KLA-Tencor Reports Fiscal 2011 Fourth Quarter and Full Year Results

MILPITAS, Calif., July 28, 2011 /PRNewswire/ -- KLA-Tencor Corporation (NASDAQ: KLAC) today announced operating results for its fourth quarter and fiscal year ended June 30, 2011.  KLA-Tencor reported GAAP net income of $245 million and GAAP earnings per diluted share of $1.43 on revenues of $892 million for the fourth quarter of fiscal year 2011.  For the year ended June 30, 2011, the company reported GAAP net income of $794 million and GAAP earnings per diluted share of $4.66 on revenues of $3.2 billion.

"KLA-Tencor delivered record levels of revenue, earnings and cash flow from operations in the fourth quarter and the year, reflecting the successful execution of our long term strategies," commented Rick Wallace, KLA-Tencor's president and CEO. "These outstanding results are the product of the tremendous efforts of our employees, our leading technology and our strong partnerships with our customers, all of which have us well-positioned for future success."


GAAP Results

                           Q4 FY 2011    Q3 FY 2011    Q4 FY 2010

Revenues                   $ 892 million $ 834 million $ 559 million

Net Income                 $ 245 million $ 210 million $ 113 million

Earnings per Diluted Share $ 1.43        $ 1.22        $ 0.66






Non-GAAP Results

                           Q4 FY 2011    Q3 FY 2011    Q4 FY 2010

Net Income                 $ 256 million $ 225 million $ 120 million

Earnings per Diluted Share $ 1.50        $ 1.31        $ 0.70





A reconciliation between GAAP operating results and non-GAAP operating results is provided following the financial statements that are part of this release. Non-GAAP results include the impact of stock-based compensation, but exclude the impact of acquisitions, restatement and restructuring related items, and certain discrete tax items.

KLA-Tencor will discuss the results for its fiscal year 2011 fourth quarter and full year, along with its outlook, on a conference call today beginning at 2:00 p.m. Pacific Daylight Time. A webcast of the call will be available at: www.kla-tencor.com

Forward-Looking Statements:

Statements in this press release other than historical facts, such as statements regarding the ability of KLA-Tencor to maintain its technological advantages and its strong customer partnerships, as well as the company's ability to leverage those advantages and partnerships into future successful results, are forward-looking statements, and are subject to the Safe Harbor provisions created by the Private Securities Litigation Reform Act of 1995.  These forward-looking statements are based on current information and expectations, and involve a number of risks and uncertainties.  Actual results may differ materially from those projected in such statements due to various factors, including but not limited to:  the demand for semiconductors; the financial condition of the global capital markets and the general macroeconomic environment; new and enhanced product and technology offerings by competitors; cancellation of orders by customers; the ability of KLA-Tencor's research and development teams to successfully innovate and develop technologies and products that are responsive to customer demands; market acceptance of the company's existing and newly issued products; and changing customer demands.  For other factors that may cause actual results to differ materially from those projected and anticipated in forward-looking statements in this release, please refer to KLA-Tencor's Annual Report on Form 10-K for the year ended June 30, 2010, subsequently filed Quarterly Reports on Form 10-Q and other filings with the Securities and Exchange Commission (including, but not limited to, the risk factors described therein).  KLA-Tencor assumes no obligation to, and does not currently intend to, update these forward-looking statements.

About KLA-Tencor:  

KLA-Tencor Corporation (NASDAQ: KLAC), a leading provider of process control and yield management solutions, partners with customers around the world to develop state-of-the-art inspection and metrology technologies. These technologies serve the semiconductor, data storage, LED, photovoltaic, and other related nanoelectronics industries. With a portfolio of industry-standard products and a team of world-class engineers and scientists, the company has created superior solutions for its customers for over 30 years. Headquartered in Milpitas, California, KLA-Tencor has dedicated customer operations and service centers around the world. Additional information may be found at www.kla-tencor.com. (KLAC-F)

Use of Non-GAAP Financial Information:

The non-GAAP and supplemental information provided in this press release is a supplement to, and not a substitute for, KLA-Tencor's financial results presented in accordance with United States GAAP.

