KLA-Tencor Reports Fiscal 2014 Third Quarter Results

24 Apr, 2014, 16:15 ET from KLA-Tencor Corporation

MILPITAS, Calif., April 24, 2014 /PRNewswire/ -- KLA-Tencor Corporation (NASDAQ: KLAC) today announced operating results for its third quarter of fiscal year 2014, which ended on March 31, 2014, and reported GAAP net income of $204 million and GAAP earnings per diluted share of $1.21 on revenues of $832 million.

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"KLA-Tencor delivered solid results for the third quarter of fiscal year 2014, demonstrating our market leadership and strong operational execution," commented Rick Wallace, President and CEO of KLA-Tencor. "Semiconductor device manufacturers are facing enormous challenges in transitioning from planar to 3D transistor structures and in implementing new process technologies at the leading edge such as multi-patterning lithography. Although the semiconductor capital equipment industry is currently experiencing a pause in demand after a strong initial ramp of some of these new technologies, we remain focused on partnering with our customers to address yield issues associated with these ramps."

GAAP Results

Q3 FY 2014

Q2 FY 2014

Q3 FY 2013

Revenues

$832 million

$705 million

$729 million

Net Income

$204 million

$139 million

$166 million

Earnings per Diluted Share

$1.21

$0.83

$0.98

Non-GAAP Results

Q3 FY 2014

Q2 FY 2014

Q3 FY 2013

Net Income

$206 million

$143 million

$171 million

Earnings per Diluted Share

$1.23

$0.85

$1.01

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 2014 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 KLA-Tencor's ability to maintain, and benefit from, its market leadership position; technological challenges and focus areas of KLA-Tencor's customers; the future outlook for growth in the semiconductor equipment industry; and KLA-Tencor's anticipated future 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, 2013, 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)

March 31, 2014

June 30, 2013

ASSETS

Cash, cash equivalents and marketable securities

$

3,026,824

$

2,918,881

Accounts receivable, net

557,661

524,610

Inventories

680,919

634,448

Other current assets

276,925

273,564

Land, property and equipment, net

326,049

305,281

Goodwill

335,246

326,635

Purchased intangibles, net

31,988

34,515

Other non-current assets

251,239

269,423

Total assets

$

5,486,851

$

5,287,357

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

120,771

$

115,680

Deferred system profit

173,595

157,965

Unearned revenue

46,179

60,838

Other current liabilities

547,102

527,049

Total current liabilities

887,647

861,532

Non-current liabilities:

Long-term debt

747,783

747,376

Pension liabilities

58,408

57,959

Income tax payable

59,765

59,494

Unearned revenue

57,818

42,228

Other non-current liabilities

35,502

36,616

Total liabilities

1,846,923

1,805,205

Stockholders' equity:

Common stock and capital in excess of par value

1,206,377

1,159,565

Retained earnings

2,464,901

2,359,233

Accumulated other comprehensive income (loss)

(31,350)

(36,646)

Total stockholders' equity

3,639,928

3,482,152

Total liabilities and stockholders' equity

$

5,486,851

$

5,287,357

 

KLA-Tencor Corporation

Condensed Consolidated Unaudited Statements of Operations

Three months ended March 31,

Nine months ended March 31,

(In thousands, except per share data)

2014

2013

2014

2013

Revenues:

Product

$

670,083

$

579,746

$

1,716,006

$

1,676,847

Service

161,516

149,283

479,059

445,902

Total revenues

831,599

729,029

2,195,065

2,122,749

Costs and operating expenses:

Costs of revenues

342,826

309,508

906,297

930,648

Engineering, research and development

134,161

118,788

401,021

360,138

Selling, general and administrative

93,449

98,487

288,691

289,913

Total costs and operating expenses

570,436

526,783

1,596,009

1,580,699

Income from operations

261,163

202,246

599,056

542,050

Interest income and other, net

(9,917)

(10,131)

(31,201)

(28,519)

Income before income taxes

251,246

192,115

567,855

513,531

Provision for income taxes

47,665

25,733

113,831

105,152

Net income

$

203,581

$

166,382

$

454,024

$

408,379

Net income per share:

Basic

$

1.22

$

1.00

$

2.73

$

2.46

Diluted

$

1.21

$

0.98

$

2.70

$

2.41

Cash dividends declared per share

$

0.45

$

0.40

$

1.35

$

1.20

Weighted-average number of shares:

