KLA-Tencor Reports Fiscal 2013 Third Quarter Results

News provided by

KLA-Tencor Corporation

Apr 25, 2013, 04:15 ET

MILPITAS, Calif., April 25, 2013 /PRNewswire/ -- KLA-Tencor Corporation (NASDAQ: KLAC) today announced operating results for its third quarter of fiscal year 2013, which ended on March 31, 2013, and reported GAAP net income of $166 million and GAAP earnings per diluted share of $0.98 on revenues of $729 million. 

"KLA-Tencor delivered solid financial results in the March quarter, demonstrating consistent execution against our long-term strategic objectives," said president and CEO Rick Wallace. "The importance of process control to our customers is increasing as the yield challenges at the leading edge become more complex. We believe that this trend, paired with KLA-Tencor's superior technology and customer focus, will enable KLA-Tencor to continue generating strong operating results and maintain its market leadership position."

GAAP Results

Q3 FY 2013

Q2 FY 2013

Q3 FY 2012

Revenues

$729 million

$673 million

$841 million

Net Income

$166 million

$107 million

$205 million

Earnings per Diluted Share

$0.98

$0.63

$1.21




Non-GAAP Results

Q3 FY 2013

Q2 FY 2013

Q3 FY 2012

Net Income

$171 million

$106 million

$216 million

Earnings per Diluted Share

$1.01

$0.63

$1.27







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 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 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)

March 31, 2013

June 30, 2012

ASSETS


Cash, cash equivalents and marketable securities

$

2,879,503

$

2,534,444

Accounts receivable, net

454,224

701,280

Inventories

649,822

650,802

Other current assets

280,107

277,517

Land, property and equipment, net

298,617

277,686

Goodwill

326,792

327,716

Purchased intangibles, net

39,008

55,636

Other non-current assets

266,400

275,227

Total assets

$

5,194,473

$

5,100,308

LIABILITIES AND STOCKHOLDERS' EQUITY


Current liabilities:


Accounts payable

$

107,753

$

139,183

Deferred system profit

136,816

147,218

Unearned revenue

63,751

63,095

Other current liabilities

511,688

513,411

Total current liabilities

820,008

862,907

Non-current liabilities:


Long-term debt

747,240

746,833

Income tax payable

59,104

50,839

Unearned revenue

32,321

34,899

Other non-current liabilities

89,417

89,235

Total liabilities

1,748,090

1,784,713

Stockholders' equity:


Common stock and capital in excess of par value

1,141,959

1,089,480

Retained earnings

2,329,251

2,247,258

Accumulated other comprehensive income (loss)

(24,827)

(21,143)

Total stockholders' equity

3,446,383

3,315,595

Total liabilities and stockholders' equity

$

5,194,473

$

5,100,308

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)

2013

2012

2013

2012

Revenues:






Product

$

579,746

$

701,179

$

1,676,847

$

1,852,094

Service

149,283

139,342

445,902

427,385

Total revenues

729,029

840,521

2,122,749

2,279,479

Costs and operating expenses:






Costs of revenues

309,508

355,149

930,648

968,353

Engineering, research and development

118,788

110,102

360,138

334,227

Selling, general and administrative

98,487

90,996

289,913

278,873

Total costs and operating expenses

526,783

556,247

1,580,699

1,581,453

Income from operations

202,246

284,274

542,050

698,026

Interest income and other, net

(10,131)

(10,241)

(28,519)

(29,824)

Income before income taxes

192,115

274,033

513,531

668,202

Provision for income taxes

25,733

68,687

105,152

160,064

Net income

$

166,382

$

205,346

$

408,379

$

508,138

Net income per share:






Basic

$

1.00

$

1.23

$

2.46

$

3.05

Diluted

$

0.98

$

1.21

$

2.41

$

2.99

Cash dividends declared per share

$

0.40

$

0.35

$

1.20

$

1.05

Weighted average number of shares:






Basic

166,234

167,070

166,297

166,748

Diluted

169,180

170,146

169,425

170,023

 

KLA-Tencor Corporation


Condensed Consolidated Unaudited Statements of Cash Flows







Three months ended

March 31,

(In thousands)

2013

2012

Cash flows from operating activities:

Net income

$

166,382

$

205,346

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

Depreciation and amortization

21,168

22,400

Non-cash stock-based compensation expense

18,536

20,914

Excess tax benefit from equity awards

(872)

—

Net gain on sale of marketable securities and other investments

(712)

(96)

Changes in assets and liabilities:

Decrease (increase) in accounts receivable, net

142,764

(97,698)

Decrease (increase) in inventories

11,138

(9,694)

Decrease (increase) in other assets

2,753

(42,190)

Increase in accounts payable

4,552

10,481

Decrease in deferred system profit

(19,959)

(7,021)

Increase in other liabilities

69,033

159,652

Net cash provided by operating activities

414,783

262,094

Cash flows from investing activities:

Capital expenditures, net

(18,300)

(14,278)

Purchase of available-for-sale securities

(426,630)

(523,615)

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

288,244

267,256

Purchase of trading securities

(14,005)

(9,434)

Proceeds from sale of trading securities

15,054

10,939

Net cash used in investing activities

(155,637)

(269,132)

Cash flows from financing activities:

Issuance of common stock

48,685

74,640

Tax withholding payments related to vested and released restricted stock units

(728)

(364)

Common stock repurchases

(68,343)

(66,934)

Payment of dividends to stockholders

(66,561)

(58,524)

Excess tax benefit from equity awards

872

—

Net cash used in financing activities

(86,075)

(51,182)

Effect of exchange rate changes on cash and cash equivalents

(6,183)

(2,853)

Net increase (decrease) in cash and cash equivalents

166,888

(61,073)

Cash and cash equivalents at beginning of period

767,313

824,986

Cash and cash equivalents at end of period

$

934,201

$

763,913

Supplemental cash flow disclosures:

Income taxes paid, net

$

11,041

$

9,724

Interest paid

$

204

$

248

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, 2013

December 31, 2012

March 31, 2012

March 31, 2013

March 31, 2012

GAAP net income

$

166,382

$

106,630

$

205,346

$

408,379

$

508,138

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









Acquisition related charges

a

4,180

4,242

6,996

15,308

22,030

Restructuring, severance and other related charges

b

2,845

—

—

5,979

4,032

Restatement related charges

c

—

—

—

—

135

Income tax effect of non-GAAP adjustments

d

(2,212)

(1,392)

(2,281)

(6,583)

(9,230)

Discrete tax items

e

—

(3,514)

5,718

(3,514)

10,797

Non-GAAP net income

$

171,195

$

105,966

$

215,779

$

419,569

$

535,902

GAAP net income per diluted share

$

0.98

$

0.63

$

1.21

$

2.41

$

2.99

Non-GAAP net income per diluted share

$

1.01

$

0.63

$

1.27

$

2.48

$

3.15

Shares used in diluted shares calculation

169,180

169,076

170,146

169,425

170,023

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, 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

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 March 31, 2012






Costs of revenues

$

4,608

$

—

$

—

$

4,608

Engineering, research and development

898

—

—

898

Selling, general and administrative

1,490

—

—

1,490

Total in three months ended March 31, 2012

$

6,996

$

—

$

—

$

6,996

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 Corporation

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