KLA-Tencor Reports Fiscal Year 2010 First Quarter Results
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MILPITAS, Calif., October 29, 2009KLA-Tencor Corporation (NASDAQ: KLAC) today announced operating results for its first quarter of fiscal year 2010, which ended on September 30, 2009. KLA-Tencor reported GAAP net income of $20 million and GAAP earnings per diluted share of $0.12 on revenues of $343 million for the first quarter of fiscal year 2010.

“KLA-Tencor delivered stronger-than-expected results and returned to profitability in the first quarter of fiscal 2010, led by a sharp increase in demand from foundry customers.  Our results were also favorably impacted by a one-time non-operating gain and by a lower than normal tax rate,” commented Rick Wallace, President and Chief Executive Officer of KLA-Tencor.  “We announced several new products targeted at addressing our customers’ next-generation wafer and reticle inspection requirements.  As our customers increase their technology investments at the leading edge, we are advancing our market leadership while remaining focused on cost discipline.”

GAAP Results
 
Q1 FY 2010
Q4 FY 2009
Q1 FY 2009
Revenues
$ 343 million
$ 282 million
$ 533 million
Net Income (Loss)
$ 20 million
$(26) million
$ 19 million
Earnings (Loss) per Diluted Share
$ 0.12
$ (0.15)
$ 0.11
Non-GAAP Results
 
Q1 FY 2010
Q4 FY 2009
Q1 FY 2009
Net Income (Loss)
$ 26 million
$ (15) million
$ 55 million
Earnings (Loss) per Diluted Share
$ 0.15
$ (0.09)
$ 0.32

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 the results for its fiscal year 2010 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 the next-generation requirements of the company’s customers and KLA-Tencor’s ability to successfully innovate, develop and sell new technologies and products that meet customer demands, future business levels, expected increases in customer investments in technology at the leading edge, anticipated gains in market leadership, and the company’s ability to continue to control its cost structure, 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; the ability of KLA-Tencor’s research and development teams to successfully innovate and develop technology that is responsive to customer demands; unanticipated delays in the completion or implementation of KLA-Tencor’s recent cost-reduction efforts; KLA-Tencor’s ability 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, 2009 and other subsequent 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, compound semiconductor, 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 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. 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)  
September 30, 2009
 
June 30, 2009
 
ASSETS
Cash and short-term investments
$
1,387,232
$
1,329,884
Accounts receivable, net  
243,924
 
210,143
Inventories, net  
347,199
 
370,206
Other current assets  
503,106
 
488,384
Land, property and equipment, net  
283,160
 
291,878
Goodwill  
338,318
 
329,379
Purchased intangibles, net  
140,879
 
149,080
Other non-current assets  
432,452
 
440,584
Total assets
$
3,676,270
$
3,609,538
         
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
Current liabilities:        
Accounts payable
$
75,561
$
63,485
Deferred system profit  
114,722
 
95,820
Unearned revenue  
59,025
 
63,237
Other current liabilities  
355,746
 
341,441
Total current liabilities  
605,054
 
563,983
         
Non-current liabilities:        
Income tax payable  
50,631
 
49,738
Unearned revenue  
5,837
 
6,058
Other non-current liabilities  
63,013
 
60,163
Long-term debt  
745,339
 
745,204
Total liabilities  
1,469,874
 
1,425,146
         
Stockholders' equity:        
Common stock and capital in excess of par value  
855,830
 
835,477
Retained earnings  
1,360,941
 
1,370,132
Accumulated other comprehensive loss  
(10,375)
 
(21,217)
Total stockholders’ equity  
2,206,396
 
2,184,392
Total liabilities and stockholders’ equity
$
3,676,270
$
3,609,538

 

KLA-Tencor Corporation
Condensed Consolidated Unaudited Statements of Operations
   
Three months ended
     
(In thousands, except per share data)  
September 30, 2009
 
September 30, 2008
         
Product
$
229,251
$
405,496
Service  
113,436
 
127,017
Total revenues  
342,687
 
532,513
         
Costs and operating expenses:        
Costs of revenues  
171,892
 
252,813
Engineering, research and development  
78,209
 
114,361
Selling, general and administrative  
77,636
 
118,490
Goodwill and intangible asset impairment  
-  
 
11,911
Total costs and operating expenses  
327,737
 
497,575
Income from operations  
14,950
 
34,938
         
Interest income and other, net  
7,842
 
4,177
Income before income taxes  
22,792
 
39,115
Provision for income taxes  
2,387
 
19,826
         
Net income
$
20,405
$
19,289
         
Net income per share:        
Basic
$
0.12
$
0.11
Diluted
$
0.12
$
0.11
         
Cash dividend paid per share
$
0.15
$
0.15
         
Weighted average number of shares:        
Basic  
170,698
 
172,088
Diluted  
172,718
 
174,386

 

KLA-Tencor Corporation
Condensed Consolidated Unaudited Statements of Cash Flows
 
 
Three months ended
 
September 30,
(In thousands)
 
2009
 
2008
Cash flows from operating activities:        
Net income
$
20,405
$
19,289
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization  
23,134
 