To supplement KLA-Tencor's condensed consolidated financial statements presented in accordance with GAAP, the company provides certain non-GAAP financial information, which is adjusted from results based on GAAP to exclude certain costs and expenses, as well as other supplemental information. The non-GAAP and supplemental information is provided to enhance the user's overall understanding of KLA-Tencor's operating performance and its prospects in the future. Specifically, KLA-Tencor believes that the non-GAAP information provides useful measures to both management and investors regarding financial and business trends relating to KLA-Tencor's financial performance by excluding certain costs and expenses that the company believes are not indicative of its core operating results. The non-GAAP information is among the budgeting and planning tools that management uses for future forecasting. However, because there are no standardized or generally accepted definitions for most non-GAAP financial metrics, definitions of non-GAAP financial metrics (for example, determining which costs and expenses to exclude when calculating such a metric) are inherently subject to significant discretion.  As a result, non-GAAP financial metrics may be defined very differently from company to company, or even from period to period within the same company, which can potentially limit the usefulness of such information to an investor. The presentation of non-GAAP and supplemental information is not meant to be considered in isolation or as a substitute for results prepared and presented in accordance with United States GAAP.


KLA-Tencor Corporation

Condensed Consolidated Unaudited Balance Sheets



(In thousands)                                    June 30, 2011   June 30, 2010



ASSETS

Cash, cash equivalents and marketable
securities                                      $ 2,038,535     $ 1,534,044

Accounts receivable, net                          583,270         440,125

Inventories, net                                  575,730         401,730

Other current assets                              478,475         459,566

Land, property and equipment, net                 257,358         236,752

Goodwill                                          328,156         328,006

Purchased intangibles, net                        85,902          117,336

Other non-current assets                          328,095         389,497

Total assets                                    $ 4,675,521     $ 3,907,056



LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable                                $ 142,945       $ 107,938

Deferred system profit                            192,338         204,764

Unearned revenue                                  44,264          37,026

Other current liabilities                         502,471         422,059

Total current liabilities                         882,018         771,787



Non-current liabilities:

Long-term debt                                    746,290         745,747

Income tax payable                                78,337          53,492

Unearned revenue                                  34,905          20,354

Other non-current liabilities                     73,078          69,065

Total liabilities                                 1,814,628       1,660,445



Stockholders' equity:

Common stock and capital in excess of par value   1,010,659       921,460

Retained earnings                                 1,852,633       1,356,454

Accumulated other comprehensive income (loss)     (2,399)         (31,303)

Total stockholders' equity                        2,860,893       2,246,611

Total liabilities and stockholders' equity      $ 4,675,521     $ 3,907,056








KLA-Tencor Corporation

Condensed Consolidated Unaudited Statements of Operations





                  Three months ended              Twelve months ended

(In thousands,
except per
share data)       June 30, 2011   June 30, 2010   June 30, 2011   June 30, 2010



Revenues:

Product         $ 743,702       $ 430,286       $ 2,613,438     $ 1,324,270

Service           148,737         129,133         561,729         496,490

Total revenues    892,439         559,419         3,175,167       1,820,760



Costs and
operating
expenses:

Costs of
revenues          356,180         227,919         1,259,243       815,662

Engineering,
research and
development       100,929         83,309          386,163         329,560

Selling,
general and
administrative    91,261          87,349          369,431         361,372

Total costs and
operating
expenses          548,370         398,577         2,014,837       1,506,594

Income from
operations        344,069         160,842         1,160,330       314,166



Interest income
and other, net    (10,026)        (10,740)        (50,264)        (22,985)

Income before
income taxes      334,043         150,102         1,110,066       291,181

Provision for
income taxes      89,026          37,017          315,578         78,881



Net income      $ 245,017       $ 113,085       $ 794,488       $ 212,300



Net income per
share:

Basic           $ 1.46          $ 0.67          $ 4.75          $ 1.24

Diluted         $ 1.43          $ 0.66          $ 4.66          $ 1.23



Cash dividend
declared per
share           $ 0.25          $ 0.15          $ 1.00          $ 0.60



Weighted
average number
of shares:

Basic             167,350         168,986         167,261         170,652

Diluted           170,884         171,275         170,352         173,034








KLA-Tencor Corporation

Condensed Consolidated Unaudited Statements of Cash Flows



                                                          Three months ended

                                                          June 30,

(In thousands)                                            2011        2010

Cash flows from operating activities:

Net income                                              $ 245,017   $ 113,085

Adjustments to reconcile net income to net cash
provided by operating activities:

Depreciation and amortization                             22,533      19,554

Asset impairment charges                                  3,183       4,557

Provision for doubtful accounts                           -           (2,888)

Non-cash stock-based compensation expense                 18,939      23,459

Net gain on sale of marketable securities and other
investments                                               (580)       (1,388)

