plan
B. Name of issuer of the securities held pursuant to the plan and
the address of its principal executive office:
KLA Tencor Corporation
160 Rio Robles
San Jose, CA 95134
KLA-Tencor Corporation
401(k) Plan
REQUIRED INFORMATION
The KLA-Tencor 401(k) Plan (the "Plan") is subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"). Therefore, in lieu of the
requirements of Items 1-3 of Form 11-K, the financial statements and schedules
of the Plan for the two fiscal years ended June 30, 2001 and June 30, 2000,
which have been prepared in accordance with the financial reporting requirements
of ERISA, are attached hereto and incorporated herein by reference.
KLA-Tencor Corporation
401(k) Plan
SIGNATURES
The Plan. Pursuant to the requirements of the Securities and Exchange
Act of 1934, the trustees (or other persons who administer the KLA-Tencor 401(k)
Plan) have duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
KLA-TENCOR 401(k) PLAN
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(Name of plan)
Date: December 20, 2001 By: /s/ STUART J. NICHOLS
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(Signature)
Title: Vice President, General Counsel
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KLA-TENCOR CORPORATION ON BEHALF
OF THE PLAN ADMINISTRATOR OF THE
KLA-TENCOR 401(k) PLAN
KLA-TENCOR 401(k) PLAN
Financial Statements
June 30, 2001 and June 30, 2000
KLA-TENCOR 401(k) PLAN
FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
JUNE 30, 2001 AND JUNE 30, 2000
TABLE OF CONTENTS
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PAGE
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Independent Accountants Report ............................................1-2
Financial Statements:
Statements of Net Assets Available for Benefits .............................3
Statements of Changes in Net Assets Available for Benefits ..................4
Notes to Financial Statements ...............................................5
Supplemental Schedule as of June 30, 2001 ..................................10
Schedule of Assets Held for Investment Purposes
[MOHLER, NIXON & WILLIAMS LETTERHEAD]
INDEPENDENT ACCOUNTANTS' REPORT
TO THE PARTICIPANTS AND
PLAN ADMINISTRATOR OF THE
KLA-TENCOR 401(k) PLAN
We have audited the financial statements of the KLA-Tencor 401(k) Plan (the
Plan) as of June 30, 2001 and June 30, 2000, and for the years then ended, as
listed in the accompanying table of contents. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
Except as explained in the following paragraph, we conducted our audits in
accordance with auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
Plan's management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
As permitted by 29 CFR 2520.103-8 of the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974, investment assets held by Wells Fargo Bank, the trustee of
the Plan, and transactions in those assets were excluded from the scope of our
audit of the Plan's fiscal 2000 financial statements, except for comparing the
information provided by the trustee, which is summarized in Note 5, with the
related information included in the financial statements.
Because of the significance of the information that we did not audit, we are
unable to, and do not, express an opinion of the Plan's financial statements as
of June 30, 2000. The form and content of the information included in the fiscal
2000 financial statements, other than that derived from the information
certified by the trustee, have been audited by us and, in our opinion, are
presented in compliance with the Department of Labor's Employee Retirement
Income Security Act of 1974.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
June 30, 2001, and the changes in net assets available for benefits for the year
then ended, in conformity with accounting principles generally accepted in the
United States of America.
1
Our audit of the Plan's financial statements as of and for the year ended June
30, 2001 was performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule, as listed in
the accompanying table of contents, is presented for the purpose of additional
analysis and is not a required part of the basic financial statements but is
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
/s/ MOHLER, NIXON & WILLIAMS
MOHLER, NIXON & WILLIAMS
Accountancy Corporation
Campbell, California
November 7, 2001
2
KLA-TENCOR 401(k) PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
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JUNE 30,
2001 2000
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Assets:
Investments, at fair value $328,036,931 $309,023,194
Participant loans 6,431,738 5,940,225
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Assets held for investment purposes 334,468,669 314,963,419
Employer's contribution receivable 314,983 6,684,967
Participants' contributions receivable 153,006 --
Accrued income receivable -- 24,167
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Total assets 334,936,658 321,672,553
Liabilities:
Excess contributions refundable 5,633 --
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Net assets available for benefits $334,931,025 $321,672,553
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See notes to financial statements.
