FOR IMMEDIATE RELEASE

Investor Relations:
 
Media Relations:
Ed Lockwood
 
Meggan Powers
Sr. Director, Investor Relations
 
Sr. Director, Corporate Communications
(408) 875-9529
 
(408) 875-8733
ed.lockwood@kla-tencor.com    
 
meggan.powers@kla-tencor.com

KLA-TENCOR REPORTS FISCAL 2013 FOURTH QUARTER AND FULL YEAR RESULTS

MILPITAS, Calif., July 25, 2013 -KLA-Tencor Corporation (NASDAQ: KLAC) today announced operating results for its fourth quarter and fiscal year ended June 30, 2013. KLA-Tencor reported GAAP net income of $135 million and GAAP earnings per diluted share of $0.80 on revenues of $720 million for the fourth quarter of fiscal year 2013. For the year ended June 30, 2013, the company reported GAAP net income of $543 million and GAAP earnings per diluted share of $3.21 on revenues of $2.8 billion.

“In the fourth quarter, KLA-Tencor delivered another period of strong financial performance, maintaining our market leadership position and releasing new products focused on addressing our customers' challenges at the leading edge,” said Rick Wallace, KLA-Tencor's president and CEO. “These results highlight a continuation of the trend of high levels of process control adoption as the increasing cost and complexity associated with managing yields makes process control critical to our customers' success.”

GAAP Results
 
Q4 FY 2013
Q3 FY 2013
Q4 FY 2012
Revenues
$720 million
$729 million
$892 million
Net Income
$135 million
$166 million
$248 million
Earnings per Diluted Share
$0.80
$0.98
$1.46
 
 
 
 
Non-GAAP Results
 
Q4 FY 2013
Q3 FY 2013
Q4 FY 2012
Net Income
$139 million
$171 million
$253 million
Earnings per Diluted Share
$0.82
$1.01
$1.49

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 2013 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 ability to maintain its market leadership position, trends in the semiconductor industry relating to process control adoption and increasing costs and complexity, and the anticipated importance of process control in the semiconductor manufacturing process, 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 manage its costs; 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, 2012, 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, LED 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 more than 35 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, 2013
 
June 30, 2012
 
 
 
 
ASSETS
 
 
 
Cash, cash equivalents and marketable securities
$
2,918,881

 
$
2,534,444

Accounts receivable, net
524,610

 
701,280

Inventories
634,448

 
650,802

Other current assets
273,564

 
277,517

Land, property and equipment, net
305,281

 
277,686

Goodwill
326,635

 
327,716

Purchased intangibles, net
34,515

 
55,636

Other non-current assets
269,423

 
275,227

Total assets
$
5,287,357

 
$
5,100,308

 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
115,680

 
$
139,183

Deferred system profit
157,965

 
147,218

Unearned revenue
60,838

 
63,095

Other current liabilities
527,049

 
513,411

Total current liabilities
861,532

 
862,907

 
 
 
 
Non-current liabilities:
 
 
 
Long-term debt
747,376

 
746,833

Pension liabilities
57,959

 
53,943

Income tax payable
59,494

 
50,839

Unearned revenue
42,228

 
34,899

Other non-current liabilities
36,616

 
35,292

Total liabilities
1,805,205

 
1,784,713

 
 
 
 
Stockholders' equity:
 
 
 
Common stock and capital in excess of par value
1,159,565

 
1,089,480

Retained earnings
2,359,233

 
2,247,258

Accumulated other comprehensive income (loss)
(36,646
)
 
(21,143
)
Total stockholders' equity
3,482,152

 
3,315,595

Total liabilities and stockholders' equity
$
5,287,357

 
$
5,100,308






KLA-Tencor Corporation
 
 
 
 
 
 
 
Condensed Consolidated Unaudited Statements of Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended
 
Twelve months ended
(In thousands, except per share data)
June 30, 2013
 
June 30, 2012
 
June 30, 2013
 
June 30, 2012
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
Product
$
570,300

 
$
745,662

 
$
2,247,147

 
$
2,597,755

Service
149,732

 
146,803

 
595,634

 
574,189

Total revenues
720,032

 
892,465

 
2,842,781

 
3,171,944

 
 
 
 
 
 
 
 
Costs and operating expenses:
 
 
 
 
 
 
 
Costs of revenues
306,804

 
361,663

 
1,237,452

 
1,330,016

Engineering, research and development
127,694

 
118,710

 
487,832

 
452,937

Selling, general and administrative
97,899

 
93,793

 
387,812

 
372,666

Total costs and operating expenses
532,397

 
574,166

 
2,113,096

 
2,155,619

Income from operations
187,635

 
318,299

 
729,685

 
1,016,325

Interest income and other, net
(10,545
)
 
(12,407
)
 
(39,064
)
 
(42,231
)
Income before income taxes
177,090

 
305,892

 
690,621

 
974,094

Provision for income taxes
42,320

 
58,015

 
147,472

 
218,079

Net income
$
134,770

 
$
247,877

 
$
543,149

 
$
756,015

 
 
 
 
 
 
 
 
Net income per share:
 
 
 
 
 
 
 
Basic
$
0.81

 
$
1.48

 
$
3.27

 
$
4.53

Diluted
$
0.80

 
$
1.46

 
$
3.21

 
$
4.44

Cash dividends declared per share
$
0.40

 
$
0.35

 
$
1.60

 
$
1.40

 
 
 
 
 
 
 
 
Weighted-average number of shares:
 
 
 
 
 
 
 
