Exhibit 99.1

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 2009 SECOND QUARTER RESULTS

MILPITAS, Calif. (Jan. 29, 2009)—KLA-Tencor Corporation (NASDAQ: KLAC) today announced operating results for its second quarter of fiscal 2009, which ended on December 31, 2008. KLA-Tencor reported a GAAP net loss of $434 million and a GAAP loss per share of $2.57 on revenues of $397 million for the second quarter of fiscal 2009. The results for the second quarter of fiscal 2009 include the pre-tax impact of a $435 million charge related to the aggregate impairment of goodwill and purchased intangible assets. KLA-Tencor reported a non-GAAP net loss of $20 million and a non-GAAP loss per share of $0.12 for the second quarter of fiscal 2009.

“The continuing worldwide economic slowdown drove sharp reductions in our customers’ capital budgets, and KLA-Tencor experienced a greater-than-expected decline in orders and revenue at the end of the December quarter, including service revenue,” said Rick Wallace, president and chief executive officer of KLA-Tencor. “In light of the current economic environment and our limited visibility regarding future market conditions, KLA-Tencor has been taking aggressive steps to reduce operating expenses and drive structural efficiencies across our organization, while maintaining a high level of investment in research and development, as well as our focus on customer service. We are confident these actions will allow us to sustain our technological and market leadership during this severe downturn and position us well when industry conditions improve, while protecting our balance sheet.”

 

GAAP Results
     Q2 FY 2009     Q1 FY 2009    Q2 FY 2008

Revenues

   $ 397 million     $ 533 million    $ 636 million

Net (Loss) Income

   $ (434) million     $ 19 million    $ 84 million

(Loss) Earnings per Share

   $ (2.57 )   $ 0.11    $ 0.45
Non-GAAP Results
     Q2 FY 2009     Q1 FY 2009    Q2 FY 2008

Net (Loss) Income

   $ (20) million     $ 55 million    $ 138 million

(Loss) Earnings per Share

   $ (0.12 )   $ 0.32    $ 0.75

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, goodwill and intangible asset impairment, restatement, and restructuring related items.

KLA-Tencor will discuss its fiscal 2009 second quarter results, along with its outlook, 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 benefit to customers of KLA-Tencor’s products, anticipated performance of the company’s products, anticipated market conditions, potential market opportunities for KLA-Tencor, anticipated steps designed to reduce KLA-Tencor’s costs and the success of such efforts, KLA-Tencor’s ability to sustain its current technological and market position in the future, and demand for KLA-Tencor’s products, 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 offerings by competitors; cancellation of orders by customers; KLA-Tencor’s inability to successfully integrate and manage businesses that it acquires; 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, 2008, 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 is the world’s leading supplier of process control and yield management solutions for the semiconductor and related nanoelectronics industries. Headquartered in Milpitas, California, 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 at http://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, our financial results presented in accordance with United States GAAP.

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 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. 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)

   Dec. 31,
2008
    June 30,
2008

ASSETS

    

Cash and short- and long-term investments

   $ 1,222,400     $ 1,579,383

Accounts receivable, net

     332,353       492,488

Inventories, net

     472,585       459,449

Other current assets

     523,775       546,591

Land, property and equipment, net

     323,020       355,474

Goodwill

     337,572       601,882

Purchased intangibles, net

     162,075       297,778

Other non-current assets

     482,313       515,345
              

Total assets

   $ 3,856,093     $ 4,848,390
              

LIABILITIES AND STOCKHOLDERS’ EQUITY

    

Current liabilities:

    

Accounts payable

   $ 103,817     $ 104,315

Deferred system profit

     83,433       150,797

Unearned revenue

     70,949       56,692

Other current liabilities

     421,433       638,528
              

Total current liabilities

     679,632       950,332

Non-current liabilities:

    

Income tax payable

     55,934       63,634

Unearned revenue

     9,225       31,745

Other non-current liabilities

     79,239       76,288

Long-term debt

     744,932       744,661
              

Total liabilities

     1,568,962       1,866,660

Stockholders’ equity:

    

Common stock and capital in excess of par value

     786,464       729,629

Retained earnings

     1,532,417       2,204,417

Accumulated other comprehensive income (loss)

