KLA-Tencor Reports Fiscal 2013 Second Quarter Results

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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