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KLA-Tencor™ Reports Fiscal 2011 Third Quarter Results


News provided by

KLA-Tencor Corporation

Apr 28, 2011, 04:15 ET

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MILPITAS, Calif., April 28, 2011 /PRNewswire/ -- KLA-Tencor Corporation™ (NASDAQ: KLAC) today announced operating results for its third quarter of fiscal year 2011, which ended on March 31, 2011, and reported GAAP net income of $210 million and GAAP earnings per diluted share of $1.22 on revenues of $834 million.

"KLA-Tencor's solid third quarter financial results reflect the strong demand environment and our ability to deliver innovative solutions that enable our customers to meet their critical yield challenges," commented Rick Wallace, KLA-Tencor's president and CEO. "We're continuing our focus on delivering strong financial performance by leveraging our market and technology leadership."


GAAP Results


Q3 FY 2011

Q2 FY 2011

Q3 FY 2010

Revenues

$ 834 million

$ 766 million

$ 478 million

Net Income

$ 210 million

$ 185 million

$ 57 million

Earnings per Diluted Share

$ 1.22

$ 1.09

$ 0.33



Non-GAAP Results


Q3 FY 2011

Q2 FY 2011

Q3 FY 2010

Net Income

$ 225 million

$ 187 million

$ 71 million

Earnings per Diluted Share

$ 1.31

$ 1.10

$ 0.41


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 2011 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 the ability of KLA-Tencor's solutions to successfully address customer needs, the company's current and future focus on delivering strong financial performance, its ability to deliver such performance, and the company's ability to continue to successfully operate its business model (including maintaining and leveraging its current market and technology positions) 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; 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, 2010, 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, data storage, LED, photovoltaic, 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 over 30 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, 2011


June 30, 2010






ASSETS





Cash, cash equivalents  and marketable securities

$

1,839,574

$

1,534,044

Accounts receivable, net


566,069


440,125

Inventories, net


556,798


401,730

Other current assets


468,450


459,566

Land, property and equipment, net


250,571


236,752

Goodwill


328,159


328,006

Purchased intangibles, net


93,855


117,336

Other non-current assets


345,867


389,497

Total assets

$

4,449,343

$

3,907,056






LIABILITIES AND STOCKHOLDERS' EQUITY





Current liabilities:





Accounts payable

$

142,126

$

107,938

Deferred system profit


230,069


204,764

Unearned revenue


45,908


37,026

Other current liabilities


438,634


422,059

Total current liabilities


856,737


771,787






Non-current liabilities:





Long-term debt


746,154


745,747

Income tax payable


68,178


53,492

Unearned revenue


35,064


20,354

Other non-current liabilities


70,193


69,065

Total liabilities


1,776,326


1,660,445






Stockholders' equity:





Common stock and capital in excess of par value


1,006,949


921,460

Retained earnings


1,674,589


1,356,454

Accumulated other comprehensive income (loss)


(8,521)


(31,303)

Total stockholders' equity


2,673,017


2,246,611

Total liabilities and stockholders' equity

$

4,449,343

$

3,907,056









KLA-Tencor Corporation









Condensed Consolidated Unaudited Statements of Operations


























Three months ended


Nine months ended

(In thousands, except per share data)


March 31, 2011


March 31,    2010


March  31, 2011


March 31, 2010










Revenues:









Product

$

691,270

$

349,787

$

1,869,736

$

893,984

Service


142,789


128,512


412,992


367,357

Total revenues


834,059


478,299


2,282,728


1,261,341










Costs and operating expenses:









Costs of revenues


327,696


208,565


903,063


587,743

Engineering, research and development


95,617


84,741


285,234


246,251

Selling, general and administrative


98,967


93,714


278,170


274,023

Total costs and operating expenses


522,280


387,020


1,466,467


1,108,017

Income from operations


311,779


91,279


816,261


153,324










Interest income and other, net


(10,259)


(11,008)


(40,238)


(12,245)

Income before income taxes


301,520


80,271


776,023


141,079

Provision for income taxes


91,737


23,255


226,552


41,864










Net income

$

209,783

$

57,016

$

549,471

$

99,215










Net income per share:









Basic

$

1.25

$

0.33

$

3.29

$

0.58

Diluted

$

1.22

$

0.33

$

3.23

$

0.57










Cash dividend paid per share

$

0.25

$

0.15

$

0.75

$

0.45










Weighted average number of shares:









Basic


167,629


171,506


166,978


171,202

Diluted


171,313


173,357


169,974


173,432


KLA-Tencor Corporation

Condensed Consolidated Unaudited Statements of Cash Flows





Three months ended


March 31,

(In thousands)


2011


2010

Cash flows from operating activities:





Net income

$

209,783

$

57,016

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





Depreciation and amortization


21,075


21,420

Asset impairment charges


585


-

Non-cash stock-based compensation expense


18,847


21,469

Net gain on sale of marketable securities and other investments


(422)


(815)

Changes in assets and liabilities, net of assets acquired and liabilities assumed in business combinations:





Increase in accounts receivable, net


(35,069)


(23,518)

Increase in inventories


(46,856)


(25,604)

Decrease (increase) in other assets


(43,842)


20,117

Increase in accounts payable


18,994


4,843

Increase (decrease) in deferred system profit


(11,424)


19,378

Increase in other liabilities


112,240


33,366

Net cash provided by operating activities


243,911


127,672






Cash flows from investing activities:





Acquisition of business, net of cash received


-


(1,500)

Capital expenditures, net


(13,829)


(10,041)

Purchase of available-for-sale securities


(338,953)


(262,618)

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


173,391


239,575

Purchase of trading securities


(20,421)


(15,981)

Proceeds from sale of trading securities


22,556


18,354

Net cash used in investing activities


(177,256)


(32,211)






Cash flows from financing activities:





Issuance of common stock


74,927


351

Tax withholding payments related to vested and released restricted stock units


(1,826)


(709)

Common stock repurchases


(57,697)


(54,630)

Payment of dividends to stockholders


(41,942)


(25,731)

Net cash used in financing activities


(26,538)


(80,719)






Effect of exchange rate changes on cash and cash equivalents


2,537


(2,681)






Net increase in cash and cash equivalents


42,654


12,061






Cash and cash equivalents at beginning of period


596,104


531,444






Cash and cash equivalents at end of period

$

638,758

$

543,505






Supplemental cash flow disclosures:





Income taxes paid, net

$

79,618

$

14,929

Interest paid

$

296

$

102


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, 2011

December 31, 2010

March 31, 2010


March 31, 2011

March 31, 2010









GAAP net income


$   209,783

$   185,492

$ 57,016


$  549,471

$   99,215

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








Acquisition related charges

a

7,720

8,178

8,370


24,076

24,569

Restructuring, severance and other related charges

b

-

(974)

4,426


(974)

14,467

Restatement related charges

c

2,501

1,147

4,750


3,648

17,015

Income tax effect of non-GAAP adjustments

d

(3,632)

(2,921)

(6,417)


(9,410)

(20,300)

Discrete tax items

e

8,385

(3,706)

3,165


13,833

11,828

Non-GAAP net income


$  224,757

$   187,216

$71,310


$  580,644

$  146,824









GAAP net income per diluted share


$       1.22

$         1.09

$    0.33


$    3.23

$       0.57

Non-GAAP net income per diluted share


$       1.31

$         1.10

$    0.41


$    3.42

$       0.85

Shares used in diluted shares calculation


171,313

169,513

173,357


169,974

173,432


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  March 31, 2011





Costs of revenues

$   5,332

$             -

$            -

$     5,332

Engineering, research and development

898

-

-

898

Selling, general and administrative

1,490

-

2,501

3,991

Total in three months ended March 31, 2011

$   7,720

$            -

$    2,501

$    10,221






Three months ended  December 31, 2010





Costs of revenues

$   5,790

$            -

$            -

$       5,790

Engineering, research and development

898

-

-

898

Selling, general and administrative

1,490

(974)

1,147

1,663

Total in three months ended December 31, 2010

$   8,178

$     (974)

$    1,147

$       8,351






Three months ended March 31, 2010





Costs of revenues

$   5,908

$       345

$      (98)

$        6,155

Engineering, research and development

898

11

(260)

649

Selling, general and administrative

1,564

4,070

5,108

10,742

Total in three months ended March 31, 2010

$   8,370

$   4,426

$   4,750

$      17,546


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, inventory fair value adjustments, and in-process research and development charges 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 that it is appropriate to exclude acquisition related inventory fair value adjustments and in-process research and development charges 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.



b

Restructuring, severance and other related charges include gains and costs associated with the company's facilities divestment and consolidation program, reductions in force, and gains and losses from sales of facilities.  Management believes that it is appropriate to exclude those 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 shareholder litigation and other matters.  KLA-Tencor paid or reimbursed legal expenses incurred in connection with the investigation of its historical stock option practices and the related litigation and government inquiries by a number of its current and former directors, officers and employees. KLA-Tencor is currently paying defense costs for a former officer and employee facing SEC civil actions to which the company is not a party, and the company is also obligated to pay the attorneys' fees and expenses incurred by former employees in connection with discovery undertaken in that case. The company is further incurring costs associated with retaining counsel to respond to discovery requests and otherwise representing the company in that litigation. Management believes that it is appropriate to exclude those 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 arises 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 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

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