3
KLA-TENCOR 401(k) PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED
JUNE 30,
2001 2000
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Additions to net assets attributed to:
Investment income:
Dividends and interest $ 2,956,221 $ 22,882,791
Net realized and unrealized appreciation
(depreciation) in fair value of investments (33,355,524) 31,840,524
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(30,399,303) 54,723,315
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Contributions:
Participants' 39,897,625 27,583,919
Employer's 19,170,479 17,331,963
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59,068,104 44,915,882
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Total additions 28,668,801 99,639,197
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Deductions from net assets attributed to:
Withdrawals and distributions 15,410,329 13,861,207
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Total deductions 15,410,329 13,861,207
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Net increase in net assets 13,258,472 85,777,990
Net assets available for benefits:
Beginning of year 321,672,553 235,894,563
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End of year $ 334,931,025 $ 321,672,553
============= =============
See notes to financial statements.
4
KLA-TENCOR 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001 AND JUNE 30, 2000
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NOTE 1 - THE PLAN AND ITS SIGNIFICANT ACCOUNTING POLICIES
GENERAL - The following description of the KLA-Tencor 401(k) Plan (the "Plan")
provides only general information. Participants should refer to the Plan
document for a more complete description of the Plan's provisions.
The Plan is a defined contribution plan that was established in 1982 by
KLA-Tencor Corporation (the "Company") to provide benefits to eligible
employees, as defined in the Plan document. The Plan administrator believes that
the Plan is currently designed and operated in compliance with the applicable
requirements of the Internal Revenue Code of 1986, as amended, and the
provisions of the Employee Retirement Income Security Act of 1974 (ERISA), as
amended.
During the fiscal year ended June 30, 2001, the Plan document was amended to
allow participants to invest up to 100% of their accounts in the KLA-Tencor
Stock Fund.
ADMINISTRATION - The Company has appointed a Plan Committee (the "Committee") to
manage the operation and administration of the Plan. The Company has contracted
with a third-party administrator to process and maintain the records of
participant data and Wells Fargo Bank (Wells Fargo) to act as the custodian and
trustee. Substantially all expenses incurred for administering the Plan are paid
by the Company.
ESTIMATES - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, and changes therein, and disclosure of
contingent assets and liabilities. Actual results could differ from those
estimates.
BASIS OF ACCOUNTING - The financial statements of the Plan are prepared on the
accrual method of accounting in accordance with accounting principles generally
accepted in the United States of America.
INVESTMENTS - Investments of the Plan are held by Wells Fargo and invested based
solely upon instructions received from participants.
The Plan's investments in mutual funds and common stock are valued at fair value
as of the last day of the Plan year, as measured by quoted market prices.
Participant loans are valued at cost, which approximates fair value.
5
INCOME TAXES - The Plan has been amended since receiving its latest favorable
determination letter dated November 13, 1999. The Company believes that the Plan
is operated in accordance with, and continues to qualify under, the applicable
requirements of the Internal Revenue Code and related state statutes, and that
the trust, which forms a part of the Plan, is intended to be exempt from federal
income and state taxes.
RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500 - The differences between
the information reported in the financial statements and the information
reported in the Form 5500 arise primarily from presenting the financial
statements on the accrual basis of accounting.
RISKS AND UNCERTAINTIES - The Plan provides for various investment options in
any combination of mutual funds, and Company stock offered by the Plan.
Investment securities are exposed to various risks, such as interest rate,
market fluctuations and credit risks. Due to the level of risk associated with
certain investment securities, it is at least reasonably possible that changes
in risks in the near term would materially affect participants' account balances
and the amounts reported in the statements of net assets available for benefits
and the statements of changes in net assets available for benefits.