Basic

166,253

166,234

166,184

166,297

Diluted

167,989

169,180

168,355

169,425

 

KLA-Tencor Corporation

Condensed Consolidated Unaudited Statements of Cash Flows

Three months ended

March 31,

(In thousands)

2014

2013

Cash flows from operating activities:

Net income

$

203,581

$

166,382

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

Depreciation and amortization

20,614

21,168

Non-cash stock-based compensation expense

12,723

18,536

Excess tax benefit from equity awards

(657)

(872)

Net gain on sale of marketable securities and other investments

(281)

(712)

Changes in assets and liabilities:

Decrease in accounts receivable, net

16,598

142,764

Decrease (increase) in inventories

(14,738)

11,138

Decrease in other assets

48,463

2,753

Increase (decrease) in accounts payable

(20,818)

4,552

Decrease in deferred system profit

(70,008)

(19,959)

Increase in other liabilities

42,250

69,033

Net cash provided by operating activities

237,727

414,783

Cash flows from investing activities:

Acquisition of cost method investment

(1,345)

Acquisition of business

(18,000)

Capital expenditures, net

(18,220)

(18,300)

Purchase of available-for-sale securities

(359,299)

(460,124)

Proceeds from sale of available-for-sale securities

202,650

258,067

Proceeds from maturity of available-for-sale securities

60,035

63,671

Purchase of trading securities

(20,939)

(14,005)

Proceeds from sale of trading securities

22,521

15,054

Net cash used in investing activities

(132,597)

(155,637)

Cash flows from financing activities:

Issuance of common stock

13,334

48,685

Tax withholding payments related to vested and released restricted stock units

(2,347)

(728)

Common stock repurchases

(59,880)

(68,343)

Payment of dividends to stockholders

(74,805)

(66,561)

Excess tax benefit from equity awards

657

872

Net cash used in financing activities

(123,041)

(86,075)

Effect of exchange rate changes on cash and cash equivalents

752

(6,183)

Net increase (decrease) in cash and cash equivalents

(17,159)

166,888

Cash and cash equivalents at beginning of period

793,382

767,313

Cash and cash equivalents at end of period

$

776,223

$

934,201

Supplemental cash flow disclosures:

Income taxes paid, net

$

9,636

$

11,041

Interest paid

$

135

$

204

Non-cash investing activities:

Purchase of land, property and equipment

$

4,103

$

 

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, 2014

December 31, 2013

March 31, 2013

March 31, 2014

March 31, 2013

GAAP net income

$

203,581

$

139,246

$

166,382

$

454,024

$

408,379

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

Acquisition related charges

a

3,828

3,599

4,180

11,596

15,308

Restructuring, severance and other related charges

b

2,002

2,845

3,239

5,979

Income tax effect of non-GAAP adjustments

c

(1,193)

(1,777)

(2,212)

(4,642)

(6,583)

Discrete tax items

d

(3,514)

Non-GAAP net income

$

206,216

$

143,070

$

171,195

$

464,217

$

419,569

GAAP net income per diluted share

$

1.21

$

0.83

$

0.98

$

2.70

$

2.41

Non-GAAP net income per diluted share

$

1.23

$

0.85

$

1.01

$

2.76

$

2.48

Shares used in diluted shares calculation

167,989

168,206

169,180

168,355

169,425

 

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

Acquisition related charges

Restructuring, severance and other related charges

Total pre-tax GAAP to non-GAAP adjustment

Three months ended March 31, 2014

Costs of revenues

$

1,921

$

$

1,921

Engineering, research and development

836

836

Selling, general and administrative

1,071

1,071

Total in three months ended March 31, 2014

$

3,828

$

$

3,828

Three months ended December 31, 2013

Costs of revenues

$

1,921

$

469

$

2,390

Engineering, research and development

836

1,132

1,968

Selling, general and administrative

842

401

1,243

Total in three months ended December 31, 2013

$

3,599

$

2,002

$

5,601

Three months ended March 31, 2013

Costs of revenues

$

1,921

$

713

$

2,634

Engineering, research and development

835

2,405

3,240

Selling, general and administrative

1,424

(273)

1,151

Total in three months ended March 31, 2013

$

4,180

$

2,845

$

7,025

 

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 includes amortization of intangible assets and transaction costs associated with acquisitions.  Management believes that the expense associated with the amortization of acquisition related intangible assets and acquisition related costs are 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 these expenses 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 our 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.  

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.

d.  

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 Corporation



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