Changes in assets and liabilities, net of assets
acquired and liabilities assumed in business
combinations:

Increase in accounts receivable, net                      (13,918)    (113,496)

Increase in inventories                                   (20,125)    (26,461)

Decrease in other assets                                  14,366      26,734

Increase in accounts payable                              585         15,922

Increase (decrease) in deferred system profit             (37,731)    37,807

Increase (decrease) in other liabilities                  57,533      (13,607)

Net cash provided by operating activities                 289,802     83,278



Cash flows from investing activities:

Capital expenditures, net                                 (14,607)    (5,791)

Purchase of available-for-sale securities                 (385,226)   (217,123)

Proceeds from sale and maturity of available-for-sale
securities                                                259,044     211,008

Purchase of trading securities                            (14,183)    (22,740)

Proceeds from sale of trading securities                  16,106      35,622

Net cash provided by (used in) investing activities       (138,866)   976



Cash flows from financing activities:

Issuance of common stock                                  17,925      12,054

Tax withholding payments related to vested and released
restricted stock units                                    (411)       (601)

Common stock repurchases                                  (57,974)    (81,645)

Payment of dividends to stockholders                      (41,862)    (25,386)

Net cash used in financing activities                     (82,322)    (95,578)



Effect of exchange rate changes on cash and cash
equivalents                                               3,957       (2,263)



Net increase (decrease) in cash and cash equivalents      72,571      (13,587)



Cash and cash equivalents at beginning of period          638,758     543,505



Cash and cash equivalents at end of period              $ 711,329   $ 529,918



Supplemental cash flow disclosures:

Income taxes paid, net                                  $ 64,595    $ 28,982

Interest paid                                           $ 26,231    $ 26,006








KLA-Tencor Corporation

Condensed Consolidated Unaudited Supplemental Information

(In thousands, except per share data)



Reconciliation of GAAP Net Income to Non-GAAP Net Income



                            Three months ended             Twelve months ended

                            June 30,  March 31, June 30,   June 30,  June 30,
                            2011      2011      2010       2011      2010



GAAP net income             $ 245,017 $ 209,783 $ 113,085  $ 794,488 $ 212,300

Adjustments to reconcile
GAAP net income to
non-GAAP net income

Acquisition related
charges                   a 7,628     7,720     8,280      31,704    32,849

Restructuring, severance
and other related charges b 1,915     -         3,311      941       17,778

Restatement related
charges                   c 4,133     2,501     (866)      7,781     16,149

Income tax effect of
non-GAAP adjustments      d (4,295)   (3,632)   (3,824)    (13,705)  (24,124)

Discrete tax items        e 1,715     8,385     -          15,548    11,858

Non-GAAP net income         $ 256,113 $ 224,757 $ 119,986  $ 836,757 $ 266,810



GAAP net income per
diluted share               $ 1.43    $ 1.22    $ 0.66     $ 4.66    $ 1.23

Non-GAAP net income per
diluted share               $ 1.50    $ 1.31    $ 0.70     $ 4.91    $ 1.54

Shares used in diluted
shares calculation          170,884   171,313   171,275    170,352   173,034








Pre-tax impact of items included in Consolidated Statements of Operations



                      Acquisition Restructuring, Restatement     Total pre-tax
                      related     severance and  related charges GAAP to non-
                      charges     other related                  GAAP
                                  charges                        adjustment

Three months ended
June 30, 2011

Costs of revenues     $ 5,240     $ 435          $ -             $ 5,675

Engineering, research
and development       898         969            -               1,867

Selling, general and
administrative        1,490       511            4,133           6,134

Total in three months
ended June 30, 2011   $ 7,628     $ 1,915        $ 4,133         $ 13,676



Three months ended
March 31, 2011

Costs of revenues     $ 5,332     $ -            $ -             $ 5,332

Engineering, research
and development       898         -              -               898

Selling, general and
administrative        1,490       -              2,501           3,991

Total in three months
ended March 31, 2011  $ 7,720     $ -            $ 2,501         $ 10,221



Three months ended
June 30, 2010

Costs of revenues     $ 5,790     $ (57)         $ -             $ 5,733

Engineering, research
and development       898         -              -               898

Selling, general and
administrative        1,592       3,368          (866)           4,094

Total in three months
ended June 30, 2010   $ 8,280     $ 3,311        $ (866)         $ 10,725






