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 2014 FIRST QUARTER RESULTS
MILPITAS, Calif., October 24, 2013 - KLA-Tencor Corporation (NASDAQ: KLAC) today announced operating results for its first quarter of fiscal year 2014, which ended on September 30, 2013, and reported GAAP net income of $111 million and GAAP earnings per diluted share of $0.66 on revenues of $658 million.
“KLA-Tencor delivered solid results for the first quarter of fiscal year 2014, generating revenue and EPS in the upper half of the guided range for the period, and new orders well above the upper end of the range,” commented Rick Wallace, president and CEO of KLA-Tencor. “Our results demonstrate strong operational execution and financial performance as we address our customers' most critical yield challenges at the leading edge. With our market leadership and customer focus, we believe we will benefit from opportunities for continued growth as our customers execute their next-generation technology investments at the leading edge.”
GAAP Results
 
Q1 FY 2014
Q4 FY 2013
Q1 FY 2013
Revenues
$658 million
$720 million
$721 million
Net Income
$111 million
$135 million
$135 million
Earnings per Diluted Share
$0.66
$0.80
$0.80
 
 
 
 
Non-GAAP Results
 
Q1 FY 2014
Q4 FY 2013
Q1 FY 2013
Net Income
$115 million
$139 million
$142 million
Earnings per Diluted Share
$0.68
$0.82
$0.84
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 2014 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 KLA-Tencor's ability to maintain its market leadership position, trends in the semiconductor industry relating to process control adoption and next-generation technology investment by KLA-Tencor's customers, and KLA-Tencor's anticipated future 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: 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, 2013, 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.

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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.

2




KLA-Tencor Corporation
 
 
 
Condensed Consolidated Unaudited Balance Sheets
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
September 30, 2013
 
June 30, 2013
ASSETS
 
 
 
Cash, cash equivalents and marketable securities
$
2,951,875

 
$
2,918,881

Accounts receivable, net
440,674

 
524,610

Inventories
660,276

 
634,448

Other current assets
301,913

 
273,564

Land, property and equipment, net
319,837

 
305,281

Goodwill
326,556

 
326,635

Purchased intangibles, net
30,022

 
34,515

Other non-current assets
252,399

 
269,423

Total assets
$
5,283,552

 
$
5,287,357

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
114,716

 
$
115,680

Deferred system profit
165,931

 
157,965

Unearned revenue
54,363

 
60,838

Other current liabilities
500,100

 
527,049

Total current liabilities
835,110

 
861,532

Non-current liabilities:
 
 
 
Long-term debt
747,511

 
747,376

Pension liabilities
59,578

 
57,959

Income tax payable
58,995

 
59,494

Unearned revenue
54,918

 
42,228

Other non-current liabilities
36,277

 
36,616

Total liabilities
1,792,389

 
1,805,205

Stockholders' equity:
 
 
 
Common stock and capital in excess of par value
1,178,784

 
1,159,565

Retained earnings
2,344,270

 
2,359,233

Accumulated other comprehensive income (loss)
(31,891
)
 
(36,646
)
Total stockholders' equity
3,491,163

 
3,482,152

Total liabilities and stockholders' equity
$
5,283,552

 
$
5,287,357



3




KLA-Tencor Corporation
 
 
 
Condensed Consolidated Unaudited Statements of Operations
 
 
 
 
 
 
 
Three months ended September 30,
(In thousands, except per share data)
2013
 
2012
Revenues:
 
 
 
Product
$
501,740

 
$
574,078

Service
156,597

 
146,631

Total revenues
658,337

 
720,709

Costs and operating expenses:
 
 
 
Costs of revenues
277,657

 
317,225

Engineering, research and development
132,273

 
119,742

Selling, general and administrative
98,496

 
97,185

Total costs and operating expenses
508,426

 
534,152

Income from operations
149,911

 
186,557

Interest income and other, net
(10,047
)
 
(10,015
)
Income before income taxes
139,864

 
176,542

Provision for income taxes
28,667

 
41,175

Net income
$
111,197

 
$
135,367

Net income per share:
 
 
 