NOTE 2 - RELATED PARTY AND PARTY-IN-INTEREST TRANSACTIONS
Certain Plan investments in Company common stock and mutual funds are managed by
Wells Fargo, the trustee of the Plan. Purchases and sales of these funds are
performed in the open market at fair value and qualify as party-in-interest
transactions under ERISA regulations. These transactions are permitted under the
provisions of the Plan and are specifically exempt from the prohibition of
party-in-interest transactions under ERISA.
During the fiscal year ended June 30, 2001, the Plan was amended to permit
participants to direct their investments of up to 100% of their accounts in the
common stock of the Company. Aggregate investment in Company common stock at
June 30, 2001 was 308,492 shares with a fair value of $19,002,148 and a cost
value of $11,666,102.
NOTE 3 - PARTICIPATION AND BENEFITS
PARTICIPANT CONTRIBUTIONS - Participants may elect to have the Company
contribute from 1 % to 15% of their eligible pre-tax compensation not to exceed
the amount allowable under current income tax regulations. Participants who
elect to have the Company contribute a portion of their eligible compensation to
the Plan agree to accept an equivalent reduction in taxable compensation.
Contributions withheld are invested in accordance with the participant's
direction.
Participants are also allowed to make rollover contributions of amounts received
from other tax-qualified employer-sponsored retirement plans. Such contributions
are deposited in the appropriate investment funds in accordance with the
participant's direction and the Plan's provisions.
6
EMPLOYER CONTRIBUTIONS - The Company is allowed to make matching contributions
as defined in the Plan and as approved by the Board of Directors. In 2001 and
2000, the Company contributed an amount equal to 50% of each eligible
participant's contribution, not to exceed $1,000 per year. The Plan also allows
for a discretionary profit sharing contribution each calendar quarter as
determined by the Board of Directors. To be eligible to share in the allocation
of the discretionary profit sharing contributions for a calendar quarter, an
employee must be employed by the Company on the first and last days of the
applicable quarter. During fiscal 2001 and 2000, the Company made discretionary
profit sharing contributions of approximately $15,000,000 and $7,773,000,
respectively.
VESTING - Participants are immediately vested in their contributions and the
Company's matching and discretionary profit sharing contributions, at all times.
PARTICIPANT ACCOUNTS - Each participant's account is credited with the
participant's contribution, Plan earnings or losses and an allocation of the
Company's contribution, if any. Allocation of the Company's discretionary profit
sharing contribution is based on eligible compensation, as defined in the Plan.
PAYMENT OF BENEFITS - Upon termination, the participant or his or her
beneficiary may elect to leave his or her account balance in the Plan, or
receive his or her total benefits in a lump sum amount equal to the value of the
participant's interest in his or her account balance. On October 2, 2000,
effective as of December 31, 2000, the Plan was amended to eliminate all
optional forms of distribution previously available other than a lump sum. The
Plan allows for automatic lump sum distribution of participant account balances
that do not exceed $5,000.
LOANS TO PARTICIPANTS - Participants may borrow not less than $1,000 and up to
the lesser of $50,000 or 50% of their account balance. The loans are secured by
the participant's balance. Such loans bear interest at the available market
financing rates and must be repaid to the Plan within a five-year period, unless
the loan is used for the purchase of a principal residence in which case the
maximum repayment period is fifteen years. The specific terms and conditions of
such loans are established by the Committee. Outstanding loans at June 30, 2001
and June 30, 2000 carried interest rates, which ranged from 7.0% to 11.5%.
NOTE 4 - PLAN OBLIGATIONS
Included in net assets available for benefits at June 30, 2001 and June 30, 2000
are benefits due to withdrawing participants for benefit claims which have been
processed and approved for payment prior to year end, but not yet paid, of
approximately $1,065,000 and $1,509,000, respectively.
