Human Capital & Careers

KLA-Tencor Takes $370M Options Charge

Retroactive pricing ''was intentional, not inadvertent or through administrative error,'' according to the company.
Stephen TaubJanuary 30, 2007

KLA-Tencor announced in a regulatory filing that it has recorded $370 million in charges to correct its past accounting for stock options.

The supplier of tools for making microchips took a $348 million pre-tax, non-cash expense for the period from July 1, 1994, to June 30, 2005, and $22 million for the year ended June 30, 2006. The company also expects to amortize an additional $6 million of pre-tax charges in future periods to properly account for previously awarded stock options.

After concluding that it had used improper measurement dates for stock option grants, last September KLA-Tencor disclosed that it would restate its results. The following month, a number of executives departed from the company, including founder and chairman Kenneth Levy and general counsel Stuart J. Nichols. The company also announced that it terminated its employment relationship with Kenneth L. Schroeder, a former president, chief operating officer, and board member.

At the time, the company stated that a special committee had concluded that the retroactive pricing of options “was intentional, not inadvertent or through administrative error.” KLA-Tencor added that it would re-price all outstanding retroactively priced options held by Levy and certain other former and current executives.

KLA-Tencor also disclosed that Schroeder is contesting the company’s right to terminate his employment relationship and agreement and to cancel his options. “We intend to vigorously defend any claims that may be made by Mr. Schroeder regarding these matters, which could involve a material amount,” the company stated.

Schroeder’s attorney could not immediately be reached for comment.

KLA-Tencor further announced that the board had concluded that president and chief operating officer John H. Kisper was not aware of the improper stock option practices. Based on the special committee’s recommendation, however, his outstanding retroactively priced options were re-priced because he served as chief financial officer during part of the period in question.