KLA-Tencor Reports Fiscal 2011 First Quarter Results

MILPITAS, Calif., Oct. 28 /PRNewswire-FirstCall/ -- KLA-Tencor Corporation (Nasdaq: KLAC) today announced operating results for its first quarter of fiscal year 2011, which ended on September 30, 2010.  KLA-Tencor reported GAAP net income of $154 million and GAAP earnings per diluted share of $0.91 on revenues of $682 million for the first quarter of fiscal year 2011.  

"We are pleased with a very solid first quarter of fiscal year 2011. Orders were strong, backlog increased and we delivered outstanding gross and operating margins in the quarter," said Rick Wallace, KLA-Tencor's president and CEO. "Our customer focus, coupled with a high level of investment in R&D and successful new product execution, are helping drive increased adoption of process control and contributing to our strong financial results."


GAAP Results

                           Q1 FY 2011    Q4 FY 2010    Q1 FY 2010

Revenues                   $ 682 million $ 559 million $ 343 million

Net Income                 $ 154 million $ 113 million $ 20 million

Earnings per Diluted Share $ 0.91        $ 0.66        $ 0.12

Non-GAAP Results

                           Q1 FY 2011    Q4 FY 2010    Q1 FY 2010

Net Income                 $ 169 million $ 120 million $ 26 million

Earnings per Diluted Share $ 0.99        $ 0.70        $ 0.15





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 acquisition, restatement and restructuring related items, goodwill and intangible asset impairment, and certain discrete tax items.

KLA-Tencor will discuss the results for its fiscal year 2011 first quarter, 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 adoption levels of process control, KLA-Tencor's level of investment in research and development and the company's ability to successfully innovate, develop and sell new technologies and products that meet customer needs 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; KLA-Tencor's ability to successfully integrate and manage businesses that it acquires; 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)                               September 30, 2010   June 30, 2010



ASSETS

Cash and marketable securities             $ 1,518,992          $ 1,534,044

Accounts receivable, net                     500,022              440,125

Inventories, net                             464,242              401,730

Other current assets                         450,105              459,566

Land, property and equipment, net            247,380              236,752

Goodwill                                     328,126              328,006

Purchased intangibles, net                   108,908              117,336

Other non-current assets                     385,090              389,497

Total assets                               $ 4,002,865          $ 3,907,056



LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable                           $ 138,226            $ 107,938

Deferred system profit                       201,663              204,764

Unearned revenue                             33,518               37,026

Other current liabilities                    390,211              422,059

Total current liabilities                    763,618              771,787



Non-current liabilities:

Income tax payable                           57,500               53,492

Unearned revenue                             21,124               20,354

Other non-current liabilities                73,484               69,065

Long-term debt                               745,882              745,747

Total liabilities                            1,661,608            1,660,445



Stockholders' equity:

Common stock and capital in excess of par
value                                        953,437              921,460

Retained earnings                            1,402,931            1,356,454

Accumulated other comprehensive income
(loss)                                       (15,111)             (31,303)

Total stockholders' equity                   2,341,257            2,246,611

Total liabilities and stockholders' equity $ 4,002,865          $ 3,907,056












KLA-Tencor Corporation

Condensed Consolidated Unaudited Statements of Operations





                                        Three months ended

(In thousands, except per share data)   September 30, 2010   September 30, 2009



Revenues:

Product                               $ 550,609            $ 229,251

Service                                 131,733              113,436

Total revenues                          682,342              342,687



Costs and operating expenses:

Costs of revenues                       263,969              171,892

Engineering, research and development   94,720               78,209

Selling, general and administrative     88,037               77,636

Total costs and operating expenses      446,726              327,737

Income from operations                  235,616              14,950



Interest and other income (expense),
net                                     (12,304)             7,842

Income before income taxes              223,312              22,792

Provision for income taxes              69,116               2,387



Net income                            $ 154,196            $ 20,405



Net income per share:

Basic                                 $ 0.92               $ 0.12

Diluted                               $ 0.91               $ 0.12



Cash dividend paid per share          $ 0.25               $ 0.15



Weighted average number of shares:

Basic                                   167,187              170,698

Diluted                                 169,839              172,718








KLA-Tencor Corporation
Condensed Consolidated Unaudited Statements of Cash Flows

                                                          Three months ended

                                                          September 30

(In thousands)                                            2010        2009

Cash flows from operating activities:

