KLA-Tencor Reports Operating Results For Fiscal Year 2001
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Financial results reflect SAB 101 adoption in the fourth quarter

SAN JOSE, Calif., July 31, 2001 - KLA-Tencor Corp. (Nasdaq: KLAC) today announced its operating results for the fourth quarter and fiscal year ended June 30, 2001. The company also reported its fourth quarter transition from historical accounting methods to the new methods required by the Securities and Exchange Commission Staff Accounting Bulletin No. 101 (SAB 101). Reflecting this transition, historical results are provided first, followed by the SAB 101 results.

On an historical basis, revenues for the June 2001 quarter were $462 million, a 4 percent decrease from the June 2000 quarter and a 13 percent decrease from the March 2001 quarter. On the same basis, net income was $56 million or $0.29 per share versus $92 million or $0.47 per share in the June 2000 quarter, and $91 million or $0.48 per share for the March 2001 quarter.

For fiscal 2001, historical basis revenue reached a record $2.1 billion, a 40 percent increase over fiscal 2000 revenue of $1.5 billion. Net income before applying SAB 101 also reached record levels of $363 million or $1.87 per share-a 43 and 42 percent increase respectively over last year's net income of $254 million or $1.32 per share.

KLA-Tencor has restated its results for the full year of fiscal 2001, as if SAB 101 were implemented on July 1, 2000. In general, under SAB 101 accounting the Company defers revenue on system shipments until final acceptance is received from the customer. Restated quarterly income statements for fiscal year 2001 are included below for purposes of comparison with historical results.

On a SAB 101 basis, fourth quarter revenue for fiscal 2001 was $603 million and net income was $130 million or $0.67 per share. SAB 101 revenue for fiscal 2001 was $2.1 billion, while net income for the year was $373 million or $1.93 per share before a cumulative impact of $306 million or $1.59 per share from the transition to SAB 101 accounting principles. This change further resulted in cumulative deferred revenue of $655 million as of June 30, 2001 versus $661 million as of June 30, 2000.

Cash and short-term investments were $1.15 billion, an increase of $211 million from the previous quarter. During the fourth fiscal quarter, the Company also reduced inventory by $22 million and accounts receivable by $136 million.

Ken Schroeder, president and chief executive officer, stated, "We achieved record revenue and profit levels, while bringing 19 state-of-the-art systems to market in the last year. Our relatively strong showing, especially during the past two quarters, is largely due to demand for our most advanced inspection and metrology systems. KLA-Tencor has benefited from the industry's continued investment in yield management and process control technologies for new processes such as copper, 300 mm and sub-0.13 micron design rules. We believe KLA-Tencor is strongly positioned to take advantage of what we expect to be an unprecedented demand for advanced yield management solutions when chip demand returns and these new technologies move from development into production."

"While we continue to invest in the future, we remain focused on controlling costs and enhancing operating efficiency," continued Schroeder. "We've taken strategic cost-cutting measures such as salary reductions for management, the consolidation of facilities and the reduction of our contract and temporary workforce. Through these efforts, we have reduced spending to levels appropriate for current market conditions."

The gross margin on fourth quarter shipments was 50 percent versus 54 percent in the third quarter. On a SAB 101 basis, gross margin was 55 percent for the June 2001 quarter. The lower gross margin on fourth quarter shipments represents the impact of a reduction in quarter-to-quarter shipments, which contributed to unfavorable overhead absorption during the quarter and a higher percentage of service revenue.

The Company's results reflect a $2 million accounting benefit from non-recurring events during the quarter related to the sale of software and intellectual property associated with its iSupportÂ? on-line customer support technology and other unusual items. Introduced by KLA-Tencor in May 2000, iSupport allows original equipment manufacturer (OEM) tool suppliers to remotely diagnose and resolve equipment issues on a customer's fab floor in real time via the Internet.

Despite the downturn, the Company has retained approximately six months of shipment backlog based on current shipment levels. Geographically, bookings for the quarter were strongest in Japan and Europe, which grew sequentially.

Forward Looking Statements: Statements in this press release regarding the current order backlog, current expense levels, and future cost-saving measures 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: delays or cancellations of orders by customers; shipments or acceptances; inability by the company to meet its production and/or product development schedules; the demand for semiconductors; and new and enhanced product offerings by competitors. For other factors that may cause actual results to differ from those projected, please refer to the company's Form 10-K, Forms 10-Q and other filings with the Securities and Exchange Commission. Actual results could differ materially from those anticipated in forward-looking statements in this release as a result of certain factors, including those set forth in the risk factors described in the Company's SEC filings.

Click here to view Condensed Consolidated Unaudited Balance Sheets and Unaudited Statements Of Operations

About KLA-Tencor: KLA-Tencor is the world leader in yield management and process control solutions for semiconductor manufacturing and related 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 National Market under the symbol KLAC.

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iSupport is a trademark of KLA-Tencor.

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