7
NOTE 5 - CERTIFIED INFORMATION
In accordance with 29 CFR 2520.103-8 of the Department of Labor's Rules and
Regulations for Reporting and Disclosure under ERISA, information certified by
Wells Fargo regarding the current value of assets held at June 30, 2000, and
transactions entered into during the respective year, was used in the
preparation of the accompanying financial statements and supplemental schedule.
The following table includes the fair values of investment funds that represent
5% or more of the Plan's net assets at June 30:
2001 2000
Uncertified Certified
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Wells Fargo Stable Asset Fund $ 32,447,402 $ 18,442,201
Washington Mutual Investors Fund 48,829,307 38,022,327
Growth Fund of America 59,602,749 66,715,283
New Perspective Fund 26,829,110 31,461,304
Income Fund of America 22,760,392 12,857,367
Euro Pacific Growth Fund 20,679,006 27,631,807
Van Kampen American Cap Emerging
Growth A Fund 23,974,716 36,315,472
Fremont U.S. Micro-Cap Fund 17,912,730 20,919,587
PIMCO Total Return Fund 12,069,748 6,219,518
Seligman Communication & Information Fund 23,420,680 33,139,256
Wells Fargo Bank S&P 500 Stock 20,392,679 17,264,456
KLA-Tencor Stock Fund 19,002,148
Cash 116,264 34,616
Participant loans 6,431,738 5,940,225
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Assets held for investment
purposes $334,468,669 $314,963,419
============ ============
CERTIFIED:
Year ended June 30,
2000
-------------------
Dividends and interest $22,882.791
===========
8
The Plan's investments (including gains and losses on investments bought and
sold, as well as held during the year) appreciated (depreciated) in value as
follows for the years ended June 30:
2001 2000
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Mutual funds $(44,099,926) $ 31,840,524
Common stock 10,744,402 --
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$(33,355,524) $ 31,840,524
============ ============
NOTE 6 - PLAN TERMINATION
The Company intends to continue the Plan indefinitely for the benefit of its
participants; however, it reserves the right to terminate or modify the Plan at
any time by resolution of its Board of Directors and subject to the provisions
of ERISA.
NOTE 7 - SUBSEQUENT EVENT
As of November 7, 2001, the Nasdaq Composite and Dow Jones indices have
decreased by approximately 15% and 9%, respectively, from their June 30, 2001
levels; accordingly, the Plan's assets may have significantly decreased in
value.
9
SUPPLEMENTAL SCHEDULE
10
KLA-TENCOR 401(k) PLAN EIN: 04-2564110
PLAN #001
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
JUNE 30, 2001
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DESCRIPTION OF INVESTMENT INCLUDING
IDENTITY OF ISSUE, BORROWER, MATURITY DATE, RATE OF INTEREST, CURRENT
LESSOR OR SIMILAR PARTY COLLATERAL, PAR OR MATURITY VALUE VALUE
- ------------------------------------------------- ----------------------------------------- ------------
Wells Fargo Bank:
* Wells Fargo Stable Asset Fund Mutual fund $ 32,447,402
* Wells Fargo Bank S&P 500 Stock Mutual fund 20,392,679
* Wells Fargo Bank Cash 116,264
PIMCO Total Return Fund Mutual fund 12,069,748
Washington Mutual Investors Fund Mutual fund 48,829,307
Growth Fund of America Mutual fund 59,602,749
Euro Pacific Growth Fund Mutual fund 20,679,006
Van Kampen American Cap Emerging
Growth A Fund Mutual fund 23,974,716
Income Fund of America Mutual fund 22,760,392
New Perspective Fund Mutual fund 26,829,110
Seligman Communication & Information Fund Mutual fund 23,420,680
Fremont U.S. Micro-Cap Fund Mutual fund 17,912,730
* KLA-Tencor Stock Fund Common stock 19,002,148
* Participant loans Interest rates ranging from 7.0% to 11.5% 6,431,738
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Total $334,468,669
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* Party-in-interest