Exhibit 99.1

News Release

 

   Company Contacts:   

Jeff Hall

Chief Financial Officer

(408) 875-6800

jeff.hall@kla-tencor.com

 

Meggan Powers

Sr. Director of Corporate Communications

(408) 875-8733

meggan.powers@kla-tencor.com

FOR IMMEDIATE RELEASE

KLA-TENCOR REPORTS FISCAL 2008 SECOND QUARTER RESULTS

SAN JOSE, Calif., January 24, 2008— KLA-Tencor Corporation (NASDAQ: KLAC) today announced operating results for its second quarter of fiscal 2008, which ended on December 31, 2007. The Company reported GAAP net income of $84 million and GAAP earnings per diluted share of $0.45 on revenue of $636 million for the second quarter of fiscal 2008.

“The actions we have taken over the past several quarters to globalize our operations, reduce overhead, and streamline our cost structure are driving efficiencies throughout our business, even in this challenging demand environment.” said Rick Wallace, CEO of KLA-Tencor.

 

GAAP Results

      Q2 FY 2008    Q1 FY 2008    Q2 FY 2007

Revenues

   $ 636 million    $ 693 million    $ 649 million

Net Income

   $ 84 million    $ 88 million    $ 90 million

Earnings per Share (diluted)

   $ 0.45    $ 0.46    $ 0.44

 

Non-GAAP Results (includes stock-based compensation)

      Q2 FY 2008    Q1 FY 2008    Q2 FY 2007

Net Income

   $ 138 million    $ 145 million    $ 154 million

Earnings per Share (diluted)

   $ 0.75    $ 0.75    $ 0.75

A reconciliation between GAAP net income and non-GAAP net income is provided in the tables accompanying this release. Non-GAAP results include the impact of stock-based compensation, but exclude the impact of acquisition, restatement and restructuring related items.

Financial Highlights for the second quarter of fiscal 2008

 

   

KLA-Tencor reached an agreement in principle for the settlement of a securities class action relating to its historical stock option practices. Under the agreement, KLA-Tencor will be required to make a payment of $65 million to the settlement class. The proposed settlement, which is subject to a final agreement and court approval, will provide a full release of KLA-Tencor and the other named defendants in connection with the allegations raised in the lawsuit.

 

   

The Company declared and paid dividends of $27 million and repurchased $126 million of its common stock.

 

   

KLA-Tencor generated cash flow from operations of $126 million.

 

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Business Highlights for the second quarter of fiscal 2008

 

 

 

KLA-Tencor introduced the WaferSight 2TM, the semiconductor industry’s first metrology system that enables wafer suppliers and chipmakers to measure bare wafer flatness, shape, edge roll-off and nanotopography in a single system with the high precision and tool matching required for 45nm and beyond.

 

   

KLA-Tencor and Nikon Corporation have collaborated to develop a set of fully automated overlay correction control system tools, called Scanner Match Maker (SMM), that chipmakers can use to correct overlay errors common to “mix and match” lithography strategies which use lithography tools of varying capabilities and from different suppliers. The SMM technology is aimed at elevating the performance of all scanners, enabling chipmakers to reduce their dedication of leading-edge scanners to specific layers, thus cutting overall lithography tool costs at more advanced nodes and extending the lifetime of lithography tools.

 

   

KLA-Tencor introduced the Aleris™ family of films metrology systems, beginning with the Aleris 8500, which is the industry’s first system to combine production-worthy composition and multi-layer film thickness metrology.

 

   

KLA-Tencor introduced a unique application for its SensArray™ wafer-level metrology tools, called PlasmaWafer™ Suite, which provides chipmakers and etch equipment suppliers with an easy-to-use measurement capability to help verify plasma etch chamber health and quickly identify problems such as drift, non-uniformity and slight differences in chamber matching.

KLA-Tencor will discuss its fiscal 2008 second quarter results, along with its outlook for the third quarter of fiscal 2008, on a conference call today beginning at 2:00 p.m. Pacific Standard 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 success of collaborations with other companies, the benefit to customers of and demand for KLA-Tencor’s products, and the finalization and approval of the securities class action settlement, 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; 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 Annual Report on Form 10-K for the year ended June 30, 2007, 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).

About KLA-Tencor:

KLA-Tencor is the world’s leading supplier of process control and yield management solutions for the semiconductor and related microelectronics 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 Global Select Market under the symbol KLAC. Additional information about the Company is available on the Internet at http://www.kla-tencor.com.

Use of Non-GAAP financial information:

The non-GAAP information and supplemental information provided in this press release is a supplement to, and not a substitute for, our financial results presented in accordance with GAAP.

To supplement our condensed consolidated financial statements presented in accordance with GAAP, we provide non-GAAP financial information, which are adjusted from results based on GAAP to exclude certain costs and expenses, as well as other supplemental information. The non-GAAP and supplemental information are provided to enhance the user’s overall understanding of our operating performance and our prospects in the future. Specifically, we believe the non-GAAP information provide 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 budgeting and planning tools that management uses for future forecasting. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with United States GAAP.