To supplement our condensed consolidated financial statements presented in
accordance with GAAP, we provide certain non-GAAP financial information, which
is adjusted from results based on GAAP to exclude certain costs and expenses,
as well as other supplemental information. The non-GAAP and supplemental
information is provided to enhance the user's overall understanding of our
operating performance and our prospects in the future. Specifically, we believe
that the non-GAAP information provides useful measures to both management and
investors regarding financial and business trends relating to our financial
performance by excluding certain costs and expenses that we believe are not
indicative of our core operating results. The non-GAAP information is among the
budgeting and planning tools that management uses for future forecasting.
However, because there are no standardized or generally accepted definitions
for most non-GAAP financial metrics, definitions of non-GAAP financial metrics
(for example, determining which costs and expenses to exclude when calculating
such a metric) are inherently subject to significant discretion. As a result,
non-GAAP financial metrics may be defined very differently from company to
company, or even from period to period within the same company, which can
potentially limit the usefulness of such information to an investor. The
presentation of non-GAAP and supplemental information is not meant to be
considered in isolation or as a substitute for results prepared and presented
in accordance with United States GAAP.



a Acquisition related charges include amortization of intangible assets, and
  inventory fair value adjustments associated with acquisitions. Management
  believes that the expense associated with the amortization of acquisition
  related intangible assets is appropriate to be excluded because a significant
  portion of the purchase price for acquisitions may be allocated to intangible
  assets that have short lives, and exclusion of the amortization expense
  allows comparisons of operating results that are consistent over time for
  both KLA-Tencor's newly acquired and long-held businesses. Management
  believes that it is appropriate to exclude acquisition related inventory fair
  value adjustments as they are not indicative of ongoing operating results and
  therefore limit comparability. Management believes excluding these items
  helps investors compare our operating performance with our results in prior
  periods as well as with the performance of other companies.



b Restructuring, severance and other related charges include gains and costs
  associated with the company's facilities divestment and consolidation
  program, reductions in force, and gains and losses from sales of facilities.
  Management believes that it is appropriate to exclude these items as they are
  not indicative of ongoing operating results and therefore limit
  comparability. Management believes excluding these items helps investors
  compare our operating performance with our results in prior periods as well
  as with the performance of other companies.



c Restatement related charges include legal and other expenses related to the
  investigation regarding the company's historical stock option granting
  process and related stockholder litigation and other matters. KLA-Tencor has
  paid or reimbursed legal expenses incurred by a number of its current and
  former directors, officers and employees in connection with the investigation
  of the company's historical stock option practices and the related litigation
  and government inquiries. KLA-Tencor is currently paying defense costs for
  one former officer and employee facing an SEC civil action to which the
  company is not a party, and the company is also obligated to pay the
  attorneys' fees and expenses incurred by former employees in connection with
  discovery undertaken in that case. The company is further incurring costs
  associated with retaining counsel to respond to discovery requests and
  otherwise representing the company in that litigation. Management believes
  that it is appropriate to exclude these items as they are not indicative of
  ongoing operating results and therefore limit comparability. Management
  believes excluding these items helps investors compare our operating
  performance with our results in prior periods as well as with the performance
  of other companies.



d Income tax effect of non-GAAP adjustments includes the income tax effects of
  the excluded items noted above. Management believes that it is appropriate to
  exclude the tax effects of the items noted above in order to present a more
  meaningful measure of non-GAAP net income.



e Discrete tax items include the tax impact of shortfalls in excess of
  cumulative windfall tax benefits recorded as provision for income taxes
  during the period. Windfall tax benefits arise when a company's tax deduction
  for employee stock activity exceeds book compensation for the same activity
  and are generally recorded as increases to capital in excess of par value.
  Shortfalls arise when the tax deduction is less than book compensation and
  are recorded as decreases to capital in excess of par value to the extent
  that cumulative windfalls exceed cumulative shortfalls. Shortfalls in excess
  of cumulative windfalls are recorded as provision for income taxes. When
  there are shortfalls recorded as provision for income taxes during an earlier
  quarter, windfalls arising in subsequent quarters within the same fiscal year
  are recorded as a reduction to income taxes to the extent of the shortfalls
  recorded. Management believes that it is appropriate to exclude these items
  as they are not indicative of ongoing operating results and therefore limit
  comparability. Management believes excluding these items helps investors
  compare our operating performance with our results in prior periods as well
  as with the performance of other companies.





SOURCE KLA-Tencor Corporation