     (31,750 )     47,684
              

Total stockholders’ equity

     2,287,131       2,981,730
              

Total liabilities and stockholders’ equity

   $ 3,856,093     $ 4,848,390
              


KLA-Tencor Corporation

Condensed Consolidated Unaudited Statements of Operations

 

     Three months ended    Six months ended

(In thousands except per share data)

   Dec. 31,
2008
    Dec. 31,
2007
   Dec. 31,
2008
    Dec. 31,
2007

Revenues:

         

Product

   $ 273,072     $ 513,449    $ 678,568     $ 1,091,881

Service

     123,517       122,334      250,534       236,922
                             

Total revenues

     396,589       635,783      929,102       1,328,803

Costs and operating expenses:

         

Costs of revenues

     238,167       279,167      490,980       585,060

Engineering, research and development

     95,266       97,513      209,627       196,857

Selling, general and administrative

     133,954       159,453      252,444       269,958

Goodwill and intangible asset impairment

     434,833       6,163      446,744       6,163
                             

Total costs and operating expenses

     902,220       542,296      1,399,795       1,058,038

Income (loss) from operations

     (505,631 )     93,487      (470,693 )     270,765

Interest income (expense) and other, net

     (12,472 )     13,269      (8,295 )     30,743
                             

Income (loss) before income taxes

     (518,103 )     106,756      (478,988 )     301,508

Provision for (benefit from) income taxes

     (83,849 )     22,821      (64,023 )     129,415
                             

Net income (loss)

   $ (434,254 )   $ 83,935    $ (414,965 )   $ 172,093
                             

Net income (loss) per share:

         

Basic

   $ (2.57 )   $ 0.46    $ (2.43 )   $ 0.93
                             

Diluted

   $ (2.57 )   $ 0.45    $ (2.43 )   $ 0.91
                             

Cash dividend paid per share

   $ 0.15     $ 0.15    $ 0.30     $ 0.30
                             

Weighted average number of shares:

         

Basic

     169,022       181,241      170,552       184,516

Diluted

     169,022       185,199      170,552       189,122


KLA-Tencor Corporation

Condensed Consolidated Unaudited Statements of Cash Flows

 

     Three months ended
December 31,
 

(In thousands)

   2008     2007  

Cash flows from operating activities:

    

Net income (loss)

   $ (434,254 )   $ 83,935  

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

    

Depreciation and amortization

     35,646       28,345  

Goodwill, purchased intangible assets and long-lived asset impairment

     436,833       6,163  

Provision for doubtful accounts

     23,887       —    

Non-cash, stock-based compensation

     22,303       23,252  

Tax charge from stock-based compensation

     (3,294 )     (340 )

Excess tax benefit from stock-based compensation

     (2 )     (284 )

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

     641       (409 )

Gain on sale of real estate assets

     (1,997 )     (9,042 )

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

    

Decrease in accounts receivable, net

     31,119       48,905  

Decrease in inventories

     30,322       17,782  

Increase in other assets

     (16,314 )     (31,646 )

Increase (decrease) in accounts payable

     736       (4,543 )

Increase (decrease) in deferred system profit

     1,302       (13,366 )

Decrease in other liabilities

     (162,528 )     (23,544 )
                

Net cash provided by (used in) operating activities

     (35,600 )     125,208  

Cash flows from investing activities:

    

Acquisition of businesses, net of cash received

     (13,952 )     (3,966 )

Capital expenditures, net

     (6,967 )     (22,609 )

Proceeds from sale of real estate assets

     19,348       34,622  

Purchase of available-for-sale securities

     (124,775 )     (247,426 )

Proceeds from sale and maturity of available-for-sale securities

     129,770       268,691  

Purchase of trading securities

     (19,206 )     (14,017 )

Proceeds from sale of trading securities

     18,707       15,236  
                

Net cash provided by investing activities

     2,925       30,531  

Cash flows from financing activities:

    

Issuance of common stock

     21,118       31,764  

Common stock repurchases

     (49,046 )     (126,237 )

Payment of dividends to stockholders

     (25,335 )     (27,151 )

Excess tax benefit from stock-based compensation

     2       284  
                

Net cash used in financing activities

     (53,261 )     (121,340 )

