KLA-Tencor Reports Fiscal 2018 Fourth Quarter And Full Year Results

News provided by

KLA-Tencor Corporation

Jul 30, 2018, 16:15 ET

MILPITAS, Calif., July 30, 2018 /PRNewswire/ -- KLA-Tencor Corporation (NASDAQ: KLAC) today announced operating results for its fourth quarter and fiscal year ended June 30, 2018. KLA-Tencor reported GAAP net income of $349 million and GAAP earnings per diluted share of $2.22 on revenues of $1,070 million for the fourth quarter of fiscal year 2018. For the fiscal year ended June 30, 2018, the company reported GAAP net income of $802 million and GAAP earnings per diluted share of $5.10 on revenues of $4.0 billion.

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"We're pleased to report another strong performance by KLA-Tencor in the June quarter," commented Rick Wallace, president and chief executive officer of KLA-Tencor. "We delivered the second highest quarterly bookings result in our history, while setting all-time records in quarterly shipments, revenue, and GAAP and non-GAAP earnings per diluted share. This demonstrates KLA-Tencor's market leadership in process control, and reflects the strategic importance of inspection and metrology in enabling growth of next-generation logic and memory semiconductor markets."

GAAP Results

Q4 FY 2018

Q3 FY 2018

Q4 FY 2017

Revenues

$1,070 million

$1,021 million

$939 million

Net Income

$349 million

$307 million

$256 million

Earnings per Diluted Share

$2.22

$1.95

$1.62




Non-GAAP Results

Q4 FY 2018

Q3 FY 2018

Q4 FY 2017

Net Income

$348 million

$318 million

$259 million

Earnings per Diluted Share

$2.22

$2.02

$1.64

A reconciliation between GAAP operating results and non-GAAP operating results is provided following the financial statements included in this release. Non-GAAP results include the impact of stock-based compensation, but exclude the impact of acquisitions, merger and other related charges and certain discrete tax items. KLA-Tencor will discuss the results for its fiscal year 2018 fourth quarter and full year, along with its outlook, on a conference call today beginning at 2:00 p.m. Pacific Time. A webcast of the call will be available at: www.kla-tencor.com.  

About KLA-Tencor:

KLA-Tencor Corporation, 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, 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 40 years. Headquartered in Milpitas, Calif., KLA-Tencor has dedicated customer operations and service centers around the world. Additional information may be found at https://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 (benefits), 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 (benefits) 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 (benefits) 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)

June 30, 2018

June 30, 2017

ASSETS


Cash, cash equivalents and marketable securities

$

2,880,318

$

3,016,740

Accounts receivable, net

651,678

571,117

Inventories

931,845

732,988

Other current assets

85,159

71,221

Land, property and equipment, net

286,306

283,975

Goodwill

354,698

349,526

Deferred income taxes, non-current

193,200

291,967

Purchased intangibles, net

19,333

18,963

Other non-current assets

216,819

195,676

Total assets

$

5,619,356

$

5,532,173

LIABILITIES AND STOCKHOLDERS' EQUITY


Current liabilities:


Accounts payable

$

169,354

$

147,380

Deferred system profit

279,581

180,861

Unearned revenue

69,255

65,507

Current portion of long-term debt

—

249,983

Other current liabilities

699,893

649,431

Total current liabilities

1,218,083

1,293,162

Non-current liabilities:


Long-term debt

2,237,402

2,680,474

Unearned revenue

71,997

59,713

Other non-current liabilities

471,363

172,407

Total liabilities

3,998,845

4,205,756

Stockholders' equity:


Common stock and capital in excess of par value

617,999

529,283

Retained earnings

1,056,445

848,457

Accumulated other comprehensive income (loss)

(53,933)

(51,323)

Total stockholders' equity

1,620,511

1,326,417

Total liabilities and stockholders' equity

$

5,619,356

$

5,532,173

KLA-Tencor Corporation






Condensed Consolidated Unaudited Statements of Operations














Three months ended

Twelve months ended

(In thousands, except per share amounts)

June 30, 2018

June 30, 2017

June 30, 2018

June 30, 2017

Revenues:






Product

$

840,500

$

737,432

$

3,160,671

$

2,703,934

Service

229,504

201,215

876,030

776,080

Total revenues

1,070,004

938,647

4,036,701

3,480,014

Costs and expenses:






Costs of revenues

377,898

347,930

1,447,369

1,287,547

Research and development

151,951

136,555

608,712

526,870

Selling, general and administrative

116,649

105,164

443,426

389,336

Interest expense and other, net

17,017

23,966

81,263

103,015

Income before income taxes

406,489

325,032

1,455,931

1,173,246

Provision for income taxes

57,722

68,870

653,666

247,170

Net income

$

348,767

$

256,162

$

802,265

$

926,076

Net income per share:






Basic

$

2.24

$

1.64

$

5.13

$

5.92

Diluted

$

2.22

$

1.62

$

5.10

$

5.88

Cash dividends declared per share

$

0.75

$

0.54

$

2.52

$

2.14

Weighted-average number of shares:






Basic

155,740

156,668

156,346

156,468

Diluted

156,822

157,931

157,378

157,481

KLA-Tencor Corporation

Condensed Consolidated Unaudited Statements of Cash Flows



Three months ended

June 30,

(In thousands)

2018

2017

Cash flows from operating activities:


