KLA-Tencor Reports Fiscal 2013 Second Quarter Results

Jan 24, 2013, 16:15 ET from KLA-Tencor

MILPITAS, Calif., Jan. 24, 2013 /PRNewswire/ -- KLA-Tencor Corporation (NASDAQ: KLAC) today announced operating results for its second quarter of fiscal year 2013, which ended on December 31, 2012, and reported GAAP net income of $107 million and GAAP earnings per diluted share of $0.63 on revenues of $673 million

"In the second quarter, KLA-Tencor delivered revenue and earnings per share at or above the upper end of our range of guidance in the face of a challenging demand environment," said Rick Wallace, president and CEO of KLA-Tencor. "We believe that the accelerated pace of innovation by our customers at the leading edge, and the essential role that process control plays in the success of that innovation, will continue to provide long-term opportunities for KLA-Tencor to advance our market leadership and to deliver superior financial performance."

GAAP Results

Q2 FY 2013

Q1 FY 2013

Q2 FY 2012

Revenues

$673 million

$721 million

$642 million

Net Income

$107 million

$135 million

$111 million

Earnings per Diluted Share

$0.63

$0.80

$0.66

Non-GAAP Results

Q2 FY 2013

Q1 FY 2013

Q2 FY 2012

Net Income

$106 million

$142 million

$122 million

Earnings per Diluted Share

$0.63

$0.84

$0.72

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 2013 second quarter, 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 market conditions in the semiconductor equipment industry, anticipated innovation efforts by customers, expected trends and focus areas in customers' capital investment, the importance of process control in the success of future innovation, KLA-Tencor's ability to preserve and extend its market leadership position and KLA-Tencor's future financial performance, 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; KLA-Tencor's ability to successfully manage its costs; 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, 2012, 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, LED 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 more than 35 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)

December 31, 2012

June 30, 2012

ASSETS

Cash, cash equivalents and marketable securities

$

2,578,253

$

2,534,444

Accounts receivable, net

606,115

701,280

Inventories

662,735

650,802

Other current assets

289,197

277,517

Land, property and equipment, net

292,394

277,686

Goodwill

326,779

327,716

Purchased intangibles, net

43,514

55,636

Other non-current assets

269,776

275,227

Total assets

$

5,068,763

$

5,100,308

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

103,575

$

139,183

Deferred system profit

156,775

147,218

Unearned revenue

53,257

63,095

Other current liabilities

468,130

513,411

Total current liabilities

781,737

862,907

Non-current liabilities:

Long-term debt

747,104

746,833

Income tax payable

54,910

50,839

Unearned revenue

31,742

34,899

Other non-current liabilities

92,134

89,235

Total liabilities

1,707,627

1,784,713

Stockholders' equity:

Common stock and capital in excess of par value

1,123,422

1,089,480

Retained earnings

2,252,772

2,247,258

Accumulated other comprehensive income (loss)

(15,058)

(21,143)

Total stockholders' equity

3,361,136

3,315,595

Total liabilities and stockholders' equity

$

5,068,763

$

5,100,308

 

KLA-Tencor Corporation

Condensed Consolidated Unaudited Statements of Operations

Three months ended December 31,

Six months ended December 31,

(In thousands, except per share data)

2012

2011

2012

2011

Revenues:

Product

$

523,023

$

500,659

$

1,097,101

$

1,150,915

Service

149,988

141,823

296,619

288,043

Total revenues

673,011

642,482

1,393,720

1,438,958

Costs and operating expenses:

Costs of revenues

303,915

272,855

621,140

613,204

Engineering, research and development

121,608

116,363

241,350

224,125

Selling, general and administrative

94,241

93,801

191,426

187,877

Total costs and operating expenses

519,764

483,019

1,053,916

1,025,206

Income from operations

153,247

159,463

339,804

413,752

Interest income and other, net

(8,373)

(12,556)

(18,388)

(19,583)

Income before income taxes

144,874

146,907

321,416

394,169

Provision for income taxes

38,244

36,110

79,419

91,377

Net income

$

106,630

$

110,797

$

241,997

$

302,792

Net income per share:

Basic

$

0.64

$

0.67

$

1.45

$

1.82

Diluted

$

0.63

$

0.66

$

1.43

$

1.78

Cash dividends declared per share

$

0.40

$

0.35

$

0.80

$

0.70

Weighted average number of shares:

Basic

166,268

166,343

166,632

166,513

Diluted

169,076

169,103

169,702

169,650

 