 

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KLA-Tencor Corporation

Condensed Consolidated Unaudited Balance Sheets

 

(In thousands)    December 31,
2007
   June 30,
2007

ASSETS

     

Current assets:

     

Cash and investments

   $ 1,297,204    $ 1,710,629

Accounts receivable, net

     578,595      581,500

Inventories

     482,948      535,370

Other current assets

     453,563      425,272
             

Total current assets

     2,812,310      3,252,771

Land, property and equipment, net

     361,725      382,240

Goodwill

     310,209      311,856

Purchased intangibles, net

     153,023      175,432

Other assets

     516,558      500,950
             

Total assets

   $ 4,153,825    $ 4,623,249
             

LIABILITIES AND STOCKHOLDERS’ EQUITY

     

Current liabilities:

     

Accounts payable

   $ 114,691    $ 92,165

Deferred system profit

     194,680      201,747

Unearned revenue

     53,838      52,304

Other current liabilities

     577,683      659,346
             

Total current liabilities

     940,892      1,005,562

Non-current liabilities

     

Income tax payable

     84,289      —  

Unearned revenue

     47,279      46,950

Other non-current liabilities

     37,586      20,695
             

Total Liabilities

     1,110,046      1,073,207

Stockholders’ equity:

     

Common stock and capital in excess of par value

     674,703      967,886

Retained earnings

     2,340,557      2,570,751

Accumulated other comprehensive income

     28,519      11,405
             

Total stockholders’ equity

     3,043,779      3,550,042
             

Total liabilities and stockholders’ equity

   $ 4,153,825    $ 4,623,249
             

 

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KLA-Tencor Corporation

Condensed Consolidated Unaudited Statements Of Operations

 

     Three months ended    Six months ended
(In thousands except per share data)    December 31,
2007
   December 31,
2006
   December 31,
2007
   December 31,
2006

Revenues:

           

Product

   $ 513,449    $ 544,302    $ 1,091,881    $ 1,075,229

Service

     122,334      104,968      236,922      203,404
                           

Total revenues

     635,783      649,270      1,328,803      1,278,633
                           

Costs and operating expenses:

           

Cost of revenues

     285,005      297,772      590,898      567,891

Engineering, research and development

     97,513      108,101      196,857      207,394

Selling, general and administrative

     159,778      165,038      270,283      270,999
                           

Total costs and operating expenses

     542,296      570,911      1,058,038      1,046,284
                           

Income from operations

     93,487      78,359      270,765      232,349

Interest income and other, net

     13,269      22,657      30,743      45,114
                           

Income before income taxes and minority interest

     106,756      101,016      301,508      277,463

Provision for income taxes

     22,821      11,637      129,415      53,005
                           

Income before minority interest

     83,935      89,379      172,093      224,458

Minority interest

     —        670      —        1,513
                           

Net income

   $ 83,935    $ 90,049    $ 172,093    $ 225,971
                           

Net income per share:

           

Basic

   $ 0.46    $ 0.45    $ 0.93    $ 1.13

Diluted

   $ 0.45    $ 0.44    $ 0.91    $ 1.11

Weighted average number of shares:

           

Basic

     181,241      199,789      184,516      199,603

Diluted

     185,199      204,955      189,122      203,826

 

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KLA-Tencor Corporation

Condensed Consolidated Unaudited Statements of Cash Flows

 

     Three months ended
December 31,
 
(In thousands)    2007     2006  

Cash flows from operating activities:

    

Net income

   $ 83,935     $ 90,049  

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

    

Depreciation and amortization

     28,345       29,049  

Impairment charges

     6,163       56,830  

Non-cash, stock-based compensation

     23,252       16,068  

Tax benefit from employee stock options

     (340 )     —    

Excess tax benefit from stock-based compensation

     (284 )     —    

Minority interest

     —         (670 )

Net gain on sale of marketable securities and other investments

     (409 )     (710 )

Net gain on sale of real estate

     (9,042 )     —    

Changes in assets and liabilities:

    

Accounts receivable, net

     48,905       (17,055 )

Inventories

     17,782       (25,794 )

Other assets

     (31,646 )     (16,562 )

Accounts payable

     (4,543 )     (10,273 )

Deferred system profit

     (13,366 )     14,804  

Other liabilities

     (22,325 )     13,904  
                

Net cash provided by operating activities

     126,427       149,640  
                

Cash flows from investing activities:

    

Acquisitions of businesses, net of cash received

     (3,966 )     (390,162 )

Capital expenditures, net

     (22,609 )     (19,493 )

Proceeds from sale of real estate

     34,622       —    

Purchase of available-for-sale securities

     (247,426 )     (877,429 )

Proceeds from sale of available-for-sale securities

     262,191       789,089  

Proceeds from maturity of available-for-sale securities

     6,500       30,397  
                

Net cash provided by (used in) investing activities

     29,312       (467,598 )
                

Cash flows from financing activities:

    

Issuance of common stock

     31,764       —    

Common stock repurchases

     (126,237 )     —    

Payment of dividends to stockholders

     (27,151 )     (23,967 )