Effect of exchange rate changes on cash and cash equivalents

     8,807       (807 )
                

Net increase (decrease) in cash and cash equivalents

     (77,129 )     33,592  

Cash and cash equivalents at beginning of period

     733,459       514,051  
                

Cash and cash equivalents at end of period

   $ 656,330     $ 547,643  
                


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     Six months ended  
          Dec. 31,
2008
    Sept. 30,
2008
    Dec. 31,
2007
    Dec. 31,
2008
    Dec. 31,
2007
 

GAAP net income (loss)

      $ (434,254 )   $ 19,289     $ 83,935     $ (414,965 )   $ 172,093  

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

             

Acquisition related charges

   a      22,590       28,418       15,741       51,008       28,107  

Restructuring, severance and other

   b      23,621       4,161       (5,986 )     27,782       (3,707 )

Restatement related charges

   c      9,190       3,784       67,000       12,974       69,111  

Goodwill and intangible asset impairment

   d      434,833       11,911       6,163       446,744       6,163  

Income tax effect of non-GAAP adjustments

   e      (75,882 )     (12,214 )     (28,747 )     (88,096 )     (35,067 )

Non recurring tax item

   f      —         —         —         —         46,613  
                                           

Non-GAAP net income (loss)

      $ (19,902 )   $ 55,349     $ 138,106     $ 35,447     $ 283,313  
                                           

GAAP net income (loss) per diluted share

      $ (2.57 )   $ 0.11     $ 0.45     $ (2.43 )   $ 0.91  
                                           

Non-GAAP net income (loss) per diluted share

      $ (0.12 )   $ 0.32     $ 0.75     $ 0.21     $ 1.50  
                                           

Shares used in diluted shares calculation

        169,022       174,386       185,199       170,552       189,122  
                                           

Impact of items included in Condensed Consolidated Unaudited Statements of Operations:

 

     Goodwill
and
intangible
asset
impairment
   Acquisition
related
charges
   Restructuring,
severance

and other
    Restatement
related
charges
   Total
pre-tax
GAAP to
non-GAAP
adjustment

Costs of revenues

   $ —      $ 15,354    $ 9,759     $ —      $ 25,113

Engineering, research and development

     —        1,606      4,484       —        6,090

Sales, general and administrative

     —        5,630      9,378       9,190      24,198

Goodwill and intangible asset impairment

     434,833      —        —         —        434,833
                                   

Total in three months ended Dec. 31, 2008

   $ 434,833    $ 22,590    $ 23,621     $ 9,190    $ 490,234
                                   

Total in three months ended Sept. 30, 2008

   $ 11,911    $ 28,418    $ 4,161     $ 3,784    $ 48,274
                                   

Total in three months ended Dec. 31, 2007

   $ 6,163    $ 15,741    $ (5,986 )   $ 67,000    $ 82,918
                                   

 

     Three months ended
     Dec. 31,
2008
   Sept. 30,
2008
   Dec. 31,
2007

Stock-based compensation

        

Costs of revenues

   $ 4,679    $ 5,456    $ 4,700

Engineering, research and development

     6,981      9,971      7,109

Sales, general and administrative

     10,643      18,955      11,443
                    

Total

   $ 22,303    $ 34,382    $ 23,252
                    


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 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. 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 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 inventory fair value adjustments, in-process research and development and gains and losses on foreign exchange contracts associated with business acquisitions 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 includes gains and costs associated with the company’s facilities divestment program, reductions in force, entry into a severance and consulting agreement during the quarter ended September 30, 2008 with its former president/chief operating officer, 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 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 compensation related to reimbursement payments by KLA-Tencor to non-executive employees for penalty taxes under section 409A of the Internal Revenue Code, as well as 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 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 intangible asset impairment includes non-cash expense recognized as a result of the company’s annual testing for goodwill impairment performed in the second quarter of every fiscal year and testing for intangible asset impairment driven by certain macroeconomic and 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 Non recurring tax item includes the U.S. tax impact associated with the implementation of our global manufacturing strategy and a benefit from revision of the amount of undistributed earnings of foreign subsidiaries considered to be permanently reinvested outside the United States. 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.