KLA-Tencor Corporation

Condensed Consolidated Unaudited Statements of Cash Flows

Three months ended

December 31,

(In thousands)

2012

2011

Cash flows from operating activities:

Net income

$

106,630

$

110,797

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

Depreciation and amortization

21,925

23,267

Asset impairment charges

1,378

Net gain on sale of assets

(1,160)

Non-cash stock-based compensation expense

14,958

19,646

Excess tax benefit from equity awards

(6,067)

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

(1,048)

106

Changes in assets and liabilities:

Increase in accounts receivable, net

(77,272)

(83,819)

Decrease (increase) in inventories

28,822

(33,142)

Decrease (increase) in other assets

(19,062)

31,658

Increase (decrease) in accounts payable

(12,314)

14,580

Increase in deferred system profit

14,849

54,596

Increase in other liabilities

7,182

48,165

Net cash provided by operating activities

77,443

187,232

Cash flows from investing activities:

Capital expenditures, net

(17,091)

(14,918)

Proceeds from sale of assets

1,838

2,228

Purchase of available-for-sale securities

(341,496)

(287,987)

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

453,096

287,236

Purchase of trading securities

(8,744)

(16,852)

Proceeds from sale of trading securities

10,116

18,353

Net cash provided by (used in) investing activities

97,719

(11,940)

Cash flows from financing activities:

Issuance of common stock

23,607

39,396

Tax withholding payments related to vested and released restricted stock units

(9,471)

(11,544)

Common stock repurchases

(68,283)

(63,580)

Payment of dividends to stockholders

(66,522)

(58,101)

Excess tax benefit from equity awards

6,067

Net cash used in financing activities

(114,602)

(93,829)

Effect of exchange rate changes on cash and cash equivalents

(3,189)

(2,424)

Net increase in cash and cash equivalents

57,371

79,039

Cash and cash equivalents at beginning of period

709,942

745,947

Cash and cash equivalents at end of period

$

767,313

$

824,986

Supplemental cash flow disclosures:

Income taxes paid, net

$

48,295

$

(29,746)

Interest paid

$

26,682

$

26,904

 

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, 2012

September 30, 2012

December 31, 2011

December 31, 2012

December 31, 2011

GAAP net income

$

106,630

$

135,367

$

110,797

$

241,997

$

302,792

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

Acquisition related charges

a

4,242

6,886

7,406

11,128

15,034

Restructuring, severance and other related charges

b

3,134

1,476

3,134

4,032

Restatement related charges

c

135

Income tax effect of non-GAAP adjustments

d

(1,392)

(2,979)

(2,886)

(4,371)

(6,949)

Discrete tax items

e

(3,514)

5,079

(3,514)

5,079

Non-GAAP net income

$

105,966

$

142,408

$

121,872

$

248,374

$

320,123

GAAP net income per diluted share

$

0.63

$

0.80

$

0.66

$

1.43

$

1.78

Non-GAAP net income per diluted share

$

0.63

$

0.84

$

0.72

$

1.46

$

1.89

Shares used in diluted shares calculation

169,076

169,824

169,103

169,702

169,650

 

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 December 31, 2012

Costs of revenues

$

1,921

$

$

$

1,921

Engineering, research and development

835

835

Selling, general and administrative

1,486

1,486

Total in three months ended December 31, 2012

$

4,242

$

$

$

4,242

Three months ended September 30, 2012

Costs of revenues

$

4,560

$

$

$

4,560

Engineering, research and development

836

836

Selling, general and administrative

1,490

3,134

4,624

Total in three months ended September 30, 2012

$

6,886

$

3,134

$

$

10,020

Three months ended December 31, 2011

Costs of revenues

$

5,018

$

243

$

$

5,261

Engineering, research and development

898

241

1,139

Selling, general and administrative

1,490

992

2,482

Total in three months ended December 31, 2011

$

7,406

$

1,476

$

$

8,882

 

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 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 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 costs associated with the company's decision in the first quarter of fiscal year 2013 to exit from the solar inspection business, as well as those associated with reductions in force.  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.

 

c.

Restatement related charges include legal and other expenses related to the investigation regarding the company's historical stock option granting process and related stockholder litigation and other matters.  KLA-Tencor has paid or reimbursed legal expenses incurred by a number of its current and former directors, officers and employees in connection with the investigation of the company's historical stock option practices and the related litigation and government inquiries.  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.

 

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 arise 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 or other adjustments to the cumulative windfall tax benefit that are not indicative of ongoing operating results and 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.

 

SOURCE KLA-Tencor



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