KLA-Tencor Reports Fiscal 2016 Second Quarter Results

News provided by

KLA-Tencor Corporation

Jan 28, 2016, 04:15 ET

MILPITAS, Calif., Jan. 28, 2016 /PRNewswire/ -- KLA-Tencor Corporation (NASDAQ: KLAC) today announced operating results for its second quarter of fiscal year 2016, which ended on December 31, 2015, and reported GAAP net income of $152 million and GAAP earnings per diluted share of $0.98 on revenues of $710 million.

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GAAP Results

Q2 FY 2016

Q1 FY 2016

Q2 FY 2015

Revenues

$710 million

$643 million

$676 million

Net Income

$152 million

$105 million

$20 million

Earnings per Diluted Share

$0.98

$0.66

$0.12


Non-GAAP Results

Q2 FY 2016

Q1 FY 2016

Q2 FY 2015

Net Income

$162 million

$112 million

$113 million

Earnings per Diluted Share

$1.04

$0.71

$0.68

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 related charges, merger-related charges, and debt extinguishment loss and recapitalization charges.

In light of the pending merger transaction with Lam Research Corporation, KLA-Tencor will discontinue conducting quarterly earnings conference calls to discuss financial results, but instead publish a quarterly stockholder letter and other supplemental data on the Investor Relations section of the KLA-Tencor website.

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, 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 nearly 40 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, 2015

June 30, 2015

ASSETS


Cash, cash equivalents and marketable securities

$

2,241,425

$

2,387,111

Accounts receivable, net

427,115

585,494

Inventories

691,786

617,904

Other current assets

324,379

314,067

Land, property and equipment, net

292,393

314,591

Goodwill

335,205

335,263

Purchased intangibles, net

6,934

11,895

Other non-current assets

253,279

259,687

Total assets

$

4,572,516

$

4,826,012

LIABILITIES AND STOCKHOLDERS' EQUITY


Current liabilities:


Accounts payable

$

122,314

$

103,342

Deferred system profit

131,848

148,691

Unearned revenue

63,587

71,335

Current portion of long-term debt

—

16,981

Other current liabilities

540,581

661,414

Total current liabilities

858,330

1,001,763

Non-current liabilities:


Long-term debt

3,131,676

3,173,435

Unearned revenue

49,360

47,145

Other non-current liabilities

167,525

182,230

Total liabilities

4,206,891

4,404,573

Stockholders' equity:


Common stock and capital in excess of par value

416,144

474,374

Accumulated deficit

—

(12,362)

Accumulated other comprehensive income (loss)

(50,519)

(40,573)

Total stockholders' equity

365,625

421,439

Total liabilities and stockholders' equity

$

4,572,516

$

4,826,012

KLA-Tencor Corporation

Condensed Consolidated Unaudited Statements of Operations






Three months ended December 31,

Six months ended December 31,

(In thousands, except per share amounts)

2015

2014

2015

2014

Revenues:






Product

$

527,780

$

503,884

$

988,519

$

980,482

Service

182,465

172,473

364,370

338,776

Total revenues

710,245

676,357

1,352,889

1,319,258

Costs and expenses:






Costs of revenues

280,980

283,213

551,224

571,680

Engineering, research and development

118,272

133,557

238,215

277,194

Selling, general and administrative

96,532

104,873

188,195

206,517

Interest expense and other, net

28,986

29,313

55,481

39,459

Loss on extinguishment of debt and other, net

—

131,669

—

131,669

Income (loss) before income taxes

185,475

(6,268)

319,774

92,739

Provision for (benefit from) income taxes

33,268

(26,536)

62,670

238

Net income

$

152,207

$

20,268

$

257,104

$

92,501

Net income per share:






Basic

$

0.98

$

0.12

$

1.65

$

0.56

Diluted

$

0.98

$

0.12

$

1.64

$

0.56

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

$

0.52

$

17.00

$

1.04

$

17.50

Weighted-average number of shares:






Basic

155,252

164,036

156,036

164,440

Diluted

155,996

165,317

156,971

165,950

KLA-Tencor Corporation

Condensed Consolidated Unaudited Statements of Cash Flows

Three months ended

December 31,

(In thousands)

2015

2014

Cash flows from operating activities:


Net income

$

152,207

$

20,268

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


Depreciation and amortization

16,529

18,901

Asset impairment charges

358

—

Loss on extinguishment of debt and other, net

—

131,669

Non-cash stock-based compensation expense

11,325

14,848

Excess tax benefit from equity awards

(1,382)