Excess tax benefit from stock-based compensation

     284       —    
                

Net cash used in financing activities

     (121,340 )     (23,967 )
                

Effect of exchange rate changes on cash and cash equivalents

     (807 )     5,340  
                

Net increase (decrease) in cash and cash equivalents

     33,592       (336,585 )

Cash and cash equivalents at beginning of period

     514,051       1,199,969  
                

Cash and cash equivalents at end of period

   $ 547,643     $ 863,384  
                

Supplemental cash flow disclosures:

    

Income taxes paid, net

   $ 105,549     $ 41,072  
                

 

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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     Six months ended  
           December 31,
2007
    September 30,
2007
    December 31,
2006
    December 31,
2007
    December 31,
2006
 

GAAP Net income

      $ 83,935     $ 88,158     $ 90,049     $ 172,093     $ 225,971  

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

             

Acquisition-related charges

   a      21,904       12,366       18,074       34,270       18,892  

Restructuring, severance and others

   b      (5,986 )     2,279       67,180       (3,707 )     67,180  

Restatement-related charges

   c      67,000       2,111       15,357       69,111       17,860  

Income tax effect of non-GAAP adjustments

   d      (28,747 )     (6,320 )     (36,330 )     (35,067 )     (37,582 )

Non recurring tax item

   e      —         46,613       —         46,613       —    
                                           

Non-GAAP net income

      $ 138,106     $ 145,207     $ 154,330     $ 283,313     $ 292,321  
                                           

GAAP Net income per diluted share

      $ 0.45     $ 0.46     $ 0.44     $ 0.91     $ 1.11  
                                           

Non-GAAP net income per diluted share

      $ 0.75     $ 0.75     $ 0.75     $ 1.50     $ 1.43  
                                           

Shares used in diluted shares calculation

        185,199       193,043       204,955       189,122       203,826  
                                           

Impact of items included in Condensed Statements of Operations:

 

     Acquisition-
Related Charges
    Restructuring,
Severance and
Other
    Restatement-
Related Charges
    Total Pre-tax
GAAP to
Non-GAAP
Adjustment

Cost of revenues

   $ 15,261     $ 1,243     $ 0     $ 16,504

Engineering, research and development

     4,172       388       0       4,560

Sales, general and administrative

     2,471       (7,617 )     67,000       61,854
                              

Total in Q2 FY 2008

   $ 21,904     $ (5,986 )   $ 67,000     $ 82,918
                              

Total in Q1 FY 2008

   $ 12,366     $ 2,279     $ 2,111     $ 16,756
                              

Total in Q2 FY 2007

   $ 18,074     $ 67,180     $ 15,357     $ 100,611
                              
     Q2 FY 2008     Q1 FY 2008     Q2 FY 2007      

Stock-based compensation

        

Cost of revenues

     4,700       6,253       8,002    

Engineering, research and development

     7,109       8,592       11,243    

Sales, general and administrative

     11,443       13,238       (3,177 )  

Provision for income taxes

     (8,038 )     (8,475 )     (4,858 )  
                          

Total

     15,214       19,608       11,210    
                          

To supplement our condensed consolidated financial statements presented in accordance with GAAP, we provide non-GAAP financial information, which are adjusted from results based on GAAP to exclude certain costs and expenses, as well as other supplemental information. The non-GAAP and supplemental information are provided to enhance the user’s overall understanding of our operating performance and our prospects in the future. Specifically, we believe the non-GAAP information provide 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

 

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results. The non-GAAP information is among budgeting and planning tools that management uses for future forecasting. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with United States GAAP.

 

a Acquisition-related charges include impairment and amortization of intangibles, inventory fair value adjustments, in-process research and development associated with acquisitions, as well as asset impairment from discontinuing acquired products. Management believes that the expense associated with the impairment and 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 the Company’s newly acquired and long-held business. Management believes that it is appropriate to exclude asset impairment from discontinuing acquired products as it is not indicative of ongoing operating results or limits comparability. Management believes excluding these items helps investors compare our operating performance with that of other companies.

 

b Restructuring, severance and other includes costs associated with facilities divestment program, worldwide reduction in force, and gains from sale of facilities. Management believes that it is appropriate to exclude those items as they are not indicative of ongoing operating results or limit comparability. Management believes excluding these items helps investors compare our operating performance with that of other companies.

 

c Restatement-related charges include compensation related to reimbursement of non-executive employees for penalty taxes under section 409A of the Internal Revenue Code, legal and other expenses related to the stock option investigation, shareholder litigation and related matters. Management believes that it is appropriate to exclude those items as they are not indicative of ongoing operating results or limit comparability. Management believes excluding these items helps investors compare our operating performance with that of other companies.

 

d Income tax effect on non-GAAP adjustments. Management believes that it is appropriate to exclude the tax effects of the items noted above in order to present a more meaningful measure on non-GAAP net income.

 

e Non recurring tax item includes the U.S. tax impact associated with the implementation of our global manufacturing strategy. Management believes that it is appropriate to exclude this item as it limits comparability. Management believes excluding these items helps investors compare our operating performance with that of other companies.

 

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