Basic
$
0.67

 
$
0.81

Diluted
$
0.66

 
$
0.80

Cash dividends declared per share
$
0.45

 
$
0.40

Weighted average number of shares:
 
 
 
Basic
165,886

 
166,531

Diluted
168,734

 
169,824


4



KLA-Tencor Corporation
Condensed Consolidated Unaudited Statements of Cash Flows

 
Three months ended
September 30,
(In thousands)
2013
 
2012
Cash flows from operating activities:
 
 
 
Net income
$
111,197

 
$
135,367

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
20,637

 
24,016

Asset impairment charges

 
1,327

Non-cash stock-based compensation expense
19,219

 
18,984

Excess tax benefit from equity awards
(18,605
)
 
(7,026
)
Net gain on sale of marketable securities and other investments
(234
)
 
(309
)
Changes in assets and liabilities:
 
 
 
Decrease in accounts receivable, net
85,771

 
166,855

Increase in inventories
(29,805
)
 
(39,289
)
Decrease (increase) in other assets
(9,425
)
 
19,676

Decrease in accounts payable
(1,058
)
 
(23,104
)
Increase (decrease) in deferred system profit
7,966

 
(5,292
)
Decrease in other liabilities
(8,415
)
 
(45,812
)
Net cash provided by operating activities
177,248

 
245,393

Cash flows from investing activities:
 
 
 
Capital expenditures, net
(21,751
)
 
(20,272
)
Purchase of available-for-sale securities
(348,031
)
 
(448,149
)
Proceeds from sale of available-for-sale securities
203,541

 
227,568

Proceeds from maturity of available-for-sale securities
32,058

 
75,578

Purchase of trading securities
(20,851
)
 
(11,168
)
Proceeds from sale of trading securities
18,366

 
9,322

Net cash used in investing activities
(136,668
)
 
(167,121
)
Cash flows from financing activities:
 
 
 
Issuance of common stock
41,047

 
23,250

Tax withholding payments related to vested and released restricted stock units
(48,264
)
 
(18,961
)
Common stock repurchases
(60,504
)
 
(68,317
)
Payment of dividends to stockholders
(74,617
)
 
(66,629
)
Excess tax benefit from equity awards
18,605

 
7,026

Net cash used in financing activities
(123,733
)
 
(123,631
)
Effect of exchange rate changes on cash and cash equivalents
2,712

 
4,007

Net decrease in cash and cash equivalents
(80,441
)
 
(41,352
)
Cash and cash equivalents at beginning of period
985,390

 
751,294

Cash and cash equivalents at end of period
$
904,949

 
$
709,942

Supplemental cash flow disclosures:
 
 
 
Income taxes paid, net
$
19,052

 
$
27,909

Interest paid
$
217

 
$
233

Non-cash investing activities:
 
 
 
Purchase of land, property and equipment
$
1,798

 
$





5



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, 2013
 
June 30, 2013
 
September 30, 2012
GAAP net income
 
$
111,197

 
$
134,770

 
$
135,367

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

 
4,169

 
6,886

Restructuring, severance and other related charges
b
1,237

 
1,418

 
3,134

Income tax effect of non-GAAP adjustments
c
(1,672
)
 
(1,776
)
 
(2,979
)
Non-GAAP net income
 
$
114,931

 
$
138,581

 
$
142,408

GAAP net income per diluted share
 
$
0.66

 
$
0.80

 
$
0.80

Non-GAAP net income per diluted share
 
$
0.68

 
$
0.82

 
$
0.84

Shares used in diluted shares calculation
 
168,734

 
168,685

 
169,824

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 September 30, 2013
 
 
 
 
 
Costs of revenues
$
1,921

 
$
651

 
$
2,572

Engineering, research and development
836

 
306

 
1,142

Selling, general and administrative
1,412

 
280

 
1,692

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

 
$
1,237

 
$
5,406

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 September 30, 2012
 
 
 
 
 
Costs of revenues
$
4,560

 
$

 
$
4,560

Engineering, research and development
836

 

 
836

Selling, general and administrative
1,490

 
3,134

 
4,624

Total in three months ended September 30, 2012
$
6,886

 
$
3,134

 
$
10,020


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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.
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.



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