(565)

Net gain on sales of marketable securities and other investments

(25)

(281)

Changes in assets and liabilities


Decrease (increase) in accounts receivable, net

32,098

(200,282)

Decrease (increase) in inventories

(36,668)

10,702

Increase in other assets

(38,044)

(79,856)

Increase in accounts payable

15,047

478

Increase (decrease) in deferred system profit

(2,339)

79,285

Increase (decrease) in other liabilities

(48,782)

15,917

Net cash provided by operating activities

100,324

11,084

Cash flows from investing activities:


Capital expenditures, net

(7,938)

(12,783)

Proceeds from sale of assets

1,215

—

Purchases of available-for-sale securities

(281,503)

(469,416)

Proceeds from sale of available-for-sale securities

284,734

709,123

Proceeds from maturity of available-for-sale securities

141,362

248,035

Purchases of trading securities

(16,738)

(16,999)

Proceeds from sale of trading securities

20,036

17,807

Net cash provided by investing activities

141,168

475,767

Cash flows from financing activities:


Proceeds from issuance of debt, net of issuance costs

—

3,224,906

Repayment of debt

(20,000)

(877,367)

Issuance of common stock

21,908

24,726

Tax withholding payments related to vested and released restricted stock units

(495)

(632)

Common stock repurchases

(39,119)

(141,521)

Payment of dividends to stockholders

(81,380)

(2,796,739)

Excess tax benefit from equity awards

1,382

565

Net cash used in financing activities

(117,704)

(566,062)

Effect of exchange rate changes on cash and cash equivalents

(894)

(5,607)

Net increase (decrease) in cash and cash equivalents

122,894

(84,818)

Cash and cash equivalents at beginning of period

763,697

669,683

Cash and cash equivalents at end of period

$

886,591

$

584,865

Supplemental cash flow disclosures:


Income taxes paid, net

$

51,631

$

37,368

Interest paid

$

56,711

$

33,092

Non-cash activities:


Purchase of land, property and equipment - investing activities

$

2,253

$

3,962

Unsettled common stock repurchase - financing activities

$

—

$

12,589

Dividends payable - financing activities

$

20,284

$

42,829

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

Six months ended

December 31, 2015

September 30, 2015

December 31, 2014

December 31, 2015

December 31, 2014

GAAP net income

$

152,207

$

104,897

$

20,268

$

257,104

$

92,501

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










Acquisition-related charges

a

1,309

3,581

3,832

4,890

7,830

Restructuring, severance and other related charges

b

1,742

7,066

3,299

8,808

7,356

Merger-related charges

c

8,820

—

—

8,820

—

Debt extinguishment loss and recapitalization charges

d

—

—

134,147

—

134,147

Income tax effect of non-GAAP adjustments

e

(2,321)

(3,348)

(48,720)

(5,669)

(50,259)

Non-GAAP net income

$

161,757

$

112,196

$

112,826

$

273,953

$

191,575

GAAP net income per diluted share

$

0.98

$

0.66

$

0.12

$

1.64

$

0.56

Non-GAAP net income per diluted share

$

1.04

$

0.71

$

0.68

$

1.75

$

1.15

Shares used in diluted shares calculation

155,996

157,984

165,317

156,971

165,950

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

Acquisition
related charges

Restructuring,
severance and other
related charges

Merger-related
charges

Debt extinguishment
loss and recapitalization
charges

Total pre-tax
GAAP to non-GAAP
adjustments

Three months ended December 31, 2015








Costs of revenues

$

663

$

470

$

67

$

—

$

1,200

Engineering, research and development

—

479

—

—

479

Selling, general and administrative

646

793

8,753

—

10,192

Total in three months ended December 31, 2015

$

1,309

$

1,742

$

8,820

$

—

$

11,871

Three months ended September 30, 2015








Costs of revenues

$

2,285

$

2,770

$

—

$

—

$

5,055

Engineering, research and development

650

1,010

—

—

1,660

Selling, general and administrative

646

3,286

—

—

3,932

Total in three months ended September 30, 2015

$

3,581

$

7,066

$

—

$

—

$

10,647

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

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 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 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, impairment of certain long-lived assets. 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.

Merger-related charges that are directly related to the pending merger between KLA-Tencor and Lam as announced on October 21, 2015. Charges primarily includes costs for advisory services, appraisals, legal services and auditing services. 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.

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 ended 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.

e.

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