KLA-Tencor Reports Fiscal 2010 Fourth Quarter and Full Year Results

MILPITAS, Calif., July 29 /PRNewswire-FirstCall/ -- KLA-Tencor Corporation® (Nasdaq: KLAC) today announced operating results for its fourth quarter and fiscal year ended June 30, 2010.  KLA-Tencor reported GAAP net income of $113 million and GAAP earnings per diluted share of $0.66 on revenues of $559 million for the fourth quarter of fiscal year 2010.  For the year ended June 30, 2010, the company reported GAAP net income of $212 million and GAAP earnings per diluted share of $1.23 on revenues of $1.8 billion.

"Robust product demand in each of our major end markets, geographies and product offerings, coupled with solid execution by the KLA-Tencor team resulted in strong financial results in the fourth quarter," said Rick Wallace, KLA-Tencor's president and chief executive officer. "These results reflect our team's commitment to helping customers solve complex yield challenges at the leading edge, as well as KLA-Tencor's ability to execute against our strategic objectives in order to maintain our market and technology leadership."


GAAP Results

                                  Q4 FY 2010    Q3 FY 2010    Q4 FY 2009

Revenues                          $ 559 million $ 478 million $ 282 million

Net Income (Loss)                 $ 113 million $ 57 million  $(26) million

Earnings (Loss) per Diluted Share $ 0.66        $ 0.33        $ (0.15)






Non-GAAP Results

                                  Q4 FY 2010    Q3 FY 2010   Q4 FY 2009

Net Income (Loss)                 $ 120 million $ 71 million $ (15) million

Earnings (Loss) per Diluted Share $ 0.70        $ 0.41       $ (0.09)





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 2010 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 KLA-Tencor's position as a market and technology leader 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, 2009, 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, 2010   June 30, 2009



ASSETS

Cash and short-term investments                 $ 1,534,044     $ 1,329,884

Accounts receivable, net                          440,125         210,143

Inventories, net                                  401,730         370,206

Other current assets                              459,566         488,384

Land, property and equipment, net                 236,752         291,878

Goodwill                                          328,006         329,379

Purchased intangibles, net                        117,336         149,080

Other non-current assets                          389,497         440,584

Total assets                                    $ 3,907,056     $ 3,609,538



LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable                                $ 107,938       $ 63,485

Deferred system profit                            204,764         95,820

Unearned revenue                                  37,026          46,236

Other current liabilities                         422,059         341,441

Total current liabilities                         771,787         546,982



Non-current liabilities:

Income tax payable                                53,492          49,738

Unearned revenue                                  20,354          23,059

Other non-current liabilities                     69,065          60,163

Long-term debt                                    745,747         745,204

Total liabilities                                 1,660,445       1,425,146



Stockholders' equity:

Common stock and capital in excess of par value   921,460         835,477

Retained earnings                                 1,356,454       1,370,132

Accumulated other comprehensive income (loss)     (31,303)        (21,217)

Total stockholders' equity                        2,246,611       2,184,392

Total liabilities and stockholders' equity      $ 3,907,056     $ 3,609,538












KLA-Tencor
Corporation

Condensed Consolidated Unaudited
Statements of Operations





                  Three months ended              Twelve months ended

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



Revenues:

Product         $ 430,286       $ 176,226       $ 1,324,270     $ 1,062,126

Service           129,133         105,276         496,490         458,090

Total revenues    559,419         281,502         1,820,760       1,520,216



Costs and
operating
expenses:

Costs of
revenues          227,919         164,621         815,662         864,824

Engineering,
research and
development       83,309          79,227          329,560         371,463

Selling,
general and
administrative    87,349          72,621          361,372         415,126

Goodwill and
purchased
intangible
asset
impairment        -               -               -               446,744

Total costs and
operating
expenses          398,577         316,469         1,506,594       2,098,157

Income (loss)
from operations   160,842         (34,967)        314,166         (577,941)



Interest
expense and
other, net        (10,740)        (11,409)        (22,985)        (24,590)

Income (loss)
before income
taxes             150,102         (46,376)        291,181         (602,531)

Provision for
(benefit from)
income taxes      37,017          (20,800)        78,881          (79,163)



Net income
(loss)          $ 113,085       $ (25,576)      $ 212,300       $ (523,368)



Net income
(loss) per
share:

Basic           $ 0.67          $ (0.15)        $ 1.24          $ (3.07)

Diluted         $ 0.66          $ (0.15)        $ 1.23          $ (3.07)



Cash dividend
paid per share  $ 0.15          $ 0.15          $ 0.60          $ 0.60



Weighted
average number
of shares:

Basic             168,986         169,981         170,652         170,253

Diluted           171,275         169,981         173,034         170,253








KLA-Tencor Corporation

Condensed Consolidated Unaudited Statements of CashFlows



                                                          Three months ended

                                                          June 30

(In thousands)                                            2010        2009

Cash flows from operating activities:

Net income (loss)                                       $ 113,085   $ (25,576)

Adjustments to reconcile net income (loss) to net cash
provided by operating activities:

Depreciation and amortization                             19,554      25,732

Long-lived asset impairment charges                       4,557       638

Provision for doubtful accounts                           (2,888)     (818)

Non-cash stock-based compensation                         23,459      26,092

Tax charge from equity awards                             -           (13,223)

