KLA-Tencor Reports Fiscal 2015 Second Quarter Results

News provided by

KLA-Tencor Corporation

Jan 22, 2015, 04:15 ET

MILPITAS, Calif., Jan. 22, 2015 /PRNewswire/ -- KLA-Tencor Corporation (NASDAQ: KLAC) today announced operating results for its second quarter of fiscal year 2015, which ended on December 31, 2014, and reported GAAP net income of $20 million and GAAP earnings per diluted share of $0.12 on revenues of $676 million.

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"We are pleased with the Company's performance in the second quarter," commented Rick Wallace, President and Chief Executive Officer of KLA-Tencor. "Continued market leadership and good execution led to revenue growth and strong gross margins in the period."

GAAP Results

Q2 FY 2015

Q1 FY 2015

Q2 FY 2014

Revenues

$676 million

$643 million

$705 million

Net Income

$20 million

$72 million

$139 million

Earnings per Diluted Share

$0.12

$0.43

$0.83


Non-GAAP Results

Q2 FY 2015

Q1 FY 2015

Q2 FY 2014

Net Income

$113 million

$79 million

$143 million

Earnings per Diluted Share

$0.68

$0.47

$0.85

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, restructuring, severance and other charges and debt extinguishment loss and recapitalization charges.

KLA-Tencor will discuss the results for its fiscal year 2015 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 KLA-Tencor's ability to benefit from its market leadership position, 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, 2014, 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, 2014

June 30, 2014

ASSETS


Cash, cash equivalents and marketable securities

$

2,366,833

$

3,152,637

Accounts receivable, net

632,089

492,863

Inventories

662,799

656,457

Other current assets

384,527

284,873

Land, property and equipment, net

323,353

330,263

Goodwill

335,273

335,355

Purchased intangibles, net

19,551

27,697

Other non-current assets

262,941

258,519

Total assets

$

4,987,366

$

5,538,664

LIABILITIES AND STOCKHOLDERS' EQUITY


Current liabilities:


Accounts payable

$

108,307

$

103,422

Deferred system profit

168,086

147,923

Unearned revenue

64,257

59,176

Current portion of long-term debt

37,500

—

Other current liabilities

564,190

585,090

Total current liabilities

942,340

895,611

Non-current liabilities:


Long-term debt

3,208,571

747,919

Unearned revenue

54,900

57,500

Other non-current liabilities

179,416

168,288

Total liabilities

4,385,227

1,869,318

Stockholders' equity:


Common stock and capital in excess of par value

613,122

1,220,504

Retained earnings

24,770

2,479,113

Accumulated other comprehensive income (loss)

(35,753)

(30,271)

Total stockholders' equity

602,139

3,669,346

Total liabilities and stockholders' equity

$

4,987,366

$

5,538,664

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)

2014

2013

2014

2013

Revenues:






Product

$

503,884

$

544,183

$

980,482

$

1,045,923

Service

172,473

160,946

338,776

317,543

Total revenues

676,357

705,129

1,319,258

1,363,466

Costs and operating expenses:






Costs of revenues

283,213

285,814

571,680

563,471

Engineering, research and development

133,557

134,587

277,194

266,860

Selling, general and administrative

104,873

96,746

206,517

195,242

Total costs and operating expenses

521,643

517,147

1,055,391

1,025,573

Income from operations

154,714

187,982

263,867

337,893

Interest expense and other, net

29,313

11,237

39,459

21,284

Loss on extinguishment of debt and other, net

131,669

—

131,669

—

Income (loss) before income taxes

(6,268)

176,745

92,739

316,609

Provision for (benefit from) income taxes

(26,536)

37,499

238

66,166

Net income

$

20,268

$

139,246

$

92,501

$

250,443

Net income per share:






Basic

$

0.12

$

0.84

$

0.56

$

1.51

Diluted

$

0.12

$

0.83

$

0.56

$

1.49

Cash dividends declared per share (including a special cash dividend of $16.50 per share declared during the three months ended December 31, 2014)

$

17.00

$

0.45

$

17.50

$

0.90

Weighted-average number of shares:






Basic

164,036

166,414

164,440

166,150

Diluted

165,317

168,206

165,950

168,478

KLA-Tencor Corporation

Condensed Consolidated Unaudited Statements of Cash Flows

Three months ended

December 31,

(In thousands)

2014

2013

Cash flows from operating activities:


