Exhibit 99.1

FOR IMMEDIATE RELEASE

 

Investor Relations:

Ed Lockwood

Sr. Director, Investor Relations

(408) 875-9529

ed.lockwood@kla-tencor.com

Media Relations:

Meggan Powers

Sr. Director, Corporate Communications

(408) 875-8733

meggan.powers@kla-tencor.com

 

 

KLA-TENCOR REPORTS FISCAL 2011 THIRD QUARTER RESULTS

MILPITAS, Calif., April 28, 2011 —KLA-Tencor Corporation (NASDAQ: KLAC) today announced operating results for its third quarter of fiscal year 2011, which ended on March 31, 2011, and reported GAAP net income of $210 million and GAAP earnings per diluted share of $1.22 on revenues of $834 million.

“KLA-Tencor’s solid third quarter financial results reflect the strong demand environment and our ability to deliver innovative solutions that enable our customers to meet their critical yield challenges,” commented Rick Wallace, KLA-Tencor’s president and CEO. “We’re continuing our focus on delivering strong financial performance by leveraging our market and technology leadership.”

 

GAAP Results
     Q3 FY 2011    Q2 FY 2011    Q3 FY 2010

Revenues

   $ 834 million    $ 766 million    $ 478 million

Net Income

   $ 210 million    $ 185 million    $ 57 million

Earnings per Diluted Share

   $1.22    $1.09    $0.33
Non-GAAP Results
     Q3 FY 2011    Q2 FY 2011    Q3 FY 2010

Net Income

   $ 225 million    $ 187 million    $ 71 million

Earnings per Diluted Share

   $1.31    $1.10    $0.41

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 2011 third 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 the ability of KLA-Tencor’s solutions to successfully address customer needs, the company’s current and future focus on delivering strong financial performance, its ability to deliver such performance, and the company’s ability to continue to successfully operate its business model (including maintaining and leveraging its current market and technology positions) 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; 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, 2010, 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, data storage, LED, photovoltaic, 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 over 30 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)    March 31, 2011     June 30, 2010  

ASSETS

    

Cash, cash equivalents and marketable securities

   $ 1,839,574      $ 1,534,044   

Accounts receivable, net

     566,069        440,125   

Inventories, net

     556,798        401,730   

Other current assets

     468,450        459,566   

Land, property and equipment, net

     250,571        236,752   

Goodwill

     328,159        328,006   

Purchased intangibles, net

     93,855        117,336   

Other non-current assets

     345,867        389,497   
                

Total assets

   $ 4,449,343      $ 3,907,056   
                

LIABILITIES AND STOCKHOLDERS’ EQUITY

    

Current liabilities:

    

Accounts payable

   $ 142,126      $ 107,938   

Deferred system profit

     230,069        204,764   

Unearned revenue

     45,908        37,026   

Other current liabilities

     438,634        422,059   
                

Total current liabilities

     856,737        771,787   

Non-current liabilities:

    

Long-term debt

     746,154        745,747   

Income tax payable

     68,178        53,492   

Unearned revenue

     35,064        20,354   

Other non-current liabilities

     70,193        69,065   
                

Total liabilities

     1,776,326        1,660,445   

Stockholders’ equity:

    

Common stock and capital in excess of par value

     1,006,949        921,460   

Retained earnings

     1,674,589        1,356,454   

Accumulated other comprehensive income (loss)

     (8,521     (31,303
                

Total stockholders’ equity

     2,673,017        2,246,611   
                

Total liabilities and stockholders’ equity

   $ 4,449,343      $ 3,907,056   
                


KLA-Tencor Corporation

Condensed Consolidated Unaudited Statements of Operations

 

      Three months ended     Nine months ended  
(In thousands, except per share data)    March 31,
2011
    March 31,
2010
    March 31,
2011
    March 31,
2010
 

Revenues:

        

Product

   $ 691,270      $ 349,787      $ 1,869,736      $ 893,984   

Service

     142,789        128,512        412,992        367,357   
                                

Total revenues

     834,059        478,299        2,282,728        1,261,341   

Costs and operating expenses:

        

Costs of revenues

     327,696        208,565        903,063        587,743   

Engineering, research and development

     95,617        84,741        285,234        246,251   

Selling, general and administrative

     98,967        93,714        278,170        274,023   
                                

Total costs and operating expenses

     522,280        387,020        1,466,467        1,108,017   

Income from operations

     311,779        91,279        816,261        153,324   

Interest income and other, net

     (10,259     (11,008     (40,238     (12,245
                                

Income before income taxes

     301,520        80,271        776,023        141,079   

Provision for income taxes

     91,737        23,255        226,552        41,864   
                                

Net income

   $ 209,783      $ 57,016      $ 549,471      $ 99,215   
                                

Net income per share:

        

Basic

   $ 1.25      $ 0.33      $ 3.29      $ 0.58   
                                

Diluted

   $ 1.22      $ 0.33      $ 3.23      $ 0.57   
                                

Cash dividend paid per share

   $ 0.25      $ 0.15      $ 0.75      $ 0.45   
                                

Weighted average number of shares:

        

Basic

     167,629        171,506        166,978        171,202   

Diluted

     171,313        173,357        169,974        173,432   


KLA-Tencor Corporation

Condensed Consolidated Unaudited Statements of Cash Flows

 

     

Three months ended

March 31,

 
(In thousands)    2011     2010  

Cash flows from operating activities:

    

Net income

   $ 209,783      $ 57,016   

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

    

Depreciation and amortization

     21,075        21,420   

Asset impairment charges

     585        —     

Non-cash stock-based compensation expense

     18,847        21,469   

Net gain on sale of marketable securities and other investments

     (422     (815

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

    

Increase in accounts receivable, net

     (35,069     (23,518

Increase in inventories

     (46,856     (25,604

Decrease (increase) in other assets

     (43,842     20,117   

Increase in accounts payable

     18,994        4,843   

Increase (decrease) in deferred system profit

     (11,424     19,378   

Increase in other liabilities

     112,240        33,366   
                

Net cash provided by operating activities

     243,911        127,672   

Cash flows from investing activities:

    

Acquisition of business, net of cash received

     —          (1,500

Capital expenditures, net

     (13,829     (10,041

Purchase of available-for-sale securities

     (338,953     (262,618

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

     173,391        239,575   

Purchase of trading securities

     (20,421     (15,981

Proceeds from sale of trading securities

     22,556        18,354   
                

Net cash used in investing activities

     (177,256     (32,211

Cash flows from financing activities:

    

Issuance of common stock

     74,927        351   

Tax withholding payments related to vested and released restricted stock units

     (1,826     (709

Common stock repurchases

     (57,697     (54,630

Payment of dividends to stockholders

     (41,942     (25,731
                

Net cash used in financing activities

     (26,538     (80,719

Effect of exchange rate changes on cash and cash equivalents

     2,537        (2,681
                

Net increase in cash and cash equivalents

     42,654        12,061   

Cash and cash equivalents at beginning of period

     596,104        531,444   
                

Cash and cash equivalents at end of period

   $ 638,758      $ 543,505   
                

Supplemental cash flow disclosures:

    

Income taxes paid, net

   $ 79,618      $ 14,929   

Interest paid

   $ 296      $ 102   


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     Nine months ended  
             March 31,
2011
    December 31,
2010
    March 31,
2010
    March 31,
2011
    March 31,
2010
 

GAAP net income

      $ 209,783      $ 185,492      $ 57,016      $ 549,471      $ 99,215   

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

             

Acquisition related charges

     a         7,720        8,178        8,370        24,076        24,569   

Restructuring, severance and other related charges

     b         —          (974     4,426        (974     14,467   

Restatement related charges

     c         2,501        1,147        4,750        3,648        17,015   

Income tax effect of non-GAAP adjustments

     d         (3,632     (2,921     (6,417     (9,410     (20,300

Discrete tax items

     e         8,385        (3,706     3,165        13,833        11,828   
                                           

Non-GAAP net income

      $ 224,757      $ 187,216      $ 71,310      $ 580,644      $ 146,824   
                                           

GAAP net income per diluted share

      $ 1.22      $ 1.09      $ 0.33      $ 3.23      $ 0.57   
                                           

Non-GAAP net income per diluted share

      $ 1.31      $ 1.10      $ 0.41      $ 3.42      $ 0.85   
                                           

Shares used in diluted shares calculation

        171,313        169,513        173,357        169,974        173,432   
                                           

Pre-tax impact of items included in Consolidated Statements of Operations

 

     Acquisition
related
charges
     Restructuring,
severance and
other related
charges
    Restatement
related charges
    Total pre-tax
GAAP to  non-

GAAP
adjustment
 

Three months ended March 31, 2011

         

Costs of revenues

   $ 5,332       $ —        $ —        $ 5,332   

Engineering, research and development

     898         —          —          898   

Selling, general and administrative

     1,490         —          2,501        3,991   
                                 

Total in three months ended March 31, 2011

   $ 7,720       $ —        $ 2,501      $ 10,221   
                                 

Three months ended December 31, 2010

         

Costs of revenues

   $ 5,790       $ —        $ —        $ 5,790   

Engineering, research and development

     898         —          —          898   

Selling, general and administrative

     1,490         (974     1,147        1,663   
                                 

Total in three months ended December 31, 2010

   $ 8,178       $ (974   $ 1,147      $ 8,351   
                                 

Three months ended March 31, 2010

         

Costs of revenues

   $ 5,908       $ 345      $ (98   $ 6,155   

Engineering, research and development

     898         11        (260     649   

Selling, general and administrative

     1,564         4,070        5,108        10,742   
                                 

Total in three months ended March 31, 2010

   $ 8,370       $ 4,426      $ 4,750      $ 17,546   
                                 


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, inventory fair value adjustments, and in-process research and development charges 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 acquisition related inventory fair value adjustments and in-process research and development charges 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 related charges include gains and costs associated with the company’s facilities divestment and consolidation program, reductions in force, and gains and losses from sales 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 legal and other expenses related to the investigation regarding the company’s historical stock option granting process and related shareholder litigation and other matters. KLA-Tencor paid or reimbursed legal expenses incurred in connection with the investigation of its historical stock option practices and the related litigation and government inquiries by a number of its current and former directors, officers and employees. KLA-Tencor is currently paying defense costs for a former officer and employee facing SEC civil actions to which the company is not a party, and the company is also obligated to pay the attorneys’ fees and expenses incurred by former employees in connection with discovery undertaken in that case. The company is further incurring costs associated with retaining counsel to respond to discovery requests and otherwise representing the company in that litigation. 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 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 arises 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 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.