Basic
165,463

 
166,938

 
166,089

 
166,795

Diluted
168,685

 
170,178

 
169,260

 
170,147





KLA-Tencor Corporation
Condensed Consolidated Unaudited Statements of Cash Flows

 
Three months ended
June 30,
(In thousands)
2013
 
2012
Cash flows from operating activities:
 
 
 
Net income
$
134,770

 
$
247,877

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
20,425

 
23,282

Asset impairment charges
—

 
1,500

Non-cash stock-based compensation expense
17,606

 
17,779

Net loss (gain) on sale of marketable securities and other investments
(218
)
 
15

Excess tax benefit from equity awards
(233
)
 
—

Changes in assets and liabilities:
 
 
 
Increase in accounts receivable, net
(73,102
)
 
(61,632
)
Decrease (increase) in inventories
14,116

 
(6,610
)
Decrease in other assets
13,538

 
38,412

Increase (decrease) in accounts payable
8,054

 
(235
)
Increase (decrease) in deferred system profit
21,150

 
(36,480
)
Increase in other liabilities
19,463

 
49,398

Net cash provided by operating activities
175,569

 
273,306

Cash flows from investing activities:
 
 
 
Capital expenditures, net
(18,910
)
 
(16,272
)
Purchase of available-for-sale securities
(304,916
)
 
(407,721
)
Proceeds from sale and maturity of available-for-sale securities
306,332

 
223,242

Purchase of trading securities
(6,933
)
 
(11,034
)
Proceeds from sale of trading securities
8,019

 
12,674

Net cash used in investing activities
(16,408
)
 
(199,111
)
Cash flows from financing activities:
 
 
 
Issuance of common stock
30,579

 
39,831

Tax withholding payments related to vested and released restricted stock units
(522
)
 
(409
)
Excess tax benefit from equity awards
233

 
—

Common stock repurchases
(68,311
)
 
(66,958
)
Payment of dividends to stockholders
(66,181
)
 
(58,476
)
Net cash used in financing activities
(104,202
)
 
(86,012
)
Effect of exchange rate changes on cash and cash equivalents
(3,770
)
 
(802
)
Net increase (decrease) in cash and cash equivalents
51,189

 
(12,619
)
Cash and cash equivalents at beginning of period
934,201

 
763,913

Cash and cash equivalents at end of period
$
985,390

 
$
751,294

 
 
 
 
Supplemental cash flow disclosures:
 
 
 
Income taxes paid, net
$
33,097

 
$
2,649

Interest paid
$
26,574

 
$
26,760

Non-cash investing activities:
 
 
 
Purchase of land, property and equipment
$
6,839

 
$
—








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, 2013
 
March 31, 2013
 
June 30, 2012
 
June 30, 2013
 
June 30, 2012
GAAP net income
 
$
134,770

 
$
166,382

 
$
247,877

 
$
543,149

 
$
756,015

Adjustments to reconcile GAAP net income to non-GAAP net income
 
 
 
 
 
 
 
 
 
 
Acquisition related charges
a
4,169

 
4,180

 
6,942

 
19,477

 
28,972

Restructuring, severance and other related charges
b
1,418

 
2,845

 
—

 
7,397

 
4,032

Restatement related charges
c
—

 
—

 
—

 
—

 
135

Income tax effect of non-GAAP adjustments
d
(1,776
)
 
(2,212
)
 
(2,307
)
 
(8,359
)
 
(11,537
)
Discrete tax items
e
—

 
—

 
878

 
(3,514
)
 
11,675

Non-GAAP net income
 
$
138,581

 
$
171,195

 
$
253,390

 
$
558,150

 
$
789,292

 
 
 
 
 
 
 
 
 
 
 
GAAP net income per diluted share
 
$
0.80

 
$
0.98

 
$
1.46

 
$
3.21

 
$
4.44

Non-GAAP net income per diluted share
 
$
0.82

 
$
1.01

 
$
1.49

 
$
3.30

 
$
4.64

Shares used in diluted shares calculation
 
168,685

 
169,180

 
170,178

 
169,260

 
170,147



Pre-tax impact of items included in Consolidated Statements of Operations
 
Acquisition related charges
 
Restructuring, severance and other related charges
 
Total pre-tax GAAP to non-GAAP adjustment
Three months ended June 30, 2013
 
 
 
 
 
Costs of revenues
$
1,921

 
$
950

 
$
2,871

Engineering, research and development
836

 
514

 
1,350

Selling, general and administrative
1,412

 
(46
)
 
1,366

Total in three months ended June 30, 2013
$
4,169

 
$
1,418

 
$
5,587

 
 
 
 
 
 
Three months ended March 31, 2013
 
 
 
 
 
Costs of revenues
$
1,921

 
$
713

 
$
2,634

Engineering, research and development
835

 
2,405

 
3,240

Selling, general and administrative
1,424

 
(273
)
 
1,151

Total in three months ended March 31, 2013
$
4,180

 
$
2,845

 
$
7,025

 
 
 
 
 
 
Three months ended June 30, 2012
 
 
 
 
 
Costs of revenues
$
4,560

 
$
—

 
$
4,560

Engineering, research and development
892

 
—

 
892

Selling, general and administrative
1,490

 
—

 
1,490

Total in three months ended June 30, 2012
$
6,942

 
$
—

 
$
6,942





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 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 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 costs associated with the company’s decision in the first quarter of fiscal year 2013 to exit from the solar inspection business, as well as those associated with reductions in force. 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. 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 or other adjustments to the cumulative windfall tax benefit that are not indicative of ongoing operating results and 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.