Net income

$

20,268

$

139,246

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


Depreciation and amortization

18,901

19,811

Asset impairment charges

—

1,374

Loss on extinguishment of debt and other, net

131,669

—

Non-cash stock-based compensation expense

14,848

14,870

Excess tax benefit from equity awards

(565)

(925)

Net gain on sale of marketable securities and other investments

(281)

(1,213)

Changes in assets and liabilities:


Increase in accounts receivable, net

(200,282)

(136,562)

Decrease (increase) in inventories

10,702

(2,938)

Increase in other assets

(79,856)

(30,567)

Increase in accounts payable

478

26,997

Increase in deferred system profit

79,285

77,672

Increase in other liabilities

15,917

7,506

Net cash provided by operating activities

11,084

115,271

Cash flows from investing activities:


Capital expenditures, net

(12,783)

(14,465)

Purchase of available-for-sale securities

(469,416)

(448,777)

Proceeds from sale of available-for-sale securities

709,123

317,034

Proceeds from maturity of available-for-sale securities

248,035

18,831

Purchase of trading securities

(16,999)

(11,256)

Proceeds from sale of trading securities

17,807

12,513

Net cash provided by (used in) investing activities

475,767

(126,120)

Cash flows from financing activities:


Proceeds from issuance of debt, net of issuance costs

3,224,906

—

Repayment of debt

(877,367)

—

Issuance of common stock

24,726

37,719

Tax withholding payments related to vested and released restricted stock units

(632)

(945)

Common stock repurchases

(141,521)

(60,302)

Payment of dividends to stockholders

(2,796,739)

(74,983)

Excess tax benefit from equity awards

565

925

Net cash used in financing activities

(566,062)

(97,586)

Effect of exchange rate changes on cash and cash equivalents

(5,607)

(3,132)

Net decrease in cash and cash equivalents

(84,818)

(111,567)

Cash and cash equivalents at beginning of period

669,683

904,949

Cash and cash equivalents at end of period

$

584,865

$

793,382

Supplemental cash flow disclosures:


Income taxes paid, net

$

37,368

$

48,189

Interest paid

$

33,092

$

26,084

Non-cash activities:


Purchase of land, property and equipment - investing activities

$

3,962

$

5,923

Dividends payable - financing activities

$

42,829

$

—

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, 2014

September 30, 2014

December 31, 2013

December 31, 2014

December 31, 2013

GAAP net income

$

20,268

$

72,233

$

139,246

$

92,501

$

250,443

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









Acquisition related charges

a

3,832

3,998

3,599

7,830

7,768

Restructuring, severance and other related charges

b

3,299

4,057

2,002

7,356

3,239

Debt extinguishment loss and recapitalization charges

c

134,147

—

—

134,147

—

Income tax effect of non-GAAP adjustments

d

(48,720)

(1,539)

(1,777)

(50,259)

(3,449)

Non-GAAP net income

$

112,826

$

78,749

$

143,070

$

191,575

$

258,001

GAAP net income per diluted share

$

0.12

$

0.43

$

0.83

$

0.56

$

1.49

Non-GAAP net income per diluted share

$

0.68

$

0.47

$

0.85

$

1.15

$

1.53

Shares used in diluted shares calculation

165,317

166,580

168,206

165,950

168,478

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

Acquisition related charges

Restructuring, severance and other related charges

Debt extinguishment loss and recapitalization charges

Total pre-tax GAAP to non-GAAP adjustments

Three months ended December 31, 2014






Costs of revenues

$

2,577

$

—

$

—

$

2,577

Engineering, research and development

700

1,289

—

1,989

Selling, general and administrative

555

2,010

2,478

5,043

Loss on extinguishment of debt and other, net

—

—

131,669

131,669

Total in three months ended December 31, 2014

$

3,832

$

3,299

$

134,147

$

141,278

Three months ended September 30, 2014






Costs of revenues

$

2,577

$

355

$

—

$

2,932

Engineering, research and development

700

2,933

—

3,633

Selling, general and administrative

721

769

—

1,490

Total in three months ended September 30, 2014

$

3,998

$

4,057

$

—

$

8,055

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

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 associated with acquisitions. Management believes that the expense associated with the amortization of acquisition related intangible assets 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 employee severance and other exit costs. 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.   

Debt extinguishment loss and recapitalization charges include a pre-tax loss on early extinguishment of debt related to the 6.900% Senior Notes due in 2018, net and certain other expenses incurred in connection with the leveraged recapitalization plan which was completed in the second quarter of fiscal year ending June 30, 2015. 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.

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.

SOURCE KLA-Tencor Corporation