KLA-Tencor Reports Fiscal 2007 Third Quarter Results

Revenue of $716 million and EPS of $0.76

SAN JOSE, Calif.--(BUSINESS WIRE)--

KLA-Tencor Corporation (NASDAQ:KLAC) today announced operating results for its third quarter of fiscal 2007, which ended on March 31, 2007. The Company reported GAAP net income of $155 million, which included share-based compensation and other charges discussed below, and GAAP earnings per diluted share of $0.76 on revenue of $716 million in the third quarter, compared to GAAP net income of $90 million or $0.44 per diluted share on revenue of $649 million in the second quarter of fiscal 2007, and GAAP net income of $97 million or $0.47 per diluted share on revenue of $520 million in the third quarter of fiscal 2006.

Net income for the third quarter of fiscal 2007 reflects $62 million in pre-tax charges, as follows:

    --  Acquisition-related charges of $18 million for amortization of
        intangible assets and in-process R&D related primarily to the
        acquisitions of ADE Corporation, OnWafer Technologies and
        SensArray Corporation. Acquisition-related charges for the
        second quarter of fiscal 2007 were $19 million.

    --  Stock-based compensation charges of $29 million, compared to
        $16 million for the second quarter of fiscal 2007 and $48
        million for the third quarter of fiscal 2006.

    --  Restatement-related charges of $15 million, including
        compensation expense for non-executive related to
        reimbursements for penalty taxes under Section 409A of the
        Internal Revenue Code and legal and other expenses related to
        the stock options investigation, shareholder litigation and
        related matters. Restatement-related charges for the second
        quarter of fiscal 2007 were $15 million.

"KLA-Tencor's solid financial performance this quarter reflects our focus on enabling our customers to meet their technical and economic challenges with our inspection and metrology solutions," said Rick Wallace, Chief Executive Officer of KLA-Tencor. "I thank our employees for their unwavering commitment to operational excellence, customer satisfaction and profitable growth."

KLA-Tencor ended the third quarter of fiscal 2007 with approximately eight months of product-related shipment and revenue backlog. The geographic breakdown of orders in the quarter was:

                              Percent of Orders
Region                    -------------------------
                           Current    Historical
                            Quarter      Average
------------------------------------ --------------
United States                    17%            25%
------------------------------------ --------------
Japan                            28%            25%
------------------------------------ --------------
Taiwan                           31%            20%
------------------------------------ --------------
Korea, China, & Singapore        16%            20%
------------------------------------ --------------
Europe                            8%            10%
------------------------------------ --------------

Cash and investments ended the quarter at $1.6 billion compared to $2.1 billion at the end of previous quarter as a result of a pre-payment of $750 million on an accelerated stock repurchase program.

KLA-Tencor will discuss its fiscal 2007 third quarter results, along with its outlook for the fourth quarter of fiscal 2007, 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 benefit to customers of KLA-Tencor's products, demand for KLA-Tencor's products and the Company's future financial performance, 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: our ability to successfully address and resolve all issues arising from the discovery that we had retroactively priced stock options (primarily from July 1, 1997 to June 30, 2002) and had not accounted for them correctly; the demand for semiconductors; new and enhanced product offerings by competitors; cancellation of orders by customers; 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 the Company's Form 10-K, Form 10-Q and other filings with the Securities and Exchange Commission (including, but not limited to, the risk factors described therein).

About KLA-Tencor: KLA-Tencor is the world leader in yield management and process control solutions for semiconductor manufacturing and related industries. Headquartered in San Jose, Calif., the Company has sales and service offices around the world. An S&P 500 Company, KLA-Tencor is traded on the Nasdaq National Market under the symbol KLAC. Additional information about the Company is available on the Internet at http://www.kla-tencor.com

                        KLA-Tencor Corporation
           Condensed Consolidated Unaudited Balance Sheets

(In thousands)                                 March 31,    June 30,
                                                   2007        2006
                                               ----------- -----------

ASSETS
Current assets:
  Cash and investments                         $1,585,234  $2,325,796
  Accounts receivable, net                        499,298     439,899
  Inventories                                     530,141     449,156
  Other current assets                            332,482     328,392
                                               ----------- -----------
      Total current assets                      2,947,155   3,543,243

Land, property and equipment, net                 363,767     395,412
Goodwill and intangibles, net                     465,330      70,341
Other assets                                      564,541     566,915
                                               ----------- -----------
      Total assets                             $4,340,793  $4,575,911
                                               =========== ===========

LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                $93,805     $95,192
  Deferred system profit                          217,232     226,142
  Unearned revenue                                 86,805      80,543
  Other current liabilities                       631,694     600,604
                                               ----------- -----------
      Total current liabilities                 1,029,536   1,002,481

Minority interest in subsidiary                        $-      $5,439

Stockholders' equity:
  Common stock and capital in excess of par
   value                                          958,567   1,421,373
  Prepaid stock repurchase                       (113,676)          -
  Retained earnings                             2,446,446   2,137,710
  Accumulated other comprehensive income           19,920       8,908
                                               ----------- -----------
        Total stockholders' equity              3,311,257   3,567,991

                                               ----------- -----------
Total liabilities, minority interest, and
 stockholders' equity                          $4,340,793  $4,575,911
                                               =========== ===========
                        KLA-Tencor Corporation
Condensed Consolidated Unaudited Statements Of Operations


                           Three months ended     Nine months ended
                           ------------------- -----------------------
(In thousands except per   March 31  March 31   March 31    March 31
 share data)
                             2007      2006       2007        2006
                           --------- --------- ----------- -----------

Revenues:
  Product                  $607,390  $429,068  $1,682,619  $1,230,201
  Service                   108,818    90,580     312,222     261,390
                           --------- --------- ----------- -----------
      Total revenues        716,208   519,648   1,994,841   1,491,591
                           --------- --------- ----------- -----------

Costs and operating
 expenses:
  Cost of revenues(1)       306,751   226,575     874,642     657,927
  Engineering, research and
   development(1)           106,265    97,633     313,659     295,210
  Selling, general and
   administrative(1)        120,537   110,513     391,536     303,543
                           --------- --------- ----------- -----------
Total costs and operating
 expenses                   533,553   434,721   1,579,837   1,256,680
                           --------- --------- ----------- -----------
Income from operations      182,655    84,927     415,004     234,911

Interest income and other,
 net                         20,817    17,225      65,931      47,986
                           --------- --------- ----------- -----------
Income before income taxes
 and minority interest      203,472   102,152     480,935     282,897
Provision for income
 taxes(1)                    48,546     6,388     101,551      37,041
                           --------- --------- ----------- -----------
Income before minority
 interest                   154,926    95,764     379,384     245,856
Minority interest              (141)      920       1,372       2,920
                           --------- --------- ----------- -----------
Net income                 $154,785   $96,684    $380,756    $248,776
                           ========= ========= =========== ===========

Net income per share:
  Basic                       $0.78     $0.48       $1.91       $1.25
  Diluted                     $0.76     $0.47       $1.87       $1.22

Weighted average number of
 shares:
  Basic                     197,930   199,876     199,053     198,498
  Diluted                   203,474   205,361     203,976     204,294

(1) includes the following
 amounts related to equity
 awards:
Costs of revenues            $6,629    $6,198     $23,218     $19,649
Engineering, research and
 development                $11,036   $12,488     $33,984     $38,019
Selling, general and
 administrative             $11,604   $29,675     $25,182     $69,258
Provision for income taxes  $(9,349) $(15,247)   $(25,596)   $(46,320)

Source: KLA-Tencor Corporation