Net loss (gain) on sale of marketable securities and
other investments                                         (1,388)     160

Net gain on sale of real estate assets                    -           (353)

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

Decrease (increase) in accounts receivable, net           (113,496)   37,261

Decrease (increase) in inventories                        (26,461)    53,111

Decrease (increase) in other assets                       26,734      (40,943)

Increase in accounts payable                              15,922      6,720

Increase in deferred system profit                        37,807      21,632

Decrease in other liabilities                             (13,607)    (16,995)

Net cash provided by operating activities                 83,278      73,438



Cash flows from investing activities:

Capital expenditures, net                                 (5,791)     (1,980)

Purchase of available-for-sale securities                 (217,123)   (349,358)

Proceeds from sale of available-for-sale securities       187,900     116,127

Proceeds from maturity of available-for-sale securities   23,108      21,000

Purchase of trading securities                            (22,740)    (20,402)

Proceeds from sale of trading securities                  35,622      27,525

Net cash provided by (used in) investing activities       976         (207,088)



Cash flows from financing activities:

Issuance of common stock                                  12,054      12,971

Tax withholding payments related to vested and released
restricted stock units                                    (601)       (549)

Common stock repurchases                                  (81,645)    -

Payment of dividends to stockholders                      (25,386)    (25,490)

Net cash used in financing activities                     (95,578)    (13,068)



Effect of exchange rate changes on cash and cash
equivalents                                               (2,263)     6,756



Net decrease in cash and cash equivalents                 (13,587)    (139,962)



Cash and cash equivalents at beginning of period          543,505     664,929



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



Supplemental cash flow disclosures:

Income tax paid (refunds received), net                 $ 28,982    $ (5,274)

Interest paid                                           $ 26,006    $ 26,474








KLA-Tencor Corporation

Condensed Consolidated Unaudited Supplemental Information

(In thousands, except per share data)



Reconciliation of GAAP Net Income (Loss) to Non-GAAP Net Income (Loss)



                 Three months ended                 Twelve months ended

                 June 30,  March 31,
                 2010      2010      June 30, 2009  June 30, 2010 June 30, 2009

GAAP net
income (loss)    $ 113,085 $ 57,016  $ (25,576)     $ 212,300     $(523,368)

Adjustments to
reconcile GAAP
net income
(loss) to
non-GAAP net
income (loss)

Acquisition
related
charges        a 8,280     8,370     11,561         32,849        79,287

Restructuring,
severance and
other related
charges        b 3,311     4,426     7,007          17,778        54,119

Restatement
related
charges        c (866)     4,750     (1,731)        16,149        13,261

Goodwill and
purchased
intangible
asset
impairment     d -         -         -              -             446,744

Income tax
effect of
non-GAAP
adjustments    e (3,824)   (6,417)   (5,883)        (24,124)      (107,503)

Discrete tax
items          f -         3,165     -              11,858        -

Non-GAAP net
income (loss)    $ 119,986 $ 71,310  $ (14,622)     $ 266,810     $ (37,460)



GAAP net
income (loss)
per diluted
share            $ 0.66    $ 0.33    $ (0.15)       $ 1.23        $ (3.07)

Non-GAAP net
income (loss)
per diluted
share            $ 0.70    $ 0.41    $ (0.09)       $ 1.54        $ (0.22)

Shares used in
diluted shares
calculation      171,275   173,357   169,981        173,034       170,253








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



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

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
March 31, 2010

Costs of revenues  $ 5,908      $ 345           $ (98)       $ 6,155

Engineering,
research and
development        898          11              (260)        649

Selling, general
and administrative 1,564        4,070           5,108        10,742

Total in three
months ended March
31, 2010           $ 8,370      $ 4,426         $ 4,750      $ 17,546



Three months ended
June 30, 2009

Costs of revenues  $ 9,314      $ 3,662         $ -          $ 12,976

Engineering,
research and
development        742          4               -            746

Selling, general
and administrative 1,505        3,341           (1,731)      3,115

Total in three
months ended June
30, 2009           $ 11,561     $ 7,007         $ (1,731)    $ 16,837










                          Three months ended

                           June 30, 2010  March 31, 2010  June 30, 2009

Stock-based compensation

Costs of revenues          $ 3,869        $ 3,793         $ 5,091

Engineering, research and
development                7,176          6,843           8,650

Selling, general and
administrative             12,414         10,833          12,351

Total                      $ 23,459       $ 21,469        $ 26,092








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, entry into a severance and consulting agreement
  with the company's former president/chief operating officer during the fiscal
  year ended June 30, 2009, gains and losses from sales of facilities, and
  asset impairment (other than impairment of goodwill and purchased intangible
  assets, which is included within the category described in note (d) below)
  from discontinuing or making available for sale certain acquired product
  lines. 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, including an
  expense accrual  reflecting the net amount paid by KLA-Tencor during the
  fiscal year ended June 30, 2010 in connection with settlements of various
  separate litigation 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 Goodwill and purchased intangible asset impairment includes non-cash expense
  recognized as a result of the company's annual evaluation of goodwill or the
  testing for intangible asset impairment driven by certain company-specific
  triggering events, as well as the impairment of goodwill and intangible
  assets as a result of discontinuing acquired products and making acquired
  products available for sale. 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.



e 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.



f 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