42,708
Impairment charges  
-
 
12,358
Non-cash, stock-based compensation  
20,199
 
34,382
Tax charge from equity awards  
(5,133)
 
(618)
Excess tax benefit from equity awards  
-
 
(1,689)
Net gain on sale of marketable securities and other investments  
(1,292)
 
(128)
Gain on sale of real estate  
(2,824)
 
(1,368)
Changes in assets and liabilities:        
Decrease (increase) in accounts receivable, net  
(28,279)
 
131,364
Decrease (increase) in inventoies  
26,971
 
(16,739)
Decrease (increase) in other assets  
(46,368)
 
50,623
Increase (decrease) in accounts payable  
11,288
 
(9,881)
Increase (decrease) in deferred system profit  
18,902
 
(68,667)
Increase (decrease) in other liabilities  
36,246
 
(110,277)
Net cash provided by operating activities  
73,249
 
81,357
         
Cash flows from investing activities:        
Acquisitions of businesses, net of cash received  
-
 
(127,023)
Capital expenditures, net  
(3,635)
 
(10,132)
Proceeds from sale of real estate      
2,466
Purchase of available-for-sale securities  
(263,646)
 
(394,378)
Proceeds from sale and maturity of available-for-sale securities  
221,588
 
269,235
Purchase of trading securities  
(23,573)
 
(8,939)
Proceeds from sale of trading securities  
29,145
 
11,704
Net cash used in investing activities  
(40,121)
 
(257,067)
         
Cash flows from financing activities:        
Issuance of common stock  
2,917
 
5,967
Tax withholding payments related to released restricted stock units  
(1,833)
 
(10,342)
Common stock repurchases  
-
 
(177,469)
Payment of dividends to stockholders  
(25,606)
 
(25,840)
Excess tax benefit from equity awards  
-
 
1,689
Net cash used in financing activities  
(24,522)
 
(205,995)
         
Effect of exchange rate changes on cash and cash equivalents  
7,266
 
(12,942)
         
Net increase (decrease) in cash and cash equivalents  
15,872
 
(394,647)
         
Cash and cash equivalents at beginning of period  
524,967
 
1,128,106
         
Cash and cash equivalents at end of period
$
540,839
$
733,459
         
Supplemental cash flow disclosures:        
Income taxes paid , net
$
10,591
$
11,042
Interest paid
$
246
$
424

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
   
Sept. 30, 2009
June 30, 2009
Sept. 30, 2008
         
GAAP net income (loss)  
$  20,405
$ (25,576)
$ 19,289
Adjustments to reconcile GAAP net income (loss) to non-GAAP net income (loss):        
         
Acquisition related charges
a
8,095
11,561
28,419
Restructuring, severance and other related charges
b
(4,409)
7,007
4,161
Restatement related charges
c
5,188
(1,731)
3,784
Goodwill and intangible asset impairment
d
-
-
11,911
Income tax effect of non-GAAP adjustments
e
(3,121)
(5,883)
(12,214)
Non-GAAP net income (loss)  
$  26,158
$ (14,622)
$ 55,350
         
GAAP net income (loss) per diluted share  
$  0.12
$ (0.15)
$ 0.11
Non-GAAP net income (loss) per diluted share  
$  0.15
$ (0.09)
$ 0.32
Shares used in diluted shares calculation  
172,718
169,981
174,386

 

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

 
Acquisition related charges
Restructuring, severance and other related charges
Restatement related charges
Goodwill and intangible asset impairment
Total pre-tax GAAP to non-GAAP adjustment
Costs of revenues
$    5,721
$       (104)
$             -
$            -
$     5,617
Engineering, research and development
897
(213)
-
-
684
Selling, general and administrative
1,477
(4,092)
5,188
-
2,573
Total in three months ended Sept. 30, 2009
$    8,095
$    (4,409)
$     5,188
$            -
$     8,874
           
Total in three months ended June 30, 2009
$  11,561
$      7,007
$   (1,731)
$            -
$   16,837
           
Total in three months ended Sept. 30, 2008
$  28,419
$      4,161
$     3,784
$  11,911
$   48,275

 

 
Three months ended
   
September 30, 2009
 
June 30, 2009
 
September 30, 2008
Stock-based compensation            
Costs of revenues
$
3,288
$
5,091
$
5,456
Engineering, research and development  
6,603
 
8,650
 
9,971
Selling, general and administrative  
10,308
 
12,351
 
18,955
Total
$
20,199
$
26,092
$
34,382

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, and in-process research and development 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, entry into a severance and consulting agreement with the company’s former president/chief operating officer, gains from sale of facilities, and asset impairment (other than impairment of goodwill and intangible assets, which is included within the category described in note (d) below) from discontinuing or making available for sale certain acquired product lines.  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 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 testing for intangible asset impairment driven by certain 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.

 

# # #
 
Investor Relations:
Ed Lockwood
Sr. Director, Investor Relations
(408) 875-9529
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Media Relations:
Meggan Powers
Sr. Director, Corporate Communications
(408) 875-8733
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