Net income                                              $ 154,196   $ 20,405

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

Depreciation and amortization                             20,783      23,134

Non-cash stock-based compensation                         24,213      20,199

Tax charge from equity awards                             -           (5,133)

Net gain on sale of marketable securities and other
investments                                               (1,047)     (1,292)

Gain on sale of real estate assets                        -           (2,824)

Changes in assets and liabilities:

Increase in accounts receivable, net                      (50,342)    (28,279)

Decrease (increase) in inventories                        (63,450)    26,971

Decrease (increase) in other assets                       10,870      (46,368)

Increase in accounts payable                              30,096      11,288

Increase (decrease) in deferred system profit             (3,101)     18,902

Increase (decrease) in other liabilities                  (26,690)    36,246

Net cash provided by operating activities                 95,528      73,249



Cash flows from investing activities:

Capital expenditures, net                                 (11,163)    (3,635)

Purchase of available-for-sale securities                 (228,951)   (263,646)

Proceeds from sale and maturity of available-for-sale
securities                                                239,650     221,588

Purchase of trading securities                            (16,004)    (23,573)

Proceeds from sale of trading securities                  30,623      29,145

Net cash provided by (used in) investing activities       14,155      (40,121)



Cash flows from financing activities:

Issuance of common stock                                  2,953       2,917

Tax withholding payments related to vested and released
restricted stock units                                    (9,517)     (1,833)

Common stock repurchases                                  (62,156)    -

Payment of dividends to stockholders                      (41,785)    (25,606)

Net cash used in financing activities                     (110,505)   (24,522)



Effect of exchange rate changes on cash and cash
equivalents                                               9,288       7,266



Net increase in cash and cash equivalents                 8,466       15,872



Cash and cash equivalents at beginning of period          529,918     524,967



Cash and cash equivalents at end of period              $ 538,384   $ 540,839



Supplemental cash flow disclosures:

Income tax paid, net                                    $ 46,060    $ 10,591

Interest paid                                           $ 352       $ 246








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

                            September 30, 2010 June 30, 2010 September 30, 2009

GAAP net income             $ 154,196          $ 113,085     $ 20,405

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

Acquisition related
charges                   a 8,178              8,280         8,095

Restructuring, severance
and other related charges b -                  3,311         (4,409)

Restatement related
charges                   c -                  (866)         5,188

Income tax effect of
non-GAAP adjustments      d (2,857)            (3,824)       (3,121)

Discrete tax items        e 9,154              -             -

Non-GAAP net income         $ 168,671          $ 119,986     $ 26,158



GAAP net income per
diluted share               $ 0.91             $ 0.66        $ 0.12

Non-GAAP net income per
diluted share               $ 0.99             $ 0.70        $ 0.15

Shares used in diluted
shares calculation          169,839            171,275       172,718








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

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

Three months ended
September 30, 2010

Costs of revenues  $ 5,790      $ -             $ -          $ 5,790

Engineering,
research and
development        898          -               -            898

Selling, general
and administrative 1,490        -               -            1,490

Total in three
months ended
September 30, 2010 $ 8,178      $ -             $ -          $ 8,178



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



Three months ended
September 30, 2009

Costs of revenues  $ 5,721      $ (104)         $ -          $ 5,617

Engineering,
research and
development        897          (213)           -            684

Selling, general
and administrative 1,477        (4,092)         5,188        2,573

Total in three
months ended
September 30, 2009 $ 8,095      $ (4,409)       $ 5,188      $ 8,874










                         Three months ended

                          September 30, 2010  June 30, 2010  September 30, 2009

Stock-based compensation

Costs of revenues         $ 4,168             $ 3,869        $ 3,288

Engineering, research
and development           7,618               7,176          6,603

Selling, general and
administrative            12,427              12,414         10,308

Total                     $ 24,213            $ 23,459       $ 20,199







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,
  inventory fair value adjustments, and in-process research and development
  charges 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 and
  in-process research and development charges 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 those 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 shareholder litigation and other matters. Management
  believes that it is appropriate to exclude those 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.
  A shortfall arises when the tax deduction is less than book compensation.
  Windfalls are recorded as increases to capital in excess of par value.
  Shortfalls 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.
  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