Net income

$

348,767

$

256,162

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


Depreciation and amortization

14,989

14,324

Stock-based compensation expense

18,804

14,485

Net gain on sales of marketable securities and other investments

148

(375)

Changes in assets and liabilities, net of business acquisition:


Accounts receivable, net

2,095

167,034

Inventories

(73,211)

(32,464)

Other assets

44,211

5,000

Accounts payable

403

6,844

Deferred system profit

21,439

(8,655)

Other liabilities

(4,132)

40,282

Net cash provided by operating activities

373,513

462,637

Cash flows from investing activities:


Acquisition of non-marketable securities

—

(1,060)

Business acquisition, net of cash acquired

(11,913)

(28,560)

Capital expenditures, net

(22,828)

(10,668)

Proceeds from sale of assets

—

365

Purchases of available-for-sale securities

(27,657)

(414,383)

Proceeds from sale of available-for-sale securities

68,229

70,443

Proceeds from maturity of available-for-sale securities

118,877

227,569

Purchases of trading securities

(12,762)

(9,694)

Proceeds from sale of trading securities

14,829

11,629

Net cash provided by (used in) investing activities

126,775

(154,359)

Cash flows from financing activities:


Repayment of debt

(225,000)

(25,000)

Issuance of common stock

40,873

21,665

Tax withholding payments related to vested and released restricted stock units

(2,133)

—

Common stock repurchases

(38,091)

(25,002)

Payment of dividends to stockholders

(117,035)

(84,637)

Net cash used in financing activities

(341,386)

(112,974)

Effect of exchange rate changes on cash and cash equivalents

(10,202)

1,940

Net increase in cash and cash equivalents

148,700

197,244

Cash and cash equivalents at beginning of period

1,255,682

955,807

Cash and cash equivalents at end of period

$

1,404,382

$

1,153,051

Supplemental cash flow disclosures:


Income taxes paid, net

$

31,331

$

43,888

Interest paid

$

53,210

$

56,865

Non-cash activities:


Purchase of land, property and equipment - investing activities

$

7,418

$

3,299

Business acquisition holdback amounts- investing activities

$

—

$

5,318

Dividends payable - financing activities

$

9,571

$

13,772

KLA-Tencor Corporation

Condensed Consolidated Unaudited Supplemental Information

(In thousands, except per share amounts)

Reconciliation of GAAP Net Income to Non-GAAP Net Income












Three months ended

Twelve months ended


June 30,
2018

March 31,
2018

June 30,
2017

June 30,
2018

June 30,
2017

GAAP net income

$

348,767

$

306,881

$

256,162

$

802,265

$

926,076

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









Acquisition-related charges

a

3,973

7,413

1,029

14,581

3,322

Merger-related charges

b

—

—

3,072

3,015

13,967

Income tax effect of non-GAAP adjustments

c

(300)

(343)

(1,295)

(2,707)

(5,406)

Discrete tax items

d

(4,402)

4,184

—

441,676

(3,064)

Non-GAAP net income

$

348,038

$

318,135

$

258,968

$

1,258,830

$

934,895

GAAP net income per diluted share

$

2.22

$

1.95

$

1.62

$

5.10

$

5.88

Non-GAAP net income per diluted share

$

2.22

$

2.02

$

1.64

$

8.00

$

5.94

Shares used in diluted shares calculation

156,822

157,201

157,931

157,378

157,481

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


Acquisition-
related charges

Merger-related
charges

Total pre-tax
GAAP to non-
GAAP
adjustment

Three months ended June 30, 2018




Costs of revenues

$

729

$

—

$

729

Selling, general and administrative

3,244

—

3,244

Total in three months ended June 30, 2018

$

3,973

$

—

$

3,973

Three months ended March 31, 2018




Costs of revenues

$

1,122

$

—

$

1,122

Selling, general and administrative

6,291

—

6,291

Total in three months ended March 31, 2018

$

7,413

$

—

$

7,413

Three months ended June 30, 2017




Costs of revenues

$

708

$

9

$

717

Research and development

—

995

995

Selling, general and administrative

321

2,068

2,389

Total in three months ended June 30, 2017

$

1,029

$

3,072

$

4,101

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 and inventory fair value adjustments, and transaction costs associated with acquisitions or pending acquisitions, including the pending acquisition of Orbotech. 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 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 performances with our results in prior periods as well as with the performance of other companies.


b.  

Merger-related charges associated with the terminated merger agreement between KLA-Tencor and Lam Research Corporation ("Lam") primarily includes employee retention-related expenses, legal expenses and other costs. Management believes that it is appropriate to exclude these items as they are not indicative of ongoing operating results and therefore limit comparability and 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  during the fiscal year ended June 30, 2018 includes the income tax effects of an income tax expense from the enacted tax reform legislation through the Tax Cuts and Jobs-Act ("the Act"), which was signed into law on Dec. 22, 2017, of which the impact is primarily related to the provisional tax amounts recorded for the transition tax on accumulated foreign earnings and the re-measurement of certain deferred tax assets and liabilities as a result of the enactment of the Act. Discrete tax item during the fiscal year ended June 30, 2017 includes the tax impact of certain merger-related charges that only became deductible during the three months ended Dec. 31, 2016 as a result of the termination of the proposed merger between KLA-Tencor and Lam. 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.

SOURCE KLA-Tencor Corporation

Related Links

http://www.kla-tencor.com

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